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DJIA 22349.59 g 0.04%
What’s
News
Business & Finance
ending to the most
L highly indebted firms
in the U.S. and Europe is
surging, sparking concern
about the effect on finan-
cial markets if global ex-
pansion starts to fade. A1
 Uber is seeking to ne-
gotiate with London after
the city’s transport regula-
tor said it would refuse to
reissue the ride-hailing
firm’s operating license. B1
 European investors are
buying more foreign bonds
than ever before, a sign
fund managers don’t expect
ECB tapering to boost local
yields soon. B1
 A wave of attacks by
Chinese hackers on Ger-
many’s manufacturing and
technology companies is
raising alarm in Berlin. B1
 Mashable is leaning to-
ward an all-out sale of the
new-media firm and has had
talks with German broad-
caster ProSiebenSat.1. B1
 Facebook abruptly aban-
doned a plan to change its
stock structure that would
have given CEO Zucker-
berg more control. B3
 OPEC is scrambling to
contain output from Libya
and Nigeria, where surging
production could derail ef-
forts to boost oil prices. B7
 AIG will remain under
federal supervision for
now after U.S. officials dis-
cussed the firm’s future at
a private meeting. B5
 Bettencourt’s death has
placed a question mark
over the ties between
L’Oréal and Nestlé. B2
World-Wide
 Merkel’s alliance was
headed for victory in Ger-
many’s general election, ac-
cording to exit polls, but
support for the center-right
bloc has dropped sharply. A1
 The nationalist AfD cap-
tured over 13% of the vote in
one of the biggest jolts to
Germany’s political establish-
ment in the postwar era. A3
 U.S. Senate GOP leaders
face a seemingly impossible
path this week to repealing
the ACA after two Republi-
can senators signaled that
their support was unlikely. A1
 Pyongyang warned that
a rocket attack on the U.S.
mainland was “inevitable,”
while U.S. warplanes flew
off the east coast of North
Korea in a show of force. A4
 Iran said it tested a new
medium-range ballistic mis-
sile, the day after unveiling it
in defiance of U.S. criticism
of its nuclear program. A4
 Kurds are expected to
back a referendum that could
bring them closer to inde-
pendence from Iraq, despite
international concerns. A4
 Puerto Rico’s mayors
met with the island’s gov-
ernor for the first time
since Hurricane Maria, re-
porting the full scope of
the storm’s devastation. A7
 The death toll from last
week’s quake in Mexico rose
to 319, with thousands of
survivors uncertain when
they could return home. A4
 NFL players demon-
strated before games as a
feud between Trump and the
sports world escalated. A7
CONTENTS
Business & Fin...... B2
Crossword.............. A12
Europe File............... A2
Heard on Street..... B8
Journal Report....... B4
Life & Arts.... A8-9,12
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Opinion.............. A10-11
Review........................ A5
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World News....... A2-4
MONDAY, SEPTEMBER 25, 2017 ~ VOL. XXXV NO. 166 WSJ.com EUROPE EDITION
NIKKEI 20296.45 g 0.25% STOXX 600 383.22 À 0.09% BRENT 56.86 À 0.76% GOLD 1293.30 À 0.21% EURO 1.1959 À 0.15%
Merkel Set to Win; Support Slips
Far-right party appears
poised to capture
seats in parliament,
signaling turbulence
BY ANTON TROIANOVSKI
BERLIN—Chancellor Angela
Merkel’s conservative alliance
was headed for victory in Ger-
many’s general election on
Sunday, according to exit
polls, but its support dropped
dramatically from four years
ago and a surge for an anti-
immigrant party signaled po-
litical turbulence ahead for
Europe’s largest economy.
TOBIAS SCHWARZ/AGENCE FRANCE-PRESSE/GETTY IMAGES
Ms. Merkel’s center-right
alliance finished well ahead of
its closest competitor, the cen-
ter-left Social Democrats, 33%
to 20.6%, according to projec-
tions based on exit polls and
early results released by ARD
public television.
If those results hold, Ms.
Merkel, who is 63 years old
and first took office in 2005,
will have enough backing to
assure her status as the lon-
gest-serving elected leader of
any major Western country.
But the early election re-
sults also pointed to a historic German Chancellor Angela Merkel speaks as she is surrounded by her team during election night at the CDU’s headquarters in Berlin.
setback for her and for Ger-
many’s political mainstream. 33.8% of the vote in 2009. the right has won seats in Ger- lems, by taking in their con- prominent voice in the na-
The results would be the The nationalist Alternative many’s Parliament. cerns and in part their fears, tional discourse. The party de-
worst for the Social Democrats for Germany, or AfD, was on “We of course were hoping and especially through good scribes Germany’s Muslim mi-
in postwar history and the track to win 12.8% of the vote, for a slightly better result,” policy-making.” nority as a “great danger” and
worst since 1949 for Ms. according to the projections, a Ms. Merkel told supporters in With a foothold in the leg- Please see VOTE page A3
Merkel’s center-right bloc. The result that would make it the Berlin after the early returns islature, the AfD, which has
conservative alliance tallied first time in more than half a came in. “We want to win back pledged to weaken European  Voters boost nationalists... A3
41.5% of the vote in 2013 and century that a party this far to AfD voters by solving prob- integration, would gain a more  Tough road for Merkel......... A3
TRAGEDY IN Bid to Scrap U.S. Health Law
SMALL-TOWN Is Facing More Resistance
AMERICA BY LOUISE RADNOFSKY
AND TED MANN
“It’s very difficult for me to
imagine a scenario where I
would end up voting for this
ahead of a Saturday deadline
under parliamentary rules that
would allow such an action
WASHINGTON—Senate Re- bill,” Ms. Collins said Sunday with only GOP votes.
The Goski twins belonged to a generation publican leaders face a seem- on CNN. Later, on CBS, she A bill by Republican Sens.
ingly impossible path this added: “It is hard for me to en- Bill Cassidy of Louisiana and
of rural youths who enlisted after 9/11 week to reviving their bid to vision getting to ‘yes’ on this Lindsey Graham of South Car-
repeal the Obama-era Afford- bill because my concerns are olina would set “block grants”
BY MICHAEL M. PHILLIPS tion, Marines in white hats able Care Act, after GOP Sen. so fundamental.” of federal funding for each
and Special Forces in green Susan Collins of Maine said Republican senators are state to use for health care, in-
Mike Goski stared into the berets. Mike, an Army Special she couldn’t envision voting making a last-ditch attempt to cluding the Medicaid program
steel casket at his twin Forces patch on his own for the bill and Sen. Rand Paul pass legislation striking much for the poor. With capped
brother’s body, dressed for shoulder, asked that none cry. of Kentucky outlined tough de- of the 2010 health law popu- funding, all states would likely
eternity in a deep-blue Ma- “Chris had only one fear mands for his support. larly known as Obamacare, Please see HEALTH page A7
rine Corps jacket with red that I’m aware of, and it was
piping and brass buttons. It not death,” Mike said as he
was like looking into a cruel
mirror, Chris’s face, so like
stood beside the coffin that
held his twin. “He feared
Trump’s
his own, distorted by a
wound the mortician
providing anything less than
absolutely perfect close air
Feud With
couldn’t hide.
Alone together for the
support for his brothers. He
feared failing them when
Athletes
last time, Mike slipped a they needed him the most.” Escalates
knife into his brother’s The twins were small-
hand, a weapon for Valhalla, town boys, part of a genera- TAKING A KNEE:
the mythical refuge for tion who came of age at the Players around the
fallen warriors. time of the Sept. 11 terrorist NFL demonstrated
Chris was a born fighter attacks. Since 2001, volun- in response to
from Red Oak, Texas, a Ma- teers from such places— President Donald
rine commando with six many of them out-of-the-way Trump saying they
tours of duty. In combat, he counties struggling with lag- shouldn’t be allowed
could orchestrate from the ging economies, drug addic- to protest on the
chaos a lethal strike by jet tion and fewer options—have field during the
fighters, helicopters, mortar shouldered the greatest bur- national anthem.
and artillery, raining hot den for America’s defense. Two Tampa Bay
metal on enemies a few hun- They enlisted, fought and Buccaneers before
dred yards away. died in greater proportions their game at
At the cemetery, as “Taps” than those from relatively Minnesota, left. A7
played, comrades of the more prosperous urban ar- LOREN ELLIOTT/TAMPA BAY TIMES/ZUMA PRESS
Goski twins stood at atten- Please see TWINS page A6
Updated Nursery Rhymes Mend INSIDE Risks Pile Up Again
Humpty, Empower Miss Muffet
i i i In Leveraged Loans
New versions with positive messages BY CHRISTOPHER WHITTALL Toys ‘R’ Us offered a re-
minder of the risks of piling
spawn media empire of viral videos Lending to the most highly on debt when the company
indebted companies in the U.S. filed for bankruptcy protection
and Europe is surging, a devel- on Sept. 18. The toy seller’s
BY ERIC BELLMAN So Mr. Krishnan, an ac-
countant, whipped up a differ-
MAY BUYS opment that investors worry
could pressure financial mar-
chief executive said in court
papers that Toys ‘R’ Us had
CHENNAI, India—Like many ent ending for the fragile A LITTLE TIME kets if the global economic ex- been hampered by its “signifi-
Indians, B.M. Krishnan grew freak of nature and in the pro-
up with both local and West- cess stumbled on a curious
OVER BREXIT pansion starts to fade.
Volume for these leveraged
cant leverage.” Its $5.3 billion
in debt included a large num-
ern nursery rhymes. Even as a content concoction that has loans is up 53% this year in ber of leveraged loans and
child, he figured the English fueled the takeoff of an un- EUROPE FILE, A2 the U.S., putting it on pace to high-yield bonds.
ones just didn’t make much likely media empire. surpass the 2007 record of Even though default levels
sense. The company he $534 billion, according to S&P are currently low, and global
The tale of the works for, ChuChu Global Market Intelligence’s growth has been picking up,
downfall of Humpty TV Studios, is now LCD unit. the lending boom could prove
Dumpty—univer- the source of some In Europe, recent loans of- troublesome when market
JEFF J MITCHELL/PA WIRE/ZUMA PRESS (TOP)
sally portrayed as a of the internet’s fer fewer investor safeguards conditions change or the econ-
giant egg with most viral videos. It than in the past. This year, omy slows.
limbs—still upsets is attracting billions 70% of the region’s new lever- “It feels like the market is
him. “It is saying of eyeballs with aged loans are known as cove- getting frothy,” said Henrik
something cannot content few would nant-lite, according to LCD, Johnsson, co-head of global
be fixed, cannot be
repaired. That is not
Humpty
together again
have pegged as click
bait—rewritten
THE NEED more than triple the number
four years ago. Covenants are
debt-capital markets
Deutsche Bank AG. “We’re
at
something you tell a nursery rhymes. FOR BREACH the terms in a loan’s contract overdue a correction.”
child,” Mr. Krishnan complains. Today, more than 200 pro-
“Why should Humpty be like grammers, animators and mu-
DISCLOSURE that offer investor protections,
such as provisions on borrow-
Before the financial crisis, a
boom in leveraged loans was
that? So pathetic. Let him go sicians sit shoulder to shoul- ers’ ability to take on more one of the signs of markets
to the doctor and be OK.” Please see VIDEO page A2 KEYWORDS, B1 debt or invest in projects. Please see LOANS page A2
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Monday, September 25, 2017
U.K.’s May Buys a Little Time Over Brexit
EUROPE FILE
By Simon Nixon
Theresa May had two ob-
jectives when she summoned
members of her cabinet and
the British press corp to the
Italian city of Florence to
hear her make a major
speech on Brexit last week.
She needed to say enough
to unblock a stalled Brexit
negotiation ahead of the
next round of
talks that
start Monday
in Brussels—
essential to
reassure in-
creasingly
anxious United Kingdom-
based businesses—without
blowing apart the unity of
her government just ahead
of next Sunday’s Conserva-
tive party conference in
Manchester.
What made this task so
complicated was that to se-
cure the first objective, she
had to abandon many core
Brexiter nostrums that have
formed the basis of official
Brexit policy until now. Gone
were the bullish claims that
negotiating a free-trade pact
with the EU would be the
easiest deal in history; that
an agreement could be
reached in two years while
simultaneously negotiating
ambitious free-trade deals
with other major economies;
that by March 2019, the U.K.
would be free of all EU juris-
diction; that this could be
done without paying vast
On a Roll
While the volume of leveraged loans is up, changing market
conditions could become troublesome for the lending boom.
Total leveraged-loan issuance,
through Sept. 15 of each year
$500 billion
400
300
200
100
0 than at any time since the be-
2007 ’08 ’09 ’10 ’11
Average leverage of private-
equity-backed loan deals*
7 times
6 Europe
U.S.
5 40
4 20
3 0
2010
*Through August. Leverage is measured by debt to earnings before interest, tax,
depreciation and amortization. †Through Sept. 15
Source: LCD, S&P Global Market Intelligence
VIDEO
Continued from Page One
der in the ChuChu office
churning out videos that get
more views on YouTube than
the official channels of Be-
yoncé, Coldplay or “The To-
night Show Starring Jimmy
Fallon.” It has become one of
the 25 most-watched YouTube
channels in the world.
One of ChuChu’s first viral
hits was Jack and Jill. In Mr.
Krishnan’s version, the duo
gets a sort of pep talk, recov-
ers and then heads back up
the hill to fetch a pail of water.
“Jack and Jill, with a strong
will, went again up the hill,”
starts the new verse.
“I thought ‘let’s take away
the negativity.’ It should not
de-motivate people,” said Mr.
Krishnan, 47, creative head at
ChuChu TV. “My songs should
do better than that.”
In ChuChu’s rendition,
Humpty Dumpty is healed and
stops sitting on the wall. “Baa
Baa Black Sheep” adds white
and brown sheep to the flock
and becomes a tale about
sharing with the less fortu-
nate. “Little Miss Muffet” is a
song about female empower-
ment and “Ring Around the
Rosie” is about appreciating
nature.
Children are the most avid
In her speech, Theresa May pushed for a two-year transition deal during which the U.K. would continue to abide by EU rules.
sums to Brussels; or that
Britain would emerge as well,
if not better off, than before.
I
nstead, Mrs. May pushed
for a two-year transition
deal during which the
U.K. would continue to abide
by EU rules despite no lon-
ger having any say over
them; she agreed that the
U.K. would pay its share of
all existing EU financial com-
mitments—just weeks after
British officials spent an en-
tire negotiating round deny-
ing that the U.K. had any le-
gal obligation to pay
anything. She dropped the
harsh language of her previ-
ous Brexit interventions in
Europe
U.S.
’12 ’13 ’14 ’15 ’16 ’17
Share of leveraged loans without
traditional investor protections†
80%
60 Europe
U.S.
2010
THE WALL STREET JOURNAL.
clickers on YouTube and when
they like something they
watch it repeatedly.
ChuChu previously helped
companies build and maintain
websites. It started to dabble
in YouTube content in 2013,
when it turned to Mr. Krish-
nan. He was the accountant at
the time, but had always
dreamed of directing a movie.
In the office he was known as
a scholar and storyteller who
had a great memory for an-
cient tales in Tamil.
By looking at YouTube traf-
fic numbers, the company
could see videos of nursery
rhymes were getting millions
of clicks. The problem was
viewers had hundreds of op-
tions. ChuChu needed to find a
way to stand out.
Humpty Dumpty survives the fall in the ChuChu TV Studios version.
WORLD NEWS
favor of warm talk of shared
values, common challenges
and the need for a deep
partnership covering secu-
rity and trade. Indeed parts
of her speech sounded like
the full-throated strategic
case for Britain’s EU mem-
bership that was so conspic-
uously absent from the refer-
endum campaign.
Will this unblock the talks,
allowing the negotiations to
move to the next phase in
December when the U.K. and
EU start discussing their fu-
ture relationship? The con-
cessions on future budgetary
contributions and the rights
of EU citizens living in the
U.K. certainly appeared to go
LOANS
Continued from Page One
overheating. As the crisis in-
tensified in 2008, investors in
U.S. leveraged loans lost nearly
30%, according to the S&P/
LSTA Leveraged Loan Index.
Regulators are taking note.
In its most recent quarterly
report, the Bank for Interna-
tional Settlements noted the
growth of covenant-lite loans
and pointed out that U.S. com-
panies are more leveraged
ginning of the millennium.
That could harm the economy
in the event of a downturn or
a rise in interest rates, said
the bank.
The leveraged loan market
has long been favored by pri-
vate-equity firms raising cash
to fund takeovers. Investment
banks arrange the loans and
typically parcel them out to
other lenders and investors.
Now, investors are jumping
in because central bank stimu-
lus has pushed down returns
across bond and equity mar-
kets. In the U.S. alone, inves-
tors have poured $16.9 billion
into loan funds this year, tak-
It started picking off the
most-searched and watched ti-
tles, such as, “Twinkle Twin-
kle Little Star,” “Wheels on
the Bus” and “Row Row Row
Your Boat.” Then it began get-
ting input from viewers
around the world.
Someone suggested “Little
Miss Muffet,” which Mr. Krish-
nan updated last year. After
being frightened off her tuffet,
Ms. Muffet of 2016 is re-
minded of powerful women
and gets a pep talk in a new
chorus: “Oh Dear Muffet. You
are not a puppet. Be brave and
face your day.” She returns to
befriend the spider and share
her curds and whey.
Viewers also warned Chu-
Chu about the supposed dark
meanings behind some nurs-
CHUCHU TV STUDIOS
further than many had been
expecting—although EU offi-
cials insist they will need to
see detailed proposals when
talks resume on Monday.
“You can’t do a deal on the
basis of a speech,” says a se-
nior diplomat.
What is unclear is what
further assurances the EU will
demand on the future status
of the Northern Irish border
which the EU has identified
as a priority in the first phase
of talks and about which Mrs.
May had nothing new to say.
Much will depend on the ap-
proach taken by Dublin, which
is dissatisfied with progress
so far and has a de facto veto.
But assuming these hur-
ing total assets to a record of
$141.2 billion at the end of Au-
gust, according to Thomson
Reuters Lipper.
In Europe, the pipeline for
leveraged loan deals still to be
sold was €7.6 billion in August,
according to LCD, the highest
level in seven years.
In the U.S., loans issued to
fund leveraged buyouts from
private-equity companies this
year total $88.5 billion, up
74% from the same period last
year and on track for the larg-
est amount since 2007. High-
yield bonds are trading at
their highest levels since be-
fore the financial crisis.
“When you have more
money seeking loans and
bonds than there are new
[deals], you see leverage creep
up and covenants” relax, said
Jeff Mueller, a portfolio man-
ager at Eaton Vance.
Loan terms are now “more
aggressive here in Europe,”
said Christopher Kandel, a
partner at law firm Latham &
Watkins LLP, citing provisions
giving borrowers greater flexi-
bility to pay out dividends or
incur additional debt.
Cov-lite loans barely existed
in Europe before the financial
crisis. “That will be the test
ery rhymes.
With the help of books and
the internet, Mr. Krishnan in-
vestigated rhymes that may
have centuries-old, political
and pagan origins. “Ring
Around the Rosie,” goes one
popular but unproven theory,
is about the black plague.
Humpty Dumpty, some say,
could be about a cannon that
fell off the ramparts around
the town it was supposed to
be protecting in the 17th cen-
tury. While commonly por-
trayed as an egg, the verse
doesn’t say so explicitly.
ChuChu has attracted more
than 10 billion views, with the
U.S. as the largest single
source of traffic—an impor-
tant distinction as ads played
in the U.S. pay more.
The company still dabbles
in updating nursery rhymes.
Mr. Krishnan is working on a
version of “Georgie Porgie”
where Georgie makes up with
the girls. He wants to add
verses to “I’m a Little Teapot”
to teach about other things,
like how pizza is sliced. “I’m a
Little Pizza,” is something he
is considering.
His dream is that children
who grew up on his take on
the classics will sing them to
their children. “I would love to
see our changed version of the
rhymes used by others,” he
said. “Of course, even our
rhymes could be rewritten.”
THE WALL STREET JOURNAL.
everything to be the same.
Yet by not saying where she
thinks the balance of future
benefits and obligations
might lie, she kept hopes of a
cake-and-eat-it deal alive.
T
he fate of Brexit
hinges on when these
trade-offs need to be
fully acknowledged. Opinions
vary. Some in Brussels take a
legalistic view that Article 50
of the EU Treaties requires
the framework of the future
relationship to be agreed be-
fore any commitment to a
transition deal; others argue
that it would be better to
keep discussion of the future
framework as vague as possi-
ble until after the U.K. has
formally left when it will be-
come easier for the EU to
make concessions.
Much may therefore de-
pend on how Mrs. May
JEFF J. MITCHELL/POOL
chooses to play it. Does she
try to defer the debate in
hopes of keeping her party
together and avoiding a cha-
otic Brexit, recognizing it will
likely be impossible to secure
any binding commitments be-
fore Brexit and trusting that
dles can be surmounted, economic logic will deliver a
Mrs. May still needs to aban- good deal? Or does she force
don the most cherished of all the issue early in the next
Brexiter nostrums if she is to phase of talks while the U.K.
achieve her goal of a smooth still has some leverage?
and orderly Brexit that Downing Street believes
doesn’t inflict grave damage that politically it has no
on the U.K. economy: that is choice but to push for clarity
the belief that the U.K. can— on the nature of any future
in the words of foreign sec- relationship early in the next
retary Boris Johnson—have phase of talks if it is to per-
its cake and eat it, that it suade Brexiters to back their
can maintain frictionless transition deal. But it also
trade with the EU while set- knows that this strategy
ting its own rules and pursu- comes with high risks. After
ing its own trade deals. all, it remains an article of
British officials insist that faith for many hard-line Br-
Mrs. May conceded this point exiters that the only good
in Florence, recognizing for deal is a cake-and-eat-it
the first time that Britain can- deal—and that no deal is
not leave the EU and expect better than a bad deal.
for investors,” said Taron
Wade, a director at S&P
Global. “How they perform
through the cycle.”
vestors demand to hold these
securities over haven U.S.
Treasurys has declined to lev-
els not seen since 2007, ac-
Some fund managers, cording to Bloomberg Barclays
meanwhile, are uncomfortable bond indexes.
with increasing levels of lever- “If you get a spike in de-
age in the market. That is par- fault rates, you’re patently not
ticularly true in the U.S., getting compensated in high
where nearly a third of loans yield,” said Zak Summerscale,
to private-equity backed com- head of credit fund manage-
panies this year are leveraged ment for Europe and Asia Pa-
six times or more, according cific at Intermediate Capital
to LCD’s calculations of com- Group.
panies’ debt to earnings before Still, some argue the valua-
interest, tax, depreciation and tions in loans and bonds are
amortization. justified by the benign eco-
That is despite 2013 guide- nomic environment. Mike
lines from U.S. regulators, in- Freno, global head of fixed in-
cluding the Federal Reserve, come and multiasset at Bar-
on loan underwriting stating ings, said that while there are
that leverage of more than six some troubled sectors, such as
times “raises concerns for retail, overall the companies in
most industries.” his loan portfolios aren’t
Five of the six largest new showing “excessive leverage.”
loans backing leveraged buy- Economic “fundamentals are
outs this year have exceeded very supportive,” he said.
those levels, according to Dea- Loans to fund buyouts from
logic and Moody’s Investors private-equity firms are still
Service. well below where they were
The largest was a $3.15 bil- before the crisis. So far this
lion loan taken earlier this year, U.S. loan issuance used
year by Team Health Holdings to fund leveraged buyouts is
Inc. to fund Blackstone Group 34% lower than in 2007. While
LP’s leveraged buyout of this leveraged buyout activity is on
health-care provider. In Janu- the rise in Europe, volumes
ary, Moody’s estimated that are less than a quarter of their
Team Health’s leverage was at 2007 peak.
around 7.5 times. But there is increasing cau-
Moody’s USI Insurance Ser-
vices had leverage of just
above eight times following its
takeover by KKR & Co. and
tion. Beth Maclean, a portfolio
manager at Pacific Investment
Management Co, said she has
been reducing risk by favoring
Caisse de dépôt et placement larger and better capitalized
du Québec, which was fol- loans with higher ratings.
lowed by $2 billion in lever- “We are seeing increasing
aged loans. risks across the board in the
Other corners of the market loan market in Europe and the
are showing signs of overheat- U.S.,” she said.
ing. In the high-yield bond
market, another area where THE WALL STREET JOURNAL.
riskier companies look for Europe Edition ISSN 0921-99
funding, the extra premium in- The News Building, 1 London Bridge Street,
London, SE1 9GF
Thorold Barker, Editor, Europe
Grainne McCarthy, Senior News Editor, Europe
CORRECTIONS  Cicely K. Dyson, News Editor, Europe
Darren Everson, International Editions Editor
AMPLIFICATIONS Joseph C. Sternberg, Editorial Page Editor
Anna Foot, Advertising Sales
Jacky Lo, Circulation Sales
Andrew Robinson, Communications
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THE WALL STREET JOURNAL.
Results
Point to
Tough
Road for
Merkel
BY BERTRAND BENOIT
AND WILLIAM BOSTON
BERLIN—German voters
handed Angela Merkel a disap-
pointing victory on Sunday,
forcing her into what will be
one of her most delicate bal-
ancing acts since she took
power 12 years ago.
While the chancellor fin-
ished first and is all but guar-
anteed to head the next gov-
ernment for a fourth term, she
scored her party’s worst result
since 1949, losing more than
one million voters to the right-
wing Alternative for Germany,
or AfD, according to pollster
Infratest-Dimap.
Within minutes of the first
exit polls flashing on TV
screens across the country,
leaders of her conservative
party were calling on her to
rethink a centrist course they
said had alienated former sup-
porters.
“We’ve made the mistake
that we left an open flank on
our right on immigration and
on security,” said Horst See-
hofer, Bavaria’s state premier
and chairman of the Christian
Social Union, Ms. Merkel’s sis-
ter party in the southern state.
“We must close this vacuum.”
This is something Ms.
Merkel could find hard to do.
Given the election results,
Ms. Merkel must build a coali-
tion to govern. But she has no
option for a center-right ma-
jority, and her current coali-
tion partner, the Social Demo-
cratic Party, has announced it
would go into opposition. The
only coalition possible for Ms.
Merkel appears to be an un-
tested alliance with the pro-
business Free Democrats, or
FDP, and left-leaning Greens,
which scored 10.6% and 8.9%
Sunday respectively, according
to early estimates released by
ARD public-sector broadcaster.
As head of such a govern-
ment, Ms. Merkel would have
to chart a path between the
demands of her increasingly
restless party, the misgivings
of the FDP on such issues as
surveillance, and the liberal
views of the Greens on immi-
gration and the environment.
“Merkel’s control on her
party is very much dimin-
ished,” said Jackson Janes,
president of the American In-
stitute for Contemporary Ger-
German Chancellor
Angela Merkel scored
her party’s worst
result since 1949.
man Studies at Johns Hopkins
University. “Holding this or-
chestra together is going to
become far more compli-
cated.”
One possibility, he said,
would be for Ms. Merkel to
“outsource” the handling of
security and immigration pol-
icy, for instance by naming a
hard-line CSU politician to the
interior ministry, while focus-
ing herself on foreign policy
and Europe.
As chancellor, Ms. Merkel
ignored many conservative ta-
boos. Her decision to open
borders to hundreds of thou-
sands of refugees in late 2015
nearly broke her party apart,
as several senior conserva-
tives, including Mr. Seehofer,
rebelled against the policy.
While the refugee crisis has
since receded, pollsters said
the election was a delayed in-
dictment of that decision. An
early analysis of the vote by
Infratest-Dimap showed some
67% of Ms. Merkel’s Christian
Democratic Union supporters
who didn’t vote for the party
this time named Ms. Merkel’s
refugee policy as the reason,
the institute said.
Ms. Merkel said Sunday
night, “we want to win back
AfD voters by solving prob-
lems, by taking in their con-
cerns and in part their fears,
and especially through good
policy-making.”
—William Wilkes
contributed to this article.
Monday, September 25, 2017 | A3
WORLD NEWS
Voters Boost German Nationalists
A strong showing by
the Alternative for
Germany has jolted
the country’s politics
BY ANTON TROIANOVSKI
AND ZEKE TURNER
BERLIN—An antiestablish-
ment, nationalist party won a
foothold in Germany’s parlia-
ment Sunday, delivering one of
the biggest jolts to the coun-
try’s political establishment in
the postwar era and sending
its multiparty system into un-
charted waters.
Alternative for Germany, or
AfD, which wants to limit Eu-
ropean integration, cut back
on immigration and lessen
Germany’s focus on Holocaust
MARTIN MEISSNER/ASSOCIATED PRESS
remembrance, captured
around 13% of the vote in an
election that saw eroding sup-
port for mainstream parties,
projections based on early re-
sults showed.
That means that for the
first time in more than half a
century, a party will enter the
national legislature that holds
views well to the right of the Alexander Gauland and Alice Weidel, the top candidates representing for the AfD, celebrated with supporters at an election party.
center-right bloc led by Ger-
man Chancellor Angela “Don’t repeat history!” read established parties’ handling before it can be undertaken, Central Council of Jews in
Merkel, whose Christian Dem- another. of the migration crisis. and all other parties have Germany, said. “A party that
ocrats won the most votes AfD’s success echoes the “New people have to get to pledged not to work with it. tolerates extreme right-wing
Sunday. rise of nationalist parties else- power,” she said. “We can’t But the party’s rise to the thoughts and agitates against
Parties must win 5% of the where in Europe. The German bring people into the country national legislature will give it minorities is now not only in
vote to seat representatives in political mainstream will now when we aren’t able to take a new level of prominence. It nearly all state parliaments,
the German Bundestag. have to decide whether to con- care of our own.” can expect more frequent invi- but also in the federal parlia-
Backers reacted with jubila- tinue trying to isolate the AfD, Alice Weidel, the other co- tations to appear on national ment.”
tion in a Berlin nightclub the ignore it or engage in hopes of leader of AfD ticket, said the television, and each of its law- Founded in 2013 focused on
party rented out to celebrate defusing its antiestablishment party’s initial goal in Parlia- makers will receive state fund- opposing eurozone bailouts,
the results. message. ment would be to launch an ing to hire staff and open local the party made a splash by
“We are going to chase “We will have to see if Ger- investigative committee to offices. It is also expected to presenting itself as a group of
down Ms. Merkel,” Alexander man democracy is able to deal look into Ms. Merkel and “all gain seats in a variety of bod- professorial, button-down
Gauland, who co-led the AfD with this kind of party,” said the legal breaches” she alleg- ies and organizations, from conservatives who opposed
ticket, said on Sun- Gero Neugebauer, a political edly committed. AfD politi- the board of the KfW develop- the Christian Democrats’ move
day night, “and get our coun- scientist at Berlin’s Free Uni- cians say Ms. Merkel broke the ment bank to the supervisory to the center under Ms.
try back for the people.” versity. law by allowing refugees from council of the German History Merkel.
The AfD remains a cultural Exit polls showed the AfD the Middle East and Africa to Museum. The AfD scored below 5%
lightning rod in Germany. did particularly well in the enter Germany in 2015; the The party describes Ger- in that year’s general elec-
Demonstrators gathered out- former East Germany and government says the actions many’s Muslim minority as a tion, was soon riven by a
side the AfD election-night among men, blue-collar work- were legal. “great danger,” and thinks too leadership battle, and looked
venue, forcing party organiz- ers, and the unemployed. The party’s direct influence much attention is paid to Ho- close to irrelevance two years
ers to defensively close off the Sandra Blümke, a 37-year- on policy will be limited. It locaust remembrance. later.
second-floor balcony. “Xeno- old businesswoman in Berlin, would need one-quarter of “Unfortunately our fears —Andrea Thomas
phobia isn’t an alternative,” said she voted for the AfD be- Bundestag members to sup- have come true,” said Josef and Todd Buell
read one protester’s banner. cause she was fed up with the port its Merkel investigation Schuster, president of the contributed to this article.
VOTE cording to the exit polls, which
We like to take
wouldn’t be enough for a gov-
erning majority.
Instead, Ms. Merkel could
Continued from Page One seek a repeat of her current
says the country should re- “grand coalition” with the So-
duce its focus on Holocaust re- cial Democrats, but would face
membrance.
Support for AfD has surged
in the wake of the arrival in
Germany of more than a mil-
lion refugees and migrants,
resistance from some in her
party. Many Social Democrats
fiercely oppose another four
years governing in Ms. Merkel’s
shadow, and many mainstream
a different path.
Yours.
admitted by Ms. Merkel’s gov- politicians fear that uniting the
ernment since 2015. country’s two largest political
Sunday’s election results are parties in one government yet
a sign that even in stable Ger- again could further strengthen
many, the political center is the political extremes on the
weakening—as it has across right and the left.
much of Europe—in the face of Martin Schulz, the SPD’s
pressure from nationalist and failed chancellor candidate,
euroskeptic parties once on the gave little hint of the party’s
margins. In addition to the AfD’s next steps in his speech ac-
gains, the far-left Left Party knowledging the defeat. But
was projected to win 9.1%. other senior SPD figures in-
The AfD’s rise and what is cluding parliamentary leader
likely to be an arduous effort Thomas Oppermann reacted
by Ms. Merkel to assemble a to the first projected result
ruling coalition inject new un- by saying the voters have re-
certainty into Europe’s biggest jected the grand coalition, a
economy—and the European strong hint his party wants
Union itself—as important pol- to have some time in opposi-
icy decisions loom on the direc- tion.
tion of the EU and immigration. Ms, Merkel could also try
Fear of losing more voters for a three-way alliance with
to the AfD could boost the in- the Free Democrats and the
fluence of conservatives in Ms. environmentalist Greens,
Merkel’s camp who are skepti- which were on track to win
cal of deeper European integra- 8.9% of the vote.
tion and want the chancellor to The coalition-building pro-
limit the numbers of refugees cess could drag on for weeks
that Germany will accept. or even into the winter, as Ms.
Ms. Merkel remains widely Merkel and other party leaders
popular, buoyed by a strong hammer out the new govern-
economy providing jobs for al- ment’s position on EU integra-
most every German who wants tion, immigration and other is-
one. Her pre-vote approval rat- sues in their coalition talks.
ings were over 60%. But with Europe will be eagerly
her own party falling short of awaiting the result as French
an outright majority, she could President Emmanuel Macron
face complicated negotiations prepares to seek deeper politi-
to build a ruling coalition. cal ties among the 19 coun-
If the exit polls are right, tries that use the euro and the
her conservative alliance’s fa- EU grapples with how to re-
vored partner, the pro-busi- spond to the continuing flow
ness Free Democrats, were set of African migrants crossing
to win 10.6% of the vote, ac- the Mediterranean.
Projected Results
Percentage of votes won in Germany’s election
Christian Democrats* 33% Entrepreneurial thinking.
Social Democrats 21%
Private banking. efginternational.com
Alternative for Germany 13%
EFG International’s global private banking network operates in around 40 locations worldwide, including Zurich,
Geneva, Lugano, London, Madrid, Milan, Monaco, Luxembourg, Hong Kong, Singapore, Miami, Bogotá and Monte-
Free Democrats 11% video. In the United Kingdom, EFG Private Bank Limited’s principal place of business and registered office is located
at Leconfield House, Curzon Street, London W1J 5JB, T + 44 20 7491 9111. EFG Private Bank Limited is authorised by
Greens 9% the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation
Authority. EFG Private Bank Limited is a member of the London Stock Exchange. Registered in England and Wales
Left 9% as no. 2321802. EFG Private Bank Ltd is a subsidiary of EFG International.
Note: Projections based on partial returns as of 3:10 p.m. EDT *Including Bavarian sister
party Christian Social Union Source: ARD Broadcasts
THE WALL STREET JOURNAL.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Monday, September 25, 2017
North Korea,
U.S. Raise
New Threats
American warplanes
fly near coast in show
of force as Pyongyang
says it will attack
BY FARNAZ FASSIHI
AND BEN KESLING
North Korea’s foreign minis-
ter warned in a United Nations
speech that a rocket attack on
the U.S. mainland was “inevita-
ble,” while U.S. warplanes flew
off the east coast of North Ko-
rea in an explicit show of force.
The eight U.S. aircraft flew
close to the North Korean
coastline while remaining in
international airspace, the
Pentagon said, adding it was
the farthest north of the de-
militarized zone between
North Korea and South Korea
that American warplanes have
flown since Pyongyang started
testing ballistic missiles and
nuclear weapons in the 1990s.
“This mission is a demon-
stration of U.S. resolve and a
clear message that the presi-
dent has many military op-
tions to defeat any threat,”
Pentagon spokeswoman Dana
White said. “We are prepared
to use the full range of mili-
tary capabilities to defend the
U.S. homeland and our allies.”
The moves on Saturday
capped a week of hostility be-
tween the two countries and
involving their top leaders.
The rising animosity has
spurred world leaders to call
Iran Tests a Missile Amid Tensions Dissenter Warns
BY ARESU EQBALI
TEHRAN—Iran said it had
tested a new midrange ballis-
tic missile, the day after un-
veiling it in defiance of U.S.
criticism over its disputed nu-
clear program.
State television flashed im-
ages of the Khoramshahr mis-
sile’s disengaging warhead,
calling it the country’s third
such missile capable of travel-
ing some 1,240 miles. The an-
nouncement came after it and
other missiles, tanks and a
submarine were displayed in a
military parade on Tehran’s
outskirts marking the anniver-
sary of the 1980s Iran-Iraq
war.
President Hassan Rouhani
on Friday vowed that his
country would continue to bol-
ster its ballistic-missile pro-
gram, amid rising tensions
with the U.S.
“Whether you like it or not,
we will strengthen our defense
and military capabilities as
deemed necessary for deter-
WORLD WATCH
SWITZERLAND
Voters Reject Changes
To Pension System
Swiss voters rejected a gov-
ernment-backed proposal to shore
up the national pension system in
part by raising the retirement age
for women and increasing taxes.
According to preliminary fig-
ures released on Sunday, the pen-
sion-overhaul plan was rejected
by a 53%-47% margin. It had been
passed by parliament in March.
The changes would have in-
creased the retirement age for
women to 65 from 64, putting it
in line with the age for men.
—Brian Blackstone
ITALY
5 Star Movement
Opts for a Moderate
The antiestablishment 5 Star
Movement on Saturday anointed
31-year-old Luigi Di Maio, one of
its most moderate leaders, as its
candidate for premier in Italy’s
national elections next year.
On Saturday, the group pre-
sented the results of an online
vote by the movement’s activ-
ists taken last week.
Mr. Di Maio was named at a
three-day party meeting that
largely kicks off the group’s elec-
toral campaign. Italy must hold par-
liamentary elections by May.
—Giovanni Legorano
for restraint and diplomacy,
but neither capital has shown
an inclination to back down.
President Donald Trump last
week derided North Korean
leader Kim Jong Un as “Rocket
Man,” saying he was on a sui-
cide mission and that the U.S.
would annihilate North Korea if
forced to defend itself or its al-
lies. He drew a personal re-
sponse from Mr. Kim, who
called Mr. Trump “deranged”
and warned of retaliation.
On Saturday, North Korean
Foreign Minister Ri Yong Ho
suggested at the annual Gen-
eral Assembly gathering that
military strikes by his country
are inevitable. North Korea has
been steadily advancing in both
its missile and nuclear-warhead
programs and is considered
close to possessing the capabil-
ity of an intercontinental strike.
“Trump might not have
been aware what is uttered
from his mouth, but we will
make sure that he bears con-
sequences far beyond his
words, far beyond the scope of
what he can handle, even if he
is ready to do so,” Mr. Ri said.
“He committed an irrevers-
ible mistake of making our
rockets’ visit to the entire U.S.
mainland inevitable all the
more,” he said.
U.S. officials watched as Mr.
Ri spoke, but the U.S. mission
to the U.N. didn’t comment on
Mr. Ri’s speech.
Mr. Ri’s speech marked a
setback to hopes that Pyong-
yang was open in the short
Iranian armed forces members marched in a military parade Friday.
rence. Not just our missiles
but also our land, air and mar-
itime capabilities,” he said in a
speech. “We won’t ask any-
body’s permission to defend
our people.”
Mr. Rouhani also addressed
a key source of tension with
the U.S. and its regional allies,
saying Iran would continue to
defend “the wronged people of
Yemen, Syria and Palestine,”
Mexico Quake Survivors Reel
BY ROBBIE WHELAN
AND DUDLEY ALTHAUS
MEXICO CITY—Even as the
death toll from last week’s
earthquake climbed on Sunday
to 319, tens of thousands of
people who survived the disas-
ter in central Mexico were
dealing with a new challenge:
the gnawing uncertainty of
not knowing when, if ever,
they will be able to return to
their homes.
Rescue teams still held out
hope of finding survivors five
days after the 7.1-magnitude
quake, which claimed some 181
lives in Mexico City, parts of
which sit on an ancient lake
bed that amplifies the shaking.
At a collapsed office block
in the capital’s Roma neigh-
borhood, dogs were still de-
tecting life under the rubble
early Sunday, local media re-
ported. The building was one
of about 40 that collapsed in
Mexico City when the quake
struck Tuesday afternoon.
“The priority is to continue
with search-and-rescue
tasks…at all points where
there is the possibility of find-
ing people alive,” Mexico City
Mayor Miguel Ángel Mancera
said at a press conference.
“We have the hope of finding
people alive.”
On Sunday, aftershocks con-
tinued from the 8.1-magnitude
HK JP KO ML SI
WORLD NEWS
Tens of thousands of North Koreans gathered in Pyongyang’s Kim Il Sung Square on Saturday for a protest against the U.S.
run to attempts to de-escalate
tensions in the interest of di-
plomacy and negotiations.
The North Korean official de-
livered a series of personal at-
tacks on Mr. Trump, calling him
“mentally deranged,” “evil,” and
an “old gambler” who had
turned the White House into “a
noisy marketing place” and the
U.N. into a “gangster den.”
He said it was Mr. Trump,
not North Korean leader Kim
Jong Un, who was on a “sui-
cide mission” and that he
should be blamed if innocent
American lives were lost.
Mr. Ri also said North Ko-
rea’s nuclear program had en-
tered into the phase of comple-
tion and the country was a
“responsible nuclear state” that
would only use its weapons
against nations that took mili-
tary actions against Pyongyang.
indicating it wouldn’t scale
back its involvement in Middle
East conflicts.
The missile test came days
after U.S. President Donald
Trump sharply criticized Iran
in his address to the United
Nations General Assembly, de-
nouncing the landmark 2015
nuclear deal reached between
Tehran and six world powers
including the U.S.
quake that hit the southern
states of Oaxaca and Chiapas
on Sept. 7, killing almost 100
people. A 6.1-magintude after-
shock in Oaxaca early Satur-
day was strong enough to set
off the earthquake alarms and
be felt in Mexico City, spark-
ing panic and briefly halting
rescue work but causing no
further damage in the capital.
Last week’s tremor
left thousands of
families in the capital
city homeless.
Last Tuesday’s quake, cen-
tered much closer to Mexico
City, has had relatively few af-
tershocks, the biggest of which
was magnitude 4, said Carlos
Valdés, director of the Na-
tional Center for Disaster Pre-
vention.
The tremor caused serious
damage to at least 3,000 build-
ings in Mexico City, Mr.
Mancera said, leaving thou-
sands of families homeless and
many structures uninhabitable.
There were nearly 17,000 peo-
ple at shelters across the city,
officials said.
As of late Saturday, inspec-
tions had been carried out at
IN UK FR MN PR
Mr. Trump responded via
Twitter late Saturday: “Just
heard Foreign Minister of
North Korea speak at U.N. If
he echoes thoughts of Little
Rocket Man, they won’t be
around much longer!”
In the U.S. air operation
east of North Korea, eight
planes including Air Force B-1
Lancer bombers and F-15C Ea-
gle fighter escorts flew off the
east coast of North Korea, the
Pentagon said.
The U.S. air mission under-
scored “the seriousness with
which we take DPRK’s reckless
behavior,” said Ms. White, the
Pentagon spokeswoman, refer-
ring to North Korea by its ac-
ronym.
Two B-1 bombers flew from
the U.S. territory of Guam, home
to two U.S. military bases, in-
cluding Andersen Air Force base
Mr. Trump referred to the
missile test in a Twitter mes-
sage on Saturday that reiter-
ated his criticism that the nu-
clear agreement doesn’t cover
issues such as Iran’s missile
program or support for re-
EBRAHIM NOROOZI/ASSOCIATED PRESS
gional militant groups.
“Iran just test-fired a ballis-
tic missile capable of reaching
Israel,” he wrote in the Twit-
ter message. “They are also
working with North Korea. Not
much of an agreement we
have.”
U.S. and international ex-
perts have said there is no evi-
dence of nuclear cooperation
between the two countries,
but that they have cooperated
on missile development.
U.S. sanctions introduced
this year included legislation
targeting the missile program.
Iran regards those new sanc-
tions as a violation of the deal,
which suspended most inter-
national sanctions on Tehran
in return for curbs to its nu-
clear program. It doesn’t men-
tion ballistic missiles.
7,649 buildings, 87% of which
suffered minor damage and
can still be occupied, Mr.
Mancera said. The rest would
have to be assessed to deter-
mine if they needed to be de-
molished.
Across the city, soldiers,
police officers and representa-
tives of the government’s Civil
Protection agency stood guard
at buildings with crumbled fa-
cades, shattered plate-glass
windows and sagging walls,
their entrances roped off with
yellow tape.
Julio Padilla, 25 years old,
lived with his parents in a six-
story building in the Roma Sur
neighborhood. Two of the four
walls of their condominium
collapsed inward, and the fa-
cade of the building fell off in
pieces.
Mr. Padilla, who is living
with a friend temporarily, said
neither of his parents—a re-
tired small-business owner
and a retired airline secre-
tary—had pensions or prop-
erty insurance, and the family
had mostly given up hope on
ever living in the building
again.
“The fear is that we’ll never
again be able to live in the
comfort we once had,” he said.
“Compensation from the gov-
ernment is a possibility, but
we have no idea how long that
will take.”
THE WALL STREET JOURNAL.
and its fleet of B-1 bombers.
Mr. Kim in August threat-
ened to launch a missile attack
on the island of Guam, located
roughly 3,800 miles west of
Hawaii and 2,100 miles south-
southeast of Pyongyang,
though he ratcheted back that
threat days later.
The six F-15C escorts were
deployed from Kadena Air
Base in Okinawa, Japan, U.S.
Pacific Command spokesman
Cmdr. David Benham said.
Cmdr. Benham didn’t com-
ment on the planes’ arma-
ments but said the F-15s pro-
vided fighter escort and “they
are prepared to defend against
attack, if necessary.”
Japan is within the range of
North Korea’s ballistic mis-
siles, and in mid-September
Mr. Kim launched a missile
over Japan, the second such
As Kurds Set Vote
BY ISABEL COLES
AND ALI NABHAN
ERBIL—Kurds are expected
to vote on Monday in support
of a referendum that could
bring them closer to indepen-
dence from Iraq, riding a wave
of nationalism that has
drowned out concerns from
the international community.
Inside the semiautonomous
region, one man is swimming
against the tide.
Branded a traitor, business-
man Shaswar Qadir is the only
Kurdish figure to run a cam-
paign against the referendum,
taking on leaders in the region
who have fought for an inde-
pendent state since the
breakup of the Ottoman Em-
pire in 1918.
His following is tiny by
comparison.
But the 38-year-old political
upstart has given voice to
widely held concerns about
the timing and repercussions
of a vote that Western powers
have warned will undermine
the war against Islamic State,
spell the end of Iraq and de-
stabilize the entire region.
“The circumstances are not
ready for us to have indepen-
dence, internally or interna-
tionally,” said Mahmoud Oth-
man, a veteran of the Kurdish
struggle who is close to the
region’s leaders. “This is a
gamble.”
The Kurds no longer believe
in a unified Iraq, proponents
of the referendum say. They
are prepared to “pay any price
for freedom” from a country
that has inflicted genocide on
them, the region’s president,
Masoud Barzani, told a crowd
of more than 20,000 on Friday.
It isn’t only Baghdad that
opposes the referendum. The
Kurds packed a stadium in Erbil in support of Monday’s referendum.
KCNA/KNS/AGENCE FRANCE-PRESSE/GETTY IMAGES
launch in the span of a month.
That missile flew an estimated
2,300 miles, according to
South Korea’s Joint Chiefs of
Staff, which also would put
Guam within range.
Cmdr. Benham declined to
comment on whether North
Korea responded in any way to
the mission, citing policy to not
discuss intelligence matters.
At the U.N., Mr. Ri said his
country was a victim of unfair
sanctions and biased action by
the world body and said the
U.N. was tilted in favor of the
five permanent members of
the Security Council, the U.S.,
U.K., France, Russia and China.
North Korea appeared defi-
ant against international criti-
cism and U.N. Security Council
action, dismissing both as un-
justified pressure by the U.S.
and its allies.
effort also has riled Iraq’s
neighbors, Iran and Turkey, as
well as the U.S., which has
been one of the Kurds’ firmest
allies.
In the latest strongly
worded statement from the
U.S., the State Department
warned the vote “may jeopar-
dize Iraqi Kurdistan’s regional
trade relations, and interna-
tional assistance of all kinds.”
Still, the Kurds have re-
buffed an alternative proposed
by Western powers to facili-
tate talks with Baghdad on all
matters of concern, including
the future of their relation-
ship. Kurdish leaders say they
have exhausted dialogue and
will now settle for no less than
a clear road map to indepen-
dence.
“This is not a risk-free pro-
cess” said Hoshyar Zebari, one
of the referendum’s main
backers. “We have calculated
the risk.”
Although the vote won’t au-
tomatically deliver statehood,
Kurdish leaders say a strong
“yes” would give them a man-
date to initiate divorce pro-
ceedings with Baghdad, culmi-
nating in an amicable
separation years from now.
Like the overwhelming ma-
jority of Iraq’s Kurds, Mr.
Qadir says he, too, dreams of
statehood, but doesn’t believe
the referendum will advance
their cause. Many Kurds fear it
could have the reverse effect,
endangering what the Kurds
have gained over decades of
armed struggle and diplomacy.
“This unrecognized and un-
trusted referendum will not
help us,” Mr. Qadir said. Talks
with Baghdad and the Kurds’ al-
lies should come first, he adds.
—Nour Malas in Istanbul
contributed to this article.
CHRIS MCGRATH/GETTY IMAGES
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Letter From North Korea
As the nuclear crisis mounts, Journal reporters were able to visit Pyongyang and see life there in a tightly controlled tour.
BY JOHN LYONS
AND JONATHAN CHENG
N
ORTH KOREA’S nu-
clear ambitions are
etched into the land-
scape of Pyongyang,
its showcase capital
city. A giant sculpture of the
atom sits on top of a new apart-
ment tower built for nuclear sci-
entists. Atom designs adorn road
overpasses, lampposts and build-
ing facades.
Bomb imagery colors daily life.
At an orphanage, children play
with plastic mobile rocket launch-
ers instead of toy trucks. Shops
sell commemorative intercontinen-
tal ballistic missile stamps, while a
bakery sells cakes featuring an up-
right rocket, ready for launch.
During a recent visit, the first
by The Wall Street Journal since
2008, the city’s atomic aesthetics
reinforced the message govern-
ment officials conveyed repeatedly
to the Journal reporters: North
Korea won’t part with its nuclear
weapons under any circumstances
and is resolved to suffer economic
sanctions and risk war with the
U.S. to keep them.
“It is too late, we have grown
up,” said Ri Yong Pil, the vice pres-
ident of the Institute for American
Studies, a division of North Ko-
rea’s Ministry of Foreign Affairs.
“We are not interested in dialogue
to undermine our newly built stra-
tegic status.”
The Journal reporters traveled
to Pyongyang for a tightly con-
trolled reporting trip between
Sept. 14 and 19 amid rising tension
between the U.S. and North Korea,
one of the world’s most brutal and
isolated dictatorships. North Korea
launched a ballistic missile over
Japan on the second day of the
trip. Hours after the group de-
parted, U.S. President Donald
Trump vowed to “totally destroy
North Korea” if the U.S. is required
to defend itself or allies, saying
leader Kim Jong Un—whom he
called “Rocket Man”—was on a
suicide path.
On the day the Journal group
flew into Pyongyang, North Korea’s
state news agency declared in a
news release that all “Yankees”
should be “beaten to death, as a
stick is fit for a rabid dog,” for
persuading the United Nations to
enact economic sanctions against
the country.
Two affable, English-speaking
diplomats in dark suits who re-
ceived the Journal at Pyongyang’s
new glass-fronted international air-
port took a more measured tone.
Over the next few days, the su-
pervised series of official inter-
views, visits to city landmarks and
brief encounters with a handful of
Pyongyang residents appeared to
signal a rare outreach campaign by
the government, which has in-
cluded other U.S. news organiza-
tions, to describe what it sees as
the logic of its nuclear-weapons
program. The U.S. and North Korea
don’t have diplomatic relations,
and even informal contact between
the two nations is limited.
Official reporting trips to North
Korea only happen with the ex-
plicit sanction of the state, and
visitors are kept under close
watch. Authorities granted Journal
requests to visit factories and
stores, which were chosen by the
government. Some requests, such
as to meet two U.S. citizens de-
tained while working at a Pyong-
yang university, were denied.
Handlers allowed the Journal to
talk to residents encountered
along the way, but translations
were done by the North Koreans
and it was unclear if people felt
free to speak their minds.
North Korean officials said their
weapons, which include nuclear
missiles being designed to reach
the U.S., were meant for defensive
purposes only. They described
them as necessary to end what
they said was a constant threat of
attack by the U.S., which has main-
tained troops in South Korea since
1953. The officials said they
wanted to force the U.S. to coexist
under a system of deterrence,
much as it did with the Soviet
Union in the Cold War.
The North Korean officials ex-
pressed curiosity about difficult-
to-answer questions such as: Who
is Mr. Trump’s chief adviser? And
will Secretary of State Rex Tiller-
son keep his job? One official had
followed the heated U.S. debate
over transgender soldiers, and
wondered if the U.S. had many.
They were convinced the U.S.
has wanted the destruction of their
government since the Cold War,
and reminded reporters that the
U.S. designated North Korea as part
of an axis of evil in 2002. They ex-
pressed chagrin at perceived U.S.
slights, with Mr. Ri recalling taking
offense once when a U.S. immigra-
tion officer at New York’s John F.
A SIGNBOARD in Pyongyang declares ‘No one can stand in our way’ as a tank rolls over words representing U.N. sanctions and North Korea’s international isolation.
A BIRTHDAY CAKE in Pyongyang featured a replica of a North Korean rocket.
Kennedy International Airport
didn’t realize that the Democratic
People’s Republic of Korea was
North Korea, not South.
Most Washington policy makers
view talk of coexistence with a nu-
clear-armed Pyongyang as a non-
starter. Allowing an unpredictable
leader such as Kim Jong Un, who
has threatened to attack the U.S.,
to have such capabilities is simply
too risky.
North Korea has long ranked
among the world’s most repressive
nations. During the 1990s, the
country fell into a famine that
killed hundreds of thousands, even
as the government diverted re-
sources to the military. Today tens
of thousands of North Koreans are
believed to languish in gulags and
the state allows no dissent.
Pyongyang officially denies the
existence of gulags and says all of
its citizens enjoy human rights. It
acknowledges the famine, but
blames it on U.S. sanctions and
bad weather.
In interviews with grocery-store
employees and other workers ar-
ranged by the government, and in
conversations struck up with peo-
ple approached by the Journal, all
‘We are not interested in dialogue to undermine
our newly built strategic status.’
said they supported the missile
program and were resolved to
make sacrifices if sanctions
squeezed the economy.
A restaurant bartender ap-
proached by the Journal expressed
pride in the country’s advancing
missile capabilities after a broad-
cast of a Sept. 15 missile test
played on a television over the bar.
“We will accomplish the final vic-
tory against the U.S.,” the bar-
tender said. “I wish they would
launch 20 or 30 missiles a day.”
Several people, including some
government officials, expressed
wariness of China, a longtime
friend of Pyongyang that histori-
cally has opposed any talk of re-
gime change. China supported re-
cent steps to tighten sanctions
against North Korea, and some
residents said they question the
quality and safety of Chinese foods
and other products.
Pyongyang appeared spotless. A
Korean War museum with marbled
REVIEW
halls that supposedly takes four
days to tour didn’t have a single
visitor one morning. Broad avenues
had sparse traffic despite the city’s
three million residents. A Protes-
tant church service had no North
Korean families in it, just individu-
als, mostly elderly women. The ser-
mon was an anti-American diatribe.
It is also a city undergoing a
growth spurt, thanks to an eco-
nomic miniboom driven by trade
with China. Kim Jong Un is adding
futuristic-looking skyscrapers,
many built for scientists and uni-
versity lecturers, plus cultural
amenities including a water park.
A new science-and-technology li-
brary has computer labs connected
to the country’s internal internet
system, which for nearly all North
Koreans is cut off from the World
Wide Web.
The Journal’s team was housed
in a lavish villa of white marble
and glass on the rural outskirts of
Pyongyang, and was encouraged to
walk the grounds freely after long
reporting days. On two occasions,
a guard with a rifle motioned re-
porters back to the villa, ending
the strolls.
Propaganda is ubiquitous, from
anti-U.S. posters and slogans to the
constant sound of patriotic hymns,
sometimes set to rock beats. The
messages exalt three generations
of Kim family leaders, who have
stayed in power for more than
seven decades by building a police
state and instilling in the populace
a quasi-religious devotion.
At a new ophthalmology hospi-
tal with a giant bubble window
shaped like a human eye, external-
affairs director Kim Un Ae said the
facility was completed in six
months and that supreme leader
Kim Jong Un visited on May 26,
2016, during construction to give
“on-the-spot guidance.”
Mr. Kim suggested changes to the
hospital’s eye-shaped logo, including
adding a second line to the eye-
brow, the hospital’s external-affairs
director said. Mr. Kim picked green
as the main interior color because it
soothes the eyes, and guided the
glasses shop inside to organize
frames by gender and price.
Monday, September 25, 2017 | A5
KYODO NEWS/GETTY IMAGES
conclusions about whether Pyong-
yang can outlast the sanctions.
During the trip, Mr. Trump sug-
gested in a tweet that new sanc-
tions were causing long lines at
Pyongyang gas stations.
A European aid worker in
Pyongyang interviewed by the
Journal said gas prices had risen
significantly since November. But
there were no lines at four gas sta-
tions that reporters saw while
touring the city. At one station
PAOLO BOSONIN/THE WALL STREET JOURNAL
where reporters waited for 20
minutes seeking permission to
take a photograph, two cars came
in to fill up.
Ri Gi Song, an economist at
North Korea’s Academy of Social
Sciences, said North Korea was
well positioned to weather sanc-
tions after enduring them in some
form or another since the end of
the Korean War. Cryptically, he
said the country could rely on oil-
producing North Korean allies to
Time-to-completion informa- get around the sanctions. “I’ll let
tion and dates of leaders’ on-the- you guess which,” he said. When
spot visits were recurring themes the Journal suggested a few possi-
at museums, a dolphin-show fa- ble countries, including Iran and
cility, a factory, hospitals and Venezuela, he smiled and repeated
other buildings. his answer.
Elites appear to be living well. A What’s more, he said, the nu-
sushi restaurant run by deceased clear-weapons program was al-
leader Kim Jong Il’s former sushi ready allowing the country to re-
chef serves $100 platters of raw duce spending on conventional
fish. A supermarket in Kwangbok weapons and channel that money
Street had products ranging from to economic development.
locally made tea to $70 imported “You can’t hurt this economy
Japanese whisky. with sanctions,” said Ding Jiansh-
People are playing videogames eng, a Chinese coal trader who
on locally made smartphones that lives in Pyongyang and was enjoy-
are becoming more common yet re- ing a musical performance by the
main disconnected from the global waitresses at a bustling new
internet. One of the Journal’s han- Pyongyang pizza restaurant on the
dlers said some parents worry banks of the Taedong River. He
about how much screen time their said his coal business was thriving
children get, much like Americans. despite U.N. sanctions designed to
Solar panels have sprung up stop coal sales to North Korea,
across Pyongyang, appearing on though he declined to say how.
apartment balconies, providing an The Journal also spoke with Ri
alternate power source for individ- Song Ho, who directs the Golden
uals and insulating them from Cup Trading Co. factory, which pro-
power outages while also easing duces some 700 different snacks,
their reliance on government-sup- sodas, bread and sweets, including
plied power. a cake featuring a North Korean
Although the Journal’s team rocket ready for launch. He said his
didn’t leave Pyongyang, foreign aid experience during the lean years of
workers who have access to other the 1990s inspired him to produce
more food to offset the sanctions.
“Since we were kids, we’ve
known how to find a way to make
things work,” he said.
Like all companies in North Ko-
rea, the Golden Cup is state-owned.
An economic policy introduced in
2013 gives managers such as Mr. Ri
parts of the country describe a more decision-making power, he
strikingly different scene in the said, as well as the freedom to sell
provinces. Even on the city’s out- any surplus production directly to
skirts, the drop-off in living stan- customers for extra profit.
dards is stark. Journal reporters Much of the building was dedi-
saw farmers relying on ox carts in cated to other activities. On a
fields just a short drive from the higher floor, a hallway decorated
new dolphin-show facility and sci- like a cave led to a large tropical-
ence complexes. themed swimming pool featuring
North Korea’s economy grew live banana trees.
3.9% last year to around $32 bil- Mr. Ri had two rooms dedicated
lion, according to South Korea’s to the two visits made by North
central bank, which makes esti- Korea’s leader.
mates about the economy of its His conversation moved quickly
northern neighbor in the absence from making snacks to nuclear de-
of reliable figures from Pyongyang. terrence. He was convinced that
That is the fastest growth since the threat of war would fade as the
1999, according to South Korea, U.S. came to accept North Korea’s
and may have been helped by gov- nuclear power as a fact of life.
ernment spending on weapons “We now have all these nuclear
manufacturing. weapons to defend us. I believe in
The U.S. strategy is to squeeze a few days there will be news that
Mr. Kim by snuffing out North Ko- will mean that the U.S. will not at-
rean growth with sanctions, includ- tack us, but I can’t say what that
ing limits on purchases of oil. The is,” said Mr. Ri.
supervised nature of the Journal’s —Andrew Dowell and Paolo
trip made it impossible to draw Bosonin contributed to this article.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
WINS
inued from Page One
an analysis of government
ary data by The Wall
t Journal found.
ing Pentagon data on the
etowns of 6,800 military
alties from the wars in
and Afghanistan through
the Journal found that
came from small towns
rural areas, even though
e places made up just 17%
e U.S. population.
contrast, 23% of those
d came from core counties
S. metropolitan areas of
than one million people,
e 29% of Americans live.
he Goskis’ story is one of
hers at home and at arms.
was born first, and Mike
wed. That was the way it
d always be. Growing up,
threw the first punch,
Mike leapt to his defense.
quit high school; Mike
he same. Chris enlisted in
military the day after 9/11;
wasn’t far behind.
he thing Mike loved most
e world was Chris,” their
r said, “and the thing
loved most in the world
Mike.”
ter burying his brother in
Mike was left to find a
path.
his account of his journey
sed on military, police and
cal records, as well as
nals, emails, texts,
s and photographs;
nterviews with rel-
s and friends, and
ades and officials
Army Special
s, U.S. Special Oper-
s Command, Marine
ial Operations Com-
d, the 10th Mountain
ion and the 2nd Air
l Gunfire Liaison Co.
tle
tructors’
hris and Mike Goski
born on May 1, 1981.
grew up in Red Oak,
he time a town of
0 people and count-
crepe myrtles, 20
s south of Dallas. The
y lived on a street of
e-story brick houses.
he boys were fraternal
s with good looks so simi-
was hard to distinguish
rom the other.
heir father, Tim Goski,
ed in trucking. Their
er, Kathy, was a nurse.
he Goskis tried to raise
wins—obedient as young
—with a firm yet loving
. Chris and Mike devel-
a rambunctious energy
attracted friends.
heir mischief eventually
ed into delinquency. Their
r, Tim, had quit drinking
nd the time Chris and
were 14 years old, yet
ure of substance-fueled
pe seemed to pass from
generation to the next.
hris was the impulsive
r; Mike, the thoughtful
wer. “Shut the f— up,
, and come on,” Chris
d say. In fights, he would
h off and throw the first
h, and Mike would step in
ack up his brother. After
such bout, Mike told his
er: “I was just standing
thinking, ‘Chris, don’t do
n’t say it.’”
nny Jones, who met the
s in eighth grade and
d Mike, said, “They were
ng-to-do-anything type
little destructors.”
he twins bought and sold
s in tough South Dallas
hborhoods. In Red Oak,
oski brothers became the
l suspects to local police.
hen the boys were 16, Tim
Kathy moved the family,
h included a younger son,
o Irving, Texas, hoping to
e the twins from a future
son or the morgue. “They
rebels in a little Texas
,” their father said, a la-
hat was tough to shake.
he move to Irving led to
trouble. Chris ripped off
g dealer, and his parents,
ied for his safety, sent
to live with his grand-
er in New Jersey in 1999.
ith his brother gone, Mike
ed deep into drugs. Tim
Kathy checked him into a
ment program, where he
diagnosed with schizo-
nia. A doctor prescribed
ntipsychotic medicine that
ed Mike’s thinking and
ed him to 275 pounds.
hris returned from New
y that spring, and by the
of summer, the brothers
ottom, aiming pistols at
other while high on PCP.
‘The thing Mike loved most in the world was Chris,
and the thing Chris loved most in the world was Mike.’
gram, where he watched the
9/11 terrorist attacks on TV.
Chris called his father and
said, “Come get me the hell
out of here.”
The following day, Chris
went to the Marine Corps re-
cruiter’s office in an Irving
strip mall and enlisted in the
Reserve. Mike also tried to
enlist, but Marine and Army
recruiters rejected him for
being overweight.
Months later, when Chris
returned from boot camp, he
urged Mike to stop taking
the antipsychotic pills. Mike
complied, and he dropped 70
pounds on a diet of fish and
vegetables—and by wrapping
himself in trash bags as he
worked unloading trucks at a
warehouse.
In late 2002, the Army en-
listed the newly trim Mike
Goski. He served with the 10th
Mountain Division in Afghani-
stan and, following the inva-
sion of Iraq, was in Baghdad.
Mike embraced Army life
and, after his second combat
tour, was eager to advance be-
yond the infantry. “I’m better
than this,” he told friends.
He won a spot in the Spe-
cial Forces selection course. A
third of the class gave up after
standing in formation for
hours in a cold North Carolina
rain. Mike trained as an explo-
sives expert, graduating in
2008 to become a Green Beret.
The same year, Mike
learned he was going to be a
father. When the sonogram
showed two heartbeats, Mike
raced out to call his brother.
When the twins were born,
Mike and his wife, a former
Army truck driver, named
them Mike and Chris.
Death’s door
Chris started unraveling in
2006, during his second tour
of Iraq.
When he returned to Texas,
the panic attacks started. One
night he called his father. “I
think I’m having a heart at-
tack,” he said. Chris’s mother, a
nurse, recognized it as anxiety.
In 2007, Chris was back in
Iraq. One night, in a freak acci-
dent, static electricity from a
helicopter’s blades detonated
the explosives carried by a
soldier. The blast blew up the
man, and his remains drew fe-
ral dogs.
The commander, worried
IN DEPTH
Tim Goski, their father
body until dawn.
Chris and two other men
watched as the dogs ate their
fill. In the morning, he and the
others collected what was left.
Like his brother, Chris
moved to an elite force. In Au-
gust 2009, he earned a spot in
the 2nd Marine Special Opera-
tions Battalion, the Marine
Corps equivalent of the Green
Berets. Mike gave him a .45-
caliber Springfield 1911 pistol
to mark the promotion.
The commandos wanted
Chris for his skill coordinating
air and artillery attacks. In
Iraq, Chris excelled at his job
with an uncanny ability to pic-
ture airspace in three dimen-
sions during combat. But back
home at the base in North
Carolina, friends watched him
grow disheveled and edgy.
His decline accelerated dur-
ing an eight-month tour of Af-
ghanistan that began in 2010.
The pace of operations wore
at Chris. He turned to pills to
help him sleep and to wake
him up.
On April 24, 2011, the Ma-
rines found five insurgent
bombs on the road. Dave Day,
the team’s explosives expert,
defused four of them. He was
lying on his stomach to work
Heavy Burden
Per capita, nearly twice as many small-town Americans have
died at war since the Sept. 11, 2001 terrorist attacks compared
with those from large metro areas.
Casualties per million population*
Large metro cores
Large metro suburbs
Medium and small metros†
Rural areas and small towns
*Deployed military fatal casualties from 2001 through 2016 divided by 2006 population
†Metros with between 50,000 and 1 million population
on the last one when 80
pounds of explosives blew up
beneath him. Chris retrieved
Dave’s helmet and jaw.
When Chris got back to
Camp Lejeune, he tried to
blend into stateside life.
Around Christmas 2011, he
flew home to Texas. While
switching planes in Atlanta, he
had what an airport medical
team said was a panic attack.
His commanders ordered a
mental-health evaluation on
April 20, 2012. The examiner
diagnosed him with anxiety
disorder but concluded Chris
was no threat to himself or
others. A counselor noted that
Chris denied considering sui-
cide because “he would never
do that to his brother.” Chris
was prescribed antidepres-
sants and antianxiety drugs
and warned against mixing the
pills with alcohol.
On June 7, he and Doug
Webb, a close Marine comrade,
attended a suicide-prevention
lecture led by a general and his
wife. The couple had lost a son
in war and another to suicide.
During the talk, Chris told
Doug, “We’ve all had the gun in
our mouth at one point.” The
thought of Mike kept him from
pulling the trigger, he said.
16
17
24
28
in Clarksville, Tenn., to de
the findings of a Marine C
investigation. The report
Chris had mixed alcohol
antianxiety drugs de
warnings and determined
Marine Corps wasn’t resp
ble for his death.
“This is unaccepta
SPECIAL FORCES FRIEND; LAURA BUCKMAN FOR THE WALL STREET JOURNAL; GOSKI FAMILY(BOTTOM)
Mike told them. “He was
responsibility.” Then
took a menacing step tow
the senior Marines. “Get
f— out of my house,” he
In the months that
lowed, Mike became convi
the outburst undermined
standing in the Special Fo
Mike’s commander ord
him to undergo a me
health evaluation in Jan
2013, citing a menu of is
“Dealing with grief; Dang
self & others; Anger man
ment; Ability to perform;
ing skills.”
Mike saw a military p
cian assistant, who n
Mike’s traumatic brain in
from exposure to explos
and “adjustment disorder
anxiety.”
In October 2013, Mike
active duty. He lost his h
to foreclosure, and return
Texas to live with his par
Over the next 2½ years
rarely left his room.
thought people spied on
emails and put duct tape
the cameras on computer
put a shield of body armo
his headboard.
When Mike did venture
side, he carried a snub-n
revolver in his belt, hidde
a shirt. His phone cal
friends were m
and exhausting
a
want to go over
w
and I want to
a
t
there,” he told a
ccial Forces friend.
Mike sought es
tthrough a mind-add
use of Dust-Off, can
u
ccompressed air use
cclear debris from
p
puter keyboards. H
h
haled blasts of the ch
ccal vapors, which gave
hallucinations.
h
High on the fumes,
would imagine Chris b
w
oning to him and sayin
o
llost you. I’ve been loo
ffor you.”
In May 2016, Kathy
cceived notice of a cert
lletter waiting for her at
post office. It was about C
p
She read it before leaving
S
parking lot, sitting in th
year-old Chevy TrailBlaze
had given her.
“I know that words c
never ease the pain of
loss, which is why I have m
suicide prevention my pri
Clockwise from top left, as the commander of
Mike and Chris Goski, United States Special Op
right, with Mike’s twin tions Command,” wrote
boys, also named Mike Raymond A. Thomas III.
and Chris; Chris, left, and He asked Kathy and Ti
Mike in uniform in New participate in a study of
Jersey; the twins as boys. tary suicides. He included
phone number of a s
worker.
On June 8, Chris reclined Kathy called the s
on the guest bed at a friend’s worker at once. “You r
house. On his laptop, he en- want to help?” she deman
tered a search for post-trau- “How about you help my
matic stress disorder. He that’s still alive?”
raised the .45-caliber pistol his The social worker conta
brother had given him, put it Larry Rivera, a care coord
to his right ear and pulled the tor assigned to special-op
trigger, according to authori- tions troops. The next day
ties. Chris was 31 years old. Rivera spoke with Mike fo
Onslow County sheriff’s minutes. They discussed t
deputies found his body sur- ment at the Departmen
rounded by 24 empty Bud Veterans Affairs hospita
Light cans. Tampa, Fla., which specia
in helping commandos.
Tim saw a rare smil
Mike alone Kathy’s face. Mike return
Mike and his parents waited Tennessee hopeful but w
on the tarmac in Dallas to “I’ll believe it when I se
meet Chris’s casket, which ar- he told his mother.
rived draped in stars and On July 2, Mike wen
stripes. A Marine friend Nashville for the wedding
stepped off the plane and told close friend, another G
Tim and Kathy, “I brought Beret. The ceremony incl
Chris home to you.” only the couple, a mai
The Goski family buried honor and Mike, who wa
Chris at Dallas-Fort Worth Na- best man. He felt safe en
tional Cemetery on June 18, to leave his gun in the h
2012. when the wedding party
Mike returned to Fort out to celebrate.
Campbell to a glowing evalua- The next day, Mike d
tion and a bronze star. Sgt. back to his apartmen
First Class Goski “is a leader Clarksville. He settled on
of character who places the camouflaged poncho line
mission, his Soldiers and his the bare mattress and pu
teammates before himself,” his nozzle of a Dust-Off can i
commander wrote. mouth. Police found his
Yet Mike had struggled at five days later.
home in the months before his When Mike’s casket arr
brother’s death. Bills went un- in Dallas, Tim and Kathy
paid, and the routine problems lowed the same journe
of civilian life set him off. they had with Chris.
“You are all like cartoon learned Mike had arra
characters to us,” Mike told ci- permission to share his
vilian friends. “You’re not even brother’s gravesite.
in the real world.” On July 18, 2016, the G
His wife had moved away buried Mike’s casket ato
with the twins, and Mike had a Chris’s, one brother’s n
hard time talking about any- chiseled into the front o
thing but war. He fumed over grave marker, the ot
Chris’s death and believed the name chiseled into the b
Marines had killed his brother “That’s how they came
through negligence. the world,” Tim said.
In December, Chris’s com- that’s how they left.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Tax Proposal Puts Focus on High Earners
GOP wants roughly
similar tax rates for
corporations and
pass-through firms
BY RICHARD RUBIN
AND LAURA SAUNDERS
WASHINGTON—Today, a
business owner making
$500,000 gets taxed much like
a corporate executive with a
$500,000 salary. How they
make their income doesn’t
matter much.
That could change dramati-
cally under Republican plans
aimed at driving down tax
rates on business income,
leaving high-income wage
earners with much less to gain
from a tax overhaul.
Republicans, eager to drive
down business tax rates in a
bid to boost economic growth,
want roughly similar tax rates
for corporations and for so-
called pass-through firms that
report business income on the
individual tax returns of their
owners.
For them, lowering the 35%
corporate tax rate requires
also lowering the 39.6% top
rate for pass-through business
income, even though creating
a new special rate for that
business income leaves a po-
tentially large gap with the top
rate for high-income wage
earners.
The exact contours of the
GOP tax agenda aren’t set. Top
lawmakers and administration
officials say they will release
another blueprint in the com-
ing days.
The 2016 House GOP blue-
Puerto Rico’s Mayors Tell of Ruin Trump, Athletes
BY JOSÉ DE CÓRDOBA
SAN JUAN, Puerto Rico—
The full scope of Hurricane
Maria’s devastation of Puerto
Rico began to emerge over the
weekend as 48 of the island’s
78 mayors, many of them cut
off since the storm, met with
Gov. Ricardo Rosselló for the
first time, bringing reports of
ruined homes and destroyed
infrastructure.
Most of the mayors attend-
ing the meeting Saturday had
been incommunicado since the
Category 4 hurricane dragged
fierce winds and heavy rain
across the island after making
landfall Wednesday. “I learnt
about it from a runner who
brought a note,” said Jose Ger-
ena Polanco, the mayor of the
town of Florida. In his area,
bridges have been destroyed
and more than 200 people had
lost the roofs on their homes,
he said.
Oscar Santiago, the mayor
of Vega Alta, a town on Puerto
Rico’s north coast, said his mu-
nicipality had been pounded by
20-foot waves. Two bridges
had been destroyed, and more
than 100 families had lost
roofs. He said many people had
refused to evacuate, and were
staying in the ruins of their
houses, using wood and zinc
HEALTH
Continued from Page One
get less funding over time than
they would under the current
system.
The GOP bill also would let
states seek to opt out of ACA
insurance requirements such
as one that mandates everyone
be able to buy health insurance
at similar prices regardless of
their medical history.
No Senate Democrats are
expected to support the legis-
lation, meaning the bill’s spon-
sors must cobble together 50
votes from among the 52 Sen-
ate seats they control. That
has been a monthslong strug-
gle between the GOP’s more
centrist and conservative sen-
ators.
Republican Sen. John Mc-
Cain of Arizona indicated his
own vote was out of reach Fri-
day. With room for no more
defections beyond Mr. McCain
and Ms. Collins, party leaders
have now focused on winning
over Mr. Paul, who has criti-
cized the Graham-Cassidy ef-
fort but who was believed to
be open to negotiating.
Mr. Paul on Sunday set a
high bar, saying on NBC that
the block grants that Demo-
crats and some centrist Repub-
Monday, September 25, 2017 | A7
U.S. NEWS
gue against raising the top
Where’s the rate on individuals. They
warned tax increases would
Business Income?
Net income by entity, 2014
punish successful small busi-
nesses, although many aren’t
Nonfarm sole small. By splitting wage and
S corporations proprietorships business taxation, the ap-
14.5% 10.9% proach under consideration
could undercut future argu-
ments against raising the top
rate.
Lowering the corporate rate
to improve U.S. investment in-
centives is a core driver of the
planned tax overhaul. Other
large industrialized countries
have lowered their rates.
BRENDAN SMIALOWSKI/AGENCE FRANCE-PRESSE/GETTY IMAGES
Partnerships C corporations
15.2% 59.4% Politically, it is nearly im-
possible to cut corporate rates
Source: Joint Committee on Taxation without cutting the rate on
THE WALL STREET JOURNAL. pass-through income. Pass-
throughs form a key part of
through businesses include the Republican coalition.
partnerships, limited liability “The pass-through commu-
companies and S corpora- nity demands something in the
tions. The income they earn process of the corporate rate
doesn’t face the corporate in- going down,” said Douglas
come tax and then a potential Holtz-Eakin, president of the
second tax layer on capital center-right American Action
gains or dividends; instead, it Forum.
passes through to owners’ tax “There is a difference be-
returns and is taxed at their tween high-wage income or
individual rates. some other [business] in-
President Donald Trump during a rally on Friday in Huntsville, Ala. Such firms reported more come,” said Sen. Mike Crapo
than 40% of net business in- (R., Idaho). “It doesn’t have to
print called for a 20% corpo- deductions could go away. the high-wage earners at a come in 2014, according to the all be treated identically.”
rate tax rate, a 25% tax rate on With GOP senators agreeing disadvantage,” said Andy congressional Joint Committee The challenge for policy
pass-throughs and a 33% top to, at most, $1.5 trillion in tax Mattson, a certified public ac- on Taxation. makers will be separating
individual rate. In April the cuts over the next decade, countant with Moss Adams in They include global law and wage income from business in-
White House proposed a 35% there is a limited amount to go Campbell, Calif. accounting firms, real-estate come for high earners. The
top rate for individuals. Presi- around. Republicans are fo- Keeping the top tax rate on investors, hedge funds, doc- proposed lower pass-through
dent Donald Trump has said cused on cutting business wages near 39.6% would be a tors’ offices and manufactur- rate wouldn’t help the large
he might not cut taxes for the taxes and offering a larger way for Mr. Trump to defend ers. About 60% of pass- share of business owners who
wealthiest Americans, and re- standard deduction for mid- his argument that he isn’t pri- through income goes to don’t generate significant high
cently Republicans have talked dle-income households. oritizing tax cuts for the rich, households making over income, because their top
a lot less about the importance The emerging Republican even if other pieces of the tax $500,000, according to the Tax rates are below the 25% pro-
of reducing the 39.6% top tax plan would “open a gulf be- plan favor wealthy business Policy Center. posed rate in the House plan.
rate on ordinary income. In tween wages and pass-through owners, investors or heirs of In the past, Republicans The biggest winners are high
the end that rate might not business income that has large estates. have seized on the importance earners who can classify their
come down much and some never existed before, putting Under current law, pass- of pass-through income to ar- earnings as business income.
The government doesn’t yet
have a cost estimate for the is-
land’s reconstruction, but the
Escalate Dispute
governor said it would surely
be “north of the $7 billion to BY ANDREW BEATON National Basketball Association
$8 billion” cost of repairing the AND MATTHEW FUTTERMAN champion Golden State War-
damage brought about by Hur- riors to visit the White House,
ricane Georges in 1998. Players around the National after star guard Stephen Curry,
ALEX WROBLEWSKI/BLOOMBERG NEWS
Throughout the island, Football League demonstrated among others, had expressed
Puerto Ricans struggled to before games Sunday in re- reluctance to attend a ceremony
cope with the total absence of sponse to an escalating feud with the president. Mr. Trump
power that has plunged the is- between President Donald was quickly denounced by other
land into almost total darkness. Trump and the professional prominent athletes, including
Only diesel-fed generators are sports world. LeBron James of the Cleveland
keeping a few lights shining, The number of protests Cavaliers. “U bum,” Mr. James
and telecommunications were surged far beyond anything tweeted at the president.
spotty to nonexistent. Mr. Ros- the NFL has seen before, with Although Mr. Trump had
selló said the telecommunica- players on every team making been critical of the NFL protests
tions system was working only gestures of some sort at stadi- at various points in the past
Puerto Ricans sat in shelters after evacuations over the weekend. at 25%, most of that concen- ums around the country. year, this latest and most em-
trated in the metropolitan area Some players knelt for the phatic war of words began Fri-
sheets scrounged from the de- As the mayors described of San Juan. He said the grid national anthem, while others day when he addressed the
tritus to build new temporary widespread destruction in their would take a long time to re- interlocked arms. One team, the topic during a stump speech for
roofs on their homes. towns, the island’s national store. The government would Pittsburgh Steelers, stayed in sitting Republican Sen. Luther
“This is about to turn into a guard and police raced to evac- concentrate on bringing power the locker room for the anthem. Strange in Alabama.
humanitarian crisis,” said Ro- uate some 300 families around to heavily damaged hospitals. Later, the Seattle Seahawks and Mr. Trump said he and Mr.
lando Ortega, the president of the towns of Quebradillas and The crisis comes during des- Tennessee Titans followed the Strange “respect the flag” and
Puerto Rico’s mayors associa- Isabela on Puerto Rico’s north- perate economic times for Steelers’ path and chose to re- encouraged NFL owners to fire
tion. Mr. Ortega, the mayor of ern coast because of a widen- Puerto Rico, where years of main in the locker room during players who take part in the
Cayey, a town of about 50,000 ing crack in a dam threatening overborrowing and economic the national anthem. The Titans protests.
people in the island’s central communities with catastrophic recession pushed the govern- in a statement said the “players The comments drew rebut-
mountains, said the town had flooding. “It’s a situation that ment and the state-owned pub- jointly decided this was the tals from a number of players,
been devastated. Its residents calls for immediate evacua- lic power monopoly into bank- best course of action” and “the owners and executives. NFL
were in dire need of water, die- tion,” said Mr. Rosselló in a ruptcy protection. The U.S. absence of our team for the na- Commissioner Roger Goodell, in
sel fuel and gasoline, and he news conference. He confirmed Congress installed an oversight tional anthem shouldn’t be mis- a statement, said, “Divisive
said they would soon lack food. 10 deaths on the island due to board last year to renegotiate construed as unpatriotic.” comments like these demon-
About 20 municipalities still the hurricane, the strongest roughly $73 billion in debt and The events effectively rep- strate an unfortunate lack of re-
haven’t been able to communi- storm to make landfall on the coax businesses back to the is- resented a leaguewide expres- spect for the NFL, our great
cate with the governor. island since 1928. land. sion, as many owners showed game and all of our players, and
support for their players and a failure to understand the
denounced the president’s overwhelming force for good
have Mike Lee’s either,” Mr.
Cruz said from the stage of the
Texas Tribune Festival in Aus-
tin, referring to the Utah Re-
Pressed by CNN’s Jake Tap-
per to say whether she would
oppose the bill if it comes to a
vote, Ms. Collins said she ex-
statements.
The controversy comes at a
unique moment for the NFL,
which is grappling with declin-
our clubs and players represent
in our communities.”
The message behind the pro-
tests has become more diffuse
publican senator. pected to make her decision ing television ratings and since Colin Kaepernick, the
Speaking on Fox, Mr. Lee after the nonpartisan Congres- heightened concerns about con- then-quarterback of the San
said, “I’m still a maybe, be- sional Budget Office weighs in cussions. The protests risk fur- Francisco 49ers, first refused
cause the bill is still a moving on the legislation Monday. ther alienating some fans and to stand for the national an-
target.” Ms. Collins said the Senate potentially making broadcast them last season. That was ini-
Last week, Mr. Cruz had should follow the lead of Sens. partners—who pay the league tially meant to call attention to
said he was offering changes Lamar Alexander (R., Tenn.) billions of dollars annually— police brutality in the U.S., par-
to help the bill bring down the and Patty Murray (D., Wash.), nervous about the implications. ticularly in communities of
YURI GRIPAS/REUTERS
cost of health-care premiums, who have held hearings on The developments extended color. More recently, the mes-
but he declined to say what he plans to stabilize the insurance a feud Mr. Trump has been sage has been about calling at-
was proposing. markets. That effort was waging since Friday against tention to social and economic
The White House has alter- shelved as the 11th hour GOP athletes who have criticized inequality. Now, the demonstra-
nately cajoled and criticized repeal bid picked up steam. him or his policies. tion has become a protest
Mr. Paul in pursuit of his vote; Ms. Murkowski hasn’t yet On Saturday morning, Mr. against Mr. Trump and an ex-
Sen. Susan Collins, a conversations continued over indicated her decision on the Trump declared that he had clamation that they won’t be
Republican from Maine, in July. the weekend about ways to new bill, and GOP leaders, as withdrawn an invitation for the bullied into falling into line.
settle the various objections well as Democrats and health-
licans worry are too small raised by GOP senators. care advocacy groups, have
were still too big for his liking. Still, one White House offi- been trying to persuade her to
“The Graham-Cassidy bill cial said Sunday, the adminis- their side.
basically keeps most of the tration was now trying to as- Health-care lobbying groups
Obamacare spending, almost sess whether there was a way argue that the new effort
all of the spending, and just to meet Mr. Paul’s concerns. would leave states with too lit-
reshuffles it and block grants Administration officials also tle funding to operate health
it to the states,” Mr. Paul said. don’t see a clear way to secure systems and undo popular and
“They could remove the block the support of Sen. Lisa important protections of the
MATT DUNHAM/ASSOCIATED PRESS
grants from it and then we Murkowski of Alaska, another ACA. Mr. Cassidy said that on
could vote on what we actually wavering vote. pre-existing conditions, states
all agree on.” Ms. Collins said on CNN wouldn’t be able to jettison
Meanwhile, Republican Sen. that she had “serious reserva- guaranteed coverage for these
Ted Cruz offered criticism of tions” about the potential ef- patients unless they show that
the bill as well, saying Sunday fects of the Graham-Cassidy these people have other pro-
he and other conservative sen- bill, including its impact on tections.
ators still were holding out. Medicaid and the “erosion of —Kristina Peterson
“Right now, they don’t have protections for people with and Laura Meckler
my vote, and I don’t think they pre-existing conditions.” contributed to this article. NFL players knelt during the U.S. national anthem in London Sunday.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A8 | Monday, September 25, 2017 THE WALL STREET JOURNAL.

LIFE&ARTS
WEEKEND CONFIDENTIAL |By Alexandra Wolfe

A Novelist’s New Experiment

With ‘Manhattan Beach,’ Jennifer Egan opted for a more traditional approach
JENNIFER EGAN has become
known for her genre-bending, time-
traveling, inventive fiction. Her
2010 Pulitzer-Prize winning novel
“A Visit from the Goon Squad” was
hailed as a creative work of meta-
fiction, incorporating multiple
points of view, with one chapter
told entirely in PowerPoint and an-
other set far in the future. In 2012,
her science-fiction short story
“Black Box” was released in 140-
character installments on Twitter.
Her new book, “Manhattan
Beach,” thus comes as something
of a surprise. It’s a more tradi-
tional historical novel whose pro-
tagonist is a female diver working
in the Brooklyn Navy Yard during
World War II.
Ms. Egan didn’t set out to write
a straightforward narrative. At
first she wanted to tell the story
by going back and forth in time,
but it just didn’t lend itself to a
fragmented approach. “It was so
inert when I tried that,” she says.
She did years of research for
the book, interviewing retirees in
Florida who once worked at the
Navy Yard and combing through
original documents at the Brook-
lyn Historical Society. “I found

MATT FURMAN FOR THE WALL STREET JOURNAL; HAIR & MAKEUP BY NICKEE DAVID
writing…the old-fashioned way to
be actually much harder,” she says,
because of the need to sustain the
story’s momentum. “It’s no joke,”
she says. “It’s really hard to do.”
Ms. Egan, 55, wanted to be a
doctor as a kid growing up in San
Francisco. “In a way I’m amazed I
didn’t become a doctor in that I
was so sure,” she says. But she
found as a teen that she was
squeamish about blood and gore.
She discovered her passion for
writing just before college, when
she kept a journal during a trip
through Europe. It was a difficult
time in her life. She was anxious
about being so far away from home,
and her mother and stepfather were
divorcing. Writing, she found, was a
“lifeline.” Once she got to the Uni-
versity of Pennsylvania, she decided Ms. Egan’s new novel whose protagonist is a female diver working in the Brooklyn Navy Yard during World War II is something of a surprise.
to major in English.
In her mid-20s Ms. Egan moved personal secretary to a countess. narrative is being written by a strive to emulate anyone in particu- the parts and characters that work
to New York to try to become a She eventually managed to pub- character in a writing workshop at lar. and discarding those that don’t.
writer. Inspired by her pre-college lish some short stories and won a a prison. “It’s sort of one step re- Ms. Egan keeps to a routine She hasn’t given up on experi-
trip abroad, she had started a grant from the National Endow- moved from reality,” she says. “I when she’s writing. As we tour her mental literature. For her next
novel about an 18-year-old girl ment for the Arts. Her novel, “The felt like it was the first thing I’d office on the third floor of her book, she’d like to bring back char-
who re-traces a trip her sister took Invisible Circus” was published in written for which I didn’t really spacious Brooklyn brownstone, she acters and elements from “A Visit
through Europe before she com- 1995, when she was 32. have any clear models.” points to a lounge chair in the cor- from the Goon Squad.”
mitted suicide. She went on to publish “Emer- She says that she has always ner. “That’s where I write,” she Ms. Egan has two teenage sons
She worked on the novel for ald City and Other Stories” in been excited about new approaches says. “I like to recline.” with her husband, theater director
years. An early draft grew to 800 1996, and “Look at Me,” a sus- to narrative. “I didn’t think, ‘Oh, I She writes the first draft of her David Herskovits. But don’t expect
pages. An old college professor penseful novel about the fashion am going to experiment,’ ” she re- books by hand. The first draft of to read any fiction based on her
agreed to take a look at it and told industry, in 2001. Her first best calls. “I thought, ‘Oh, I’m telling this “Manhattan Beach” takes up 27 le- own life. “For me, the No. 1 thing
her he could barely make it seller was her 2006 novel “The really strange story, and I’m doing gal pads. Now stacked up in a shelf about my process that’s different
through the first few pages. Keep,” a haunting book about two it the best I can.’ ” “A Visit From in her office closet, they took her a from most people I know is that I
She kept at it, though. “I don’t cousins renovating a Gothic castle. the Goon Squad” took the experi- year and a half to fill. do not use my own life at all or
think I really believed in myself that She calls “Look at Me” a “cross- mentation further. “I think it’s natu- Then she types up what she’s anyone I know…. I seem to go
much, but I just kept going,” she over book” in terms of her writing ral that my projects would be more written. “There’s a certain amount pretty cold when I try to get near
says. In the meantime, she took on style. Her previous books had been ambitious as I got older and more of horror in that, because of course myself,” she says. “I don’t know
odd jobs, such as working as a ca- more traditional. confident as a writer,” she says. She it’s terrible,” she says with a laugh. what it is, but I feel bored.” In-
terer for the Port Authority at the “The Keep” is actually a story admires Don DeLillo, among current Once that’s done, she develops a stead, she adds, “I’m always looking
World Trade Center and becoming a within a story: The Gothic castle writers, but says that she doesn’t proper outline and structure, using to be transported out of my life.”

ANATOMY OF A SONG | By Marc Myers

HOW THE DEAD’S TOURING INSPIRED ‘TRUCKIN’

A MONTH AFTER the Grateful The Grateful Dead’s Jerry Garcia, far At first, I complained bitterly
Dead’s “Truckin’ ” was released in left, and Bob Weir in London in 1972. about how those dense verses were
November 1970, the single peaked at going to go. Jerry’s response was,
#64 on Billboard’s pop chart. Fre- to wearin’ thin / They just won’t let “Sing ’em like Chuck Berry in
quent FM-radio airplay of the longer you be.” ‘School Days’.” Jerry meant I should
album version turned the road song The “reds” were red Seconal pills. use Chuck’s rapid-fire delivery and
into a counterculture anthem. Re- The bikers were using them as a enunciation.
cently, Bob Weir, the Grateful Dead recreational drug. We took them to We kept refining the music and
guitarist and lead singer and the co- overcome insomnia. Given how tightening the choruses (sings):
writer of “Truckin’,” talked about much coffee we drank to be up for “Truckin’, up to Buffalo. Been
MICHAEL PUTLAND/GETTY IMAGES

the song’s evolution. Mr. Weir was shows, a little Seconal at night was thinkin’, you got to mellow slow /
just named a U.N. Development Pro- the only thing that knocked us out Takes time, you pick a place to go,
gramme Goodwill Ambassador for fast. an’ just keep truckin’ on.”
world poverty and climate change, In late March 1970, we finally had We never divided up harmony
and his band, Dead & Company, will time to work on the music. We were parts to sing in specific ranges. In-
tour this fall. Edited from an inter- booked to play a theme park in Da- stead, each of us just looked for
view. nia Beach, Fla., called Pirates World. great-sounding notes. If you listen
At our motel, we had the afternoon carefully, you’ll hear that sometimes
Bob Weir: In the spring of 1970, the off, so the band sat by the pool. I I’m on the high notes and some-
hardest thing about touring was don’t believe Hunter was there. times the lowest ones.
getting up in the morning. We were cist. He had ears. He would write them was “Keep on Truckin’,” which Jerry, bassist Phil Lesh and I sat on We first performed “Truckin’ ” in
young and full of fun, and we didn’t lyrics and hand us the sheets. Then was the spirit of our song—keep the diving board with our acoustic August 1970 at the Fillmore West in
go to bed real early. We were on the we’d work on the music and vocal boogieing on. guitars and came up with a melody San Francisco. We didn’t have time
road a lot, and our nightly “celebra- harmonies. At first, the meaning of Hunter’s to go with Hunter’s words. to go into rehearsal space to work
tions” probably made touring more At some point in early March lyric was a mystery to us. But the As we wrote, we came up with on things.We did that live, while
difficult than it had to be (laughs). 1970, Hunter pulled a lyric sheet out words became clear the more we this bluesy shuffle. We moved back touring. Today, when I sing
Our touring schedule in 1969 and of his luggage and gave it to Jerry read them. For example, Hunter in- and forth from the diving board to a “Truckin’,” I go back to that time
early ’70 was relentless. We’d play a [Garcia]. Hunter’s title at the top cluded our New Orleans incident table to write things down. The mel- through my character’s eyes. It’s
gig, stay up late and then fly to our said “Truckin’.” Jerry liked what he two months earlier in January. ody had to work in my register, so sort of a fantasy version of what my
next gig first thing in the morning. read, and we planned to work on After we played a gig at the we put it in the key of E. The mel- life was like then and what I was
Most of the time, our equipment the music as soon as we had some Warehouse there, we returned to ody came fairly quickly. Then we observing on the road. Iin those rare
was trucked overnight to the next down time. our hotel to find that the cops had came up with choral parts. moments when I do think about the
destination. The word “truckin’ ” goes back to searched our rooms and found our The choruses were easy for me to words I’m singing on “Truckin’,” I
In the band’s early days, Robert music of the 1930s. But Hunter stash. A bunch of us were arrested, sing lead but the verses were hell. usually wish I had a few new verses.
Hunter occasionally traveled with probably grabbed the title from Mr. but a settlement was reached. Some of them were straight-up But I don’t feel at liberty to write
us. He’s a great guitarist, but he Natural, one of R. Crumb’s under- Hunter’s lyric was, “Busted, down tongue twisters, like “Most of the them myself. I’ll have to give Hunter
wasn’t a playing member of the ground-comic characters. Mr. Natu- on Bourbon Street / Set up, like a cats that you meet on the streets a buzz to see if he has anything for
band. He was a friend and our lyri- ral had a bunch of sayings. One of bowlin’ pin / Knocked down, it gets speak of true love.” me.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Monday, September 25, 2017 | A9

LIFE & ARTS

FITNESS

When Take-Out Follows Workout

Catering to time-pressed fitness buffs, many gyms offer freshly made ready-to-eat meals to go
to avoid carbs and sugar and are
BY RACHEL BACHMAN
really seeking out protein and
fresh vegetables,” says Jason
SEAN POTTER gets his pork Vieth, senior vice president of Lif-
chops where he does his pull-ups. eCafe, Life Time’s fast-casual res-
Mr. Potter, a member of the taurant.
CrossFit New England gym in Na- It’s good that more people are
tick, Mass., is part of a growing focused on eating unprocessed
group of exercisers picking up foods, says Yoni Freedhoff, medi-
prepared food where they work cal director of the Bariatric Medi-
out. His favorite service, Paleo cal Institute, a weight-manage-
Power Meals, delivers freshly ment center in Ottawa. But for the
made breakfasts, lunches and din- average person, he says, packaged-
ners twice weekly to a refrigera- meal services can subvert an im-
tor at CrossFit New England. portant part of long-term overall
When not on the road for work, health: preparing healthy meals
Mr. Potter buys several meals a and sharing them with friends or
week, such as the “all-natural” family.
Berkshire pork chop with red and “I think it’s a mistake for us to
green peppers, balsamic glaze and fall into that narrative that it’s
mashed cauliflower. Other mem- hugely difficult and takes tremen-
bers order ahead, and leave work- dous effort, because it really
TONY LUONG FOR THE WALL STREET JOURNAL

outs lugging bags bulging with doesn’t,” Dr. Freedhoff says.

entrees. Many fitness-industry leaders
Mr. Potter, who is married and acknowledge that eating choices
has three children, explains why play a larger role in weight loss
he started relying on the gym for than exercise. The U.S. Army is
healthy meals, particularly planning to bring healthy foods
lunches. “No. 1, spending time into fitness centers, including
with my family is more important sandwiches, salads and box break-
than cooking meals for the week,” fasts.
the 40-year-old software salesman “In some cases our dining facili-
says. “No. 2, spending time at the ties are a distance away from a fit-
gym is more important than going ness center, so sometimes soldiers
out to lunch.” Heather Bergeron, above, co-owner of CrossFit New England in Natick Mass., which stocks Paleo Power Meals, like the have to choose between working
For years, companies have de- one favored by her co-owner, Ben Bergeron, below right. Chicken harissa, below left, is an option from LifeCafe. out and eating breakfast,” says
livered stocks of en- Tim Higdon, Healthy Army Com-
ticing meals to cus- munities program manager. “This
tomers’ homes. The allows them to accomplish both.”
services are finding a The changes could arrive in
new market in time- some fitness centers as soon as
strapped people next spring, he says.
seeking healthy, pre- Bonnie Lefrak, chief executive
servative-free serv- of the Fitness Asylum, a studio
ings, often packed in with three Massachusetts loca-
a single plastic con- tions, has tried half-a-dozen pre-
tainer. To minimize pared-healthy-meal services and
delivery costs, many says they help her have something
companies drop the nourishing on hand amid a hectic
meals off in a place schedule.
that customers fre- “I know if I get hungry, then I’m
quent: the gym. eating off my kids’ plates. I call
Healthy packaged those ‘momnivores,’” Ms. Lefrak
meals are popping up says. She recently started offering
everywhere from meals from New York-based Ket-
Tone House, a Man- tlebell Kitchen at her location in
hattan studio where Hudson, Mass.
a sports-conditioning Ms. Lefrak says she asks mem-
class costs $40, to bers at kickoff events: How many
Energy Fitness in Pa- of you like to cook? “Not a lot of
ducah, Ky., where the hands are going up,” she says.
meals are popular Nationwide research under-
with food-loving mil- that the meals don’t cost much clude sugar, grains, dairy and scores that notion, and the chal-
lennials as well as more than grass-fed beef or or- other foods for 30 days. lenge for meal-kit services that ar-
budget-conscious se- ganic vegetables at a grocery Life Time, a 127-location health- rive with ingredients and a recipe.
niors who live alone, says Sharon go through a drive-thru and eat store—and spare them the shop- club chain based in Chanhassen, Baltimore-based Terra’s Kitchen
Hales, the gym’s general manager. unhealthy food, they’re just spin- ping, food prep and clean-up. Minn., is revamping and relaunch- mostly delivers meal kits but CEO
About 25% of Energy Fitness’s ning their wheels,” she says. These meals often have labels ing its Meals to Go service. What Mike McDevitt says prepared
members buy Megafit Meals, pre- A typical lunch or dinner from detailing how much protein, car- used to be a few basic items— foods make up 16% of sales, a
pared in nearby Benton, Ky., which these services costs between $8 bohydrates and fat they contain— chicken enchiladas and wraps—is share that’s rising quickly.
the gym displays in a cooler. Offer- and $14 if picked up at a gym. (De- along with calories and ingredi- expanding to about 30 options in- “There are these two markets,”
ing healthy meals helps members livery can add $30 or more for ents.Some meals are vegan or cluding steak chimichurri with the Fitness Asylum’s Ms. Lefrak
stick to weight-loss and fitness multiple-meal orders going long vegetarian, or comply with low- roasted vegetables and tuna toga- says, “and the one with the al-
goals, Ms. Hales says. distances on dry ice or in insu- carb plans such as the Paleo diet rashi. ready cooked food is going to
“If they leave our club and they lated packages.) Fans point out or Whole 30, in which people ex- The club’s members are “trying win.”

FILM REVIEW

‘STRONGER’: WHAT MAKES A HERO?

BY JOHN ANDERSON

WHEN A MOVIE is called “Stron-

ger” and its hero is a maimed sur-
vivor of the Boston Marathon
bombing, certain expectations
arise. Courage? Valor? Tragedy? A
dash of dark comedy? A heaping
helping of tenacity? Yes, and
“Stronger” delivers all the above.
But it does so in a way that flips
the whole idea of post-9/11 hero
worship upside down, in a manner
as welcome as it is disturbing.
Equally disturbing: Jake Gyllen-
haal, who always has the glint of
the madman about him and deliv-
ers a powerful, vulnerable portrayal
of Jeff Bauman, a Boston guy who
was in the wrong place at the
wrong time: A photo of a shattered
Mr. Bauman post-blast, his legs
shredded, became emblematic of
ROADSIDE ATTRACTIONS

the catastrophe. When he awakens

in the hospital, intubated and mute,
the first thing he writes down is
“saw the bomber”—he’d been jos-
tled by one of the Tsarnaev broth-
ers just before the explosion, and
realizes the connection. The FBI de- Jake Gyllenhaal plays Boston Marathon bombing survivor Jeff Bauman in a film that turns hero worship upside down.
scends. The inclination of the pub-
lic to find a bright spot amid sense- away, who cleans Jeff up when he’s enjoy the reflected celebrity of their Pollono’s adaptation of the book “false flag” operation; the near im-
less terror suddenly has an outlet. a mess, and who contends with mangled boy. They coerce him into by Mr. Bauman and Bret Witter, possibility of functioning as a leg-
From the start, Jeff recoils from Jeff’s family—who, if they are to be waving the team flag at center ice maintains a brisk pace. There’s less man, not just as a citizen of
having the whole “Boston Strong” construed as typical of the city’s at a Bruins game, during which he barely a maudlin moment, which the modern world but as a mem-
thing thrust upon him. “I’m a hero blue-collar community, might con- experiences a violent flashback to is remarkable given the subject ber of a family in which somebody
for standing there and getting my stitute grounds for a class-action the bombing. They can’t believe he matter, and the things that make should know how to install a
legs blown off?” he asks. The only slander suit by an entire stratum of doesn’t want to have Oprah Winfrey Mr. Bauman’s story more than a handrail in a bathroom. Being Jeff
reason he was at the Marathon at Boston citizenry. come to his house. “C’mon, it’s soap opera with a side of current Bauman isn’t easy, of course, and
all was to impress his on-again, off- It’s a remarkable characteriza- Oprah,” his mother pleads, oblivi- events come through loud and he isn’t even totally likable. But
again girlfriend Erin Hurley (a won- tion, actually. Spearheaded by an ous to his pain. She’s a full-blown clear: the embarrassment of being the fact he survives that family
derful Tatiana Maslany), who was epic Miranda Richardson as Jeff’s monster, but no one save Erin is ex- publicly deified for something you makes him a hero in my book.
actually running. If anything, Erin mother, Patty, the family Bauman is empt from that categorization. consider your own stupid timing;
is the real heroine of “Stronger.” an almost comically vulgar clan of Director David Gordon Green, the pure idiocy of characters who Mr. Anderson writes on TV for the
She’s the person who doesn’t walk alcoholic Red Sox fans who come to working with screenwriter John accuse Jeff of being part of a Journal. Joe Morgenstern is away.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A10 | Monday, September 25, 2017 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
Ignore the Turmoil,
Merkeldämmerung ESPN Isn’t Doomed
G
erman voters on Sunday returned An- leadership, and with the SPD’s failure to oppose
gela Merkel to her fourth and almost her for the eight of those years when it formed It’s time to let you in Which brings us to the real crux of
on a secret, two the ESPN-is-doomed argument, recently
certainly final term as Chancellor. But coalitions with her.
weeks into the Jemele touted on the cover of Barron’s maga-
they also handed the bronze This election result gives Hill controversy here zine. Isn’t ESPN destined to be trampled
medal—which was the only Merkel wins again but Berlin a chance to deliver the in America. Ms. Hill, by Amazon, Apple, Google and Facebook
prize in real contention—to a Germans show a desire competitive politics voters an ESPN on-air per- in the bidding for future sports rights as
protest party in a muted plea want. Strong fourth- and fifth- sonality, sparked a fu- these tech giants build out their video
for more competition. for more choices. place finishes for the free-mar- BUSINESS
ror by tweeting her businesses and battle for eyeballs? After
WORLD
Exit polls pegged Mrs. ket Free Democrats (FDP) and By Holman W.
opinion that Donald all, they have tens of billions to throw at
Merkel’s center-right Chris- the Greens, winning just over Trump is a “white su- “Monday Night Football.”
Jenkins, Jr.
tian-democratic CDU/CSU alliance at around and just under 10% respectively, will allow Mrs. premacist” and his Except why would they? Amazon is
33% of the vote, down eight percentage points Merkel to divorce the SPD and form a coalition presidency a “direct paying $50 million this year to stream
from her win four years ago. Her coalition with the two smaller parties. The SPD seems result of white supremacy.” “Thursday Night Football,” in an experi-
Now, this epithet may not mean what ment that begins with next week’s Chi-
partners in the center-left Social Democratic ready to push her in that direction instead of be-
you think it does. As Wikipedia or lin- cago-Green Bay matchup. But Amazon’s
Party (SPD) waddled in at an abysmal second- ing gulled into another coalition. guists or some on the disquieted left stream will be ancillary. The games will
place with around 20%. The seat count in the Berlin could offer more than a browbeaten would be happy to tell you, in the still air on CBS or the NFL Network.
Bundestag will take time to tabulate, but Mrs. “ja” to whatever scheme for European Union mouths of “critical race theory” activ- Amazon might get a few hundred thou-
Merkel will again control a plurality in the par- fiscal integration French President Emmanuel ists, white supremacy refers, in fact, to sand viewers, whose data usage would
liament. Macron dreams up. Germans deserve a vigor- almost everybody and everything. pose no serious challenge to the public
The big surprise is that the right-wing Alter- ous debate on EU reform. More conservative CUNY’s Angus Johnston, an enthusiastic internet. But what if Amazon were try-
native for Germany (AfD) party finished third, members of Mrs. Merkel’s own party, who will purveyor, explained on Twitter last year: ing to deliver the action to the entire 13
with more than 13% of the vote. Once a wonky have to find her replacement in four years, “White supremacy isn’t about what is in million who tune in for “Thursday
professors’ protest party against the euro, the would relish the opportunity. somebody’s heart. It’s about who wields Night Football”?
political power.”
AfD has transformed into an anti-immigration, If the FDP enters a coalition government, Ber-
The finer points received a thorough
nationalistic echo of France’s National Front. Its lin also might have a shot at tax reform. Expect airing last November when certain writ- Why Amazon and
entry into the Bundestag marks the first time only marginal progress here, but the party could ers on the left debated whether Bernie
Germans have put a far-right party in parlia- push Mrs. Merkel beyond the paltry €15 billion Sanders qualified as a white supremacist
Facebook don’t want
ment in decades. ($17.93 billion) in personal-tax rate cuts she because of comments pooh-poohing the ‘Monday Night Football.’
This is a very German protest vote: safe. The promised in the campaign. At least it’s a start. Democratic preoccupation with identity
AfD struggled for most of the campaign season, This election is no sea change. Mrs. Merkel’s politics. What remains to be pointed out
and its home-stretch surge owes to two factors. unimaginative grip on German politics is still is the obvious appeal of such thinking The point is consistently overlooked.
A television debate between Mrs. Merkel and strong, all the other parties are weak, and Ger- about white supremacy: It’s a way of Distributing live, big-time sports pro-
her SPD challenger, Martin Schulz, this month mans don’t like big shake-ups. gratifyingly expanding the number of gramming, which millions want to watch
highlighted how little the two major parties But Germany is entering the twilight of the persons, occasions and institutions that simultaneously, isn’t the same as
can be denounced as racist. streaming prerecorded shows that peo-
compete with each other. And polls showing Merkel era—call it “Merkeldämmerung”—and
How ESPN put its foot in this mess is ple watch on their own schedules, and
Mrs. Merkel steamrolling her opponents reas- it’s time to consider what comes next. That also partly explained by the fact that which can be “cached” in advance
sured voters they could cast a ballot for the AfD means policies to meet the demographic and many more enrollees in American jour- around the internet.
without handing the party real power. competitive pressures bearing down on Ger- nalism schools aspire to be sports re- Verizon has tried to crack this nut by
The message is that Germans want competi- many, and politics that delivers meaningful de- porters than find jobs as sports report- implementing multicast on its wireless
tion. The AfD draws support from voters on bate. If Germany can’t have the reforms while ers. They become business reporters system, reserving a slice of spectrum for
both left and right who are disillusioned with Mrs. Merkel is in office, its politicians can set instead. And the flailings of ESPN have a single stream that any subscriber can
12 years of Mrs. Merkel’s bland-as-she-goes the stage for them in the future. lately become America’s favorite—and tune into, rather than sending a duplicate
overstated—business story. stream to each viewer. Verizon might do
The Disney-owned sports channel has this as a promotional stunt for one event,
Turning the Screws on North Korea been losing at least two million sub-
scribers a year since 2013. Many of them
but a whole weekend of overlapping
sporting events? Verizon presumably

A
were basic-cable subscribers who were would quickly run out of spectrum to
merican officials have been wrong for executive order goes further than sanctions on forced to pay for ESPN though they serve its regular wireless customers.
years predicting breakthroughs in the any other country. didn’t watch it. If this keeps up, ESPN is It’s not that it couldn’t be done, with
North Korea nuclear crisis, but last So far the U.S. has declined to sanction large certainly kaput. Except it likely won’t: enough investment and management. But
week could prove to be differ- Chinese banks, so will it do When the sports network loses a cord- why bother when we already have a
ent. The combination of Kim New sanctions and a turn that now? It may not have to. cutter who never watched, its remaining broadcast business model better suited to
Jong Un’s growing belliger- by China may finally Since the U.S. fired its warn- customer base consists increasingly of simultaneous delivery of identical pro-
ence, new U.S. financial sanc- ing shot by sanctioning the those who value ESPN. gramming to millions of viewers? The
tions and a Chinese turn on isolate the Kim regime. Bank of Dandong in June, Chi- To be sure, the rise of broadband digital revolution certainly is upending
North Korea trade might be a nese banks have frozen or video has eroded cable’s strength in reg- the traditional “linear” TV channels. But
turning point that finally iso- ularly scheduled programming, includ- it never followed that the cable bundle
closed North Korean accounts.
ing ESPN’s flagship “Sports Center.” would go away, only that it would be-
lates the Kim regime. That has reduced trade flows across the Chi- Scores and highlights now can be come increasingly a live news-and-sports
The new U.S. sanctions that President nese border by 75%, according to a Kyodo re- watched on your smartphone whenever bundle. In fact, it already has.
Trump announced Thursday will finally cut off port. Fuel prices began to rise in Pyongyang you want. This seems to have led ESPN Which means ESPN has some adjust-
the regime from the U.S. dollar, the currency even before new U.N. sanctions this month down the ill-advised path of promoting ments to make, but its business model is
it has continued to rely on for trade. Any insti- capped trade in petroleum. noisy, opinionated hosts like Ms. Hill to far from unsalvageable, assuming it
tution that does business with Pyongyang will China isn’t saying if the People’s Bank of jazz up the viewing. doesn’t keep stepping into messes of its
lose access to the U.S. financial system. Mean- China acted last week in anticipation of the But notice something else: In a Net- own creation. Disney needs to remember
while, Chinese regulators have told China’s tougher Trump sanctions. Leaks to the press flix world, live sports increasingly will that the culture of sports is fundamen-
banks to stop handling North Korea trade, and say the U.S. gave President Xi Jinping a heads- be the only programming people will be tally celebratory and unifying, not divi-
many of them had already frozen North Ko- up on Wednesday. But it’s hard to dispute that willing to watch while tolerating com- sive. Let the cable news channels spe-
mercials. The value of ESPN’s live-sports cialize in niche-making. ESPN should be
rean accounts. Mr. Trump’s public statements and official ac-
rights should actually go up. the antidote.
These mark a significant ramp-up in pres- tions on the North have got Beijing’s attention
sure on the North. Americans might think that in a way that previous American Presidents
such sanctions were already in place since the have not. Mr. Trump’s words are often undiplo- LETTERS TO THE EDITOR
regime first tested a nuclear weapon 11 years matic, as with last week’s exchanges with Kim
ago. Barack Obama once called North Korea Jong Un, but they are an attempt to convince
“the most heavily sanctioned, the most cut-off the world that he intends to solve the problem
‘Bourgeois Norms’ Got Professors Their Jobs
nation on Earth.” And the U.S. foreign-policy es- one way or another. Regarding Heather Mac Donald’s up the “norms” of that era as some
tablishment, right and left, has claimed that Relations between Beijing and Pyongyang “Higher Education’s Latest Taboo Is sort of beacon of American virtue sure
sanctions were tried and failed to change have also clearly soured over the past year, and ‘Bourgeois Norms’ ” (op-ed, Sept. 20): as hell scares me.
Pyongyang’s behavior. some Chinese scholars and media are openly The left won the culture wars that be- DAVID L. SAFFAN
gan in the 1960s and ended with cul- Santa Barbara, Calif.
Yet until last year United Nations and U.S. calling for an end to support for Kim Jong Un.
tural conservatives running for cover
sanctions on North Korea were far-less strin- This suggests that Kim’s behavior and U.S. sanc- during the Obama years. One would As an immigrant from India, I am,
gent than those imposed on Iran before 2015. tions may be driving a wedge between China think that the left would be magnani- like most of my fellow immigrants, liv-
Only in March 2016 did the U.N. begin to restrict and North Korea. The increased pressure may mous in victory and open to intellec- ing the American dream precisely be-
the country’s commercial trade, and only in No- have helped Beijing recognize that it would en- tual debate. After all, President Obama cause my family follows what the au-
vember did the U.S. sever North Korean banks dure heavy costs if it continues to prop up a de- himself observed that children grow- thors advocate. This also holds true,
from its financial system. This June the U.S. fi- stabilizing regime. ing up without a father are more likely from what I know, for most East Asian
nally blacklisted a Chinese bank along with On Friday Kim Jong Un responded to all of to live in poverty, more likely to drop immigrants, even the most liberal
companies and individuals that helped the this by threatening to detonate a hydrogen out of school and more likely to wind among us. And I am gratified to see that
North obtain forbidden materials for its nuclear bomb over the Pacific Ocean. That would be the up in prison. our adult children do this too.
A married couple with children We practice bourgeois norms, self-
and missile programs. first nuclear explosion in the atmosphere in de-
earns, on average, an income that is reliance, conservatism and are proud
Those were important steps, but on Thurs- cades, with radiation effects throughout the more than triple the income of a to be in America. But we personify
day the gloves really came off. U.S. Treasury northern hemisphere. household headed by a single mom. “diversity” and are perplexed to hear
Secretary Steve Mnuchin told a press briefing, The threat is further proof that a nuclear That fact isn’t a license to stigmatize rants against diversity in general,
“Foreign financial institutions are now on no- North Korea would mean a new era of instabil- single moms, but it is a statistical rather than against specific behavior.
tice that, going forward, they can choose to do ity and danger. War on the Korean Peninsula truth—and the left apparently cannot AJIT DAMLE
business with the United States or with North must be a last resort, which is why the world handle the truth. With freedom, includ- Tampa, Fla.
Korea, but not both.” The punishments to be should hope that China follows through on its ing post-1950s sexual liberation, comes
meted out are similar to those reserved for fi- order and that these latest sanctions convince responsibility. Shouting down those What is strange about the opposi-
nanciers of terrorism under the Patriot Act. One enough people in North Korea that its current who call attention to the economic fall- tion by University of Pennsylvania fac-
Administration official claimed that Thursday’s path means the end of the regime. out from postbourgeois culture change ulty to Amy Wax’s advice (work hard,
is neither responsible nor progressive. get married, go to school, don’t drink
GENE BRADLEY too much) is that every one of them

ObamaCare’s Tax on the Poor Norfolk, Va. has followed this advice. I have spent
my career in academia, and all profes-

D
Ms. Mac Donald asks: “What are sors whom I know have done exactly
emocrats claim to have a monopoly on These Americans are paying a fine to avoid university administrators and faculty that. Why would so many of Ms. Wax’s
caring for the poor and suffering, and the purchasing a product they don’t want or can’t so afraid of?” Here’s what they’re so colleagues be opposed to advice that
left has been portraying a GOP health-care afford but government compels them to buy. afraid of: perpetuating the myth that has made them so successful?
bill as an attack on America’s Such individuals don’t sud- “hard work” is what’s needed to coun- PROF. PAUL H. RUBIN
vulnerable. So check out the The mandate penalty denly have access to less ex- ter the economic problems that plague Emory University
data on how ObamaCare is a tax pensive or higher quality med- so many people in an America where Atlanta
on some low-income families.
hits low-income ical care, but they do have less jobs are wiped out daily by technol-
Americans the hardest. money for household ex- ogy; promoting the idea, widely be- Ms. Wax and Larry Alexander say
Internal Revenue Service
lieved in the 1950s, that a lack of “self- nothing to imply white supremacy, mi-
data offers insight into who paid penses, which can consume a discipline” is at the root of poverty, sogyny or homophobia. They espouse
the law’s individual-mandate high share of income for this alcoholism, mental illness and other traditional values. The response of
penalty in 2015 for not buying health insurance, the class of families. social scourges; admonishing married Dean Ruger, Stephen Ferruolo and
latest year for which figures are available. Spoiler The unfortunate irony is that ObamaCare de- couples to stay together for “the good many of the faculty only reveals their
alert: The payers aren’t Warren Buffett or any of stroyed the private market that offered options of the kids,” while the kids watch bigotry in assuming the authors were
the other wealthy folks Democrats say they want that in some cases made sense for these people. Daddy batter Mommy (or vice versa) referring to black people.
to tax. More than one in three of taxed U.S. house- For example: High-deductible, limited coverage physically or mentally and end up in HUGH DOSS
holds earned less than $25,000, which is roughly for unexpected events. similar dysfunctional relationships Louisville, Ky.
the federal poverty line for a family of four. Then again, the point of this coercion was to themselves; upholding “respect for au-
More than 75% of penalized households made substitute the government’s political prefer- thority,” which for decades allowed Letters intended for publication should
predator priests (and certainly not be addressed to: The Editor, 1211 Avenue
less than $50,000 and nine in 10 earned less than ences for individual judgment, while forcing the only them) to molest children, confi- of the Americas, New York, NY 10036,
$75,000. Fewer families paid the tax in 2015 than young and healthy to pay more to finance the dent that the child’s (or his/her par- or emailed to wsj.ltrs@wsj.com. Please
in 2014, yet government revenues increased to mandated benefits that Democrats think every- ents’) “respect for authority” would include your city and state. All letters
more than $3 billion from about $1.7 billion, as one must have. This is the status quo that Sena- guarantee his silence. are subject to editing, and unpublished
the financial punishment for lacking coverage tors John McCain and Rand Paul are supporting I grew up in the 1950s, in a “bour- letters can be neither acknowledged nor
returned.
increased. with their opposition to reform. geois” family, and the idea of holding
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
Trump Gets Blunt at the United Nations
DECLARATIONS
By Peggy Noonan
I
’m not sure President Trump’s
speech to the United Nations
General Assembly last week
has been fairly judged or re-
ceived. It was a strong
speech—clear, emphatic, remarkably
blunt. The great question is whether
the bluntness will tend at this point
in history to make things better or
worse. We’ll find out soon enough.
Often Mr. Trump grows bored
with prepared speeches and starts
throwing in asides and improvising
adjectives. But he was committed to
this speech and focused: It looked
like Trump believing what Trump
Will bracing clarity make
things better or worse?
We’ll know soon enough.
But he said things the
world needed to hear.
was saying. Detractors say, “Oh, his
speechwriters just put something in
front of him,” but all presidents,
from the most naturally eloquent to
the verbally dullest, have speech-
writers. The point is what a presi-
dent decides he wants to say and
how he agrees to say it. In the end
he directs what goes in and what
comes out.
Mr. Trump explained to the U.N.
the assumptions he sees as driving
his own foreign policy, which
showed a proper respect for the
opinion of mankind. He outlined the
central problems facing the world
as he sees them—a tradition in
such speeches, and a good one, for
it matters what an American presi-
dent thinks.
Mr. Trump’s speech was rhetori-
cally dense, in that a lot was in it and
Why Afghans Are Hopeful About Trump’s New Strategy
By Parwiz Kawa
And Shafi Sharifi
I
Kabul
n 2011 President Obama an-
nounced that all U.S.-led coali-
tion forces would leave Afghani-
stan by the end of 2014. The timing
of the departure could not have been
worse. The country was being ripped
apart politically by a presidential
election marred with corruption. Af-
ghan security forces were not fully
ready to take on the Taliban and
other terrorist groups pouring in
from safe havens across the border
in Pakistan, their ranks replenished
by thousands of recent graduates of
Pakistani madrassas.
In the absence of a clear U.S.
strategy, Iran and Russia also began
increasing their involvement in Af-
ghanistan, providing arms to the Tal-
iban. By mid-2015, the emboldened
Taliban could see victory. They had
been attacking Afghan government
posts in bigger numbers, targeting
provincial centers and strategic ar-
eas. According to public reports and
By Nina Shea
A
s Islamic State heads toward
defeat in Iraq, Christian and
Yazidi survivors of genocide
should be returning to their home-
towns in Nineveh province. Instead,
these fragile minority communities
mostly remain stranded at displace-
ment shelters in Kurdistan without
the means to rebuild their villages.
Many are fleeing Iraq, and the
country now risks losing these reli-
gious minorities entirely. The
Trump administration is making the
situation worse by continuing
Obama policies that effectively ex-
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little time was wasted. There were
moments of eloquence—the U.N.
must not be complacent; we cannot
become “bystanders to history.”
He began with the usual brag-
ging: The U.S. economy is improv-
ing, and we are militarily strong and
getting stronger—and fairly quickly
kicked into hopefulness, and respect
for the U.N.’s history.
On his administration’s driving
foreign-policy attitudes: “We do not
expect diverse countries to share
the same cultures, traditions or
even systems of government. But
we do expect all nations to uphold
these two core sovereign duties: to
respect the interests of their own
people and the rights of every sov-
ereign nation.” Then: “In America,
we do not seek to impose our way
of life on anyone, but rather to let
it shine as an example for everyone
to watch.”
He painted “America First” as
benign, politically realistic. “Our
government’s first duty is to its
people, to our citizens—to serve
their needs, to ensure their safety,
to preserve their rights, and to de-
fend their values. As president of
the United States, I will always put
America first, just like you, as the
leaders of your countries, will al-
ways and should always put your
countries first.” Still, the nations of
the world must “work together in
close harmony and unity to create a
more safe and peaceful future for
all people.”
The U.S. has always been “a great
friend to the world” and will con-
tinue to be. “Our citizens have paid
the ultimate price to defend our
freedom and the freedom of many
nations represented in this great
hall,” he said. “We want harmony
and friendship, not conflict and
strife. We are guided by outcomes,
not ideology. We have a policy of
principled realism, rooted in shared
goals, interests and values.”
All this is the opposite of democ-
racy promotion and nation building
and dreams of eradicating evil. The
president has spoken like this be-
fore. This section was less statement
private accounts of Afghan officials,
casualty rates of Afghan security
forces in 2015 and 2016 soared to re-
cord numbers, as many as 50 killed
and wounded daily.
Despite all this, violent extrem-
ists have failed to break up Af-
ghan security forces or gain full
control of a province. There were
two reasons.
First, Mr. Obama realized that
leaving Afghanistan altogether risked
squandering the gains of the previ-
ous decade and a half. The limited
presence and support of U.S. special
forces and advisers helped Afghan
special forces stall the Taliban’s mo-
mentum, especially in the battle for
Kunduz in 2015 and 2016.
Second, Afghanistan has changed
fundamentally since 1996, when the
Taliban came to power. The popula-
tion is younger and better educated.
Afghans have better access to infor-
mation and technology, as well as
higher literacy rates. Popular sup-
port for Afghan security forces has
increased too, especially for the Af-
ghan National Army.
How to Help Iraq’s Religious Minorities
clude these non-Muslims from U.S.
aid in Iraq.
Today there are fewer than
250,000 Christians in Iraq, according
to the U.S. State Department, down
from as many as 1.4 million before the
2003 invasion. These Christians speak
Aramaic, like Jesus of Nazareth, and
trace their faith to Thomas the Apos-
tle, whose relics were spirited from
Nineveh by Orthodox monks as Is-
lamic State approached.
The Iraqi Jewish community, its
roots in the Babylonian exile, was
forced out over the past 70 years;
fewer than 10 Jewish families re-
main in Baghdad. Yazidis—who
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OPINION
President Trump speaking at the United Nations General Assembly on Tuesday.
than restatement for an interna-
tional audience.
But there was an interesting
question of emphasis. Throughout
the speech Mr. Trump stressed the
importance of national sovereignty,
of countries protecting their own
ways and needs.
Sovereignty, of course, is crucial.
But as he spoke, my mind went
back to 1914 and all the fiercely
sovereign nations that decided to
go to war with each other, putting
an end to a unique and rising Euro-
pean civilization. In 1945, after
World War II, they put greater em-
phasis on a more corporate ap-
proach, on cooperation and trans-
national institutions. That path can
be abused too, and has been. But it
hasn’t been all bad.
It has been charged that Mr.
Trump virtually ignored Russia, men-
tioning it only once, in thanks for
supporting sanctions against North
Korea. But he also said: “We must re-
ject threats to sovereignty, from the
Ukraine to the South China Sea.” That
isn’t ignoring Russia. “We must up-
hold respect for law, respect for bor-
ders, and respect for culture,” he said.
“We must work together and confront
Now that President Trump has
announced a new strategy, there is
renewed but cautious optimism in
Afghanistan. Afghans are hopeful
because Mr. Trump’s plan, though
Our country’s future as
a peaceful democracy
is not guaranteed, but
America won’t abandon us.
lacking details, puts aside a time-
line-based exit in favor of a condi-
tions-based approach.
It also boosts support for Afghan
security forces and, more impor-
tant, addresses Pakistan’s support
for the Taliban and other terrorist
groups such as the Haqqani net-
work. This will allow Afghanistan to
sustain what has been achieved
since 2001.
In the past 16 years a new gener-
ation of Afghans have come of age.
They are accustomed to a free
have lived near the Sinjar Moun-
tains—number about 400,000. Na-
dia Murad, the voice for thousands
of Yazidis enslaved by Islamic
State, warned a congressional panel
earlier this year that her people
could soon disappear because of
emigration. This would signal the
end of Iraq’s indigenous non-Mus-
lim communities.
Since fiscal 2014, the U.S. has pro-
vided $1.4 billion in humanitarian aid
for Iraq, but very little of it has
reached the beleaguered Christian
and Yazidi communities. This is be-
cause the Obama administration de-
cided to channel most of it through
United Nations refugee and develop-
ment agencies, a practice the new ad-
ministration has continued.
There is no protection for reli-
gious minorities in the U.N.’s over-
whelmingly Muslim camps, and
Christians and Yazidis are terrified of
entering them. The U.N. doesn’t oper-
ate camps in Iraq for displaced Chris-
tians, and the international body has
enough resources to shelter only half
the Yazidis who congregate around
Dohuk, in Iraqi Kurdistan. U.N. pro-
grams also exclude the local churches
that struggle to care for these minor-
ities, forcing them to raise aid on a
piecemeal and insecure basis from
other sources.
President Trump has spoken about
the plight of Christians in the Middle
East, but he has done little to effect
change. Far lower percentages of
Christians and Yazidis are returning
from displacement to their homes in
the devastated Nineveh Plains and
Sinjar, respectively, compared with
Monday, September 25, 2017 | A11
they’re taking will slow them down,
make them question their ambitions
and intentions. But the U.N. needed
to hear clearly and unequivocally
the gravity with which the American
president views North Korea. Ulti-
mately, as Mr. Trump noted, con-
fronting this question is “what the
United Nations is for.”
MOHAMMED ELSHAMY/ANADOLU AGENCY/GETTY IMAGES
A great line—because it spoke a
great truth—was this: “The problem
in Venezuela is not that socialism
has been poorly implemented, but
that socialism has been faithfully
implemented.” Mr. Trump then
paused and looked at the audience.
It struck some as a “please clap”
moment. It struck me as a stare-
down: I’m saying something a lot of
you need to hear. You’re not going
to like it, and I’m going to watch
you not like it.
Two final points: One is that Mr.
Trump is on a roll, a sustained one
the past few weeks, and this is new.
together those who threaten us with All levels of government performed
chaos, turmoil, and terror.” well in the hurricanes. Mr. Trump
The most publicized section of showed competence, focus and
the speech was on North Korea. He warmth. His bipartisan outreach,
characterized its regime as “de- however it ends, went over well
praved,” “twisted,” a “band of crimi- with core supporters and others. He
nals.” True enough. North Korea’s had a strong speech at the U.N., in
“reckless pursuit of nuclear weapons fact a successful U.N. week, from be-
and ballistic missiles” cannot be al- ginning to end. His poll numbers are
lowed to continue. In the speech’s inching toward 40%.
most famous flourish: “Rocket Man Which gets us to point two: This
is on a suicide mission for himself is a very important moment for him.
and for his regime.” The U.S. “has History suggests he will ruin it at
great strength and patience, but if it any minute with intemperate state-
is forced to defend itself or its allies, ments, wiggy decisions or crazy
we will have no choice but to totally tweets.
destroy North Korea.” He does this because he’s some-
Is this too hot, or helpful, or what compulsive and has trouble
both? During the Cold War colorful governing himself. He also does it
candor produced a great deal. When because he thinks his supporters
Ronald Reagan was drop-dead blunt like it. Some do, most don’t. He
about the nature of the Soviet thinks they all do because he misun-
Union, foreign affairs was a high- derstands his base.
stakes chess game between two su- Mr. Trump’s supporters should
perpowers. The context now is a less push back when he starts to go
clearly demarcated world in which slightly mad. They should tweet at
anyone with a weapon of mass de- him: “Stop, Donald! Be U.N. Donald,
struction is, for the moment, a “su- not Twitter Donald.”
perpower.” They should tweet this to him by
It’s hard to know if blunt talk will the millions. Because he does feel
excite nuts into greater activity, or if some loyalty to them, and it’s possi-
bracing clarity about the risks ble he might try to listen.
press, social media and fearless self- Corruption remains a signifi-
expression. This was inconceivable cant challenge. Some corrupt offi-
for past generations. They are also cials have been successfully prose-
against the Taliban’s ideology and cuted: Gen. Mohammad Moeen
their version of Islam. Faqir and businessman Abdul Gha-
The new strategy provides more far Dawi were convicted of embez-
training and support for Afghan se- zlement and abuse of authority in
curity forces. A strong military is August.
essential if Afghanistan is to tackle Yet the government must do a
domestic security challenges and better job of tackling the ethnic di-
join with coalition forces against visions and partisan bickering that
terrorism in the country and region. hamper anticorruption efforts.
It will also pave the way for a There is also the problem of
peaceful political settlement. brain drain. Without serious eco-
With his new strategy, Mr. Trump nomic and security reforms to cre-
has made it clear that he recognizes ate more and better jobs, Afghani-
Pakistan’s double game—harboring, stan will lose its best asset:
arming and supporting the Taliban educated Afghan youth.
and Haqqani network while claiming Afghanistan’s future as a peace-
to be an ally of the U.S. ful, functioning democracy is not
On the political side, the success guaranteed. But for the first time in
of the new American strategy a long time, Afghanistan has hope.
largely depends on whether Presi-
dent Ashraf Ghani’s government can Mr. Kawa is editor in chief of
ensure that elections scheduled for Hasht e Subh Daily, Afghanistan’s
2018 and 2019 are fair, transparent largest newspaper. Mr. Sharifi is
and successful. Afghans cannot af- the chairman of Afghanistan Analy-
ford another debacle like the 2014 sis and Awareness, a Kabul-based
elections. think tank.
the larger religious groups in Tikrit, decide stabilization projects, track
Fallujah and Mosul. progress and ensure locals are hired
Usaid lacks direct oversight in for them. Rex Tillerson’s State De-
Nineveh and relies heavily on U.N. partment has not changed this pol-
Development Program reports that icy. Nor has it answered my request
for information.
Security remains a problem and
Trump should undo threatens America’s regional inter-
ests. Iran is moving in on the towns
an Obama policy that minorities have been unable to re-
largely blocks them claim. The U.N. has focused on mi-
nor projects in Bartella, a main
from getting U.S. aid. Christian town. Yet on Sept. 15 the
“Imam Khomeini” elementary school
and mosque complex opened there
claim progress in Christian towns. at an official ceremony, a “gift from
One local church authority told me the Islamic Republic of Iran.” In sev-
the U.N. reports “grossly overstate eral towns, Iranian-backed militias
the quality and substance of the ac- stand guard.
tual work” and their projects’ influ- Mr. Trump can take immediate
ence is “minimal or nonexistent.” A steps to ensure U.S. aid reaches
representative from the Nineveh Re- Iraq’s most vulnerable minorities.
construction Committee, a unified First, he can direct his administra-
church group, told me earlier this tion to address their humanitarian
month that the only major projects and stabilization needs. This should
under way are its own. These are include dropping the U.N. as a pass-
supported by Hungary and the through for U.S. aid.
Knights of Columbus. Samaritan’s He can also appoint an interagency
Purse and Aid to the Church in Need coordinator to ensure that bureau-
are planning projects in Qaraqosh, cratic hurdles don’t interfere with get-
also without U.S. government assis- ting aid to all groups. These relatively
tance. These private charities can re- small tweaks would help preserve the
build houses, but large infrastructure region’s religious minorities.
projects need government aid. Iraq’s religious minorities are
The U.N. acknowledges that most small in number, but assisting them
of the displaced minorities have not would affirm that the U.S. stands
returned home and have shown “a against genocide, protects religious
reluctance to return without guaran- freedom and aids vulnerable minor-
tees of their security and the stabil- ity groups.
ity of their towns and villages.”
Church leaders close to the dis- Ms. Shea is director of the Hud-
placed are excluded from U.N. and son Institute’s Center for Religious
Iraqi government committees that Freedom.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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A12 | Monday, September 25, 2017 THE WALL STREET JOURNAL.

LIFE & ARTS

WHAT’S YOUR WORKOUT? | By By Jen Murphy
A Buddy’s
Positive Influence
Inspired to Sweat Workout buddies can motivate
us for a 5 a.m. gym session and
push us to run that extra mile,
but they can also affect our
Hawaii’s culture and natural beauty led Jeff Ammerman to Kiakahi, an intense workout choices outside the gym, says
Tony Maloney, an exercise physi-
SOME PEOPLE TURN to spiritu- ologist and fitness center man-
ality when they hit hard times. ager at the National Institute for
Jeff Ammerman turned to fitness. Fitness and Sport in Indianapolis.
“Sunday beach workouts are my “I always ask people, ‘What does
church,” he says. “It’s my spiritual your power circle of friends look
reset and network of support.” Mr. like?’,” he says. “We often act like
Ammerman, 37, had been living a the people we hang out with.” Mr.
“rocker party” lifestyle on Oahu, Maloney says people who over-
struggling with depression and al- come an addiction, such as alco-
cohol. In 2015 he moved to Maui holism, typically change their
hoping for a fresh start. A per- friends. “When you make a posi-
sonal vacation planner for Westin tive change and others don’t, it
Maui Resorts, he overhead a resort can bring out their insecurities,”
concierge talking about Kiakahi. he says. “Rather than rise up and
AMANDA EMMES FOR THE WALL STREET JOURNAL

Kiakahi workouts fuse Polyne- support you, they might try to

sian cultural practices with func- bring you down.” Being in a com-
tional movement. A typical session munity that cares about exercise,
might start with an oli, or a Ha- nutrition, sleep, career and family
waiian chant, follow with various can be inspiring, he says, and
kolo, or crawls, and sprints in the people who discover fitness often
ocean, and end with the instructor pick up the healthy habits of their
blowing on a conch shell. personal trainers or workout part-
Mr. Ammerman showed up for a ners and friends. “Instead of hav-
free community workout on Sugar ing three drinks at a bar after a
Beach in September 2016 and was workout, you might go for a juice
greeted by an instructor jumping or grab a healthy dinner,” he says.
out of the ocean with a huge rock
in his hands. “I was immediately Top, Mr. Ammerman and a partner work with a laau. Below, he and teammates run through the surf carrying a pohaku.
sold,” he says. He routinely hits the salad bar
Mr. Ammerman is 6-feet-2 and tan Ultra Beast, a race that covers at a target. Hakoko, or Hawaiian Uprising workouts at a local field. at a local grocery store and tosses
at the time weighed 250 pounds. “I 26 miles and has 60-plus obsta- play fight, involves partner drills The group might run stadium together greens, broccoli, eggs,
struggled,” he says. “I couldn’t run cles throughout the course. and movements like squats and stairs 100 times, then rotate chicken, cucumbers and strawber-
more than 25 yards on the sand Mr. Ammerman has dropped to lunges. Workouts end with kaula, through stations of kettle bells, ries or raisins and tops it with bal-
without thinking of giving up.” But 215 pounds and is training for the or ropes, which work the arms and jump ropes, sled pulls, burpees samic vinaigrette. He used to eat
he says the instructors’ encourage- Maui Marathon Relay on Oct. 15. core and challenge balance. He and medicine ball throws. He goes sweets every day. His weakness is
ment and outdoor setting kept him “I never imagined when I went to says one of the toughest drills in- to 24 Hour Fitness three times a chocolate peanut butter Häagen-
motivated. that first beach workout I’d find a volves carrying sandbags through week and will lift weights and run Dazs. “I would eat an entire con-
Mr. Ammerman was born on family,” he says. “I train not just thigh-high waves. 3 miles on the treadmill. Once or tainer in one go,” he says. “Now I
Oahu but spent his teens and 20s for me but to make them proud Four nights a week he attends twice a week he does a P90X yoga try to make a pint last over the
in California and says he lost touch because they believe in me.” and ab workout at home af- course of a week or two. I have
with Hawaii’s culture. “Every work- ter a beach run. four or five bites and set a date of
out speaks to the cultural message The Workout when I’m allowed to dig back in.”
of respecting the land or people Two-hour Kiakahi sessions The Diet He says he still drinks alcohol, but
and understanding the true mean- incorporate ropes, sandbags, Breakfast is occasional and in moderation.
ing of aloha,” he says. “It sets a medicine balls, jump rope, light. “It depends on if I’m
tone of gratitude and appreciation.” pohaku, or rocks, and laau, working,” Mr. Ammerman The Gear & Cost
As he got more fit, Mr. Ammer- or long wooden sticks. says. “I usually grab a ba- Mr. Ammerman wears Inov-8 X
man began going to Uprising, a The workout is broken nana after I run.” He has su- Talon 212 sneakers for trail run-
functional workout at a field run into four parts. The first in- shi for lunch. Uprising fin- ning (retail $115) and or Nike Flex
by some of the Kiakahi instruc- volves crawls that warm up ishes at 6:30 p.m. and his Experience RN 6 sneakers ($65)
tors. “It’s like Kiakahi, but with a the muscles and might even drive home can take up to for the gym or road running. He
CrossFit edge, and you have to include somersaults and an hour. “I’m too lazy to buys Virus compression apparel.
wear shoes,” he says. In August, frog hops. The second part cook when I get home,” he He pays $40 a month for his mem-
Mr. Ammerman, along with some uses laau, which Mr. Am- says. “I usually just pick up bership at 24 Hour Fitness and
of his Uprising and Kiakahi merman might push and something healthy and $60 a month for Uprising work-
friends, participated in the Spar- pull with a partner or throw easy.” outs. Kiakahi workouts are free.

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. 32 Reach its
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BUSINESS & FINANCE
© 2017 Dow Jones & Company. All Rights Reserved.
Euro vs. Dollar 1.1959 À 0.15%
In London, Uber Tries for Compromise
BY SAM SCHECHNER
After a stinging regulatory
rebuke from the city of Lon-
don, Uber Technologies Inc.
is seeking to negotiate.
The ride-hailing company is
pushing to meet the London
regulator that on Friday said it
would refuse to reissue Uber’s
operating license there. At the
same time, it is preparing a le-
gal appeal and rallying its us-
ers in London to build sup-
port. It will be allowed to
operate as usual during the
appeal, a process that could
take months.
Uber once had an approach
to transport regulation that its
former chief executive called
“principled confrontation.”
KEYWORDS
By Christopher Mims
Should U.S.
Require
Breach
Disclosure?
There are
two things we
can count on
in the wake of
the Equifax
breach, al-
ready credited with exposing
a majority of American
adults to the possibility of
identity theft. The first is
that more and potentially
worse breaches are in our
future. The second is that
companies will need to be
prodded toward smarter cy-
bersecurity practices and
faster reporting of breaches.
Details of the breach—
which Equifax said it discov-
ered in late July—have only
recently been revealed by
the credit-reporting com-
pany and by Mandiant, the
cyberforensics firm it hired.
However, the enormous loss
of data appears to have been
the result of an unpatched
vulnerability, which allowed
hackers to roam freely inside
Equifax’s computer network
for more than four months.
(In a report, Equifax said it
“took efforts” to fix the com-
promised system.)
The Federal Trade Com-
mission and the Federal Bu-
reau of Investigation are in-
vestigating, and the first of
what is expected to be a
wave of lawsuits by state at-
torneys general has already
been filed. But punishing
Equifax isn’t the same as
minimizing the impact of
similar disasters. For that,
we are going to need some-
thing anathema to the tech
industry and especially com-
panies that have been
hacked: transparency.
It isn’t coming voluntarily.
There is already a patchwork
of data-breach disclosure
Please see MIMS page B3
INSIDE
ALL EYES TURN
TO L’ORÉAL’S
NESTLÉ TIES
BUSINESS & FINANCE, B2
FEARS ARISE
OVER SEC’S
NEW DATABASE
FINANCE & MARKETS, B5
TECHNOLOGY: CHINESE LEAD THE WAY IN MOBILE PAYMENTS B3
FTSE 100 7310.64 À 0.64%
Uber wants to meet with Transport for London on the decision.
More recently, it has softened
its approach, particularly in
Europe.
Still, it was blindsided by
London’s announcement Fri-
Deutsche Telekom has detected 30,150 cyberattacks from China this month. CEO Timotheus Höttges, on screen, speaking in March.
Germany Combats Foreign Hackers
Government steps in
to help small, midsize
firms bolster defenses
amid wave of attacks
BY WILLIAM WILKES
BERLIN—A wave of attacks
by Chinese hackers on Ger-
many’s cutting-edge manufac-
turers is raising alarm in Berlin
and prompting the government
to step in to defend the coun-
try’s competitive edge.
The small and midsize com-
panies that make Germany an
export powerhouse have
landed in the crosshairs of for-
eign hackers attracted to the
companies’ valuable but often
poorly protected intellectual
property, German intelligence
officials warn.
Some 65% of German manu-
facturing and technology com-
panies were hit by cyberattacks
in 2016, compared with 62% in
the U.S. and 50% in the U.K., ac-
cording to insurer Hiscox Ltd.
Germany’s BfV domestic intelli-
Mashable Searches for Potential Buyer
BY LUKAS I. ALPERT
AND SUZANNE VRANICA
The new-media company
Mashable is about to test
how much “pivoting to video”
pays off.
The U.S. company, known for
its mix of technology and pop-
culture stories, has for months
been looking to raise capital
from a strategic investor but is
now leaning toward an all-out
sale, people familiar with the
matter said. Mashable has had
extensive discussions with Ger-
man television broadcaster
ProSiebenSat.1, the people said.
It is possible another suitor
could emerge. U.S. media com-
pany Viacom Inc. also explored
a deal but isn’t currently en-
gaged in talks, one of the peo-
ple said.
Mashable laid off about 30
employees last year, curtailed
the scope of its written-news
reporting and shifted re-
THE WALL STREET JOURNAL. Monday, September 25, 2017 | B1
Gold 1293.30 À 0.21% WTI crude 50.66 À 0.22% German Bund yield 0.449% 10-Year Treasury yield 2.262%
fying Uber’s approach to re- could set a precedent, poten- The mayor’s office oversees
porting serious crime and tially locking Uber into provid- the transport authority, and
driver background checks, ing them to other municipali- Mayor Sadiq Khan has said he
among other issues. Uber has ties around the world. That backs the decision to withhold
contested the authority’s de- could add to costs at a time the operating license.
DANIEL LEAL-OLIVAS/AFP/GETTY IMAGES
scription of its shortcomings. when Uber is trying to narrow “While we haven’t been
The company circulated an its large losses. asked to make any changes,
online petition asking users to Uber is likely to reach out we’d like to know what we can
call on London to back down. to Transport for London as do. But that requires a dia-
As of Sunday afternoon, the early as Monday to try to set logue we sadly haven’t been
petition had garnered more up a meeting to help deter- able to have recently,” Tom El-
than 640,000 supporters. mine what the authority’s spe- vidge, Uber’s general manager
Given the high-profile na- cific complaints are, and how in London, said in a statement
ture of the standoff with Lon- Uber could resolve them, ac- that Uber provided by email.
don, and the importance of cording to a person close to Uber said it hasn’t had suc-
London’s market size for Uber, the company. Uber hasn’t had cess in setting up a meeting
the stakes are especially high. any direct contact with the with Mr. Khan since he was
day that it was unfit to oper- London accounts for about 5% transport authority or the elected. The company said it
ate in the city. The agency, of Uber’s global base of cus- London mayor’s office since has only met with senior staff
Transport for London, cited tomers who use the service at Friday’s announcement, but is at Transport for London one
what it called a general lack of least once a month. eager to talk, that person and time this year, despite at-
corporate responsibility, speci- Any concessions to London another said. Please see UBER page B2
Global
Yields Feel
Europe’s
Weight
BY MIKE BIRD
European investors are buy-
ing more foreign bonds than
ever before, another sign that
many fund managers aren’t ex-
pecting tapering from the Eu-
ropean Central Bank to boost
local yields anytime soon.
The trend has global impli-
cations. Heavy demand from
the eurozone puts pressure on
yields elsewhere in the world,
WOLFGANG RATTAY/REUTERS
including the U.S., and lowers
borrowing costs there. The eu-
rozone’s investors are big
spenders: In 2016, local inves-
tors bought around $500 bil-
lion in foreign, mainly govern-
ment, bonds, almost enough to
cover the entire $584.7 billion
U.S. budget deficit.
The most recent numbers,
between May and July, show
that the eurozone’s investors
bought €160.8 billion ($192
gence agency estimates that billion) in international bonds,
German companies lost €55 bil- Targeting Technology the largest sum in any three-
lion ($66 billion) to espionage, German firms lead the world in factory technology... month period on record, ac-
sabotage and data theft last cording to data from the ECB.
year, up from €51 billion in 2015. Factory patents filed, 2016 ECB stimulus, including neg-
Spooked by the losses, the ative interest rates and a huge
German government is moving Germany bond-buying program, have
to shield companies from pushed down the yields on lo-
state-backed hackers and crim- Switzerland cal government debt to record
inal gangs, offering to pay to lows. That has made investors
harden the defenses of Ger- look elsewhere for returns.
many’s most vulnerable com- South Korea Now, robust growth in the
panies. Industry groups are eurozone is raising expecta-
also reaching out to members U.S. tions that the ECB will roll
about the threat. back its monetary policy, eas-
“The German economy is Netherlands ing more quickly than once ex-
the focus of industrial espio- pected. As ECB buying sub-
nage,” Hans-Georg Maassen, 0 1,000 2,000 3,000 4,000 sides, that should push yields
head of Germany’s domestic higher.
intelligence agency, said in ...making them a target for hackers. But eurozone investors
July. “Attacks have increased Percentage of manufacturers hit by attacks in 2016 don’t appear to be buying into
over the last two years.” the idea that local yields are
Two years ago, the U.S. and Germany about to get more attractive.
China signed an agreement not In June, ECB President Ma-
to support hacking aimed at rio Draghi said that “all the
industrial espionage. But de- U.S. signs now point to a strength-
spite high-level discussions, ening and broadening recov-
German officials have yet to U.K. ery in the euro area”—which
secure a similar deal. The investors interpreted as being
G-20, which includes China and 0.% 20% 40% 60% 80% 100% the central bank laying the
Germany, announced a pact Sources: World Intellectual Property Organization ground for tapering. But that
Please see HACK page B2 (patents); Hiscox Insurance THE WALL STREET JOURNAL. didn’t stop eurozone investors
from snapping up €40.9 billion
in foreign bonds in the follow-
ing month alone.
“The rhetoric is about
higher rates and tapering…but
the reality is that government-
sources into video. That pre- much of a premium someone multiple—the ratio of its valu- bond yields and interest rates
ceded a wave of similar moves would pay for part—or all—of ation to its revenue—its valua- in Europe are extremely low
by media outlets seeking the company. tion now would top $300 mil- and even negative in some
faster digital advertising “We made big changes and lion, not factoring in any places,” said Mouhammed
growth as their business mod- it wasn’t easy, but we are ex- premium for acquiring control. Choukeir, chief investment of-
els come under stress. Many tremely happy where we are. If the company fetched a dis- ficer at Kleinwort Hambros.
have used the phrase “pivot to We consider it success by any appointing price, it would be a “So you’re going to see that
video” to explain the shift. measure,” Greg Gittrich, Mash- signal of skepticism about the continued search for yield
By some measures, the able’s chief content officer, prospects of digital-media firms. overseas.”
change has paid off for Mash- said of the company’s shift to- The industry—which features European government-bond
bigger competitors such as yields haven’t shifted signifi-
BuzzFeed, Vox Media and Vice cantly against their global
Media and smaller, independent peers since the ECB began
New-media firm faces a test of the decision
to move resources toward video production.
outfits such as Mic, Refinery 29,
Bustle and Mashable—was fly-
changing its tone on tapering.
That is particularly so in
ing high a few years ago as the the short-dated government
digital ad market looked prom-
ising and capital poured in.
bond market. German two-
year bund yields are now 2.1
able: Its revenue increased ward video production. “Any Traditional media companies percentage points below U.S.
36% to $42 million in 2016, further investment will help us were hungry to invest in these two-year Treasury yields, a
while the site posted a net loss unlock growth much faster players, as they lost young au- gap that has widened from 2
of $10 million, people familiar
with its financials said. It is
than we could organically.”
Mashable, which has raised
diences on the TV dial.
But the high valuations
percentage points six months
ago. That is partly because the
targeting $50 million this year $46 million in capital, was val- came with high expectations Federal Reserve has already
and might break even. Video
views have soared on YouTube
ued at $250 million in its last
fundraising round in 2016,
from investors: rapid revenue
growth and the promise of lu-
moved on tightening its own
monetary policy. On Wednes-
and other platforms. people familiar with the mat- crative exits one day via an day, Fed officials kept the door
But the real test is how ter said. Assuming a steady initial public offering or sale. Please see BONDS page B2
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Monday, September 25, 2017
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
Alibaba Group
A
Holding...............B3,B4
Alstom.........................B2
American International
Group.........................B5
Ant Financial Services
Group.........................B4
Apple......................B3,B8
Aston Martin
Lagonda ................... B4
B L'Oreal....................B2,B8
Bank of America Merrill
Lynch.........................B8
BASF............................B4
Bayerische Motoren
Werke........................B4
BlackRock....................B5
C-E
China Rapid Finance...B4
Credit Suisse Group ... B8
INDEX TO PEOPLE
B I
Bell, Mike....................B2
Benham, David ........... A4
Bettencourt, Liliane....B8
Boucheron, Marion.....B2
C Kinniry, Fran................B5
Carter, Richard John...B4
Choukeir,
Mouhammed.............B1
Clayton, Jay ................ B5
D Loeb, Daniel................B8
Deluard, Vincent.........B7
Deora, Madhur............B3
Draghi, Mario..............B1
F Murtagh, Ciaran..........B4
Fine, Saul....................B4
Friedman, Michael......B5
H O'Sullivan, Andrea......B3
Hoppe, Ulrich .............. B4
UBER
Continued from the prior page
tempts to set up meetings.
At the one meeting, offi-
cials told Uber they couldn’t
discuss the license renewal,
Uber said. As a result, people
close to Uber said the com-
pany is still in the dark about
what it could do to address
the authority’s concerns.
A person close to London’s
mayor said Mr. Khan has con-
sciously avoided meeting with
any parties involved in the
Uber case, including the com-
pany and black-cab unions, to
stay out of what he considers
a regulatory process.
Transport for London de-
clined to comment beyond its
statement on Friday. It cited
the appeal process.
Uber’s offer to negotiate is
one of the strongest signals of
a changing public stance from
a company that is facing scan-
dals, probes and board infight-
ing—often brought on by alle-
gations of an aggressive
corporate culture.
Now the company is being
forced to change its behavior
in multiple arenas at once—its
governance, how it treats its
drivers, and its approach to-
HACK
Continued from the prior page
against commercial cyberespi-
onage in 2015.
In June 2016, a delegation
led by German Chancellor An-
gela Merkel flew to Beijing for
talks on the matter. While Chi-
nese officials led by Premier Li
Keqiang told Ms. Merkel that
Beijing would protect German
companies’ intellectual prop-
erty in China, they didn’t agree
to stop hacking.
As Chinese attacks on U.S.
companies have eased, Ger-
many has become a bigger tar-
get, according to Nigel Inkster,
senior adviser to the Interna-
tional Institute for Strategic
Studies in London.
In a faxed statement,
China’s Ministry of Foreign Af-
fairs said it was unaware of the
German allegations but reiter-
ated Beijing’s official position
that it “resolutely opposes” cy-
berhacking in every form.
CHRISTOPHE MORIN/BLOOMBERG NEWS
An employee inspected a rail car along the assembly line inside
Alstom’s train factory in Petite-Forêt, France, last year.
THE WALL STREET JOURNAL.
BUSINESS & FINANCE
Equifax ........................ B1
F
Facebook......................B3
S
Sanofi..........................B8
Shay Murtagh
All Eyes on L’Oréal-Nestlé Ties
Finup Credit ................ B4 Precast.....................B4 BY MATTHEW DALTON Some analysts have ques-
G Siemens.................B2,B4 AND BRIAN BLACKSTONE tioned whether Ms. Betten-
General Motors...........B2 SoftBank Group..........B3 court’s death could prompt
Goodfish Group...........B4 T PARIS—The death of Liliane her heirs to either sell their
J Telia.............................B2
Bettencourt has placed a ques- L’Oréal shares or increase
Julius Baer Gruppe.....B8 Tencent
tion mark over the decades- their stake in the company.
L-M Holdings.........B3,B4,B8 long ties between L’Oréal SA But a person close to the fam-
Thesys Technologies...B5 and Nestlé SA, two of the ily and analysts say neither
Mandiant.....................B1 Trillium Asset world’s largest consumer- outcome is likely.
Mashable.....................B1 Management.............B5 goods companies. Françoise Bettencourt Mey-
Morgan Stanley..........B8 Shares of L’Oréal jumped ers, Ms. Bettencourt’s only
U
N Friday as investors speculated child, orchestrated the 2014
Uber Technologies ...... B1
Nestle.....................B2,B8 on the possibility either side deal to cement her family’s
UBS Group...................B8
Nintendo......................B8 might reconsider Nestlé’s control over L’Oréal. Neither
Unipart Group.............B4
P large stake in L’Oréal. How- she nor her sons want to sepa-
ProSiebenSat.1
V ever, analysts, as well as a per- rate from the company, a per-
Media........................B1 Vanguard Group..........B5 son close to the Bettencourt son close to the family said
family, are tamping down ex- Friday. “It’s the story of their
pectations of a shake-up, cit-
ing a thicket of financial hur-
life, their family,” the person
said. “They are very attached
JACQUES HAILLOT/SYGMA/GETTY IMAGES
dles as well as the companies’ to the company.”
Q comfort with the status quo. The family faces a signifi-
Inkster, Nigel..............B2 Qi, Liu..........................B4 Nestlé, the Swiss consumer- cant obstacle to increasing its
K S goods giant, and L’Oréal, the stake: Under French law, any
Schenone, Karen.........B5 world’s biggest cosmetics shareholder that wants to own
Kathrein, Reed............B5
Schneider, Ulf Mark....B8 company, have been inter- more than one-third of a com-
Katz, Ian......................B5
Scuoler, Terry..............B4 twined since 1974, when Ms. pany must make an offer to
Shea-Porter, Carol......B3
L Swanson, Shane.........B5 Bettencourt, heiress to the buy all of the company. That
L’Oréal cosmetics fortune, would stretch the pockets of
Langevin, Jim..............B3 T-V
Lewis, James..............B2 Thiru, Suren................B4
swapped a large stake in even one of the world’s richest
Lieu, Ted......................B3 Van Hoisington...........B5 L’Oréal for shares in Nestlé to Liliane Bettencourt, left, had a more-than-30% stake in L’Oréal. families.
fend off a feared nationaliza- “Launching a mandatory of-
W
Lythgoe, Tony ............. B4 tion by the French state. back to L’Oréal for assets and tives have previously said they fer on L’Oréal would require
Wang, Zane.................B4
M-N That agreement between cash, cutting its stake from are in no rush to trim the close to €60 billion, which is a
Wedin, Charlie ............ B3
McDonald, Greg .......... B4 Wegner, Kirsten..........B5 Nestlé and Ms. Bettencourt, 29.4% to 23.29%. Ms. Betten- L’Oréal stake further. significant amount,” said Mar-
Woodall, Roy...............B5 who died Thursday in Paris at court’s stake in L’Oréal rose “This asset has been deliv- ion Boucheron, an analyst at
Neill, John...................B4 Y the age of 94, allows either from 30.6% to 33.31%, while ering stellar financial returns Raymond James in Paris.
O-P Yellen, Janet...............B5 party to increase its stake in Nestlé’s presence on L’Oréal’s to us in recent years, and we The relationship between
Z L’Oréal six months after her board shrank from three seats also consider it a strategic as- the two companies extends be-
Palmer, Andy .............. B4 Zuckerberg, Mark ....... B3 death. to two. set. Hence anything we would yond shareholding. Nestlé’s
Nestlé and L’Oréal have Following Ms. Bettencourt’s ever want to do on that would stake in L’Oréal gives it a valu-
been moving to unwind their death, Nestlé expressed its need to be pondered very able asset in neighboring
ward local laws. “The truth is
that there is a high cost to a
bad reputation,” said Chief Ex-
ecutive Dara Khosrowshahi in
relationship in recent years. In
2014, Nestlé agreed to sell
48.5 million L’Oréal shares
condolences and said now is
“not the right time” for addi-
tional comment. But execu-
carefully,” Nestlé Chief Execu-
tive Mark Schneider told a
news conference in February
France while providing L’Oréal
with a stable long-term inves-
tor.
an email to staff about the
London decision on Friday.
After a bad run of confron-
tations in Europe and Asia, the
company in 2015 embarked on
BONDS folio of bonds in October.
“There is a good chance the
ECB hasn’t done any hikes by
the end of 2018,” said Mike
you could well see continued
large foreign bond purchases.”
All that could mean lower
borrowing costs for Ameri-
the five-year Treasury yield by
0.4 to 0.6 percentage point in
the short run.
Adding to the attraction of
push to negotiate new deals Continued from the prior page Bell, global market strategist cans. In 2012, a Fed research investing abroad for European
with cities to create jobs in re- open for a December interest- at J.P. Morgan Asset Manage- paper estimated a $100 billion investors: The cost of hedging
turn for looser rules. rate rise at the conclusion of ment. “Whilst that gap be- rise in foreign official de- their exposure to movements
Later that year, after fierce their September meeting. Offi- tween very low bond yields in mand—from institutions such in foreign currencies has fallen
opposition in France and other cials also said that they would the eurozone and somewhat as central banks and sover- this year.
countries, the company re- begin shrinking the Fed’s port- higher global yields persists, eign-wealth funds—reduces A five-year cross-currency
versed course in much of Eu- basis swap currently costs a
rope to its service that uses European investor around
drivers without professional Bond Binge 0.35 percentage point above
licenses. European investors have stepped up their purchases of bonds issued outside the eurozone since the interest rates—allowing them
Since then, however, the Continent began moving to negative interest rates three years ago. to borrow in dollars and
company has continued to run Since negative interest hedge their risk—down from a
into problems in multiple cit- €5 trillion rates were introduced peak of 0.56 percentage point
ies—including London—over last year.
questions of safety and the Stock of foreign bonds held by eurozone investors Still, despite European in-
treatment of its drivers. 4 vestors buying their bonds
Like many car-hailing com- abroad, the eurozone is now
panies, Uber says its drivers registering inflows in the eq-
3
are independent contractors, uity market, a trend that
but some drivers say they some analysts don’t see re-
should be entitled to some 2 versing soon.
workers’ rights, such as a min- Earnings have picked up in
imum wage and sick pay. This Europe, and compared with
week, Uber is expected to ar- 1 U.S. stocks, equities in the re-
gue its appeal to a court ruling gion are relatively cheap
in London last fall that two of “Looking at the growth mo-
its drivers are entitled to 0 mentum and the economic re-
workers’ rights. 2008 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 form story, we expect that to
—Wiktor Szary Note: €1 trillion = $1.2 trillion continue,” said Jordan Roches-
contributed to this article. Source: WSJ Market Data Group THE WALL STREET JOURNAL. ter, strategist at Nomura.
“If the relevant parties have
definitive evidence of hacking
attacks, they can provide it to
the Chinese side and we will
the Mittelstand—that produce
more than half of Germany’s
economic output and sell the
tools, parts and components
7,661 attacks.
Chinese state-backed hack-
ing of Western companies is
conducted by the cyberwarfare
nesses using intelligence re-
sources, companies can still
put in a request for a target to
be hacked but no longer can
Chinese intelligence had pene-
trated in 2016 the systems of a
Mittelstand manufacturer—a
leading manufacturer in its
handle it according to the law,” that power factories around units of the People’s Libera- assign tasks to the teams di- field—injecting software to
the statement said. It added the world, experts say. tion Army or China’s Ministry rectly, Mr. Lewis said. steal blueprints and other data.
that, “baseless accusations and “The ignorance at smaller of State Security intelligence Germany’s domestic intelli- Deepening economic ties
speculation are not only un- firms is extreme,” Alexander agency, according to Western gence agency said in May it between China and Germany
professional, they also do Dörsam, head of information- intelligence agencies and secu- had evidence the APT-10 Chi- make Berlin wary of confront-
nothing to solve the problem.” technology security at com- rity companies. nese hacker group—also ing Beijing over the attacks,
German companies lead the puter-security firm Antago known as Menupass Team and according to Nadège Rolland, a
world in advanced-manufac- GmbH said. “The founders of Stone Panda—was behind a re- senior China analyst at the Na-
turing patents, with 3,917 filed the company are often its lead- cent hacking campaign against tional Bureau of Asian Re-
last year versus 1,410 by U.S. ers. They are older and don’t
Some 65% of German German high-tech companies. search in Washington. Exports
and 860 by Japanese compa- understand the technology.” manufacturing and APT-10 has been active to China, one of the fastest-
nies, according to the World China has long fed its vora- since 2009 when it started growing markets for German
Intellectual Property Organiza- cious appetite for German tech-
tech firms were hit by hacking U.S. military research goods, hit $76 billion in 2016.
tion. The world’s third-largest nology via Chinese regulations cyberattacks in 2016. institutions and companies, ac- A spokesman for Germany’s
exporter spends 2.9% of gross and directives that force for- cording to an April report by foreign ministry said Berlin of-
domestic product on research eign investors to share knowl- BAE Systems PLC and consult- ten raises the issues of cyber-
and development, a higher per- edge with local partners and by ing firm PWC in collaboration attacks and intellectual prop-
centage than the U.S. and the acquiring German businesses. Chinese companies used to with Britain’s GCHQ intelli- erty with Beijing.
U.K do, according to the most But China’s spy agencies have be able to direct the PLA or gence agency. APT-10 has sig- Berlin is offering to cover
recent figures from the Organi- also joined the hunt, counterin- MSS to hack into Western nificant financial and human some of the cost of shielding
zation for Economic Coopera- telligence officials here say. competitors, according to resources and was active dur- Mittelstand firms from cyber-
tion and Development. Deutsche Telekom AG, Ger- James Lewis, director of the ing Chinese working hours, ac- attacks. The economics minis-
Large multinationals can af- many’s largest telecommunica- Strategic Technologies Pro- cording to the report. try pays for consultants to
ford to protect their property. tions company, said it detected gram at the Center for Strate- Intelligence officials in the visit smaller firms and plot
Not so the more than 3.5 mil- 30,150 cyberattacks from China gic and International Studies South-German state of Baden- countermeasures.
lion small and midsize busi- so far this month, with Russia in Washington. In the wake of Württemberg in March said —Josh Chin
nesses—known collectively as the second-largest source at Beijing’s crackdown on busi- hackers likely controlled by contributed to this article.
BUSINESS WATCH
ALSTOM billion ($8.7 billion) in the finan- resolution brings to an end all Tennessee plant that makes
cial year ended March 31. Sie- known corruption investigations sport-utility vehicles, a sign that
Train Firm, Siemens mens’s mobility unit had €7.8 into the company. the slowdown in the broader car
Consider Rail Deal billion in revenue last year. It remains part of a broader market is spreading to SUVs.
—Robert Wall probe by U.S. authorities into GM notified employees at its
German industrial giant Sie- and Ben Dummett corruption in Uzbekistan. Spring Hill, Tenn., assembly plant
mens AG and French train Telia agreed on Thursday to Friday that the company will lay
maker Alstom SA are in talks to TELIA pay a total of $965 million in off the overnight shift because
create a European rail-transpor- penalties and fines, the criminal of “moderating” sales of the two
Settlement Reached
tation powerhouse to counter portion of which will be equally crossover SUV models built
growing competition from China. On Bribe Allegations split between the U.S. and Dutch there. About 1,000 people work
France’s Alstom, which makes authorities. on that shift, though some
trains and buses, said Friday it Telia Company AB agreed to —Samuel Rubenfeld might be able to transfer to
was in talks to combine its oper- pay nearly $1 billion to U.S. and other parts of the operation,
ations with the mobility unit of Dutch authorities to settle alle- GENERAL MOTORS which also makes engines and
Siemens. The German company gations that the Swedish tele- other components, a spokesman
confirmed the talks. communications company and a Hundreds Face for GM said.
A combination would create a subsidiary paid about $331 mil- Layoffs at SUV Plant The factory makes the GMC
European transportation busi- lion in bribes in Uzbekistan. Acadia and Cadillac XT5 cross-
ness with $18 billion in annual Telia, which is partly owned General Motors Co. will lay over sport-utility vehicles.
sales. Alstom had sales of €7.3 by the Swedish state, said the of several hundred workers at a —Mike Colias
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
JITENDRA PRAKASH/REUTERS
A Hindu holy man used the Paytm mobile-payment app to buy a book during a religious festival in Allahabad, India, in January.
Chinese Propel Mobile Pay
BY NEWLEY PURNELL
NEW DELHI—Silicon Valley
is home to the world’s most
influential consumer-tech
companies, but China’s online
corporate titans are way ahead
in the race to build mobile-
payment services in many of
the world’s fastest-growing
consumer markets.
China’s digital-payments
market, by far the world’s
largest, is dominated by e-
commerce company Alibaba
Group Holding Ltd. and so-
cial-media champ Tencent
Holdings Ltd. Now the two are
imparting money and know-
how to mobile-money startups
in other Asian markets.
As people across Asia in-
creasingly move from cash to
smartphone apps for buying
goods and transferring money
between individuals, U.S. com-
panies are “still very focused
on their home market,” trying
to increase usage there, said
Shiv Putcha, an analyst at re-
search firm IDC in Mumbai.
QR codes are used widely
by smartphone owners in
China to pay bills and make
purchases in shops and at
vending machines, contribut-
ing to a $9 trillion mobile-pay-
ment market last year, accord-
ing to iResearch. That is
almost 90 times the size of the
U.S. mobile-payment market of
iPhone Shoppers
Consider Options
When new iPhones hit the
market, they usually fly off the
shelves. But with the two mod-
els that began selling Friday,
there are signs demand is
By Tripp Mickle
in San Francisco
and Yoko Kubota
in Beijing
tepid—and some analysts say
that could be a good thing for
Apple Inc.
The paradox arises from Ap-
ple’s unusual lineup this year.
It includes the iPhone 8 and 8
Plus that arrived Friday, plus
the far pricier and advanced
iPhone X scheduled to arrive
six weeks later, which many
Apple investors expect to be
this year’s blockbuster.
Any sluggishness in iPhone
8 sales could signal more appe-
tite for the iPhone X, said Katy
Huberty, an analyst with Mor-
gan Stanley. “From a financial
standpoint, that’s the best out-
come” for Apple, she said, be-
cause the more expensive,
higher-margin model would
boost revenue and profits.
The trio of phones has cre-
ated confusion for some long-
time customers. Jeremy Kirk-
land, a 32-year-old marketer
from Brooklyn, N.Y., woke at
2:45 a.m. on Sept. 15—when
Apple started allowing preor-
ders—to buy an iPhone 8 Plus.
But he canceled his order on
Tuesday after reading a critical
review of the device. He now
plans to wait for the iPhone X.
In Beijing, lines were short
at the Apple Store in the city’s
Sanlitun district, where the
new iPhone 8s went on sale
Friday morning.
Several of those picking up
the new handset said they
No Contest
When it comes to mobile
payments, China dwarfs
the U.S.
U.S.
2016
$112 billion
2011
$8.3 billion
Sources: iResearch (China); Forrester (U.S.)
THE WALL STREET JOURNAL.
$112 billion, according to data
from research firm Forrester.
Two payment platforms—
Alibaba-backed Alipay and
Tencent’s Tenpay—handle
some 90% of China’s online
payments by transaction
value, iResearch says. As
China’s market matures, Ali-
baba and Tencent are chasing
growth overseas, helping local
startups in emerging markets
run mobile-money systems
that don’t require plastic.
Chinese investors supplied
the bulk of $2.7 billion in
funding to Asian financial-
technology startups in the sec-
ond quarter of 2017, according
to research firm CB Insights.
Their experience in China and
technical savvy might prove
even more valuable.
As in China, merchants in
didn’t think the iPhone X
would be worth the wait.
“The new features of the
iPhone X are fresh, but not at-
tractive enough for me to feel
that I have to own it no matter
what,” said Yang Zheng, a 30-
year-old working in the educa-
tion industry who paid $1,200
for his iPhone 8 Plus. (The
phone starts at $799 in the U.S.
but costs more in China because
of a value-added tax.)
Much of Apple’s perfor-
mance over the next year will
be determined by iPhone de-
mand in China. Sales there
have slumped over the past six
quarters as local, low-price
manufacturers have cut into
Apple’s market share.
Still, Apple has its Chinese
fans. Some of the customers in
Beijing on Friday took photos
and videos of the new phones
going on sale.
In France, Florian Burnat
said he buys a new iPhone ev-
ery year. The 33-year-old law-
yer opted for the iPhone 8,
picking it up at the Apple store
next to the Louvre museum in
Paris. “I didn’t go for the
iPhone X because it is just too
expensive,” he said. “I’d rather
just wait for the new features
to appear in other models.”
Strong sales of all three new
iPhone models would be the
best scenario for Apple. And
there are risks in banking too
much on the iPhone X. The
phone, which features facial-rec-
ognition technology and a
larger, edge-to-edge display, was
beset by production problems
this summer. It is unclear how
many will be available when the
iPhone X ships on Nov. 3.
—Yang Jie in Beijing
and Sam Schechner in Paris
contributed to this article.
TECHNOLOGY
China
2016
$9 trillion
2011
$15 billion
many emerging markets lack
point-of-sale machines needed
to process payments via Apple
Inc.’s Apple Pay and Alphabet
Inc.’s Android Pay. Meanwhile,
few consumers in these mar-
kets have credit or debit cards
to make payments.
Executives at India’s largest
mobile-payment app, Paytm,
drew inspiration from Alibaba,
one of its main funders.
Paytm’s chief financial officer,
Madhur Deora, said his com-
pany benefits from frequent
meetings with senior Alibaba
executives. Paytm staff travel
to Alibaba’s offices in China
and vice versa.
“We exchange thoughts on
design and product,” Mr. De-
ora said, referring to the way
apps appear on smartphone
screens and how services can
MIMS
Continued from page B1
laws passed by 48 different
states, yet none have been
strong enough to get compa-
nies—wary of increased
costs and hits to their repu-
tations—in line. Newly pro-
posed federal regulations
could be, if they can get bi-
partisan support.
“Equifax has had a very
poor response and I’m disap-
pointed in them,” says Rep.
Jim Langevin (D., R.I.), one
of the members of Congress
behind the new regulatory
push. “As good corporate cit-
izens I believe Equifax owes
much more transparency to
consumers.”
Equifax didn’t respond to
requests for comment.
Many firms share infor-
mation with each other
through cybersecurity back-
channels, but participation is
entirely voluntary. That is
one reason the European
Union passed the General
Data Protection Regulation,
going into effect in May
2018, which will force com-
panies that do business in
the EU and the U.K. to
promptly disclose when per-
sonal data is breached.
Lawmakers in the U.S. are
urging Congress to follow
suit. Rep. Langevin reintro-
duced the Personal Data No-
tification and Protection Act,
first proposed by President
Obama in 2015. Co-sponsors
include Rep. Ted Lieu (D.,
Calif.) and Rep. Carol Shea-
Porter (D., N.H.). All three
are members of the biparti-
san Congressional Cyberse-
curity Caucus.
Meanwhile, Republican
lawmakers are gearing up
for hearings that will surely
include grilling Equifax exec-
utives, but have yet to call
for regulations. House En-
ergy and Commerce Commit-
increase user engagement.
Mr. Deora and his col-
leagues had noted Alibaba was
offering users of its app access
to online money-market funds,
so the Indian company decided
to riff on that product.
The result is a savings
product that Paytm’s more
than 225 million users in India
can use to purchase portions
of gold bars through the plat-
form—an idea designed to ap-
peal to consumers accustomed
to storing wealth in the pre-
cious metal.
When India’s government
last year suddenly canceled
86% of currency in circulation
to clamp down on corruption
and tax evasion, Paytm
swooped in.
It bombarded India’s mer-
chants—the vast majority of
which don’t accept credit
cards because they lack swip-
ing machines—with stickers
bearing the Paytm logo and
QR codes. The service’s user
numbers skyrocketed.
Now, Paytm is used in India
to pay for items from roadside
hawkers, rides from auto rick-
shaws and more. Sellers don’t
need special gadgets beyond
the QR code, which transfers
money from a buyer’s mobile
account into the vendor’s.
Paytm added to its heft in
May, raising $1.4 billion from
Japan’s SoftBank Group Corp.
tee Chairman Greg Walden
(R., Ore.) has said that until
those fact-finding hearings
are complete, he doesn’t
want to pre-emptively put
forward legislation.
Many companies and ana-
lysts object to proposed leg-
islation, in part because they
believe that should it come
to pass, companies would
prioritize compliance—fol-
lowing the letter of the law
and appearing to do the
right thing—rather than ac-
tually dealing with the fast-
moving problem of cyberse-
curity, says Andrea
O’Sullivan, program manager
of the technology policy pro-
gram for the pro-market
Mercatus Center at George
Mason University.
Companies don’t want to
be embarrassed or face the in-
creased costs of having to dis-
close when people’s data is
leaked, and there is also a
concern that should compa-
nies be forced to report every
breach, it could lead to “data
breach fatigue,” where regula-
tors are overwhelmed and the
public throws up its hands at
a problem that feels too per-
vasive to fix. (One could argue
we’re already past that point.)
Transparency could actually
give companies herd immu-
Monday, September 25, 2017 | B3
Facebook Drops
Plan to Change
Share Structure
BY DEEPA SEETHARAMAN
AND SARAH E. NEEDLEMAN
Facebook Inc. on Friday
abruptly abandoned a plan to
change its stock structure that
would have given Chief Execu-
tive Mark Zuckerberg more
control, the latest in a string of
reversals by the social-media
giant as it fends off controver-
sies on several fronts.
The about-face heads off a
public trial for a lawsuit filed
against Facebook by share-
holders who claimed that con-
flicts of interest and other be-
hind-the-scenes discussions
tainted a board decision to ap-
prove the creation of a new
class of shares.
The share restructuring was
aimed at ensuring Mr. Zucker-
berg’s continued control of
Facebook even as he planned
to give away 99% of his fam-
ily’s wealth over his lifetime.
Mr. Zuckerberg had been
scheduled to take the stand in
that trial at Delaware’s Chan-
cery Court on Tuesday, in a
hearing that was due to be
open to the public.
A lawyer for the plaintiffs,
Stuart Grant, said he expects
the case to now be dismissed.
Facebook’s decision is “all the
relief we asked for,” Mr. Grant
said. “It’s a complete win.”
The reversal fits an increas-
ingly common pattern for Face-
book, which has repeatedly had
to alter its position in the wake
of public criticism over how it
manages its powerful global
platform. On Thursday, Mr.
Zuckerberg said Facebook
would provide congressional in-
vestigators with details of
3,000 ads bought by Russians
during the U.S. presidential
election, responding to pres-
sure from lawmakers and oth-
ers that it wasn’t forthcoming
enough about how foreign enti-
ties used its platform to influ-
ence political discourse during
the election.
That came after Facebook
Chief Operating Officer Sheryl
Sandberg said last week that
the company is adding more
human reviewers to oversee
its ad-targeting system after a
report showed it was possible
for advertisers to target ads to
users interested in anti-Se-
mitic and other hateful topics.
And Mr. Zuckerberg was
initially dismissive of concerns
nity. Existing voluntary breach
reporting systems allow com-
panies to share data on the na-
ture of cyberattacks as soon as
they occur. If reporting were
mandatory, more companies
could be quicker to defend
against new attack vectors and
new bad actors.
And, needless to say, strong
cybersecurity is quickly be-
coming a selling point for
savvy financial businesses.
Even regulation-averse poli-
ticians have cause to support a
data-breach disclosure law at
the federal level, says Rep.
Langevin. It would simplify the
issue for businesses by pre-
CARL WIENS
empting the patchwork of 48
state laws, dating to 2003, that
currently govern what compa-
nies have to do in the event of
a breach of personal data.
Rep. Langevin argues that
had it been in place already,
the Personal Data Notifica-
tion and Protection Act
would have had a direct im-
pact in the case of the Equi-
fax hack, and in previous
hacks that inspired the bill.
Under this proposed legis-
lation, Equifax would have
had to disclose its breach
within 30 days—not the six
weeks it took—to the FTC and
the Department of Homeland
Security, which would become
WSJ.com/Tech
about the proliferation of false
and misleading news spread
on Facebook during the U.S.
presidential campaign last
year—only to reverse himself
and announce measures to try
to curb such misinformation.
Mr. Zuckerberg, whose for-
tune is estimated at $71 bil-
lion, said he doesn’t need the
change in shareholding struc-
ture because Facebook’s stock
has risen so much that he can
fund his for-profit philan-
thropic organization, the
Chan Zuckerberg Initiative,
for at least 20 years by sell-
ing his existing stock without
losing control.
Facebook shares have risen
more than 50% since April
2016, when the plan was first
announced.
Mr. Zuckerberg acknowl-
edged that his plan to change
from a two-class to a three-
NAM Y. HUH/ASSOCIATED PRESS
CEO Mark Zuckerberg
class share structure “was go-
ing to be complicated and it
wasn’t a perfect solution. Today
I think we have a better one.”
In a blog post, Mr. Zucker-
berg said he plans to acceler-
ate the sale of shares to fund
the Chan Zuckerberg Initia-
tive, an entity that allows him
to donate to charitable causes
and invest in companies that
further a global mission.
Limiting Mr. Zuckerberg’s
ability to gain more control
over Facebook goes against
the tightening grip other tech
founders have exerted on their
companies. Google, now Al-
phabet Inc., started issuing a
third class of nonvoting shares
in 2014. Google was sued over
the decision, ultimately set-
tling with investors.
central clearinghouses for
breach information.
Companies that fail to
meet the requirements would
face a raft of penalties, in-
cluding fines of as much as
$1 million per violation. They
would be liable for civil pen-
alties in lawsuits from states’
attorneys general, with no
limit on the damages that
could be recovered if a com-
pany is found to have acted
willfully or intentionally.
Even absent such efforts
at the federal level, the com-
ing EU regulations will force
many large U.S. companies
to get better at cybersecu-
rity and, more important,
improve their data collection
and storage policies, says
Charlie Wedin, a partner at
international law firm Os-
borne Clarke. “What compul-
sory breach notification is
doing is putting this on the
board agenda, and they’re
focusing on this like never
before,” he says.
What we really need to do
is start treating data safety
with the same seriousness
we apply to airplane and au-
tomobile safety.
This could happen with a
one-two punch of regulatory
and market-based solutions.
Forced to buy car insurance,
we make certain economic de-
cisions about how, what and
when we drive. Meanwhile,
seat-belt laws have saved mil-
lions of lives. Along these
same lines, mandatory disclo-
sure would force companies
to think more about their se-
curity in the first place—and
even consider buying cyber
insurance. And damage done
by irresponsible companies
could be minimized.
When Equifax was
breached, hackers got birth
dates, Social Security numbers
and other hard facts about
most of us. These data have
the power to ruin our finan-
cial lives, so it is time we all
took interest in its protection.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Monday, September 25, 2017
Brexit Uncertainty Crimps Investment Plans
Looming split from EU leads
some companies to change or
postpone U.K. projects
BY NINA TRENTMANN
JOHN NEILL IS FACING some
tough decisions.
The chairman of Unipart
Group Ltd., a closely held lo-
gistics, manufacturing and
consulting firm in Oxford,
England, with annual revenue
of $1 billion, is about to decide
on his capital-spending plans
for the next five to 10 years.
But Britain’s planned exit
from the European Union is
making that task more chal-
lenging. “We haven’t made
that decision yet, and it has
been made more difficult by
the uncertainty,” Mr. Neill says.
Fifteen months after the
June 2016 Brexit vote, many
British and international com-
panies say they lack crucial in-
formation about the future re-
lationship between the U.K.
and the EU, one of its most
important trading partners. As
a result, some have delayed
spending decisions or changed
their U.K. investment plans.
According to the Office of
National Statistics, business
investment by British compa-
nies and local subsidiaries of
multinationals was broadly
unchanged in the second quar-
ter from a year earlier, at
£43.8 billion, or approximately
$59.2 billion.
Lower forecast
But Mark Carney, governor
of the Bank of England, warned
last month that uncertainty
about the country’s relation-
ship with the EU is weighing on
business investment. The cen-
tral bank says it now expects
investment in the U.K. economy
to be 20% lower in 2020 than
what it had been forecasting
before the referendum.
The British Chambers of
Commerce, which represents
more than 75,000 businesses
in the U.K., says investment by
some of its member compa-
nies has declined, especially in
the service sector, the back-
bone of the British economy.
Gap in China’s Economy:
Consumer Credit Ratings
Lack of recognized single standard limits growth
of borrowing among nation’s rising middle class
BY CHUIN-WEI YAP
SAUL FINE, a Tel Aviv-based
psychologist, used to help Is-
rael’s military develop person-
ality and integrity tests for its
soldiers. Now, he’s helping a
small Chinese financial-tech-
nology company conduct tests
of consumers’ fitness as bor-
rowers.
Mr. Fine’s work with Bei-
jing-based Finup Credit Co. is
part of a scramble to plug a
gap in China: The world’s sec-
Give Them Credit
China's consumers are relatively
small borrowers globally. House-
hold debt as a share of GDP:
Australia 105%
U.K. 91%
S. Korea 87.2%
U.S. 80.1%
Japan 62.5%
Germany 52.8%
China 44.4%
Source: Federal Reserve Economic Research
THE WALL STREET JOURNAL.
ond-largest economy doesn’t
have a widely accepted system
to gauge creditworthiness
among a fast-expanding mid-
dle class with growing pay-
checks, a hunger for consumer
products and little or no credit
history.
Chinese household debt is
growing rapidly, outpacing
broad credit growth every
year since 2013 and reaching
38 trillion yuan ($5.7 trillion)
by the end of the second quar-
ter of this year. But household
debt remains relatively low by
JOURNAL REPORT | THE FUTURE OF FINANCE
“We see subdued business in-
vestment, across the board,”
says Suren Thiru, head of eco-
nomics at the BCC.
In the car industry, produc-
tion investment declined to
£1.6 billion in 2016 after aver-
aging around £2.5 billion an-
nually in previous years, ac-
cording to the Society of
Motor Manufacturers and
Traders, an industry body. In
the first six months of this
year, less than £500 million
has been committed.
“Companies are waiting for
the outcome of the [Brexit]
negotiations,” says Terry
Scuoler, head of the EEF, a
British manufacturers’ associ-
ation.
Some businesses, however,
are taking a more proactive
approach.
Greg McDonald, founder of
Goodfish Group Ltd., which
makes machines and injection-
molded parts for the car indus-
try, is setting up a plant in Slo-
vakia that he expects to be
operational in 2019. His three
U.K. factories might soon be
outside the EU’s single market
and customs union, Mr.
McDonald says, so he decided
to follow some of his custom-
ers to Eastern Europe.
“I have invested too much
money to wait and see what is
happening,” Mr. McDonald
says. He plans to invest
around £2 million in the new
site—money that without
Brexit he says he likely would
have spent in the U.K.
For some companies, look-
ing outside the U.K. isn’t an
option. “Our brand stands for
Britishness,” says Andy
Palmer, chief executive of As-
ton Martin Lagonda Ltd., an
auto maker based in Gaydon,
England. “Making the car
somewhere else could alienate
some of our customers.”
Yet Brexit may affect the
car maker’s investment deci-
sions in other ways, he says.
Two months before the refer-
endum, Aston Martin an-
nounced plans to spend £500
global standards, at about 44%
of gross domestic product, and
the absence of a widely used
standard of creditworthiness
is keeping consumer borrow-
ing from growing even faster,
hampering access to credit for
some 500 million potential
borrowers.
That’s not good for China’s
economy, as the government
looks to consumer spending to
provide more of the fuel for
growth. And, as a rash of on-
line lenders mushroom to fill
the void left by state banks
that won’t lend to most con-
sumers, regulators say a viable
credit-scoring system is in-
creasingly critical as a safe-
guard against the risk of wide-
spread defaults.
No lack of trying
China’s central bank has
sought for nearly three years
to put in place an answer to
the FICO credit-scoring system
predominant in the U.S., cre-
ated in 1989 by data firm Fair
Isaac Corp. A viable system
still eludes Chinese officials.
Technology giants Ant Fi-
nancial Services Group and
Tencent Holdings Ltd., along
with several smaller compa-
nies, are developing compet-
ing credit-rating systems. Ten-
cent began testing its system
in August, two years after Ant,
an affiliate of e-commerce gi-
ant Alibaba Group Holding
Ltd., launched its Sesame
Credit personal scores.
But none of these projects
has emerged as a single stan-
dard that’s widely used and
trusted by lenders nationwide.
And detractors say some don’t
genuinely gauge creditworthi-
ness but rather are designed
mainly as lures to get consum-
ers to use e-commerce sites
where higher scores earn shop-
pers discounts and other perks.
“These firms have great
A Siemens unit put off plans to expand output of wind-turbine blades in Hull, England, for export to Europe and other countries.
Brexit Effect?
The net percentage* of surveyed British companies saying their
investment plans for plant and machinery or training have increased
Plant & machinery Training
Manufacturing companies
Brexit vote (6/23/16)
30%
25
20
15
10
5 5
0 0
2Q 4Q 2Q 4Q 2Q
2015 ’15 ’16 ’16 ’17
*Figures are the percentage of companies saying investment plans have increased minus the
percentage saying plans have decreased.
Source: British Chambers of Commerce Quarterly Economic Survey, 1,878 manufacturing
companies and 4,856 services companies
million to produce new models
in Gaydon and in Wales. But
now, because of the continued
uncertainty around Brexit, the
company may reduce the num-
ber of sports-car models it
plans to produce in Gaydon
scope to mine data on con-
sumer behavior, but they don’t
answer a basic question: Is
this person creditworthy and
to what degree?” says Zane
Wang, chief executive officer
of online lending platform
China Rapid Finance Ltd.
“What you get with FICO is
the legitimacy of a company
that’s been doing this for 50-
odd years,” says Tony Lythgoe,
a financial-infrastructure con-
sultant previously with the
World Bank Group. “The trust
it gets is what sets it apart.
That’s what the Chinese busi-
nesses don’t have.”
Mr. Lythgoe says he isn’t
particularly fazed by the re-
cent massive data breach at
Equifax, one of the big U.S.
credit-reporting companies.
“To my mind the data
breaches are inevitable when
you have such a high profile,”
he says. “I think what sets the
established players apart is,
ironically, their transparency. I
am not so sure that if some-
thing similar was to happen in
China we would find out about
it quite so quickly.”
Chinese regulators in Janu-
ary 2015 invited eight compa-
nies, including Ant and Ten-
cent, to design the commercial
component of a “social credit”
system the Communist Party
has said it wants to put in
place nationwide by 2020. The
system would assign scores to
people—based on both finan-
cial and social activity, from
loan repayment to shopping
habits and volunteer activity—
that would affect their access
to credit and to various gov-
ernment services.
But so far, no company has
been licensed to develop the
commercial portion of the sys-
tem.
“A license can’t be issued as
none of the eight so far has
met the standards for the per-
Services companies
Brexit vote
30%
25
20
15
10
2Q 4Q 2Q 4Q
2015 ’15 ’16 ’16
THE WALL STREET JOURNAL.
from three to two. “That could
happen,” says Mr. Palmer.
Elsewhere, a Siemens AG
unit, Siemens Gamesa Renew-
able Energy, had been consid-
ering extending its rotor-blade
production in Hull in northeast
China is looking to consumer spending for growth, but household debt is low by global standards.
sonal-credit preparatory
work,” Wan Cunzhi, head of
credit regulation at the Peo-
ple’s Bank of China, said in
April. The central bank didn’t
respond to requests for com-
ment for this article.
Regulators in March set up
a new clearinghouse, Wan-
glian, to centralize the pro-
cessing of online payments.
Analysts say the government-
controlled agency, by making
payment platforms share
transaction information, could
pave the way for a national
credit-scoring system.
Meanwhile, Ant’s Sesame
Credit has a head start on its
competition. Launched in 2015,
Sesame derives a person’s
credit score—which the indi-
vidual can view on Ant’s popu-
lar Alipay payment platform—
by mining data on the
consumer’s e-commerce activ-
ity and other online behavior.
Higher ratings confer perks
such as waived deposits at
some hotels and faster security
screening at Beijing’s airport.
Tencent completed tests on
its system in early August,
though the company is taking
a more cautious approach, a
person familiar with the mat-
ter says. There’s no certainty
THE WALL STREET JOURNAL.
England to export to Europe
and other countries. That plan
has been postponed until there
is more clarity on Brexit, a
spokeswoman says.
Of course, not all companies
are willing to speak openly
about their investment plans in
the wake of Brexit, says Ulrich
Hoppe, director general of the
German-British Chamber of In-
dustry & Commerce in London.
“Many firms keep a low pro-
file,” he says. “Brexit plays a
role, but companies don’t nec-
essarily want to talk about it.”
Too soon to tell
Other firms simply state the
obvious: that it is just too early
2Q
’17 to tell how Brexit will affect
them. “We simply don’t know
what the impact of Brexit will
be,” says Richard John Carter,
managing director for the U.K.
and Ireland at German chemical
company BASF SE, though he
concedes the referendum hasn’t
helped him in discussions with
the board in Germany.
The U.K. government re-
cently asked big companies to
sign an open letter in support
of its Brexit strategy—the let-
internally if its scores, which
are based more on users’ so-
cial-media interaction than on
e-commerce activity, would be
more reliable than other sys-
tems, the person says.
There are small credit bu-
reaus in major cities including
Beijing and Shanghai, but they
have never gained traction and
often lack access to borrowers’
financial data. Such bureaus
reach only a third of Chinese
borrowers, compared with
90% of borrowers in the U.S.
reached by credit bureaus
there, according to consulting
firm Oliver Wyman.
Accuracy concerns
Some experts are concerned
about the accuracy and pri-
vacy of the data used to gener-
ate credit scores in China, as
well as the lack of a clear pro-
cess to challenge scores and
have them redressed.
“Without independent vali-
dation of the models or the
right to challenge and address
the underlying data, Chinese
citizens are at risk of inappro-
priate discrimination,” Mr.
Lythgoe says.
But lenders, borrowers and
credit-scoring developers are
all pressing ahead.
MATTHEW LLOYD/BLOOMBERG NEWS
ter was leaked to the press af-
ter some businesses refused to
sign it—and says a decision by
BMW AG to manufacture a
new electric Mini at an exist-
ing plant in Oxford is proof
that investing in the U.K. re-
mains attractive.
And indeed, in a few in-
stances, the Brexit vote has
led to U.K. investments that
might not have happened oth-
erwise. Ciaran Murtagh, man-
aging director of Irish firm
Shay Murtagh Precast Ltd., a
maker of precast concrete
products, bought a factory
near Derby, England, for £4.5
million after the Brexit vote.
Mr. Murtagh says he plans to
invest an additional £2 million
in the coming 18 months.
Because the U.K. is his most
important market, he didn’t
want to risk losing out in case
of potential trade barriers be-
tween Ireland and the U.K., he
says. “We bought the factory
because of Brexit,” he says.
Ms. Trentmann is a news
editor for CFO Journal in
London. Email her at
nina.trentmann@wsj.com.
LIU JIN/AFP/GETTY IMAGES
In November last year, Liu
Qi, Finup Credit’s chief execu-
tive officer, struck up a friend-
ship with Mr. Fine at an indus-
try conference in New York.
Mr. Liu saw in him a key to
Chinese markets.
In May, Finup launched
tests designed by Mr. Fine, giv-
ing its customers a means to
estimate the likelihood of de-
fault among borrowers. “We’ve
taken note of the work done by
various payment platforms,
but we’re also developing our
own way,” Mr. Liu says.
When Cai Kaining, a 52-
year-old Shanghai state em-
ployee, wanted a home-reno-
vation loan earlier this year,
he turned to his smartphone.
It took him one meeting with a
Finup representative and a 10-
minute questionnaire—de-
signed by Mr. Fine—to get a
110,000 yuan ($16,500) loan.
“I wasn’t even sure I
wanted to borrow,” Mr. Cai
says. “But it was so convenient
that I did.”
Mr. Yap is a Wall Street
Journal reporter in Hong
Kong. He can be reached at
chuin-wei.yap@wsj.com.
Alyssa Abkowitz in Beijing
contributed to this article.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Monday, September 25, 2017 | B5

FINANCE & MARKETS

SEC Breach Stirs Fears on New Database

Some say the audit following a multiyear push by the NYSE wrote in a letter The CAT will receive data
the SEC, which approved the shared with Capitol Hill staff on roughly 58 billion daily
system would contain plan last year. that was reviewed by The Wall transactions submitted to ex-
sensitive and lucrative Critics have argued that if Street Journal. changes and private trading
the detailed information re- SEC Chairman Jay Clayton venues operated by brokerage
information for hackers ported to the database falls has acknowledged that the firms. “One of the reasons we
into the wrong hands, it could CAT raises hacking concerns. won the CAT is because of the
The breach of the Securities be used to reconstruct the In the same statement on deep expertise of our manage-
and Exchange Commission is most lucrative and closely Wednesday in which he dis- ment team in data security,”
stoking doubts about a vast guarded trades of hedge funds closed the breach of the said Shane Swanson, chief

ANDREW HARRER/BLOOMBERG NEWS

database of trades that the and other big investors. agency’s filings system, he compliance officer of Thesys
agency has touted as a defense The program is an ambi- wrote that the CAT would give CAT LLC, a subsidiary of The-
tious, expensive and not uni- the SEC “access to significant, sys Technologies LLC.
By Alexander Osipovich, versally popular undertaking nonpublic, market sensitive Lobbying groups represent-
Dave Michaels that is coming under renewed data and personally identifi- ing financial firms have criti-
and Kate Fazzini scrutiny after the agency was able information.” cized the plan to create the gi-
caught off guard by the breach “Cybersecurity has been ant database, which they say
against episodes like the 2010 of its corporate filings system, and will remain a key element would bring additional costs.
“Flash Crash” but is coming known as Edgar. in the development of CAT “There’s going to be height-
under fire as a hacking risk. “This data can be used to SEC Chairman Jay Clayton has acknowledged concerns of hacking. systems,” he added. ened attention to the question
The Consolidated Audit reverse-engineer highly profit- An SEC spokeswoman de- of securing financial informa-
Trail, or CAT, would keep track able trading strategies,” Mi- and key.” amount of customer data kept clined to comment. tion from cyberrisk,” said
of every trade and order in chael Friedman, general coun- The New York Stock Ex- in the repository. Executives of the company Kirsten Wegner, chief execu-
U.S. stock and option markets, sel of Trillium Management change recently lobbied Capi- “The existence of such a that was picked to build the tive of Modern Markets Initia-
and is designed to help the LLC, a New York-based elec- tol Hill to delay the CAT’s vast collection of [personal in- CAT say they have designed tive, a group that lobbies on
SEC analyze complex market tronic trading firm. “It is launch, say people familiar formation] of individual cus- robust cybersecurity defenses. behalf of high-frequency trad-
events and detect manipula- worth tens of millions to the with the matter. The exchange tomers of U.S. brokerage firms The data is encrypted both ing firms. “I don’t think this
tion. The CAT will begin re- quant firms and other proprie- says it still supports the proj- creates a risk to those custom- while it is sitting in the reposi- should be a reason to stop the
ceiving data from stock ex- tary trading firms who create ect but thinks the SEC should ers that, we believe, has not tory and when it is being sent CAT, but it’s a question that’s
changes in November it, and they keep it under lock consider scaling back the been sufficiently considered,” between different parties. going to be raised.”

THE INTELLIGENT INVESTOR | By Jason Zweig

AIG Stays
Bonds or Stocks? Picking the Less-Expensive Evil Under
Bonds have
been in a bull
Federal
market for
most of the
past 35 years
Oversight
or so. Many BY RYAN TRACY
investors are still buying, but AND LESLIE SCISM
they aren’t chasing past per-
formance. American International
In August, more than 90% Group Inc. will remain under
of the $30 billion that flowed federal supervision for now af-
into all mutual funds and ex- ter U.S. officials discussed the
change-traded funds went firm’s future at a private meet-
into taxable-bond funds. ing Friday, according to people
Yet the bond market has familiar with the matter and a
squeezed out only a 3% re- Treasury Department state-
turn this year, according to ment.
one gauge, while the S&P Discussions among regula-
500 is up more than 13%, in- tors are expected to continue
cluding dividends. about the company, which was
Look at the money pour- designated a systemically im-
ing into such funds as the portant financial institution in
iShares 20+ Year Treasury 2013. The SIFI label was cre-
CHRISTOPHE VORLET

Bond ETF, which holds gov- ated after the financial crisis
ernment debt maturing be- comes with stricter federal
tween 2036 and 2047. oversight.
Through Sept. 20, this fund Regulators review the desig-
has had the strongest nation for companies tagged
monthly, quarterly and year- with it every year. This year
to-date influx of money in its icy meeting, officials left says Van Hoisington, lead rates of just 1 percentage they have been considering
15-year history. Investors open the possibility of an- Bonding manager for the $363 million point. For the most part, whether to remove it for AIG,
have added $4.4 billion this other interest-rate rise by Counting the income they've Wasatch-Hoisington U.S. though, investors aren’t buy- according to people familiar
year and $2.7 billion in Sep- year-end and lowered their plowed back in, investors have put Treasury Fund. “Maybe the ing riskier vehicles like with the matter.
tember alone; the fund has forecast of rates over the trillions of dollars into bond funds. average, supposedly unso- emerging-market bond funds AIG declined to comment.
nearly doubled in size, to longer run from 3% to 2.75%. phisticated investor is right.” or high-yield corporate A Treasury Department
Cumulative flows
$9.9 billion, since the end of So why are investors buy- Fran Kinniry, an invest- funds. Instead, hordes of re- statement said the Financial
to bond mutual funds
February. ing bond funds hand over ment strategist at Vanguard tirees and near-retirees are Stability Oversight Council of
Fund investors are notori- fist? $3 trillion Group, points out that U.S. moving into more-conserva- senior regulators discussed the
ous for buying whatever has The figures commonly Reinvested distributions stocks have more than tri- tive investment-grade and designation of a financial firm,
recently had hot returns, of- cited to show how much Net new cash flow
pled since the financial cri- government funds with but didn’t disclose a vote. The
ten right before it goes cold. money the public puts into 2 sis. So an investor who had lower risk of default and firm discussed was AIG, people
If you map the performance or takes out of mutual funds 60% in stocks and 40% in moderate sensitivity to ris- familiar with the matter said.
of bonds against the money don’t include any income bonds then would have more ing interest rates. Treasury Secretary Steven
going into and out of bond from such funds that inves- than 75% in stocks now. And with the S&P 500 Mnuchin, a Trump appointee,
funds over the past couple of tors plow back into their ac- 1 Stocks have done so well chairs the council. He is one of
brushing highs and interest
decades, you can see the counts. Through July, accord- that bond funds are only rates too low for bond funds five Trump appointees among
public chronically—almost ing to the Investment about 25% of investors’ total to provide generous income, the group’s 10 voting members.
addictively—buying after Company Institute, those re- 0 portfolios, down from 31% in neither stocks nor bonds The rest were chosen by Presi-
bond prices have shot up and invested dividends totaled 2000 ’05 ’10 ’15 ’17 2012, according to the ICI. look particularly attractive. dent Barack Obama and are
selling after a drop. nearly $51 billion. Note: Excludes funds of funds. Data for
Getting those ratios back During the financial crisis, still serving out their terms.
What is happening now is Instead of sporadically 2017 are as of July 31. into balance requires buying however, high-quality bonds Rescinding AIG’s SIFI desig-
the opposite. Investors seem spending that income, inves- Source: Investment Company Institute a lot more bonds. like Treasurys were one of nation would typically require
to be moving from stocks, tors are automatically put- THE WALL STREET JOURNAL. “Back in the late 1990s, in- the few assets that did well a two-thirds vote of the coun-
the hot asset, to bonds, the ting it back in. Over time, vestors were very momen- when stocks got trashed. cil, or seven out of 10 votes.
cold one. that raises their stake in “They seem to be saying, ‘I’ve tum-based, buying stocks Government bonds “have Analysts have said Roy
Over the past year, long- bonds, providing more bal- done well in the stock market and selling bonds,” says Mr. continued to be the stron- Woodall, the council member
term Treasury bonds have last if the stock market be- in the past few years, so Kinniry. “But now, here we gest flight-to-quality asset,” with insurance expertise, may
lost more than 4%, and the comes turbulent. maybe it’s time to take some are in the midst of this giant says Mr. Kinniry, and remain be sympathetic to AIG’s argu-
overall bond market has de- A “healthy mix of institu- of that risk off the table.’ ” bull market for stocks, and I likely to do well in future ment. Federal Reserve Chair-
livered a gain of less than tional and retail investors” People are buying bond love seeing that investors stock-market crashes unless woman Janet Yellen also
1%, counting interest pay- have been buying the iShares funds for their stability rela- are buying bonds instead.” interest rates unexpectedly “seemed open to the possibil-
ments. long-term Treasury fund, tive to stocks “rather than to Yes, many long-term bond rise at the same time. For ity” in a press conference
What’s more, at this past says Karen Schenone, fixed- take advantage of an ex- funds will fall in price by 15% many investors, bonds feel Wednesday, said Ian Katz, ana-
week’s Federal Reserve pol- income strategist at the firm. pected rise in bond prices,” or more on a rise in interest like the lesser of two evils. lyst at Capital Alpha Partners,
in a client note Thursday.
Trump and Obama appoin-

Win for BlackRock Is Setback for ETF Investors
BY SARAH KROUSE
Investors could have a
harder time suing exchange-
traded-fund managers for mis-
representing risks following a
California court decision in fa-
vor of BlackRock Inc.
A group of investors who
lost money during a wild day
of ETF trading in 2015 accused
BlackRock’s iShares unit of
leaving out certain warnings
about what could go wrong in
fund documents. BlackRock
said in court documents that
its warnings were adequate.
Because of the way ETF
shares are created and sold,
those investors were unable to
link their holdings to a spe-
cific registration statement
that they said misrepresented
certain risks and therefore
couldn’t sue, according to San
Francisco Superior Court
Judge Curtis E.A. Karnow.
In his ruling Sept. 18, the
judge said investors who pur-
chase securities after they are
first issued are unable to sue ties with mutual funds, their
under a specific section of se- mechanics are subject to dif-
curities law. ferent rules. ETFs trade on ex-
The case showcases the changes like stocks and typi-
evolving legal infrastructure cally track the performance of
surrounding the ETF market, indexes. They have some tax
according to fund lawyers. and trading advantages over
Globally ETFs hold $4.2 tril- mutual funds and have pulled
lion in assets, up from less in hundreds of billions of dol-
than a trillion a decade ago. lars in cash in recent years.
But the same structure that
has made ETFs popular also
makes it impossible for indi-
California court vidual investors to track when
ruling favoring fund the shares they own were is-
sued and for fund providers to
firm highlights legal see who owns them in real
landscape for ETFs. time, industry experts and
lawyers say. Shares of mutual
funds are purchased from fund
managers themselves.
If the decision stands, “no ETF providers first create
retail investor will ever be and redeem shares in their
able to sue for a false registra- funds in large blocks with so-
tion statement or prospectus” called authorized participants
for ETFs, said Reed Kathrein, in exchange for baskets of se-
an attorney for the investors curities. Shares are then sold
at Hagens Berman Sobol Sha- to individual investors.
piro LLP. The investors who sued
While ETFs share similari- BlackRock lost money on Aug.
tees have been at odds in re-
cent weeks over the procedures
surrounding the AIG vote, ac-
cording to people familiar with
24, 2015, when large share- to link their shares to registra- the matter.
price declines triggered trad- tion statements that were mis- Securities and Exchange
ing halts and dozens of ETFs leading when shares were first Commission Chairman Jay
traded at sharp discounts to issued to authorized partici- Clayton has recused himself
the sum of their holdings. pants. That, however, isn’t from the AIG discussions due
Those investors alleged in possible, BlackRock said. to his prior work at the Sulli-
part that BlackRock failed to ETF shares are “fungible van & Cromwell law firm,
clearly state the risks of buy- and cannot be traced by plain- which counts AIG as a signifi-
ing and selling ETFs using tiffs to any other particular cant client. That leaves an open
particular order types, even registration statement or question: If Mr. Clayton doesn’t
though the firm had known for amendment thereto, much less vote, are seven votes still re-
years that such risks existed. one that was materially false quired to rescind the SIFI des-
BlackRock successfully ar- and misleading when the ignation? Officials have been
gued that retail investors shares were first sold in the privately wrangling over the
bringing the case must be able primary market,” it said. question, these people said.
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B6 | Monday, September 25, 2017 THE WALL STREET JOURNAL.

MARKETS DIGEST Data as of Friday, September 22, 2017

Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
20296.45 t 51.03, or 0.25% Year-to-date s 6.18% 383.22 s 0.34, or 0.09% Year-to-date s 6.03% 2502.22 s 1.62, or 0.06% Trailing P/E ratio 24.25 24.81
High, low, open and close for each 52-wk high/low 20347.48 16251.54 High, low, open and close for each 52-wk high/low 396.45 328.80 High, low, open and close for each P/E estimate * 19.14 18.43
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 1.99 2.13
All-time high: 2508.24, 09/20/17

Weekly P/E data based on as-reported earnings from Birinyi Associates Inc.
Session high 20500 390 2525
DOWN UP
65-day moving average
t

Session open Close

20250 385 2500
Close Open
t

Session low
20000 380 2475

19750 375 2450

19500 370 2425

65-day moving average

19250 365 2400

65-day moving average
Bars measure the point change from session's open
19000 360 2375
June July Aug. Sept. June July Aug. Sept. June July Aug. Sept.

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 2909.74 5.01 0.17 2390.11 • 2914.34 14.9 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1977.61 8.35 0.42 1614.17 • 1981.49 17.4 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 1102.25 –5.94 –0.54 838.96 • 1112.92 27.8 2.750 Australia 2 1.973 52.9 54.4 50.1 82.5 1.991 1.835 1.599
2.750 10 2.802 54.0 55.7 44.0 41.9 2.835 2.654 2.040
Americas DJ Americas 604.74 0.66 0.11 503.67 • 605.95 11.9
3.000 Belgium 2 -198.3 -196.9 -189.3 -139.3 -0.522 -0.559 -0.618
-0.539
Brazil Sao Paulo Bovespa 75389.75 –214.59 –0.28 57110.99 • 76004.15 25.2
0.800 10 0.729 -153.4 -154.4 -150.3 -149.1 0.735 0.711 0.131
Canada S&P/TSX Comp 15454.23 –0.69 –0.004 14509.25 • 15922.37 1.1
0.000 France 2 -0.472 -191.6 -192.3 -182.2 -138.8 -0.476 -0.488 -0.614
Mexico IPC All-Share 50313.51 –232.24 –0.46 44364.17 • 51713.38 10.2
1.000 10 0.733 -153.0 -154.4 -151.1 -141.5 0.735 0.703 0.207
Chile Santiago IPSA 4015.83 0.51 0.01 3127.54 • 4015.83 24.6
0.000 Germany 2 -0.673 -211.7 -212.3 -204.7 -144.1 -0.677 -0.713 -0.666
U.S. DJIA 22349.59 –9.64 –0.04 17888.28 • 22412.59 13.1
0.500 10 0.449 -181.4 -182.2 -181.1 -171.6 0.456 0.403 -0.094
Nasdaq Composite 6426.92 4.23 0.07 5046.37 • 6461.32 19.4
0.050 Italy 2 -0.114 -155.8 -155.7 -136.7 -90.4 -0.110 -0.033 -0.129
S&P 500 2502.22 1.62 0.06 2085.18 • 2508.24 11.8
2.200 10 2.103 -16.0 -18.0 -11.8 -43.0 2.098 2.097 1.192
CBOE Volatility 9.59 –0.08 –0.83 9.36 • 22.51 –31.7
0.100 Japan 2 -0.130 -157.4 -157.2 -146.5 -99.5 -0.125 -0.131 -0.221
EMEA Stoxx Europe 600 383.22 0.34 0.09 328.80 • 396.45 6.0 0.100 10 0.028 -223.5 -224.8 -217.4 -164.5 0.030 0.040 -0.023
Stoxx Europe 50 3126.02 3.47 0.11 2730.05 • 3276.11 3.8 4.000 Netherlands 2 -0.678 -212.2 -213.1 -199.5 -141.2 -0.684 -0.661 -0.638
Austria ATX 3305.97 9.11 0.28 2371.66 • 3305.97 26.3 0.750 10 0.569 -169.3 -170.3 -168.5 -159.9 0.575 0.529 0.023
Belgium Bel-20 3957.96 –10.71 –0.27 3426.21 • 4041.03 9.7 4.750 Portugal 2 -0.071 -151.5 -150.3 -133.2 -31.0 -0.056 0.002 0.465
France CAC 40 5281.29 14.00 0.27 4377.46 • 5432.40 8.6 4.125 10 2.410 14.7 12.6 53.7 173.1 2.404 2.751 3.353
Germany DAX 12592.35 –7.68 –0.06 10259.13 • 12888.95 9.7 2.750 Spain 2 -0.321 -176.5 -176.1 -168.3 -99.1 -0.315 -0.349 -0.217
Greece ATG 773.94 7.95 1.04 562.40 • 858.08 20.2 1.450 10 1.619 -64.3 -66.5 -76.2 -70.4 1.613 1.452 0.918
Hungary BUX 38178.63 69.42 0.18 27476.40 • 38387.22 19.3 4.250 Sweden 2 -0.695 -213.8 -214.7 -200.0 -143.0 -0.700 -0.666 -0.656
Israel Tel Aviv 1419.90 … Closed 1363.50 • 1478.96 –3.5 1.000 10 0.658 -160.5 -162.8 -158.5 -139.7 0.651 0.629 0.225
Italy FTSE MIB 22530.83 39.10 0.17 16134.71 • 22530.83 17.1 1.750 U.K. 2 0.438 -100.5 -99.2 -111.5 -69.5 0.455 0.219 0.079
Netherlands AEX 528.03 –0.44 –0.08 440.51 • 536.26 9.3 4.250 10 1.357 -90.6 -91.0 -112.6 -101.4 1.368 1.088 0.608
Poland WIG 64397.32 188.13 0.29 46910.91 • 65208.48 24.4 1.250 U.S. 2 1.443 ... ... ... ... 1.447 1.334 0.774
Russia RTS Index 1123.24 3.11 0.28 960.32 • 1195.61 –2.5 2.250 10 2.263 ... ... ... ... 2.278 2.214 1.622
Spain IBEX 35 10305.00 8.00 0.08 8607.10 • 11135.40 10.2
Sweden SX All Share 573.73 1.52 0.27 496.66 • 596.72 7.3 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 9136.72 2.59 0.03 7593.20 • 9176.99 11.2 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 55839.73 –27.61 –0.05 48935.90 • 56655.88 10.2 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 9/21/2017
Turkey BIST 100 104122.85 121.65 0.12 72519.85 • 110423.11 33.3
One-Day Change Year Year
U.K. FTSE 100 7310.64 46.74 0.64 6693.26 • 7547.63 2.3 Commodity Exchange Last price Net Percentage high low

Asia-Pacific Corn (cents/bu.) CBOT 353.50 3.25 0.93% 417.25 344.25

Soybeans (cents/bu.) 985.25 14.50 1.49 1,047.00 907.00
Australia S&P/ASX 200 5682.10 26.70 0.47 5156.60 • 5956.50 0.3
Wheat (cents/bu.)
CBOT
CBOT 449.75 -2.75 -0.61% 592.25 422.50
China Shanghai Composite 3352.53 –5.28 –0.16 2980.43 • 3385.39 8.0
Live cattle (cents/lb.) CME 117.550 1.350 1.16 122.850 99.825
Hong Kong Hang Seng 27880.53 –229.80 –0.82 21574.76 • 28159.77 26.7
Cocoa ($/ton) ICE-US 1,979 -42 -2.08 2,301 1,794
India S&P BSE Sensex 31922.44 –447.60 –1.38 25765.14 • 32575.17 19.9
Coffee (cents/lb.) ICE-US 134.45 -0.55 -0.41 166.75 119.10
Japan Nikkei Stock Avg 20296.45 –51.03 –0.25 16251.54 • 20347.48 6.2
Sugar (cents/lb.) ICE-US 14.65 -0.08 -0.54 20.40 13.50
Singapore Straits Times 3220.25 6.43 0.20 2787.27 • 3354.71 11.8
Cotton (cents/lb.) ICE-US 68.56 0.31 0.45 75.75 66.15
South Korea Kospi 2388.71 –17.79 –0.74 1958.38 • 2451.53 17.9 Robusta coffee ($/ton) ICE-EU 2010.00 -2.00 -0.10 2,272.00 1,892.00
Taiwan Weighted 10449.68 –128.76 –1.22 8931.03 • 10631.57 12.9
Copper ($/lb.) COMEX 2.9445 0.0100 0.34 3.1785 2.5025
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1299.60 4.80 0.37 1,362.40 1,160.80
Silver ($/troy oz.) COMEX 17.020 0.002 0.01 18.875 14.440
Currencies London close on Sept. 22 Aluminum ($/mt)* LME 2,174.50 -16.50 -0.75 2,191.00 1,688.50
Tin ($/mt)* LME 20,580.00 -150.00 -0.72 21,225.00 18,760.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Fri YTDchg Copper ($/mt)* LME 6,453.00 -112.00 -1.71 6,937.00 5,491.00
Country/currency in US$ per US$ (%) Lead ($/mt)* LME 2,470.00 7.50 0.30 2,481.00 2,022.00
10% Europe Zinc ($/mt)* LME 3,078.00 -79.00 -2.50 3,195.00 2,450.50
Bulgaria lev 0.6119 1.6342 –12.1 Nickel ($/mt)* LME 10,940.00 -530.00 -4.62 12,220.00 8,780.00
s WSJ Dollar index Croatia kuna 0.1598 6.260 –12.7 Rubber (Y.01/ton) TCE 210.50 0.30 0.14 n.a. n.a.
0
Euro zone euro 1.1959 0.8362 –12.0
s Euro Czech Rep. koruna-b 0.0459 21.793 –15.2 Palm oil (MYR/mt) MDEX 2737.00 -33.00 -1.19 2876.00 2436.00
–10 Denmark krone 0.1607 6.2225 –12.0 Crude oil ($/bbl.) NYMEX 50.64 0.09 0.18 58.37 42.84
Hungary forint 0.003862 258.94 –12.0 NY Harbor ULSD ($/gal.) NYMEX 1.8053 -0.0021 -0.12 1.8206 1.3943
s Yen
Iceland krona 0.009324 107.25 –5.1 RBOB gasoline ($/gal.) NYMEX 1.6249 0.0183 1.14 1.6689 1.2736
–20 Norway krone 0.1283 7.7924 –9.9
0.2800 3.5713 –14.7
Natural gas ($/mmBtu) NYMEX 3.017 0.010 0.33 3.5960 2.8860
2016 2017 Poland zloty
Russia ruble-d 0.01738 57.547 –6.1 Brent crude ($/bbl.) ICE-EU 56.34 0.25 0.45 60.09 45.51
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1255 7.9666 –12.5 Gas oil ($/ton) ICE-EU 539.25 -2.00 -0.37 543.00 408.25
Fri Fri
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0310 0.9699 –4.8
Turkey lira 0.2864 3.4915 –0.9 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1281 7.8093 0.7
Ukraine hryvnia 0.0380 26.2850 –2.9
Argentina peso-a 0.0577 17.3202 9.1
India rupee
Indonesia rupiah
0.0154
0.0000751
64.8650
13313
–4.6
–1.6
U.K. pound 1.3525 0.7394 –8.7 Cross rates London close on Sep 22
Brazil real 0.3198 3.1273 –3.9 Middle East/Africa
Japan yen 0.008922 112.08 –4.2
Canada dollar 0.8117 1.2321 –8.3 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002932 341.12 2.2 Bahrain dinar 2.6517 0.3771 –0.02
Chile peso 0.001602 624.40 –6.8 Australia 1.2549 1.6975 1.2942 0.0112 0.1607 1.5007 1.0186 ...
Macau pataca 0.1248 8.0108 1.2 Egypt pound-a 0.0566 17.6580 –2.6
Colombia peso 0.0003450 2898.79 –3.4 Canada 1.2321 1.6662 1.2702 0.0110 0.1578 1.4732 ... 0.9817
Malaysia ringgit-c 0.2388 4.1883 –6.6 Israel shekel 0.2865 3.4902 –9.3
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.7336 1.3631 –5.6 Kuwait dinar 3.3172 0.3015 –1.4 Euro 0.8362 1.1312 0.8624 0.0075 0.1071 ... 0.6788 0.6664
Mexico peso-a 0.0563 17.7483 –14.4
Pakistan rupee 0.0095 105.385 1.0 Oman sul rial 2.5964 0.3851 0.05 Hong Kong 7.8093 10.5620 8.0516 0.0697 ... 9.3371 6.3384 6.2224
Peru sol 0.3079 3.2475 –3.1
Philippines peso 0.0198 50.584 2.0 Qatar rial 0.2688 3.720 2.2 Japan 112.0810 151.5900 115.5700 ... 14.3530 134.0200 90.9800 89.3100
Uruguay peso-e 0.0347 28.850 –1.7
Singapore dollar 0.7437 1.3446 –7.1 Saudi Arabia riyal 0.2666 3.7503 –0.01 0.9699 1.3118 ... 0.0087 0.1242 1.1596 0.7873 0.7728
Venezuela bolivar 0.099534 10.05 0.5 Switzerland
South Korea won 0.0008837 1131.63 –6.3 South Africa rand 0.0757 13.2122 –3.5
U.K. 0.7394 ... 0.7623 0.0066 0.0947 0.8842 0.6001 0.5891
Asia-Pacific Sri Lanka rupee 0.0065462 152.76 2.9 Close Net Chg % Chg YTD % Chg
0.7969 1.2549 –9.6 Taiwan dollar 0.03316 30.155 U.S. ... 1.3525 1.0310 0.0089 0.1281 1.1959 0.8117 0.7969
Australia dollar –7.1 WSJ Dollar Index 85.49 –0.13 –0.15 –8.02
China yuan 0.1517 6.5901 –5.1 Thailand baht 0.03023 33.080 –7.6 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 1.23833% 0.52222% ¥ TakedaPharm 4502 6090.00 -0.02 25.96 CHF RocheHldgctf ROG 248.00 -0.40 6.62 Last: 168.70 t 0.05, or 0.03% YTD s 19.7%
Three month 1.32944 0.85294 Asia Titans HK$ TencentHoldings 0700 346.20 -0.29 82.50 £ RoyDtchShell A RDSA 2190.00 1.13 -2.34
Six month 1.49683 1.24472 HK$ AIAGroup 1299 59.90 -0.50 36.91 ¥ TokioMarineHldg 8766 4500.00 -1.23 -6.17 € SAP SAP 92.09 0.38 11.21 High 170
One year 1.77539 1.55744 84.12 0.30 9.39
AU$ AustNZBk ANZ 29.94 0.60 -1.58 ¥ ToyotaMtr 7203 6733.00 -0.07 -2.11 € Sanofi SAN Close 165
Euro Libor AU$ BHP BHP 25.95 -0.15 3.55 AU$ Wesfarmers WES 41.21 0.68 -2.21 € SchneiderElectric SU 72.20 -0.84 9.21 Low t 160
One month -0.40071% -0.37400% HK$ BankofChina 3988 3.97 -1.00 15.41 AU$ WestpacBanking WBC 31.64 1.15 -2.94 € Siemens SIE 116.55 -0.77 -0.21
Three month -0.37829 -0.32029 HK$ CKHutchison 0001 99.75 -0.45 13.48 AU$ Woolworths WOW 25.35 0.20 5.19 € Telefonica TEF 9.05 -0.30 2.57 50–day 155
Six month -0.30500 -0.21186 AU$ CSL CSL 133.08 0.20 32.54 € Total FP 45.94 0.11 -3.82 moving average 150
One year -0.21943 -0.07329 ¥ Canon 7751 3773.00 -0.42 14.51 Stoxx 50 CHF UBSGroup UBSG 16.44 -0.36 3.07
145
Euribor ¥ CentralJapanRwy 9022 19470 -0.33 1.25 € Unilever UNA 49.13 -0.80 25.60
CHF ABB ABBN 23.93 -0.21 11.41
One month -0.37200% -0.37000% HK$ ChinaConstructnBk 0939 6.62 -0.75 10.89 £ Unilever ULVR 4264.00 0.06 29.51 23 30 7 14 21 28 4 11 18 25 1 8 15 22
€ ASMLHolding ASML 138.95 0.62 30.29
Three month -0.32900 -0.30200 HK$ ChinaLifeInsurance 2628 23.65 -0.84 17.08 € Vinci DG 80.18 -0.43 23.93 July Aug. Sept.
€ AXA CS 24.95 0.36 4.04
Six month -0.27100 -0.20000 HK$ ChinaMobile 0941 79.40 -0.94 -3.41 £ VodafoneGroup VOD 208.25 0.07 4.20
€ AirLiquide AI 109.75 0.41 3.88
One year -0.17100 -0.05900 HK$ ChinaPetro&Chem 0386 5.87 -0.51 6.73 CHF ZurichInsurance ZURN 288.00 -0.14 2.71
186.70
Yen Libor AU$ CmwlthBkAust CBA 76.62 0.72 -7.03
€
€
Allianz
AB InBev
ALV
ABI 97.51
0.65 18.92
-0.55 -3.02 DJIA Stoxx 50
One month -0.04293% -0.07843% ¥ EastJapanRailway 9020 10385 1.52 2.82 £ AstraZeneca AZN 4912.00 3.01 10.69 Last: 3126.02 s 3.47, or 0.11% YTD s 3.8%
Three month -0.02750 -0.01914 ¥ Fanuc 6954 22855 0.04 15.34 € BASF BAS 88.34 -0.10 0.03
$ AmericanExpress AXP 88.40 -0.02 19.33
Six month 0.00414 0.00707 ¥ Hitachi 6501 791.40 -0.23 25.22 € BNP Paribas BNP 67.30 0.87 11.15
$ Apple AAPL 151.89 -0.98 31.14 3275
One year 0.10757 0.10929 TW$ Hon Hai Precisn 2317 108.00 -2.70 28.27 £ BT Group BT.A 282.80 0.09 -22.92
$ Boeing BA 256.45 0.16 64.73
$ Caterpillar CAT 124.43 -0.29 34.17 3200
Offer Bid ¥ HondaMotor 7267 3352.00 0.63 -1.84 € BancoBilVizAr BBVA 7.51 0.04 18.21
KRW HyundaiMtr 005380 142000 0.35 -2.74 $ Chevron CVX 117.29 0.70 -0.35 3125
Eurodollars € BancoSantander SAN 5.74 0.81 15.73
HK$ Ind&Comml 1398 5.84 -0.68 25.59 $ CiscoSystems CSCO 33.37 2.05 10.42
One month 1.3300% 1.2300% £ Barclays BARC 191.55 0.60 -14.28 3050
$ Infosys INFY 14.54 -0.72 -1.99 $ Coca-Cola KO 45.49 0.20 9.72
Three month 1.4000 1.3000 € Bayer BAYN 110.10 -0.27 11.07
2975
¥ JapanTobacco 2914 3674.00 -0.24 -4.42 $ Disney DIS 98.60 -0.29 -5.39
Six month 1.5400 1.4400 £ BP BP. 466.60 0.67 -8.44
$ DowDuPont DWDP 69.96 -0.51 4.14
One year 1.8100 1.7100 ¥ KDDI 9433 2980.00 0.32 0.69 £ BritishAmTob BATS 4611.00 1.01 -0.23 2900
¥ Mitsubishi 2589.50 -0.10 4.00
$ ExxonMobil XOM 79.92 0.04 -11.46
Latest 52 wks ago 8058 € Daimler DAI 66.60 -0.40 -5.83 $ GeneralElec GE 24.87 0.48 -21.30 23 30 7 14 21 28 4 11 18 25 1 8 15 22
¥ MitsubishiElectric 6503 1742.00 -1.02 6.90 € DeutscheTelekom DTE 15.46 0.78 -4.53 $ July Aug. Sept.
Prime rates GoldmanSachs GS 231.03 -0.11 -3.52
¥ MitsubishiUFJFin 8306 723.70 0.60 0.49 £ Diageo DGE 2436.50 0.66 15.47 $
U.S. 4.25% 3.50% HomeDepot HD 159.97 0.49 19.31
¥ Mitsui 8031 1689.50 0.09 5.13 € ENI ENI 13.78 0.29 -10.92 $
Canada 3.20 2.70 Intel INTC 37.18 -0.05 2.51
198.90 0.35 -5.20 1474.00
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥
¥
Mizuho Fin
NTTDoCoMo
8411
9437 2579.00 0.17 -3.15
£
£
GlaxoSmithKline
Glencore
GSK
GLEN 347.15
0.41 -5.63 $
0.17 25.17 $
IBM
JPMorganChase
IBM
JPM
145.13
94.83
-0.09 -12.57
-0.21 9.90
Dow Jones Industrial Average P/E: 20
AU$ NatAustBnk NAB 31.28 0.90 1.99 £ HSBC Hldgs HSBA 727.10 0.76 10.69 $ J&J JNJ 131.39 -0.27 14.04 Last: 22349.59 t 9.64, or 0.04% YTD s 13.1%
Policy rates
ECB 0.00% 0.00%
¥ Nintendo 7974 41130 -1.49 67.60 € INGGroep INGA 15.35 -0.10 14.81 $ McDonalds MCD 158.91 -0.08 30.55
Britain 0.25 0.25
¥ NipponTeleg 9432 5016.00 -1.76 2.12 £ ImperialBrands IMB 3227.50 0.40 -8.89 $ Merck MRK 65.13 -0.72 10.63 22500
Switzerland 0.50 0.50
¥ NissanMotor 7201 1152.00 -0.52 -2.00 € IntesaSanpaolo ISP 2.97 0.07 22.51 $ Microsoft MSFT 74.41 0.27 19.75
¥ Panasonic 6752 1631.50 -0.64 37.16 € LVMHMoetHennessy MC 230.40 0.24 27.01 $ Nike NKE 53.24 0.09 4.74
22000
Australia 1.50 1.50
HK$ PingAnInsofChina 2318 61.60 -1.60 58.76 £ LloydsBankingGroup LLOY 66.91 -0.80 7.04 $ Pfizer PFE 35.96 -0.03 10.71
U.S. discount 1.75 1.00 21500
Fed-funds target 1.00-1.25 0.25-0.50
$ RelianceIndsGDR RIGD 25.25 -1.37 -19.97 € LOreal OR 180.95 2.46 4.35 $ Procter&Gamble PG 92.24 -0.43 9.71
Call money 3.00 2.25
KRW SamsungElectronics 005930 2650000 0.38 47.06 £ NationalGrid NG. 944.10 -0.40 -9.06 $ 3M MMM 210.76 0.15 18.03 21000
¥ Seven&I Hldgs 3382 4366.00 0.37 -1.95 CHF Nestle NESN 80.55 -0.19 10.27 $ Travelers TRV 122.04 0.45 -0.31
Overnight repurchase rates 20500
U.S. 1.08% 0.51%
¥ SoftBankGroup 9984 9080.00 -0.73 16.93 CHF Novartis NOVN 83.45 0.60 12.62 $ UnitedTech UTX 115.01 0.45 4.92
Euro zone n.a. n.a.
¥ Sony 6758 4174.00 -0.45 27.45 DKK NovoNordiskB NOVO-B 305.80 -0.20 20.06 $ UnitedHealth UNH 193.03 -1.12 20.61 23 30 7 14 21 28 4 11 18 25 1 8 15 22
¥ Sumitomo Mitsui 8316 4319.00 0.58 -3.16 £ Prudential PRU 1774.00 0.03 9.00 $ Visa V 105.56 0.24 35.30 July Aug. Sept.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 130.40 -1.06 33.06 £ ReckittBenckiser RB. 6807.00 1.54 -1.15 $ Verizon VZ 49.90 1.96 -6.52 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 218.50 -1.13 20.39 £ RioTinto RIO 3500.00 1.00 10.81 $ Wal-Mart WMT 79.53 -0.60 15.06 Sources: WSJ Market Data Group; Birinyi Associates
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THE WALL STREET JOURNAL. Monday, September 25, 2017 | B7

FINANCE & MARKETS

OPEC Aims to Recalibrate Small-Cap Value

Meeting focuses on ria to join its output cuts. The
group can also put public pres-
Stocks Are Back
In Swing in U.S.
output from Libya and sure on countries to get in
Nigeria, the cartel’s line.
For their part, Nigeria and
‘problem children’

PATRICK MCGROARTY/THE WALL STREET JOURNAL

BY BENOIT FAUCON
AND SUMMER SAID
VIENNA—The Organization
of the Petroleum Exporting
Countries is scrambling to
contain output from strife-torn
members Libya and Nigeria,
where surging production
could threaten to derail the
group’s efforts to withhold
supplies and raise the price of
crude oil.
Libya and Nigeria were ex-
empt from OPEC’s agreement
last year to join with Russia
and other producers to cut
about 2% of the world’s oil
production. The countries’ oil
industries at the time were
crippled by civil unrest and
weren’t expected to recover
soon.
Both have since struck deals
with militants, allowing the
spigots to be turned on again.
Libya and Nigeria have
added 550,000 barrels a day of
crude-oil production since Oc-
tober, the month OPEC uses as
a benchmark for its cuts, ac-
cording to figures from the In-
ternational Energy Agency.
That new output wipes out
almost half of the cuts
achieved by OPEC’s other
members, about 1.2 million
barrels a day. OPEC asked Ni-
gerian Oil Minister Emmanuel
Ibe Kachikwu and Libyan oil
chief Mustafa Sanallah to ex-
plain their production plans at
a meeting Friday.
“If these countries stabilize
around certain levels and hold
them around a period of time,
then this would be the time for
them to join this initiative,”
said Russian Energy Minister
Alexander Novak, whose coun-
try isn’t an OPEC member but
who has taken on a leading
role this year in regulating
output.
OPEC, and allies such as
Russia, didn’t make a recom-
mendation Friday on whether
A refinery in Nigeria. A deal with militants has lifted oil output.
Opening the Spigots
New output from Libya and Nigeria is complicating
OPEC’s attempts to withhold crude-oil supply
and raise prices.
Monthly crude-oil production, percentage
above or below October 2016 levels
Libya Nigeria
Other OPEC countries
Nov. Dec. Jan. Feb. March April
Source: IEA
the group should extend its oil
cuts beyond March 2018. OPEC
will have a meeting on Nov. 30
to decide on production.
Oil prices have risen 10% in
the past three weeks on opti-
mism that OPEC’s production
cuts, announced last year and
put into effect this year, were
finally working.
OPEC members’ national oil
ministers on Friday praised
the effect of their production
cuts. Kuwaiti Oil Minister Es-
sam al-Marzouq said the de-
veloped world’s oil inventories
had fallen by 170 million bar-
rels from January to August.
OPEC is trying to bring oil in-
ventories down closer to his-
Libya say they have no imme-
diate plans to pull back.
In Nigeria, oil production
rose to 1.69 million barrels a
day in August, its highest level
since February 2016.
The increase follows a
cease-fire that Vice President
Oluyemi Osinbajo sealed with
militants in the country’s Ni-
ger Delta. The militants had
cut off pipelines to export
hubs in a standoff with the
government over money and
services. Mr. Kachikwu said he
is supportive of OPEC’s policy
and would cap his country’s
production at 1.8 million bar-
rels a day but wants to wait
100%
another six months.
90 Libyan production has shot
80
up even faster, reaching one
million barrels a day in July
70 for the first time in four years.
60 As recently as August 2016,
Libya’s output was below
50 300,000 barrels a day.
40 A top official at Libya’s Na-
tional Oil Corp. said his coun-
30 try had no intention to cap its
20 output for now. “Our produc-
tion is too unstable,” he said.
10 Libya remains divided be-
0 tween a United Nations-
backed government in Tripoli
–10 and militias in the east aligned
May June July Aug. with Egypt and Russia. Islamic
THE WALL STREET JOURNAL. State is regrouping in the vac-
uum, The Wall Street Journal
toric averages. Global oil in- has reported, plotting attacks
ventories in industrialized both in Libya and elsewhere.
nations are 170 million barrels Saudi Arabia Oil Minister
above their five-year average. Khalid Falih didn’t attend the
“While we are on the right meeting but called in. He has
track and there is more light at lobbied Nigeria and Libya to
the end of the tunnel, this is join in cuts but also served as
not the time to take our foot a buffer between the countries
off the accelerator,” he said. and members who want to
However, Libya and Nigeria take a harder line against
are pumping out so much new them.
oil that, combined with robust The meeting “put OPEC’s
output from the U.S., they are problem children under the
keeping the world well sup- microscope,” said Helima
plied with crude and weighing Croft, chief commodities strat-
down prices, said Ian Taylor, egist at RBC Capital Markets.
chief executive of Vitol Group, —Sarah McFarlane
a large independent oil trader. in London and Sarah Kent
OPEC has no legal mecha- in Abuja, Nigeria,
nism to force Libya and Nige- contributed to this article.
BY CHRIS DIETERICH
Few corners of the U.S.
stock market embodied the
“Trump bump” more than un-
dervalued shares of small U.S.
companies.
After lagging behind for
much of this year, small-capi-
talization value stocks are
perking up, and analysts are
becoming bullish.
A popular exchange-traded
fund of these stocks is up
more than 7% over the past
month, and some observers
say a second wind can power
the group to above-market
gains in the final months of
the year.
That is because large-cap
U.S. stocks are looking pricey,
and signs that the Federal Re-
serve still plans to move
steadily to boost interest rates
mean this overlooked group
could be poised to receive in-
vestors’ attention.
Small-value stocks shot
higher in the immediate wake
of the U.S. presidential elec-
tion.
Investors hoped that tax
overhauls, infrastructure
spending and pared-back regu-
lation would boost the U.S.
economy.
That postelection euphoria
rewarded shares of long-ne-
glected financial and indus-
trial firms.
Shares of small companies,
which do business domesti-
cally and so tend to pay higher
marginal tax rates, jumped as
well.
The iShares S&P Small-Cap
600 Value ETF, which is nearly
40% composed of industrial
and financial stocks with be-
low-market valuations, soared
16% between Election Day and
the end of 2016.
But small value stocks
quickly ran out of steam as
optimism for quick passage of
President Donald Trump’s
agenda faded. Shares of eco-
Pop Goes the ETF
The iShares S&P Small-Cap 600
Value ETF is beating rivals over
the past three months after a
dismal 2017.
4% iShares S&P
Small-Cap 600
Value ETF
2
0
–2
Russell 2000
S&P 500
–4
July Aug. Sept.
Source: WSJ Market Data Group
THE WALL STREET JOURNAL.
nomically sensitive stocks lan-
guished, and the Russell 2000
Value Index was the only ma-
jor benchmark to end last
week with a year-to-date de-
cline.
That makes small-value
stocks a screaming buy to
some, including Vincent Delu-
ard, head of global macro
strategy at broker-dealer INTL
FCStone.
Fed officials last week af-
firmed their view that the U.S.
economy is strong enough to
support higher interest rates,
a plus for small, cheap U.S.
stocks that benefit from sus-
tained growth.
Of equal importance, Mr.
Deluard sees this group rising
in part as investors sell to take
profits in large-cap technology
shares, which have dominated
the market all year, and rotate
to cheaper segments of the
market.
That already seems to be
happening.
The iShares small value ETF
is up 7.1% over the past month,
more than tripling the S&P
500’s return and topping
small-cap benchmarks.

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Philippe
Garnier

B
eing fluent in 10 languages isn’t essential when working
for Hilton but it helps. A French national, Philippe
joined Hilton in 2003 and has been instrumental
in developing its brands, including Conrad and Waldorf
Astoria, throughout Asia Pacific and the world. Prior to
joining Hilton, Philippe held a number of senior consulting
roles with companies such as Price Waterhouse Coopers
and KPMG Consulting. Currently VP Global Luxury Sales
based in the US, Philippe is married with three children.
As recently as 2007 there was only one Waldorf
Astoria in the world, in New York, and now we have more
than 28, and more than 29 Conrads, so we really cover the globe
from Europe to the Middle East to Americas to Asia Pacific.
The next big thing in travel is about personalisation.
It’s not about gimmicks, it’s really about getting to the core of
“There is a
the reason the guest is staying at the luxury hotel and what tremendous
they want to get out of it. The more the hotel knows about the
guest and the reason for their stay, the more they are able to appetite
tailor the guests experience in a way that is really unobtrusive.
for creating
The travel sector is one of the largest employers
and we do a lot to generate these vocations. We have memories and
a very successful programme in the US to hire veterans from
the army. Maybe hospitality was not their first career choice,
experiences”
but, once someone starts, it’s very compelling. The typical
tenure that you have at one of our properties shows that there “Ignorance
is something about this industry that is very attractive.

10% of world GDP is travel. Among the wealthiest
citizens of the world, there has been a huge shift over the
last few years from buying ‘stuff’ towards experiencing
and creating memories with families and loved ones - and
this is where travel has an amazing part to play.
Ignorance breeds conflict and, by contrast, travelling
to a certain part of the world gives you a better
understanding of what’s going on. Having a more
personal connection at our hotels with the people who work
there will give you a bit of an insight as to what is going on in
a particular country. You will soon make your own judgement
about that country’s politics, but you will have a connection at
a human level and that is going to make you a world citizen.
Travellers are extremely resilient. In my home country of
breeds conflict
France, despite recent terror attacks, 2017, has been a record year for and, by contrast,
tourism. There is a tremendous appetite for creating memories and
experiences and for enriching ones culture by having encounters with travelling to a
people from different cultures and different backgrounds. In actual
fact, back in the 1960’s one of our Founder’s underlying ideas was
certain part of
to open a Hilton in all of the world capitals for precisely that reason. the world gives
The emerging trends for the luxury travel industry will be debated you a better
at International Luxury Travel Market – ILTM, and ILTM Asia Pacific,
the annual global events where the movers and shakers of today’s understanding of
high-end travel industry gather to explore what’s new on the
luxury scene. Luxury Travel businesses wishing to be considered
what’s going on.”
for accreditation to ILTM Asia Pacific 2018 (21st – 24th May in
Singapore) should visit www.iltm.com for further information.
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B8 | Monday, September 25, 2017 THE WALL STREET JOURNAL.

MARKETS
THE DAILY SHOT By Lev Borodovsky and Akane Otani

Sunny Views, Cloudy Skies

Economic commentary has lately taken on a bullish tone, what with Europe and even Japan showing signs of
strengthening. Eight years in, the U.S. expansion is broadly perceived as robust. Traders are betting the Federal Reserve
will raise interest rates again in December. Yet beneath the surface, it’s far from clear that the economy has as much
momentum as might be implied by the Dow’s run this month of nine straight gains, including its 42nd record of 2017.

Rate implied by Fed funds futures Index performance, year to date

Now 20%
2.0%

1.5 15
Nasdaq Composite
One Week Ago
1.0 10

0.5 5 Dow Jones Industrial Average

S&P 500

0 0
2017 ’18 ’19 ’20 Jan. Feb. March April May June July Aug. Sept.

Third-quarter growth New York Fed Nowcast model prediction for Q3 and Q4 2017 GDP growth Atlanta Fed GDPNow Q3 2017 GDP growth forecast
estimates provided by the
Federal Reserve banks in 4% 4%
New York and Atlanta Q4 2017
have tailed off sharply 3 3
following strong starts.
2 2
Retail sales and industrial
production have been 1
Q3 2017
1
weak as well. In general,
‘soft’ data such as 0 0
sentiment continues to June July August September August September
paint a ruddier picture than
‘hard’ data using numbers.
Retail sales excluding gasoline Industrial production index, Gas and electric utilities’ Production of durable consumer
Adding to the uncertainty, stations, percentage change monthly change* output, percentage change goods, percentage change
a string of hurricanes— from a year earlier* from a year earlier from a year earlier
most prominently Harvey, Recessions
which battered the Gulf 10% 2% 10% 30% WSJ
subscribers can get
Coast energy industry— The Daily Shot—
5 0 5 15
is making economic a chart-by-chart briefing
forecasting even less on markets and economics—
0 –2 0 0 sent to their email
precise. October, historically each morning. Subscribe at
the meanest month for –5 –4 –5 –15 wsj.com/newsletters
stocks, could be a doozy.
–10 –6 –10 –30
’07 ’10 ’15 ’17 ’07 ’10 ’15 ’17 ’07 ’10 ’15 ’17 ’07 ’10 ’15 ’17
*Seasonally adjusted
Sources: Chicago Board of Trade (Fed funds futures); WSJ Market Data Group (Dow, S&P 500, Nasdaq); Federal Reserve Bank of New York (Nowcast); Federal Reserve Bank of Atlanta (GDPNow); Federal Reserve Bank of St. Louis (industrial production, retail sales, utilities) THE WALL STREET JOURNAL.

Email: heard@wsj.com
HEARD ON THE STREET FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard

Hidden Juice for Global Equities OVERHEARD Nintendo

One common sign of trou-
ble ahead is people borrow-
ing heavily to buy equities.
Investors should be wor-
ried then that stocks are be-
ing supported by record
amounts of margin debt, ac-
cording to research released
last week from the Bank for
International Settlements.
These kinds of loans se-
cured against stocks have of-
ten proved dangerous be-
cause when share prices fall,
borrowers are forced to sell.
In the U.S., margin debt is
more than three times the
level ahead of the 2008 cri-
sis and is greater even than
its peak in 2000 before the
dot-com crash, according to
the bank.
However, lending volume
alone isn’t a clear indicator
of risk because equity values
have increased, too. In the
U.S., lending as a share of
market capitalization has
been relatively steady for the
past four years, most re-
cently at 2.12%. But that
level is much higher than the
period before 2007 and
above even the dotcom-era
peak of 2.05%.
Margin Makers
Loans secured against marketable securities
UBS UBS
international Americas
$60 billion
50
40
30
20
10
0 der management.
‘12 ‘14 ‘16 ‘12 ‘14 ‘16
Note: 2017 is second-half data, which Julius Baer doesn't disclose. Morgan Stanley didn't
disclose figures for 2012 or prior years. Currency conversions at June 30 value.
Source: the companies
Swiss private banks,
which have among the big-
gest margin lending opera-
tions, have grown this busi-
ness significantly. Credit
Suisse has doubled its vol-
ume since 2006 to about $42
billion, while Julius Baer’s
has grown by five times to
$24 billion, although it got a
big boost from its takeover
of Bank of America-Merrill
Lynch’s international wealth
business in 2013. UBS, with
about $92 billion, has also
Credit Bank of Morgan
Suisse America Stanley
Merrill Lynch
‘12 ‘14 ‘16 ‘12 ‘14 ‘16 ‘12 ‘14 ‘16
THE WALL STREET JOURNAL.
seen strong growth.
While overall growth ap-
pears to have slowed, that is
partly due to a decline
among Asian investors in
2015 and 2016, which is
masking strength elsewhere.
The Chinese market crash
in 2015 shattered investor
confidence across Asia, ac-
cording to bankers. But
while Asian lending went
backward, U.S. loans contin-
ued to grow, including at
Morgan Stanley, Bank of
Switches on
America-Merrill Lynch and The stock market has
UBS’s American wealth arm.
Rich clients’ desire to bor-
row against stocks has been
fallen in love again with
China’s beleaguered state-
owned steel titans, which are
The Growth
Julius stoked by low interest rates up roughly 60% since the dark Nintendo keeps hitting
Baer and rising stock markets. It days of early 2016 due to high scores. Getting to the
is attractive for banks, too. higher steel prices. But next level will take some
Lending against shares is China’s banks don’t share in- hard work.
seen as less risky than mort- vestors’ enthusiasm. Shares of the Japanese
gages because stocks can be Maybe that is because game maker have risen
sold more quickly than a state banks are being asked nearly 70% this year, reach-
house. Also, if the borrowed to convert loans they made to ing their highest level since
money is invested with the the steelmakers into their 2008. The main driver is the
bank, that boosts assets un- now inflated stocks. Only two unexpected success of the
of the 10 agreements signed Switch, which works both as
‘12 ‘14 ‘16
The banks each say that so far have moved forward. a hand-held and home con-
while lending looks high, The banks agreed to the sole. Since its launch in
their own approach is con- swaps beginning in 2016— March, Nintendo has sold 1.5
servative and the competi- when steelmakers were gasp- million units in Japan, more
tion for clients is less ag- ing for air and share prices than twice the sales of Sony’s
gressive than in the past. were far lower—following PlayStation 4 in the country
But neither the banks nor much arm-twisting by Beijing. in its first six months, ac-
their investors have a full Meanwhile, Chinese real es- cording to Jefferies. It also
view of leverage across the tate, the main driver of steel has been the best-selling
system and the risk that may demand, is slowing again. console in the U.S. for four
pose. Westerners often assume out of the past six months.
Equities have to fall 20% Beijing’s control over state Analysts are now raising
to 30% before margin loans firms is nearly absolute, but it their forecasts. Credit Suisse
are underwater. That pro- turns out that corralling pow- expects Nintendo to sell 130
tects the banks, but doesn’t erful state-owned firms isn’t million units of the console
stop a wave of selling to re- so simple. Don’t be surprised by 2022, an 86% increase
pay debt when a downturn if banks keep dragging their from its previous forecast.
comes. That could spell real feet until steel-company And the Switch has at-
pain for everyone else. shares are much lower. tracted more third-party
—Paul J. Davies game makers—crucial for the
console to grow beyond its
core fan base. Those that

Death of World’s Richest Woman Begins Stock Scramble
The death of the world’s
richest woman may—eventu-
ally—trigger the unwinding
of anachronistic cross-share-
holdings between three of
Europe’s largest companies.
Investors are likely to end up
with more money.
Liliane Bettencourt, whose
father founded cosmetics gi-
ant L’Oréal in 1907, died
Thursday at the age of 94.
Her daughter and grandchil-
dren already controlled her
33% stake, worth €39.1 bil-
lion ($47 billion).
The death starts a six-
month countdown until the
expiration of a “memoran-
dum of agreement” between
the Bettencourts and Nestlé,
L’Oréal’s other key share-
Looking Good
Value of $100 invested in
January 1988
$8,000
6,000
4,000
2,000
0 500
1988 1990 2000 2010
Source: FactSet
THE WALL STREET JOURNAL.
holder. The packaged-food
behemoth has owned a chunk
of L’Oréal since 1974, when
Ms. Bettencourt sought a co-
investor to protect her com-
pany from a rumored wave
signed up this month include
Rockstar, which developed
the all-time best-selling
of state takeovers. lion investment in June. He its buyback program, but its game “Grand Theft Auto V,”
The memorandum, struck wants the L’Oréal stake sold. huge size is such that the im- and China’s Tencent, the
in 2004, bars either side The most likely outcome is pact would be less dramatic: world’s biggest game maker.
from lifting its stake and that Nestlé sells its remain- Morgan Stanley figures When Nintendo’s share
binds them to act as one ing €27.3 billion stake back Nestlé’s earnings per share price was at this level nine
L'Oréal
party. A clause barring them to L’Oréal, following the pat- would rise by 5%, all else be- years ago, its operating
Nestlé
from selling shares expired tern trialed in 2014. L’Oréal ing equal. profit was around 10 times
in 2009. Nestlé sold a 6% can afford it comfortably as This underlines the chal- higher. To fulfill the expecta-
slug back to L’Oréal in 2014, long as it sells its €11.8 bil- lenge facing Mr. Loeb’s in- tions, Nintendo needs to
but reaffirmed most ele- lion stake in pharmaceutical vestment: At 23 times earn- avoid execution mistakes. It
S&P
ments of the memorandum giant Sanofi. ings, the share price is needs to fight with the likes
and confirmed that its re- The buybacks would boost baking in a lot of reform at a of Apple to secure cheap and
maining 23% stake was “stra- L’Oréal’s earnings per share company so large that even steady supply of compo-
tegic.” by 15.5% at the current share €27.3 billion of buybacks nents. Most crucially, it
But now Nestlé has a new price, assuming a 1.5% cost barely move the needle. needs to improve its online
chief executive, Ulf Mark of new debt, calculates Mor- Ms. Bettencourt’s death services—an increasingly im-
Schneider, who is under gan Stanley. L’Oréal shares marks the end of an era—and portant and durable revenue
pressure from investors to rose 3% as investors digested opens the door to share- source in other consoles.
shake up the company. Activ- the news of Ms. Betten- holder-friendly maneuvers at Investing in Nintendo now
ist Daniel Loeb of Third Point court’s death Friday morn- some of Europe’s most sto- may offer some upside, but
has been particularly vocal ing. Nestlé would probably ried companies. the game isn’t for the faint-
since announcing a $3.5 bil- also plow the proceeds into —Stephen Wilmot hearted. —Jacky Wong