TUESDAY, MARCH 14, 2017 ~ VOL. XXXV NO. 31 WSJ.

com EUROPE EDITION

DJIA 20881.48 g 0.10% NASDAQ 5875.78 À 0.24% NIKKEI 19633.75 À 0.15% STOXX 600 374.64 À 0.38% BRENT 51.35 g 0.04% GOLD 1202.40 À 0.14% EURO 1.0673 g 0.01%

Intel Sets
What’s Data Drip
A Wall Street Journal analysis of trading ahead of U.K. economic data from April 2011 to December 2016
Big Buy
News
shows a consistent drift in prices before the release of official figures.

On Jan. 17, a rumor spread on Twitter that U.K. consumer For CPI and industrial production, prices can start moving in

Business & Finance

prices rose 1.6% in December, above analysts’ expected 1.4%.
The rumor was true, but early trading meant the pound had
already surged when the news was released.
anticipation almost a full day earlier. The data are given to selected
government employees 24 hours ahead. Trading should show no
distinct positive or negative pattern if traders are uninformed.
For Drive
I ntel agreed to buy Is-
rael’s Mobileye for about
$1.220 Pre-announcement
Post-
announcement 0.05 % Into Cars
$15.3 billion, the latest in- 1.218 0 BY AUSTEN HUFFORD
vestment by a tech com-
pany in self-driving cars. A1
1.216 –0.05 Silicon Valley is deepening
 U.K. government-bond its bet that cars will increas-
futures often move sharply ingly morph into computers
before economic reports 1.214 How many dollars £1 buys –0.10 Government-bond futures prices, on wheels.
are released, suggesting avg. change, April 2011-December 2016 Intel Corp. said Monday
trading on leaked data. A1 1.212 –0.15 that it struck a deal to buy
Mobileye NV for about $15.3
 Oil trader Andurand lost
billion, the latest investment
about $130 million due to 1.210 –0.20 by a technology company in
wrong-way bets on crude,
90 60 30 0 minutes 30 10 a.m. 12 noon 2 p.m. 4 8.05 a.m. 10 the future of self-driving cars.
making his fund one of the Day 1 Day 2 The deal values Mobileye at
year’s worst performers. B1
$63.54 a share, a 34% premium
 The EU said it would ask For retail sales and GDP, the market Number of people ...but for some releases, the market starts Number of people to its closing price Friday. Mo-
market participants for doesn’t react until the moment of release... who know before moving in the hour leading up to the release. who know before bileye shares were up 29% at
comments on steps prom- Government-bond futures prices, announcements Government-bond futures prices, announcements $61.90 on Monday afternoon,
ised by Gazprom to address avg. change, April 2011-December 20161 avg. change, April 2011-December 20162 while Intel shares were off
Industrial production 28
competition concerns. B3 2.3% at $35.09.
0.02% 0.02 %
Mobileye makes chip-based
 ABB said lax controls = 10
0 0 camera systems that power
played a part in fraud at its CPI 61
Retail sales 41 semi-automated driving fea-
South Korean unit, costing
–0.02 –0.02 tures that are already being
the Swiss firm some $73 mil-
used in cars, and is working to
lion in lost pretax profit. B3
–0.04 GDP 50 –0.04 put that technology in the
 Yahoo outlined its lead- Jobs market 118 center of self-driving cars of
ership for the business that –0.06 –0.06 the future.
will remain after its core as- The deal “merges the intel-
–0.08 –0.08
sets are sold to Verizon. B4 ligent eyes of the autono-
60 0 minutes 60 60 0 minutes 60 mous car with the intelligent
 Singapore’s central bank
brain that actually drives the
banned an ex-Goldman 1
138 releases around GDP and retail sales 2207 releases around inflation, industrial production and the labor market car,” Intel Chief Executive
banker from operating in the Sources: Factset (currency); Dr. Alexander Kurov, West Virginia University (data analysis) THE WALL STREET JOURNAL.
Brian Krzanich said in a note
financial sector, linking him
to employees. “The saying
to alleged 1MDB fraud. B5

Do Traders See Data Early?

‘what’s under the hood’ will
 A Fed signal that it plans increasingly refer to comput-
to lift rates more than three ing, not horsepower.”
times this year could boost The two companies already
the dollar, posing problems have ties. Intel, Mobileye and
for China’s central bank. B5 Market moves in U.K. are made public. leases between April 2011 and tion themselves. BMW AG, have a partnership
The analysis highlights Brit- December 2016, U.K. govern- But traders in other coun- to put about 40 self-driving
 The Dow and U.S. bonds suggest investors may ain’s unusual practices in the ment-bond futures correctly tries, such as the U.S., are not cars on the road in test mode.
slipped as investors looked
ahead to a key Fed meet- be informed about handling of market-moving anticipated the rise or fall anticipating economic data re- The purchase of Jerusalem-
data: Over a hundred people, that ultimately happened leased by government depart- based Mobileye is also a win
ing this week. B8 unpublished statistics from Prime Minister Theresa when economic data were ments with the same precision for Israel’s tech scene, repre-
 The Justice Department May to dozens of policy advis- published, according to an as it happens in the U.K., re- senting the largest Israeli
and CFPB will square off in BY MIKE BIRD ers and press officers, can get analysis prepared for The search shows. technology deal to date.
a court case, in an unusual to see some of the figures a Wall Street Journal by Alex- Some senior British statisti- Auto makers and tech com-
U.S. legal conflict between U.K. government-bond fu- day before they come out. In ander Kurov, associate pro- cians and policy makers have panies including Alphabet Inc.,
two federal entities. B5 tures often move sharply in the U.S., the president and the fessor of finance at West Vir- long feared that the U.K.’s Uber Technologies Inc. and
the 24 hours before sensitive chairman of the Council of ginia University. wide, early distribution of Tesla Inc. are racing to de-
World-Wide economic reports are released, Economic Advisers receive There may be other reasons data creates a much greater velop autonomous technology.
an analysis of trading data sensitive data like GDP a day why markets move ahead of risk of leaks and the potential General Motors Co. last
shows, a phenomenon that in advance. In several Euro- embargoed data. that people could trade on year spent $1 billion to acquire
 Scotland’s chief minister suggests some investors may pean countries, there is no Traders, for example, use data ahead of their release. Cruise Automation to expedite
said she plans to seek a sec- be trading with knowledge of prerelease access at all. privately collected economic For U.K. unemployment its self-driving program. Uber
ond referendum on inde- official statistics before they In 59.5% of 172 data re- data in a bid to estimate infla- Please see DATA page A2 Please see INTEL page A2
pendence within two years,
as Britain prepares to nego-
tiate its exit from the EU. A1
 The House of Commons
voted for a second time to
approve May’s plans to be-
Scotland to Pursue Trump, Xi Planning to Meet
gin Britain’s formal with-
drawal from the EU. A3 A Second Exit Vote WASHINGTON—U.S. Presi-
dent Donald Trump is tenta-
tively set to meet in coming
club members snapped photos
of the leaders huddling about
a North Korean missile test.
 Trump and China’s Xi
tentatively plan to meet in BY JASON DOUGLAS pected. Immediately after the weeks with his Chinese coun- The U.S. and China have
April to help defuse tensions U.K. voted in June to leave the terpart, Xi Jinping, officials been moving to smooth rela-
over North Korea and U.S. LONDON—Scotland’s chief EU, Ms. Sturgeon signaled that from both nations said. tions since Mr. Trump reaf-
missile deployment. A1 minister said she plans to seek a new push for Scottish inde- firmed U.S. commitment to
a second referendum on Scot- pendence was likely. Scottish By Lingling Wei, the “One China” policy in a
 Merkel will try to cool a tish independence within two voters have chosen overwhelm- Jeremy Page phone call last month. Chinese
budding trade dispute be- years, again casting doubt on ingly to remain in the EU. and Felicia Schwartz leaders were especially
JASON ALDEN/BLOOMBERG NEWS

tween Washington and Ber- the nation’s future in the U.K. Still, Ms. Sturgeon’s an- alarmed when Mr. Trump sug-
lin when the German leader just as Britain prepares to ne- nouncement comes at a deli- Two Chinese officials said gested in January that he
meets with Trump Friday. A4 gotiate its exit from the Euro- cate time for U.K. Prime Minis- the leaders are expected to would review the longstand-
 NATO said its members pean Union. ter Theresa May, who is poised meet for the first time in ing policy, under which the
increased military spending Nicola Sturgeon, leader of to start two years of arduous April at Mr. Trump’s private U.S. agrees not to have formal
and would focus more on the Scottish National Party and divorce talks with the EU. club in Florida, Mar-a-Lago. diplomatic relations with Tai-
fighting terrorism, two of head of Scotland’s semiautono- Underscoring her irritation, White House spokesman Sean wan, the island Beijing sees as
Trump’s key demands. A4 mous government in Edin- Mrs. May told the British Spicer on Monday wouldn’t a rebel province.
burgh, on Monday said she Broadcasting Corp. late Mon- confirm a date or location but China’s Xi Jinping U.S. Secretary of State Rex
 An anti-immigrant party would ask the Scottish parlia- day that the SNP’s “tunnel vi- said “planning is ongoing” for Tillerson will meet with senior
won fewer votes than ex- ment next week to authorize sion” over independence a visit between the two lead- Mr. Xi would be the second Chinese officials in Beijing this
pected in Australian state her to begin talks with the U.K. risked fueling fresh uncer- ers to help defuse tensions head of state that Mr. Trump week, which a senior State De-
elections, contributing to a government in London on hold- tainty and division. over North Korea and the de- hosts at Mar-a-Lago—he partment official said would
loss for the government. A5 ing a second referendum on “Politics is not a game,” the ployment by the U.S. of a hosted Japanese Prime Minis- lay the groundwork for an
 The firing of the Manhat- leaving the U.K. prime minister said, stopping missile-defense system in ter Shinzo Abe there in Febru- eventual meeting between
tan U.S. attorney leaves un- The move wasn’t unex- Please see SCOTS page A3 South Korea. ary, and faced criticism when Please see XI page A7
certain the government’s
approach to trying financial
U.S. Soldiers Heading to Poland
and terrorism cases. A6
 The House GOP plan to
overhaul the health-care Face Ordeal: No Burger King U.S. INSURERS TAKE ON
law could hit rural areas
hard, an analysis found. A6
 U.S. patients of high-
i

For new deployment, Army cuts on-base

i i
PENSION BURDENS
spending hospital doctors
did no better than other pa- luxuries such as Whoppers and lattes
tients, a study found. A7
BY JULIAN E. BARNES ment at a recent rehearsal
Companies with old-fashioned plans are shedding responsibility for them
 Egypt’s Mubarak was or- drill. “Be ready for potatoes
dered to be freed, ending le- VILSECK, Germany—For three meals a day for six BY LESLIE SCISM an old employer no longer is responsible for
gal proceeding against the years, wherever the U.S. Army months. The Irish have figured their pension, and they may face additional
ousted president. A4 went, Burger King was sure to out how to make it interest- Millions of retirees are expecting to get a risk from a switch to a different safety-net
follow. ing. I am sure you can, too.” company pension check for the rest of their system. Others consider their benefits just
CONTENTS Markets...................... B8 When the Army rolls into In Iraq and Afghanistan, lives. Increasingly, the name on it is likely to as safe, or even safer, in the hands of a
Business News..... B3 Opinion.............. A10-11
Capital Journal...... A2 Streetwise................. B1
Poland next month to soldiers stationed at be an insurance company. highly rated insurer with expertise in lon-
Crossword.............. A12 Technology............... B4 take positions near big U.S. bases got The reason is a growing business called gevity calculations.
Finance & Mkts.... B5 U.S. News............ A6-7 the Russian border, used to gorging on pension-risk transfer, in which employers Now the prospect of higher U.S. interest
Heard on Street... B7 Weather................... A12 however, the creature American fast food with old-fashioned pension plans, such as rates is providing another spur to the little-
Life & Arts......... A9,12 World News....... A2-5
comforts will stay and shopping at mili- General Motors Co., cut deals with insur- known business of transferring pension risk.
€3.20; CHF5.50; £2.00; behind. No Whop- tary strip malls. ers to take responsibility for retirees’ Under the complex math used to calculate
U.S. Military (Eur.) $2.20
pers. No foot-long Whopper “We went a little monthly benefit. liabilities, higher rates generally make it
Subway sandwiches. too far on some of The movement is expected over time to less expensive for employers to offload pen-
No Pizza Hut pies or caramel the luxuries,” says the regi- transform the management of pensions sion obligations.
lattes at the Army’s version of ment’s Command Sgt. Maj. for employers, which can slash their expo- “If interest rates go up…there definitely
Starbucks, Green Beans. Kevin Muhlenbeck, a veteran sure to the volatility of the stock and will be a lot [of employers] lining up to do
“You are never going to see of both conflicts. “We set a bond markets, as well as for the insurance this,” said Robin Diamonte, chief investment
Burger King,” Lt. Gen. Ben climate that soldiers weren’t industry, which gains a source of growth officer of United Technologies Corp. The
s Copyright 2017 Dow Jones & Hodges, the top Army com- in a combat zone anymore. at a time when some traditional busi- Connecticut manufacturer signed a $775
Company. All Rights Reserved
mander in Europe, warned sol- They weren’t in the right nesses are slipping. million deal in October to transfer about
diers of the 2nd Cavalry Regi- Please see ARMY page A8 For retirees, it can be unsettling to learn Please see PENSION page A8
A2 | Tuesday, March 14, 2017
The Unease That Motivates Trump Loyalists
CAPITAL JOURNAL
BY GERALD F. SEIB
T
im Hayes is a 71-year-
old Pennsylvanian
who once ran a small
manufacturing company. He
leans Republican but some-
times votes for Democrats
and has some issues with
President Donald Trump: “I
wish he’d get off Twitter.”
But he’s giving Mr.
Trump a thumbs-up for his
job perfor-
mance so
far, and here
is one big
reason: “I
think he has
some good
ideas with regard to trade,”
Mr. Hayes says. “There is an
imbalance in trade. We’re
draining funds out of the
United States at an astro-
nomical rate.”
Four months have passed
since Mr. Trump won elec-
tion, and just over 50 days
since he took office, yet he
remains as much an enigma
as ever. His early days have
been marked by turmoil,
and his popularity ratings
sag well below the norm for
this point of a presidency.
Yet there is a solid cadre
DATA
Continued from Page One
data, for instance, 118 people
have prerelease access, ac-
cording to the Office for Na-
tional Statistics.
“The more prerelease ac-
cess you have, the more likely
it is that these things are go-
ing to be leaked,” said Hetan
Shah, executive director of the
Royal Statistical Society, the
U.K.’s professional body for
statisticians that has cam-
paigned for several years to
end such access.
In a review last year of U.K.
economic statistics, former
Bank of England Deputy Gov-
ernor Charles Bean criticized
what he called “laxity in com-
pliance” with prerelease ac-
cess rules. Mr. Bean recom-
mended that the government
should keep the distribution of
prerelease access to an abso-
lute minimum.
In 2010, the U.K. Statistics
Authority, the independent
body responsible for the integ-
rity of official U.K. data, rec-
ommended that the maximum
prerelease period were cut to
three hours, partly on the ba-
sis that it would reduce the
risk of leaks. The government
rejected the proposal.
Large London-based traders
approached by the Journal de-
clined to comment.
David Clark, chairman of
the Wholesale Markets Bro-
kers’ Association, a trade body
for interdealer brokers, said
that if trading on leaked data
happens, “it happens to a
much lesser degree than it did
decades ago” because eco-
nomic statistics don’t surprise
as much as they did.
Some traders and investors
say they have long had suspi-
cions about trading on poten-
tial data leaks.
“People watching the mar-
kets just had a feeling that
something was going on, that
markets were drifting into the
number in a way that looked
as though somebody, some-
INTEL
Continued from Page One
bought self-driving truck
maker Otto for $680 million in
August. Alphabet, Google’s
parent, recently sued Uber for
allegedly stealing trade secrets
related to that deal.
In January, Intel said it
would buy a 15% stake in digi-
tal mapmaker Here Interna-
tional BV, joining with its
other core shareholders—
BMW, Daimler AG and Volks-
wagen AG’s Audi unit—to de-
velop navigation technology
for self-driving cars.
Intel and Mobileye said the
deal provides Intel with closer
relationships to suppliers and
car makers. Last week, Sam-
sung Electronics Co. completed
its $8 billion deal to buy Har-
of Trump supporters who
aren’t turned off by the tur-
moil, but rather see it as a
sign that something is hap-
pening. They remain loyal;
for them, the Trump mes-
sage is more important than
the messenger.
The three nearby charts
help explain this as clearly
as anything. They represent
the three sources of eco-
nomic anxiety that Trump
supporters often cite as in-
dicators that things haven’t
been right under the status
quo in Washington—and as
problems that the country’s
political and financial elites
don’t see the way they do.
One line shows the track
of the nation’s burgeoning
trade deficit since 1990. The
second shows the steady ac-
cumulation of federal debt
over the same period. And
the third shows an estimate
of the total cumulative cost
of military operations in
Iraq, Afghanistan and else-
where over the last 15
years, which runs north of
$1.5 trillion.
These three charts offer a
pretty good summary of the
sentiments often heard
from Trump supporters: We
are sending our jobs and
our money overseas, we’re
piling up debt for our kids,
and we’ve spent so much
money rebuilding other
countries that we haven’t
invested enough on our-
selves. Oh, and that the
only politician who seems
Some statisticians have long been concerned about the U.K.’s wide, early distribution of data. Above, London’s Canary Wharf district.
where, knew it already,” said
Kevin Rodgers, a former
trader who was Deutsche
Bank’s global head of foreign
exchange up to 2014.
Policy makers have also
noted that suspicious trading
goes through fits and starts.
Some officials believe, for in-
stance, that there was a per-
sistent leak of British gross
domestic product data in 2009
and 2010, according to a for-
mer senior official familiar
with the matter. This episode
ended immediately after the
May 2010 general election,
when many of the individuals
with prerelease access
changed.
A spokeswoman for the Of-
fice for National Statistics,
which produces official statis-
tics, said it took the protection
of unreleased data “extremely
seriously.”
A spokeswoman for the
Cabinet Office, a department
responsible for supporting the
man International Industries
Inc. in its own move into the
automotive space.
In a memo to employees,
Mobileye executives said In-
tel’s existing automated-driv-
ing efforts will be integrated
into the company, based in Is-
rael and run by its existing
leaders.
The transaction will add to
Intel’s adjusted per-share
earnings and is expected to
close in the next nine months.
Intel, which provides many
of the chips used in desktop
computing, has worked in re-
cent years to try to predict
and stay ahead of the next
emerging technology after
largely missing the smart-
phone market. A common
challenge in the technology
business is that companies
that lead one generation of
computing often struggle in
WORLD NEWS
Sources of Anxiety
A look at three factors that have been driving economic unease for some Americans in recent years:
Annual U.S. trade deficit in
goods and services
$0 billion
–200
–400
–600
–800
1990 2000 ’10
Sources: U.S. Census Bureau (deficit); Federal Reserve Bank of St. Louis (debt);
Brown University paper ‘Costs of War’ by Neta C. Crawford (cost)
to get this is Donald Trump.
The charts also present a
cautionary note for Mr.
Trump and his administra-
tion. These sources of eco-
nomic anxiety generally are
cited more often by Trump
backers than are immigra-
tion or health care, the is-
sues that are sucking up all
the oxygen in Washington
right now.
I
n a January Wall Street
Journal/NBC News poll,
addressing trade unfair-
ness and keeping jobs from
going abroad far outranked
deporting illegal immi-
grants or building a border
wall as top priorities among
Trump voters.
prime minister, said there
were clear rules around prere-
lease access to official statis-
tics and the government takes
compliance with them “ex-
tremely seriously.”
Officials say the wide and
early briefing is so that law-
makers can prepare how to
present the data to the media
and public.
The analysis conducted by
Prof. Kurov looked at 207 re-
leases of U.K. consumer-price
inflation, industrial production
and labor-market data over
the five-year period.
Of those, 172 were generally
considered by the market to
be surprises, meaning that the
figure came in above or below
the consensus estimate among
analysts.
In 59.5% of the cases where
bond futures reacted to unex-
pectedly strong or weak eco-
nomic data, a move in the di-
rection that would be
consistent with the data had
the next. Intel last year said it
would slash 11% of its work-
force to cut costs and to free
up money to invest in busi-
nesses that are growing.
Intel stumbled when it
bought security-software spe-
cialist McAfee Inc. for $7.7 bil-
lion in 2011. Last fall, it agreed
to sell a majority stake in that
unit to private-equity firm
TPG, in a deal that valued it at
$4.2 billion including debt. In-
tel executives had talked up
the possibility of using McA-
fee’s expertise to build more
security features into chips.
Intel’s acquisition of Mobil-
eye dwarfs recent deals among
auto makers, reflecting the
widespread view that the auto-
supply sector is where future
value is expected to be gener-
ated. Many suppliers have a
narrow product focus and
don’t carry the same amount
Accumulated public debt
$20 trillion
15
10
5
0
1990 2000 ’10
Of course, the fact that
Mr. Trump has effectively
tapped into these senti-
ments doesn’t necessarily
mean his policies will re-
solve the underlying prob-
lems. In fact, they actually
could make them worse.
His desire for a big tax
cut, his defense buildup and
his reluctance to trim Medi-
care or roll back Medicaid
growth may grow the debt
further. His pledge to wipe
Islamic State “from the face
of the earth” could add to
the costs of overseas adven-
tures. His trade policies
could set off trade wars
that would undermine the
economy without ending
that trade deficit.
already been under way in the
60 minutes before the data an-
nouncement.
In the 60 minutes before
data was published, bond-fu-
tures prices moved, on aver-
age, by 0.029%—in the direc-
tion they would end up going
after publication. That is more
than a third of total movement
in the two hours surrounding
the release.
The bond-futures market
analyzed by Prof. Kurov, which
covers U.K. debt maturing be-
tween around 8 and 13 years,
is valued at £234 billion ($286
billion). So a gain of 0.029%
would add about £68 million
in value.
Prof. Kurov also found that
during the 24 hours before
surprisingly strong or weak
CPI and industrial-production
data were released, the
changes in bond-future prices
were larger than the move in
those prices in the hour after
the release of the numbers.
of overhead related to facto-
ries or the cost of meeting
emissions and safety rules.
GM earlier this month
agreed to sell its Adam Opel
AG unit for $2.2 billion and
had to take responsibility for
billions of dollars in liabilities
to persuade France’s Peugeot
SA to acquire it, for instance.
Opel sells more than one mil-
lion cars a year in Europe.
Nissan Motor Co., which has
an alliance with Renault SA,
last year bought a controlling
stake in Mitsubishi Motors
Corp. for $2.3 billion.
Mobileye has supply and
tech-sharing agreements with
several auto makers and other
auto suppliers, including Del-
phi Automotive.
The company became more
prominent earlier in the de-
cade when Tesla started using
Mobileye’s technology for its
THE WALL STREET JOURNAL.
are driving across crum-
bling bridges while tax dol-
lars flow away to build
roads and bases 7,000 miles
Cost of recent military away.
operations, FY2001-16 Moreover, the argument
that trade deficits don’t
Iraq matter in a globalized econ-
$805 billion omy often doesn’t mesh
Afghanistan with their own experiences.
“We’re being treated un-
783
fairly by these trade deals,”
Others
says Debra Powers of Wise,
107
Va. Mrs. Powers worked as
Syria a seamstress in an apparel
12 factory that was moved to
Pakistan Honduras, she says. She re-
8 calls with particular bitter-
ness that some colleagues
were sent there to train the
workers who took their
jobs.
L
THE WALL STREET JOURNAL.
isten carefully to Mr.
Still, what matters to Trump and you will
Trump supporters for now hear him sounding
is that what they see as notes that appeal to these
simply their own common- sentiments. In his prime-
sense impulses are being time speech to Congress
acknowledged. They have two weeks ago, for example,
grown tired of hearing from he quoted Abraham Lincoln
experts that the problems supporting “the protective
they feel either don’t really policy of the American gov-
matter or aren’t for real. ernment” on trade, and de-
They are told, for exam- clared: “We’ve financed and
ple, that budget deficits and built one global project af-
debt don’t undermine the ter another, but ignored the
economy, but don’t buy it. fates of our children in the
They hear that the U.S. inner cities of Chicago, Bal-
has no choice but to clean timore, Detroit—and so
up the mess in Iraq or suf- many other places through-
fer the consequences of in- out our land.”
stability rippling all the way Mr. Trump may not have
home. Yet they recognize the answers, but, as the en-
that the war in Iraq was a tertainer he once was, he
war of choice, and that they knows his audience.
an investigation after rumor-
fueled trading appeared to an-
ticipate that the consumer-
price index would be 4%—
considerably below market
expectations of 4.4%. The ru-
mors contributed to a fall in
sterling against the dollar. The
data came in at 4%. The ONS
said no immediate evidence of
any leak had been uncovered.
Prof. Kurov has published
several papers investigating
market reactions to important
economic and financial an-
nouncements across currency
markets, U.S. bonds and equi-
ties, and oil and other com-
modities.
In the analysis prepared for
the Journal, Prof. Kurov em-
ployed the methods he and his
co-authors used in a 2016 pa-
per, which also found evidence
of “price drift” in U.S. equity
and Treasury futures ahead of
EDDIE KEOGH/REUTERS
economic announcements. Ac-
ademics Gennaro Bernile and
Yuehua Tang said the tech-
niques used were consistent
with their own work.
In five of the seven cases
where strong evidence of
“price drift” was found in the
“Based on what I see in the U.S. by Prof. Kurov and his co-
data in this case, it is very un- authors, the data were re-
likely that we are looking at a leased by private organiza-
random pattern,” Prof. Kurov tions where security
said. arrangements aren’t required
The futures tended to sell to be as strict. That analysis
off before an unexpectedly covered the period from Janu-
good reading, while gaining ary 2008 until March 2014.
when the data was weaker Strong evidence of prices
than expected. moving in the direction they
Strong economic data raises would end up going after pub-
expectations that interest lication, or drift, was found in
rates will go up. Rising inter- only two of 14 data releases
est rates push down bond published by U.S. government
prices. agencies, according to Prof.
Investors point to several Kurov’s analysis.
examples in which they be- Official U.S. data are typi-
lieve that traders may have cally completed less than 24
been acting on leaks. hours before a release and the
In January, sterling jumped data are physically couriered
by 0.4% against the dollar in to the chairman of the Council
the 30 minutes ahead of infla- of Economic Advisers, who
tion numbers. Before the re- then relays the information to
lease, some traders talked of a the U.S. president.
rumor on Twitter that sug-
gested the data would come in THE WALL STREET JOURNAL.
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THE WALL STREET JOURNAL.
U.K. Gets Closer to Starting Brexit Process
Lower house backs
prime minister’s plans
to begin formal talks;
amendments rejected
BY JENNY GROSS
LONDON—Parliament’s
lower house backed Prime
Minister Theresa May’s plans
to begin the U.K.’s formal
withdrawal from the European
Union for a second time, clear-
ing one of the final hurdles be-
fore she can start the divorce
process.
The House of Commons on
Monday voted to approve the
government bill in its original
form, rejecting two amend-
ments added by the unelected
upper House of Lords.
One amendment to guaran-
tee rights for EU citizens liv-
ing in the U.K. was overturned
335 to 287, and a second
amendment to guarantee par-
liamentarians greater say over
final terms of the country’s
exit from the EU was over-
turned 331 to 286.
The bill was to return
later Monday to the House of
Lords.
Once the bill clears both
SCOTS
Continued from Page One
short of rejecting another ref-
erendum, which her govern-
ment must approve to make
the result legally binding.
Peter Lynch, senior lecturer
in politics at the University of
Stirling in Scotland, said Mrs.
May could find it hard to resist
the SNP’s demand, given the
party’s electoral heft in Scot-
land.
“You don’t want to antago-
nize voters,” he explained,
though he added that if London
were to allow a second referen-
dum on Scottish independence,
it would want the vote sched-
uled after Brexit in 2019.
Supporters of an amendment to guarantee legal status of EU citizens rallied in London on Monday.
houses of Parliament and be-
comes law, Mrs. May can trig-
ger Article 50, which opens
the two-year window for di-
vorce talks between the U.K.
At her press conference in
Edinburgh, Ms. Sturgeon said
she wants the fresh vote on in-
dependence to be held between
the fall of 2018—when the
terms of the U.K.’s exit from
the European Union are
broadly agreed—and before the
spring of 2019—when the U.K.
formally exits the EU.
“It is important that Scot-
land is able to exercise the
right to choose our own future
at a time when the options are
clearer than they are now, but
before it is too late to decide
on our own path,” Ms. Stur-
geon told reporters.
In September 2014, Scots
voted 55% to 45% to stay in the
U.K. The SNP has since consoli-
dated its grip on Scottish poli-
tics, holding on to its position
WORLD NEWS
and the EU. If the House of
Lords tries to restore the
amendments, that could delay
the bill by several days, but
Mrs. May would still be on
as the largest party in Scottish
parliamentary elections last
year and in 2015 routing the
main opposition Labour Party
to win a record 56 seats in na-
tional elections to the U.K. Par-
liament in London.
In September 2014,
Scots voted 55% to
45% to remain a part
of the U.K.
Tensions between Edin-
burgh and London have flared
since June’s Brexit vote, when
Scots voted to remain in the
EU but U.K. voters as a whole
Tuesday, March 14, 2017 | A3
shadow more trouble ahead as
she negotiates Britain’s exit.
Her Conservative Party, which
holds a thin majority, Parlia-
ment and the country are di-
vided over what Britain’s fu-
ture relationship with Europe
should look like.
Jeremy Corbyn, leader of
the opposition Labour Party,
said after the vote that the
party would demand EU citi-
zens living in the U.K. are
given the right to remain.
DANIEL LEAL-OLIVAS/AGENCE FRANCE-PRESSE/GETTY IMAGES
“It is deeply disappointing
that the government has de-
nied the British people,
through Parliament, greater
oversight over the Brexit ne-
gotiations and refused to guar-
antee the rights of EU citizens,
who have made their lives in
the U.K.,” Mr. Corbyn said.
Britain in June voted 52%
to 48% to leave the EU.
Mrs. May’s spokesman said
on Monday that the British
government wouldn’t let law-
makers tie Mrs. May’s hands
as she heads into negotiations
with the other 27 EU member
states and would push for the
course to trigger Article 50 by bill to be passed in its original
the end of March as planned. form.
The speed bumps the prime The bill travels back-and-
minister has faced in getting forth between the Commons
the bill approved could fore- and the Lords until both sides
chose to leave.
Edinburgh’s move adds an-
other headache for Mrs. May as
she prepares to kick off talks to
take the U.K. out of the EU. She
plans to officially notify Brus-
sels this month of the U.K.’s de-
parture from the bloc, starting
the clock ticking on two years
of exit talks. The notification
could come as soon as Tuesday.
Ms. Sturgeon said on Mon-
day that her efforts to per-
suade Mrs. May to adapt her
Brexit strategy to reflect Scot-
tish wishes to remain within
the bloc’s single market for
goods and services had been
rebuffed, giving her no choice
but to seek a fresh poll on inde-
pendence. She said the Brexit
that Mrs. May envisages will
damage Scotland’s economy. Theresa May, left, with SNP leader Nicola Sturgeon in July.
agree, a process referred to as
“ping pong.” Once both sides
agree, the queen will symboli-
cally approve the bill.
The prime minister’s
spokesman wouldn’t give a
date that Mrs. May would trig-
ger talks, but signaled she
would do so by the end of the
month.
“I have said ‘end’ many
times but it would seem I
didn’t put it in capital letters
quite strongly enough,” he
said, referring to media re-
ports that Mrs. May would do
so this week.
In a sign of some divisions
within the party, Mrs. May
came under criticism last
week after lawmakers accused
her of reneging on the party’s
election pledges by raising
taxes for self-employed work-
ers.
Mrs. May’s government
fought against having a parlia-
mentary vote on starting
Brexit talks, a move that led
lawmakers to criticize her for
not giving them enough say on
the process. She later acqui-
esced, after the Supreme
Court ruled in a case brought
by pro-EU activists that she
needed parliamentary ap-
proval.
ANDREW MILLIGAN/PRESS ASSOCIATION/ZUMA PRESS
 A4 | Tuesday, March 14, 2017
Merkel, Trump Set for Encounter
German leader to seek
to defend her country’s
export-based economy
from protectionist line
President Donald Trump of-
ten slammed Angela Merkel on
the campaign trail, calling her
refugee policy “insane.” When
the German chancellor meets
her new U.S. counterpart for
By Anton Troianovski
and Bertrand Benoit in
Berlin and Ted Mann in
Washington
the first time this week, she will
come face to face with the gap-
ing differences over that and a
host of other policies clouding a
vital trans-Atlantic relationship.
“I believe that direct conver-
sation is always much better
than talking about each other,”
Ms. Merkel told business repre-
sentatives on Monday. Regard-
ing Mr. Trump’s past criticism
of her, an aide to Ms. Merkel
said: “It makes no sense in poli-
tics to read too much into past
statements.”
The two leaders agreed to
postpone the visit, originally
scheduled for Tuesday, to Fri-
day because of impending snow
in Washington, the White
House said Monday.
The two have much to dis-
cuss. Germany, with its export-
oriented economy and its reli-
ance on multilateral diplomacy
to address crises, has been rat-
tled by Mr. Trump’s “America
first” approach.
The most urgent worry in
Berlin, according to interviews
with German officials, is that
Mr. Trump could move quickly
to punish countries that sell
more goods to the U.S. than
they buy from it. That thrusts
Germany, Europe’s largest econ-
omy and an export powerhouse,
into the spotlight.
The typically pragmatic and
reserved German leader hopes
to dial down the temperature in
the budding dispute between
Washington and Berlin over
trade policy, German officials
say.
She plans to highlight Ger-
At Least One Dead, Eight Wounded as Explosion Hits Kabul
MOHAMMAD ISMAEIL/REUTERS
KABUL, Afghanistan—An ex-
plosion in the Afghan capital, Ka-
bul, on Monday killed one person
and wounded at least eight peo-
ple, according to Afghan officials.
Interior Ministry spokesman
Sediq Seddiqi said the explosion
EGYPT
Prosecutor Orders
Mubarak to Be Freed
Egypt’s ousted President
Hosni Mubarak was ordered to
be freed from detention on Mon-
day, according to the prosecutor
who signed his release order,
ending nearly six years of legal
proceedings against him.
The prosecutor, Ibrahim Saleh
said that he ordered Mr. Muba-
rak’s release after he accepted a
petition by the former presi-
dent’s lawyer for his freedom on
man firms’ multibillion-dollar
investments in the U.S. and
bring several German CEOs to
the White House to talk about
expanding Germany’s voca-
tional training system to the
U.S. Ms. Merkel is also prepared
to explain issues ranging from
the eurozone’s monetary policy
to European taxation to a skep-
tical Mr. Trump.
While the “character of the
trans-Atlantic relationship” is
changing, Ms. Merkel told Ger-
man parliament last week, she
remained “deeply convinced
that trans-Atlantic partnership
on the basis of our values and
interests is of paramount signif-
icance to us all.”
Berlin continues to puzzle
over the Trump administra-
tion’s long-term goals in foreign
policy, but White House state-
ments in support of the North
Atlantic Treaty Organization
and of sanctions on Russia over
its intervention in Ukraine have
calmed German officials con-
cerned about immediate, radical
changes in those areas. That
leaves economics and trade as
the burning issues.
Some German officials who
have spoken with Mr. Trump’s
team said they came away with
the impression that their coun-
terparts didn’t fully understand
how the European Union works.
White House trade adviser Pe-
ter Navarro reinforced that
view last week when he publicly
Machinery Makers
Urge Trade Peace
Protectionism poses risk
to U.S., Europe, group warns
FRANKFURT—Europe’s larg-
est trade group of machinery
makers used German Chancellor
Angela Merkel’s pending meet-
ing in Washington with Presi-
dent Donald Trump to warn of
the negative consequences of
U.S. protectionism for the U.S.
and Europe.
“Our advice to Ms. Merkel
and Mr. Trump: Shake hands!”
said Carl Martin Welcker, presi-
didn’t appear to have been a sui-
cide attack.
Deputy ministry spokesman
Najib Danish said the blast ap-
peared to have targeted a mini-
bus carrying a group of employ-
ees.
the basis of time already
served.
Mr. Mubarak, 88 years old, was
acquitted by the country’s top ap-
peals court on March 2 of charges
that he ordered the killing of pro-
testers during the 2011 uprising
that ended his 29-year rule.
That verdict, according to Mr.
Saleh, cleared the way for the
lawyer to request that his client
be released since he has already
served a three-year sentence for
embezzling state funds while in
detention in connection to the
protesters’ case.
—Associated Press
HK JP KO ML SI IN UK
WORLD NEWS
Chancellor Angela Merkel of Germany is slated to meet U.S.
President Donald Trump for the first time in Washington Friday.
suggested that the U.S. should
hold bilateral trade talks with
Germany—a move that would
violate EU rules.
“We are always ready to talk
about questions that are impor-
tant to the U.S. side,” a German
economics ministry spokesman
said in response. “At the same
time, it is clear that trade policy
continues to be the responsibil-
ity of the European Union.”
German officials worry that
Mr. Trump and his top aides
see the EU—with its combined
economic strength of a single
market comprising 500 million
people—as an adversary in
trade policy and will try to di-
dent of the VDMA industry
group, which represents more
than 3,200 German engineering
firms.
Germany’s ballooning trade
surplus has spurred criticism
from the Trump administration
over Germany’s dependence on
foreign demand. Mr. Trump has
accused Germany of flooding
the U.S. with cars while U.S. car
makers weren’t being given
enough access to the German
market.
Peter Navarro, the head of
Mr. Trump’s new National Trade
Council, has said German ex-
porters had an unfair advantage
because of the euro’s weak ex-
change rate.
No group has claimed respon-
sibility for the attack, but Islamic
State has launched multiple re-
cent attacks in Kabul—including
the storming of a military hospi-
tal last week in which more than
30 people were killed.
WORLD WATCH
SOMALIA
Capital Rocked by
Deadly Car Bombing
A suicide car bomber struck
near a hotel in Somalia’s capital
Monday morning, killing at least
six people and injuring four oth-
ers, police said.
The bomber detonated near
the Weheliye hotel on the busy
Maka Almukarramah road, Capt.
Mohamed Hussein said. Ambu-
lances rushed to the scene.
The al Qaeda-linked Islamic
extremist group al-Shabaab
FR MN PR THE WALL STREET JOURNAL.
for the meeting, said the White
House was still completing its
position on trade with the Eu-
ropean Union. Mr. Trump might
still choose to pursue a free-
JOHN MACDOUGALL/AGENCE FRANCE-PRESSE/GETTY IMAGES
trade agreement between the
U.S. and the EU; negotiations
for such an agreement didn’t
finish before President Barack
Obama’s departure, one of the
officials said.
In foreign policy, Mr. Trump
wants to discuss Ms. Merkel’s
experiences dealing with Presi-
dent Vladimir Putin of Russia,
and continue to push for more
military spending by America’s
European allies.
Mr. Trump is “heartened so
far by the signals he’s seen
from Berlin, in terms of increas-
ing their defense budget,” one
vide the bloc to gain an advan-
tage in bilateral talks. One of
of the officials said. The presi-
dent plans to discuss with Ms.
Merkel plans for all NATO
Ms. Merkel’s messages, German members to contribute 2% of
officials said, will be that the their respective gross domestic
EU is here to stay. product to defense by 2024, the
“If one isn’t successful in official said.
making it clear to the Ameri- Aides to Ms. Merkel said she
cans that the European Union is would want to gauge how much
in their interest, then one opposition or support she can
should at least make it clear expect from the U.S. to her
that they should not count on agenda for Germany’s presi-
the European Union losing sig- dency of the Group of 20 coun-
nificance,” said lawmaker Jür- tries this year, including the
gen Hardt, an ally of Ms. Merkel promotion of free trade, the
who also handles trans-Atlantic fight against climate change
issues at the German Foreign and tighter financial-markets
Ministry. regulation—all topics on which
Senior administration offi- Mr. Trump has expressed deep
cials, outlining the U.S. agenda skepticism.
The U.S. in 2016 was the As a result “there is no di-
single-biggest export market rect competition in the U.S. for
for Germany’s plant and ma- roughly one-third of German
chinery makers, ahead of China. plant and machinery exports to
“Open markets are good for the U.S.”
the U.S. and Germany,” Mr. Wel- German engineering exports
cker said Monday in an inter- to the U.S. were €16.3 billion
view ahead of Friday’s meeting ($17.4 billion) last year, or
of the two leaders at the White about 15% of total German
House. goods exports to the world’s
Mr. Welcker warned that de- largest economy, according to
cades of underinvestment have the VDMA.
left the U.S. manufacturing sec- “Prices of goods will go up
tor weakened and dependent if U.S. companies stop using
on imports of cutting-edge ma- German efficiency in their pro-
chinery from Europe’s largest duction,” Mr. Welcker said.
economy. He also stressed German
“De facto, the U.S. machin- companies’ importance as major
ery sector isn’t that strong,” Mr. producers and employers.
Welcker said. —Nina Adam
Elsewhere, in the southern said the raid took place Sunday
province of Helmand, 32 people— night in the Nad Ali district.
including four members of the A Taliban spokesman, Qari
security forces—were freed fol- Yusouf Ahmadi, confirmed the
lowing a raid on a Taliban-prison. raid, but said all 32 prisoners
Mohammad Rasoul Zazia, the were drug addicts.
military spokesman for Helmand, —Associated Press
claimed responsibility for the RUSSIA
blast, according to the group’s
Andalus radio. EU Extends Sanctions
In a separate blast Monday On Russian Officials
morning, a suicide bomber deto-
nated a minibus laden with explo- The European Union extended
sives at the gate of a military sanctions of travel bans and asset
camp south of the capital. The freezes against Russian officials
bomber was killed and two peo- and pro-Moscow separatists in
ple were wounded, said Col. Yusuf Ukraine for six more months.
Burhan, a Somali military officer. The bloc said it was renewing
Somalia’s new Prime Minister sanctions on 150 officials and 37
Hassan Ali Khaire condemned firms and other entities.
the two attacks, saying they The EU imposed the sanc-
were carried out by “bloodthirsty tions in 2014, following Russia’s
groups.” annexation of Crimea.
—Associated Press —Natalia Drozdiak
STEPHANIE LECOCQ/EURUOPEAN PRESSPHOTO AGENCY
Jens Stoltenberg of NATO
NATO
Spending
Falls Short
Of Target
BY JULIAN E. BARNES
BRUSSELS—The North At-
lantic Treaty Organization said
its members have increased
military spending and would
focus more on fighting terror-
ism, two key demands of the
Trump administration.
In its annual report, the al-
liance said 23 members in-
creased military spending last
year, though in a majority of
European countries that
spending remains below the
NATO goal of 2% of gross do-
mestic product.
Though military expendi-
ture among European nations
has increased, their total
spending last year was well
below the level in 2009, when
it began a six-year drop.
During the U.S. presidential
campaign, Donald Trump said
European countries should pay
a larger share for their de-
fense. While critical of those
comments at the time, NATO
Secretary-General Jens Stol-
tenberg has embraced Mr.
Trump’s demand.
NATO diplomats say he has
worked behind the scenes to
encourage America’s European
allies to take a hard look at
their budgets. NATO says the
U.S. accounts for 46% of the
alliance’s economic output but
68% of its military spending.
In an interview Monday, the
NATO chief said a timetable for
plans to reach the 2% spending
guideline could be adopted at a
NATO summit in May, which
the White House has said the
president will attend.
“The proposal from some
allies is to agree in May that
by the end of the year, at the
latest, we will have national
plans,” Mr. Stoltenberg said.
“We can foresee different
ways of doing this. The thing
is to have a stronger national
commitment.”
The secretary-general said
that reaching the 2% spending
threshold by 2024 is a realistic
goal for NATO members, citing
Latvia, Lithuania and Romania
for their increased military
spending in recent years.
While attaining the goal
will be more difficult for Ger-
many and its much larger
economy, Mr. Stoltenberg said,
any boost in spending by Ber-
lin will help security. U.S. and
NATO officials have said that
an increase in defense expen-
ditures by Germany is crucial.
“Germany won’t reach 2%
within a few years, it will take
some time,” Mr. Stoltenberg
said. “But of course if Ger-
many starts to increase mili-
tary spending, it will really
make a difference because
their economy is so big.”
Five alliance members, in-
cluding the U.S., currently
spend at least 2% of their gross
domestic product on defense, a
number that is expected to
climb to at least eight in 2018.
Mr. Trump has proposed a
$54 billion increase in U.S.
military spending. But Defense
Secretary Jim Mattis has said
that the U.S. could reduce its
military commitment to Eu-
rope if countries don't in-
crease their spending.
In addition to pushing allies
on defense, Messrs. Trump
and Mattis have said the alli-
ance needs to take on a larger
role in combating terrorism.
NATO officials believe that
increasing intelligence-sharing
and training in the Middle
East and North Africa are the
best way for the alliance to
contribute to the fight against
terrorism.
The alliance’s command in
Naples has been stepping up
counterterrorism training
courses for the militaries of
Jordan, Mauritania, Morocco
and Tunisia. In Tunisia, NATO
also has been helping set up a
new intelligence center.
THE WALL STREET JOURNAL.
Nations Pursue Free Trade Without U.S.
Chile meeting heralds
effort to revive TPP
after Washington
pulls out of accord
BY JOHN LYONS
HONG KONG—With the U.S.
signaling a turn toward pro-
tectionism, nations that have
benefited from global com-
merce, from Australia to Japan
to Peru, are trying to pick up
the free-trade mantle.
Since the end of World War
II, the U.S. has championed
the idea that economies gain
the most when they can freely
buy and sell goods with each
other. Now, amid rising U.S.
skepticism of trade pacts, ne-
gotiators from other countries
are rushing to salvage existing
deals and sign new ones—of-
ten in talks without major
American participation.
The latest example: Officials
from more than a dozen coun-
tries are meeting in Chile start-
ing Tuesday in part to discuss
whether it is possible to revive
the Trans-Pacific Partnership—
a formerly U.S.-led trade pact
that President Donald Trump
pulled out of in January. The
Saudi King’s Asia Expedition Enters Crucial Phase
As Saudi Arabia’s King Sal-
man and his 1,000-plus entou-
rage woo investors in Japan
and China this week, they are
facing a difficult task: con-
vincing those countries, both
big buyers of Saudi oil, that
the kingdom is also a wise
place to park their cash.
By Brian Spegele,
Summer Said
and Mayumi Negishi
King Salman’s monthlong
Asia tour is making some of
its most crucial stops this
week, passing through Tokyo
and Beijing to attract foreign
investment for everything in-
cluding transportation proj-
ects and the initial public of-
fering of state-owned Saudi
Australian Voters Spurn Nationalists Malaysia Arrests Seven
BY RACHEL PANNETT
AND MIKE CHERNEY
SYDNEY—The global rise of
nationalist politics suffered a
setback in the heart of Austra-
lia’s mining belt, as an anti-im-
migrant party won fewer votes
than expected in state elec-
tions, contributing to a crush-
ing loss for the government.
The Western Australia state
branch of Prime Minister Mal-
colm Turnbull’s ruling Liberal
Party joined with a controver-
sial, right-wing firebrand in
hopes her high profile would
help avert an expected election
defeat. The gamble backfired,
with the conservatives losing of-
fice and Pauline Hanson’s One
Nation party securing less than
5% of the vote. Final results were
still being counted on Monday.
Rodney Smith, a politics
professor at the University of
Sydney, said the result showed
the limitation of the national-
ist rhetoric of populist law-
makers, at least in local elec-
tions. The issues that attract
voters to politicians like Ms.
Hanson, such as immigration
or religious freedom, play bet-
A police officer salutes outside the Great Hall of the People.
Tuesday, March 14, 2017 | A5
WORLD NEWS
Regardless of what happens diversify and do deals with
in Chile, the discussion will pro- other countries that they may
vide much-needed momentum not previously have had reason
for trade talks in an era of to, because of the uncertainty”
growing criticism. Keeping talks about future U.S. participation
going could allow a future U.S. in trade deals, said New Zea-
president to complete a long- land Trade Minister Todd Mc-
sought deal, proponents say. Clay, who is attending the
The U.S. has been the chief Chile meeting. In 2008, New
promoter of open markets Zealand became the first de-
through the creation of multina- veloped nation to sign a free-
tion trade frameworks since trade agreement with China.
helping found the precursor of A spokeswoman for Chile’s
the World Trade Organization 70 foreign-relations ministry said
years ago. But the election of Mr. China is sending a delegation
Trump, a critic of the WTO and to the talks.
multicountry trade deals, has Japan and Vietnam, mem-
called that role into question. bers of the TPP, have redou-
Besides exiting the TPP, Mr. bled efforts to finish free-
IVAN ALVARADO/REUTERS
Trump threatened to quit the trade agreements with the
20-year-old North American European Union, officials of
Free Trade Agreement with the countries have said.
Mexico and Canada, and slap Peruvian President Pedro
tariffs on China, the biggest Pablo Kuczynski said on
U.S. trade partner. Mr. Trump Thursday that his government
Finance ministers from Colombia, Chile, Mexico and Peru spoke at a meeting in Santiago on Friday. says that trade deals allowed would seek to strengthen
other nations to steal U.S. jobs trade and investment within
agreement was settled last of trade in Australia, who is ing—not a senior trade offi- and that his administration the Pacific Alliance, which
year but never took effect. In traveling to Chile for the talks. cial—a sign of limited U.S. would seek one-on-one pacts would then explore as a group
trade circles, the notion of en- The talks will take place at interest in the outcome with better terms. new accords in Asia with other
acting the pact without the a meeting of the Pacific Alli- Reviving the TPP without The U.S. shift has sparked blocs such as the Association
U.S., its biggest member, is now ance in Chile, a pro-trade the U.S. is a long shot. Japan— concerns of possible trade of Southeast Asian Nations.
known as “TPP minus one.” grouping of four Latin Ameri- whose support will be crucial— wars. It has also prompted a “The TPP without the
“What I will absolutely not can nations that also includes is reluctant to open its markets host of nations that looked to United States is very difficult
do is pull down the [shutters] Colombia, Peru and Mexico. more without greater access to Washington for cues on trade to do, but we can rescue some
and say ‘that’s it, game over,’ ” The U.S. is sending its ambas- the U.S., officials from Japan to forge ahead on their own. of the very important things,”
said Steve Ciobo, the minister sador to Chile to the meet- and other nations said. “More countries may try to he said.
Arabian Oil Co., or Aramco. with the tour say the Saudis a barrel. That plan entails at- Group Corp. has said it is set-
The king’s trip coincides have set up meetings to up- tracting foreign interest in ting up with up to $45 billion Market Share
with a visit this week by his date potential backers. sectors such as construction, in money from a Saudi sover- Saudi Arabia faces growing
son, deputy crown prince Mo- The Hong Kong and Tokyo transportation and financial eign-wealth fund. competition from Russia over
hammed bin Salman, to the stock exchanges are also services. Still, investment interest China's oil imports.
U.S., where he is expected to likely pitching their markets In Japan, where more than from Japan, which buys more Saudi Arabia Russia
meet U.S. President Donald to the king’s delegation as 1,000 Saudi officials are now oil from Saudi Arabia than
1.2 million barrels per day
Trump, as well as business places to list, people familiar camped out in Tokyo’s luxury anywhere else, remains al-
leaders to follow up on con- with the matter said, since hotels, the two sides plan to most wholly fixated on the 1.0
versations about potentially the sheer scale of the IPO discuss special economic fuel, said Japanese trade offi-
listing Aramco in the U.S. means it will likely go public zones in Saudi Arabia, with cials. 0.8
Gauging interest in the on multiple exchanges. Both tax breaks and fewer regula- China, Saudi Arabia’s big-
Aramco IPO, expected to be exchanges said they are pur- tions. Companies and state- gest oil-export market, is po- 0.6
the world’s biggest and to suing a possible Aramco list- owned entities will study tentially an even more impor-
raise more than $100 billion ing. some 30 projects, including tant investment partner to 0.4
as early as 2018, is a focus of The Saudis are also seeking the possible construction of a win over. Vast Saudi reserves
King Salman’s tour. To make to secure investment for an production facility by Toyota mean its exports to China will 0.2
it a success, Aramco would ambitious plan, dubbed Vision Motor Corp., Japanese offi- likely continue to grow for
0
benefit from billions of dol- 2030, to reduce the kingdom’s cials said. years to come as domestic
lars from investors like state- long-term dependence on oil, One sign of Saudi Arabia’s production in China shrinks. 2012 ’13 ’14 ’15 ’16
backed Chinese funds and a push that has gained ur- push to diversify is a $100 bil- —Kane Wu Source: China General Administration
China’s increasingly global oil gency as benchmark prices re- lion technology-investment and Dan Strumpf of Customs
companies. People familiar main depressed at around $50 fund that Japan’s SoftBank contributed to this article. THE WALL STREET JOURNAL.
$11 billion to reduce the state’s
yawning budget deficit. Labor
With Alleged Terror Ties
campaigned against the sale. BY YANTOULTRA NGUI members Mahmud Ahmad
“The focus is really on state and Mohamad Joraimee
issues, and if you’re going to KUALA LUMPUR, Malay- Awang Raimee, Mr. Khalid
come in with a nationalism, sia—Counterterrorism police said, while the other two—a
populist appeal, then that’s arrested seven people, in- female ferry-ticket seller and
probably not going to cut ter- cluding one immigration offi- a laborer—helped smuggle
ribly far,” Mr. Smith said. The cer, over suspected links to three Indonesian Islamic
REBECCA LE MAY/AAP/REUTERS
tie-up between the conserva- Islamic State. State militants to the Philip-
tive party and One Nation The seven—two Malay- pines.
“just really drew attention to sians and five Filipinos—were One of the other Filipino
their desperation,” Mr. Smith arrested from March 8 to suspects has sworn alle-
said, adding that conservatives March 12 in Sabah and Selan- giance to Abu Sayyaf senior
at the national level would be gor states, Inspector-General leader Isnilon Hapilon, Mr.
less likely to make such a deal. of Police Khalid Abu Bakar Khalid said, while the last, a
In Australia, disaffection has said Monday. Two of the sus- car mechanic, was planning
Pauline Hanson addressed a One Nation function in Perth Saturday. largely been restrained by 25 pects, including the immigra- to go to Syria to join Islamic
years of unbroken growth and tion officer, are women. State.
ter on a broader stage, he said. likely 40 seats in the 59-seat an affinity for the political cen- Mr. Khalid said the officer, The other Malaysian sus-
Around one in 10 Western Western Australia lower house. ter. But U.S. President Donald 31 years old, arranged for pect was deported from Tur-
Australia voters had been ex- The center-left party now con- Trump’s turbulent ascent—Ms. people without valid travel key, where authorities had
pected to support the far trols six of the country’s eight Hanson praises his nationalist documents—including Islamic arrested him on Jan. 16 for
right, as Ms. Hanson tapped states and territories. trade and immigration agenda— State militants from Indone- trying to enter Syria to join
into a deep well of discontent Resource-rich Western Aus- has inspired some voters. sia and Malaysia—to enter Islamic State, Mr. Khalid said.
over joblessness and immigra- tralia is grappling with a min- Ms. Hanson is still aiming Sabah before heading to the The suspects were unavail-
tion, a phenomenon seen glob- ing falloff that has turned it to extend her populist brand southern Philippines, site of a able to comment, and it is
ally in Britain’s decision to from a powerhouse economy of politics to other Australian long-running insurgency by unclear whether they have le-
leave the European Union and to one with the nation’s high- states. In her home state of the Islamic State-allied Abu gal representation.
the resurgence of Marine Le est jobless rate and soaring Queensland, usually a conser- Sayyaf group. All seven suspects were
Pen’s National Front in France. debt. The conservatives’ elec- vative bastion, surveys show Three of the Filipinos hold arrested for offenses related
Instead, the main opposition tion loss also killed off plans one in four voters could shift permanent-resident status in to terrorism under special se-
Labor Party surged to victory to privatize the state’s electric- support to her party in a com- Malaysia. One collected funds curity laws that allow indefi-
in Saturday’s poll, winning a ity network, hoping to raise ing state election there. for Malaysian Islamic State nite detention without trial.
China Set to Tweak Its Civil Code
BY JOSH CHIN story goes. clause after some delegates them in courts of law and pub-
In publicly doubting that said comments attacking mar- lic opinion. The press office of
Scratching at the legends and other details, the court tyrs of revolutionary lore were the National People’s Congress
around revolutionary heroes ruled Mr. Hong had damaged harmful to the public interest. didn’t respond to a request to
stands to become a civil of- the soldiers’ “heroic image The clause would make it a comment.
fense in China. and spiritual value.” civil offense to “damage the Descendants of the Langya
Anyone who slanders or Approving general provisions name, likeness, reputation or Mountain survivors sued Mr.
otherwise harms the image of for a civil code is one of the cen- glory of heroes and martyrs.” Hong after he wrote articles
Communist Party heroes and tral tasks facing the annual gath- While civil codes have been that cast doubt on core ele-
revolutionary martyrs could ering this month of the National credited with helping foster ments of the story, including
face legal liability under a People’s Congress, China’s parlia- civil society, particularly in claims the quintet killed vast
NICOLAS ASFOURI/AGENCE FRANCE-PRESSE/GETTY IMAGES
clause lawmakers added to ment, at Beijing’s Great Hall of post-Cold War Central and numbers of enemy troops be-
draft rules for China’s first the People. Eastern Europe, they have also fore leaping. Despite scram-
unified code of civil law. Proponents of the code, which been employed to do the op- bling four hours to the top of
Illustrating what kind of would be used to settle private posite, according to legal ex- Langya Mountain in an act of
heresy authorities have in disputes, have portrayed it as vi- perts. defiance and an effort to bol-
mind, a Beijing court last year tal to improving protections for The clause gives Chinese ster his case, the writer lost
found writer Hong Zhenkuai citizens’ rights. authorities a new tool in an an appeal.
guilty of libel for questioning If the new clause is ap- intensifying campaign to root The attack on historical ni-
elements of “The Five Heroes proved, as is likely, the code out sprouts of “historical ni- hilism is part of a vast effort
of Langya Mountain,” a well- could instead end up under- hilism,” their term for public by Chinese President Xi Jin-
known patriotic tale about a mining the right of Chinese skepticism around the party’s ping to clamp down on dis-
group of Chinese soldiers who citizens to question their version of past events. senting views and gird Chi-
threw themselves from a cliff country’s history. In the past, the party muz- nese society against what he
to avoid capture by Japanese State media reports on zled critics of official history sees as ideological threats em-
forces. Two survived after fall- Monday said the NPC’s legal with censorship, but increas- anating from Western coun-
ing onto tree branches, the committee decided to add the ingly it prefers to discredit tries.
 A6 | Tuesday, March 14, 2017
Manhattan Prosecutor’s Office in Limbo
Justice Department’s
firing of a key U.S.
attorney leaves long-
term course unclear
The sudden departure of
the top U.S. prosecutor in
Manhattan raises uncertainty
about the federal govern-
ment’s approach to trying fi-
By Nicole Hong,
Erica Orden
and Peter Nicholas
nancial crimes and global ter-
rorism cases, even as it isn’t
likely to change the course of
several high-profile investiga-
tions.
Preet Bharara was fired as
Manhattan U.S. attorney on
Saturday, a day after the Jus-
tice Department asked the 46
remaining U.S. attorneys ap-
pointed by former President
Barack Obama to step down.
While it isn’t unusual for a
new administration to fire
holdover U.S. attorneys, Mr.
Bharara’s refusal to resign is
extremely rare, and it was sur-
prising given that then-Presi-
dent-elect Donald Trump had
invited him to Trump Tower in
late November and asked him
to stay on as Manhattan U.S.
attorney, Mr. Bharara told re-
porters at the time.
The Manhattan U.S. attor-
ney has wide jurisdiction in
prosecuting financial crimes
Health Bill Puts Rural Areas at Risk GOP Attacks Office
BY ANNA WILDE MATHEWS
AND DANTE CHINNI
The House Republican ef-
fort to overhaul the Affordable
Care Act could hit many rural
areas particularly hard, ac-
cording to a new analysis,
sharply increasing the cost for
some residents buying their
own insurance.
In extreme cases, the
amount a consumer might owe
for a plan could exceed that
person’s annual income. In Ne-
braska’s Chase County, a 62-
year-old earning about $18,000
a year could pay nearly
$20,000 annually to get
health-insurance coverage un-
der the House GOP plan—com-
pared with about $760 that
person would owe toward pre-
miums under the ACA, an anal-
ysis by Oliver Wyman showed.
The consulting firm, a unit
of Marsh & McLennan Cos. is
the first to project what con-
sumers could have to pay to
get health plans under the
House’s blueprint. The analysis
looked at the cost of a bench-
mark plan at the “silver” level
under both setups.
Among people who cur-
rently have ACA benchmark
plans, Oliver Wyman found
those who are older and have
lower incomes would generally
see their costs for similar cov-
erage increase the most under
the House bill. Some with
higher wages, and certain
younger consumers, would
likely do better under the new
regime. Both urban and rural
35-year-olds making about
$54,000 a year could on aver-
age save roughly $3,000 annu-
ally, the analysis showed.
In 2020, the House legisla-
tion would completely revamp
the federal subsidies that cur-
RYAN HERMENS/ASSOCIATED PRESS
Under the House plan, low-income residents in parts of the country would face yearly premiums that exceed their annual income.
and other white-collar cases,
and prosecutors in that office
have been particularly aggres-
sive in charging and arresting
people outside the U.S. for
federal crimes like terrorism,
sanctions violations and cy-
bercrime. Mr. Bharara, who
had served in the role since
2009, had become prominent
with a string of insider-trad-
ing and public-corruption in-
vestigations.
Mr. Trump had tried to
phone Mr. Bharara on Thurs-
day—two days before the fir-
ing—to thank him for his ser-
vice and “to wish him luck,” a
White House aide said Sunday.
After receiving the message
that Mr. Trump was trying to
reach him, Mr. Bharara called
Joseph “Jody” Hunt, chief of
staff to Attorney General Jeff
Sessions, to say it was inap-
propriate for the president to
be contacting U.S. attorneys,
“particularly ones that have
jurisdictions over important
matters,” according to a per-
son familiar with the call.
Mr. Hunt agreed it was in-
appropriate, and Mr. Bharara
suggested that Mr. Hunt con-
vey that information immedi-
ately to Mr. Sessions, the per-
son familiar said. A trict of New York, including
spokeswoman for the Justice
Department declined to com-
ment on the call.
The White House appears
to be unhappy with Mr. Bhar-
ara’s handling of the situation.
In reference to Mr. Bharara’s
Regional Divide
The Republican health bill could raise costs for some who buy their
own insurance, particularly those who are rural, older and have lower
incomes; others stand to benefit.
Change in what consumers would pay toward premiums in rural
and urban areas, by age and income level
Age 35
$18,000 per year
Urban +$1,095
Rural +$1,576
$36,000 per year
–$1,760
–$1,282
$54,000 per year
–$2,992
–$3,107
Note: Analysis reflects cost of a benchmark ‘silver’ individual plan in 2020, comparing amounts
under current rules or proposed Republican setup. Income levels approximate.
Source: Oliver Wyman
rently help lower-income peo-
ple afford insurance on the ex-
changes—replacing them with
flat-sum tax credits instead.
While the ACA subsidies are
pegged to a person’s income
and the costs of health plans
in the geographic area where
the recipient lives, the tax
credits are based on age, with
income limits.
The Oliver Wyman analysis
highlights how rural areas,
where individual insurance
premiums are often higher,
could see a major effect from
the shift to flat-sum tax cred-
its. Compounding that, rural
populations are often older
and poorer, so the proportion
of those doing worse under the
new setup may be higher.
U.S. NEWS
ouster, the White House aide
said: “The U.S. attorneys are
political appointees, and all 46
of the holdovers from the
Obama administration re-
ceived the same resignation
letter. It’s fair to say that 45 of
the 46 behaved in a manner
befitting the office.”
The aide added: “As much
as Preet wants everything to
be about Preet, everyone was
treated the same way.”
Mr. Bharara, in response to
the White House’s comments,
said: “It was my understand-
ing that the president himself
has said anonymous sources
are not to be believed.”
The firings don’t force
pending investigations across
the country to be put on hold,
as U.S. attorney’s offices have
career prosecutors who will
fill in until new ones are con-
firmed. In Manhattan, Mr.
Bharara’s departure is unlikely
to have a significant impact on
continuing probes, largely be-
cause the interim leader of the
office, Joon Kim, is a close
friend and longtime colleague
of Mr. Bharara.
Since 2013, Mr. Kim has
served in various leadership
roles within the Southern Dis-
most recently as deputy U.S.
attorney.
“We anticipate that the work
of the office will continue for
the foreseeable future with
minimal disruptions,” said a
lawyer within the Manhattan
Age 45 Age 62
+$1,588 +$6,954
+$2,291 +$9,075
–$1,267 +$4,099
–567 +$6,217
–$3,272 –$2,856
–$3,336 –$2,588
THE WALL STREET JOURNAL.
Of the 100 counties where a
62-year-old making three
times the federal poverty
level—generally around
$36,000—would see the big-
gest jump in annual costs for a
plan under the Republican
blueprint, 97 were rural. “It is
disproportionately affecting
the rural,” said Dianna Welch,
an actuary at Oliver Wyman.
The dynamic may present a
political challenge for Republi-
cans, because many rural re-
gions strongly supported Pres-
ident Donald Trump.
A Wall Street Journal analy-
sis of Oliver Wyman’s data
shows that 62-year-olds cur-
rently earning about $18,000 a
year would see a bump in an-
nual premiums of more than
Preet Bharara’s departure will be closely watched on Wall Street.
U.S. attorney’s office.
Most notably, Mr. Bharara
leaves behind his office’s year-
long probe into New York City
Mayor Bill de Blasio, a Demo-
crat, and his aides in connec-
tion with a corruption investi-
gation into the mayor’s
fundraising operations. That
probe has escalated in recent
weeks, with federal prosecu-
tors questioning both the
mayor and one of his top
aides, according to people fa-
miliar with the matter.
The mayor has said he and
his allies have done nothing
$10,000 in 41% of counties won
by Mr. Trump last November,
and in 28% of counties won by
Hillary Clinton.
Kevin Brady, the Texas Re-
publican who chairs the House
Ways and Means Committee,
said the analysis didn’t reflect
all aspects of the House bill.
“Our legislation eliminates the
red tape, taxes, and mandates
that have led to sky high pre-
miums and a collapsing health
care marketplace,” he said in a
statement.
Stephen Vasey, a retired
teacher living in Heber, Ariz.,
and his wife pay about $3,200
a year for their exchange plan,
and get a federal subsidy
worth more than $30,000 that
pays the rest of their premi-
ums. Under the Republican
proposal, a couple like them
would get a flat $8,000 a year
in tax credits, according to Oli-
ver Wyman. Mr. Vasey will be
eligible for Medicare before
2020, but his wife is younger.
“It would be a stretch,” says
Mr. Vasey.
The Oliver Wyman analysis,
which used data from states
and the federal Department of
Health and Human Services,
projected the cost of a bench-
mark plan at the “silver” level
in 2020 in each county in the
U.S. It compared the amounts
that consumers at different
income levels and ages would
pay for those plans, after any
federal subsidy they would re-
ceive under the current ACA
regime or the tax credit envi-
sioned in the Republican bill.
It didn’t include the impact of
some other provisions in the
bill, including ending enforce-
ment of the ACA’s coverage
mandate and a new penalty
for people who have a gap in
coverage.
THE WALL STREET JOURNAL.
criticized for not holding indi-
vidual executives accountable
for actions related to the fi-
nancial crisis.
Mr. Bharara’s departure will
be closely watched in financial
circles because he oversaw the
increased use of wiretaps and
confidential informants in
white-collar cases—basically
treating them no differently
than drug cases. This was a
successful but controversial
approach, and it is unclear
whether his successor would
employ similar tactics amid
pressure by some defense law-
DREW ANGERER/GETTY IMAGES
yers and others.
Spokespeople for the Jus-
tice Department and the White
House declined to comment on
when Mr. Trump would name
a permanent successor to Mr.
Bharara.
One person long seen in the
New York City legal commu-
nity as a possible successor to
wrong and have followed the Mr. Bharara under a Trump
law. administration is Marc Mu-
It is also unclear whether kasey, a white-collar defense
the office’s pursuit of white- lawyer who works at Green-
collar crime, an enforcement berg Traurig LLP, the law firm
area where the Southern Dis- that also employs longtime
trict has been a pioneer since Trump adviser and former
the 1960s, might shift. Mr. New York City Mayor Rudy
Bharara’s office secured more Giuliani.
than 80 insider-trading con- Mr. Mukasey’s father is for-
victions in recent years, ex- mer U.S. Attorney General Mi-
posing webs of improper tips chael Mukasey, who sat near
and favors that reached across Mr. Sessions during his confir-
Wall Street to some of the mation hearing and testified
most successful and wealthy on his behalf.
hedge-fund managers. Along The younger Mr. Mukasey
the way, Mr. Bharara has been declined to comment.
‘Scoring’HealthPlan
BY JOSH ZUMBRUN A review from the Com-
AND BYRON TAU monwealth Fund, a nonparti-
san health-care foundation,
This week, the Congressio- found that the office initially
nal Budget Office will find it- overestimated by 30% the
self at the center of Washing- number of people who would
ton’s political storm over enroll in insurance through
health-care policy, and some the 2010 health law’s market-
Republicans anxious to dis- places, and underestimated
mantle the Affordable Care enrollment in Medicaid under
Act have taken preemptive the law by about 14%.
shots at the nonpartisan Though both misses are sig-
agency’s credibility. nificant, the Fund also con-
It is familiar terrain for the cluded that the CBO’s projec-
agency, and interviews with tions were closer to reality
former directors appointed by “than were those of many
both political parties and even other prominent forecasters.”
some of its critics in Congress The Commonwealth Fund
suggest the verbal assaults analysis cited delayed imple-
would do little to diminish the mentation of certain health-
office’s stature as the primary law provisions as one reason
scorekeeper of American fiscal for the misses.
policy. To Doug Elmendorf, who
As soon as Monday, served as CBO director from
the CBO could release its anal- 2009 to 2015, attacks on the
ysis of the latest House Re- agency are familiar and unal-
publican plan to replace for- arming.
mer President Barack Obama’s “I’m not saying I enjoyed
signature health law. The esti- being the brunt of criticism,
mate of the legislation’s costs but it’s standard at CBO,” Mr.
and effects on Americans’ Elmendorf said. “As long as
health-care coverage will come it’s confined to disagreement
at a crucial moment for the
bill, which late last week
passed through two key House
committees on party-line
The Congressional
votes. Budget Office is used
A CBO spokeswoman said,
“We are working very hard on
to critics challenging
the estimate and will publish its estimates.
it as soon as it has been com-
pleted.”
The particular estimates
that could be in focus this about particular estimates, I
week: CBO’s “scoring” of how think it’s OK. I would be more
many Americans stand to lose worried if there were a verbal
health insurance under the Re- assault on the structure of the
publican move to dismantle institution.”
the ACA. In a report last week, Earlier this year, former
the Brookings Institution stud- House Speaker Newt Gingrich
ied previous CBO evaluations said the office’s score of the
of health-care legislation and initial Affordable Care Act was
concluded the agency might “not just wrong, it was clearly
project that 15 million people corrupt.” He called on the of-
would lose insurance under fice to be abolished and re-
the new bill. placed with private forecasters
Ahead of that CBO “score” who would compete to score
of the bill, Republicans have legislation the most accu-
taken shots at the office, cit- rately.
ing what they say were inaccu- Other Republicans, even
rate estimates earlier this de- those critical of the previous
cade of how many people health-care scores, wouldn’t
would be covered under the go that far.
ACA. White House spokesman Rep. Mark Sanford (R., S.C.)
Sean Spicer last week said: “If said the CBO’s score of the
you’re looking to the CBO for ACA during the 2009-2010
accuracy, you’re looking in the health-care debate was “mag-
wrong place.” nificently off,” adding that the
On Sunday, Gary Cohn, di- office’s “numbers are atro-
rector of President Donald cious.”
Trump’s National Economic “That having been said,”
Council, said on Fox News that Mr. Sanford continued,
CBO health estimates have the CBO is “one of the only
“really been meaningless” in tools that we have for fiscal
the past. “They’ve said that restraint. The idea of discard-
many more people will be in- ing this notion of scoring, I
sured than are actually in- think, would be really harmful
sured.” to the taxpayer.”
On NBC Sunday, Health and The CBO has updated its es-
Human Services Secretary timates of the health law over
Tom Price said the CBO “has time, citing subsequent legal
been very adept in not provid- changes, economic develop-
ing appropriate coverage sta- ments and changes to the
tistics.” law’s implementation.
 THE WALL STREET JOURNAL.
Value of Doctors Ordering
Costly Tests Is Questioned
BY MELANIE EVANS
U.S. Medicare patients
whose doctors spent more on
tests, scans and consultations
were as likely to die within a
month of leaving the hospital
as patients with more parsi-
monious physicians, new re-
search shows.
Patients of high-spending
doctors were also as likely to
return to the hospital within a
month, according to the re-
sults, published by JAMA In-
ternal Medicine.
The results suggest high-
spending doctors could do less
without harming patients, the
researchers wrote.
“We all think we practice
medicine in a similar way be-
cause we all think we know
the right way to practice med-
icine,” said Ashish Jha, who is
one of the study’s authors and
a physician and health-care
quality researcher at Harvard
University.
Researchers examined phy-
sician-related spending—such
as fees for reading an X-ray or
examining a patient—for
nearly 22,000 physicians who
work exclusively in hospitals,
specialists known as hospital-
ists. The spending didn’t in-
clude hospital costs for pa-
tients’ visits.
Researchers analyzed about
485,000 hospital visits by
Medicare patients between
2011 and 2014. The study fac-
tored out other reasons spend-
ERIN HOOLEY/TRIBUNE NEWS SERVICE/ZUMA PRESS
Chicago Police Department members in November. The city, which has a near-record homicide rate, plans to add 1,000 police officers.
Police Overtime Is Getting a Closer Look
BY SCOTT CALVERT
Police overtime is coming
under scrutiny as cities’ costs
rise and understaffed depart-
ments demand more from
their officers, especially in
places like Baltimore and Chi-
cago that are battling near-re-
cord homicide rates.
Policing experts say some
overtime is always needed be-
cause crime is unpredictable,
and it can be cheaper than hir-
ing officers given the cost of
training and benefits. Some
departments also struggle
with retention and recruit-
ment, forcing them to rely on
officers to cover extra shifts.
“When you have crime
spikes, the quickest way to
deal with that is to throw
more cops at the problem,”
said Jim Bueermann, president
of the Police Foundation, a
law-enforcement think tank in
XI
Continued from page A1
Messrs. Trump and Xi.
China has been pushing for
a presidential meeting for sev-
eral weeks in the hope that it
would set the bilateral rela-
tionship on a fresh, more sta-
ble, footing following Mr.
Trump’s repeated public re-
marks indicating a harder line
toward Beijing than his prede-
cessor, diplomats say.
China’s foreign ministry
didn’t respond to a request to
comment, but it has said re-
peatedly that it is in regular
A study analyzed 485,000 hospital visits by Medicare patients.
ing may vary, including the
potential that some doctors
treat more complex, acutely ill
patients.
Hospitalists who spent the
most on patients spent $1,055,
on average, or 40% more than
those who spent the least. No-
tably, the research found wide
variation in spending by hos-
pitalists who worked in the
same hospital.
The gap between high- and
low-spending doctors in the
same hospital was larger than
the gap in spending between
hospitals.
That could be an important
finding in the effort to slow
the nation’s fast-rising health-
care costs, said researchers
not involved in the study.
“Two doctors in the same
Washington. “The way you in-
stantly get cops on the street
when you don’t have them is
through overtime, which is go-
ing to be expensive.”
Ron DeLord, a Texas lawyer
who helps police unions nego-
tiate labor contracts, said ris-
ing overtime levels are di-
rectly related to understaffed
departments, adding it isn’t
surprising some officers often
volunteer for overtime when it
pays 50% more than their reg-
ular compensation.
Baltimore Mayor Catherine
Pugh has called for an audit of
police overtime in the wake of
a federal racketeering indict-
ment that alleged overtime
fraud by seven officers, as well
as robbery and extortion. Po-
lice overtime costs jumped
88% from 2013 to 2016, amid a
surge in violent crime and a
shortage of patrol officers.
The current fiscal year’s pro-
contact with the Trump ad-
ministration through various
channels.
Relations have stabilized
somewhat since the February
call between Messrs. Trump
Beijing remains wary about Trump’s plans,
especially on trade and the South China Sea.
and Xi, but Beijing remains
wary about his plans in other
areas, especially trade and the
South China Sea.
Mr. Trump has been critical
of China’s construction of
U.S. NEWS
Center in Springfield, Mass.,
who wasn’t involved in the
study. “It’s not just that you
can spend less and achieve the
same outcomes.”
Dr. Lagu’s work includes
finding ways Baystate Medical
Center and its doctors can
avoid unnecessary tests or
treatments, but she also cares
ANDREW HARRER/BLOOMBERG NEWS
for patients and understands
why some doctors may spend
more on patients’ care.
Doctors undergo different
training, she said. Some doc-
tors may be less experienced
and less confident. Others may
worry about an atypical symp-
tom and decide “I am going to
get that extra test because I
don’t want to miss a blood clot
hospital can look quite differ- in their lungs,” Dr. Lagu said.
ent in how their patients are More Medicare incentives,
treated,” said John Romley, a including some in the Afford-
senior fellow at the Leonard D. able Care Act, penalize hospi-
Schaeffer Center for Health tals with high spending and
Policy and Economics at the poor performance on quality
University of Southern Califor- measures. And in 2015, Con-
nia. “Those differences don’t gress introduced new incen-
translate into important qual- tives for doctors as part of a
ity gains. That fits squarely sweeping overhaul of Medi-
into this debate about what it care physician payment to
is we get for our money.” promote quality performance
The study didn’t identify and lower spending.
which medical services high- Despite the introduction of
spending doctors could safely new Medicare incentives for
cut back on, an area of ongo- doctors, “surprisingly little is
ing study as the nation’s known” about how “to effec-
health-care costs escalate. tively influence behavior so
“It’s a complex issue,” said that all doctors provide high-
Tara Lagu, an academic hospi- quality health care at low
talist and researcher at the costs,” said Yusuke Tsugawa, a
Center for Quality of Care Re- physician and lead author on
search at Baystate Medical the study.
jected $43.5 million overtime the hiring of new officers.
tab works out to roughly 1.7% of In Chicago, where shootings
the city’s $2.6 billion operating and homicides have surged since
budget and nearly 10% of over- last year, police union president
all police spending—“a large Dean Angelo Sr. said his mem-
chunk of money,” Ms. Pugh, a bers are paying a personal price
Democrat, said in an interview. because they are being asked to
Other police departments, work one of their two days off
including in Seattle and San each week. “They’re over-
Jose, Calif., have seen overtime worked,” he said. “They sacrifice
budgets as much as triple over time with their family to make
the past decade. And an outside ends meet and risk their lives on
report in 2015 found that Bos- one of their days off.” The city
ton’s police overtime budget has announced plans to add
had grown despite higher staff- 1,000 police officers.
ing, with few internal controls. Unprecedented officer vacan-
Boston City Councilor Tim- cies have fueled rising overtime
othy McCarthy said he worries in San Jose. An audit released
that overtime, whether volun- last fall found overtime levels
tary or mandatory stints, more than tripled in the previ-
takes a toll on officers, who ous seven years and that such
are permitted to work as many payments peaked last fiscal
as 90 hours a week. “It has to year at $36 million, about 10%
be wearing on their psyche,” of department expenses. Budget
he said in an interview. He
wants the department to boost
constraints and other factors
drove attrition and hurt recruit-
wellness spending and step up ment, a city spokesman said.
seven artificial islands in the
South China Sea, and Mr. Til-
China—and to label Beijing a
currency manipulator.
lerson suggested in a confir- China’s top diplomat, State
mation hearing that the U.S. Councilor Yang Jiechi, visited
should block Beijing’s access Washington in late February
to those facilities. to discuss those and other is-
sues and to prepare the
ground for a Xi-Trump meet-
ing, according to diplomats
and others briefed on the visit.
One official close to China’s
Commerce Ministry said that
trade would be a big part of a
Xi-Trump meeting and that
Beijing is also concerned China wanted a more “stable”
about the prospects of a trade relationship ahead of a Com-
war, based on the Trump munist Party leadership shake-
team’s pledges to eliminate up due this autumn.
the $500 billion U.S. trade def- —Carol E. Lee
icit—the bulk of it with contributed to this article.
Tuesday, March 14, 2017 | A7
Paying for Performance
Since 2011, when Tennessee started basing state-college funding
entirely on outcomes like graduation rates and credits earned, some
schools have seen a big jump in funding for operations while others
have lagged behind.
50%
40
30
20
10
0 University
–10
FY 2011 ’12 ’13 ’14 ’15
Notes: Operating funds don’t include salary, health insurance, retirement funds or
changes due to the removal of the hold harmless provision. 2018 is based on governor’s
budget recommendation.
Source: Tennessee Higher Education Commission
States Challenge
Public Universities
Over Funding
BY MELISSA KORN
Taking a page from cash-
strapped parents, states in-
creasingly are telling their pub-
lic universities to prove they
are worth the investment.
Kentucky lawmakers on
Tuesday are expected to ap-
prove a new formula that ties
a significant portion of the
state’s roughly $1 billion in pub-
lic higher-education funding
to student outcomes, like earn-
ing certificates and degrees.
Arkansas Gov. Asa Hutchin-
son, a Republican, last month
signed into law a funding model
that, over a few years, will in-
crease the pot of money and
begin judging schools against
their own baseline figures for
keeping students on track to-
ward on-time graduation.
And Republican Wisconsin
Gov. Scott Walker has recom-
mended expanding its model,
already in use at the state’s
technical colleges, to four-year
public universities.
At least 33 states now use
performance-based funding, ac-
cording to the National Confer-
ence of State Legislatures,
meaning they divvy up appro-
priations in part by looking at
outcomes that might include
graduation rates, debt loads or
U.S. WATCH
CONFERENCE BOARD
Employment-Trends
Index Increases
A basket of U.S. employment
indicators climbed in February
following a slight reversal in the
prior month, indicating nascent
business confidence has carried
into hiring.
The Conference Board said
Monday its employment trends
index grew 1.1% last month to
131.39. From a year earlier, the
gauge is up 3.1%. The January
number had been revised down-
ward to 129.91 from 130.04.
The board’s employment
trends index, which seeks to
show employment trends more
clearly by filtering out the volatil-
ity of monthly data, is an aggre-
gate of eight indicators, including
jobless claims, job-openings data
from the Bureau of Labor Statis-
tics and industrial production fig-
ures from the Federal Reserve.
—Ezequiel Minaya
NORTH DAKOTA
Tribes Ask Judge to
Stop Oil From Flowing
Sioux tribes suing to stop the
Dakota Access pipeline want a
federal judge to head off the im-
minent flow of oil. Judge James
BABY, IT’S COLD OUTSIDE
ICY CONDITIONS: A fountain at New York’s Bryant Park is covered in
ice on Monday. The Northeastern U.S. braced for what meteorologists
predict could be the worst winter storm of the season.
Austin Peay
State University
University of
Tennessee at
Chattanooga
Total Funding
Tennessee
Technological
Tennessee State
’16 ’17 ’18 University
THE WALL STREET JOURNAL.
graduates in high-demand
fields like engineering. Funds
tied to such outcomes range
from a few percent in Washing-
ton state to nearly the entire
pool in Tennessee.
Historically, states have
doled out funds based on enroll-
ment figures, or reissued dol-
lars just by looking at the prior
year’s allotment—which some
call the inertia model.
Now, the focus is on getting
students to graduate and land
jobs, not just getting them
into school.
“While there’s comfort” in
the old model, “there’s no
logic,” said Kentucky state Sen.
David Givens. The Republican
sponsored the bill now working
its way through Kentucky’s leg-
islature, which has backing
from the governor.
Critics say cutting funds
from schools where outcomes
aren’t already on the upswing
perpetuates a downward spiral
in performance, because it
may pull money from schools
that need it for more academic
advising and other support
services.
“There are winners and los-
ers, no doubt, in our model,”
said Russ Deaton, deputy exec-
utive director of the Tennessee
Higher Education Commission.
Boasberg last week rejected the
request of the Standing Rock and
Cheyenne River Sioux to stop
construction of the final segment
of the pipeline that would move
oil from North Dakota to Illinois.
Developer Energy Transfer Part-
ners says the pipeline could begin
operating this week.
Cheyenne River attorney Ni-
cole Ducheneaux appealed Judge
Boasberg’s ruling and asked the
judge to prevent oil from flowing
until the appeal is resolved.
Judge Boasberg has given ETP
and co-defendant Army Corps of
Engineers until Tuesday to file
responses.
—Associated Press
NEW YORK CITY
Push for More Firms
To Hire Summer Interns
New York City Mayor Bill de
Blasio wants more companies to
hire summer interns. The city
unveiled an ad campaign to spur
more companies to join “Ladders
for Leaders,” a program that
helped 1,538 high school and col-
lege students find paid intern-
ships last summer at 475 sites.
Some business leaders, however,
say it can be time-consuming to
supervise interns and find mean-
ingful tasks for them.
—Leslie Brody
TIMOTHY A. CLARY/AGENCE FRANCE-PRESSE/GETTY IMAGES
A8 | Tuesday, March 14, 2017
PENSION
Continued from Page One
35,000 pension-plan partici-
pants to the care of Prudential
Financial Inc.
William Nelson, who
worked as a mechanic for
Kimberly-Clark Corp. in Texas,
“didn’t like the idea whatso-
ever” when he learned in 2015
his former employer was mov-
ing responsibility for him and
21,000 other pensioners to
Prudential and Massachusetts
Mutual Life Insurance Co.
“I think if you make an
agreement, you shouldn’t back
out of it and put a third party
in there to do it,” said Mr. Nel-
son, 60 years old. Kimberly-
Clark declined to comment.
Among his concerns, Mr.
Nelson worried the insurance
companies might someday not
have the money to pay. More
recently, however, he said he
had a good experience with
Prudential’s call center and
now is more satisfied.
Prudential has emerged as
the leader in U.S. pension-risk
transfer. The insurance giant,
which traces its roots to the
Widows and Orphans Friendly
Society in 1873, has signed 10
jumbo deals through which it
has assumed nearly $45 bil-
lion of corporate pension obli-
gations, involving more than
320,000 people.
Other insurers pitching
pension-risk transfer include
MetLife and the U.S. unit of
British giant Legal & General.
Some smaller insurers have
gotten in on the action, team-
ing up to have sufficient capi-
tal to make credible bids. De-
spite the spread of 401(k)
plans, about 22,000 tradi-
tional plans sponsored by sin-
gle, private-sector employers
remain in the U.S., covering 30
million people.
Prudential, based in New-
ark, N.J., initially grew inter-
ested in this business in 2006.
It was a time when some em-
ployers were freezing tradi-
tional pension plans because
of costs and investment vola-
tility, while Congress was si-
multaneously debating an up-
date of pension law.
Phil Waldeck, a Prudential
executive and self-described
pension nerd, was glued to C-
Span the day Congress voted
to tighten rules for pension-
plan funding. In the details, he
saw opportunity.
His team built upon an ex-
isting, low-profile business
called pension closeouts, in
which insurers assumed the li-
abilities of organizations that
wanted to shut down their en-
tire pension plan. Prudential
had done one such deal in
1928 with the Cleveland Public
Library. It still sends checks to
two former librarians, aged
100 and 103.
In the closeout transac-
tions, a company paid an in-
surer cash to take over the en-
tire pension responsibility.
The closeouts typically in-
volved private companies or
organizations and involved lia-
bilities of no more than tens
of millions of dollars.
Hoping to do much larger
deals, Mr. Waldeck started
building a team of actuaries,
lawyers and investment pro-
fessionals. The larger transac-
tions would differ in some
ways. They generally would
ARMY
Continued from Page One
mind-set to fight tonight.”
On the menu for Poland:
austerity. “The standard of liv-
ing is Spartan—Spartan, plus
Wi-Fi,” Gen. Hodges told the
soldiers, to some chuckling.
The Army says the internet is
necessary for soldiers to keep
up with paperwork, to Skype
family members and to watch
Netflix.
Some soldiers plan to get
their fill before they leave
their German base for Poland.
“I am probably going to hit
the American Burger King on
post at least twice this week,”
says Sgt. Zackary Cowher, 27
years old. “And then I am go-
ing to get out to one of the
German Pizza Huts.”
Last year, the North Atlan-
tic Treaty Organization ap-
proved a deterrent force in Po-
land and the Baltic States to
counter Russia’s military
buildup. After a road march
through the Czech Republic
and Western Poland, the U.S.
Army’s contribution to the
NATO force will arrive at its
new position early next
month.
For much of the long wars
in Afghanistan and Iraq, the
Thomas Guarino, a 65-year-old former manager for Verizon in New England, is among retirees of
the company opposed to its transfer of pension responsibility to an insurance company.
involve only retirees, where li-
ability can be estimated with
greater precision, unlike pen-
sion closeouts, which include
active workers.
And employers, instead of
paying the insurance company
cash, would hand over assets
accumulated to back the pen-
sions, along with an amount
charged by the insurer for do-
ing the deal. In the biggest
deals, insurers typically would
isolate these assets in sepa-
rate accounts.
Mr. Waldeck anticipated
that growing numbers of
large, publicly traded compa-
nies would be interested, hav-
ing seen their pension-plan as-
sets crater when the tech-
stock bubble burst a few years
earlier.
While he was building his
team, the 2008 financial crisis
interfered. The stock plunge
left many corporate pension
plans with deep funding gaps.
The gaps widened further
when the crisis kicked off a
Federal Reserve campaign of
ultralow interest rates, which
required a recalculation of lia-
bilities. In industry lingo,
when interest rates are lower,
the present value of the
monthly payments owed in the
future is higher.
Prudential didn’t want to
take over any pension liabili-
ties that weren’t fully funded.
So, many companies inter-
ested in handing off obliga-
tions would first have to pour
more assets into their plans.
Employers fretted about
how shareholders would react
to the costs involved. An em-
ployer doing a pension-risk
transfer would have to hand
over not only assets backing
the obligations, but also a sub-
stantial additional amount as
the insurer’s price, typically a
mid-single-digit percentage of
the liabilities.
Among employers, “no one
wanted to be the first ele-
phant through the door, be-
cause you didn’t know if you
were going to be shot by your
shareholders at the other
side,” said Michael Moloney, a
partner with Oliver Wyman, a
consultancy that advises on
large pension transactions.
Despite the hurdles, GM
and Prudential agreed on a
pension-risk deal in 2012 in
which the car maker provided
Army fought out of forward
operating bases. The military
called them FOBs, and soldiers
who rarely left those bases
were called Fobbits, especially
by Marines who often lived in
more rugged conditions.
In 2010, when Gen. Stanley
McChrystal was the top com-
mander in Afghanistan, he or-
dered the closing
of Burger King at bases in that
country to put the military
more on a war footing.
The ban lasted about a year.
After Gen. McChrystal was
forced to resign after his staff
was quoted anonymously
speaking derisively about the
Obama administration, his re-
placement, Gen. David Petra-
eus, decided an Army moves
on its stomach. He brought
back Burger King.
The U.S. military can send
expeditionary fast-food res-
taurants nearly anywhere in
the world.
In Poland, the military will
send toiletries and snacks, but
no Whoppers, says Command
Sgt. Maj. Muhlenbeck. Meals
will be taken at a Polish mess
hall. Too many amenities, he
says, risk creating divisions
between those on the front
lines and those in bigger
bases.
“You see how it starts erod-
ing the fiber of teamwork,” he
IN DEPTH
Peripatetic Pensions
In a growing business called pension-risk transfer, insurance companies
take over responsibility for pensions from employers.
Employer considering a deal gives insurers
demographic data on pension recipients.
ER
OY
PL
EM
Employer
Insurers submit deal prices;
employer chooses a bid.
Employer transfers both
pension responsibility and
assets to insurer.
ER
EM
PL
OY
Sources: Industry analysis (transfers); Edward Boatman, Noun Project (ties);
Gregor Cresnar, Noun Project (piggy bank); Icon Island, Noun Project (index);
Gilberg Bages, Noun Project (bidders)
Pension Push
Volume of deals in which insurers take on other companies’
pension obligations
$20 billion
15
10
5
0 ation,” Thomas Guarino, a 65-
2013 ’14
Sources: Limra Secure Retirement
Institute (2013-16); Mercer (2017 estimate)
Prudential with a total of
$25.1 billion for a “group an-
nuity,” as the deals are techni-
cally called, according to a GM
regulatory filing. Prudential
received fixed-income securi-
ties as payment.
The transaction was part
of a broader set of changes to
says. “Soldiers at outposts
start thinking those guys have
all that stuff and we don’t.
You actually start seeing a
level of animosity between
traditional combat arms sol-
diers and soldiers who have
more of the sustainment
duty.”
Further complicating the
culinary dynamic, U.S. troops
will be working alongside Brit-
ish, Croatian and Romanian
forces and under the supervi-
sion of a Polish brigade.
Gen. Hodges wants to inte-
U.S. soldiers lined up to order from a Burger King at Camp Liberty in Baghdad, Iraq, in 2005.
Insurers
If asked by insurer, employer
adjusts mix of assets
backing pensions.
Henceforth, insurer sends
pensioners their monthly
checks.
Nigel Chiwaya/THE WALL STREET JOURNAL.
Estimate:
$14–$16B
’15 ’16
THE WALL STREET JOURNAL.
GM’s pension plan, and the
company has told analysts its
net cost was around 107% of
the obligations it shed. At that
percentage, the math suggests
GM would have paid Pruden-
tial more than $1.6 billion
above its liabilities. GM de-
clined to provide a specific
grate the Americans with their
allies to create a seamless
fighting force—the most im-
portant reason, he thinks, to
keep Burger King out. “We are
not going to have an American
ghetto inside a Polish garri-
son,” he says. “That defeats
the whole purpose of being
with our allies.”
The Wi-Fi exception to the
Spartan ethic, he says, is a
bow to the modern world. Sol-
diers need access to the inter-
net to complete training,
check their pay, complete vari-
THE WALL STREET JOURNAL.
figure.
Prudential earns interest on
the bonds it takes possession
of, using the interest and
ident Edward Fowler, an 80-
year-old who retired as a
manager at a Verizon prede-
cessor company.
eventually the principal to pay “Who’s in worse shape,
pension checks. For additional Prudential or the federal gov-
profit, it sometimes trades out ernment?” Mr. Fowler said he
of bonds received from an em- asked other retirees at their
ployer and invests in similar- coffee klatch in Gardnerville,
quality but higher-yielding Nev. He said he was “more
loans that Prudential’s invest- worried about our government
ment-management unit makes going bankrupt than Pruden-
directly to companies. tial.”
If retirees live far longer A judge in federal court in
than the insurer expected Dallas ruled in Verizon’s favor.
when doing the deal, it may The decision remains in effect
have to tap other financial after an appeal and further
LIBBY MARCH FOR THE WALL STREET JOURNAL
resources; if they live less proceedings, but plaintiffs
long, its profit may be have a pending petition seek-
greater. ing Supreme Court review. Ve-
State regulators require in- rizon said it acted properly.
surers to set aside capital to For Prudential, an impor-
back the transactions in case tant step in developing large
their estimates are way off, pension-risk transactions was
usually cushions of 5% to 10% figuring out how to transfer
of a pension-risk deal’s size. thousands of securities di-
Most of insurers’ profit is rectly from employer pension
expected to come from negoti- plans, rather than receiving
ating deal prices large enough cash. A transfer would cut
to cover future monthly trading costs and the risk of
checks and leave a tidy sum bond prices changing radically
for the insurer once those ob- as the insurer poured hun-
ligations have been fulfilled. dreds of millions of dollars
Counting this, the bond inter- into the market.
est and its efforts to trade Employers that transfer
into higher-yielding loans, pension risk often must first
Prudential aims to earn a 12% adjust their mix of assets
to 13% long-term return on the backing the obligations. For
capital tied up in pension-risk employers, asset mixes often
deals, it has told investors. include stocks, but insurers
The deal Prudential did generally want only bonds.
with GM didn’t relieve the And just the right bonds. In
auto maker of all of its pen- the 2012 GM deal, the auto
sion liability, by any means. At maker spent months rejigger-
the time, this totaled $134 bil- ing its fixed-income portfolio
lion, counting active workers, to match credit ratings, indus-
in the U.S. and abroad. Still, a
GM executive said on an in-
vestor call, the transaction let
GM chip away at its image as
The movement is
“a very large pension plan expected to transform
with a car company attached.”
When giant risk transfers
the management of
such as this one first took off pensions.
in 2012, some workers re-
sisted. Verizon’s $8.4 billion
agreement with Prudential
that year ran into legal chal- tries, maturities and other
lenges—claims of harm both particulars specified by Pru-
from some of the retirees be- dential.
ing transferred and from some Employers that transfer
of those whose pension obli- pension risk to insurers in-
gations stayed with Verizon. creasingly involve two of
A retiree representing them, in part to ease retiree
those whose obligations worry of an insurance-com-
stayed at Verizon said the pany failure. A U.S. unit of
company had harmed them by Royal Philips of the Nether-
paying the entire deal price, lands used three.
including the amount for Pru- To price their bids, insurers
dential’s potential profit, out ask for demographic data on
of pension-plan assets. the retirees. They want birth
The plaintiffs suing on be- dates, genders, ZIP Codes and
half of the 41,000 transferred kind of work performed, on a
pensioners said they were names-withheld basis.
harmed because they no lon- Insurers must beware of
ger had protection from the longevity miscalculations, said
Pension Benefit Guaranty Scott Robinson, a manager at
Corp. In pension-risk deals, Moody’s Investors Service.
this federal backstop is re- “Retirees living longer than an
placed by state-based associa- insurer assumes in pricing can
tions funded by the insurance eat into expected returns and
industry, which offer varying even cause big losses.”
levels of protection. Between 1970 and 2015, the
“These pension deals are average U.S. male’s remaining
beautiful for insurance compa- life expectancy at 65 increased
nies, but they’re asking us to to 21.7 years from 15.7 years,
take on additional risk with no according to the Society of Ac-
compensation, no consider- tuaries.
Prudential limits its expo-
’17 year-old former manager for sure to life-extending ad-
Verizon in New England, said vances by focusing on retirees
in an interview. rather than active workers.
Citing the switch in safety The average age of those in its
nets, Mr. Guarino said “some deals is about 72.
kind of bonus” ought to be “A cure for cancer is a po-
paid to transferred pensioners tential shock to our longevity
to make up for the risk, espe- modeling but…has a smaller
cially in light of big problems impact than one might expect”
some insurers had during the on older people, said Mr. Wal-
2008 financial crisis. deck. “It takes time for medi-
The loss of a federal back- cal advances” to filter through
stop didn’t bother Nevada res- the health-care system.
ous Army requirements—and
to play games on their lap-
tops.
Still, Russia has some of the
for the U.S. Army Europe.
“This is not just about the mil-
itary networks, but the Wi-Fi
sites as well. There are risks.
most adept hackers on the We are in a contested environ-
planet. Military officials say ment, so we have to make sure
they expect Moscow to try to we act properly and protect
break into any vaguely mili- ourselves. “
tary network, even if it is used Soldiers can look forward
just for streaming movies. to one other exception to the
They are warning troops to be Spartan barracks conditions in
very careful how they use Wi- Poland.
Fi. In Iraq and Afghanistan, the
“It gets back to vigilance,” military’s “General Order
says Col. William Holt, who Number 1” has banned alcohol
helps oversee cybersecurity at U.S. military bases
there. European forces gener-
ally don’t follow that rule. The
French army in Afghanistan
had wine in their field rations.
The Polish army in Iraq would
put on feasts with alcoholic
beverages available for visit-
ing general officers.
Given the mix of soldiers in
the NATO deployment, enforc-
ing an alcohol ban would be a
failing enterprise, American
officers say.
CHRIS TOMLINSON/ASSOCIATED PRESS
“It will be impossible in
this environment, and I be-
lieve not necessary, to have a
general order number one
banning alcohol,” Gen. Hodges
told the 2nd Cavalry Regi-
ment. “I am sure we will have
one or two knuckleheads that
will do something stupid, but
first sergeants know how to
deal with this.”
 THE WALL STREET JOURNAL. Tuesday, March 14, 2017 | A9

LIFE&ARTS
BONDS: ON RELATIONSHIPS | Elizabeth Bernstein

You’re Not Busy, You’re Just Rude

Many people hear ‘I’m busy’ as bragging or as a cover for avoiding them; be specific about what is taking up your time
I RECENTLY ASKED a friend I ha-
ven’t seen in months if she wanted
to get together and catch up. I en-
visioned us gabbing over cocktails
at the new Vietnamese restaurant
in our neighborhood. Or maybe I
could fix her dinner.
Her reply: “Sure. Why don’t you
stop by for 45 minutes to an hour
on Monday night around 8:30.”
Gee, thanks. But are you sure
you can spare the time?
Yes, we’re legitimately busy. We
work more than ever—many of us
when we’re not even in the office.
We’re involved parents. Technol-
ogy soaks up much of the rest of
our time. Research even shows we
have an idleness aversion—people
who are busy are happier than
people who are idle, even when
they were forced to be busy.

Most of us aren't too

busy to make time for
our loved ones, to return
a text or a phone call.

Here’s the problem: Most of us

aren't too busy to make time for

ILLUSTRATION BY THOMAS PITILLI

our loved ones—to return a text or
phone call or free up time for sat-
isfying chat. And yet that is the
impression we’re giving. When we
tell someone we’re too busy to
give them more than a few mo-
ments of our attention—too busy
for a call or a meal or a visit—
what they hear is this: “I am too
busy for you. You don’t matter
enough to me.”
The statement “I’m busy” has
long been a code—for “I’m feeling
overwhelmed” or “life is chaotic.”
Our culture discourages people, es-
pecially men, from unloading their
mood or troubles on others, so we
claim to be busy to avoid a discus-
sion. When I asked my friend who
barely had an hour to spare what
was going on, she explained that
she felt guilty about taking more
time away from her children, given
her looming work deadline and up-
coming business trip.
But, now we’re busy bragging
about being busy—in conversa-
tions, texts and emails, Twitter
handles, such as “Busy Mom,” and
Facebook posts, such as “After be-
ing super busy all day this beauti-
ful sunset slowed me down.” In
yet-unpublished research, Ann
Burnett, a professor of communi-
cation at North Dakota State, ana-
lyzed 50 family holiday letters
written from 2000 to 2016—the
ones people send out at the end of
the year—and found that bragging
about busyness was the second
most-common type of brag. “Once
again, this year has been busier
than ever,” was a typical state-
ment. People bragged about being
busy even more than they bragged
about their achievements. (The
most-common type of brag in the
letters was pride of ownership:
“We have a new granddaughter.
She’s adorable and a good
sleeper.”)
Why are we so proud of being
busy? We think people will think
that we’re successful and important
and interesting. And we’re right:
Studies by researchers from Colum-
bia Business School, Georgetown
University and Harvard Business
School, featured in the Harvard
Business Review in December, 2016,
found that busier people are per-
ceived as having a high status. “We
place a high value on hard work
and rewarding effort, which is re-
ally rewarding activity and not nec-
essarily achievement,” says Woody
Woodward, an organizational psy-
chologist in New York City.
We also use busy as an excuse
when we drop the ball or simply
don’t want to be bothered. This
became perfectly clear to me re-
cently when I told my niece, So-
phia, I missed her and asked why
she hadn’t called me for a week—
we typically talk every day—and
she responded with a flip (you
guessed it): “I was busy.” She’s
five.
So what do we do?
Banish the word. “Never use
‘busy’ as a positive,” says William
J. Doherty, a marriage and family
therapist and professor of family
social science at the University of
Minnesota. It has taken on a con-
notation of virtue, and that is false
and misleading, he says.
Instead, be specific. When peo-
ple ask how you are, be more ex-
act: “My life is intense.” “I am a
little behind.” “I’m feeling frus-
trated at the moment.”
If you’re overwhelmed, say so.
Explain if you’re not comfortable
talking about what’s going on in
your life.
Schedule less, knowing that
something will always pop up. Dr.
Doherty suggests pruning your
commitments to make time for
friends and family.
Drop the shame. We tend to be-
lieve that busy is the opposite of
lazy, which we see as bad. That is
a myth, says Dr. Burnett. “At the
end of your life, do you want your
tombstone to say: “He was busy”?
she says.
Write to Elizabeth Bernstein at
elizabeth.bernstein@wsj.com or
follow her on Facebook, Twitter
and Instagram at EbernsteinWSJ.

FLORENCE’S CATHEDRAL is among the city’s

art treasures at peril if there were a major
quake.

earthquake-resistant. Cecilie Hollberg, who

took over in December 2015 as the director
of the Galleria dell’Accademia, is skeptical of
the project, which still hasn’t begun. She
says, “If the statue stands up to the tremors
because of the plinth, what is the point if the
ceiling falls” on the David?
In December, the Opera di Santa Maria
del Fiore, the organization responsible for
maintaining the cathedral’s building com-
plex, held a one-day conference of experts
that concluded with a statement lamenting
“serious levels of uncertainty” over govern-
ment regulations and how they applied to
Italy’s monuments.
Among the participants was the opera’s
vice president, Francesco Gurrieri, who is
overseeing a “thorough checkup” of another
vulnerable structure: Giotto’s towering, slen-
der campanile, a bell tower that stands
ASSOCIATED PRESS

alongside the cathedral. “We don’t know for

certain the depth or shape of the founda-
tions,” says Mr. Gurrieri.
What is known is disquieting: An aquifer
runs just over 30 feet beneath the bell
tower. Mr. Gurrieri plans to use radar to
ART peer under the ground, using a technology
first developed in the Vietnam War to dis-

THE RISK OF A QUAKE IN FLORENCE

BY JOHN HOOPER
FLORENCE’S CATHEDRAL, with its im-
mense, octagonal dome designed by Filippo
Brunelleschi, is the great symbol of a city
filled to the brim with masterpieces. But how
safe are the artistic treasures of this Renais-
sance capital?
The past year has seen an upsurge of
seismic activity in central Italy. Last April, a
minor earthquake (3.6 on the Richter scale)
shook Florence forcefully enough to prompt
damage checks to buildings. The epicenter
was less than 25 miles away. Last August,
about 300 people died in an earthquake that
hit an area including the town of Amatrice,
less than 200 miles away. By January, there
had been more than 40,000 further tremors.
Such threats have always loomed over
Florence, which is close to the intensely
seismic Apennine mountains. On one side of
the cathedral, a foot-wide fissure runs
through the stonework. Experts disagree
about whether the cracks appeared natu-
rally as the building settled down, as a di-
rect result of a 1453 earthquake, or both.
But another severe earthquake could wreak
untold damage on the building.
The recent scares have stirred up debate
over how to protect Italy’s cultural heri-
tage. Italians still remember the quakes
that in 1997 demolished part of the basil-
ica in Assisi, 100 miles to the southeast.
They severely damaged several frescoes
about the life of St. Francis painted by
Giotto (1266-1337), who heralded the Re-
naissance, though they have since been
largely restored.
Experts cannot predict when the next
quake will strike Florence or how big it will
be. The city’s treasures include major muse-
ums including the Uffizi Gallery, the Pitti Pal-
ace, the Galleria dell’Accademia and the
Bargello, as well as the Basilica of Santa
Croce (which had a starring role in the movie
“A Room With a View”) and the Medici Cha-
pel. The city’s university is preparing a study
of which districts of the city are at greatest
risk.
The most fragile treasure of all is likely
Michelangelo’s 1504 “David,” in the Acca-
demia. Almost 17 feet high, weighing more
than 6 tons and carved from marble of poor
quality, the statue stood outdoors for more
than 350 years. In 2004, researchers found
cracks in the biblical hero’s left ankle. Some
fear that even a modest earthquake could
bring the most celebrated statue of the Re-
naissance crashing down.
Two years ago, Italy’s heritage minister
announced funding of more than $200,000
for a new statue base that would be more
cover Viet Cong foxholes. He expects to
complete the survey within a year.
For years, Fernando De Simone, an archi-
tect, has been campaigning for Florence to
build an anti-seismic museum to house its
cultural riches. Failing that, he argues, Da-
vid’s custodians should consider building a
steel shell into the walls of the spacious,
rounded alcove in which the statue is dis-
played.
Ms. Hollberg is skeptical of that idea too.
No one, she says, understands the complex-
ity of the situation. David may be the
world’s most admired statue, yet surpris-
ingly little is known about it. “No one can
even tell me if it is attached to its pedes-
tal,” she says. If the statue had to be lifted,
how could that be done safely? If work had
to be carried out in the alcove, could the
statue withstand the resulting vibration?
Ms. Hollberg has a “medium- to long-term
plan” to assemble an international group of
experts to advise her on how best to protect
Michelangelo’s towering masterpiece. “I have
the feeling a new expert is writing to me ev-
ery week,” she sighs.
A10 | Tuesday, March 14, 2017 * THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK Germany’s China Option
By Christoph M. Schmidt a position to shape a new world order in
What the Dutch Want And Jochen Andritzky free trade and investment with China in-

A
stead of the U.S.

W
ednesday’s election in the Nether- proved in the polls as he has co-opted some ngela Merkel is in Washington this A “China first, America second” trade
lands is about more than Geert of Mr. Wilders’s attitudes toward immigrant week to advocate on behalf of the policy for Europe would reflect the new
open-minded and open-market political reality in the U.S. and acknowl-
Wilders. The speculation about assimilation—such as his warning that immi-
economic policies of the European edge longer-term trends in EU-China
whether Mr. Wilders, an anti- grants should “behave nor- Union. When the German chancellor trade. In late February, the German Sta-
immigration firebrand, will Wednesday’s election mally or leave”—without Mr. meets with President Donald Trump, she tistical Office reported that in 2016
win a plurality in Parliament is about more than Wilders’s more outré presen- is expected to make a strong case China for the first time displaced Amer-
has obscured a deeper change tation. Mr. Rutte also won against his protectionist stance. The U.S. ica as Germany’s most important trading
in Dutch politics. the ‘rise of populism.’ points over the weekend for turning its back on free trade would hit partner.
For all the talk about a blocking Turkish officials the EU hard, and export-driven Germany Against this backdrop, the recent de-
populist revolt, the larger re- from participating in rallies even harder. mand by France, Germany and Italy that
ality is the stability of Dutch politics. The in Dutch cities in favor of Turkish strongman But the Trump administration— the EU ought to rethink its liberal rules
Dutch economy has weathered recent reces- Recep Tayyip Erdogan. whose officials have already sniped at on foreign direct investment into Europe
sions better than most, with a growth rate It’s better to read the decade-long popular- Germany for its hefty trade surplus— to stop “a possible sell-out of European
shouldn’t mistake Mrs. Merkel’s pursuit expertise” is totally misguided. It is, if
now at 2.5% year-on-year in the fourth quarter ity of Mr. Wilders and his party as a protest
of good economic relations as a sign of
and unemployment consistently low by Euro- against mainstream politicians who had be- desperation. As tumultuous as a disrup-
pean standards. come too consensus-driven. Dutch politics has tion of trans-Atlantic free trade may be, Trump shouldn’t mistake
The latest polls suggest Prime Minister grown more fragmented as the old triumvirate a protectionist America wouldn’t be the
Mark Rutte’s People’s Party for Freedom and of center-right, centrist and center-left parties end of all free trade. For Germany and Merkel’s advocacy of free
Democracy will remain the largest party in Par- has fallen apart in the past generation. As with the EU, there is always China. trade with America as
liament, though with fewer seats than it now the 5 Star Movement in Italy or Podemos in Dealing with China is far from a pana-
holds. Investors appear to be relaxed about the Spain, Mr. Wilders wins support from voters cea. European policy makers find Chi- a sign of desperation.
potential outcomes, although a large propor- for daring to say politically incorrect things nese President Xi Jinping as hard to pin
tion of voters remain undecided and this is an about anything—whether immigration, eco- down on economic policies as his new
era of political surprises. counterpart in Washington. Mr. Xi has anything, yet another reason for EU-
nomic policy or the euro.
been known to use nationalist dog-whis- China free trade and investment. Econo-
Mr. Wilders and his Party for Freedom es- Mr. Wilders’s outsize personality has drawn tles to stir up public suspicion of for- mies have derived tremendous benefit
pouse views on immigration and Islam that are most attention to fissures on the right, espe- eigners, to protect state-owned compa- from foreign investment in the past, and
calculated to inflame the country’s complacent cially on cultural issues. But the other story of nies, to back government intervention in ad hoc interventions to block takeovers
center—such as threats to ban mosques or the this election is the near-collapse of the Labor the stock market and to at least tolerate could damage the EU’s image as an at-
Quran. But his underlying theme that the Neth- Party, which isn’t hitting 15% in most polls. Its if not outright extend restrictions on tractive place to invest.
erlands should have a deeper sense of national base has rebelled against leaders who partici- foreign investment in China. A trade deal between the EU and
identity into which it expects immigrants to as- pated in Mr. Rutte’s welfare-reform agenda as But his recent pledge at his country’s China has enormous potential. Cutting
similate resonates broadly. part of his coalition government. Voters in- National People’s Congress that “China’s customs duties would boost trade. Bet-
Mr. Wilders isn’t outside the mainstream on stead are turning to far-left parties such as the open door will not close” echoed his turn ter access to China would open a huge
other issues in the campaign, such as social Greens and Socialists or urban-focused parties at the World Economic Forum in January new market for EU exporters in many in-
when he pledged to “remain committed dustries, such as electric mobility, where
spending. His support for an expansive welfare such as D66.
to developing global free trade and in- European firms currently face severe
state is in line with orthodox center-leftists, as That makes the Netherlands the latest ex- vestment.” Mr. Xi is pushing China to- market-access problems.
Leon de Winter writes nearby. Mr. Wilders also ample of a phenomenon that’s bigger than the ward a fundamental transition, reshaping Reciprocity in foreign direct invest-
has moderated his euroskeptic views in this “rise of populism.” Voters are demanding its economy from one driven by exports ment would allow European companies
campaign, apparently judging that voters greater choices and more fight from politi- to a more balanced model also driven by to own businesses in China—the compa-
aren’t focused on Brussels for now. cians. If mainstream parties feel harried by the domestic consumption. nies most likely to benefit from rising
Mr. Wilders and his party enjoy only about likes of Mr. Wilders, they might reflect that Mr. Xi’s ambition to move his country Chinese consumer demand. It would also
20% support and shrinking. This is a substan- they’ve taken too long to recognize that Eu- up the economic value chain, from “made restore fairness to European takeovers,
tial number of voters, but it is far from the ma- rope’s consensus-driven elitism has alienated in China” to “created in China,” requires as Chinese bidders would no longer be
jorities or near-majorities that delivered a growing number of citizens. Those voters sophisticated intermediate goods cur- the only ones able to price in the acqui-
Brexit, the election of Donald Trump or that welcome the debates that the Geert Wilderses rently only made abroad, and huge in- sition target’s entry into the Chinese
vestment in high-tech that only foreign market. It is often much easier for Euro-
say they support Marine Le Pen in France. stir up even if they don’t embrace their agen-
capital can provide. On top of that, pean companies to offer their goods and
As for Mr. Rutte, his fortunes have im- das in the ballot box. China’s growing middle class craves top services on the Chinese market if they
brands—usually foreign ones, too. are under Chinese ownership. The cur-

Russia’s Arms Treaty Violation China’s transition can only succeed if

Mr. Xi harnesses the potential of open
rent setting thus gives Chinese buyers a
potential edge in takeover battles. Hence

W
markets. The shift in the composition of free trade and investment need to go
hile the press corps chases accusa- grand bargain that President Trump contem- Chinese demand will lower overall im- hand in hand.
tions of Russian-Trump election col- plates with strongman Vladimir Putin. It also port volumes (consumer goods are less Closer trading and investment links
lusion and illegal Obama Administra- calls into question, again, the wisdom of arms- import-intensive) and hurt capital-goods with a country as dynamic as China
tion wiretaps, few noticed the control deals with adversaries exporters like Germany. promise to boost EU competitiveness and
Pentagon’s first public confir- The U.S. goes public that will inevitably cheat. The But it will also offer huge new oppor- innovation. This would give Europe the
tunities for China’s trading partners. chance to remain an economic force in
mation last week that the about Putin’s nuclear INF pact was the Ronald Rea- Should the U.S. retreat from global today’s globalized world. As the U.S. toys
Kremlin is violating the 1987 gan-Mikhail Gorbachev deal trade, Europe would be in a unique posi- with protectionism and China inches to-
Intermediate-Range Nuclear missile deployment. that removed midrange mis- tion to take advantage of China’s transi- ward a more active role in global eco-
Forces Treaty (INF). siles from Europe and suppos- tion by exporting capital and high-qual- nomic relations, today’s situation might
General Paul Selva, vice edly signaled a new era of good ity goods and services to China. With offer a historic opportunity for the EU.
chairman of the Joint Chiefs of Staff, told Con- relations. Mr. Putin has other ideas. the U.S. expected to withdraw from the
gress that Russia has deployed a land-based The Obama Administration complained pri- Transatlantic Trade and Investment Mr. Schmidt is chairman of the Ger-
cruise missile that violates the “spirit and in- vately about the Russian missile violation, but Partnership, Mrs. Merkel and other EU man Council of Economic Experts, where
tent” of that arms pact. “The system itself pres- President Obama declined to do anything about policy makers could find themselves in Mr. Andritzky is the secretary-general.
ents a risk to most of our facilities in Europe and it. Arms control rivals catastrophic climate
we believe that the Russians have deliberately change in the former President’s belief system.
deployed it in order to pose a threat to NATO and The Pentagon’s public declaration is a good sign
to facilities within the NATO area of responsibil- that perhaps the Trump Administration will take
Reviving the U.S. Democrats
ity,” General Selva told the House Armed Ser- a more skeptical view of parchment pledges By Roger C. Altman The problem is that the party has reg-
vices Committee. from authoritarian rulers who want to dominate

P
The public admission raises the stakes for any their neighbors. resident Trump’s chaotic begin-
ning has many Democrats envi-
sioning a big comeback. They see
We Shouldn’t Always Have Paris the marches and protests and presiden-
tial tweets and expect newly energized
ularly tried this in national elections,
and it never works. Ask Walter Mondale,
Michael Dukakis or even John Kerry. On
the other hand, Barack Obama and Bill
Clinton rejected that brand of populism
and each won two terms. Americans

P
resident Trump is expected as soon as deal. Greens are adept at finding judges to require Americans to vote blue in droves. But mostly care about well-paying jobs and
these hopes mask the decrepit state of economic security for their families.
this week to order the U.S. Environmen- environmental regulations that Congress never
the Democratic Party at all levels of gov- They want an economic agenda focused
tal Protection Agency to rescind its Clean intended. Such sympathetic judges today pack the ernment. A true Democratic comeback on growth, middle-class tax relief, infra-
Power rule that is blocked by D.C. Circuit Court of Appeals will be impossible without top-to-bot- structure, affordable education and pro-
the courts. But the President The case for pulling and include Supreme Court tom changes. tecting ObamaCare.
faces another test of political out of Obama’s Justice Anthony Kennedy, who The GOP is in one of its strongest po- Third, Democrats need a precise
fortitude on whether to with- in 2007 joined four liberals to sitions since its founding in 1854. Re- strategy for reversing the extreme ger-
draw the U.S. from the Paris global climate accord. redefine the Clean Air Act to publicans control the House, the Senate rymandering that the other side has im-
climate accord. cover carbon as a pollutant. and the presidency. But much of govern- plemented in Michigan, Ohio, Pennsylva-
That’s suddenly uncertain. Remaining in the Paris pact ing in America is done at the state and nia, Wisconsin, and elsewhere. David
Mr. Trump promised to withdraw during the will invite litigation to impose the Paris standards local levels, where education, infrastruc- Daley’s recent book on the topic exposes
presidential campaign, correctly arguing that and direct the EPA to impose drastic carbon cuts ture, voting and gun rights are primarily the dark but shrewd tactics Republicans
determined. There the GOP is even more used to achieve these perverse out-
the accord gave “foreign bureaucrats control that would hurt the U.S. economy. Energy compa- dominant. Republicans have 33 gover- comes. It also explains how difficult it
over how much energy we use.” His transition nies are aware of this threat, and despite Exxon’s norships and more than two-thirds of will be to win back state legislatures to
team even explored strategies for short-cutting recent pledge to pour $20 billion into Gulf Coast state legislative chambers. fix redistricting.
the cumbersome, four-year process of getting facilities, other companies remain wary of U.S. That the Democrats have allowed There’s a better approach. Since 2008
out of the deal. regulation. They will be warier if Mr. Trump looks this domination borders on gross negli- voters in California, Florida and Arizona
But the President’s is now getting resistance like he’s waffling on his climate positions. gence. Complacency was so deep, for have approved independent redistricting
from his daughter, Ivanka, and U.S. Secretary of Mr. Trump’s best bet is to exit the United Na- example, that most Democrats in Wash- commissions, taking authority away from
State Rex Tillerson, who are fretting about the tions Framework Convention on Climate Change, ington apparently either didn’t know or gerrymandered state legislatures. Demo-
diplomatic ramifications. No doubt many coun- which could be done in a year and would result didn’t care about the gerrymandering crats must fight to get such referendums
tries would object, and loudly, but this risk pales in a simultaneous withdrawal from Paris. That strategy Republicans perpetrated over on the ballot in other states. Borrowing a
the past eight years to gain long-term page from the Republican playbook, they
compared to the potential damage from staying would quickly end the litigation risk.
control of the House and key swing- need this effort to be run by people who
in the accord. Mr. Tillerson said at his confirmation hearing state legislatures. That’s why hearing aren’t employed by the Democratic Na-
President Obama committed as part of Paris that he believes the U.S. should remain in the some senior Democratic leaders dismiss tional Committee and aren’t based in
to cutting U.S. emissions by 26% compared with Paris pact to have a “seat at the table” for the cli- recent losses as a “messaging problem” Washington.
2005 levels by 2025. Even Mr. Obama’s climate mate debate. But the U.S. doesn’t need Paris to is disturbing. If the Democratic Party Finally, maneuvering for the 2020
regulatory programs—all imposed without Con- have a say in global energy policy. were a publicly held company, the man- Democratic presidential nomination has
gressional votes—would only achieve about half America has already done more to reduce CO2 agement and the board already would already begun, and Democrats should
that commitment. Mr. Trump is killing those emissions with its natural-gas fracking revolution have been dismissed. look to the states for their candidates.
Obama programs, which means the U.S. may not than has most of the world. Many of the Paris sign- The Democratic Party needs a house- Mr. Obama was the first sitting member
reach that Paris promise. Why stay in an agree- ers want to use the pact to diminish any U.S. fossil- cleaning. It will never get out of deep of Congress elected directly to the presi-
ment that the Trump Administration has no in- fuel production. Mr. Tillerson will also be on the minority status without it. In that spirit, dency since John F. Kennedy in 1960.
here are four reforms that would help Could Sen. Warren or Sen. Cory Booker
terest or plan for honoring? back foot in Paris discussions as he tries to over-
get the party back on its feet. win in 2020? Maybe, but the next Demo-
Another risk is that the U.S. might at some point come his past as an oil-company executive. First, the party needs new leadership. cratic president is probably in a gover-
be coerced into compliance. Mr. Obama joined the The best U.S. insurance against the risks of Younger, more diverse voices are needed nor’s mansion right now—not roaming
accord without congressional assent and endorsed climate change is to revive economic growth at the congressional and state levels. the halls of Congress.
the lengthy withdrawal process precisely to bind that will drive energy innovation and create the The giant Republican gains largely oc- Many Democrats seem to think that
future Administrations to his climate priorities. wealth to cope with any future damage—if that curred under the noses of most of the big change isn’t necessary. They expect
Since Mr. Trump’s election, the international cli- day arrives. current party leadership. It’s time for the Trump administration to self-de-
mate lobbies have debated ways to muscle the new Policy details aside, the worst part of Mr. new faces. struct, making a return to power easy.
Administration to comply. Obama’s climate agenda was its lack of demo- Second, the party needs an overarch- Or they believe that a couple of adjust-
These include imposing punitive tariffs on cratic consent. He failed to persuade either a Re- ing economic message that resonates ments to their 2016 messaging and
beyond campuses and the coasts—some- strategy are all that’s needed. This is de-
U.S. goods or requiring the U.S. to hit targets in publican or Democratic Congress to pass his reg-
thing it lacked in 2016. Right now, lots of lusional. The Democratic Party needs
return for other international cooperation. Mr. ulation and taxes. So he attempted to impose Democrats want to move left on eco- new faces and a whole new direction.
Tillerson might consider that Paris will be used that agenda at home through the EPA and nomics, to embrace the Bernie Sanders-
as leverage against him in future international abroad via Paris to use international pressure Elizabeth Warren thesis that the econ- Mr. Altman, a former deputy Trea-
negotiations. against U.S. olitical resistance. One certainty: omy is rigged, that large employers are sury secretary and founder and senior
U.S. lawyers and environmental groups are The diplomats at Turtle Bay and in Brussels the enemy, and that Americans need chairman of Evercore, has worked on
also exploring how to use lawsuits to enforce the didn’t vote for Donald Trump. more government. nine Democratic presidential campaigns.
THE WALL STREET JOURNAL.
Immigration, Welfare and the Nervous Dutch
By Leon de Winter
T
o hear the international
media tell it, my country
has changed from one of
the most tolerant, affluent
and easygoing nations on
the planet into a zoo of xenophobes
and racists—all because a politician
with unusual hair has been saying
politically incorrect things.
The Netherlands will vote
Wednesday in elections for the
Tweede Kamer, Parliament’s lower
house. Twenty-eight parties are
competing for 150 seats. Any of
the established parties could find
a niche within America’s Demo-
cratic Party; they all are basically
social democrats.
Voters aren’t racists, but
they want immigration
that’s compatible with the
social spending they crave.
That includes the conservatives
and the so-called extreme right-
wing Freedom Party, led by Geert
Wilders, the man with the unusual
hair. Mr. Wilders is harshly critical
of Islam and the country’s immi-
gration policies, but his social
agenda is as left-wing as the So-
cialist Party’s.
The Netherlands has changed, but
it has been a decades-long process.
In the 1960s and ’70s, the Dutch in-
vited guest laborers from Morocco
and Turkey to work temporarily in
the wildly expanding economy. The
The Economic Winds Are at Europe’s Back
By Ruchir Sharma
E
urope’s annual crisis may
come earlier than usual this
year, experts suggest. Every-
one is eyeing Wednesday’s election
in the Netherlands, fearing a popu-
list revolt. Shortly thereafter
comes the French presidential elec-
tion, raising the specter of a vic-
tory by the nationalist Marine Le
Pen—and then France’s exit from
the European Union. If Frexit fol-
lows Brexit, some fear it will put
paid to the project of uniting Eu-
rope and shock the Continent’s
long-sputtering economy.
Gloomy projections for Europe re-
flect a classic forecasting mistake,
which is to extrapolate from recent
trends and miss the big shifts. Pre-
dictions of an impending takeover
by destabilizing populists overstate
their momentum. Suggestions of the
economic trouble misread the prob-
abilities: Europe has already experi-
enced two recessions in the past
eight years, and it would be unlikely
for lightning to strike thrice at the
same spot.
Start with the political argument.
Yes, right-wing populism is on the
rise. Yet in every major country
holding elections this year—includ-
ing the Netherlands, France and Ger-
many—populists are reaching the
By Sadanand Dhume
N
New Delhi
o state impacts Indian poli-
tics as deeply as Uttar
Pradesh, home to 200 mil-
lion people, or about one-sixth of
the country’s population. By win-
ning the state in a blowout Satur-
day, Narendra Modi has reaffirmed
his position as India’s most domi-
nant politician in a generation and
established himself as a firm favor-
ite for re-election as prime minister
in two years.
The results from assembly elec-
tions in Uttar Pradesh and four
smaller states also mark a remak-
ing of India’s political landscape. In
Uttarakhand, also in the populous
Hindi heartland, Mr. Modi’s
Bharatiya Janata Party scored an-
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boom ended, but the workers
stayed, creating an underclass of
low-skilled Muslim immigrants.
Photos of the original laborers
show young men in suits and dress
shirts—completely Westernized, it
seems. Now retired, they often dress
as if they had moved back to rural
Morocco or Turkey. Their children
and grandchildren drop out of
school and commit crimes at much
higher rates than the original Dutch
population. Many become more reli-
gious than their grandparents; some
even move to the Islamic State ca-
liphate in Syria.
Non-Western immigrants and
their descendants also depend on
welfare to a much greater extent
than the native Dutch. They are half
of all welfare recipients but only 11%
of the total population. Among re-
cent Somali refugees granted asy-
lum, 80% are on welfare.
Holland is truly a welfare state,
and the Dutch are proud of it. More
than half of their total earnings are
collected by the state, the goal being
to redistribute wealth and equalize
chances for everyone.
It works amazingly well, produc-
ing highways, railroads, dikes and
bridges, world-class schools and
health care, and a cradle-to-grave so-
cial-security system. Most political
discussions in today’s campaign are
about the pressing question of how
to preserve and expand the welfare
state without going broke.
The Dutch are disciplined, hard-
working, well-educated, and at the
same time open-minded, tolerant and
antiauthoritarian—all of this because
of our Calvinist heritage. We are also
the most secular people in the world.
limits of their appeal. Their parties
still lack the critical mass necessary
to obtain governing majorities.
This is by design. Most postwar
European constitutions created
multiparty systems, in part to block
extremists. In the Netherlands, the
far-right Dutch Freedom Party, led
by Geert Wilders, could win a plural-
ity of seats in Parliament. But main-
stream parties will probably block it
from forming or even joining a gov-
ernment. A similar fate awaits Ms.
Le Pen in France: The April 23 presi-
dential race will go to a May 7 run-
off, and polls show her losing re-
gardless of which mainstream
contender she faces.
Doubters counter that no one
saw Brexit or President Trump
coming. But even they performed
better in surveys than Ms. Le Pen.
Even if she miraculously prevails,
enacting Frexit would require her
party to win the even tougher leg-
islative elections in June. Mean-
while, in Germany, which votes in
September, the populists are no-
where in contention.
The political chatter obscures the
bigger story, which is that Europe’s
economy is no longer sputtering.
Initial figures suggest that last year,
for the first time since the global fi-
nancial crisis ended, Western Eu-
rope grew at a slightly faster pace
Modimania Remains Strong in India
other emphatic victory. Though it
came second in Goa on the west
coast and Manipur in the northeast,
the BJP appears to have gathered
enough support there from smaller
parties to form governments.
Only in the northern state of
Punjab, where it had ruled for 10
years as the junior partner in an
alliance, did the party lose deci-
sively to the opposition Congress
Party. The upstart Aam Aadmi
Party, which has roots in an anti-
corruption movement that rose to
prominence six years ago, came a
poor second. This ought to end
party leader Arvind Kejriwal’s
quixotic attempt to position him-
self as Mr. Modi’s chief national ri-
val. Despite loudly tom-tomming
its chances, AAP could not win a
single seat in Goa.
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OPINION
Candidates for election as the Netherlands heads to the ballot booth Wednesday.
Lots of Dutch say they believe only in
“something.” We even have a name
for this postreligious religion:
“Somethingism.”
This type of open and yet highly
regulated society can function only if
it is carried by a disciplined and
well-educated citizenry with a rea-
sonable degree of cultural homoge-
neity. But because of political cor-
rectness and cultural relativism,
Dutch elites agreed to absorb low-ed-
ucated, even illiterate, mostly Muslim
migrants from collectivistic rural ar-
eas. Significant numbers of them re-
fuse to embrace the radical, secular
tolerance of their new home.
That is what the fuss is about. To
put it in abstract terms: Can a wel-
fare state become an immigration
state? You know the answer: A wel-
fare state with open borders will
than America. Economic growth of
1.7% might sound lousy, but keep in
mind that Europe’s potential is se-
verely restrained by a shrinking
working-age population in countries
like Germany and Italy.
Crises are also forcing European
politicians to reform their welfare
states. Largely unnoticed, many
countries have started to whittle
A continent in crisis? Far
from it. Unemployment is
down; growth is up; even
Greek banks are healthier.
back the cushy government jobs and
generous benefits that for decades
had defined the Continent’s increas-
ingly uncompetitive way of life.
Sweden and Finland trimmed their
welfare states in the early 1990s,
and Germany adopted labor-market
reforms in the early 2000s. The cri-
ses that erupted in 2010 created
new urgency, as Spain and Portugal
cut spending in the face of their ex-
ploding debt costs.
There is evidence that the Euro-
pean welfare state has peaked. Gov-
ernment spending in the 28 EU na-
tions hit a high in 2009 at near 50%
For Congress, which has domi-
nated national politics for most of
the seven decades since indepen-
dence from Britain, the defeat in
Uttar Pradesh was particularly gall-
ing. Despite trimming its ambitions
and fighting alongside the Sam-
ajwadi Party, the ostensibly social-
ist, caste-based outfit that ruled
the state, Congress won just seven
of the 403 seats up for grabs. (The
BJP won 312.) Instead of helping
Samajwadi, Congress arguably
dragged it down.
By now it has become blind-
ingly obvious to all but the most
diehard loyalists that Rahul Gan-
dhi, Congress’s vice president,
shows scant ability to connect
with voters. For many younger In-
dians, he evokes mirth rather than
respect. Transforming the butt of
countless WhatsApp jokes into a
contender for national power re-
mains the party’s most serious
long-term challenge.
After Saturday’s results, the BJP
and its allies will control 17 of In-
dia’s 31 state assemblies in addi-
tion to the federal government, ac-
counting for 59% of the country’s
population and 55% of its gross
domestic product. The six Con-
gress-ruled states contain only 8%
of India’s people and 12% of its
economic output.
Uttar Pradesh also suggests a re-
ordering of the Hindi heartland’s
traditional politics of community
and faith. (As the old saw goes, in
this part of India people don’t cast
their vote. They vote their caste.)
With a gauzy promise of economic
development for all, the BJP man-
aged to project itself above base
appeals to caste identity. At the
same time, it whittled down the
traditional support base of its
AFP/GETTY IMAGES
one day run out of money. But what
moral justification is there for limit-
ing migration in a globalized and
unjust world? That’s a tough ques-
tion for the politically correct mind.
(Interestingly, the American Demo-
crats’ main project is the reverse:
turning an immigration state into a
welfare state.)
But the tensions in Dutch society
aren’t only about money. We’ve had
two political assassinations in the
past 15 years. In May 2002, two
weeks before a national election,
Pim Fortuyn—the leading candidate
for prime minister, a gay professor
who had published a book called
“Against the Islamization of Our
Culture”—was killed by an animal-
rights activist who said he wanted
to protect “vulnerable groups.” The
killer, who served 12 years in
of gross domestic product and has
since fallen to 46%. Germany led
with a steep drop, followed closely
by Spain and Italy. The eurozone
countries now run a collective bud-
get deficit of 1.6% of GDP and have
government debt totaling 106% of
GDP. Compare that with America’s
deficit of 3.3% of GDP and debt to-
taling 104% of GDP.
The nations of southern Europe
are often seen as islands of fierce re-
sistance to reform, but that stereo-
type is fraying. Spain led the latest
charge, cutting government spending
and cleaning up its state savings
banks, which were at the center of its
bad-loan problem in 2010. Even Italy,
a country traditionally so slow to
change that it can feel like an open-
air museum, has cut spending to put
its primary government budget in
surplus. The banks at the center of
the Greek crisis look much healthier.
In the past five years, European
banks have reduced their debts sig-
nificantly and rebuilt capital re-
serves. Lately they have started to in-
crease lending, which has helped
spur the European economy.
All this has made a serious differ-
ence: Unemployment in the euro-
zone as a whole has been falling by
nearly a percentage point a year
since 2013. It finally dipped below
10% in August. Pent-up demand is
caste-based competitors by wooing
smaller subcastes through shrewd
candidate selection.
In effect, Mr. Modi and BJP Pres-
ident Amit Shah united a plethora
of disparate castes under a broad
pan-Hindu umbrella. This Hindu
A crushing win in India’s
largest state sets up Prime
Minister Narendra Modi
for re-election in 2019.
consolidation was enough to over-
come opposition from many Mus-
lims, who account for about one-
fifth of Uttar Pradesh’s population.
Traditionally, the community has
no love for the BJP, a party with
roots in the Hindu nationalist vol-
unteer organization, Rashtriya
Swayamsevak Sangh.
The election also settles a con-
tentious debate about the electoral
consequences of Mr. Modi’s Novem-
ber decision to abruptly invalidate
about 85% of India’s currency notes
by value. Though the move caused
deep pain, including the shuttering
of many small businesses and job
losses for migrant workers, it ap-
pears to have helped rather than
hurt the prime minister.
Many experts panned demoneti-
zation, as the policy is known, as a
cockamamie idea made worse by
staggeringly inept implementation.
But to Uttar Pradesh voters it ap-
pears to have buffed Mr. Modi’s im-
age as a decisive leader willing to
take tough measures to crack down
on corruption. In the temple town
of Varanasi, for instance, which
sent Mr. Modi to Parliament three
Tuesday, March 14, 2017 | A11
prison, is now free and on welfare.
The other victim was Theo van
Gogh, a provocateur, filmmaker and
Islam critic who was decapitated
on an Amsterdam street by a radi-
cal Muslim.
These two intellectuals personi-
fied the open Dutch welfare state.
They were loudmouthed and care-
free children of the antiauthoritar-
ian 1960s, unapologetic and humor-
ous critical minds who happily
provoked the sensitivities of the
bourgeois establishment and as
happily insulted religion in gen-
eral—in particular Catholicism be-
fore they turned against Islam.
They represented an extreme of the
wide horizon of Dutch tolerance.
Their peaceful and pacified coun-
trymen are still recovering from the
shock of their murders.
Did the Dutch really turn into
xenophobes and racists? No, they
are as open-minded as ever. But
they have started to demand what
most of their politicians (except
people like Fortuyn and Mr.
Wilders) until recently didn’t dare
mention because it was politically
incorrect: that immigrants practice
tolerance, work and study hard,
and teach their children to be
proud and contributing members of
this society. That is the least you
can ask when the fruits of your la-
bor are taxed at 50%.
This is the Netherlands in 2017.
Still an impressive country, if you
ask me, whatever the result of
Wednesday’s election.
Mr. de Winter is a novelist and
political commentator for De
Telegraaf.
being released. After the eurozone
crisis began in 2010, Europeans put
off purchases of just about every-
thing. Car sales and residential in-
vestment had been running at two-
thirds the pace seen last decade, but
they are already beginning to
bounce back.
This has not gone unnoticed in
markets. Although the global finan-
cial market rally is often attributed
to Mr. Trump’s victory, it is also a
response to signs that the world
economy is picking up speed and
that a European meltdown is in-
creasingly unlikely. The forecasts
for GDP growth have been revised
upward more significantly for Eu-
rope than for the U.S. Europe may
even be poised to cut its debilitat-
ing tax rates.
Europe still has weaknesses—a
weak banking union; the lack of a
mechanism to share tax revenue
across countries. But none of these
fault lines look ready to crack this
year. The Continent is poised for at
least a cyclical comeback, not
doomed to permanent crisis.
Mr. Sharma, the chief global
strategist at Morgan Stanley Invest-
ment Management, is the author of
“The Rise and Fall of Nations:
Forces of Change in the Post-Crisis
World” (Norton, 2016).
years ago, it was easy to find peo-
ple who had suffered from demone-
tization. Finding critics of the pol-
icy was a lot harder.
Winning what was in some ways
a de facto referendum on demone-
tization strengthens the prime
minister’s hand. It greatly im-
proves the odds of the BJP candi-
date for president—the largely cer-
emonial but constitutionally
important head of state—prevail-
ing in an election later this year
by central and state legislators. By
next year, the BJP’s victories will
also boost its presence in the up-
per house of Parliament, most of
whose members are elected by
state legislators.
Mr. Modi may have consolidated
his status as both the undisputed
leader of his party and India’s most
powerful prime minister in a gener-
ation. But what he intends to do
with his power remains a mystery.
In a speech in Delhi Sunday, he
promised “a movement for develop-
ment” for 1.25 billion Indians.
So far the prime minister has
proceeded cautiously on economic
reforms. His win in Uttar Pradesh
gives him the capacity to act more
boldly on controversial but sensible
policies such as privatizing loss-
making state owned firms, easing
restrictive labor laws and slashing
food and fuel subsidies. However, if
Mr. Modi’s tepid approach to re-
forms has not hurt him electorally,
he has little incentive to suddenly
do things any differently. If nothing
much changes, you can thank the
people of Uttar Pradesh.
Mr. Dhume is a resident fellow
at the American Enterprise Institute
and a columnist for WSJ.com. A re-
lated editorial appears today.
A12 | Tuesday, March 14, 2017 THE WALL STREET JOURNAL.

SPORTS
NCAA TOURNAMENT | Jason Gay

A Cheat Sheet to March Madness Pools

Look, friend, you and I do 9-22. If Fultz goes No. 1, it will be the sec-
this every year, at the exact ond straight year the NBA’s No. 1 pick
same time. It’s insanity, re- played for a team which didn’t make March
peating itself. I love you, but Madness (last year it was LSU’s Ben Sim-
I need you to sit down and mons), which should tell you all you need to
face the truth. know about the career-making importance
You’re really excited to fill of this tournament.
out your NCAA men’s basketball tournament 11. I’m not a big fan of “One Shining Mo-
bracket. Hey, I’m excited, too! It’s an exciting ment,” the tournament-capping song (“The
time of the calendar. Enthusiasm abounds, ball is tipped...”) that’s more syrupy than a
as does optimism. You’re confident. You’re Vermont maple. But if CBS ever lets Jim Nantz
informed(ish). I’m informed(ish). Maybe you record it as a duet with Iggy Pop, I’m in.
went to Northwestern and you’re sleeping in 12. Yes, my Wisconsin Badgers qualified
your lucky purple jammies and driving ev- for the tournament, thanks for asking. It
eryone at work crazy. was a bit of a weird year for the Badgers—
But someone has to tell you, and I guess some ups, some downs, and a bit of a regu-
it’s going to be me: lar-season underperformance, but they’re
You’re almost surely going to lose your 25-9 and seeded 8th in the East Regional
March Madness pool. and will play ninth seed Virginia Tech. My
Like, lose in the first day and a half. alma mater has only one true superstar
And so am I. This is the irresistible yet (center Ethan Happ), but they’re experi-
very maddening madness of March. So here enced at playing Wisconsin style, which is
are a few rules and reminders to the uniniti- to wear you down like a long-winded co-
ated—and the overly obsessed. worker telling you about a vacation to Italy.
1. Joining the casual office pool? Office 13. Yes I know the Badgers lost Sunday to
pools with prizes are almost always against the Michigan Wolverines in the Big Ten cham-
the law, but whatever. When the Feds bust pionship. I’ll just remind you that conference
MICHAEL REAVES/GETTY IMAGES

into the office with a warrant and handcuffs championships in this day and age are mean-
and shout, “OK, WHICH ONE OF YOU IDI- ingless, except for the ones Wisconsin wins.
OTS PICKED PRINCETON TO WIN THE 14. Northwestern is in the NCAA tourna-
WHOLE THING?” please let me know. ment, for the first time ever. This is genuinely
2. However, it is a strictly enforced felony great. It’s always fun to have a first-timer in
to pick all four No. 1 seeds to make it to the the mix at the tournament—there are too
Final Four. If you do it, I’m calling the FBI, many usual suspects (did anyone want to look
and your parents. at Jim Boeheim’s incredulous mug again?).
3. Reminder: expertise counts for very lit- Northwestern, with Bryant McIntosh and coach Chris Collins, is in the tournament for the first The one off-court hazard is that Northwest-
tle. If you’re in an office pool, look around the time. The first two days of March Madness are socially acceptable office hooky, writes Jason Gay. ern has a fancy-pants journalism school—it’s
office. Find your co-worker who knows the called Dill School or something—which has a
least amount about basketball. The co-worker telling everyone this March Madness stuff is Duke fever out there. It had been a rocky lot of fancy-pants journalist alumni. As a re-
who calls “basketball” “the basket games.” really stupid hard! season for the Blue Devils, with all the hulla- sult, Northwestern’s success has led to a lot
The co-worker who, if you asked him or her 5. However, to sweeten up Warren Buf- baloo about junior Grayson Allen’s rough- of media people talking to other media people
to name two famous Final Four stars, would fett’s offer, if you pick the entire Sweet 16 house play and Coach K’s convalescence after about other media people, and if we’re not
say, “Michael Jordan and...Cal Ripken.” The correctly, I will send you a live cat every back surgery, but they turned it around late careful, we’re going to turn into the White
co-worker who got handed the bracket and year for the rest of your life, until you are and rolled to victory in the ACC champion- House press corps.
said, “Fun! Is this the Oscar pool?” The co- 130 years old, or have 83 cats, whichever ship Saturday and are now a two seed in the 15. I guess I have to give you a Final Four,
worker who doesn’t have ESPN or Turner or comes first.** East. What I am trying to say is: avoid all huh? OK fine: Kansas, Kentucky, and Ari-
CBS and spends all of their spare time on the 6. I wish the NCAA would truly recognize your Duke friends this week, they’re going to zona. And Wisconsin. Yes, Wisconsin. You’re
internet looking at lizard tanks. This is the the first two days of March Madness for be impossible. I mean, more than the usual. supposed to pick your own school. Are we
person who is going to win the office pool. what it is: the biggest days of socially ac- 9. You’ll be hearing a lot about a UCLA really going to argue that? Plus, I have to be
And spent it all on a dynamite lizard tank. ceptable office hooky on the calendar. Seri- freshman named Lonzo Ball this week. Ball is able to go to bars in Madison.
4. We never learn, do we? We let these ously, if you’re not watching at least two a 6-foot-6 point guard from Chino Hills, Calif., 16. Best of luck to everyone. I mean it. And
pools take our money. We let Warren Buffett games midafternoon on Thursday, your boss who likely will be one of the top three or four remember: This is the best of amateur sports
mock us—look at Warren Buffett mocking is allowed to fire you for cause. players taken in the NBA draft this year. He’s in America, and nobody makes money off this
us, he’s cackling, I swear—by telling the 7. Human Resources: “Why was this em- very fun to watch, even if his wild-armed thing except for the coaches, schools, spon-
world he will give a million clams every ployee dismissed?” jump shot makes it look like he’s trying to sors, vendors, networks and the NCAA.
year for life to any Berkshire Hathaway em- Manager: “Employee was caught actually swat a mosquito with a rolled-up copy of The 17. As always, saying “Bracketology” out
ployee who can pick the 2017 March Mad- working at desk, wasn’t even watching Pur- Economist. loud in public is a $45 dollar fine.
ness Sweet 16 correctly. Not the entire due vs. Vermont.” 10. The presumptive No. 1 NBA draft pick 18. Nah, let’s make it $80.
bracket. Not all the way to the Final Four. Human Resources. “Appalling. Say no is Markelle Fultz, who is not playing in the ** I’m not sending anyone live cats, calm
Just two rounds. That’s not Warren Buffett more. Terminated.” NCAA tournament, because his team (the down. No one wants a new cat every year.
being a generous guy. That’s Warren Buffett 8. Troubling news: there’s a grisly case of University of Washington) stunk, finishing Plus they’re incredibly difficult to ship.

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
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Berlin 11 7 pc 12 3 pc Los Angeles 31 15 pc 28 15 pc San Juan 29 23 s 29 23 pc player Gasteyer 29 Runner’s goal writer
Bogota 19 10 sh 19 9 sh Madrid 20 7 c 20 6 s Santiago 27 12 pc 31 13 s
36 Irritating vine 58 Gym activity
Boise 22 9 pc 18 9 sh Manila 34 25 t 32 24 pc Santo Domingo 30 20 pc 30 20 sh
17 Utterance after 30 Gave a damn? 59 Nantes name
deliberate 38 Dentist’s 60 Recipe direction
Boston 2 -6 sn 1 -7 sn Melbourne 31 20 s 30 22 pc Sao Paulo 24 19 r 27 19 c
Brussels 15 8 pc 13 5 c Mexico City 21 7 pc 22 8 pc Seattle 14 10 r 12 4 c wordplay directive
61 “Twelfth Night” Previous Puzzle’s Solution
Buenos Aires 27 16 s 25 13 c Miami 29 13 pc 23 11 s Seoul 11 -1 s 12 -1 s
Shanghai 14 4 s 13 7 pc 19 Goalie’s place 40 Destroy slowly duke W O R E O H R O B U N I V
Cairo 23 13 s 21 12 s Milan 18 6 pc 19 7 pc A B E T N E E D Y N I C E
Calgary 6 -2 c 9 -3 pc Minneapolis -2 -13 pc 1 -8 pc Singapore 32 25 t 32 25 pc 41 Vert.’s R O M E L I F E J A C K E T
Caracas 30 24 pc 30 24 pc Monterrey 24 13 pc 28 14 pc Stockholm 8 3 sh 9 0 s 20 Spanish squiggle 62 Censored stuff D E A R S I R OW L E T S
Charlotte 13 -5 pc 7 -6 s Montreal -6 -8 sn -4 -11 sn Sydney 23 21 t 24 21 sh
counterpart I N A N L E V E E
Chicago -2 -10 sf -1 -10 s Moscow 6 -3 s 6 2 pc Taipei 15 13 r 18 15 c 21 Pont ___ (Paris 63 “Didn’t I tell you?” S E N A T E P A G E S N A P
bridge) 44 Japanese for C Y C L E R I G S A N E
Dallas 19 8 s 20 11 pc Mumbai 33 19 pc 32 20 pc Tehran 16 6 pc 17 6 s O R A L S O D S P E T I T
Denver 22 6 c 24 7 pc Nashville 7 -5 c 6 -6 s Tel Aviv 18 10 pc 17 11 sh “way of the gods” 64 High regard L I L Y MO O A T I M E
Detroit -3 -10 sf -1 -9 pc New Delhi 27 13 pc 29 14 pc Tokyo 12 6 pc 9 6 r 22 Raised ridge D E M G R O U N D C O V E R
Toronto -6 -12 sn -6 -11 sf
46 She may be 65 Gas company L E A S T R E N E
Dubai 30 22 s 30 23 s New Orleans 17 8 s 17 8 s I S S U E D C E R E B R A
Dublin 14 6 c 14 7 pc New York City 1 -5 sn -1 -7 sf Vancouver 11 8 r 11 3 r 23 “Be right there!” sheared with toy trucks S T O C K I N D E X D O O R
Edinburgh 12 5 pc 13 7 c Omaha 1 -8 sf 4 -3 pc Washington, D.C. 4 -5 sn 0 -7 sf L A M A A B I D E G R A M
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s

Frankfurt 15 5 pc 15 3 c Orlando 22 8 pc 18 3 s Zurich 14 0 pc 16 3 s E Y E S L A P E L E N D S


BUSINESS & FINANCE
© 2017 Dow Jones & Company. All Rights Reserved.
Euro vs. Dollar 1.0673 g 0.01%
A Demanding New Boss at HSBC
Hard-charging Mark
Tucker stands to
shake up the British
lender as its chairman
Mark Tucker, the first out-
sider tapped as chairman of
HSBC Holdings PLC, is a savvy
businessman with intimate
By Julie Steinberg
in Hong Kong and
Margot Patrick
in London
knowledge of the U.K. and
Asian markets, where the bank
principally operates.
But people who know the
hard-driving Mr. Tucker say
one of his biggest effects on
the 152-year-old British lender
could be a shake-up of what
Be Careful:
Volatility Is
Hiding, Not
Hibernating
One of the basic rules of
markets is being violated. In-
vestors usually hate uncer-
tainty, but since the U.S.
election, days of rising un-
certainty have often been ac-
companied by higher stock
prices.
The idea that riskier mar-
kets are worth more makes
little sense, but the explana-
tion may tell us something
about the split between the
views of professional traders
and retail in-
vestors. As
cash floods
in from pri-
vate inves-
tors it has
STREETWISE pushed up
JAMES the market
MACKINTOSH overall, but
has also led
profession-
als to worry a little more
about the risks—both of a
meltdown and, conceivably, a
“melt-up,” when the market
soars 10% or more in short
order. The prospect of either
big losses or big gains
prompts buying of options,
pushing up their cost, prox-
ied by implied volatility.
The puzzle shows up most
clearly in the link between
the VIX gauge of implied vol-
atility and the S&P 500, al-
though something similar
has been going on with Euro-
pean shares and the VStoxx,
the European VIX equivalent.
Days when the VIX or VS-
toxx goes up have normally
in the past been days when
the stock market falls, as
higher expected volatility
shows more risk is antici-
pated, justifying lower
prices.
That link has partially bro-
ken down, with stock prices
often rising when implied
volatility rises, particularly
last month. The 30-day cor-
relation between the VIX and
the S&P 500, a formal mea-
sure of how much they move
together, is the highest since
2006, even as the absolute
level of the VIX is very low
compared with history.
Last month underlined the
strange nature of the rally.
Money pouring in from pri-
vate investors helped push
up the Dow Jones Industrial
Average to 12 records in a
row, even as other measures
suggested growing caution.
The optimism visible at the
index level wasn’t repeated
under the surface, where de-
fensive shares outperformed
(ignoring the oil sector,
sometimes classed as defen-
sive and sometimes cyclical).
Unlike a normal rally, smaller
company stocks underper-
formed too.
When traders are more
cautious they tend to buy
more put options to protect
themselves against falling
share prices, which pushes
up implied volatility.
But volatility traders care
Please see STREET page B2
TECHNOLOGY: YAHOO OUTLINES NEW LEADERSHIP TO FOLLOW VERIZON DEAL B4
FTSE 100 7367.08 À 0.33%
some describe as a bureau-
cratic, clubby culture.
Mr. Tucker, 59, ran Hong
Kong-based insurer AIA
Group Ltd. for seven years,
taking it from a unit of Amer-
ican International Group Inc.
to the second-largest life-in-
surance company in the world
by market capitalization. He
has been described by people
who work with him as de-
manding and direct—some-
one who keeps staffers con-
stantly on their toes.
Associates say he emails at
all hours, responds to others
quickly and keeps track of who
delivers on commitments—and
who doesn’t.
Those qualities could stir
things up at HSBC, which crit-
ics say has resembled the civil
service, filled with employees
who feel they are guaranteed
A move toward earlier toilet training has aided sales of Kimberly-Clark’s training pants while hurting sales of its Snug & Dry diapers.
Diapers Lose Out in Potty Debate
BY SHARON TERLEP
The company behind Hug-
gies is wading into the messy
debate over when to start toi-
let training.
Kimberly-Clark Corp. has
benefited as more parents opt
for Huggies Pull-Ups dispos-
able training pants over less-
expensive diapers. Sales of
Pull-Ups, which absorb wet-
ness like diapers but can be
pulled on or off like under-
pants, grew by double-digits in
2015 and again in 2016, offset-
ting a decline in diaper sales.
Oil Trader’s Bet on Crude Takes Sour Turn
London-based Pierre Andurand, shown in April, took an 8.5% hit
to his commodities fund in the first two months of this year.
THE WALL STREET JOURNAL.
Gold 1202.40 À 0.14% WTI crude 48.40 g 0.19%
‘He doesn’t suffer fools,’ one associate says of Mr. Tucker.
jobs for life. HSBC also has ad- Asia-based business associate
mitted to having too many lay- of Mr. Tucker, who asked not
ers of management. to be named because he
“He doesn’t suffer fools, wasn't authorized to speak on
that is for sure,” said one the record. “You have to pass
A pack of 74 Pull-Ups costs potty training.
$24.99 at Target.com, while a “There’s a strategy on their
box of 140 Huggies Snug & Dry part to say, ‘Hey, we want chil-
diapers goes for the same dren to start training earlier
price. In addition to helping and we want them to stay
the company’s bottom line, ex- more consistent in the train-
ecutives said parents’ willing- ing pant,’” he said.
ness to pay for Pull-Ups sig- Stepping into the whirlwind
nals an economy on the mend. of perspectives by parents and
It is a trend that Kimberly- pundits is a risky move for
Clark would like to see con- Dallas-based Kimberly-Clark.
tinue. How to raise toddlers prompts
During a call with analysts endless debate online, much of
last month, its operations it revolving around when toi-
chief, Michael Hsu, said Pull- let training should start.
Ups brand managers were Most every major parenting
working to promote earlier and medical website has
BY LAURENCE FLETCHER
Pierre Andurand, one of the
world’s best-known oil traders,
has suffered a large loss at the
start of this year because of
wrong-way bets on crude.
Mr. Andurand, who runs the
$1.5 billion Andurand Com-
modities Fund, lost 8.5%, or
approximately $130 million, in
the first two months of this
year, according to numbers
sent to investors and reviewed
by The Wall Street Journal.
The loss makes his fund one of
the global hedge-fund indus-
try’s worst performers in 2017.
A spokeswoman for Mr. An-
durand declined to comment.
The French-born trader,
who runs his fund out of of-
fices opposite London luxury
FRANTZESCO KANGARIS FOR THE WALL STREET JOURNAL
department store Harrods,
gained 22% last year, helped
by bullish bets, including buy-
ing one day after oil hit a 13-
year low last January.
But like many funds, his
has been too positive of late,
recently forecasting oil would
hit $70 a barrel early this
year. On Monday, Brent, the
global price benchmark, set-
tled at $51.35 a barrel, while
U.S. crude settled at $48.40 a
barrel.
Hedge funds and other big
money managers amassed a
Tuesday, March 14, 2017 | B1
German Bund yield 0.470%
a bit of a sniff test before he’ll
give you the time you need.”
Mr. Tucker declined to com-
ment for this article. A
spokeswoman for HSBC de-
clined to comment.
The hiring of Mr. Tucker is a
big departure for HSBC, which
DAVID PAUL MORRIS/BLOOMBERG NEWS
for decades promoted its chief
executive into the chairman
role, usually at the end of a
lifetime career at the bank.
At HSBC, one of Mr.
Tucker’s most important tasks
will be appointing a new chief
executive to succeed current
CEO Stuart Gulliver, who ex-
pects to step down in 2018.
Some candidates are HSBC’s
global retail-banking head
John Flint, who has been at
Please see TUCKER page B2
 Heard on the Street: HSBC
investors get new hope....... B7
GARY CAMERON/REUTERS
reams of information, from es-
says by pediatricians to inter-
active quizzes, aimed at help-
ing parents decide when to
start and which methods are
best. Parents weigh in on
blogs and message boards
with their own opinions.
For instance, thousands of
commenters have posted on
parenting site babycen-
ter.com’s various potty-train-
ing threads, which included
everything from a debate over
whether to reward children for
using the toilet to a mom who
Please see DIAPERS page B3
record number of bullish bets
on Brent crude last month,
according to the Interconti-
nental Exchange Inc. That
came amid reports that the
Organization of the Petro-
leum Exporting Countries
had so far achieved around
90% of the production cuts
agreed upon late last year.
But, having traded in a nar-
row range for most of this
year, oil posted its biggest two-
day selloff since June last
week. Oil inventories in the
U.S. recently hit a record high
in a sign that the glut that has
depressed prices for more than
two years is still plaguing the
market. The U.S. Energy De-
partment expects American oil
production to rebound past 9.7
million barrels a day in 2018,
breaking the record output
level set in 1970.
Mr. Andurand’s perfor-
mance figures don't take ac-
count of the latest price
moves, so if he was positioned
for rising prices he is likely to
have suffered further losses.
Mr. Andurand set up An-
durand Capital Management
LLP four years ago from the
ashes of $2.4 billion former
hedge fund BlueGold Capital
Management LP.
—Georgi Kantchev
contributed to this article.
10-Year Treasury yield 2.609%
Rejected
Drugs
Get a
New Life
BY DENISE ROLAND
CAMBRIDGE, England—As-
traZeneca PLC executive Ku-
mar Srinivasan has an unusual
job description: He is in
charge of rejected drugs.
Safe and effective drugs are
sometimes shelved because
they don’t work in a disease
area that is of interest to the
company in question. Mr.
Srinivasan’s nine-person team,
dubbed the Emerging Innova-
tions Unit, is in charge of
around 20 drugs that Astra-
Zeneca has shelved, as well as
about 45 molecules that never
made it into human testing.
Drugs developed with one
disease in mind can have po-
tential in seemingly unrelated
areas. Among the unit’s proj-
ects is a collaboration with
scientists at Yale University
School of Medicine to investi-
gate whether a drug that
didn’t make the cut as a can-
cer medicine inside AstraZen-
eca could instead work in Alz-
heimer’s disease.
AstraZeneca is aiming to
build credibility with academic
scientists as part of a broader
move to drastically improve
its research-and-development
output, which until just a few
years ago was among the in-
dustry’s worst.
It hopes that making its un-
wanted molecules readily
available to university re-
searchers will give it an edge
over its rivals, most of which
are reluctant to dedicate re-
sources to rejected drugs.
No other large companies
are handing out their un-
wanted drugs with the same
enthusiasm as AstraZeneca—
but some are warming up to
the idea. In 2015, Novartis AG
licensed three shelved drugs
to a U.K. startup called Mereo
BioPharma Group PLC that is
now developing them in dis-
ease areas that don’t fit with
the Swiss company’s own pri-
orities. As part of the deal,
Novartis took an equity stake
in Mereo and will receive roy-
alties from the eventual sales
of any of the drugs.
AstraZeneca’s approach is
part of a strategic shift its
bosses orchestrated about five
years ago in the face of a drug
pipeline ill-equipped to offset
the decline in revenue as its
top-selling drugs lost patent
protection. Mene Pangalos,
head of innovative medicines,
shifted to rewarding scientists
based on how many of their
drug candidates succeeded in
later-stage testing, rather than
the sheer volume of candi-
dates they produced. He also
looked for ways the company
could support outside scien-
tists, believing that would help
AstraZeneca’s long-term re-
search productivity. Chief Ex-
ecutive Pascal Soriot acceler-
ated Dr. Pangalos’s work when
he arrived in 2012. He slashed
the number of research jobs
and uprooted the company’s
Please see DRUGS page B2
INSIDE
BUYOUT FIRM
BUYS ASSETS
FROM ITSELF
FINANCE & MARKETS, B5
SOME GERMAN
FIRMS RETHINK
FOREIGN MOVES
BUSINESS & FINANCE, B2
B2 | Tuesday, March 14, 2017
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
A
ABB ............................. B3
AIA Group.........B1,B7,B8
Air Products &
Chemicals..................B7
Alibaba Group.............B4
Alphabet......................A1
Apple...........................B8
AstraZeneca................B1
AT&T............................B8
Avalere Health............A6
B U
BMW...........................A1
Burger King Worldwide
.....................................A1
C M-N
CBOE Volatility Index.B1
Comcast.......................B8
F-G
Ford Motor..................B4
Gazprom......................B3
INDEX TO PEOPLE
A Greene, Lorna ............. B8
Andurand, Pierre.........B1
B
Baig, Mirza..................B8
Barra, Mary.................B7
Brady, Kevin................A6
C Kwok, James...............B8
Chintawongvanich,
Pravit.........................B2
F-G
Flint, John...................B1
Gerlach, Klaus.............B2
TUCKER
Continued from Page One
the bank since 1989, and HSBC
Bank PLC CEO Antonio Si-
moes, who joined in 2007.
But external candidates will
also have a strong shot and
could be the preference of the
bank’s investors. One successful
recent outside hire has been
former Goldman Sachs banker
Matthew Westerman, who a
year ago was brought on as co-
head of global banking. Mr.
Westerman restructured the
group, clearing out a cadre of
senior managers and raising in-
ternal performance standards.
Critics have described
the venerable lender’s
culture as clubby and
bureaucratic.
Established in 1865, HSBC
was formed to finance trade af-
ter the Hong Kong and Shang-
hai ports opened up in the
wake of the First Opium War.
HSBC long functioned as Hong
Kong’s de facto central bank.
When the territory was under
British control, HSBC’s chair-
man often held Hong Kong po-
litical appointments as well.
By 2009, the bank was in 88
countries and creaking under
an outdated structure in which
dozens of country heads re-
ported directly to the CEO. It
had to adapt to higher capital
requirements and spent billions
of dollars improving its sys-
tems after U.S. authorities said
its money-laundering checks
had failed.
Recently, HSBC has pared
businesses and exited from
countries, but it is still far from
meeting a return on equity tar-
get of more than 10% and re-
ported worse-than-expected
ADVERTISEMENT
The Mart
BUSINESS CONNECTIONS
 


  

THE WALL STREET JOURNAL.
BUSINESS & FINANCE
General Motors.....A1,B7
GM...............................A8
H
Hershey Power...........A5
P
PAG..............................B7
Peugeot-Citroen..........B7
Pfizer...........................B8
Mittelstand’s Uneasy Stance
BY NINA TRENTMANN
HSBC.................B1,B7,B8 Procter & Gamble.......B3
I Prudential Financial ... A1 Venturing Abroad
Krones AG, a German pack- Small and medium-size German companies’ investments in core markets such as China, the U.K. and the
Inovalon Holdings.......A6 S
aging and bottling-machine U.S. have increased in recent years.
Intel.............................A1 Sprint .......................... B4 manufacturer, planned to in-
K T vest up to €20 million ($21 Foreign direct investment by all German companies into selected countries
Kimberly-Clark............A1 Tesla............................A1 million) abroad over the next CHINA U.K. U.S.
Kimberly-Clark Corp ... B1 two years, with a strong focus €300 billion €300 billion €300 billion
Krones.........................B2 on China, the U.S. and sub-Sa-
Uber Technologies......A1 haran Africa. 250 250 250
L
V However, rising global un-
Lincoln Motor..............B4 certainty has led Krones to re- 200 200 200
Verizon Communications
consider.
..........................A8,B4,B8 150 150 150
Macro Risk Advisors .. B2 Volkswagen.................B2
CFO “Firms like us German firms with
Massachusetts Mutual JOURNAL always struggle annual turnover of
Y 100 100 100
Life Insurance...........A1 with making de- €500 million or less
Milendo Therapeutics.B2 Yahoo...........................B4 cisions for over- 50 50 50
Mobileye ..................... A1 Yahoo Japan................B4 seas investments,” said Klaus
Novartis.......................B1 Yingde Gases Group...B7 Gerlach, head of international 0 0 0
operations at Krones. “In times
like these, this is even more so 2010 ’11 ’12 ’13 ’14 2010 ’11 ’12 ’13 ’14 2010 ’11 ’12 ’13 ’14
the case.”
A mixture of political and
Source: Bundesbank Note: Data retrieved March 8, 2017 THE WALL STREET JOURNAL.
economic instability in core in- the country’s businesses, ac- managing director for sales the 2016 coup attempt.
Pangalos, Mene .......... B1 ternational markets presents a cording to the Institut für Mit- and marketing at Grimme. It is questionable whether
Grover, Sarah..............B3 Patel, Rakesh..............B8 challenge for Germany’s “Mit- telstandsforschung, a German The company has a two- existing overseas investments
Gulliver, Stuart...........B7 S telstand” firms, or small and research institute. And many year time horizon on invest- by German Mittelstand firms
H Shan, Weijian..............B7 medium-size companies. Brit- large enterprises say they ments. Hence, Grimme’s man- are sustainable, said Mr.
Hsu, Michael...............B1 Simoes, Antonio.........B2 ain’s Brexit vote, tighter capi- don’t see the need to suspend agement is weighing its Deutsch of the German indus-
Soriot, Pascal..............B1 tal controls in China and ex- or alter their plans. More bal- options. Starting a small pro- try group. Wide-ranging
K
Srinivasan, Kumar......B1 pected changes to U.S. trade ance-sheet headroom and a duction facility in India is un- changes to the North American
Stephen, Doug............B8
policy are forcing executives of presence in a wide range of der discussion, with the com- Free Trade Agreement, for ex-
L T these companies to revise countries won’t affect their pany struggling to make a final ample, or to the post-Brexit
Larsen, Jonathan........B2 Tucker, Mark..........B1,B7 their plans. Some are simply bottom lines as harshly should decision, Mr. Talg said. trade relationship between the
M-P W putting investment decisions an investment decision go The company has subsidiar- U.K. and the EU could endan-
Mayer, Marissa...........B4 Wellman, Alexi...........B4 on hold until further notice. wrong. ies in the U.S., the U.K., Russia ger some of those assets, he
McInerney, Thomas....B4 Westerman, Matthew B7 Mittelstand firms—mostly “Political and economic un- and Turkey and is building a said.
closely held family busi- certainty hampers the continu- factory in China. Grimme’s Hugo Kern und Liebers
nesses—form the backbone of ation of substantial overseas 2016 revenue was around €400 GmbH is a manufacturer of
fourth-quarter results. There
are also question marks around
its plan to invest more in China
retail banking and a domestic
the German economy. Firms
with annual revenue of €500
million ($527.9 million) or less
invested €138.3 billion abroad
investments, especially by
small and medium-sized
firms,” said Klaus Günter
Deutsch, head of research at
million, he said. The new fac-
tory in China would cost €15
million, which is sizable for
Grimme, Mr. Talg said.
springs and stamped parts
based in Schramberg, with an-
nual revenue of around €700
million. The company, which
securities business, which ana- in 2014, according to the most the Federal Association of Ger- Prospects for German Mit- operates around 50 plants, 35
lysts say could take a decade or recent data available from Ger- man Industry, the country’s telstand firms in Russia, previ- of them outside Germany, in-
more to pay off. many’s central bank. That is main industry trade group. ously a lucrative market for tends to execute the invest-
“Bringing an outsider’s view nearly 13% of all foreign in- Grimme Landmaschinenfab- them, soured when the Euro- ment decisions it has already
and an innate sense of urgency vestment by German compa- rik GmbH, a maker of harvest- pean Union introduced eco- made for 2017 and beyond.
will be immensely helpful” to nies. ing machines based in Damme, nomic sanctions following the Kern Liebers spends about
turning around HSBC, said Jon- Large, well-known compa- also is cautious about future crisis in Ukraine in mid-2014. 6% to 7% of its annual revenue
athan Larsen, a former senior nies such as Volkswagen AG, investments. “We have trouble Turkey, also a promising coun- on investments, with overseas
Citigroup executive who Siemens AG or BMW AG make dealing with the current situa- try for German exporters, has spending making up the ma-
worked closely with Mr. Tucker up only a small percentage of tion,” said Sebastian Talg, been more challenging since jority.
on an insurance-distribution
deal.
A former professional soccer
player in the U.K., Mr. Tucker
expanded Prudential PLC’s
business across Asia in the
DRUGS Zeneca.
About a year ago, it li-
censed a shelved anti-inflam-
matory drug to a Boston-based
1990s, and worked as the fi- Continued from the prior page biotech founded by former As-
nance director at British lender historic research operations in traZeneca employee Michael
HBOS PLC while it was on a Cheshire, England, to the uni- Davidson. That company, Cor-
lending binge in the mid-2000s. versity town of Cambridge. vidia Therapeutics, will test
Mr. Tucker joined AIA in Like many other pharma- the drug in cardiovascular dis-
2010, when AIG was readying it ceutical companies, Astra is ease. Two members of the
for a listing in Hong Kong. Un- also looking for new ideas Emerging Innovations Unit fol-
PHIL NOBLE/REUTERS
der his leadership, the insurer’s from academic scientists to lowed Dr. Davidson to Cor-
share price has more than dou- bolster its pipeline in the long vidia. Astra took a 19% stake
bled and its new-business run. Dr. Pangalos hopes that in the company and is entitled
value, a key measure of insur- sharing shelved molecules to future milestone payments
ers’ profitability, has quadru- with university scientists and royalties. Around the
pled to $2.75 billion in 2016. through the Emerging Innova- AstraZeneca’s Emerging Innovations Unit is in charge of around same time, the unit sold the
The company has expanded tions Unit will put AstraZen- 20 drugs that the company has shelved, as well as 45 molecules. rights for a discontinued
into new markets and built its eca at a competitive advantage schizophrenia drug candidate
business in China even as eco- to its peers when those same more than 20 advanced clini- lyst forecasts. Dr. Srinivasan to Ann Arbor, Mich.-based bio-
nomic growth there slowed. scientists are looking for a cal trials on 12 novel drugs, said AstraZeneca spends a tech Millendo Therapeutics
Mr. Tucker has served as a company to share a new compared with just nine such few million dollars a year on Inc. While it was being devel-
board member of Goldman breakthrough with. trials at the end of 2010. his unit, an investment he oped, scientists noticed it had
Sachs Group Inc. since 2012, a Dr. Pangalos said Astra’s re- For investors, the proof of called “significant, but not some hormonal side effects,
role he will give up. Between search output has risen dra- AstraZeneca’s turnaround will substantial.” which later research suggested
2009 and 2012, he was a non- matically thanks to the new come later this year, when it Outside sources such as the could be useful in treating the
executive director at the Bank strategy, which has also in- announces the results of a National Institutes of Health endocrine disorder polycystic
of England. volved plowing more invest- closely watched clinical trial contribute most of the re- ovary syndrome.
Mr. Tucker is hands-on when ment into R&D and acquiring in previously untreated lung- search funding, which totals AstraZeneca, Corvidia and
it comes to striking deals, say small biotechs to help fill the cancer patients. If successful, tens of millions of dollars an- Millendo haven’t disclosed the
people familiar with his man- pipeline. AstraZeneca’s $5.6 the so-called cancer immuno- nually. The Emerging Innova- financial details of those deals,
agement style, sending emails billion core R&D budget in therapy approach could gen- tions Unit, based in both Cam- but Dr. Pangalos said the pro-
with detailed questions about 2016 was 33% higher than the erate as much as $3.5 billion bridge, England, and Boston, ceeds from the transactions
agreements and negotiations $4.2 billion it spent in 2010. in annual revenue for Astra- has also become a small meant the unit was roughly
that in other deals are often Between 2005 and 2010, Zeneca, according to UBS ana- source of revenue for Astra- cost-neutral for the company.
sent by bankers. He pulled the just 2% of candidates that As-
plug on bids for Dah Sing Fi- traZeneca entered into human
nancial Holdings Ltd.’s life-in-
surance businesses and Ageas
NV’s Hong Kong life-insurance
business while at AIA, accord-
testing became successful
drugs, Dr. Pangalos said. In the
subsequent five years, that
figure jumped to around 15%.
STREET Vanishing Volatility
Implied volatility for the S&P 500 has tumbled, but the inverse
link between stocks and the VIX gauge of volatility isn't as
ing to people familiar with the AstraZeneca’s late-stage Continued from the prior page strong as usual.
matter, balking at the high of- pipeline has grown as well. as much about a melt-up in
fers put forth by others. Currently, it is running stocks as they do about the 60 VIX
more common meltdown,
and the risk of being caught 40
out by a jump in shares is
20
also seen to be rising.
Pravit Chintawongvanich
0
at options broker Macro
BUSINESS OPPORTUNITY Risk Advisors in New York 2500 S&P 500
says the hunt for yield last
year pushed more investors
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BUSINESS FOR SALE
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 appropriate advice should First & Business While the pattern of VIX Once inflows dry up or the porate tax cuts and a fiscal
'
   


 -,  INTERNATIONAL changes has been eccentric, its sectoral rotations stop cancel- boost. Both meltdown and

 
  
 be obtained prior to Major Airlines, Corporate Travel
entering into any Never Fly Coach Again! actual level is extremely low: ing out, volatility will no lon- melt-up look more likely than
 
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www.cooktravel.net The VIX has been lower only ger be hidden. usual. The calm on the surface


 
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binding contract. à (800) 435-8776 6% of the time since 1990. For now, the market is be- of the S&P 500 also means it


4 &  
 


 This is largely because the big having oddly, and it shows the is cheaper than normal to
swings by sectors within the dilemma investors face. hedge against either, or both.
THE WALL STREET JOURNAL.
Gazprom-EU Settlement Advances ABB
For Its Woes in South Korea
Antitrust regulator
invites comment
on steps promised
by Russian gas supplier
BY NATALIA DROZDIAK
BRUSSELS—The European
Union’s antitrust regulator
said it would ask market par-
ticipants about commitments
PAO Gazprom has offered for
addressing concerns that the
Russian energy giant had vio-
lated competition rules in
eight European countries.
The European Commission,
the bloc’s antitrust watchdog,
commission has been investi-
gating Gazprom—which ac-
counts for about a third of Eu-
rope’s natural-gas imports—
for more than five years over
concerns it applies unfair
prices and restrictive terms in
Central and Eastern Europe.
In October, both sides
agreed to settle the issue, al-
lowing the state-owned pro-
ducer and distributor to es-
cape hefty fines and a finding
of guilt in exchange for
changes to its business prac-
tices. Since December, they
have been ironing out details
of Gazprom’s proposals before
submitting them for the so-
called market test.
On Monday, the commission
said Gazprom offered commit-
DIAPERS
Continued from page B1
experimented with both dia-
pers and training pants for her
children and ultimately “just
made them run around the
house in real underwear.”
Some child-care experts say
that training pants, because
they are so similar to diapers,
don’t encourage toilet use.
“No kid will use a trainer
like underwear, which is what
marketers want people to
think,” said Sarah Grover, a
potty-training consultant in
Chicago. “If a child can pee
and poop in there and not get
1993
The year FinTech was coined as a term.
It was the original name of the Financial
Services Technology Consortium, a
project initiated by Citicorp, now
known as Citigroup.
WORLD CLASS PARTNERS | KEYNOTES | FIRESIDE CHATS | PANELS | BREAKOUT SESSIONS
Wall Street Journal readers can receive a special ticket discount when using code: WSFINTECH
Lead Media Partner
Faults Own Oversight
EU antitrust chief Margrethe Vestager in Brussels on Monday.
ments for a duration of eight
years that the regulator be-
lieves will enable cross-border
gas flows at competitive
prices. “They address our com-
petition concerns and provide
a forward-looking solution in
line with EU rules,” said EU
antitrust chief Margrethe Ve-
stager, announcing the start of
the market test.
Gazprom Deputy Chairman
Alexander Medvedev said on
Monday that the commitments
“are a result of substantial
work” and “demonstrate our
willingness to address...the rel-
evant concerns of the Euro-
pean Commission.” He said he
hopes a positive response from
market participants would al-
low the case to be completed
“in the near future.”
Gas companies, govern-
wet, that’s not potty training.”
Huggies in 2016 started a
marketing campaign aimed at
teaching parents to recognize
when children are ready for
potty training and training
pants. It also enlisted a child-
development expert who au-
thors posts on the company’s
website giving advice such as,
“Diapers are for babies. Pull-
Ups are for big kids,” and dis-
couraging parents from re-
turning to diapers once they
have begun using training
pants.
But it avoids specifying an
age when that should begin,
said Arist Mastorides, head of
Kimberly-Clark’s North Ameri-
can childcare business.
UK challenger bank Monzo set the
record for the fastest crowdfunding raise
in history, after securing £1 million in 96
seconds with 1,861 investors.
300+ FINTECHS | 100 INDUSTRY LEADING SPEAKERS | 2000 ATTENDEES
BUSINESS NEWS
mission disclosed its formal
investigation against Gazprom
in 2012, Russian and Gazprom
officials denounced the EU’s
probe as politically motivated
and aimed at forcing the com-
pany to reduce its prices. The
case gained extra significance
once the EU stepped up efforts
FRANCOIS LENOIR/REUTERS
to diversify energy supplies
after the start of the Ukraine
crisis in early 2014.
In spring 2015, Ms. Vestager
then formally charged Gaz-
prom over allegations that it
breached antitrust rules in
Bulgaria, Czech Republic, Esto-
nia, Hungary, Latvia, Lithuania,
ments and other market play- Poland and Slovakia, all coun-
ers have until May 4 to submit tries where the company is the
their comments to the EU. dominant gas supplier.
Should they present Brussels Gazprom has pledged to re-
with strong legal arguments move contractual restrictions
challenging the proposals, fur- that prevented customers from
ther negotiations with the reselling gas across borders,
company might be required. the EU said. In addition, the
Within hours of the EU’s an- company has promised to en-
nouncement, Polish oil-and-gas sure that gas prices in Central
company PGNiG SA said its and Eastern European coun-
“initial assessment shows that tries reflect competitive price
the commitments are insuffi- benchmarks
cient to remove the negative Asked whether settling the
impact.” The state-owned en- case without a fine could be
ergy company said it would seen as appeasing the Russian
submit a detailed response to government, Ms. Vestager said
the EU with “minimum re- that “you have to keep law en-
quirements to be imposed on forcement clear of politics” or
Gazprom.” risk undermining regulators’
Comment from other mar- legitimacy.
ket participants wasn’t imme- —Emre Peker in Brussels and
diately available. James Marson in Moscow
When the European Com- contributed to this article.
“We would never tell mom
implicitly when to start,” he
said. “It’s a hard journey and
it’s messy and time-consum-
Baby Dry diapers.
P&G is pushing hard to
catch up with Kimberly-Clark
in a rivalry that led to a dis-
ing. We’re trying to help edu- pute over advertising.
cate parents on the signs of P&G in January agreed to
readiness to help moms get modify its Easy-Ups advertis-
comfortable with training.” ing after the National Adver-
Competition in training tising Division agreed with a
pants has been intensifying Kimberly-Clark complaint that
between Huggies and chief ri- it was misleading. P&G agreed
val brand, Procter & Gamble to stop saying, “You’ll see
Co.’s Pampers, which was late drier nights,” and to change
to the game but has been gain- the wording of the claim,
ing customers. “doesn’t leak like ordinary
Like Kimberly-Clark, P&G training pants.”
charges more for training But P&G said it would ap-
pants than traditional diapers: peal the regulatory body’s de-
An 80-pack of Pampers Easy- cision that it stop using “the
Ups costs $24.99, similar in best way to potty-train” and
price to a box of 104 Pampers “the easiest way to under-
Monday 10 th - Tuesday 11th April
Guildhall, London
25% of UK consumers will use
technology companies for half their
banking needs or more by 2020.
SECONDS
Every year the Innovate Finance Global
Summit welcomes the global FinTech
community to London for the biggest
celebration of achievement in FinTech.
FULL 2017 PROGR AMME ANNOUNCED
Platinum Sponsor
Tuesday, March 14, 2017 | B3
BY BRIAN BLACKSTONE
ZURICH—ABB Ltd. said lax
controls played a part in the
fraud and embezzlement at its
South Korean unit, costing the
Swiss company an estimated
$73 million in lost pretax
profit—or some $30 million
less than first signaled.
ABB “failed to provide ade-
quate management oversight
and review of the local trea-
sury activities,” the Swiss
power-equipment and auto-
mated-technology company
said Monday.
“Management has con-
cluded that these deficiencies
in the operation of ABB’s in-
ternal controls constituted a
material weakness,” the com-
pany said in its annual report.
ABB said the fraud would
knock last year’s pretax profit
$73 million lower—down from
the company’s previous esti-
mate of a $100 million finan-
cial hit—on expected payouts
from its insurance policies.
Last month, ABB said it had
uncovered a “sophisticated
criminal scheme” orches-
trated by the treasurer of its
South Korean unit, who went
missing. The company sus-
pects that the treasurer forged
documents and colluded with
third parties to steal from it,
before disappearing on Feb. 7.
The treasurer was identi-
wear,” arguing the phrases
constitute so-called puffery, or
vague and subjective advertis-
ing claims.
Pampers Easy-Ups had 23%
of the U.S. training-pants mar-
ket in December, up from 14%
in July, according to Nielsen
data supplied by the company.
Huggies, still the dominant
player, saw its share drop to
53% from 62% in that time.
Overall, U.S. sales of train-
ing pants rose 5.3% to $1 bil-
lion in the 52-week-period
ending Jan. 28, according to
Nielsen. Diaper sales fell 4.4%
to $3.9 billion during that pe-
riod, the first decline in at
least four years.
P&G said it doesn’t encour-
2017
Global VC investment in FinTech
topped £14.2 billion in 2016, with
1,436 deals. China and the US led
the way.
Secure yours today at www.ifgs2017.com
fied last month by a person fa-
miliar with the matter as Oh
Myung-se. Mr. Oh couldn’t be
reached for comment.
ABB uncovered the theft on
Feb. 9 and subsequently de-
layed publication of its latest
annual report. The investiga-
tion, which involves both in-
ternal and external parties, “is
progressing well,” ABB said.
“ABB failed to safeguard
physical access to the signa-
ture seals of the subsidiary in
South Korea and prevent the
company from being bound to
unauthorized financial con-
tracts,” the company said
Monday.
“We have started imple-
menting disciplinary conse-
quences and will continue to
do so as appropriate,” the
company said. An ABB spokes-
man said the company has
suspended parts of the finance
organization in South Korea.
A police officer at the Cheo-
nan Seobuk Police Station de-
clined to comment. ABB Ko-
rea’s plants are in Cheonan,
which is south of Seoul.
The alleged theft marked a
setback for ABB after it had
announced a string of large
orders in its power-grid unit,
including a $640 million proj-
ect to deliver an electricity-
transmission link in India.
—In-Soo Nam in Seoul
contributed to this article.
age parents to start potty-
training earlier.
“We recognize every tod-
dler and every family is
unique, and parents really are
in the best position to deter-
mine when and how to embark
on potty training for their lit-
tle ones,” a P&G spokeswoman
said in an email.
The Cincinnati company
does, however, take issue with
the idea that training pants
are no different than diapers
when it comes to potty train-
ing. Toddlers, for instance, lie
down during a diaper change
but can aid in changing in and
out of training pants and are
generally standing during the
process.
 B4 | Tuesday, March 14, 2017 THE WALL STREET JOURNAL.

TECHNOLOGY WSJ.com/Tech

Fees Slashed in Sprint Case

One lawyer bills 6,905 didn’t respond to emails and
calls seeking comment. Abel-
hours, accounting for son Legal Search didn’t re-
$1.5 million; judge says spond to requests to comment.
ERIC RISBERG/ASSOCIATED PRESS

Mr. Weiser said in the letter

it is ‘unbelievable’ that his firm stands by the ac-
curacy of Mr. Silow’s billing
BY JOE PALAZZOLO records in the Sprint lawsuit,
AND SARA RANDAZZO which alleged the company di-
rectors and officers concealed
Alexander Silow, a contract problems created by the
lawyer for a Pennsylvania merger with Nextel. The com-
Marissa Mayer will remain as Yahoo’s CEO before the deal closes. plaintiffs’ firm, clocked 6,905 pany posted a nearly $30 bil-
hours of work on a share- lion loss as a result of the

MIKE BLAKE/REUTERS
Yahoo Sets Leadership holder lawsuit against former
executives and directors of
Sprint Corp. related to its
deal.
The lawsuit sought to claw
back profits from former

Ahead of Verizon Deal 2005 merger with Nextel. Av-

BY JOSHUA JAMERSON
Yahoo Inc. outlined its
leadership for the business
that will remain after its core
web assets are sold to Verizon
Communications Inc., placing
board director Thomas McIn-
erney at the helm of Yahoo’s
rich stakes in Alibaba Group
Holding Ltd. and Yahoo
Japan.
Chief Executive Marissa
Mayer will continue in the role
prior to the deal’s closing, at
which point she will be suc-
ceeded by Mr. McInerney and
step down from the company’s
board of directors.
After the web assets are
sold off, Yahoo will change its
name to Altaba Inc. The new
name is derived from a combi-
nation of the words “alter-
nate” and “Alibaba,” The Wall
Street Journal has reported.
Yahoo, in a regulatory filing
Monday, said Ms. Mayer will
receive a so-called golden
parachute of $23 million, of
which nearly $3.02 million will
be cash and about $20 million
will be from restricted stock
units she was previously
awarded. Ms. Mayer’s future
with operations that will be-
come part of Verizon is un-
clear, though she has said she
is “planning to stay.”
Mr. McInerney, the former
chief financial officer of IAC/
InterActive Corp., joined Ya-
hoo’s board in 2012, the same
year Ms. Mayer was named
the company’s CEO after she
came over from Google. Mr.
McInerney, 52 years old, was
part of the independent com-
mittee of Yahoo directors run-
ning its auction process last
year. Mr. McInerney would
earn a base salary of $2 mil-
lion a year, plus incentive pay
based on job-performance
goals, according to a separate
regulatory filing on Monday.
Analysts say most of Ya-
hoo’s value stems from its
stakes in Alibaba and Yahoo
Japan, not the core business
being sold to Verizon. Because
the business to be known as
Altaba will consist primarily of
equity investments, short-term
debt investments and cash, it
will register as an investment
company. However, Yahoo
shareholders’ stock in the
company won’t be affected by
the move.
Alexi Wellman, who is vice
president, global controller of
Yahoo, will be Altaba’s finance
and accounting chief, accord-
ing to a filing. She joined Ya-
hoo in 2013 as vice president,
finance. Arthur Chong, who
was a legal adviser for Yahoo
from October through last
Thursday, will serve as general
counsel and secretary, and
DeAnn Fairfield Work, another
outside legal adviser to the
company, will be chief compli-
ance officer. Mr. Chong’s new
role was effective last Friday
while the others will take their
new roles post-sale.
eraging about 13 hours a day,
Mr. Silow reviewed 48,443
documents and alone ac-
counted for $1.5 million, more
than a quarter of the re-
quested legal fees, according
to court documents.
“Unbelievable!” is how
Judge James Vano in Kansas
described the billing records.
And he meant it.
“It seems that the vast
amount of work performed on
this case was illusory, perhaps
done for the purpose of inflat-
ing billable hours,” Judge
Vano, who sits in Olathe, Kan.,
wrote in a Nov. 22 opinion.
Courts often slash what
they see as excessive billing in
securities and other litigation,
but rarely are they so scath-
ing, legal experts said. Judge
Vano’s ruling might have gone
unnoticed but for a recent dis-
closure about Mr. Silow by the
law firm where he worked: He
was disbarred in 1987 and
practiced law illegally for de-
cades.
The revelation, contained in
a February letter to Judge
Vano, could rupture a settle-
ment in the Sprint case, and
provide grist for corporate
groups and others that have
highlighted alleged abuses in
the civil-justice system, fuel-
ing current momentum for
legislative change.
A Republican bill passed on
Thursday by the House would
make it harder to file class ac-
tions, curtailing lawyer-driven
litigation that provides little
benefit to shareholders and
The shareholder suit was related to Sprint’s merger with Nextel.
consumers, its supporters say.
Plaintiffs’ lawyers and con-
sumer-rights advocates say
the legislation would reduce
access to the courts and blunt
litigation that has improved
corporate governance and
forced companies to pull un-
safe drugs and faulty products
from shelves.
Courts regularly bless mul-
timillion-dollar fee awards in
recognition of the risk plain-
tiffs’ firms take by fronting
the costs for litigation. But fee
experts said bill-padding is
pervasive in class actions and
shareholder suits because bill-
ing records aren’t reviewed by
clients and are scrutinized
only when a judge needs to
approve a settlement or award
fees after trial.
William G. Ross, a law pro-
fessor at Samford University
in Alabama who has written
two books on attorney bill-
ing, said his most recent sur-
vey of lawyers showed that
two-thirds were personally
aware of bill-padding and
more than half admitted they
sometimes performed work
they otherwise wouldn’t have
done had they been charging
a flat fee.
Plaintiffs’ firms bill for
work done by contract attor-
neys like Mr. Silow at hourly
rates of $300 or more when
they submit their fee requests,
but they typically pay the at-
torneys $20 to $40, said Les-
Sprint directors and officers,
who it accused of incompe-
tence and self-dealing. But a
settlement reached last year
ter Brickman, an emeritus pro- was more modest. Sprint
fessor at Benjamin N. Cardozo agreed to changes to its cor-
School of Law in New York porate governance and the
who has written about bill- composition of its board of di-
padding. Mr. Brickman said it rectors.
is common for firms to staff Judge Vano approved the
cases with contract attorneys deal in his November ruling
and direct them to review but slashed the proposed legal
thousands of documents to fees for plaintiffs’ attorneys
run up the fees. from $4.25 million to
Mr. Silow had been working $450,000.
as a contract attorney for at “The focus appears to have
least eight years when staffing been upon an easy, cheap set-
agency Abelson Legal Search tlement in the first instance,”
placed him at the Weiser Law Judge Vano wrote.
Firm PC in Berwyn, Pa., in The plaintiffs’ lawyers—Mr.
2008, according to a Feb. 3 Weiser’s firm, Florida lawyers
letter from the firm to Judge Alison Leffew and Bruce G.
Vano. Murphy and the Kansas City
The law firm was contacted firm Dollar Burns & Becker
last month by a third party it LC—have appealed Judge
declined to name and learned Vano’s ruling on the fees. They
that no one with Mr. Silow’s argued the results of the set-
name was listed in a state da- tlement, rather than the hours
tabase of licensed lawyers, billed, justified the amount
Robert B. Weiser, co-founder sought.
of the firm, said in the letter. In court documents, Mr.
Mr. Weiser said Mr. Silow Weiser and the other plain-
presented himself to the firm tiffs’ lawyers representing a
as Alexander J. Silow, but Sprint shareholder said Mr. Si-
“was in actuality named Jef- low’s “extensive document re-
frey M. Silow” and confessed view” enabled them to make
he had been disbarred when “well-informed decisions.”
the firm confronted him, the Michael Hartleib, a Sprint
letter said. The firm has shareholder who objected to
ended its relationship with the settlement, asked the Kan-
Mr. Silow and alerted authori- sas appeals court last month
ties, it said. to return the case to Judge
Pennsylvania’s attorney dis- Vano’s court so he can recon-
cipline office confirmed Mr. sider the deal in light of the
Silow was disbarred in 1987 new evidence showing Mr. Si-
but could provide no addi- low had no license to practice
tional information. Mr. Silow law.

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THE WALL STREET JOURNAL.
U.S. Rate Policy Risks Trouble for China
Fed’s signals about
borrowing costs are
critical for yuan,
nation’s central bank
BY SAUMYA VAISHAMPAYAN
The Federal Reserve could
revive a pesky problem for
China’s central bank Wednes-
day, depending on the signal it
delivers about the path of U.S.
interest rates.
A recent round of speeches
by Fed policy makers already
has investors fairly confident
of an increase to short-term
rates at this week’s policy
meeting. Any indication that
officials are ready to lift rates
more than the three times
they currently project for 2017
Buyout Firm Buys $800 Million in Assets From Self
BY SIMON CLARK
Buyout firms face increas-
ing competition from patient
investors like sovereign-
wealth funds. One has found a
way to play them at their own
game: Investindustrial, a Eu-
ropean buyout firm, is creat-
ing a new fund to buy €750
million ($800 million) of as-
sets it already owns.
The reason: It thinks it can
make more money by holding
on to the portfolio—including
a controlling stake in the oper-
ator of a Ferrari-themed
amusement park in Spain—for
longer than the maximum 10
years it originally intended. In
doing so, it is breaking with
the tradition for buyout firms
to raise funds that last a de-
cade, buying and then selling
companies before the fund ex-
pires.
Investindustrial, founded by
Italian deal maker Andrea
Bonomi, has decided on this
novel course of action as it re-
sponds to greater competition
for assets from institutions
such as sovereign-wealth
funds, which don’t have re-
strictions on how long they
can own companies. The com-
petition is pressuring buyout
firms to devise new ways to
own companies.
Historically, buyout special-
ists took pride in their ability
to turn around the fortunes of
Bankers
FaceBans
In 1MDB
Fallout
BY JAKE MAXWELL WATTS
AND P.R. VENKAT
SINGAPORE—Singapore’s
central bank banned a former
Goldman Sachs Group Inc.
banker from operating in the
financial sector and said it
plans to ban three more peo-
ple from other banks, follow-
ing investigations linking them
to alleged financial fraud in-
volving Malaysian state fund
1Malaysia Development Bhd.
The Monetary Authority of
Singapore said in a statement
Monday it would ban Tim
Leissner, who was the director
of Goldman’s local branch and
the firm’s Southeast Asia chair-
man, for 10 years after it found
he had made false statements
without the bank’s knowledge.
The other individuals facing
bans have been found guilty by
Singapore courts of various fi-
nancial crimes related to
1MDB. They are Yak Yew Chee
and Yvonne Seah, former bank-
ers at the Singapore branch of
Swiss private bank BSI SA, and
Jens Sturzenegger, a former
Singapore branch manager of
Falcon Private Bank. The MAS
is proposing lifetime bans for
Mr. Sturzenegger and Mr. Yak.
Ms. Seah faces a 15-year ban.
The bans effectively pre-
vent the four individuals from
performing any service or ac-
tivity in Singapore’s financial
markets, including providing
financial advice or represent-
ing a financial firm.
Mr. Leissner was Goldman’s
point man on lucrative deals
involving 1MDB, The Wall
Street Journal has reported.
The MAS in December said it
planned to ban Mr. Leissner
after it found he had written a
recommendation letter for a
Malaysian financier, Jho Low,
could send the dollar higher.
That includes against the
yuan, especially in the off-
shore market where it trades
more freely than it does do-
mestically.
The People’s Bank of China
will again have to closely mon-
itor trading in hubs like Hong
Kong for bearish yuan bets to
ensure that the onshore and
offshore markets don’t diverge
too much.
If enough negative yuan
wagers accumulate, the PBOC
might even decide to intervene
in the offshore market, ana-
lysts say, as it has on several
occasions in the past two
years. A pullback in the dollar
over the past two months has
given the central bank some
breathing room. The offshore
yuan has gained 1.1% against
The new Ferrari Land complex in PortAventura amusement park in Tarragona, Spain
ailing companies and sell them
for a big profit within five
years.
“There used to be no alter-
native to selling,” Carl Nauck-
hoff, head of investor relations
at Investindustrial, said in an
interview.
Investindustrial’s move to
hold on to PortAventura park
for longer comes as fierce
competition is pushing up
prices for companies, meaning
Singapore plans to ban four people from its finance sector.
in June 2015. In it, Mr. Leiss-
ner falsely claimed that Gold-
man had performed due dili-
gence on Mr. Low.
Mr. Low, whose full name is
Low Taek Jho, is considered by
investigating authorities in the
U.S. the mastermind of a mas-
sive alleged fraud at 1MDB that
spread world-wide. Some inves-
tigators have described it as
one of the world’s largest-ever
financial swindles. Mr. Low took
no formal role at 1MDB but ran
the fund behind the scenes, say
people who worked there.
1MDB didn’t reply to a re-
quest for comment on Monday.
The fund has previously denied
wrongdoing and said it would
cooperate with any lawful in-
vestigation. Malaysian authori-
ties have cleared 1MDB of
wrongdoing. Attempts to reach
Mr. Low, who has denied
wrongdoing, were unsuccessful.
Goldman said previously
that it had reported Mr. Leiss-
ner’s dealings with Mr. Low to
Singapore authorities and
would cooperate with authori-
ties. The bank said Monday it
stood by that statement. Mr.
Leissner left Goldman in Feb-
ruary last year after the bank
put him on leave. Attempts to
reach a representative for Mr.
Leissner weren’t successful.
Falcon Bank’s Mr.
Sturzenegger was convicted of
several financial crimes includ-
ing failing to report suspicious
transactions and providing
false information to authorities
in an attempt to cover up his
Tuesday, March 14, 2017 | B5
FINANCE & MARKETS
the dollar this year, according zied than at the start of this the borrowing costs for the yuan further.
to Thomson Reuters data. year when the forwards mar- currency and so making it Chinese authorities have
Chinese officials “won’t ket pointed to one dollar buy- much more costly to short the clamped down on many of the
want to see the renminbi drop ing 7.33 yuan in a year’s time. yuan. The pool of yuan float- channels through which
too fast because of the U.S. The evidence from the past ing around Hong Kong is money can leave its borders,
dollar’s strength,” said Ken two years suggests that the shrinking—yuan deposits tum- which has lessened the pres-
Cheung, Asian foreign-ex- PBOC can very easily squeeze bled nearly 40% in the year sure for now. But most inves-
change strategist at Mizuho through January, according to tors still expect a decline in
Bank in Hong Kong. That is es- the Hong Kong Monetary Au- the yuan against the dollar
pecially the case this year, thority—making it less costly this year, pointing to the di-
when stability is the key goal
The People’s Bank for the central bank to push vergence of interest rates and
of China’s leaders. PBOC Gov- could again have to up borrowing costs in this economic growth between the
ernor Zhou Xiaochuan said way. two countries. Bank of Amer-
last week that the yuan’s ex-
watch for bearish bets The central bank wants to ica Merrill Lynch analysts rec-
change rate will stay largely against the currency prevent the offshore yuan ommend betting on dollar
steady in 2017. from falling significantly more strength against the offshore
Pricing in the forwards than the onshore yuan because yuan through the options mar-
market indicates the offshore a divergence tends to increase ket.
yuan will weaken 3.2% in the investors out of their bearish pressure on capital outflows. “President Trump will need
next year, to 7.12 to the dollar, bets in Hong Kong, market If individuals and companies a weak [dollar], but President
according to Thomson Reu- participants say. believe the yuan will depreci- Xi needs a weak [yuan],” the
ters. Depreciation expectations One option would be to di- ate, they are more likely to analysts wrote in a note. “We
have picked up recently, rect state-owned banks to buy swap it for foreign currencies believe risk premium for a col-
though they remain less fren- up yuan offshore, driving up like the dollar—weakening the lision course is too low.”
to buy PortAventura have the
option to reinvest in the new
fund or sell their stakes to
GIAN MATTIA D’ALBERTO/LAPRESSE/ZUMA PRESS
other investors who want to
stay in. Investors representing
55% of the money in the origi-
nal fund have returned to the
new fund. The 2008 fund has
outperformed its target of
generating a 25% gross inter-
nal rate of return. AlpInvest
Partners NV is underwriting
the new fund, which will also
raise an additional €115 mil-
lion to invest in the compa-
Andrea Bonomi nies.
While it is very unusual for
competitive as the amount of buyout firms to buy their own
“dry powder” private-equity companies from themselves,
firms have to buy assets firms regularly acquire compa-
soared to a record $820 billion nies from rivals in transac-
in 2016. tions known as secondary buy-
INVESTINDUSTRIAL
This is forcing firms to con- outs. When a secondary
sider how they can make more buyout is sold to yet another
money with existing assets as private-equity firm, it is
well as searching for new op- known as a tertiary buyout.
portunities. The deal could mark the
Investindustrial is creating start of a trend because the
a new five-year fund to repur- increasing size of the buyout
it increasingly makes more more than the traditional 10- chase the stakes in companies industry means many more
sense to hold on to assets than year maximum. it first acquired with a €1 bil- funds are coming to the end of
to sell. Some sovereign-wealth Buyout firms raise funds lion, 10-year fund raised in their lives than in the past,
funds and pension funds—tra- from investors to acquire com- 2008. said Pablo de la Infiesta, a
ditional investors in buyout panies, which they try to im- The new fund allows In- banker at Lazard Ltd. who ad-
funds—are increasingly com- prove before selling for a mul- vestindustrial to keep control vised on the transaction.
peting directly for assets. And tiple of the purchase price. of PortAventura. The resort’s “Investindustrial has set a
they can hold them for as long They usually raise new funds earnings before interest, taxes, new direction,” Mr. de la Infi-
as they want. In response, to buy new companies when depreciation and amortization esta said in an interview. “I
buyout firms like New York- all the money in their last have almost tripled to €95 think everybody who has as-
based Blackstone Group LP fund is spent and they have million since Investindustrial sets sitting in a fund that is
are raising longer-term funds started to sell the assets. That bought the company in 2009. coming to the end of its life
so they can own companies for process is becoming more Investors in the fund used will be thinking about it.”
U.S. Agencies Set to Battle
ROSLAN RAHMAN/AGENCE FRANCE-PRESSE/GETTY IMAGES
BY YUKA HAYASHI Court of Appeals for the Dis- countable and that the initial
trict of Columbia Circuit, Jus- decision made by the three-
WASHINGTON—A court
case questioning the structure
of the Consumer Financial
tice Department lawyers led
by Chad Readler, acting assis-
tant attorney general, didn’t
judge panel at the D.C. Circuit
court was correct.
In a Friday filing related to
Protection Bureau is about to
take an unusual turn, with the
Trump administration’s Jus-
specifically say they would op-
pose the CFPB, but alluded to
their position by saying that
the rehearing, PHH said the
CFPB was plagued by “many
constitutional problems” and
tice Department expected to “the views of the U.S. on mat- that giving the president
oppose the independent ters involving the president’s power to remove the director
watchdog agency—one of only removal power aren't always at will won’t be enough to re-
a few instances in recent de- entirely congruent with the solve the case. “The appropri-
cades where two federal enti- view of independent agencies.” ate remedy is to strike down
ties square off in court. “It would be a significant the CFPB in its entirety,” law-
Justice Department lawyers development if you have the yers representing PHH wrote.
indicated earlier in March that Department of Justice arguing “There can be no remand to an
relationship with Mr. Low. they would side with PHH that a federal statute is uncon- unconstitutional agency.”
A lawyer for Mr. Sturzeneg- Corp., the mortgage lender stitutional,” said Joe Palmore, Legal experts say court
ger declined to comment. Falcon challenging the CFPB’s struc- co-chairman of the appellate cases in which two govern-
Bank declined to comment, but ture, as they requested an ex- and Supreme Court practice ment entities confront each
has previously said that it is ini- tension of the deadline for group at law firm Morrison & other are extremely rare.
tiating new control measures to submitting briefs weighing in Foerster LLP, who works with Among them, 1988’s Mor-
prevent future issues and that it on the case. trade groups critical of the rison v. Olson stands out ow-
has been cooperating with the The court has extended the CFPB. “The members of the ing to its similarity to the
authorities. BSI declined to deadline to Friday. Oral argu- court would certainly pay at- current case. That case in-
comment Monday. In the past, ments are scheduled for May tention to what the U.S. says.” volved a dispute between the
the bank has said it was cooper- 24. House Judiciary Committee
ating with authorities and tak- The PHH case has gone and the Justice Department
ing steps to improve compli- through various twists and over the appointment of an
ance. A lawyer for Mr. Yak said turns in recent months, as a
The Justice independent counsel to inves-
the former banker respected the federal appeals court ruled Department is tigate an Environmental Pro-
MAS ban. A lawyer for Ms. Seah that the CFPB’s structure was tection Agency program. A
didn’t immediately respond to a unconstitutional and gave the
heading for a court Justice Department lawyer ar-
request for comment. president power to remove its fight with the CFPB. gued that naming an indepen-
Mr. Yak and Ms. Seah were director at will. The holding dent counsel who couldn’t be
both convicted late last year was invalidated four months removed by the president was
after pleading guilty to multi- later by the same court, pav- a violation of the Constitu-
ple counts of failing to report ing the way for a rehearing. Trump administration offi- tion’s separation of powers
suspicious transactions and of Meanwhile, the case has be- cials have indicated they want clause. The lawyer, whose
forging reference letters on come part of a thorny political to install new leadership at claim was rejected by the Su-
behalf of Mr. Low. battle as Republicans look for the CFPB but have acknowl- preme Court, was Theodore
The use of Singapore’s ways to weaken the CFPB, edged the pending court case Olson, then assistant attorney
banking system to funnel hun- which they have long criti- is an obstacle. A White House general for the Office of Legal
dreds of millions of dollars in cized as an example of regula- representative said last month Counsel, who now represents
allegedly stolen funds has em- tory overreach. that President Donald Trump PHH in the case against the
barrassed authorities here, In the request to the U.S. believed the CFPB was unac- CFPB.
who in the past year have
taken action to penalize banks
involved in allegedly moving
1MDB money, including shut-
Advertisement INTERNATIONAL INVESTMENT FUNDS
tering the local branches of
both Falcon Bank and BSI. [ Search by company, category or country at europe.WSJ.com/funds ]
Ong Chong Tee, deputy
managing director of financial NAV —%RETURN—
FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR
supervision at the MAS, said
n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866
in a statement that the central Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg
bank “will not tolerate con- CAM-GTF Limited OT OT MUS 03/03 USD 304140.17 0.7 8.6 -4.8
duct by any finance profes-
sional that threatens to under- Data as shown is for information purposes only. No offer is being made by
Morningstar, Ltd. or this publication. Funds shown aren’t registered with the
For information about listing your funds,
mine trust and confidence in U.S. Securities and Exchange Commission and aren’t available for sale to United
States citizens and/or residents except as noted. Prices are in local currencies.
please contact: Freda Fung tel: +852 2831
Singapore’s financial system.” All performance figures are calculated using the most recent prices available. 2504; email: freda.fung@wsj.com
B6 | Tuesday, March 14, 2017 THE WALL STREET JOURNAL.

MARKETS DIGEST
Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
19633.75 s 29.14, or 0.15% Year-to-date s 2.72% 374.64 s 1.41, or 0.38% Year-to-date s 3.66% 2373.47 s 0.87, or 0.04% Trailing P/E ratio * 24.68 23.02
High, low, open and close for each 52-wk high/low 19633.75 14952.02 High, low, open and close for each 52-wk high/low 375.69 308.75 High, low, open and close for each P/E estimate * 18.27 16.72
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 1.98 2.27
All-time high: 2395.96, 03/01/17

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

20000 380 2380

19500 370 2340

19000 360 2300

18500 65-day moving average 350 2260

65-day moving average Session high

DOWN UP 65-day moving average
18000 340 2220
t

Session open Close

Close Open
t

17500 330 2180

Session low
Bars measure the point change from session's open
17000 320 2140
Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar.

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 2675.66 7.15 0.27 2193.75 • 2694.43 5.8 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1770.50 6.60 0.37 1471.88 • 1956.39 3.2 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 938.44 12.30 1.33 691.21 • 1044.05 18.2 5.250 Australia 2 1.902 52.2 57.6 60.3 107.8 1.927 1.809 2.034
4.750 10 2.945 33.7 41.2 27.8 70.4 2.989 2.712 2.688
Americas DJ Americas 571.06 0.66 0.12 480.90 • 577.65 5.7
3.000 Belgium 2 -187.8 -184.9 -174.1 -132.7 -0.498 -0.535 -0.371
-0.498
Brazil Sao Paulo Bovespa 65596.78 921.32 1.42 46520.81 • 69487.58 8.9
0.800 10 0.964 -164.3 -159.1 -155.3 -145.5 0.986 0.880 0.529
Canada S&P/TSX Comp 15536.15 29.47 0.19 13217.17 • 15943.09 1.6
0.000 France 2 -0.466 -184.6 -180.4 -171.0 -135.2 -0.453 -0.504 -0.397
Mexico IPC All-Share 47077.48 –24.83 –0.05 43902.25 • 48956.06 3.1
0.250 10 1.092 -151.6 -145.3 -140.7 -144.3 1.123 1.026 0.541
Chile Santiago IPSA 3515.67 52.26 1.51 2998.64 • 3519.84 9.1
0.000 Germany 2 -0.816 -219.6 -218.7 -199.6 -141.6 -0.835 -0.790 -0.461
U.S. DJIA 20881.48 –21.50 –0.10 17063.08 • 21169.11 5.7
0.250 10 0.470 -213.8 -209.0 -209.8 -171.4 0.487 0.335 0.270
Nasdaq Composite 5875.78 14.06 0.24 4574.25 • 5911.79 9.2
0.300 Italy 2 0.028 -135.2 -132.9 -121.4 -99.3 0.022 -0.009 -0.037
S&P 500 2373.47 0.87 0.04 1991.68 • 2400.98 6.0
1.250 10 2.370 -23.8 -20.9 -20.6 -65.2 2.368 2.227 1.333
CBOE Volatility 11.33 –0.33 –2.83 9.97 • 26.72 –19.3
0.100 Japan 2 -0.256 -163.6 -161.4 -141.5 -111.7 -0.262 -0.210 -0.162
EMEA Stoxx Europe 600 374.64 1.41 0.38 308.75 • 375.69 3.7 0.100 10 0.088 -252.0 -248.7 -234.2 -199.5 0.090 0.091 -0.011
Stoxx Europe 50 3108.37 7.01 0.23 2626.52 • 3120.09 3.2 4.000 Netherlands 2 -0.816 -219.6 -218.9 -191.0 -140.5 -0.837 -0.704 -0.449
Austria ATX 2836.15 10.04 0.36 1981.93 • 2845.05 8.3 0.750 10 0.730 -187.8 -183.1 -191.8 -160.5 0.746 0.515 0.379
Belgium Bel-20 3771.04 6.39 0.17 3127.94 • 3778.90 4.6 4.450 Portugal 2 0.019 -136.1 -133.2 -119.2 -69.5 0.019 0.014 0.261
France CAC 40 4999.60 6.28 0.13 3955.98 • 5022.10 2.8 2.875 10 3.982 137.5 146.4 155.5 77.0 4.040 3.988 2.754
Germany DAX 11990.03 26.85 0.22 9214.10 • 12082.59 4.4 2.750 Spain 2 -0.092 -147.2 -145.3 -148.3 -97.5 -0.101 -0.277 -0.019
Greece ATG 651.25 2.66 0.41 517.10 • 670.21 1.2 1.500 10 1.895 -71.3 -71.1 -77.1 -50.2 1.866 1.662 1.482
Hungary BUX 32686.30 –40.94 –0.13 25126.36 • 34334.92 2.1 4.250 Sweden 2 -0.554 -193.4 -191.8 -174.6 -155.4 -0.567 -0.541 -0.599
Israel Tel Aviv 1440.11 0.90 0.06 1372.23 • 1504.42 –2.1 1.000 10 0.771 -183.7 -179.5 -171.5 -136.9 0.782 0.718 0.615
Italy FTSE MIB 19706.95 48.58 0.25 15017.42 • 19810.77 2.5 1.750 U.K. 2 0.098 -128.2 -125.3 -109.2 -39.2 0.098 0.114 0.564
Netherlands AEX 511.90 0.76 0.15 409.23 • 514.04 5.9 4.250 10 1.248 -136.0 -134.1 -104.1 -40.8 1.235 1.392 1.577
Poland WIG 59322.58 1006.47 1.73 42812.99 • 60021.25 14.6 1.125 U.S. 2 1.380 ... ... ... ... 1.351 1.206 0.955
Russia RTS Index 1069.14 13.21 1.25 818.95 • 1196.99 –7.2 2.250 10 2.608 ... ... ... ... 2.577 2.433 1.984
Spain IBEX 35 9995.90 –10.50 –0.10 7579.80 • 10091.40 6.9
Sweden SX All Share 562.65 2.43 0.43 443.66 • 564.93 5.3 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 8683.05 13.08 0.15 7475.54 • 8702.62 5.6 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 51855.38 585.84 1.14 48935.90 • 54704.22 2.4 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 3/10/2017
Turkey BIST 100 89429.73 –181.67 –0.20 70426.16 • 91437.77 14.5
One-Day Change Year Year
U.K. FTSE 100 7367.08 24.00 0.33 5788.74 • 7394.61 3.1 Commodity Exchange Last price Net Percentage high low
360.75 -3.50 -0.96% 387.25 357.50
Asia-Pacific DJ Asia-Pacific TSM 1530.40 9.95 0.65 1308.52 • 1540.02 7.6 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 1006.25 -0.25 -0.02 1,088.25 1,001.25
Australia S&P/ASX 200 5757.30 –18.30 –0.32 4924.40 • 5816.30 1.6
Wheat (cents/bu.)
CBOT
CBOT 430.25 -10.25 -2.33 477.00 416.25
China Shanghai Composite 3237.02 24.26 0.76 2806.91 • 3282.92 4.3
Live cattle (cents/lb.) CME 108.025 0.525 0.49% 109.625 103.150
Hong Kong Hang Seng 23829.67 261.00 1.11 19694.33 • 24201.96 8.3
Cocoa ($/ton) ICE-US 2,016 82 4.24 2,273 1,869
India S&P BSE Sensex 28946.23 … Closed 24551.17 • 29048.19 8.7
Coffee (cents/lb.) ICE-US 142.55 1.20 0.85 159.30 136.70
Japan Nikkei Stock Avg 19633.75 29.14 0.15 14952.02 • 19633.75 2.7
Sugar (cents/lb.) ICE-US 18.24 0.02 0.11 21.21 17.96
Singapore Straits Times 3147.15 13.80 0.44 2729.85 • 3147.15 9.2
Cotton (cents/lb.) ICE-US 76.84 -0.45 -0.58 79.46 71.55
South Korea Kospi 2117.59 20.24 0.97 1925.24 • 2117.59 4.5 Robusta coffee ($/ton) ICE-EU 2164.00 -6.00 -0.28 2,279.00 2,093.00
Taiwan Weighted 9697.34 69.45 0.72 8053.69 • 9799.76 4.8
Copper ($/lb.) COMEX 2.6280 0.0330 1.27 2.8360 2.4800
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1203.70 2.30 0.19 1,264.90 1,149.70
Silver ($/troy oz.) COMEX 16.980 0.057 0.34 18.540 16.000
Currencies London close on March 13 Aluminum ($/mt)* LME 1,897.50 42.00 2.26 1,939.00 1,688.50
Tin ($/mt)* LME 19,300.00 75.00 0.39 21,225.00 18,760.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Mon YTDchg Copper ($/mt)* LME 5,729.00 57.00 1.00 6,156.00 5,518.00
Country/currency in US$ per US$ (%) Lead ($/mt)* LME 2,263.00 34.00 1.53 2,445.00 2,022.00
20%
Europe Zinc ($/mt)* LME 2,713.00 48.00 1.80 2,958.50 2,555.00
Yen Bulgaria lev 0.5455 1.8332 –1.4 Nickel ($/mt)* LME 10,070.00 -40.00 -0.40 11,095.00 9,430.00
10 s
s Croatia kuna 0.1436 6.964 –2.9 Rubber (Y.01/ton) TCE 263.90 2.20 0.84 n.a. n.a.
Euro Euro zone euro 1.0673 0.9370 –1.4
0 Palm oil (MYR/mt) MDEX 2720.00 -51.00 -1.84 3,123.00 2,717.00
Czech Rep. koruna-b 0.0395 25.319 –1.4
Denmark krone 0.1436 6.9660 –1.5 Crude oil ($/bbl.) NYMEX 49.00 -0.03 -0.06 57.50 48.45
–10 sWSJ Dollar index
Hungary forint 0.003420 292.41 –0.6 NY Harbor ULSD ($/gal.) NYMEX 1.5024 -0.0012 -0.08 1.7752 1.4943
Iceland krona 0.009035 110.68 –2.0 RBOB gasoline ($/gal.) NYMEX 1.6038 -0.0146 -0.90 1.9065 1.5961
–20 Norway krone 0.1170 8.5451 –1.1
0.2459 4.0662 –2.9
Natural gas ($/mmBtu) NYMEX 3.066 -0.008 -0.26 3.5070 2.7370
2016 2017 Poland zloty
Russia ruble-d 0.01699 58.849 –3.9 Brent crude ($/bbl.) ICE-EU 51.41 0.04 0.08 59.53 50.85
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1118 8.9436 –1.8 Gas oil ($/ton) ICE-EU 453.50 -6.25 -1.36 523.50 451.50
Mon Mon
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 0.9936 1.0064 –1.2
Turkey lira 0.2678 3.7340 6.0 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1288 7.7647 0.1
Ukraine hryvnia 0.0375 26.6470 –1.6
Argentina peso-a 0.0645 15.4986 –2.3
India rupee
Indonesia rupiah
0.0151
0.0000748
66.1740 –2.6
13365 –1.2
U.K. pound 1.2235 0.8173 0.9 Cross rates London close on Mar 13
Brazil real 0.3173 3.1514 –3.2 Middle East/Africa
Japan yen 0.008722 114.65 –2.0
Canada dollar 0.7438 1.3445 0.02 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.003183 314.14 –5.9 Bahrain dinar 2.6522 0.3771 –0.03
Chile peso 0.001500 666.80 –0.4 Australia 1.3191 1.6134 1.3103 0.0115 0.1698 1.4074 0.9812 ...
Macau pataca 0.1259 7.9429 0.3 Egypt pound-a 0.0556 17.9783 –0.9
Colombia peso 0.0003344 2990.70 –0.4 Canada 1.3445 1.6447 1.3356 0.0117 0.1732 1.4346 ... 1.0193
Malaysia ringgit-c 0.2249 4.4465 –0.9 Israel shekel 0.2734 3.6583 –4.9
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.6928 1.4434 –0.04 Kuwait dinar 3.2738 0.3055 –0.1 Euro 0.9370 1.1464 0.9309 0.0082 0.1207 ... 0.6971 0.7105
Mexico peso-a 0.0511 19.5853 –5.5
Pakistan rupee 0.0095 104.825 0.4 Oman sul rial 2.5972 0.3850 0.02 Hong Kong 7.7647 9.4985 7.7137 0.0677 ... 8.2860 5.7753 5.8872
Peru sol 0.3042 3.2870 –2.0
Philippines peso 0.0199 50.239 1.3 Qatar rial 0.2746 3.641 0.02 Japan 114.6480 140.2700 113.9100 ... 14.7670 122.3600 85.2900 86.9400
Uruguay peso-e 0.0353 28.350 –3.4
Singapore dollar 0.7076 1.4133 –2.3 Saudi Arabia riyal 0.2667 3.7502 –0.01 1.0064 1.2314 ... 0.0088 0.1296 1.0743 0.7487 0.7632
Venezuela bolivar 0.100150 9.99 –0.1 Switzerland
South Korea won 0.0008729 1145.55 –5.2 South Africa rand 0.0763 13.1058 –4.3
U.K. 0.8173 ... 0.8121 0.0071 0.1053 0.8723 0.6080 0.6198
Asia-Pacific Sri Lanka rupee 0.0066636 150.07 1.1 Close Net Chg % Chg YTD % Chg
0.7581 1.3191 –5.0 Taiwan dollar 0.03230 30.955 –4.6 U.S. ... 1.2235 0.9936 0.0087 0.1288 1.0673 0.7438 0.7581
Australia dollar WSJ Dollar Index 91.59 –0.16 –0.18 –1.45
China yuan 0.1446 6.9145 –0.4 Thailand baht 0.02831 35.320 –1.4 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 0.91222% 0.44130% ¥ TakedaPharm 4502 5344.00 0.87 10.53 £ RoyDtchShell A RDSA 2120.50 0.33 -5.44 Last: 152.04 s 1.28, or 0.85% YTD s 7.8%
Three month 1.13122 0.63955 Asia Titans HK$ TencentHoldings 0700 215.40 1.41 13.55 € SAP SAP 89.16 0.15 7.67
Six month 1.43211 0.91040 HK$ AIAGroup 1299 48.80 -2.98 11.54 ¥ TokioMarineHldg 8766 5096.00 0.41 6.26 € Sanofi SAN 82.04 -0.24 6.68 High 155
One year 1.82122 1.23120 65.12 -0.21 -1.50
¥ AstellasPharma 4503 1554.50 -0.38 -4.25 ¥ ToyotaMtr 7203 6530.00 0.15 -5.06 € SchneiderElectric SU Close 150
Euro Libor AU$ AustNZBk ANZ 31.89 -0.19 4.83 AU$ Wesfarmers WES 44.25 -0.36 5.01 € Siemens SIE 122.90 -0.12 5.22 Low 145
One month -0.39357% -0.31386% AU$ BHP BHP 23.65 -0.08 -5.63 AU$ WestpacBanking WBC 35.13 ... 7.76 CHF Syngenta SYNN 441.00 -0.27 9.57 t
Three month -0.35429 -0.23929 HK$ BankofChina 3988 3.90 3.17 13.37 AU$ Woolworths WOW 26.37 -0.19 9.42 € Telefonica TEF 10.30 -0.39 16.84 50–day 140
Six month -0.24657 -0.12729 HK$ CKHutchison 0001 95.90 0.26 9.10 € Total FP 47.10 -0.35 -3.33 moving average 135
One year -0.11329 -0.00614 HK$ CNOOC 0883 8.92 1.02 -8.04 Stoxx 50 CHF UBSGroup UBSG 16.09 -0.49 0.88
130
Euribor AU$ CSL CSL 124.74 -0.93 24.23 € Unilever UNA 45.44 -0.95 16.17
CHF ABB ABBN 22.71 -0.18 5.73
One month -0.37200% -0.31100% ¥ Canon 7751 3487.00 0.40 5.83 £ Unilever ULVR 3989.50 -1.14 21.17 16 23 30 6 13 20 27 3 10 17 24 3 10
€ ASMLHolding ASML 116.40 -0.17 9.14
Three month -0.33000 -0.22600 ¥ CentralJapanRwy 9022 18695 1.30 -2.78 € Vinci DG 69.91 -0.61 8.05 Jan. Feb. Mar.
€ AXA CS 23.93 0.04 -0.23
Six month -0.24100 -0.13100 HK$ ChinaConstructnBk 0939 6.25 3.31 4.69 £ VodafoneGroup VOD 203.35 -0.25 1.75
€ AirLiquide AI 103.45 1.12 -2.08
One year -0.10800 -0.00800 HK$ ChinaLifeInsurance 2628 24.00 2.35 18.81 CHF ZurichInsurance ZURN 283.60 0.32 1.14
169.85
Yen Libor HK$ ChinaMobile 0941 84.50 0.12 2.80
€
€
Allianz
AB InBev
ALV
ABI 100.90
0.41
0.20
8.18
0.35 DJIA Stoxx 50
One month -0.04914% -0.05843% HK$ ChinaPetro&Chem 0386 5.84 0.69 6.18 £ AstraZeneca AZN 4815.00 1.17 8.51 Last: 3108.37 s 7.01, or 0.23% YTD s 3.2%
Three month -0.00214 -0.00329 AU$ CmwlthBkAust CBA 84.30 -0.24 2.29 € BASF BAS 89.04 -0.29 0.83
$ AmericanExpress AXP 79.20 -0.23 6.91
Six month 0.02714 0.01586 ¥ EastJapanRailway 9020 10170 1.35 0.69 € BNP Paribas BNP 61.18 -1.10 1.04
$ Apple AAPL 139.20 0.04 20.19 3100
One year 0.12829 0.10786 ¥ Fanuc 6954 22320 ... 12.64 £ BT Group BT.A 331.60 -3.17 -9.62
$ Boeing BA 179.05 0.20 15.01
$ Caterpillar CAT 92.66 0.38 -0.09 3025
Offer Bid ¥ Hitachi 6501 633.70 0.59 0.27 € BancoBilVizAr BBVA 6.88 -0.12 7.33
TW$ Hon Hai Precisn 2317 90.00 0.11 6.89 $ Chevron CVX 109.35 -1.14 -7.09 2950
Eurodollars € BancoSantander SAN 5.46 -0.53 10.12
¥ HondaMotor 7267 3554.00 -1.14 4.07 $ CiscoSystems CSCO 34.10 -0.47 12.84
One month 0.9500% 0.8500% £ Barclays BARC 230.20 -0.71 3.02 2875
KRW HyundaiMtr 005380 146000 ... ... $ Coca-Cola KO 42.03 0.26 1.37
Three month 1.2000 1.1000 € Bayer BAYN 107.25 0.47 8.19
2800
HK$ Ind&Comml 1398 5.06 3.05 8.82 $ Disney DIS 111.55 0.57 7.03
Six month 1.3500 1.2500 £ BP BP. 463.50 -1.53 -9.05
$ DuPont DD 81.24 0.47 10.68
One year 1.7500 1.6500 ¥ JapanTobacco 2914 3845.00 1.08 0.03 £ BritishAmTob BATS 5139.00 0.61 11.20 2725
¥ KDDI 3029.00 1.46 2.35
$ ExxonMobil XOM 81.42 -0.23 -9.79
Latest 52 wks ago 9433 € Daimler DAI 70.82 1.17 0.14 $ GeneralElec GE 29.86 -1.39 -5.51 16 23 30 6 13 20 27 3 10 17 24 3 10
¥ Mitsubishi 8058 2510.50 0.16 0.82 € DeutscheTelekom DTE 15.98 -0.59 -2.26 Jan. Feb. Mar.
Prime rates $ GoldmanSachs GS 248.16 -0.09 3.64
¥ MitsubishiElectric 6503 1692.50 -0.21 3.87 £ Diageo DGE 2271.00 0.09 7.63
U.S. 3.75% 3.50% $ HomeDepot HD 147.47 0.42 9.99
¥ MitsubishiUFJFin 8306 767.90 -0.22 6.62 € ENI ENI 14.65 0.14 -5.30
Canada 2.70 2.70 $ Intel INTC 35.16 -2.09 -3.06
1697.00 0.12 5.60 1677.50
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥
¥
Mitsui
Mizuho Fin
8031
8411 213.90 -0.09 1.95
£
£
GlaxoSmithKline
HSBC Hldgs
GSK
HSBA 672.10
0.30
0.81
7.39
2.31
$
$
IBM
JPMorganChase
IBM
JPM
176.45
91.36
-0.78
0.09
6.30
5.88
Dow Jones Industrial Average P/E: 21
¥ NTTDoCoMo 9437 2733.50 2.07 2.65 € INGGroep INGA 14.54 -0.51 8.79 $ J&J JNJ 126.69 0.38 9.96 Last: 20881.48 t 21.50, or 0.10% YTD s 5.7%
Policy rates
ECB 0.00% 0.05%
AU$ NatAustBnk NAB 33.14 -0.06 8.05 £ ImperialBrands IMB 3859.50 0.31 8.95 $ McDonalds MCD 127.63 -0.27 4.86
Britain 0.25 0.50
¥ NipponTeleg 9432 4963.00 1.35 1.04 € IntesaSanpaolo ISP 2.46 0.99 1.24 $ Merck MRK 64.14 -1.52 8.95 20900
Switzerland 0.50 0.50
¥ NissanMotor 7201 1157.50 -0.04 -1.53 € LVMHMoetHennessy MC 198.25 0.94 9.29 $ Microsoft MSFT 64.71 -0.34 4.14
¥ Panasonic 6752 1292.50 0.62 8.66 £ LloydsBankingGroup LLOY 68.54 -0.32 9.65 $ Nike NKE 56.68 0.44 11.51
20250
Australia 1.50 2.00
HK$ PingAnInsofChina 2318 41.75 0.72 7.60 € LOreal OR 176.45 -0.51 1.76 $ Pfizer PFE 34.12 0.03 5.05
U.S. discount 1.25 1.00 19600
Fed-funds target 0.50 0.25
$ RelianceIndsGDR RIGD 38.85 3.05 23.14 £ NationalGrid NG. 980.60 0.19 3.05 $ Procter&Gamble PG 91.32 0.27 8.61
Call money 2.50 2.25
KRW SamsungElectronics 005930 2030000 1.05 12.65 CHF Nestle NESN 75.90 0.60 3.90 $ 3M MMM 191.52 0.16 7.25 18950
¥ Seven&I Hldgs 3382 4380.00 0.23 -1.64 CHF Novartis NOVN 75.75 -0.46 2.23 $ Travelers TRV 122.14 -0.56 -0.23
Overnight repurchase rates 18300
U.S. 0.53% 0.45%
¥ SoftBankGroup 9984 8413.00 0.57 8.35 DKK NovoNordiskB NOVO-B 235.40 ... -7.58 $ UnitedTech UTX 112.31 0.15 2.45
Euro zone n.a. n.a.
¥ Sony 6758 3659.00 -0.05 11.73 £ Prudential PRU 1664.50 1.28 2.27 $ UnitedHealth UNH 170.23 0.15 6.37 16 23 30 6 13 20 27 3 10 17 24 3 10
¥ Sumitomo Mitsui 8316 4362.00 -0.75 -2.20 £ ReckittBenckiser RB. 7276.00 -0.61 5.66 $ Visa V 90.13 0.45 15.52 Jan. Feb. Mar.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 113.30 0.80 15.61 £ RioTinto RIO 3304.50 3.96 4.62 $ Verizon VZ 49.47 0.24 -7.32 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 186.50 1.63 2.75 CHF RocheHldgctf ROG 259.60 0.43 11.61 $ Wal-Mart WMT 69.95 -0.21 1.20 Sources: WSJ Market Data Group; Birinyi Associates
THE WALL STREET JOURNAL.
Email: heard@wsj.com
Air Products’
Yingde Bid
Is Losing Air
Air Products & Chemi-
cals’ aspirations to be big in
China may be deflated soon.
The U.S. gas giant has been
circling around its largest ri-
val in China, Yingde Gases,
for months. The Pennsylva-
nia-based company had made
public its nonbinding bid of
up to $1.5 billion in January,
but has insisted on doing a
proper due diligence before
making the offer formal.
Yingde, which was em-
broiled in a boardroom tussle,
had dragged its feet in open-
ing its books. By the time it
finally relented last month,
Air Products might have al-
ready missed its best chance.
Hong Kong-based private-eq-
uity company PAG, led by
seasoned deal maker Weijian
Shan, swooped in with a firm
bid. Yingde’s three biggest
shareholders, owning about
42% of the company, agreed
to accept the offer, unless
there is a better bid.
And PAG has been buying
shares from other holders,
according to a person famil-
iar with the deal. It has al-
ready bought more than 15%
of Yingde—which appears to
be enough to block Air Prod-
ucts from privatizing the
company.
According to FactSet, a big
trade involving 79.7 million
shares, or 4.2% of the com-
pany, was done Monday at 6
Hong Kong dollars (77 U.S.
cents) a share—PAG’s offer
price.
Yingde’s shares have
traded above PAG’s HK$6 of-
fer price since the start of
the month. If Air Products is
really nudged out of the way,
that premium should disap-
pear. Air Products is already
fighting an uphill battle to
outbid PAG because the lat-
ter’s offer wasn’t conditional
on regulatory approval. It
may have to throw in the
towel. —Jacky Wong
HEARD ON THE STREET
HSBC Investors Get New Hope
HSBC is stepping out of
its comfort zone in picking
its first chairman from out-
side its executive ranks. In
Mark Tucker, the hard-
charging entrepreneurial
chief executive of insurer
AIA, it has chosen someone
of a very different breed.
Investors will hope the
bank has found a chairman
who can pick up the pace at
an institution whose privi-
leged history—it was for de-
cades Hong Kong’s de facto
central bank—has at times
slowed it down. HSBC has
become good at returning
capital, but partly because it
is struggling to find profit-
able growth.
Mr. Tucker will be a non-
executive chairman, but he
will be an engaged and de-
manding one for HSBC’s
mostly Hong Kong- and Lon-
don-based executives. The
bank needs a tune-up and
Mr. Tucker has the potential
to make some people’s lives
uncomfortable. That is un-
doubtedly part of the plan,
For Global Auto Makers, Scale Is What They Make of It
Scale matters in the auto
industry—but management
matters more.
General Motors’ decision
to pull out of Europe flies in
the face of a century-old in-
dustrial logic: that the more
cars mass-producers make,
the lower their unit costs
and the more competitive
their products. Without its
European arm Opel, GM is no
longer one of the world’s
top-three car makers by unit
sales and is the only big
manufacturer with no pres-
ence in the European market.
Chief Executive Mary
Barra justified the move by
highlighting a “divergence”
between the European and
North American markets,
both in terms of regulation
and consumer taste. She said
only 20% of Opel’s products
Tuesday, March 14, 2017 | B7
FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard
OVERHEARD
nally, that could point to an- As dream jobs go, being
External View
HSBC shares vs. bank index
other relative outsider like
Matthew Westerman, a re-
cent recruit from Goldman
employed by the “Nutella
Checking Agency” is right up
there.
120% Sachs who is co-head of Unfortunately it only exists
global banking, HSBC’s name (so far) as a sarcastic remark
100
for traditional investment by the German agriculture
80 banking. minister. The comment came
Two outsiders at the top after a senior Hungarian gov-
60 of HSBC really would be rad- ernment minister pointed out
ical. Fresh minds without at- what he considers a serious
40 HSBC tachments to the way things scandal: low-grade Nutella.
MSCI Europe
have always been done could Hungarian authorities have
20 Banks
revitalize the bank. discovered that the chocolate
The bank has had to hazelnut spread seems to
0
change already: It has en- have a different, lower-quality
2011 ’12 ’13 ’14 ’15 ’16 dured real discomfort after consistency in Hungarian
Sources: FactSet; Reuters (photo) HSBC’s headquarters misbehavior at its Swiss, shops than in those across
THE WALL STREET JOURNAL. in London Mexican and other arms ex- the border in Austria. The
posed it to penalties and same went for several other
but a shake-up isn’t without nesses. very public reprimands. Mr. items from cookies to soft
risks. HSBC does a huge amount Tucker, who has long experi- drinks.
For HSBC, much will de- of corporate lending at low ence of financial services in Food companies protest
pend on who he puts up as returns, but struggles to Asia and the U.K. as well as that they adjust products for
chief executive when Stuart turn those relationships into serving on Goldman Sachs’s the tastes of different coun-
Gulliver retires next year. more capital markets, advi- board since 2012, will have tries rather than sell inferior
For clues, look at what HSBC sory and other ancillary to manage the legacy of this goods. The issue is of such
needs to do better. business. That holds back its and sharpen up the rest. importance to Hungary that it
The biggest issue is get- return on equity. His biggest challenge will was discussed in last week’s
ting more juice out of its The next chief executive be working out just how EU summit. Keep your eyes
global commercial and in- will need to bring expertise hard to push. peeled for that job posting.
vestment banking busi- and fresh ideas there. Inter- —Paul J. Davies
tion is that scale is crucial at The problem was that GM and expertise across the
Profit Engines a continental level, but unim- failed to exploit its global group has helped make other
Mass-market car makers, portant globally. scale. The lack of commonal- group brands, notably
by operating margin This is a convenient narra- ity between its products on Porsche and Skoda, excep-
Toyota 8.0% tive for GM, but it stretches the two continents looks as tionally profitable compared
Renault 6.4% credibility. Californian emis- much a failure of integration with their peers.
Nissan 6.2% sions rules, which are also or strategy as a reflection of Peugeot, which is acquir-
GM 6.1% used or being introduced in a divergent tastes. As Carlos ing Opel, rightly sees oppor-
Peugeot 6.0%
Honda 4.6%
dozen or so other U.S. states, Ghosn, head of the Renault- tunity in greater scale. But
Fiat Chrysler 4.5% will likely remain among the Nissan-Mitsubishi alliance the deal could bring excess
Volkswagen 4.4% tightest in the world, while and another exponent of capacity and brand cannibal-
Ford 2.4% taste for SUVs in Europe is scaling up, said last week: ization as easily as efficiency
Source: FactSet growing fast. And manufac- “Scale by itself can be an as- gains; the potential is all in
THE WALL STREET JOURNAL. turers should benefit from set or a curse, depending the execution. Given the
scale in sourcing and devel- [on] how you use it.” challenge of shedding capac-
overlapped with the rest of opment, even when they pro- Volkswagen Group, the ity in Europe, investors—
GM’s portfolio, which is in- duce different vehicles. The world’s largest manufacturer who have sent the shares up
creasingly focused on sport- two continents require “dif- in 2016 by unit sales, offers sharply since the takeover
utility vehicles and pickup ferent engines and different case studies on both sides. leaked—have probably got
trucks. vehicles, but there are lots of Overly bullish expansion ahead of themselves.
In addition, GM argued things they contain in com- plans lumbered the com- Scale in the car industry
that Opel had a “subscale” mon,” said Sergio Marchio- pany’s namesake brand with helps. But as GM’s experience
market position in Europe, nne, CEO of Italian-American excess manufacturing capac- in Europe shows, it is no
which the deal with Peugeot car maker Fiat Chrysler, after ity that has weighed on mar- guarantee of efficiency.
would resolve. The implica- GM’s announcement. gins. Yet sharing components —Stephen Wilmot
Carry the
Square Mile
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London and beyond. Get the most crucial stories,
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 B8 | Tuesday, March 14, 2017 THE WALL STREET JOURNAL.

MARKETS
Investors Shrug Off Storms Dow Slips Ahead
Volatility levels in
stocks, bonds and
Eerie Calm
Volatility is at an unusually low level across currencies, bonds and
late last year. J.P. Morgan’s
gauge of emerging-market
currency volatility fell to 9.26
Of Fed Meeting
currencies have eased; stocks globally. on Tuesday, its lowest level BY ALEXANDER OSIPOVICH worst-performing sectors of
since 2015 and below its 10- AND RIVA GOLD the S&P 500 Monday, shedding
avoiding major calls CURRENCIES BONDS STOCKS year average of 10.9. The in- 0.2% by late afternoon. Mara-
J.P. Morgan currency Bank of America CBOE Volatility dex measures expectations The Dow Jones Industrial thon Oil lost 1.9%, and Mur-
BY SAUMYA VAISHAMPAYAN volatility indexes Merrill Lynch Move Index for swings in currencies such Average and U.S. government- phy Oil declined 0.8%.
Index as the Mexican peso, Brazil- bond prices declined Monday Intel shares fell 2.4% by
If the world seems particu- 14 120 40 ian real and Chinese yuan as investors looked ahead to a late afternoon after the chip
larly unpredictable these Developed over three months. key meeting of the Federal Re- maker struck a $15.3 billion
markets
days, no one appears to have The reluctance of influen- serve later this week. deal to buy Mobileye, which
told investors. 12 100 30 tial investors to make major The Dow fell makes technology for self-
From the uncertainties market bets, a factor in the MONDAY’S 21.50 points, or driving cars. Shares of Mobil-
around U.S. President Donald volatility slump, is driven in MARKETS 0.1%, to eye soared 29%.
10 80 20
Trump’s policies to the sud- part because many have al- 20881.48. The Shares of HSBC Holdings
den belief that the Federal ready lost money this year as S&P 500 edged rose 0.8% in London after the
Reserve will raise interest 8 Emerging the postelection run-up in up less than 0.1%, and the Nas- global bank said it was choos-
60 10
markets
rates this month, there are the dollar and Treasury daq Composite rose 0.2%. ing an outsider as chairman
plenty of unsettling factors in yields cooled. In Europe, the Stoxx Europe for the first time. AIA Group
the U.S. Other reasons to fret 6 40 0 Market participants say in- 600 climbed 0.4% to 374.64 as Chief Executive Mark Tucker is
include France’s close presi- 2015 ’16 ’17 2015 ’16 ’17 2015 ’16 ’17 vestors are unwilling to wa- a pickup in metals prices set to become chairman Oct. 1.
dential election and height- Sources: Thomson Reuters (J.P. Morgan indexes); ger on political uncertainties. boosted the mining sector.
ened instability around North Bank of America Merrill Lynch; FactSet THE WALL STREET JOURNAL. “At a time when the Fed is In the U.S., the Fed is

Korea.
Yet none of this is roiling
financial markets. The level
of volatility in global stocks,
bonds and currencies—evi-
denced by the prices for key
derivatives known as op-
tions—is close to catatonic.
Among the reasons: Sub-
dued market swings in recent
weeks are feeding into expec-
tations that things will con-
tinue this way. Big investors
are steering clear of major
calls on the market’s direc-
tion. And despite the disquiet
about politics, global eco-
nomic growth has been
steady.
There remains a “lack of
conviction” among major in-
stitutional investors such as
hedge funds, according to
Rakesh Patel, head of equities
for Asia Pacific at HSBC in
Hong Kong. In turn, their de-
mand for products such as
options is mixed, as investors
tend to buy these when they
have a strong view about the
market’s direction or want to
protect themselves against
worst-case scenarios.
“There is an oversupply of
volatility in the market,” he
said. “The ecosystem of vola-
tility markets, whereby vola-
tility is recycled from
wealthy clients to banks and
on to institutional investors,
has broken down a bit.”
Investors pay close atten-
tion to volatility, the amount
an asset swings over a given
period. Choppy stocks or
bonds can be a turnoff for
those who prefer steady re-
turns but can present the
brave with more opportuni-
ties for profit.
Most investors look at
both realized volatility, a
measure of an asset’s recent
swings, and implied volatility,
which gauges expectations of
future gyrations. The latter is
derived from the price of op-
tions—popular hedging in-
struments that give investors
the choice to buy or sell as-
sets at a certain price by a
future date. The two mea-
sures are linked. If investors
feel markets are relatively
calm, they tend to be less
willing to shell out for op-
tions, which depresses im-
plied volatility.
Despite the surge in some
markets since the American
election in November, notably
U.S. stocks, day-to-day moves
have been subdued. The S&P
500 posted no daily 1%
swings in the first two
months of the year, compared
with three in November and
December.
The CBOE Volatility Index,
or VIX, which reflects inves-
tors’ expectations for moves
in the S&P 500 over the next
30 days, has fallen this year,
hitting 11.66 on Friday—well
below its 10-year average of
21. The Bank of America Mer-
rill Lynch Move index, which
measures expectations for
swings in Treasurys, has also
declined in 2017.
Emerging-market stocks
have been calm, too. The
iShares MSCI Emerging Mar-
kets ETF posted seven swings
of 1% or more in January and
February, compared with 16
such moves in the last two
months of 2016.
The CBOE Emerging Mar-
kets ETF Volatility Index in
turn dropped to 15.23 last
month, its lowest level since
2014. The index, which mea-
sures expectations for swings
in the ETF, has since ticked
higher, ending at 17.07 on Fri-
day, but remains below its
average of 24.5 based on data
going back to March 2011.
Currency volatility has
faded, too, given the pause in
the dollar’s postelection rally
hiking interest rates and
we’ve just had a massive re-
shape of U.S. politics, volatil-
ity does seem remarkably
low,” said Mirza Baig, head of
foreign exchange and inter-
est-rate strategy in Asia at
BNP Paribas.
One explanation is that
economic growth in the U.S.,
Europe and China has been
decent, Mr. Baig said. The
broad outlook is more settled
than this time a year ago,
when fears about China’s
economy stoked the last ex-
tended period of high volatil-
ity in global markets.
Cheap options prices could
begin to attract some inves-
tors. James Kwok, head of
currency management for
Amundi Asset Management in
London, said he owns some
euro put options, which rise
in value if the euro declines,
in preparation for the French
election. One of the leading
candidates, Marine Le Pen,
has said she wants to pull
France out of the European
single currency.
The options are there “to
protect just in case,” Mr.
Kwok said. “Last year, we saw
a lot of unexpected events.”
—Andrew Peaple
contributed to this article.
widely expected to raise bor-
rowing costs Wednesday for
the first time this year, with
fed-funds futures tracked by
CME Group pointing to a
roughly 95% chance of a rate
rise. Analysts said they would
be focused on signals from the
Fed on how aggressively it
would move to raise rates
later this year.
“It’s the calm before the
storm,” said David Lafferty,
chief market strategist at
Natixis Global Asset Manage-
ment. “The market is still co-
alesced around three tighten-
ings this year, but there’s
certainly room for four,” he said.
Expectations that the Fed
would boost short-term rates
lifted the yield on the bench-
mark 10-year U.S. Treasury
note to 2.609%—the highest
closing level since September
2014—from 2.582% Friday.
Yields move inversely to prices.
Keeping risk sentiment sub-
dued, U.S. crude-oil futures for
April delivery fell 0.2%, to
$48.40 a barrel, after dropping
9% last week. Prices have been
dragged down by concerns
that growth in U.S. oil produc-
tion could foil OPEC’s plan to
shift the market into a short-
age.
Energy was among the
2.609%
The yield on the benchmark 10-
year U.S. Treasury note
Besides the Fed, the Bank of
Japan, Bank of England and
the Swiss National Bank are all
set to hold meetings this week.
Investors are also watching
as Dutch voters head to the
polls this week in the first of a
series of key elections in the
eurozone this year. Some in-
vestors will be watching to see
how well Geert Wilders’s anti-
establishment party performs
to determine the Dutch politi-
cal landscape and reassess
anti-euro candidate Marine Le
Pen’s chances of winning the
French presidency.
The WSJ Dollar Index,
which measures the U.S. cur-
rency against a basket of 16
others, fell 0.1%. The British
pound was up 0.5% against the
dollar. The U.K. is expected to
trigger Article 50 in the com-
ing days, launching the formal
step toward exiting the Euro-
pean Union, but the move has
long been anticipated by in-
vestors, analysts said.

Head Start
Issuance in Taiwan’s Formosa
bond market has surged ahead
of a local rule change.
Foreign-currency-denominated
WE SEE ALPHA
bond issuance
Through March 10 of each year
$20 billion
IN THE PRIME TIME
15 OF URBANIZATION.
CHRIS RATCLIFFE/BLOOMBERG NEWS

10

0 At PGIM, we see alpha in the greatest population

2014 ’15 ’16 ’17 shift in history — 60 to 70 million people each year
Source: Dealogic moving to cities over the next three decades.1
Apple Inc. is one big U.S. company that has issued debt in Taiwan. THE WALL STREET JOURNAL.
We see opportunity in $50 trillion of new urban

Taiwan’s Bond Market Gets Hot infrastructure needs and 1 billion new prospects
for consumer goods and services in emerging markets.

BY RACHEL ROSENTHAL
Big U.S. companies includ-
ing Apple Inc. and Pfizer Inc.
have the world’s largest corpo-
rate-bond market in their
backyard. So why have they
been rushing to Taiwan lately
to issue debt?
The reason is a feature of
the Taiwanese bond market
that—for now—makes it easy
and relatively cheap for com-
panies to redeem any debt
they issue there before its due
date.
That could be changing.
Taiwanese regulators have
proposed a rule change, likely
to go into effect by May, that
would require issuers to wait
at least five years before re-
deeming, or “calling,” their
bonds in a move to limit the
disruption to investors. Previ-
ously there was no restriction.
The anticipated shift has
triggered a surge of so-called
Formosa bonds, which are sold
in Taiwan but denominated in
major global currencies such
as the U.S. dollar: Issuance is
up 81% in the year to date to
$17.1 billion, according to Dea-
logic. That follows a 50% rise
in issuance last year to nearly
$50 billion, according to
Deutsche Bank.
“The whole call feature is
one of the attractions of the
Formosa market [for issuers],”
said Doug Stephen, head of
private placement for Asian lo-
cal markets at Deutsche Bank.
The Formosa bond market
is tiny compared with the
U.S.’s $8.6 trillion corporate-
bond market. Yet blue-chip
companies including Apple,
Pfizer, Verizon Communica-
tions Inc. and Comcast Corp.
each have issued north of $1
billion of such debt this year.
AT&T Inc. issued a $1.43 bil-
lion 30-year Formosa bond
with a 5.5% coupon this
month.
AT&T said the company
continues to see strong de-
mand from investors and “we
like the investor diversification
this issuance brings.”
Apple declined to comment
beyond the content of its latest
earnings call, which occurred
before it issued its Formosa
bond in mid-February. Com-
cast and Verizon declined to
comment.
The ability to redeem a
bond early is good for issuing
companies because it enables
them to pay back their bonds
when interest rates are low
and reissue when funding
costs are cheaper. This “call”
feature isn’t as swell for inves-
tors, who can get stuck with
cash that the borrower has
paid off earlier than expected,
with few attractive alternative
places to put their money.
That is why investors tend to
get paid more in the form of
higher coupons when they buy
“callable” bonds.
In the Formosa market, the
call option adds only an extra
0.1 percentage point to 0.15 Across the Americas, Europe and Asia, our 1,100
percentage point in yield, com- investment professionals marry bottom-up analysis
pared with 0.8 percentage with top-down understanding of the macroeconomic
point to a full percentage point environment to seek out long-term opportunities.
in other markets, according to
Deutsche Bank’s Mr. Stephen.
“There’s no other way [Tai- Partner with PGIM to see the investable
wanese investors] can achieve implications of such megatrends.
their yield target by investing
in regular bonds,” said Lorna Get the longer view at PGIM.com/alpha
Greene, director of debt syndi-
cate and origination at Na-
tional Australia Bank in Hong
Kong. “They would rather
choose names they feel com-
fortable with. But rather than
taking credit risk, they opt for
the risk of the call option.”
Having greater flexibility to
move cash around could come
into play if the Trump admin-
istration makes good on its
plan for a one-off lowering of
the tax rate on overseas earn-
ings, as it tries to entice multi-
national firms to bring more of
the cash they hold overseas
back home.
U.S. drug maker Pfizer,
which issued a $1.065 billion FIXED INCOME | EQUITIES | REAL ESTATE | ALTERNATIVES | PRIVATE DEBT
30-year Formosa bond with a
4.2% coupon late last month, Available to institutional and retail investors
said it hadn’t made a U.S. tax
provision on about $86 billion
of unremitted earnings from
1
international subsidiaries, as Fuller, B./Romer, P., “Urbanization as Opportunity.”
of Dec. 31, 2016. © 2017 Prudential Financial, Inc. (PFI) and its related entities. The PGIM logo and the Rock design are service
The company considered marks of PFI and its related entities, registered in many jurisdictions worldwide. PGIM is a subsidiary of PFI, a
President Donald Trump’s pro- company incorporated and with its principal place of business in the United States. PFI of the United States is
posals and Taiwan’s new rules not affiliated in any manner with Prudential plc, a company incorporated in the United Kingdom. URB-XUS
when deciding to issue in the
Formosa market for the first
time, according to a company
representative.