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INNOVATION IN TECH Iran Takes a British

EVOLVES IN NEW WAYS Hostage for Ransom
KEYWORDS | B1 OPINION | A12

MONDAY, SEPTEMBER 12, 2016 ~ VOL. XXXIV NO. 157 WSJ.com EUROPE EDITION
DJIA 18085.45 g 2.13% NASDAQ 5125.91 g 2.54% NIKKEI 16965.76 À 0.04% STOXX 600 345.52 g 1.09% BRENT 48.01 g 3.96% GOLD 1330.10 g 0.50% EURO 1.1211 g 0.45%

Fifteen Years On, America Marks a Solemn Anniversary

Health
What’s
Becomes
News
Business & Finance
Focus in
T he EU is expected to
propose subjecting on-
U.S. Race
line services such as Skype
BY PETER NICHOLAS
and WhatsApp to rules that
regulate telecom firms. A1
A health scare involving
 Oil prices are entering Hillary Clinton as she abruptly
their sixth month of trad- left a Sept. 11 commemoration
ing between $40 and $50 a event Sunday in New York
barrel as the narrow range poses a potential unwelcome
reflects a new reality. B1 distraction for the presidential
candidate just as her lead over
 A VW engineer pleaded
rival Donald Trump has nar-
guilty to helping the auto
rowed in recent weeks.
maker’s efforts to cheat on
Clinton aides put out a
emissions tests. B4
statement 90 minutes after
 China’s Huawei is tak- she left the 9/11 event, saying
SPENCER PLATT/GETTY IMAGES

ing on HP Enterprise and that the 68-year-old had “felt

Cisco in the market for overheated” and recovered
cloud-computing gear. B1 quickly. After a brief stop at
her daughter’s apartment in
 The EU defended its rul-
New York, Mrs. Clinton
ing over Apple’s Irish tax bill,
emerged to smile and wave at
saying it wasn’t an attack
the cameras before leaving for
against U.S. companies. B2
her home north of the city.
 Apple is using wireless REMEMBRANCE: A girl holds on to her mother during a ceremony for victims of the 9/11 attacks at the National September 11 Memorial Still, cable news on Sunday
chips from Intel instead of & Museum in New York. Thousands gathered in New York, Pennsylvania and Washington to commemorate the 15th anniversary. A7 repeatedly showed amateur
Qualcomm in some models video of Mrs. Clinton looking
of the new iPhone 7. B3 wobbly as she got into her van
leaving the event. That all but
 Thales and SES are team-
ensures that her campaign will
ing up to offer enhanced
broadband-via-satellite links
to airline passengers. B3
HOW ISIS ELUDES DETECTION spend precious days ahead
parrying questions about her
health status.
 Tesla is preparing an Mr. Trump, who is 70, has
updated version of its Au- sought to fan concerns about
topilot technology follow- Encrypted chat apps, face-to-face meetings, written notes and misdirection leave few electronic clues Mrs. Clinton’s health, ques-
ing a fatal crash in May. B4 tioning her stamina and chid-
BY SAM SCHECHNER AND BENOIT FAUCON 20 months, reflect new operational dis- ing her for keeping what he
 China’s Postal Savings
is expected to have five cor-
In the Middle East cipline and technical savvy by the Is- says is a light campaign
Weeks before Islamic State militant  Review: Islamic State is shrinking, but lamic State terrorists who carried them schedule. Mr. Trump, in turn,
nerstone investors in its
Abdelhamid Abaaoud led the Nov. 13 ter- its fall will bring new problems......... A8 out, security officials said. has come under attack for put-
coming Hong Kong IPO. B5
ror attacks in Paris, French authorities  Syrian rebels press fight against Assad The extremist group’s communica- ting out few details about his
 A U.S. court dismissed thought he was holed up in northern despite U.S.-Russia cease-fire............. A3 tions, once commonly conducted on health.
a suit by Fannie and Fred- Syria. Western Intelligence agencies pur- phones and social media accounts easily In December 2012, Mrs.
die investors over govern- suing Abaaoud had tracked him there tracked by authorities, have evolved into Clinton fainted and suffered a
ment claims to profits. B5 using cellphone location data and other Syria likely used phones and WhatsApp a mix of encrypted chat-app messages concussion. She was hospital-
electronic footprints. accounts belonging to Abaaoud and over WhatsApp and Telegram, face-to- ized and treated for a blood
World-Wide The Paris attacks, which killed 130 other attackers to mask the group’s face meetings, written notes, stretches clot in her head. In July 2015,
people, showed how badly they were travel to Europe, said a Western security of silence and misdirection. her personal physician wrote a
 A health scare involving fooled. Abaaoud had slipped past the official: “We relied too much on technol- These techniques helped protect at- letter saying Mrs. Clinton was
Clinton poses a potential dragnet and entered the city unnoticed. ogy. And we lost track.” tackers from Western intelligence agen- in “excellent physical condi-
unwelcome distraction for Drawing from a growing bag of tricks, Terror attacks in Europe, which have cies by leaving few electronic clues in a tion and fit to serve” as presi-
the candidate just as her Islamic State accomplices located in killed more than 200 people in the past Please see ISIS page A6 dent. The letter said Mrs. Clin-
lead over Trump has nar- ton suffered from
rowed in recent weeks. A1 hypothyroidism and seasonal

Chat Apps Face Tougher EU Rules

pollen allergies.
 Hundreds gathered in The incident came amid a
Manhattan to mark the 15th new sign that the number of
anniversary of the World competitive states in the pres-
Trade Center attacks. A7 Some of the world’s big- book Inc.’s WhatsApp to some for the receipt of calls from move in a direction telecom idential race is expanding.
 A Syrian rebel group is gest telecom companies are of the same rules that have traditional phones—it could executives have been pushing New Wall Street Journal/NBC
seeking to rally other fac- poised to win a round in their long regulated the telecom- also be required to let those for years. The executives say News/Marist polls found the
tions to continue a drive to munications business, accord- users take their numbers with they want a “level playing races in New Hampshire and
overthrow Assad ahead of a By Sam Schechner ing to technology and telecom them if they decide to move field” with tech companies Nevada—two states that Dem-
truce set to start Monday. A3 in Paris and Stu Woo lobbyists briefed by EU offi- to a different provider. amid all the new, mostly free, ocrats have won in recent
in London cials. Chat service WhatsApp, online communications ser- presidential elections—to be
 Forces in Libya opposed Skype, for example, might meanwhile, could be subject vices that they perceive to neck-and-neck, with Mrs. Clin-
to the unity government global slugfest with Silicon have to offer emergency-call- to new oversight from na- have undermined telecoms’ ton holding a lead of a single
claimed control of oil-ex- Valley—at least in Europe. ing services for European tional telecom regulators on traditional voice and text ser- percentage point in head-to-
porting facilities after at- The European Union’s ex- customers who use its online- topics such as network secu- vices. head matchups in both states.
tacking three ports. A3 ecutive arm is expected this voice service to dial tradi- rity. They have long wanted the At the same time, the polls
 Iran said U.S. claims about week to propose subjecting tional phone numbers. In The draft proposals are EU to repeal some of the in- showed a tight race in two
its vessels veering danger- online services such as Micro- cases where it assigns users still in flux. But what is clear dustry-specific regulations states—Arizona and Georgia—
ously close to American war- soft Corp.’s Skype and Face- telephone numbers—allowing is that the EU is proposing to Please see TECH page A2 Please see RACE page A7
ships around the Persian
Gulf were exaggerated. A3
 The U.S., Japan and
Rebecca Moss Is Stranded on a The New
South Korea pledged to con-
sider new unilateral steps to
Cargo Ship—and That’s Absurd Reality in
pressure North Korea after
its fifth nuclear test. A5
i i i Oil Prices
 A fire at a packaging fac- Hanjin bankruptcy disrupts filmmaker’s TIGHTER BAND: Oil
tory in Bangladesh killed prices have traded
some 30 people, spurring residency but offers oceans of inspiration in a narrower range
calls for safety measures. A5 over the past six
months, reflecting
 Ukrainian officials and BY ERICA E. PHILLIPS traordinarily absurd,” Ms. the ways in which
Russia-backed separatists Moss wrote in an email from U.S. producers—
SPENCER PLATT/GETTY IMAGES

say a tenuous cease-fire The Hanjin Geneva, a aboard the ship Thursday. whose boom output
has held for a week in 68,000-ton ship stranded 15 Ms. Moss was one of four from shale-oil fields
eastern Ukraine. A4 nautical miles off the coast of artists drawn from nearly pushed the market
 Three women were Japan, is carrying thousands of 2,000 applications by the pro- into oversupply in
killed after they attacked a cargo containers, a roughly 20- gram’s creator, Access Gallery 2014—have changed
police station in Kenya. A3 man crew, and absurdist Brit- in Vancouver, which calls the industry dynamics.
ish filmmaker Rebecca Moss. residency “a profoundly gener- At left, a field in
Ms. Moss, 25 years old, ative time and space—in the Andrews, Texas. B1
CONTENTS Opinion.............. A12-13 boarded the vessel late last unconventional studio space of
Business & Fin.. B1-4 Review................. A8-10
Crossword.............. A14 Technology............... B3
month in Vancouver, bound for the cargo ship cabin—for fo-
Europe File............... A2 The Numbers....... A14 Shanghai, as part of a program cused research and the cre-
called “23 Days at Sea” which ation of provocative new ideas
Heard on Street.... B8
Finance & Mkts B5-8
Markets Digest..... B6
U.S. News.................. A7
Weather................... A14
World News........ A2-5
puts artists in residence on
cargo ships. Now it’s unclear
and work.”
In her films, Ms. Moss per-
Market Volatility Returns Ahead of Fed
€3.20; CHF5.50; £2.00; just how long her stint will be. forms offbeat stunts in dull Markets have awoken from stocks, bonds, oil and gold all Oil and gold prices both had
U.S. Military (Eur.) $2.20
“The predicament in which I settings. In one, she is dressed their summer slumber. slid amid mounting concerns risen more than 20% this year,
currently find myself is ex- Please see SHIP page A6 over the willingness and abil- while the MSCI Emerging Mar-
By Inyoung Hwang, ity of central banks to prop up kets Index had climbed 17%
Paul Vigna markets. amid confidence the flow of
and Aaron Kuriloff Before Friday’s rout, in easy money from central
which the S&P 500 fell by banks would run deeply and
Investors who had grown 2.5%, the broad stock index indefinitely. The CBOE Volatil-
s Copyright 2016 Dow Jones & used to thin trading volumes hadn’t dropped by more than ity Index, or VIX—known as
Company. All Rights Reserved
and depressed volatility were 1% for 52 consecutive trading the market’s fear gauge—
Hanjin Geneva jolted Friday as prices of sessions. Please see ABREAST page A2
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Monday, September 12, 2016
French Centrist Politician Plots a Rebel Run
EUROPE FILE
SIMON NIXON
Emmanuel Macron is
nothing if not audacious.
Across Europe, mainstream
politicians are being
squeezed between a nativist
right and radical left that
are tapping into deep public
anxiety
about the
economic,
social and
cultural ef-
fects of glob-
alization.
Euroskepticism everywhere
is on the rise and insurgent
parties are capitalizing on
voter rage against current
elites.
Yet the 38-year-old for-
mer French economy minis-
ter—a former investment
banker and graduate of a
prestigious grande ecole—is
plotting a run for the French
presidency in next year’s
elections on a platform of
market-friendly overhauls
and deep commitment to the
EU.
Mr. Macron will make a
formal decision later this
month on whether to stand,
after he has completed a
lengthy national consulta-
tion exercise and delivered
his diagnosis of the changes
needed to revive a troubled
TECH
Continued from Page One
they face, particularly on user
privacy. Failing that, they
have pushed to extend some
of the same telecom rules to
internet-based services.
“It would be better to re-
move rules for us,” said a
telecom executive who has
been briefed on the propos-
als. “But this is real prog-
ress.”
A spokeswoman for the Eu-
ropean Commission said the
proposed rules, which also
seek to spur improvement in
the Continent’s high-speed-in-
ternet networks and cellular-
airwave-allocation process,
are part of the EU’s strategy
to “encourage investments in
next-generation networks, set
the right conditions for mod-
ern digital networks and pro-
vide a level playing field for
all market players.”
The proposals still face po-
tentially years of debate and
changes before adoption. But
they represent a rare boost to
ABREAST
Continued from Page One
bounced near multiyear lows
during July and August, as
traders looked at tepid eco-
nomic growth as an excuse for
central banks to hold off tight-
ening. On Friday, it jumped
40%.
While some investors this
summer warned about com-
placency and questioned how
far assets could rally amid
mixed economic data, many
were loath to sit on the side-
lines in a rising market.
Money went into everything
from small-cap stocks and
negative-yielding corporate
bonds to emerging-market as-
sets.
In the week before Friday,
for example, emerging-market
equity funds took in $1.9 bil-
lion, according to Michael
Hartnett, chief investment
strategist at Bank of America/
Merrill Lynch Global Research,
sealing a tenth consecutive
week of inflows.
“Because volatility has been
so calm, people started to add
risk everywhere,” said Rebecca
Cheong, head of Americas eq-
uity derivatives strategy at
UBS Group AG. “Now things
are at extreme levels, even
higher than last August,” when
China devalued its currency
and set shockwaves across fi-
nancial markets and the VIX
jumped 46%.
While Friday represents
just one trading day, the tur-
bulence has reignited fears
that the Federal Reserve is
moving further into a rate-
raising phase that could leave
THE WALL STREET JOURNAL.
WORLD NEWS
economy that has struggled
to grow more than 1% in a Centrist Insurgency
year for years and where A recent poll shows Emmanuel Macron would come in third in the
THIERRY ZOCCOLAN/AGENCE FRANCE-PRESSE/GETTY IMAGES
unemployment remains first round of the election behind Marine Le Pen and either of the two
stuck close to 10%. But hav- front-runners in France’s Republican party.
ing quit President François
Hollande’s government in Marine Le Pen
26%
National Front party
August to focus on his fledg-
Nicolas Sarkozy*
ling political movement, En Republican 20%
Marche, few doubt his inten-
Emmanuel Macron
tions. 16%
D
Jean-Luc Mélenchon
oes he stand a Left 11%
chance? Conventional
François Hollande
political wisdom says Socialist 11%
no. Mr. Macron likes to
François Bayrou
paint himself as an insur- Democratic movement
9%
gent. He rejects the idea
*Macron polls 15% in a matchup with Republican Alain Juppé Source: TNS Sofres poll of 1,006
that he is a centrist, main- Former Economy Minister Emmanuel Macron, center, discussed adults conducted Sept. 2–5
stream candidate, arguing the economy with dairy farmers in central France last week. THE WALL STREET JOURNAL.
that the old split between
left and right no longer has drop punitive taxes imposed he rely on the deep net- ond round of the presiden- DNA of the Fifth Republic; it
any meaning and that the early in his presidency that works of local and regional tial election alongside Na- is not a parliamentary sys-
two-party system division were widely blamed for crip- elected officials that help to tional Front leader Marine tem; parties are not so im-
between defenders of capital pling the economy (Mr. Ma- sustain large party cam- Le Pen, who is widely ex- portant,” he told The Wall
and labor has become irrele- cron dismissed them as paigns. pected to win the first Street Journal in London
vant to world of growing in- turning France into “Cuba round. last week.
M
security arising from tech- without the sun.”) They also eanwhile, his mes- Few believe Mr. Hollande
A
nological change. He says he welcomed his efforts to push sage of technocratic has much chance. With an poll this week sug-
wants to challenge tradi- a package of overhauls, with reform and strong approval rating of just 12%, gested he would cur-
tional French corporatism, partial success, to liberalize support for the European he has yet to decide whether rently come in third
which prioritizes insiders the economy and labor mar- Union risks being drowned to stand in the Socialist pri- in the first round of the
and discourages risk-taking ket. But at a time of rising as political debate is domi- mary, where he is certain to election, behind Ms. Le Pen
and innovation, and to focus economic insecurity, his nated by issues of security, face the indignity of a left- and either of the Republican
instead on how better to message of greater flexibil- terrorism, culture and iden- wing challenge. Whoever challengers. His best hope
protect individuals rather ity may be a hard political tity in the wake of a series ends up against Ms. Le Pen lies in the other center-left
than jobs. sell. of terrorist atrocities and in the second round in May candidates—including im-
His challenge will be to To make his task harder, fragile social cohesion. is widely expected to win plicitly, Mr. Hollande—allow-
reach out beyond his core Mr. Macron isn't only inex- Indeed, many observers the presidency, as Socialist ing him a clear run should
support among France’s perienced—he has never say the real contest for the and Republican voters are polls continue to show that
business and financial elite stood for elected office—he presidency is the Republi- likely to combine to keep he is the best-placed candi-
and young, educated metro- also lacks a party machine cans’ primary election, out the far-right leader. date to challenge the right.
politans who see Mr. Macron to organize a campaign and which takes place in Novem- Mr. Macron clearly That might seem like a
as the great hope for French get out his vote. En Marche ber. Polls suggest that either doesn’t believe his own shot. But in a year when to-
reform after decades of dis- currently has just 75,000 of the front-runners, former prospects are so hopeless. day’s political impossibilities
appointment. signed-up supporters, far President Nicolas Sarkozy or He believes France’s consti- have often become tomor-
He won the respect of short of the center-right Re- former Prime Minister Alain tution was designed to facil- row’s political realities, it
these groups for his efforts publican party’s 213,000 Juppé, will secure the votes itate exactly such a candi- would be a brave soul who
to persuade Mr. Hollande to paid-up members. Nor can necessary to make the sec- dacy as his: “It is in the ruled it out.
telecom companies in their
skirmishes with Silicon Val-
ley’s lobbying machinery.
While telecom executives
Dialing Up
Telecom firms have been playing defense against
tech firms offering voice and text alternatives.
vices.
“You could see these
cheaper calling options and
video options disappearing
Telecommunications Network
Operators’ Association.
European telecom compa-
nies aren’t getting everything
increasingly acknowledge that from the markets,” said they are seeking. The EU,
services such as Snapchat and Global mobile-phone messaging traffic James Waterworth, vice pres- which had already passed leg-
WhatsApp help them sell 70 trillion messages SMS App-based* ident for Europe at the U.S.- islation to eliminate telecoms’
more expensive data plans, in based Computer & Communi- lucrative roaming fees in the
60
many parts of the world they cations Industry Association, bloc, retreated last week on a
have also been on the defen- 50 a lobby group that represents rule that would have limited
sive about how those so- Microsoft, Facebook and Al- such free roaming to 90 days
called over-the-top services 40 phabet Inc.’s Google. a year, after widespread out-
have eaten into their tradi- 30 The new proposals are in cry from consumer groups.
tional offerings. part the fruit of telecom-in- Another hot-button issue is
The two sides have also 20 dustry lobbying over several whether so-called lawful ac-
clashed over regulatory issues years on issues that go be- cess rules, which require tele-
10
including net neutrality in the yond relationships with tech com companies to allow po-
U.S., connecting the develop- 0 companies. lice to install wiretaps, should
ing world, and the question of Telecom lobbyists say they be expanded to tech compa-
’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20
who will profit from the de- Forecasts
are optimistic the EU will nies. It isn’t clear whether the
tailed information both sets *Does not include picture or video messages propose rules that would EU’s proposals would include
of companies have on the on- Source: Ovum THE WALL STREET JOURNAL. make it easier for big telecom such a change, but the possi-
line and offline habits of their companies to charge more for bility raises the specter of re-
customers. vices face industry-specific field—it’s a layered playing access to new networks, newed fighting over whether
The battle lines are partic- taxes and restrictions that field, and the rules need to something lobbyists for in- tech companies should be
ularly clear in Europe, where similar offerings from big reflect that,” said an execu- cumbent telecom companies forced to build in back doors
carriers were slower than tech companies don’t. tive at a U.S.-based tech com- say will give them incentives to encrypted services, tele-
those in the U.S. in switching Big tech companies reject pany. to invest in faster internet com and tech lobbyists say.
to earn money from selling that notion. They argue that Tech companies say over- connections. “There’s a lot of money
data rather than voice and while they sometimes offer sight from the EU’s national “We have high hopes and that operators invest in data
texts. Telecom giants, such as comparable services, their telecom regulators could raise expectations that it will cre- access for authorities,” a tele-
Telefónica SA of Spain and businesses contrast starkly— costs and lead to jurisdic- ate the right incentives to in- com executive said. “It should
Deutsche Telekom AG, have and need different rules. tional disputes, discouraging vest,” said Steven Tas, chair- be same services, same obli-
long chafed that their ser- “This isn’t a level playing them from launching new ser- man of the European gations.”
stocks, emerging markets and
commodities vulnerable to a
deeper pullback.
Thursday, according to CME
Group Inc.
Faith in central banks
collided on Friday, sparking
the first bout of turbulence in
markets in more than two
more assets to post the addi-
tional collateral that is de-
manded by brokers, moves
der the 2.27% level at which it
ended last year.
“Markets had been pa-
Whether Friday’s move is a started to wane last week af- months. that further pressure prices. tiently waiting for a more
blip or something bigger could ter the European Central Bank “There’s a growing sense Some investors said Fri- clear signal that something
hinge on what the Fed does refrained from announcing any that central banks have hit the day’s move don’t necessarily was going to change,” said
over the next two weeks. new policy moves and signs wall,” said David Rosenberg, mark an inflection point. Brett Mock, managing director
Three Fed speakers are emerged that the Bank of chief economist and strategist “It’s been very quiet in the at brokerage JonesTrading In-
scheduled to speak Monday, Japan may run out of available at Gluskin Sheff & Associates markets, suddenly you get a stitutional Services LLC. “We
after which the central bank government debt to buy. And Inc., a Toronto money man- bit of noise and people tend to are still in a policy-driven
enters a self-imposed blackout in a speech Friday, Boston Fed ager. “The bottom line is overreact,” said Brian Jacob- market, and fortunately or un-
period before its Sept. 20-21 President Eric Rosengren, who there’s more downside risk sen, chief portfolio strategist fortunately Fed speak is still
meeting. has long been viewed as one than upside potential for this at Wells Fargo Funds Manage- what assets are being priced
Federal-funds futures, of the board’s most dovish market over the next few ment. “Sometimes these on.”
which are used by traders to members, said: “A reasonable months." moves in the markets can be —Corrie Driebusch
place bets on central-bank pol- case can be made for continu- Speculators who bet heavily nasty and brutish, but short.” and Ira Iosebashvili
icy, on Friday showed a 24% ing to pursue a gradual nor- that the tranquility would con- For example, stocks tum- contributed to this article.
chance of a U.S. interest-rate malization of monetary pol- tinue paid for it on Friday. In bled after the U.K.’s vote to
rise in September, compared icy.” net terms, hedge funds and leave the European Union in THE WALL STREET JOURNAL.
with an 18% chance as of The three developments other large speculators were June, but then rebounded to Europe Edition ISSN 0921-99
short VIX futures by about a fresh highs. The News Building, 1 London Bridge Street,
London, SE1 9GF
record 134,000 contracts as of Yet there is scope for the
Jolted Sept. 6, according to Commod- increase in volatility to con- Thorold Barker, Editor, Europe
Grainne McCarthy, Senior News Editor, Europe
Trading volumes and investors' expectations for stock swings ity Futures Trading Commis- tinue, data suggest. Cicely K. Dyson, News Editor, Europe
rose after a quiet summer. sion data, a position that re- Even after Friday’s jump to Margaret de Streel, International Editions Editor
Darren Everson, Deputy International Editor
flects an expectation of 17.5, the VIX remains well be-
U.S. daily stock-trading volumes continued low volatility. low its 2016 high from Febru- Joseph C. Sternberg, Editorial Page Editor
15 billion shares Traders also made big bets ary of 28. In bond markets, Anna Foot, Advertising Sales
on the long side, with bullish while the benchmark 10-year Jacky Lo, Circulation Sales
Andrew Robinson, Communications
10 Sept. 9 wagers on futures tracking the Treasury yield jumped to Jonathan Wright, Commercial Partnerships
8.3B S&P 500, Nasdaq 100 Index 1.67% on Friday, it is still un-
and Russell 2000 Index near Katie Vanneck-Smith,
Global Managing Director & Publisher
5 their highest since 2013 as of
Tuesday.
Short covering from the
CORRECTIONS  Advertising through Dow Jones Advertising
Sales: Hong Kong: 852-2831 2504; Singapore:
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842 9600; Paris: 33 1 40 17 17 01;
June July Aug. Sept. total $153 million over the New York: 1-212-659-2176
next few days, according to Printers: France: POP La Courneuve; Germany:
CBOE Volatility Index UBS’s Ms. Cheong. The first use of water- Dogan Media Group/Hürriyet A.S. Branch; Italy:
30 The unwinding of bets boarding by American troops Qualiprinters s.r.l.; United Kingdom: Newsprinters
(Broxbourne) Limited, Great Cambridge Road,
Sept. 9 would be driven partly by vol- occurred in the Philippines Waltham Cross, EN8 8DY
17.5 atility-tracking exchange- more than a hundred years Registered as a newspaper at the Post Office.
20 Trademarks appearing herein are used under
traded securities that would ago. The China’s World column license from Dow Jones & Co.
need to rebalance immedi- Thursday about Philippine ©2015 Dow Jones & Company. All rights reserved.
Editeur responsable: Thorold Barker M-17936-
10 ately, while hedge funds that President Rodrigo Duterte in- 2003. Registered address: Avenue de Cortenbergh
60/4F, 1040 Brussels, Belgium
were short VIX futures could correctly said American forces
face margin calls because of pioneered waterboarding NEED ASSISTANCE WITH
0 the sudden jump in the gauge, there. YOUR SUBSCRIPTION?
June July Aug. Sept. she said. By web: http://services.wsje.com
Readers can alert The Wall Street By email: subs.wsje@dowjones.com
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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
Syria Rebels Press Fight Against Assad
Former al Qaeda
affiliate seeks to rally
other groups despite
U.S.-Russia cease-fire
BY MARIA ABI-HABIB
AND NOAM RAYDAN
BEIRUT—A dominant Syr-
ian rebel group is seeking to
rally other factions to con-
tinue a drive to overthrow
President Bashar al-Assad, po-
tentially complicating a U.S.-
Russia brokered cease-fire
deal slated to start Monday.
The U.S.-Russia agreement,
reached over the weekend, en-
visions a seven-day cease-fire
starting Monday evening, dur-
ing which time rebels must
separate themselves from
Syria Conquest Front or risk
being targeted by Moscow and
Washington in airstrikes. The
Front, formerly al Qaeda’s lo-
cal branch and previously
known as Nusra Front, is
viewed by the U.S. and Russia
as a terrorist group.
The ultimatum highlights
one of the most challenging
aspects of the five-year Syrian
conflict and the fresh U.S.-
Russia efforts to end it: How
to hive off those viewed as ex-
tremist from more main-
stream groups.
Rebels of all stripes are
deeply intertwined with Syria
Conquest Front, and view the
group as an integral part of
the revolution whose isolation
would only weaken the armed
opposition and bolster the
Assad regime.
In addition, many Syrian
families have sons fighting
with both Syria Conquest
Front and more moderate
rebel forces backed by the
U.S. and its allies, making any
split logistically difficult.
These rebel outfits are now
grouped around Aleppo and
trying to fend off regime
forces for control of a city
that is considered pivotal for
the balance of the Syrian war.
Neither side has been able to
fully control Aleppo, once the
Forces Battle for Control of Libyan Oil Ports Police
Forces opposed to Libya’s
unity government launched an
attack Sunday on three ports,
claiming control over oil-ex-
porting facilities held by
troops loyal to the government
that had recently resumed op-
erations in an effort to revive
the nation’s economy.
The attack by Gen. Khalifa
By Hassan Morajea in
Tunis, Tamer El-
Ghobashy in Cairo and
Benoit Faucon in
London
Haftar’s forces on terminals in
the so-called oil crescent is the
first armed conflict between
Libya’s eastern government
and the internationally-backed
Government of National Ac-
cord, which is based in the
capital, and could draw others
from Libya’s array of militias
into a fresh round of fighting.
It comes as Libyan fighters
in the west, backed by U.S. air-
strikes, have made strides in
wresting away the strategic
city of Sirte from Islamic State
militants, giving hope that
Libya is beginning to emerge
from five years of political and
armed struggles that erupted
Iran Denies It Is Harassing U.S. Ships in Gulf
BY ARESU EQBALI
AND ASA FITCH
U.S. claims about Iranian
vessels veering dangerously
close to American warships
were exaggerated and
stemmed from fear of Iran’s
power, a spokesman for Iran’s
armed forces said Sunday.
“The Islamic Republic’s
vessels always act in full
awareness of international
rules and regulations and
based on defined norms,”
Brig. Gen. Masoud Jazayeri
said, according to the official
Islamic Republic News
Agency. “Therefore the
[American] claims are not
only untrue, but stem from
their fear of the power of the
Islamic Republic’s soldiers.”
Gen. Jazayeri was respond-
ing to concerns voiced by U.S.
officials about near-confron-
Syrian men carrying babies make their way through the rubble of destroyed buildings on Sunday after a reported airstrike on a rebel-held neighborhood in Aleppo.
country’s largest city and its
economic juggernaut.
Fighting showed no sign of
abating over the weekend.
Airstrikes on rebel-held Idlib
city and opposition-held parts
of Aleppo killed at least 90
and injured scores more on
Saturday and Sunday. Rebels,
meanwhile, announced new
offensives in the south, in
Daraa and Quneitra.
Antiregime activists say
Washington has done little to
alleviate the suffering of Syri-
ans caught up in the war and
credit Syria Conquest Front
with protecting civilians
against what they say are the
crimes of Mr. Assad’s regime
and his allies. Syria’s war has
killed some 400,000 people,
according to the United Na-
tions.
Mostafa Mahamed, the di-
Smoke billowed from an oil tank in Libya in January. Battles are raging for control of oil facilities.
after dictator Moammar Gad-
hafi was deposed and killed in
2011.
Ahmed al-Mismari, a self. A Western intelligence of-
spokesman for Gen. Haftar,
said the general’s forces had
staged a multipronged assault
on five key oil facilities and
ports, assuming full control of
Ras Lanuf and Sidra ports
while taking checkpoints and
roads in the towns of Zueitina
and Ajdabia.
The spokesman said the op-
tations between U.S. ships
and Iranian vessels in and
around the Persian Gulf.
In one such incident last
month, a U.S. Navy spokes-
man said four vessels from
Iran’s Revolutionary Guard
Corps approached an Ameri-
can destroyer at high speed,
ignoring radio communica-
tions and other warnings. Ira-
nian boats also made a close
approach to an American ship
in the Strait of Hormuz in
July.
While interactions between
Iranian and U.S. ships are
common, American officials
have raised growing alarm re-
cently about the risk of an es-
calation at sea between the
two rivals.
Gen. Jazayeri, however,
said American claims of close
approaches weren’t accurate.
“When Iranian vessels pass
WORLD NEWS
rector of foreign media rela-
tions for Syria Conquest
Front, declared in written re-
sponses to questions that his
group had the support of “nu-
merous groups on the
ground” despite the ultima-
tum to other rebels to split
from his bloc.
“We expect a united stance
of all major players in Syria
against this deal. The sincere
groups in Syria will never be
tools used by external govern-
ments that fight their proxy
wars,” Mr. Mahamed said.
“Make no mistake about it.
The U.S. and Russia have
agreed to end this revolu-
tion.”
He slammed members of
the political opposition who
accepted the U.S.-Russian
agreement to halt fighting as
disingenuous representatives
eration had been planned for
some time and had been an-
nounced by Gen. Haftar him-
ficial described the attack by
Gen. Haftar’s forces as “a ma-
jor offensive.”
The Petroleum Facilities
Guard, the armed group that
controls the oil ports under the
command of the influential
Ibrahim Jadran, disputed the
claim. A spokesman for the
group said they are involved in
the Americans a few kilome-
ters from them, they claim
that the Iranian boats have
come within one kilometer,”
he said.
U.S. officials couldn’t im-
The destroyer USS Nitze, in a photo provided by the U.S. Navy.
Monday, September 12, 2016 | A3
of the revolution who occupy by most local rebel groups.
“five star hotels and confer- Islamic State has largely
ence halls abroad.” concentrated in northern
Following the U.S.-Russian parts of Syria in an effort to
announcement of the cease- establish its self-declared ca-
fire deal, rebel groups held liphate, but it has come under
marathon negotiations in both increasing pressure with U.S.-
Turkey and Syria to decide led coalition airstrikes and
whether to accept it and dis- Kurdish fighters.
tance themselves from Syria Because of its links to
Conquest Front. By Sunday other Syrian rebels, Syria
evening, many groups had not Conquest Front is seen as
announced a decision. much more difficult to uproot.
Ahrar al-Sham, which is Mosaab Khalaf, an activist
closely allied to Syria Con- in Aleppo said the situation
quest Front, said late Sunday could lead to intra-rebel fight-
that it rejected the cease-fire ing.
and any effort to isolate one “If the rebel groups don’t
rebel group from another. unite and some of them de-
When they reconvene early cide to break ties with Syria
next week, Moscow and Wash- Conquest Front and submit to
ington are also expected to the international community,
discuss ways to cooperate this will lead to internal fight-
against Islamic State, a mostly ing amongst the rebel fac-
foreign fighting force reviled tions,” Mr. Khalaf said. “This
government that has con-
trolled eastern Libya since
2014.
The attack on the oil ports
is the strongest indication that
Gen. Haftar has abandoned any
negotiations to support and
work with the unity govern-
ment.
The clashes also threaten to
AGENCE FRANCE-PRESSE/GETTY IMAGES
draw other forces allied with
the unity government into the
fresh round of fighting, poten-
tially undermining the fight
against Islamic State while
scuttling the progress of the
unity government.
The powerful Misrata Bri-
gades, which have lead the
largely successful battle
against the Islamic State pres-
ence in Sirte under the aus-
heavy fighting and vowed to pices of the unity government,
take back lost territory within could be forced to confront
24 hours. Mr. Jadran backs the Gen. Haftar’s forces over the
unity government. oil terminals—once again pit-
Gen. Haftar has long been ting two of Libya’s most potent
an opponent of the unity gov- fighting forces against each
ernment, calling it an unneces- other.
sary foreign interference. But An official with Libya’s
he has a common goal of dis- state-controlled National Oil
lodging Islamist militants in Co. said the company’s em-
Libya’s east, and in waging his ployees were unharmed in the
own campaigns against them fighting and the board of di-
has won support from some rectors had convened to dis-
regional governments and the cuss the outbreak of violence.
mediately be reached for com- ping waterway have prolifer-
ment. ated over the years.
Iran has long asserted its In January, Iran captured
dominance over the Persian two small U.S. Navy boats af-
Gulf, and incidents involving ter they strayed into Iranian
its ships in the key oil-ship- territorial waters. The 10
crew members were held
briefly and released, but the
incident heightened tensions
in the region just days before
Iran’s nuclear deal took effect.
The nuclear deal, agreed
US NAVY/AGENCE FRANCE-PRESSE/GETTY IMAGES
between Iran and six world
powers, prescribed curbs on
Iran’s disputed nuclear pro-
gram in exchange for sanc-
tions relief.
Apparently referring to the
recent incidents involving
close approaches by Iranian
vessels, Republican candidate
Donald Trump on Friday sug-
gested Iranian ships harassing
U.S. destroyers would “be
shot out of the water” if he
were president.
AMEER ALHALBI/AGENCE FRANCE-PRESSE/GETTY IMAGES
will weaken the fighting
fronts and the Syrian regime
will take advantage of this. It
will be a disaster.”
Leaders of the political op-
position said on Sunday that
they hadn’t received details of
the cease-fire’s implementa-
tion, the geographical areas it
covers and how Russia and
Damascus would be held ac-
countable for any violations.
Both sides have violated past
agreements.
“We have not received the
agreement and don’t know its
details,” said Suhair Atassi, a
member of the political oppo-
sition. “The agreement does
not address issues like local
truces which the regime uses
to force people to leave their
areas, in addition to the issue
of besieged areas, prisoners,
and political transition.”
Station
In Kenya
Attacked
Associated Press
Three women were killed
after they attacked a police
station in the Kenyan coastal
city of Mombasa, a police of-
ficial said on Sunday.
One of the women threw a
gasoline bomb at officers
while another pulled out a
knife, Mombasa police chief
Parterson Maelo said.
He added that two police-
men were wounded in the at-
tack.
The women, who were
dressed in niqabs, were then
shot and killed by police.
Mr. Maelo said the women
arrived at the central police
station at about 10:30 a.m. to
report a stolen telephone.
“While the officers were
questioning them about the
particulars of the stolen
phone, one of them drew a
knife and another threw a
petrol bomb at the officers
of the report office,” he said.
No group has claimed re-
sponsibility for the attack.
Kenya faces a constant
danger of being attacked by
adherents of the Somali mili-
tant group al-Shabaab, which
has vowed retribution for
Kenya’s deployment of
troops to Somalia in 2011.
Al-Shabaab is al Qaeda’s
affiliate in the region.
It has recruited hundreds
of Kenyans and used them in
numerous attacks on the
country, including the April
2015 assault on Garissa Uni-
versity that killed at least
148 people.
Recently, al-Shabaab at-
tacks in Kenya have been
limited to the border towns
of Mandera and Liboi near
Somalia.
However, Kenya is also
struggling to battle Islamic
State’s recruitment of young
people in the country.
At least 20 young Kenyans
have traveled to Libya to join
the extremist group, police
said.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Monday, September 12, 2016
Greece’s Leader Comes Down to Earth
Populist premier seeks
Out of Favor
to revive his popularity Greece’s ruling leftwing Syriza party trails the
with voters with conservative opposition in popularity.
promise of recovery Share of voter support for each party
BY NEKTARIA STAMOULI
AND MARCUS WALKER
THESSALONIKI, Greece—
Greek Prime Minister Alexis
Tsipras, languishing in polls,
sought to reboot his premier-
ship over the weekend. But his
economically depressed coun-
try has largely given up hope
on the imminent change he is
promising.
Europe’s most electorally
successful populist has be-
come about as unpopular as
the Greek political establish-
ment he ousted almost two
years ago. A recent survey
showed only 19% of Greeks
view him favorably and 85%
are dissatisfied with his gov-
ernment.
Such low approval ratings—
familiar to Europe’s least-pop-
ular establishment politicians,
such as French President Fran-
çois Hollande—reflect how the
star of the eurozone’s antiaus-
terity movement has come
down to earth.
Because of its deep eco-
nomic crisis, Greece was ahead
of the rest of Europe in the re-
volt against mainstream cen-
trist parties. Elsewhere, anti-
establishment populists of the
anticapitalist left and the na-
tionalist right are now on the
rise. In Greece, they have been
partners in government since
early 2015, in a coalition led
by Mr. Tsipras’s left-wing
Syriza party, and their appeal
is on the wane.
World
Watch
FRANCE
Paris Authorities
Open Terror Probe
Authorities opened a formal in-
vestigation on terrorism charges
against a woman held in connec-
tion with a car loaded with cook-
ing-gas canisters found a week
earlier near Notre Dame Cathedral.
The suspect, identified as Or-
nella G., will be investigated on
preliminary charges of terrorist
association and attempted mur-
der as part of a terrorist group,
the prosecutor’s office said.
Once magistrates have com-
pleted a probe, they can either or-
der a suspect to stand trial or drop
the charges.
Ornella G., whom prosecutors
described as a 29-year-old on
France’s antiterror watch list, was
arrested last Tuesday after her fin-
gerprints were found in the vehicle.
—Sam Schechner
IRAN
Russia Helps Build
New Nuclear Plant
Iran began building its second
nuclear power plant with Rus-
sian help, the first such project
since last year’s landmark nu-
clear deal with world powers.
The project in the southern
port city of Bushehr will eventu-
ally include two power plants
expected to go online in 10
years.
Construction of the second
plant is set to begin in 2018.
The entire project will cost more
than $8.5 billion, with each plant
producing 1,057 megawatts of
electricity.
—Associated Press
AUSTRALIA
Alleged Stabber
Charged With Terror
Police charged a man with
committing a terrorist act and
attempted murder after he alleg-
edly stabbed a man multiple
times in Sydney.
Australia’s New South Wales
state police said the 22-year-old
man was arrested following the
stabbing of a 59-year-old man in
the Sydney suburb of Minto.
The attack was allegedly in-
spired by Middle East-based mili-
tant group Islamic State, but the
man isn’t known to be connected
to any terror group, New South
Wales State Police Deputy Com-
missioner Catherine Burn said.
Last Monday, an Australian
man who planned to kill a police
officer in an Islamic State-in-
spired attack during veterans day
commemorations last year was
sentenced to 10 years in prison.
—Rhiannon Hoyle
Syriza
Latest opinion poll*
Sept. 2015 election result
New Democracy
Greeks’ view of party leaders
Prime Minister Alexis Tsipras
2.5% 16.5%
VERY POSITIVE POSITIVE
2.5% 19.5%
New Democracy leader Kyriakos Mitsotakis
*Excluding undecided voters
Source: University of Macedonia. 1,034 people surveyed
on Sept 1-2, margin of error +/-3.1%
Economic recovery, which
Mr. Tsipras is counting on to
revive his fortunes, has so far
failed to materialize. Tax in-
creases to reach the tough
budget goals of Greece’s bail-
out, and capital controls to
protect the fragile banking
system, are set to keep Greece
in recession this year.
The 42-year-old premier
used a major speech over the
weekend to tell Greeks that
better days are beginning.
“There is light at the end of
the tunnel and it is now visi-
ble,” Mr. Tsipras told an audi-
ence of businesspeople and
politicians at the annual trade
fair in Thessaloniki, Greece’s
second-biggest city after Ath-
ens. “We have to hold on. With
tenacity and persistence, we
will soon be in calmer waters.”
The speech sought to pres-
Fragile Weeklong Cease-Fire Holds in Ukraine
BY NATHAN HODGE
MOSCOW—Ukrainian offi-
cials and Russia-backed sepa-
ratists say a tenuous cease-fire
has held for a week along the
front lines in eastern Ukraine,
after months of intense com-
bat over the summer.
Government and separatist
forces began the truce on
Sept. 1, coinciding with the be-
ginning of the school year.
“The number of casualties
among Ukrainian service
members has decreased dra-
matically,” said Col. Oleksandr
Motuzyanyk, the Ukrainian
government’s military spokes-
man. “Not a single soldier was
killed over Sept. 1-4.”
Fighting erupted in eastern
Ukraine in 2014, in the wake of
pro-Russia President Viktor
Yanukovych’s ouster. The con-
flict has continued to simmer,
despite a European-brokered
peace deal in early 2015. Dur-
ing two successive summers,
casualties spiked as the two
sides traded fire along a rela-
tively stable front line.
While the shaky cease-fire
has held, both sides accuse the
other of frequent violations,
and exchanges of fire continue
at contested points. Major
Russian military drills along
Brexit Doesn’t Deter EU Students From U.K.
BY DENISE ROLAND
LONDON—Britain’s decision
to leave the European Union
doesn’t appear to have dented
the number of EU students
planning to start degrees in
the U.K. in the coming weeks,
though senior figures warn the
vote could take a more serious
toll next academic year.
EU students haven’t relin-
quished offers from U.K. uni-
versities any more than usual
this year, according to several
top institutions surveyed by
The Wall Street Journal.
“We’ve had no obvious indi-
cation at this stage there will
be a reduction in the number
of EU students,” said Paul Teu-
lon, director of admissions for
King’s College London. How-
ever, “we will only really know
where we stand towards the
end of September or beginning
of October.”
The same is true for Uni-
versity College London, ac-
cording to its provost, Michael
Arthur.
Students who have been of-
fered places are under no obli-
gation to show up when term
starts, typically in late Sep-
tember, so university admis-
sion departments use indica-
tors such as accommodation
HK JP KO ML SI
WORLD NEWS
21.5%
35.5%
33.7%
28.9%
30.5%
NEGATIVE VERY NEGATIVE
29.5% 17%
THE WALL STREET JOURNAL.
ent “an upbeat explanation of
what’s going on. But what’s
going on is total stasis,” said
Theodore Couloumbis, emeri-
tus professor of politics at
Athens University.
Around 5,000 police offi-
cers cordoned the premier’s
events in Thessaloniki, pro-
tecting him from demonstra-
tions that drew around 13,000
protesters on Saturday. Mr.
Tsipras used to be among the
leaders of such antigovern-
ment protests.
Many locals say they didn’t
bother to listen to his Satur-
day-night speech. “No matter
what he says, nothing is going
to change now; it’s too late,”
said Panagiotis Kostakis, a re-
tiree who watched the speech.
Greece needs rebuilding from
the foundations, he said, sip-
ping his Sunday coffee with
Ukrainian soldiers playing table tennis late last month in an empty pool in the village of Marinka.
Ukraine’s border have height-
ened alarm in Kiev amid
Washington-Moscow tensions.
In a briefing Thursday in
Kiev, Alexander Hug of the Or-
ganization for Security and
Cooperation in Europe, which
monitors the conflict in
Ukraine, said a particularly se-
rious incident occurred Mon-
day night around the Stanytsia
Luhanska bridge, where both
sides exchanged fire with mor-
tars, automatic grenade
applications from would-be
freshmen to estimate final
numbers.
Representatives of Imperial
College London, the London
School of Economics and Polit-
ical Science, and the universi-
ties of Oxford, Bristol, Cardiff,
Edinburgh, Glasgow, Notting-
ham and Southampton also
said they didn’t expect a fall in
EU students enrolling this
year.
The University of Oxford is one of several universities not expecting a drop in EU students this year.
IN UK FR MN PR
28%
Mr. Tsipras used a speech in Thessaloniki over the weekend to tell Greeks better days are beginning.
other pensioners.
Mr. Tsipras retains political
strengths. His boy-next-door
charisma and modest middle-
class background contrast
with the elite roots of most
top Greek politicians, includ-
ing conservative opposition
leader Kyriakos Mitsotakis, the
Harvard-educated scion of a
political dynasty.
“Tsipras is an attractive
young person who does not
create feelings of revulsion in
the public. But even this guy is
losing his appeal because peo-
ple are feeling it in their pock-
ets,” Mr. Couloumbis said.
The most recent opinion
polls put Mr. Mitsotakis’s New
Democracy party ahead of
Syriza by between four and 10
percentage points. Snap elec-
tions, common in Greece,
though, aren’t expected soon.
launchers, small arms and
heavy-machine guns.
“The episode underlines the
fragility of the cease-fire,” Mr.
Hug said. “One bullet fired in
anger can set off an inferno.”
It is in that fraught context
that Russia is carrying out
large-scale military exercises
in its Southern Military Dis-
trict. The drills, dubbed Cau-
casus-2016, involve around
12,500 troops and include avi-
ation assets and ships from
That is partly due to reas-
surances from the U.K. govern-
ment soon after the Brexit
vote that nothing would
change for those enrolling this
academic year. Several univer-
sities themselves moved
quickly to assuage potential
concerns among incoming EU
students. Further, those arriv-
ing this year would have ap-
plied to study in the U.K. well
before the Brexit vote.
THE WALL STREET JOURNAL.
NIKOS ARVANITIDIS/EUROPEAN PRESSPHOTO AGENCY
Mr. Tsipras’s parliamentary A year on, however, life un-
majority is slim but cohesive. der Syriza largely resembles
Syriza was a fringe group- what came before. The govern-
ing of Marxists and other radi- ment is stuck in endless
cals until Greece’s debt crisis rounds of talks with creditors
catapulted it to prominence, about hitting the deal’s budget
culminating in election victory targets. The main change is
in January 2015. that Syriza’s austerity relies
Mr. Tsipras, who had long more on raising taxes than
said Greece could end fiscal cutting spending.
austerity if only it wanted to, Despite the setbacks, Mr.
tried to force the country’s Tsipras can’t be written off,
Germany-led creditors to says George Pagoulatos, pro-
loosen the terms of its bailout. fessor of European political
He failed, and had to sign a economy at the Athens Univer-
humiliating surrender: a new sity of Economics and Busi-
bailout deal that deepened and ness, and a prominent critic of
prolonged the austerity. the government. “The majority
Despite that climbdown, of people have decided that
Syriza won re-election in Sep- Tsipras has failed, and that he
tember 2015 because Greeks lied to them. But as an indi-
didn’t want to return to rule vidual, he’s viewed as more
under their old parties, which like them, with his failings,
are widely blamed for steering than other contenders,” he
Greece into its debt crisis. said.
troops to newly built installa-
tions along Ukraine’s border.
Underscoring those ten-
sions, the Pentagon said
Wednesday a Russian Su-27
jet fighter buzzed a U.S. Navy
P-8A Poseidon surveillance
aircraft in international air-
space over the Black Sea, at
one point closing to within 10
feet of the U.S. aircraft, ac-
cording to U.S. officials.
The Russian military said
that U.S. aircraft had ap-
MAX BLACK/ASSOCIATED PRESS
proached Russian territory
with transponders switched
off, and that Russian war-
planes had scrambled to iden-
tify the American planes.
“This is not the first at-
tempt by NATO aircraft to ap-
proach the state border of the
Russian Federation to conduct
reconnaissance during ‘Cauca-
Russia’s Black Sea and Caspian sus-2016’ strategic command
Sea fleets. and staff exercises,” the Rus-
Some of the exercises are sian military said.
taking place around the Black The military exercises and
Sea peninsula of Crimea, high-wire aerial encounter
which Russia annexed from come amid international con-
Ukraine in 2014, prompting cern about Russian President
swift condemnation by many Vladimir Putin’s intentions.
nations, including the U.S. and According to Ukraine’s mili-
its European allies. Defense tary intelligence and armed
analysts have noted a buildup forces, Russia has deployed
of Russian forces inside Cri- regular forces to back mili-
mea in recent months, along tants in eastern Ukraine, a
with the deployment of more charge Moscow denies.
EU students currently are But the government hasn’t
charged the same fees as U.K. guaranteed these benefits to
students, which at £9,000 those enrolling in 2017 or be-
($12,000) a year for most uni- yond, raising concerns that
versities are lower than the applications from EU students
charges for those from outside could fall next academic year.
the bloc: The fees for non-EU Julia Goodfellow, president of
international undergraduates lobbying group Universities
range from £9,500 to £49,600, U.K., said there was an urgent
depending on the type of de- need to address these issues
gree, according to the Com- to prevent a likely decline in
plete University Guide, a EU student applications for
higher-education data service. entry next academic year. Sev-
eral university researchers are
already concerned the leave
vote has hurt their chances of
winning all-important grant
money from the EU.
For some EU students, the
more pressing issue, according
to Mr. Teulon, is whether they
can continue to access U.K.
student loans.
One potential problem for
universities post-Brexit is that
outside the bloc, the U.K.
might be prevented from of-
fering special conditions to EU
students over those from any
other country. “The concern is
OLI SCARFF/GETTY IMAGES
it could be regarded as dis-
criminatory and prejudiced,”
Prof. Arthur of University Col-
lege London said.
Losing those students
“would create a huge intellec-
tual, cultural and creative
hole,” Prof. Arthur said.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Monday, September 12, 2016 | A5

WORLD NEWS

Scandal Puts Spotlight on Najib’s Wife

Documents in 1MDB She is the only child of school- After Mr. Najib became
teachers, hasn’t had a regular prime minister in 2009, she
probe show millions in paying job in years and her drew criticism for her ostenta-
credit-card spending husband, Prime Minister Najib tious style. Photos appeared
Razak, is a longtime bureau- online of her with a dozen dif-
by Rosmah Mansor crat with an annual salary of ferent Hermès Birkin bags,
$100,000. which can cost tens of thou-
BY TOM WRIGHT Ms. Rosmah, 64 years old, sands of dollars.
says she has a habit of saving. The U.S. lawsuit, which
A major financial scandal “I have bought some jewelry charges more than $3 billion
surrounding the Malaysian and dresses with my own was diverted from the fund,
prime minister is drawing money. What is wrong with detailed how Ms. Rosmah’s

SAEED KHAN/AGENCE FRANCE-PRESSE/GETTY IMAGES

fresh attention to his glamor- that?” she wrote in her 2013 son from an earlier marriage—
ous wife, Rosmah Mansor, who autobiography. a onetime banker named Riza
newly revealed documents But allegations that Mr. Na- Aziz—allegedly received tens
show has racked up at least $6 jib received hundreds of mil- of millions of dollars from
million in credit-card charges lions of dollars siphoned be- 1MDB, which U.S. officials say
in recent years—despite hav- tween 2009 and 2015 from he used to buy property in
ing no known source of in- 1Malaysia Development Bhd., a London, Los Angeles and New
come beyond her husband’s state investment fund he set York and to finance a Holly-
salary. up, are bringing renewed scru- wood film company.
At an anticorruption rally tiny of her. The studio, Red Granite Pic-
last month in Kuala Lumpur, Extensive bank-transfer re- tures, has said that to its
hundreds of students, young cords reviewed by the Journal knowledge, none of its funding
professionals and other dem- showed that large sums from “was in any way illegitimate”
onstrators took to the streets 1MDB wound up in the prime and that Mr. Aziz “did nothing
behind a cardboard caricature minister’s personal accounts Malaysian Prime Minister Najib Razak and wife Rosmah Mansor in 2009 after he was sworn in. wrong.”
of a meticulously coiffed via intermediaries. The re- Zulkiflee Anwar Ulhaque, a
woman carrying a Hermès cords were also cited in a civil Saudi Arabia, most of which Journal show those expenses with Mr. Najib’s inheritance cartoonist who has taken pot-
handbag, demanding an inves- lawsuit filed by the U.S. Jus- he said was returned. The Sau- are part of at least $6 million from his father, a former shots at Ms. Rosmah, depict-
tigation into Ms. Rosmah’s fi- tice Department in July seek- dis have offered only vague in spending by Ms. Rosmah prime minister. His four broth- ing her with huge rings and
nances. ing the seizure of more than statements. between 2008 and 2015 on ers later denied their father massive hair, was charged last
“She said she saved that $1 billion of assets from peo- The Wall Street Journal re- clothing, shoes and jewelry had left a big estate, without year with sedition for ques-
money since she was small. ple connected to Mr. Najib. ported this year, citing bank- from London’s Harrods depart- giving details. Mr. Najib issued tioning the impartiality of Ma-
That is impossible,” said Anis The lawsuit doesn’t name Mr. ing documents, that at least $1 ment store, Saks Fifth Avenue another statement describing laysia’s judicial system. He de-
Syafiqah Mohd. Yusuf, a 24- Najib, but a person with direct million in purchases made by of New York and elsewhere. his father as frugal and a man nies the charges. A trial is set
year-old student from the Uni- knowledge of the investigation Ms. Rosmah at jewelry and Ms. Rosmah hasn’t com- of integrity, without address- to begin this month.
versity of Malaya who helped said the “Malaysian Official 1” fashion stores in Europe and mented on that spending. At- ing the inheritance. He held a display of works,
organize the protest. in the complaint is Mr. Najib. the U.S. in 2014 were paid for tempts to reach her and Mr. Ms. Rosmah met Mr. Najib, including more caricatures of
Ms. Rosmah’s jewel-be- Mr. Najib has denied wrong- by Mr. Najib using credit cards Najib for this article were un- who was chief minister of Pa- Ms. Rosmah, in a field outside
decked public appearances doing. His attorney general, that drew on 1MDB funds. The successful. hang state, in the 1980s. She Kuala Lumpur this month. The
have long made her a polariz- without releasing documenta- couple declined to comment at The prime minister’s office was working for a property opening was attended by op-
ing figure in this relatively tion, described the money as a the time. last year said the first family’s company, but stopped soon af- position politicians and hu-
poor, Southeast Asian country. legal political donation from New documents seen by the spending was commensurate ter they were married. man-rights workers.

Allies Lack Options on North Korea Anti-India Sentiment

BY ALASTAIR GALE Hardens in Kashmir
SEOUL—The U.S., Japan and BY RAYMOND ZHONG ernment is examining less-
South Korea pledged to con- harmful means of crowd
sider new unilateral steps to BIJBEHARA, India — A control. But Javaid Gillani,
pressure North Korea after its mounting death toll in Kash- Kashmir’s inspector-general of
fifth nuclear test, but their op- mir, where street protests police, said shotguns remain
tions are limited by a lack of erupted after security forces essential. “If you don’t have
economic and diplomatic ties killed a well-known separatist something like a pellet gun, all
KIM WON-JIN/AGENCE FRANCE-PRESSE/GETTY IMAGES

to Pyongyang. fighter this summer, is stoking you have is live ammunition,”

On Sunday, the top U.S. en- public anger with Indian rule he said in a recent interview.
voy on North Korea said the in the Himalayan region. The United Nations’ top hu-
three nations would work to- Efforts by New Delhi to man-rights official demanded
gether at the United Nations calm tensions across the in August that India and Paki-
on action against Pyongyang, mostly Muslim section of stan grant observers access to
as well as study their own in- Kashmir it controls—neighbor- Kashmir “given grave concerns
dividual penalties. ing Pakistan administers an- about recent allegations of se-
“In addition to sanctions in other—have foundered as the rious human-rights violations.”
the [U.N.] Security Council, violence stretches into a third Pakistan says it would wel-
both the U.S. and Japan, to- month, raising the prospect of come a visit. India has re-
gether with the ROK [South a return to armed struggle. buffed the request.
Korea], will be looking at uni- “They don’t control us here The unrest has derailed rec-
lateral measures,” Sung Kim, by giving us flowers,” said onciliation efforts between the
U.S. special representative for Pyongyang residents watched a TV broadcast announcing North Korea’s latest nuclear test Friday. Aala Fazili, a scholar and ac- nuclear-armed rivals, which
North Korea policy, told re- tivist at the University of have fought three wars over
porters in Tokyo. U.S. nationals travel to North dustrial park it co-managed cooperation of China, which Kashmir, referring to the In- Kashmir since 1947.
Japan’s foreign ministry Korea as tourists each year. with Pyongyang earlier this holds a veto on the Security dian authorities. “So our re- Separatist leaders say the
said Sunday that it would Such measures are unlikely year, severing the last eco- Council. Beijing condemned sponse cannot be just giving government isn’t taking their
study further action it could to cause North Korea pain. nomic link between the two. the latest nuclear test but them flowers.” demands seriously. They re-
take by itself as well as at the North Korean officials have lit- The options for South Korea hasn’t indicated if it would More than 70 people have fused to negotiate with Indian
U.N., while South Korea’s pres- tle contact or dealings with and Japan are mostly con- support new sanctions. been killed and thousands in- politicians who traveled last
ident said on Friday she would Americans, and Pyongyang has strained to lobbying other na- Beijing is the most impor- jured in near-daily clashes be- week to Srinagar, the state’s
seek the toughest possible ac- become proficient at disguis- tions that have links to North tant player in diplomacy over tween law enforcement and summer capital, saying the
tion on Pyongyang, which car- ing its trade and financial enti- Korea to cut off their ties or North Korea because almost all stone-throwing demonstrators delegation wasn’t ready to dis-
ried out its latest test Friday. ties through steps such as crack down on Pyongyang. of Pyongyang’s trade is with demanding more autonomy cuss the core issue of Kashmiri
For the U.S., further unilat- switching the firms’ names South Korea has stepped up China or passes through it. and fewer Indian troops. Secu- self-determination. Mr. Singh
eral sanctions could include and moving them into neigh- those efforts this year, with Beijing is widely perceived to rity forces have fired birdshot criticized the snub, saying,
adding more North Korean of- boring China. As for a travel President Park Geun-hye and have diplomatic influence over into crowds, tearing flesh and “We are ready to speak with
ficials and entities to its black- ban, North Korea’s revenue senior diplomats traveling to North Korea, but relations lacerating eyeballs. everyone who wants peace and
list, which freezes assets held from American tourists is tiny. several of North Korea’s tradi- have soured under North Ko- Shafat Ahmad Mir, a 24- normalcy in Kashmir.”
in dollars and restricts Ameri- Like the U.S., South Korea tional allies to seal trade and rean leader Kim Jong Un. year-old, has been studying to Kashmiris have long chafed
cans from doing business with and Japan have almost no military deals in return for Pyongyang’s state media become a software engineer. under Delhi’s rule. But the July
these individuals and firms. trade or other ties to North ending ties to North Korea. published articles Sunday ac- Now he says he isn’t sure what killing of Burhan Wani, a 22-
It could also bar Americans Korea after imposing wide- Washington, Seoul and To- claiming the nuclear test. It his future holds. “I’m abso- year-old militant, touched a
from traveling to North Korea. ranging bilateral sanctions in kyo have said they would seek also blasted U.S. President Ba- lutely ready to die for this nerve, particularly in rural ar-
Although two Americans are response to previous missile to close loopholes in current rack Obama for leading calls cause,” he said. eas, where he used social me-
currently serving long prison and nuclear tests by Pyong- U.N. sanctions against North for punitive steps against the India’s home minister, Ra- dia and personal outreach to
terms in North Korea, a few yang. Seoul shut down an in- Korea, but that depends on the regime. jnath Singh, has said the gov- become a sort of folk hero.

Deadly Factory Fire in Dhaka Spurs New Outcry on Safety

BY SYED ZAIN AL-MAHMOOD equivalent to 80% of the coun-
try’s exports, according to
DHAKA, Bangladesh—Inter- government statistics.
national labor-rights and fac- However, the sudden growth
tory-safety groups called on in the number of factories has
the Bangladesh government to outpaced infrastructure and
speed up and expand the coun- safety regulations, resulting in
try’s industrial-safety-improve- a number of high-profile indus-
ment program after a fire at a trial accidents in recent years.
packaging factory near Dhaka In 2013, the collapse of a
killed around 30 people. factory building on the out-
The fire at the Tampaco skirts of Dhaka killed more
Foils factory in an industrial than 1,100 garment workers. In
area in Tongi, which is about response two parallel interna-
10 miles north of the capital, tional safety coalitions were
was still burning Sun- created to inspect thousands of
day night, although local fire- garment factories and help in-
service officials said the blaze vest in building and fire-safety
was under control. improvements. The Bangla-
Authorities believe the fire deshi government, with sup-
was caused by a boiler explo- port from the International La-
sion in the five-story factory, bor Organization, has also been
which produces foil and other carrying out inspections at
packaging materials. thousands of garment factories.
Low-cost manufacturing is a The Bangladesh govern-
mainstay of the Bangladesh ment, the ILO and interna-
economy. International retailers tional retailers who have
have flocked to the country’s joined the safety initiatives
low-price, high-volume garment have been eager to highlight
has passed a new labor law,
recruited hundreds more
safety inspectors and ordered
dozens of factories to undergo
extensive safety upgrades.
Critics, however, say the fo-
cus on clothing factories has
left less money and manpower
to monitor other industries.
On Saturday, a coalition of
international labor groups—
the Worker Rights Consor-
tium, the International Labor and international brands to
Rights Forum, the Clean speed up and expand the
Clothes Campaign, and the safety-improvement campaign.
Maquila Solidarity Network— “The boiler explosion and
released a statement urging resulting fire and structural
the Bangladesh government collapse at the Tampaco Foils
factory in Bangladesh demon-
strates the continuing dangers
to industrial workers in that
country and the failure of
global corporations to take
meaningful steps to protect the
safety of workers in their sup-
ply chains,” the statement said.
The Alliance for Bangladesh
Worker Safety, a group of 28
mostly North American compa-
nies led by Wal-Mart Stores
Inc. and Gap Inc., which has
been working to improve build-
ing and fire safety at nearly
700 Bangladeshi garment fac-
tories, said that the Tampaco
Foils factory fire underscored
the need to expand current
safety initiatives.
“This factory isn’t an RMG
[ready-made-garment] fac-
tory, and thus not aligned with
XINHUA/ZUMA PRESS

industry, which has become the the steps taken by Bangladesh any current safety initiative—
world’s third-largest exporter of to improve safety and working which speaks to why factory
clothing, after China and Italy. conditions at its roughly 5,000 safety reform is needed across
Bangladeshi garment ex- garment factories. Since the all industries in Bangladesh to
ports totaled $28 billion for deadly collapse of the factory ensure every worker is pro-
the year ended June 30— complex in 2013, Bangladesh Firefighters on Saturday worked to extinguish a deadly blaze at a packaging factory near Dhaka. tected,” the group said.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A6 | Monday, September 12, 2016
ISIS
Continued from Page One
sea of intercepted data.
In recent months, Europe
has been convulsed by a string
of simple yet lethal attacks.
Some were committed by peo-
ple who appear to have re-
ceived little direct training
from Islamic State. The sus-
pects in a failed plot in France
last week were “remotely con-
trolled” from Syria by the
group, prosecutors said Friday.
Officials worry such attacks
could be a way to distract intel-
ligence services while militants
prepare more complex plots.
The Paris attackers commu-
nicated sparingly—electronic
silences sometimes lasted
weeks—as they crossed the
continent in September and Oc-
tober en route to their deadly
rendezvous in Paris, security
officials said. When they did
communicate, they at times
called or sent text messages on
disposable cellphones they used
once and tossed.
“Try to make it so that even
if the idolatrous dogs intercept
and decrypt your messages…the
only information they will be
able to find is your username
and password,” advised Islamic
State’s French-language maga-
zine Dar Al Islam this spring.
Tips posted by Islamic State-
related propaganda outlets de-
scribe high- and low-tech meth-
ods to avoid detection: Switch
mobile phones frequently; sign
up for online accounts using
temporary phone numbers;
hopscotch frequently between
chat apps, making any inter-
cepted conversations difficult
to follow.
“Buy cheap burner phones;
use and throw,” Islamic State
sympathizers wrote in one
chat-app message. “This will
help you not to get tracked.”
The extremist group has also
apparently learned to keep se-
crets off the grid and to limit
who knows what—techniques
long used by al Qaeda, which
favors messengers and hand-
written notes.
“They’re using anonymity as
much as they use encryption,
because encryption can attract
the attention of intelligence
services,” said Jean-Charles
Brisard, president of the Center
for the Analysis of Terrorism, a
Paris-based think tank. “It’s a
huge challenge.”
Patrick Calvar, head of
France’s main domestic intelli-
gence agency, told French par-
liament investigators in May
that Islamic State had become a
hierarchical, militarized organi-
zation, drawing expertise from
experienced jihadists and veter-
ans of Iraqi security forces.
“We’re dealing with people
who are well versed in clandes-
tine operations, and who un-
derstand our capabilities,” Mr.
Calvar said. “We’re up against
real professionals.”
This Wall Street Journal ac-
count of the evolving state of
Islamic State communications
is based on court filings, gov-
ernment transcripts and Islamic
State propaganda and internal
documents, as well as inter-
views with officials investigat-
SHIP
Continued from Page One
as a frog, using a pogo stick to
hop through a muddy puddle.
In another, she rolls down a
hillside into a patch of mouse
traps. “I construct a scene, and
place my body within it to tear
down transcendent, powerful
systems through humour,” Ms.
Moss wrote in her email.
One week into her trip,
South Korea’s Hanjin Shipping
Co.—the global ocean carrier
whose name adorns both hulk-
ing sides of Ms. Moss’s tempo-
rary residence—filed for bank-
ruptcy protection, idling
dozens of its ships in interna-
tional waters. As authorities
sort out the uncertainty about
who will pay docking, unload-
ing and storage bills for the
nearly 500,000 containers
across Hanjin’s fleet, Ms. Moss
and the Geneva crew sit at an-
chor in the North Pacific.
Ms. Moss said that she and
the others aboard the Geneva—
a German captain and chief en-
gineer, a Polish chief mate,
members of the mostly Philip-
pine crew and two American
passengers—have little idea
when they will be able to come
ashore. Still, the sailors and
engineers continue their hard
work to keep the ship running,
she said.
In her email Thursday, Ms.
Moss waxed poetic about the
Hanjin Geneva. “The sheer la-
bour of the operation, cargo
Rescue workers ferry a wounded woman from the Bataclan concert hall after the Paris attacks last November.
ing terror cells in Brussels and
Paris.
Lessons Learned
Islamic State is a militant
group of the internet age, its
followers steeped in Facebook,
smartphones and text messag-
ing. These tools, which helped
spread the terror group’s mes-
sage around the world, also
helped authorities foil plots,
capture suspects and win con-
victions in the group’s early
years.
Karim Mohamed-Aggad, a
brother of one of the Paris at-
tackers, sent text messages ex-
tolling jihad and martyrdom in
late 2013 before heading to
Syria with friends from Stras-
bourg, France, according to a
court document. Radouane Ta-
her, a companion, talked in one
message about joining a jihad-
ist team. Then he added that
French intelligence services
“are reading this. You have a
message for them?”
The two men were arrested
on their return to France in
spring 2014. Mr. Mohamed-Ag-
gad was sentenced in July to
nine years in prison, and Mr.
Taher to eight years, both for
terrorist association. A lawyer
for Mr. Mohamed-Aggad said
she was appealing the verdict.
A lawyer for Mr. Taher didn’t
respond to a request for com-
ment.
Islamic State tightened secu-
rity following airstrikes by the
U.S.-led coalition on its territo-
ries in Syria and Iraq. The ter-
ror group in October 2014
banned the use of GPS to avoid
detection by Western allies, ac-
cording to documents seized by
U.S. Special Forces and viewed
by the Journal.
Western recruits have since
returned from Syria better
trained, security officials said.
“At the point at which
they’re leaving Belgium, France,
the U.K., these guys are ama-
teurs. By the time they are
turned around and come back
again, they are a different
destined for nowhere in partic-
ular.” It had all become a
source of inspiration in her
work, she wrote. She is docu-
menting the journey, including
the “mounting desperation and
frustration from everybody
about our predicament.”
Philosopher Albert Camus,
in his 1942 essay “The Myth of
Sisyphus,” theorized that the
human condition is inherently
absurd, writing: “The workman
of today works everyday in his
life at the same tasks, and his
fate is no less absurd. But it is
tragic only at the rare mo-
ments when it becomes con-
scious.”
In this case, life appears to
be imitating art. “The fact that
Rebecca is in the middle of a
global financial event is hair-
raising but ultimately excep-
tional for her practice,” said
Kimberly Phillips, director of
the “23 Days at Sea” program.
The residency “was meant
to bring visibility to a system
we’re all implicated in but
many of us aren’t aware of,”
Ms. Phillips said. “This is prob-
ably the best thing that could
happen.”
The program covers the cost
of the voyage and other ex-
penses during the trip, she
said, but the artists’ contract
stipulates the program doesn’t
have liability for things beyond
its control, such as the current
situation.
Ms. Phillips said she called
the British consulate in Van-
couver and was put in touch
with British emergency ser-
FROM PAGE ONE
Ways ISIS Keeps its Secrets
The terror group’s communications, once commonly conducted
on phones and social media accounts easily tracked by authorities,
have evolved into a mix of high- and low-tech methods to avoid
detection, including encrypted messages, disposable phones,
face-to-face meetings, written notes and stretches of silence.
Disposable phones
Cellphones used for as little as a single conversation then
tossed to avoid being tracked by cellphone location data.
Misdirection
The strategy of giving cellphones identified with an individual to
accomplices who act as decoys, hiding a terrorist's true location.
Encrypted apps
Such message services as WhatsApp and Telegram relay
messages that are difficult for authorities to decode.
breed of terrorist,” said Rob
Wainwright, the director of Eu-
ropol, which coordinates law-
enforcement agencies in the
European Union.
Abaaoud had a close call be-
fore the Paris attacks that may
have taught him a lesson about
the vulnerability of electronic
communications.
He coordinated a group, in-
cluding fighters from Islamic
State territory, to attack Bel-
gium in late 2014, Belgian
judges said in May during a
trial of accused participants.
Members of the group used
disposable phones and commu-
nicated, in part, through at
least one shared WhatsApp ac-
count and Telegram. But they
may not have been careful
Absurdist British filmmaker Rebecca Moss, who was on an art program, is stranded on the Hanjin
Geneva. Right, one of her films.
vices in the U.K., who were
aware of the situation. A
spokesman for the U.K. Foreign
Office said, “We are providing
assistance to a British national
on board [the Hanjin Geneva]
and are in close contact with
the company involved.”
A spokeswoman for German
ship-operator NSB Reederei,
which manages the Hanjin Ge-
neva and booked Ms. Moss’s
trip, said via email that the
company didn’t have an esti-
mate of when the ship would
get going again because “the
situation is changing from hour
to hour.” The captain, crew and
passengers are well cared-for
and have a good supply of pro-
visions, spokeswoman Bettina
Wiebe wrote.
In a letter to Ms. Moss
Wednesday, the company said
it was “monitoring the situa-
tion closely… We assure you
THE WALL STREET JOURNAL.
enough. Belgian police tapped
their phone lines.
The phone taps started with
a Belgian man they had sus-
pected of returning from Syria.
From there, phone taps and
physical surveillance led au-
thorities to accomplices and a
house in Verviers, Belgium,
used by the alleged plotters.
Authorities found weapons,
bomb-making chemicals and
police uniforms at the house
during a January 2015 raid.
Two suspected terrorists were
killed in a gunfight with police.
Western intelligence services
used Abaaoud’s communica-
tions with the suspected plot-
ters to locate him in Athens. By
the time Greek police cordoned
off the streets surrounding
that we will do our utmost to
arrange your disembarkation
at the earliest possibility.”
Company representative
Markus Hüneke added that
there was “no timely delay”
given that the ship had not
been expected in Shanghai be-
fore Sept. 13.
On Friday, a lawyer for Han-
jin said in U.S. Bankruptcy
Court in Newark, N.J., that the
company now has the funding
and legal permission necessary
to offload containers bound for
U.S. ports. The fate of Ms.
Moss’s ship, which was des-
tined for Shanghai, remains
uncertain.
Christopher Boyne, a sculp-
tor who was one of last year’s
“23 Days at Sea” residents—
also aboard the Hanjin Ge-
neva—said when he heard
about Ms. Moss’s predicament,
“I felt a little bit of concern for
THE WALL STREET JOURNAL.
plices assigned to set off bombs
at the Stade de France arena.
“By the time these guys re-
entered Europe, the plan was
good to go, such that the com-
munications necessary to de-
cide on the plan and get it
ready could be kept to a mini-
mum,” said Mr. Wainwright of
Europol.
When they did communicate,
the terrorists used both en-
crypted message apps and dis-
posable phones. Some phones
were used for a single conver-
sation, Bernard Bajolet, head of
France’s foreign-intelligence
agency, told French parliamen-
tary investigators in May.
The scale of the Paris attack
came as a shock. Three teams
of men armed with rifles and
suicide belts arrived in rental
cars on Friday, Nov. 13. One
THIBAULT CAMUS/ASSOCIATED PRESS
group sprayed gunfire at out-
door restaurant terraces. An-
other tried to enter the soccer
stadium where the French pres-
ident was watching the national
team. At the concert hall, three
terrorists killed 89 people.
Three days later, French offi-
cials realized Abaaoud wasn’t
in Syria, but had directed the
Paris carnage in person.
Abaaoud’s hideout, he was On Nov. 18, five days after
gone. the killings, a combination of
tips, phone taps and cellphone-
location data led French offi-
Hunting Abaaoud cials to an apartment north of
Western intelligence agen- Paris, where Abaaoud and two
cies continued to pursue accomplices were killed in an
Abaaoud electronically, inter- hourslong firefight.
cepting data sent by phones The raid left other affiliated
linked with him, French offi- terrorists in Belgium—includ-
cials said. ing alleged Paris attacker Salah
The trail led to Syria. Secu- Abdeslam, who had returned to
rity officials suspect Abaaoud Brussels—without a leader, of-
and accomplices there were ficials said. Some of the men
making final plans for the Paris used encrypted communica-
attacks early last summer, se- tions in an apparent effort to
lecting targets and choosing at- reach allies in Syria for instruc-
tack teams. Around that time, tions, including Ibrahim el-
intelligence agencies recorded Bakraoui, one of two brothers
calls between Abaaoud in Syria who died in the suicide-bomb
and his family in Morocco. attacks in Brussels.
In mid-August, Western in- Four months later, on March
telligence agents got an inkling 22, Mr. el-Bakraoui and two
that Abaaoud aimed to strike others set off bombs in the
France. They arrested Reda Brussels airport; an accomplice
Hame, an Islamic State opera- blew himself up on a crowded
tive and French national, who train. Altogether, 32 people
had returned to France from were killed.
Syria. Officials say Mr. Hame The men left behind a laptop
told them that Abaaoud had or- and other digital tools for au-
dered him to launch an attack. thorities to mine for informa-
He also revealed that Abaaoud tion, officials said, evidence
planned to strike a rock con- their security precautions had
cert, according to a French par- grown lax.
liament report. In April, investigators stum-
Using cellular networks, Wi- bled across another communi-
Fi hot spots and satellites, in- cations tool, the encrypted au-
telligence agencies, including dio message.
from the U.S., stepped up ef- Italian prosecutors said Is-
forts to find Abaaoud and his lamic State officials in the Mid-
accomplices. Cellphones pinged dle East had in April sent audio
their locations. The data messages over WhatsApp to
through mid-October showed Abderrahim Moutaharrik, a
Abaaoud moving among the Moroccan-born Italian.
Syrian cities of Raqqa, Manbij The messages ordered at-
and Deir ez-Zor. tacks in Italy and were found by
Officials aren’t certain ex- chance: Mr. Moutaharrik played
actly when or how Abaaoud them aloud in his car and they
and the others landed in Eu- were captured by a recording
rope. Evidence assembled after device planted by authorities,
the attacks suggests that according to a court document
Abaaoud and other attackers and prosecutors.
were on the continent at least “Light up the fire on the
by late September. flowing crowd, pour grenades
Once in Europe, the Paris at- on the crusader’s head,” said
tackers kept their conversa- one message, part of an Arabic-
tions to a minimum. The three language poem. “Don’t have
men assigned to attack the mercy until he’s broken.”
Bataclan concert hall with ma- —Matthew Dalton, Noemie
chine guns had no contact for Bisserbe and Manuela Mesco
weeks with the three accom- contributed to this article.
said author Sasha Issenberg,
who has sought out container
ship travel several times as a
way to cut himself off from dis-
tractions and get writing done.
“Once you get out of port,
literally nothing happens,” he
said. And while ocean vessels
have limited internet access,
crew and passengers can only
send and receive email occa-
sionally via a satellite connec-
REBECCA MOSS (2)
tion, using a computer in the
captain’s office. “I was incredi-
bly productive in a way I’m not
on land,” Mr. Issenberg said.
Kevin Griffin, director of
The Cruise People Ltd., a Lon-
don-based travel agency that
helps book passage on con-
her but mostly I felt kind of tainer ships, said the bank-
this supreme jealousy.” ruptcy will affect about 10
During his freighter resi- ships of the 300 his agency
dency, Mr. Boyne took notes works with. Some of his clients
and sketched out plans for a had trips planned on Hanjin
series of small models of the ships that they have had to
ship, one for each day he was cancel and rebook.
on board. He started on day For Access Gallery’s resi-
one with an exact replica and dency program, Ms. Phillips
then employed different “direc- said, “I don’t quite know the
tions of abstraction” in each implications yet.”
model thereafter. Last year’s artist residents
To him the experience felt recently showed their work at
highly structured, he said, un- the Access Gallery, where it
like what Ms. Moss is experi- was praised by one local critic
encing. “I love that idea that as “fascinating and diverse.”
she has this open-endedness Ms. Phillips said she isn’t sure
now,” he said. whether this year’s exhibition
Other artists and writers will take the same form.
have found their way onto con- “In a program like this you
tainer ships for similar rea- have to go with it, you have to
sons, albeit not through a coor- respond to the conditions
dinated program. you’re presented with,” Ms.
“I thought about the prover- Phillips said. “What happens to
bial cabin in the woods and Rebecca? Does she get a solo
that sounded horrible to me,” show?”
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Is Central Banks’ Independence Overrated?
Frankfurt
I
n their battle against high
inflation, governments
granted significant inde-
pendence to central banks
over recent decades.
Now, some economists ar-
gue that same independence
could be hampering their abil-
ity to combat
the current
era’s problem:
inflation that’s
too low.
To safeguard
THE their indepen-
OUTLOOK dence, major
TOM central banks
FAIRLESS may have de-
ployed “second-
best” policies
that distort financial markets
and face diminishing returns,
such as negative interest rates
and large-scale bond pur-
chases, and shunned poten-
tially more effective tools such
as “helicopter money,” argues
Joachim Fels, global economic
adviser at Pimco.
Helicopter money, which
could involve, for example, an
increase in public spending or
tax cuts financed by the cen-
tral bank, takes central banks
beyond their traditional realm
of influencing the price and
volume of credit to determin-
ing how public money is
spent—the domain of elected
politicians.
Bank of Japan Gov. Har-
Memorials Held on 15th Anniversary of Attack
Hundreds gathered Sunday
morning in lower Manhattan,
at the Pentagon near Washing-
ton and in a field in Pennsylva-
nia to commemorate the 15th
anniversary of the Sept. 11 ter-
rorist attacks, and to honor
the thousands of people who
lost their lives.
By Corinne Ramey,
Sonja Sharp
and Zolan Kanno-
Youngs
The ceremony at the Na-
tional September 11 Memorial
& Museum in New York began
with the national anthem and
a reading of names of those
killed in both the 2001 and
1993 attacks on the World
Trade Center. Attended by the
families of those killed in
those attacks, elected officials,
first responders and others,
the event included six mo-
ments of silence, timed to
commemorate significant mo-
ments on Sept. 11, 2001.
Readers of the 2,983 names
included family members of
those who were killed in both
attacks, according to the mu-
seum. Elected officials present
included New York City Mayor
RACE
Continued from Page One
that Republicans can usually
take for granted. Mr. Trump
leads by 1 point in Arizona and
by 3 points in Georgia.
The results come amid
other national and state sur-
veys that show a tighter race
than earlier in the summer.
Mrs. Clinton’s lead in the Real
Clear Politics aggregate of
polls stood at 3.1 percentage
points on Sunday, down from
nearly 8 points in early Au-
gust.
The competition between
the two remains equally close
when the field is widened to
include Libertarian nominee
Gary Johnson and Green Party
candidate Jill Stein.
The Journal/NBC News/
Marist results illustrate how
the traditional electoral map is
being scrambled in an uncon-
ventional year that could see a
realignment of both parties’
coalitions.
Mr. Trump is making deep
inroads among working-class,
white men but alienating
many Hispanic voters with his
harsh rhetoric about Mexico
and illegal immigration. Mrs.
Clinton is scoring gains among
college-educated white voters,
a bloc that Republicans have
carried handily in the past.
“As we enter the final lap of
this very unconventional elec-
tion, it would not be surpris-
ing if the electoral map, in the
end, has new contours,” said
Lee M. Miringoff, director of
the Marist College Institute
for Public Opinion. “Any of
these four states could awaken
uhiko Kuroda has warned re-
peatedly that helicopter
money would be an unaccept-
able intermingling of fiscal
and monetary policy. In July,
the BOJ disappointed hopes
that it might embark on an
experiment with helicopter
money.
In Europe, Bundesbank
President Jens Weidmann has
cited similar concerns over
the independence of the Euro-
pean Central Bank as a reason
not to deploy helicopter
money. ECB President Mario
Draghi says that the topic
hasn’t even been discussed at
policy meetings.
T
he fear is that if govern-
ments started to finance
their deficits through
the money-printing presses,
they would succumb to politi-
cians’ desire to spend without
raising taxes. The result
would, eventually, be higher
inflation.
“To be told to increase the
balance sheet by x would
mean the independence was
lost, and the effects on infla-
tionary expectations could be
quite dramatic,” said Charles
Goodhart, a former member of
the Bank of England’s mone-
tary policy committee.
Yet advocates of more co-
operation say such risks are
exaggerated relative to the
benefits that closer coopera-
Bill de Blasio and former may-
ors Michael Bloomberg and
Rudy Giuliani. Presidential
nominees Donald Trump and
Hillary Clinton, who was a U.S.
senator from New York state
at the time of 2001 attacks, at-
tended the event as well.
President Barack Obama
spoke at an observance at the
Pentagon, where one of the hi-
jacked planes crashed, killing
184 people. He called for
Americans to embrace “our
patchwork heritage.” And
while he said the U.S. still
faces terror threats, “we re-
solve to continue doing every-
thing in our power to protect
this country that we love.”
At the Flight 93 National
Memorial near Shanksville, Pa.,
where a plane hijacked by ter-
rorists crashed in a field 15
years ago, the names of the 40
passengers and United Airlines
crew members were read and
bells rang in their memory.
The ceremony in New York
comes on the heels of recent
changes for the area surround-
ing the former World Trade
Center site. In March, the
World Trade Center transit
hub, with its soaring Oculus
centerpiece, opened to the
a fault line in what is looking
more and more like a shake-up
election, with more states be-
ing up for grabs.”
The four states polled in
the Journal/NBC News/Marist
surveys have historically been
less fiercely competitive than
vote-rich battlegrounds such
as Ohio and Florida.
President Barack Obama
won New Hampshire and Ne-
vada by more than 5 percent-
age points in 2012, while GOP
nominee Mitt Romney won
Georgia by nearly 8 points and
Arizona by 9.
Now, the states look more
competitive. Sensing opportu-
nities in traditionally Republi-
can territory, Mrs. Clinton is
airing advertising in Georgia
and Arizona.
The polls found that voting
Tight Contests in Four Battlegrounds
New polling confirms that Arizona and Georgia have joined the list of battleground states in this year's
presidential election. Hillary Clinton and Donald Trump are only two percentage points apart in Arizona,
Nevada and New Hampshire, while Mr. Trump leads by three points on a two-candidate ballot in Georgia.
ARIZONA
Head-to-head among likely voters
Clinton 41%
Trump 42%
Neither 10%
Third party candidates included
Clinton 38
Trump 40
Johnson 12 10
Stein 3 *
*Jill Stein is not on the ballot in Georgia. Ballot access in Nevada has been the subject of litigation
Sources: WSJ/NBC News/Marist telephone polls of 649 likely voters in Ariz., 625 likely voters in Ga., 627 likely voters in
Nev. and 737 likely voters in N.H. conducted Sept. 6–8; margins of error: +/- 3.8, 3.9, 3.9 and 3.6 pct. pts., respectively
U.S. NEWS
Cross-Purposes
Central banks have vastly expanded their balance sheets while
governments tightened their belts.
Central bank assets
U.S. Federal Reserve
$5
$4.5 trillion
4 400
3 300
2 Once the cap on Treasury
1 1
0 0
’08 ’10 ’12 ’14 ’16
Budget deficit as a share of gross domestic product
0% U.S.
–4
–8
–12
–16
’08 ’10 ’12 ’14 ’16
Sources: St. Louis Federal Reserve (central bank assets); International Monetary Fund (deficits)
THE WALL STREET JOURNAL.
tion could achieve in today’s
circumstances.
During World War II, the
Federal Reserve helped fi-
nance the U.S. war effort by
ensuring that long-term inter- from the early 1940s to 1951
est rates remained at 2.5%,
whatever the size of the fiscal former British financial regu-
A police officer arrives with a flag at the memorial in New York.
public. Last month, Westfield
World Trade Center, a $1.4 bil-
lion shopping complex, offi-
cially opened, although some
stores haven’t yet been com-
pleted.
On Thursday, officials an-
nounced new plans for the
performing-arts center
planned for the World Trade
Center site, including news
that Barbra Streisand would be
its new chairwoman. Planned
for the corner of Fulton and
Greenwich Streets, north of
the memorial, renderings for
the building show a stone cube
patterns in these four states
are similar to trends in other
places, with Mrs. Clinton lead-
ing among women and Mr.
Trump winning among men.
Mr. Trump leads among
white voters without a four-
year college degree; Mrs. Clin-
ton tends to do better among
college-educated whites than
those without a degree. She
wins among those voters in
New Hampshire and is com-
petitive in Nevada and Ari-
zona.
In Georgia, Mrs. Clinton
trails among white voters re-
gardless of education level:
Mr. Trump leads by 25 per-
centage points among college-
educated white voters, 57% to
32%, and by 54 points, 72% to
18%, among whites without a
college degree.
GEORGIA
43
46
7 6
42
44
8 15
3*
Bank of Japan European Central Bank
¥500 €4
¥453 trillion €3.3 trillion once wage and price controls
3 34% between 1945 and 1948,
2
200
100
0 man, a member of the Bank of
’08 ’10 ’12 ’14 ’16 ’08 ’10 ’12 ’14 ’16 Israel’s Monetary Committee.
0% Japan 0% Euro area
–4 –4
–8 –8
–12 –12
–16 –16
’08 ’10 ’12 ’14 ’16 ’08 ’10 ’12 ’14 ’16 Goodhart.
deficit. When that policy
ended in 1951, the Fed didn’t
reverse its purchases, so that
“post facto, a significant pro-
portion of U.S. fiscal deficits
was money-financed,” said
MARK KAUZLARICH FOR THE WALL STREET JOURNAL
with a translucent facade.
Sunday’s Sept. 11 ceremony
included six moments of si-
lence, each timed for events
during the attacks of Sept. 11,
2001. At 8:46 a.m., a police of-
ficial rang a bell to mark the
first moment of silence, for
when the first plane struck the
North Tower. At 9:03 a.m., a
moment of silence observed
the time the second plane
struck the South Tower.
A third moment of silence
commemorated when Flight 77
struck the Pentagon, and a
fourth when the South Tower
Still, the race is tighter
than usual in Georgia, which
hasn’t voted for a Democratic
presidential candidate since
1992, when Mrs. Clinton’s hus-
band, Bill Clinton, was first
elected.
Arizona has voted Republi-
can for president in 15 of the
past 16 elections, with Demo-
crats scoring their lone win in
1996, Mr. Clinton’s re-election.
The poll there found that His-
panics, which make up a siz-
able chunk of the electorate,
favored Mrs. Clinton 55% to
30%.
She enjoys a stronger ad-
vantage among Hispanics in
Nevada, 65% to 30%, while Mr.
Trump leads among white vot-
ers there, 51% to 38%. Another
strong suit for Mr. Trump in
Nevada: He leads among inde-
NEVADA NEW HAMPSHIRE
45 42
44 41
11
41 39
42 37
3 The margins of error were
THE WALL STREET JOURNAL.
Monday, September 12, 2016 | A7
lator Adair Turner in a 2013
lecture.
All that government spend-
ing was accompanied by a
huge rise in inflation-adjusted
economic output, although it
also created huge pent-up in-
flation pressure that erupted
were lifted. Prices shot up
but then inflation reverted to
low single digits.
yields was removed, the Fed
“effectively became more in-
dependent,” said Alex Cukier-
In practice, there may be
little difference between heli-
copter money and current pol-
icies like quantitative easing,
which cover a large swath of
current government deficits.
Policies adopted during the
recent crisis have also been
“subject to a high level of dis-
cussion between central banks
and governments,” said Mr.
Most important, today’s
circumstances are very differ-
ent from the past: With inter-
est rates at zero or even nega-
tive, central banks simply
can’t boost spending or infla-
tion much more by them-
selves. Mr. Draghi has called,
with increasing urgency, for
help from other policy makers,
including elected officials.
fell. The fifth marked when
Flight 93 crashed near Shanks-
ville, Pa. At 10:28 a.m., a final
moment of silence was timed
to the fall of the North Tower.
Emily Ortiz, 15 years old,
said her relatives had told her
stories about her father, Emilio
Pete Ortiz, who died in the
north tower, where he worked.
She said she attends the cere-
mony every year.
“It’s another way to get a
little bit closer,” said Emily.
Some families attending the
event said they were com-
forted by being around others
who had experienced the trag-
edy firsthand. Kamila
Milewska-Podejma, 37, came to
honor her brother, Lukasz
Tomasz Milewski, who had
worked for a food-service com-
pany.
Sometimes when she comes
to the site, people are laughing
and taking selfies, said Ms.
Milewska-Podejma, who was
wearing a memorial T-shirt.
“That’s why when it’s only
family members and first re-
sponders it’s different, because
they get it,” added Ms.
Milewska-Podejma.
—Ryan Tracy
contributed to this article.
pendent voters, 42% to 37%.
In New Hampshire, Mrs.
Clinton has been running far
ahead of Mr. Trump in many
other recent polls. But the new
Journal/NBC News/Marist poll
finds the two candidates es-
sentially tied.
In these four states, as else-
where around the country, the
poll found that both candi-
dates were viewed negatively
by a large share of the elector-
ate, including many who dis-
like both candidates. The
share of voters who have a
negative view of both Mr.
Trump and Mrs. Clinton is
24% in Arizona, 23% in New
Hampshire, 18% in Georgia and
16% in Nevada.
Independent voters may be
a particularly unpredictable
force in these states: More
than one in 10 independents in
each state—19% in New Hamp-
shire, 17% in Georgia, 17% in
Arizona and 11% in Nevada—
report they don’t plan to sup-
port either of the major-party
candidates.
When the poll tested a bal-
lot that included third-party
candidates, the result bene-
fited neither Mr. Trump nor
Mrs. Clinton by any significant
margin. Mr. Johnson did best
in New Hampshire, where he
drew 15% support.
The Journal/NBC News/
Marist surveys were con-
ducted Sept. 6-8 and included
737 likely voters in New
Hampshire, 627 likely voters
in Nevada, 649 likely voters in
Arizona and 625 in Georgia.
plus or minus 3.6 percentage
points in New Hampshire, 3.8
points in Arizona and 3.9
points in Nevada and Georgia.
Asked about helicopter
money in June, Fed Chair-
woman Janet Yellen said that,
in unusual times when the
concern is very weak growth
or possibly deflation, fiscal
and monetary authorities
should “not be working at
cross-purposes.”
T
he difficulty is in find-
ing the right mecha-
nism. Former Fed Chair-
man Ben Bernanke proposed
in April that the Fed could
credit a special Treasury ac-
count with funds if it assessed
such a stimulus was needed to
achieve its employment and
inflation goals. The U.S. gov-
ernment would then deter-
mine how to spend the funds,
or could leave them unspent.
In the eurozone, coopera-
tion is complicated by the
need for 19 governments to
agree among themselves first.
One partial solution, suggests
Mr. Cukierman, may be to al-
ter the ECB’s charter to focus
less on inflation and more on
economic activity, like the Fed.
Another possibility: put the
onus on governments instead
of the ECB. Princeton Univer-
sity economics professor
Christopher Sims suggests a
eurozone-wide moratorium on
the bloc’s debt limits, “to be
kept in place until areawide
inflation reaches and sustains
the target level.”
U.S.
Watch
PRESIDENTIAL RACE
Nominee Rues Slam
Of Trump Backers
Hillary Clinton expressed regret
for calling half of Donald Trump’s
supporters “deplorables,” but stood
by her sharp criticism of her Re-
publican rival.
Mrs. Clinton said she was
“grossly generalistic” when she
took aim at Mr. Trump’s backers at
a Friday fundraiser in New York,
characterizing many as racist, sex-
ist and homophobic.
“That’s never a good idea,” she
said Saturday of generalizing when
describing Trump voters. “I regret
saying ‘half.’ That was wrong.”
But she added in a statement
after criticism mounted: “Let’s be
clear: What’s really ‘deplorable’ is
that Donald Trump hired a major
advocate for the so-called ‘alt-right’
movement to run his campaign
and that David Duke and other
white supremacists see him as a
champion of their values.”
Mr. Trump responded by saying
Mrs. Clinton “should be ashamed
of herself” and asking how the
former senator from New York
could be president “when she has
such contempt and disdain for so
many great Americans.”
—Colleen McCain Nelson
VIRGINIA
Shooter of Reagan
Allowed to Go Free
John Hinckley Jr., the man who
shot President Ronald Reagan, is
now living with his mother in Wil-
liamsburg, Va., after being released
from a Washington, D.C., mental
hospital.
A federal judge ruled in late
July that Mr. Hinckley isn’t a dan-
ger to himself or the public. The
61-year-old must live with his
mother for at least a year and has
had limits placed on his travel. He
will also be required to work or
volunteer at least three days a
week and continue to see his psy-
chiatrist. Mr. Hinckley was found
not guilty by reason of insanity in
the 1981 shooting.
—Associated Press
OREGON
Armed Occupation
Trial Set to Start
Nearly nine months after the
armed occupation of a federal
wildlife refuge in Oregon, argu-
ments in the first trial against
some of the participants open in
Portland, Ore., Tuesday.
Eight of the 26 protesters fac-
ing charges—including their leader,
Ammon Bundy—are due to appear
before a federal jury. Mr. Bundy, 41
years old, and the others all face
charges of conspiracy to impede
federal officers through intimida-
tion, threats or force, which carry a
maximum sentence of six years in
prison. All have pleaded not guilty.
A lawyer for Mr. Bundy didn’t re-
spond to request for comment.
—Jim Carlton
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Matt Ridley on For a happier

how to fight the life, think like a
global threat designer and try
posed by out different
invasive species prototypes
A10 A10

BOOKS | CULTURE | SCIENCE | COMMERCE | HUMOR | POLITICS | LANGUAGE | TECHNOLOGY | ART | IDEAS
A8 | Monday, September 12, 2016 THE WALL STREET JOURNAL. © 2016 Dow Jones & Company. All Rights Reserved.

A PARTIALLY
DESTROYED
Islamic State
banner hangs at
the entrance to
Qayara, Iraq,
after Iraqi forces
retook the area,
Aug. 28.
FROM TOP: SUSANNAH GEORGE/ASSOCIATED PRESS; RODI SAID/REUTERS

AfterISIS
The self-declared caliphate is under siege and shrinking, but its fall will bring new problems:
fiercer regional clashes, a revived al Qaeda and more terrorism in the West.

On July 4, 2014, a black-turbaned cleric named Abu Bakr al- hind both on the ground and, per-
haps more important, in the imagi- What
Baghdadi took to the pulpit of the Grand Mosque in the Iraqi city of Mosul nation of jihadists around the world. happens
As we mark the 15th anniversary
and proclaimed the founding of a new caliphate. Already in control of eastern
this weekend of the terrorist attacks
when
Syria and western Iraq, this so-called Islamic State had global ambitions, Mr. of 9/11, one likely consequence of the Islamic State
Baghdadi declared. The self-appointed caliph vowed to restore “dignity, demise of ISIS (as Islamic State in
Iraq and Syria is often known) will
no longer
might, rights and leadership” to his fellow Sunni Muslims everywhere. be to revive its ideological rival, al controls
BY YAROSLAV That audacious sermon from the heart of
Qaeda, which opposed Mr. Bagh-
dadi’s ambitions from the start. Al
territory,
TROFIMOV Iraq’s second-largest city was the culmina- Qaeda may yet unleash a fresh wave which set it
tion of a jihadist blitzkrieg that had seized of terrorist attacks in the West and apart among
most of the Sunni Arab parts of Iraq in previ- elsewhere—as may the remnants of
ous weeks. It was also, it turned out, the high point Islamic State, eager to show that jihadist
of Islamic State’s bid to conquer the world. they still matter. groups?
Islamic State now seems likely to fall as swiftly “Simply having ISIS go away
as it rose. In the past two years, the group has gone doesn’t mean that the jihadist prob-
to war with everyone from al Qaeda to Iran’s Shiite lem goes away,” said Daniel Benjamin
theocracy to the U.S. and Russia. It has launched at- of Dartmouth College, who served as the State Depart-
tacks in the West and elsewhere—or, at any rate, ment’s counterterrorism coordinator during the Obama
claimed credit for them—with rising frequency, administration. “Eliminating the caliphate will be an
even as it has suffered a series of battlefield defeats achievement—but more likely, it will be just the end of
and surrendered one city after another. the beginning rather than the beginning of the end.”
It is easy to think that Islamic State is still on the A FIGHTER from a U.S.-backed force helps civilians What made Islamic State unique—and, until re-
march. It isn’t. Over the past year, the territory un- evacuated from a neighborhood formerly held by cently, so appealing to many young, disaffected
der its control—once roughly the size of the U.K.— Islamic State, Manbij, Syria, Aug. 12. Muslims—is that it managed to create an actual
has shrunk rapidly in both Iraq and Syria. Islamic state in Syria and Iraq. In Mosul last year, food
State has lost the Iraqi cities of Ramadi and Fallujah, its two most important remaining centers—Mosul prices were lower than in Baghdad and the streets
the ancient Syrian city of Palmyra and the northern in Iraq and Raqqa in Syria. were kept clean, even as the group drove out the
Syrian countryside bordering on Turkey. Its mili- It may be tempting fate to ask the question, but it city’s Christians and Shiites, banned women’s
tants in Libya were ousted in recent weeks from must be asked all the same: What happens once Is- beauty salons, forbade men from shaving their
their headquarters in Sirte. In coming months, the lamic State falls? The future of the Middle East may beards and threw gay men from rooftops. Unlike
group will face a battle that it is unlikely to win for well depend on who fills the void that it leaves be- Please turn to the next page

ELECTION 2016

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THE WALL STREET JOURNAL.
A Comeback for al Qaeda?
Continued from the prior page
Taliban-ruled Afghanistan in the 1990s, it was also a place in
the heart of the Middle East to which adepts from around the
world could migrate relatively easily, by way of Turkey’s po-
rous borders.
When Mr. Baghdadi proclaimed his caliphate, demanding that
all Muslims world-wide pledge allegiance to him and, if possi-
ble, relocate to the new state, more established jihadist leaders
and clerics decried the move as illegitimate. They dismissed the
new “caliph” as unqualified and warned that the whole venture
would inevitably collapse, imperiling the jihadist cause.
Al Qaeda’s leader, Ayman al-Zawahiri, was one of the most
virulent of these critics. He branded Islamic State as the new
“Kharijites”—a universally reviled splinter sect of early Islam
known for killing indiscriminately and falsely labeling other
Muslims as infidels.
But as long as Islamic State kept going from strength to
strength, such criticism didn’t seem to matter. Victories on the bat-
tlefields of Syria, Iraq and Libya were seen by Islamic State—and
its potential backers and recruits—as divine validation of its proj-
ect. Al Qaeda affiliates as far away as the Philippines and the North
Caucasus switched their allegiance to Mr. Baghdadi.
By the same token, however, battlefield losses today are under-
mining Islamic State’s theological foundations. “The loss of terri-
tory will pose a major problem because a great part of Islamic
State’s legitimacy since the establishment of the caliphate in 2014
has arisen from control of territory,” said Stéphane Lacroix, a spe-
cialist in Islamist movements at Sciences Po University in Paris.
The group has argued “that the caliph is legitimate precisely be-
cause he controls territory,” he added.
Today Mr. Baghdadi controls less and less of it, with Islamic State
abandoning the Syrian town of Jarablus and scores of nearby villages
without much of a fight in recent weeks. “We are at a point here
where we are now really into the heart of the caliphate,” said Gen.
Joseph Votel, the commander of U.S. Central Command, on Aug. 30.
“We do see momentum building in Iraq and Syria.”
Islamic State itself has acknowledged that not much may be left
of the caliphate soon. The group’s chief spokesman, Abu Muham-
mad al-Adnani, tried to prepare its followers in a speech released
in May. “Will we be defeated and you victorious if you took Mosul
or Sirte or Raqqa or all the cities and if we returned as we were in
the beginning?” he asked the organization’s enemies. “No, defeat
is losing the will and the desire to fight.” (Adnani was killed in an
airstrike in Syria in late August.)
Islamic State won’t vanish completely, as an ideology or a terror-
ist organization, even if it loses all its lands. Its precursor in Iraq
survived the U.S. troop surge in 2007-09, bouncing back as the sec-
tarian policies of the Shiite-led Iraqi government and the uprising
RODI SAID/REUTERS
A CIVILIAN SMILES while having his beard cut after being evacuated by
U.S.-backed forces from an Islamic State-controlled area of Manbij, Syria, Aug. 12.
Turn of the Tide?
Islamic State has lost significant territory over the past year, and further setbacks in the year ahead
may bring an end to the grand ambitions of the self-styled caliphate.
50 miles Current Islamic State control (approximate)
Kobani TURKEY
50 km Islamic State losses since Jan. 29
Manbij Hasakah
Sinjar
Aleppo
Raqqa
SYRIA
Deir
D
Homs Ezzour
Ez
EEzz
zz
zz
Palmyra
LEB.
Damascus
JORDAN
Source: Institute for the Study of War (areas of control)
against Syrian President Bashar al-Assad provided new opportuni-
ties for recruitment and expansion. And Islamic State is almost cer-
tain to try to demonstrate its relevance by staging more headline-
grabbing massacres in the region and the West. The death rattle,
counterterrorism experts warn, could be ferocious.
“As the physical caliphate disintegrates, and as it comes
apart, as we dismantle it, I think that they will return to more
of their terrorist-like roots. And so they will continue to try to
either direct or support or potentially inspire attacks outside
of the core in Iraq and Syria,” said Gen. Votel.
Still, the transformation of a de facto state into just another
terrorist organization, one increasingly concerned with its own
survival and discredited even among many fellow jihadists, is
bound to shake the Middle East anew. Millions of people chaf-
ing under Islamic State rule will sigh with relief, as will the
millions more ousted from their homes. But dismantling the
“caliphate” won’t end the conflict now raging in and around
Syria and Iraq—and may even intensify it.
Over the past two years, the campaign against Islamic State
has brought together an unusually broad coalition that in-
cluded Western democracies, Russia, Iran, Shiite militias, Tur-
key, Kurdish militias and Sunni Gulf monarchies. As Islamic
State dwindles, some of these unlikely partners will probably
turn on each other as they fight for the caliphate’s spoils.
Already, Turkey (a U.S. ally and fellow NATO member) and
U.S.-backed Kurdish forces have clashed in northern Syria over
lands recently wrested from Islamic State. Iraq’s Shiite-domi-
nated government is also increasingly squabbling with the
leaders of the country’s autonomous Kurdish region, with
Baghdad refusing to recognize Kurdish control over several ar-
eas liberated from Islamic State by Kurdish fighters.
REVIEW
“The setbacks that ISIS is facing are creating more problems
than its existence ever did,” said Hassan Abu Haniyeh, a Jorda-
nian researcher of jihadist groups. “The pretext of fighting ISIS
delayed the conflicts and the protest movements across the
Middle East. Eliminating ISIS will bring back the conflicts ev-
erywhere. And it will embolden the people who had been hold-
ing back on demanding reforms by their countries’ regimes be-
cause they were concerned about ISIS.”
Moreover, the sectarian strife between Sunnis and Shiites
over dominance of the region—the rivalry that helped to foster
Islamic State’s initial rise in Iraq and then Syria—isn’t going
away. That rift would only be deepened if more of the caliph-
ate’s territory, largely inhabited by Sunni Arabs, fell into the
hands of the pro-Iranian Shiite militias that have done much
of the fighting against Islamic State, particularly in Iraq. A Shi-
ite-controlled corridor from Iran to Lebanon would be a strate-
gic nightmare for Saudi Arabia and its Sunni allies—which will
try to ensure that Sunni Arabs freed from Islamic State control
can still fend for themselves, one way or another.
“There will not be a military solution unless there is also a
political solution for all the problems in the Sunni areas, prob-
lems that have been there since the occupation of Iraq,” said
Saleh al-Mutlaq, a leading Sunni Iraqi politician and the coun-
try’s former deputy prime minister.
All of this could be exploited by Islamic State’s main ideological
rival in the jihadist universe, Mr. Zawahiri’s al Qaeda, which claims
to stand for Sunnis combating what it alleges is a “Safavid-Crusader
alliance” between the U.S. and Iran. (The Safavid dynasty converted
what is now Iran from Sunni Islam to Shiism in the 16th century.)
Mr. Zawahiri has long been a vocal critic—first privately and
then publicly—of Islamic State. The group grew out of the Iraqi
franchise of al Qaeda shortly after its founder, the Jordanian terror-
ist Abu Musab al-Zarqawi, was killed by a U.S. airstrike in 2006. Mr.
Zawahiri quarreled with Mr. Zarqawi, and even more so with his
successors, over Islamic State’s strategy of wantonly killing Shiite
civilians and refusing to seek popular support.
Beaten back by the U.S. troop surge and pro-government
Sunni militias in Iraq, Islamic State roared to life again after
Syria plunged into civil strife in 2011. The resulting vacuum
gave the group a haven in which to capitalize on Sunni griev-
ances, attract international volunteers and become the world’s
most prominent jihadist organization. In February 2014, after
months of increasingly bitter disagreements, Islamic State
openly broke with al Qaeda—a split that also severed Mr. Bagh-
dadi’s relationship with al Qaeda’s Syrian offshoot, the Nusra
Front, which remained loyal to Mr. Zawahiri.
Al Qaeda has been eclipsed by Islamic State’s gory attacks
and gruesome videos, but it has not been idle. Under the lead-
ership of Mr. Zawahiri, an Egyptian doctor now
widely thought to be based in Pakistan, the organi-
zation has embraced a more pragmatic approach:
decentralizing its operations, burrowing deep into
its host countries and creating alliances with less
radical groups.
“Zawahiri must be luxuriating. He steered al Qaeda
in a much more nuanced and subtle approach and has
always played the long
game—and what he sees
Islamic now is a validation of his
State’s foes strategy,” said Bruce Hoff-
man, the director of the
may fight Center for Security Studies
each other at Georgetown University,
who has advised the U.S.
over the
government on counterter-
caliphate’s rorism issues. With Islamic
remains. State “consuming all the
oxygen in the room” for
Western counterterrorism
officials, Prof. Hoffman
added, “nobody is paying
much attention to al Qaeda.”
In recent weeks, Mr. Zawahiri has
intensified his condemnations of Is-
lamic State—which he sneeringly calls
“the Ibrahim al-Badri group,” after Mr.
Baghdadi’s real name—describing the
rival organization as “a dagger in the
back” of real Sunni jihadists. In a
speech released online, Mr. Zawahiri
I R A N contrasted Islamic State’s “abyss of
Mosul
Erbil extremism, infidel-branding and shed-
ding forbidden blood” with al Qaeda’s
Kirkuk efforts to bring Sunnis together.
IRAQ
Al Qaeda’s new emphasis on work-
ing as part of a broader alliance has
been particularly striking in Syria. The
Tikrit Nusra Front has denied any interest in
attacks outside Syria and, in July, said
that it had cut ties with al Qaeda’s
Hit core—a move that Western officials
Baghdad dismissed as a ruse but that made the
Ramadi Fallujah front more acceptable to other Sunni
groups. The rebranded Nusra Front
now operates as part of a rebel coali-
tion known as the Army of Conquest,
THE WALL STREET JOURNAL. which includes both jihadists and
more moderate, U.S.-backed militias.
Many of these Syrian Sunnis cheer on the Nusra Front’s fighters for
battling the Iranian-backed Assad regime, particularly in the north-
ern city of Aleppo, and fume at U.S. efforts to target the group.
“I’m very impressed by how much [al Qaeda’s leaders] have
learned from their mistakes and their bad experiences in Iraq,” said
Robert Ford, who was the U.S. ambassador to Syria in 2011-14 and
is now a senior fellow at the Middle East Institute. “They are much
less brutal in Syria than they were in Iraq, and they work with non-
jihadi factions, which al Qaeda in Iraq never did. They are more
subtle in their tactics, and they have a lot more local support…This
will make them much harder to contain: It’s going to be a much
harder job to develop forces to fight them, and it’s going to be a
much harder job to develop public support for that.”
Al Qaeda’s other large franchises—in Yemen and North Af-
rica—could also take advantage of Islamic State’s fall. Al Qaeda
in the Arabian Peninsula, which claimed credit for last year’s
massacre in Paris of journalists at Charlie Hebdo magazine, has
“a chance to flourish now” by focusing on backing its fellow
Sunnis in the increasingly bitter and sectarian civil war in Ye-
men, notes Farea al-Muslimi, a Yemen expert at the Carnegie
Middle East Center in Beirut. And as Islamic State fades, al
Qaeda in the Islamic Maghreb—which has launched deadly as-
saults over the past year on international hotels in Mali,
Burkina Faso and Ivory Coast—could forge closer ties with Mr.
Baghdadi’s erstwhile subordinates in Nigeria’s ruthless Boko
Haram insurgency, which is now riven by a leadership split.
“I don’t think everybody should relax after we get ISIS out of
Mosul and Raqqa. The pressure must continue: If we relax, they will
come back,” said Mahmoud Irdaisat, a Jordanian analyst and re-
tired major general. “And we should not forget al Qaeda, because
al Qaeda was the cradle from which ISIS came.”
Monday, September 12, 2016 | A9
MIND & MATTER:
ROBERT M. SAPOLSKY
Friendship Is Good
For You—Unless
It Is Strained
SUPPOSE you’re a stressed ba-
boon. You’re having a bad hair
day, or the alpha male is ha-
rassing you. Maybe, more tragi-
cally, your infant has died. In
all these cases, spending more
time with friends, grooming and sitting in
contact with them, will lower your stress-hor-
mone levels.
We know that friends are good for the
health of baboons and of humans, too. Recent
research suggests, however, that the kind of
friend makes all the difference—and the link
between bad friends and health problems can
be stronger than the one between good
friends and their positive impact on health.
Studies have long associated social isola-
tion in humans with poor health, on roughly
the same scale as smoking or obesity. Con-
versely, social affiliation—a significant other,
best friend and/or close group of friends—is
linked to good health. Some studies have
given insight into the chicken-and-egg nature
of this relationship, showing that levels of so-
cial connection precede and predict aspects of
health at later times.
This literature has mostly dealt with the
quantity of social connections: Do subjects
live alone? How often do they see friends and
family? How many community activities (such
as religious services) do they regularly partic-
ipate in? But this research examined the sub-
jective quality of these relationships.
In work published in January in the Pro-
ceedings of the National Academy of Sciences,
or PNAS, Yang Claire Yang and Kathleen Har-
ris of the University of North Carolina at Cha-
pel Hill and colleagues examined all these is-
sues. They combined existing data sets
containing information about health and so-
cial connections in people studied at multiple
points in time. The researchers looked at
nearly 15,000 subjects, a large number in this
field, ranging from adolescents to the elderly.
The authors confirmed that beginning in
adolescence, more social connections pre-
dicted less hypertension, inflammation, obe-
sity and other signs of bad health at later
times of life. This connection between isola-
tion and health problems was weakest in mid-
dle age, probably because during those years
people tend to build large social networks
around work, community and parenting. The
type of health problems tied to sociality
seemed to vary according to different stages
of life. For adolescents, social isolation was
best at predicting subsequent obesity, while
among the elderly, isolation most often pre-
dicted hypertension.
None of this proves that social factors
caused the changes in health. But the findings
align with animal research showing that alter-
ing an individual’s social setting does “get un-
der the skin,” as health psychologists like to
say. A wide range of animal studies have un-
covered some of the hormonal, immune-sys-
tem and neurobiological mechanisms that are
responsible for these effects.
The PNAS authors also turned their atten-
tion to the quality of people’s relationships.
They asked subjects to rate on a scale the
level of support they perceived from family,
friends and significant others. (Adolescents
were asked
about school
A few good instead of sig-
friends vs. nificant oth-
ers.) In many
Facebook respects,
acquaintances. these qualita-
tive measures
predicted
health out-
comes more accurately than did the quantita-
tive ones. It’s probably better for your health,
for instance, to have a few good friends than
thousands of Facebook acquaintances.
The authors also studied the negative as-
pects of relationships, asking subjects to rate
the level of strain that they felt with friends,
family and significant others. Back came the
key finding: Supportive ties to others had
positive effects, but they were outweighed by
the adverse effects of strained relationships.
What does this tell us? From a health point
of view, it’s good to form a new, supportive
relationship, but it’s even better to jettison
TOMASZ WALENTA
that high-maintenance, exasperating friend
whom you don’t really want to see. It may
well help you more in keeping your blood
pressure down and your waist size in check.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A10 | Monday, September 12, 2016 THE WALL STREET JOURNAL.

REVIEW
trol alien prey turned on na-
tive wildlife instead—cane
toads in Australia, stoats in
New Zealand—have given
way to much more cautious
and careful scientific intro-
ductions of highly specific
control organisms. Done
right, such biological control
is indispensable.
The Centre for Agriculture
and Biosciences International
is an international agency
that scours the native homes
of invasive alien pests for
predators that can control
them. It found a rust fungus
that has reduced the infesta-
tion of rubbervine weed from
Madagascar in Queensland,
FROM TOP: CHRIS NEWBERT/MINDEN PICTURES; PIOTR NASKRECKI/MINDEN PICTURES

Australia—by up to 90% in
some areas. The Centre used
two parasitic wasps to con-
trol the mango mealybug
from Asia, which did huge
damage to mango trees in Be-
nin in Africa.
Vaccines that cause steril-
ity are another promising
weapon. Spreading food
coated with such a vaccine
could render a species sterile,
causing its numbers to fall.
This approach is working
LIONFISH have well in the lab with pigs—in-
invaded the vasive species in various
Caribbean from places—and may soon help to
the Pacific. fight gray squirrels in Britain.
Genomics is the latest
weapon. The Aedes mosquito
that spreads dengue and Zika

Invasion of the
in the Americas is an invasive
would devastate native wildlife. alien, from Africa. A biotech firm called Oxitec
A paper published last month by a team of has devised a way of suppressing its population
ecologists, led by Regan Early of the University using mass releases of genetically modified
of Exeter in Britain, points out that whereas males (males don’t bite), which father offspring

Alien Species
New tools help to combat
nonnative plants and animals
BY MATT RIDLEY
IN JULY, the New Zealand government an-
nounced its intention to eradicate all rats, stoats
and possums from the entire country by 2050 to
save native birds such as the kiwi. It’s an ambi-
tious plan, perhaps impossible to pull off with
the methods available today, but it’s a stark re-
minder that invasive alien species today consti-
tute perhaps the greatest extinction threat to
animal populations world-wide.
Birdlife International, a charity that works to
save endangered birds, reckons that of the 140
bird species confirmed to have gone extinct
since 1500, invasive alien species were a factor
in the demise of at least 71—an impact greater
than hunting, logging, agriculture, fire or cli-
mate change.
Rats, cats and diseases were the biggest cul-
prits, contributing to the extinction of 41, 34
and 16 species, respectively. Most of these were
on islands. The dodo on Mauritius, emblematic
of extinction, was wiped out less by hungry sail-
ors than by the rats, pigs, dogs and cats they
brought with them. Hawaii once had 55 species
of honeycreeper; today just 17 remain, thanks
largely to rats and avian malaria, transmitted by
alien mosquitoes brought by people. Guam has
lost nine species of bird to an introduced snake.
But continents aren’t immune to invasion by
alien species. In the Mississippi River, it is Asian
carp; in the Everglades, Burmese pythons; in the
Great Lakes, Russian zebra mussels; in the
South, Indochinese kudzu vine. In Australia,
cane toads from South America; in Lake Victoria
in Africa, water hyacinth from the Amazon; in
Germany, Chinese mitten crabs; in the Carib-
bean, lionfish from the Pa-
cific. A fungus spread by Af-
rican clawed toads (used in
laboratories) has wiped out
One solution:
frogs in Central America. bring in alien
On my farm in Northern
England, three native species
predators to
of animal are being extin- feed on them.
guished by alien invaders
from North America: the
white-clawed crayfish by the
signal crayfish; the water vole by the mink; and
the red squirrel by the gray squirrel. Himalayan
balsam flowers and Japanese knotweed infest
the woods.
Aliens turn into pests away from home be-
cause they encounter naive and ill-equipped
competitors or prey, and they leave behind their
diseases and predators. Globalization is increas-
ing the flow. An insect that would have strug-
gled to survive a long journey by ship can stow
away on board a plane. Today only Australia and
New Zealand, whose isolated fauna and flora are
especially vulnerable to invasives, take biosecu-
rity really seriously.
European countries, by contrast, are lax in al-
lowing exotic pets. In Britain, pet raccoons (na-
tive to North America) and raccoon dogs (native
to China) have escaped into the wild and may
one day establish breeding populations that
most invasive alien species (IAS) have affected that cannot mature. In trials in Brazil, this
rich countries so far, the developing world is in- method has achieved more than 90% suppres-
creasingly at risk: “Many of the global biodiver- sion of numbers.
sity hot spots that are highly vulnerable to inva- The next step is even craftier. Using a mecha-
sion are found in countries that our results nism called “gene drive,” it is possible in the
suggest have little capacity to respond to IAS (in laboratory to create a genetic variant that will
particular Central America, Africa, Central Asia gradually infect an entire population of a spe-
and Indochina).” cies with infertility. Whether such a technique
None of this is to say that invasive species would work in the wild, and how it could be
are always a threat. They can bring positive ef- safely controlled, or reversed if it began to af-
fects, too, by increasing biodiversity within a re- fect the species back in its native range, are still
gion. Ascension Island in the unanswered questions.
Atlantic was once a barren Many nonnative species are here to stay, and
volcanic rock but is now much many are welcome additions to biodiversity of
greener thanks to a deliberate a country. But scientists are going to be very
policy, suggested by Charles busy over the next few decades working to re-
Darwin, of bringing in plants verse the damage done by some and to prevent
from elsewhere in the tropics the arrival of others.
to create a forest ecosystem.
Dov Sax of Brown University
points out that New Zealand Mr. Ridley is the author, most recently, of
once had approximately 2,000 “The Evolution of Everything: How New Ideas
native plant species, has gained approximately Emerge” and a member of the British House
2,000 nonnative species that now have self-sus- of Lords.
taining populations, and yet has lost fewer than
10 native plant species.
Another positive effect is that invasive spe-
cies sometimes improve, rather than harm, eco-
system services—the quality of water, soil or air.
Zebra mussels were so effective in filtering the
water of Lake Erie that they made its water
clear. In the American Southwest, the endan-
gered willow flycatcher has taken to nesting on
alien tamarisk bushes, embarrassing conserva-
tionists who spent millions trying to eradicate
the plant for the sake of the bird.
The best way to fight invasive aliens is often
with other aliens: Go back to their native coun-
try, find an insect or fungus that eats them,
and bring it in to help. Early horror stories
when alien predators introduced to con-

THE CANE TOAD went from South America to Australia.

DESIGN YOUR WAY TO A HAPPIER LIFE

BY DAVE EVANS tion and learn by doing. Designers
AND BILL BURNETT don’t think their way forward; they
build their way forward.
“WHAT’S YOUR PASSION?” It’s a This approach works wonderfully
question that gets asked of all of us for doing life design. Consider an
as we imagine our futures, whether acquaintance of ours named Mi-
we are declaring a major, contem- chael. Michael had a degree in civil
plating a new career or preparing engineering and a job at a respect-
for retirement. We seem to operate able firm, but he was miserable. He
under the belief that if we just find concluded that he’d blown it: Civil
out what we are passionate about, engineering was not “it” for him
everything else will fall into place. (not his passion).
But there’s a problem with this ap- A family member suggested that
proach: It hardly ever works. he become a stockbroker since he
A series of studies conducted in was good at math. We suggested that
2002-09 at the Stanford Center on he change his question from “How
Adolescence (surveying over 1,200 did I blow this?!” to “What’s really
subjects and published in various aca- going on?” Michael logged his level of
demic journals) found that only about energy and engagement with all his
20% of young people between 12 and different activities for a month, using
26 have a clear vision of where they a simple dashboard format that we
want to go, what they want to accom- call “The Good Time Journal.” He dis-
plish in life, and why. Only 27% of col- covered that when he was working
CHRIS SILAS NEAL
his next prototype was to apply to
graduate school.
His early success as a grad stu-
dent proved both his love of engi-
neering and his ability to do it at a
high level. He got help from profes-
sors to connect to elite engineering
firms and landed a short-term proj-
ect. When it was over, he’d done so
well that the firm was willing to
hire him full-time immediately—
without a Ph.D. Michael ended up
with a job that he loved—a job that
he actually felt some passion for.
We all know that work can be a
daily source of enormous joy and
meaning, or it can be an endless
grind and waste of hours. A well-de-
signed life isn’t a life of drudgery.
You weren’t put on this Earth to
wait for your passion to strike be-
fore you start really living.
If you don’t know what your pas-

lege graduates work in a job related
to their major within just a few years
of graduation. The truth is, most peo-
ple don’t have a singular motivator
that drives all of their life decisions.
But we all have multiple good an-
swers to the question “What should I
do with my life?” There is no single
“right” or “best” answer. And in to-
day’s world, one version of your life
isn’t enough. Students today should
expect to have at least two and proba-
bly three to five different careers over
their 60-year working lives.
There is no algorithm for passion.
People aren’t a technology, and our
lives aren’t a problem to be solved.
Life is a human experience, and we
need a more human approach to
thinking about it—one that starts
where we are with what we have. We
need to think like designers.
Designers know that there is no
one solution for ill-defined problems.
We take a hands-on approach, first
understanding a situation deeply
through close observation, then try-
ing out quick prototypes of multiple
ideas to learn what can actually work.
The key is to try lots of ideas, take ac-
alone on hard technical issues, he
was very happy. When he was mired
in administration or marketing the
firm’s services, he was unhappy. It
turned out that he really did love do-
ing engineering; he just didn’t care
much for the business side of it.
His first prototypes for a different
career were just conversations with
other engineers, learning what kind of
positions allowed them to spend their
time actually doing engineering. He
discovered that engineers with Ph.D.s
got to work on tougher problems, so
sion is, that’s great news. Because you
don’t have to know “what to do with
your life”—you only have to do what’s
next. Be curious. Try stuff. Think like
a designer and build your future, pro-
totype by prototype.
Mr. Burnett and Mr. Evans teach in
the design program at Stanford
University. This essay is adapted
from their new book, “Designing
Your Life: How to Build a Well-
Lived, Joyful Life,” which will be
published later this month by Knopf.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL. Monday, September 12, 2016 | A11

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A12 | Monday, September 12, 2016 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK The Trump Blitz Begins
Think of it as the mo- Mr. Trump’s new approach is to un-
Taking Nuclear Korea Seriously ment when Donald
Trump truly learned to
relentingly hit all sides of that claim—
making the case that Mrs. Clinton is

N
orth Korea conducted its fifth nuclear ture changes of a long-range missile flight. But throw a (campaign) “unfit” to hold the top job. Case in
test Friday, following three missile the North has repeatedly solved technical prob- punch. It came about point: After Wednesday’s commander-
three weeks ago, amid in-chief forum on NBC, the Trump cam-
tests on Sept. 5 and about 20 so far this lems more quickly than expected.
year. The accelerating pace of All of this means the win- POTOMAC the latest swirl of sto- paign detailed precisely why Mrs. Clin-
ries on the Clintons’ ton shouldn’t be trusted with national
the Kim Jong Un regime’s nu- The rogue regime will dow to prevent the North from WATCH
ethics. Hillary Clinton security. Mr. Trump hit her during the
clear and missile testing becoming a global nuclear By Kimberley
shows its determination to
soon have an arsenal menace is closing while the A. Strassel
had recently blamed forum, while a follow-up press release
her private email highlighted her bad judgment in using
threaten Japan, South Korea that can hit Chicago. proliferation risks are growing. server on Colin Powell. an “illicit” email server and the risk of
and the U.S. homeland with The North has cooperated with Judicial Watch had released more a “hack of classified info”; noted how
nuclear weapons. The ques- Iran on missile development in emails that showed the Clinton Founda- her drone emails would “undermine”
tion is whether the West is capable of a more the past and may share its nuclear secrets. tion begging the State Department for security; and flagged her stumbling at-
determined response. Right on cue, the world’s powers condemned special favors on behalf of its donors. tempt to tell a vet in the audience why
Every nuclear test leaves forensic clues, and the missile launch. And President Obama prom- Bill Clinton had floated laughable plans she should be held to a different stan-
to reform the foundation. dard on classified information than mil-
analysts are suggesting this was Pyongyang’s ised “additional significant steps, including
The Trump campaign pounced. It be- itary officers. Good, smart stuff.
most successful, with an apparent yield of 10 ki- new sanctions to demonstrate to North Korea gan blasting out every new revelation The unrelenting pressure has put Mrs.
lotons. This is the North’s second test this year, that there are consequences to its unlawful and about—or editorial-board comment Clinton in the spotlight and on the de-
suggesting it has an ample supply of nuclear ma- dangerous actions.” on—Mrs. Clinton’s shady dealings. It fense. That by consequence has some-
terial from its restarted plutonium reactor and Yada, yada, yada. Why should Kim and com- unleashed surrogates, in particular the
enriched uranium. pany fear such words? former prosecutors Rudy Giuliani and
The North said it tested a miniaturized nuclear Sanctions get passed as a ritual but are never Chris Christie, to make the legal case The GOP nominee is finally
warhead that could be placed on a missile. True enforced enough to matter. Earlier this year against her. Mr. Trump devoted a signif- —relentlessly—arguing that
or not, we know its scientists had access to a Chi- China began to enforce new sanctions, but Bei- icant portion of a speech in Texas to de-
nese design for a partially miniaturized weapon jing let trade with the North resume after Seoul tailing the lies she had told about her Clinton is unfit for office.
through the proliferation network of Pakistani decided in July to deploy the U.S. Thaad missile- server, and the pay-to-play allegations
at the foundation. Within a few days the
scientist A.Q. Khan. The U.S. believes the North defense system. Only sanctions that imperil the campaign had cut a web ad hitting her what sheltered the Republican nominee
already has small enough warheads to fit on regime will force the North to freeze its nuclear for “corruption” and calling the founda- from attacks. Listening to Mrs. Clinton—
short-range missiles aimed at South Korea. program, and Beijing has never been willing to tion a “slush fund.” the subject of an FBI investigation, the
The North’s workhorse Nodong missile now risk undermining its client state. Mrs. Clinton’s slip in the polls is a di- facilitator of the Crown Prince of Bah-
has a range of more than 600 miles. In June it Meanwhile, the U.S. won’t even use secondary rect result of the latest flood of scandal. rain—on Wednesday drop a line about
launched a medium-range Musudan missile from sanctions against Chinese entities trading with Less noticed is the skillful way that Mr. Trump’s “scams” and “frauds” was
a road-mobile launcher, which makes it hard to the North. A February United Nations report Team Trump is making those hits land. downright amusing. Sort of like watch-
detect and destroy. North Korea recently identified dozens of Chinese firms linked to The Republican nominee’s campaign has ing Al Capone accuse Eliot Ness of hav-
launched a missile from a submarine into the Sea blacklisted North Korean entities and detailed been doing more right lately, though ing the occasional light beer.
of Japan at a range of 300 miles. This means how the Bank of China allegedly facilitated $40 nothing more so than this. When it Also effective has been the cam-
comes to the dissection of Mrs. Clin- paign’s drumbeat about Mrs. Clinton’s
Pyongyang now has a second-strike capability million in deceptive wire transfers for a Pyong-
ton’s misdeeds, the Trump campaign is refusal to hold press conferences. (“Hid-
if the world tried a preventive attack to destroy yang-linked client. Cutting off such firms from firing on 16 cylinders. ing Hillary: Day 278!”) Her longtime ap-
its nuclear weapons. the global financial system could deter others If attacking your corrupt opponent proach to scandals has been to ignore
A growing worry for the U.S. is the North’s new from trading with the North. on corruption seems obvious, it wasn’t them and wait for the press to get
KN-08 intercontinental missile with the range to But for that to happen Mr. Obama would to Mr. Trump for a long time. The GOP weary. But the stories keep pouring out
hit Chicago. In February the North used a similar have to behave differently than he has for eight nominee is a scrapper, and part of his this time, and her refusal to address
rocket to launch a small satellite into space. Sig- years. The result is that the next American draw was the expectation that he them has made her look shady, arro-
nificant challenges remain, including a warhead President will inherit one more grave and grow- would speak bluntly about the Clintons. gant, slippery. She finally succumbed to
that could withstand the vibration and tempera- ing threat to Western security. He did, though as voters would soon pressure and took a few cursory ques-
realize, only in fits and incomplete tions from reporters Thursday, though
starts. He delivered a speech on her none on the email or foundation.
Iran’s British Hostage ethics in June—then never sustained
the argument. He ignored prime oppor-
Mr. Trump’s new all-in-on-Hillary ap-
proach came about the same time as his

P
tunities (the State Department inspec- staff shakeup. It is likely due in part to
resident Obama says the $400 million he arm of the company that owns the Reuters news tor general report; FBI Director James the presence of Breitbart’s Stephen Ban-
paid Iran in January for the release of agency. She wasn’t involved in coverage of Iran. Comey’s press conference), flitting to non and (more recently) Citizens
four hostages was leverage, not ransom. One purpose of the harsh sentence is to re- other subjects instead. He seemed to United’s David Bossie. The press has fo-
If so, the mullahs have apparently developed a mind Iranians in the diaspora tempted to return think the occasional #CrookedHillary cused on Breitbart’s fractious role in the
taste for it. Witness the five-year prison sen- home in the wake of the nuclear deal that the tweet was enough. conservative world, but Mr. Bannon and
tence handed to their latest Western hostage, regime sees them as traitors. It’s also no acci- This was frustrating if only because Mr. Bossie have both devoted careers to
which came to light Friday. dent that the sentence came shortly after the Mrs. Clinton’s venality is the concrete tracking and exposing Mrs. Clinton’s
Nazanin Zaghari-Ratcliffe, a British-Iranian U.K. upgraded its diplomatic relations back to with which Mr. Trump must pave his ethical troubles.
dual citizen, had traveled to the Islamic Republic ambassador level. road to the White House. This is a Turning voters away from Mrs. Clin-
woman whom close to two-thirds of ton is the groundwork. Mr. Trump still
to visit relatives. She and her 2-year-old daugh- Foreign Secretary Boris Johnson cheered the voters view as untrustworthy. She has needs to give voters a reason to turn to-
ter, Gabriella, were detained in April at Tehran’s new opening to Tehran last Monday, only to re- based her entire campaign around the ward him. His sober approach of recent
Imam Khomeini Airport as they were about to ceive a rude awakening days later. Now the re- argument that she is more credible weeks is a start. A challenge will be to
fly home to London. gime has a new political and financial bargaining and competent to lead the nation—a translate what has so far been campaign-
The exact charges haven’t been disclosed, but chip, and Mr. Obama has created a cash-for-hos- claim utterly undermined by revela- engineered press releases and speeches
Iran’s Revolutionary Guards accuse her of plot- tages incentive system with his earlier ransom. tions about her foundation’s business into an on-the-fly prosecution of Mrs.
ting revolution. Ms. Zaghari-Ratcliffe works at Let’s hope the British government is wiser than model, her cavalier handling of classi- Clinton during the presidential debates.
the Thomson Reuters Foundation, the charitable to stuff briefcases with unmarked bills. fied information, and her inability to Mr. Trump is right that Hillary is unfit to
“recall” most of her tenure as secre- be president. Now, to keep proving it.
tary of state. Write to kim@wsj.com.
The Commander-in-Chief Choice
O Germany Offers a Model
n national security at least, the U.S. In his prepared speech Wednesday, the busi-
presidential race comes down to a nessman came as close as he ever has to sounding
choice between the record of global re- like a conventional defense Republican. He en-
treat we know and the untu-
tored wild card we don’t. Clinton runs from
dorsed substantial new spend-
ing to rebuild the military after
For Middle-Class Jobs
Within 12 hours on Wednesday the Obama drawdown. He By Edward P. Lazear trade critics. Foreign competition
last week, Donald Trump dis-
her record while promised a 350-ship Navy, up And Simon Janssen affects these jobs directly, because
Trump loves Putin.
D
played the opportunity and from the current 276, which is countries tend to trade manufactured
risk of putting the wild card in needed to compete with China onald Trump and Hillary Clinton goods and not services. Yet the wage
both maintain that foreign compe- figures in manufacturing are virtually
charge of national security. in the Western Pacific. He also
tition and unfair trade practices identical to those for the economy as a
The truth is that it’s impossible to know how pushed missile defenses, which are necessary in hurt the U.S. Yet the problems of many whole: American high-school graduates
any candidate would manage as Commander in the coming new era of nuclear proliferation. He American workers come not from the in manufacturing earn 45% of their col-
Chief because events are so unpredictable. said he’d press America’s allies to spend more on global market, but from poor training. lege-educated counterparts, while Ger-
George W. Bush campaigned on a more “hum- defense, which is fair enough, but without the The success of Germany, which faces com- mans with vocational apprenticeships
ble” foreign policy in 2000 but after 9/11 fought bluster that he’d leave NATO if they don’t. petition from developing countries, shows earn two-thirds of their counterparts.
a global war on terror and invaded Iraq. The Mr. Trump gets into trouble when he indulges that well-trained workers can thrive amid The relatively high wages of Germans
best voters can do is judge a candidate based his apparent Napoleon complex as he did at pressure from abroad. implies high productivity among those
on history and whatever insights can be Wednesday night’s military forum. Pressed by Only about one-third of American with vocational training.
gleaned from a campaign. NBC’s Matt Lauer about his claim that he knows adults 25 and older have completed a Germany’s model has its shortcom-
bachelor’s degree, according to our analy- ings. It places students onto separate
As President Obama likes to say, Hillary Clin- more about Islamic State than U.S. generals do,
sis of the Current Population Survey. Most educational tracks as early as age 10 and
ton has more national-security experience than Mr. Trump said, “I think under the leadership of workers entering the labor force rely on sometimes creates rigidity in a techno-
perhaps any previous nominee. But that is no Barack Obama and Hillary Clinton, the generals skills that they acquired in high school. logically changing world. But misclassi-
endorsement because she is responsible in part have been reduced to rubble. They have been re- Meanwhile, about 75% of Germany’s pri- fied students can, and often do, switch
for the global disorder that has broken out on duced to a point where it’s embarrassing for our vate-economy workforce has taken part in academic tracks. Employer associations
Mr. Obama’s watch. country.” Rubble? the country’s system of vocational train- and trade unions steadily update the
Many Republicans believe she is more hawk- He must trust some generals because he said ing with apprenticeships. training curriculum to keep pace with
ish than Mr. Obama, but the evidence is thin. earlier in the day that he’d ask them for a plan This system prepares millions of Ger- shifting demand for skills. A recent Uni-
She sounds like a born-again hawk on Russia but to defeat Islamic State in his first 30 days as mans for careers as machine operators, versity of Zurich study found that train-
she was a co-author of the failed “reset” with President. But then he said he’d compare their medical assistants, bank clerks and count- ing changes fluidly with technology to
Vladimir Putin. She has embraced the Presi- plan with his still-secret plan to destroy Islamic less other occupations. The U.S. has asso- accommodate the market.
ciate-arts degrees awarded by community While Germans with vocational
dent’s Iran policy while claiming to be tougher State, which he said may be better. And he’s
colleges, but only about 5% of American training do well relative to university
against Tehran’s imperialism. But Tehran is al- sticking with his preposterous line that he’d workers’ schooling ends there. graduates, neither group has experi-
ready using the threat of reneging on the nu- “take the oil” in the Middle East, as if that Higher education has a large payoff in enced much wage growth in the 2000s.
clear deal to prevent any tough U.S. response to doesn’t require occupying forces. the U.S. In 2015, the average annual But this has little to do with trade:
its regional meddling. The New Yorker also reinforced his weird ad- earnings of a high-school graduate Earnings outside manufacturing have
Mrs. Clinton favored intervention in Libya, miration for Mr. Putin. “Well, he does have an working at least 40 weeks a year was fared even worse than those in manu-
as did we, but then she abandoned the country 82 percent approval rating,” Mr. Trump said, $38,400. Those with a bachelor’s degree facturing, even though trade affects the
to chaos. She also wanted to do more in Syria, adding that “it’s a very different system, and I took in $78,600. latter more.
as did we, but on Wednesday night she said she don’t happen to like the system. But certainly, Contrast this with Germany’s voca- The different outcomes that American
opposes putting any U.S. “ground troops” in in that system, he’s been a leader, far more than tional-training system for those who and German workers experience provide
the country. Surely she knows U.S. ground our president has been a leader.” don’t attend university. Although Ger- an important lesson: Cutting the U.S. off
mans are about half as likely to go to from the global economy isn’t an effective
troops—special forces—are already in Syria It’s easy to be a “leader” when you control
college, more than 85% of private-econ- way to fight income inequality. Policy
fighting Islamic State. the media and your political opponents turn up omy workers without college degrees makers can enhance the skills of the ma-
Even if Mrs. Clinton wants to restore U.S. dead. Mr. Trump seems to think Mr. Putin have had vocational training and an ap- jority of Americans who don’t get college
global leadership, she might not have the means doesn’t respect the U.S. because he doesn’t re- prenticeship. In 2014, Germans with degrees by providing them with knowl-
given her desire to continue Mr. Obama’s fiscal spect Mr. Obama. That’s no doubt true, but Mr. apprenticeships earned about two- edge more suitable to working life.
priorities. She wants to expand domestic spend- Putin’s real problem is that America is an ob- thirds of what those with at least a Political candidates may rile up their
ing and entitlements in a way that would inevita- stacle to his goal of reviving Russia as a great bachelor’s degree did. base with antitrade speeches, but moving
bly starve defense. Given her collapse to her power that dominates Eastern Europe. Riffs Germans with vocational apprentice- Americans toward practical job-market
party’s left-wing on Pacific trade, there’s little like this make Mr. Trump sound like a bigger ships earn about 92% of the average training could actually make a difference.
reason to believe she’d stand up to Elizabeth patsy than Mr. Obama. German wage; American high-school
grads earn only 70% of the average Mr. Lazear, former chairman of the
Warren to build a bigger Navy. Her likeliest path Mrs. Clinton jumped on these comments
American wage. Germans with voca- President’s Council of Economic Advis-
as President is continuing to retreat at a some- Thursday to argue that Mr. Trump can’t be tional apprenticeships are considerably ers (2006-09), is a professor at Stan-
what slower pace. trusted as Commander in Chief in a dangerous better off than their American counter- ford University’s Graduate School of
As for Mr. Trump, he shows so little knowl- world. It’s her best argument, and it sure beats parts. Data show this to be true for Business and a Hoover Institution fel-
edge about the world that it’s impossible to talking about her own record. If Mr. Trump is go- nearly 15 years. low. Mr. Janssen is a research fellow at
know how he would react as he learns on the job. ing to prove her wrong, he’ll have to raise his Lost manufacturing jobs tend to the Institute for Employment Research
He is by turns reassuring and scary. game in the debates. draw the most attention from free- in Nuremberg, Germany.
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THE WALL STREET JOURNAL.
Dangers Rise as America Retreats
By Dick Cheney
And Liz Cheney
F
ifteen years ago Sunday,
nearly 3,000 Americans
were killed in the deadliest
attack on the U.S. home-
land in the country’s his-
tory. A decade and a half later, Amer-
ica remains at war with Islamic
terrorists. Winning this war will
require an effort of greater scale and
commitment than anything Ameri-
cans have seen since World War II,
calling on every element of our
national power.
Defeating our enemies has been
made significantly more difficult by
the policies of Barack Obama. No
American president has done more to
weaken the U.S., hobble our defenses
or aid our adversaries.
President Obama has been more
dedicated to reducing America’s
power than to defeating our enemies.
He has enhanced the abilities, reach
and finances of our adversaries, in-
cluding the world’s leading state
sponsor of terror, at the expense of
our allies and our own national secu-
rity. He has overseen a decline of our
own military capabilities as our ad-
versaries’ strength has grown.
Fifteen years after 9/11,
the next president will face
greater risks and a weaker
military to combat them.
Our Air Force today is the oldest
and smallest it has ever been. In Jan-
uary 2015, then-Army Chief of Staff
Gen. Ray Odierno testified that the
Army was as unready as it had been
at any other time in its history. Chief
of Naval Operations Adm. Jonathan
W. Greenert testified similarly that,
“Navy readiness is at its lowest point
in many years.”
Nearly half of the Marine Corps’
nondeployed units—the ones that re-
spond to unforeseen contingencies—
are suffering shortfalls, according to
the commandant of the Corps, Gen.
Joseph F. Dunford Jr. For the first
time in decades, U.S. supremacy in
key areas can no longer be assured.
The president who came into
office promising to end wars has
made war more likely by diminish-
ing America’s strength and deter-
rence ability. He doesn’t seem to un-
derstand that the credible threat of
military force gives substance and
meaning to our diplomacy. By reduc-
ing the size and strength of our
forces, he has ensured that future
wars will be longer, and put more
American lives at risk.
Meanwhile, the threat from global
terrorist organizations has grown.
Nicholas Rasmussen, director of the
National Counterterrorism Center,
told the House Homeland Security
Committee in July that, “As we ap-
proach 15 years since 9/11, the array
of terrorist actors around the globe is
broader, wider and deeper than it has
been at any time since that day.” De-
spite Mr. Obama’s claim that Islamic
State has been diminished, John Bren-
By Edmund Phelps
E
xactly a decade ago, several
asset prices in America—
most notably home prices—
were at new heights and rising. The
unemployment rate was down to
4.7% and falling—a level hardly
ever seen since the 1960s. Although
the Federal Reserve pushed the
federal-funds rate from 2004 to
2006 into the upper reaches of the
normal range—around 5.25%—it de-
clined to push the rate to the ab-
normally high levels used to con-
tain the Reagan boom of the late
’80s and puncture the internet bub-
ble of 2000.
What were they thinking? Alan
Greenspan, the Fed chairman at the
time, took the steadiness of inflation
as a sign that the prevailing unem-
ployment rate was sustainable or
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nan, Mr. Obama’s CIA director, told
the Senate Intelligence Committee in
June that, “Our efforts have not
reduced the group’s terrorism
capability or global reach.”
The president’s policies have con-
tributed to our enemies’ advance. In
his first days in office, Mr. Obama
moved to take the nation off a war
footing and return to the failed poli-
cies of the 1990s when terrorism was
treated as a law-enforcement matter.
It didn’t matter that the Enhanced
Interrogation Program produced in-
GAMMA-RAPHO/GETTY IMAGES
formation that prevented attacks,
saved American lives and, we now
know, contributed to the capture and
killing of Osama bin Laden. Mr.
Obama ended the program, publicly
revealed its techniques and failed to
put any effective terrorist-interroga-
tion program in its place.
We are no longer interrogating
terrorists in part because we are no
longer capturing terrorists. Since
taking office, the president has reck-
lessly pursued his objective of clos-
ing the detention facility at Guantan-
amo by releasing current detainees
—regardless of the likelihood they
will return to the field of battle
against us. Until recently, the head
of recruitment for Islamic State in
Afghanistan and Pakistan was a for-
mer Guantanamo detainee, as is one
of al Qaeda’s most senior leaders in
the Arabian Peninsula.
As he released terrorists to return
to the field of battle, Mr. Obama was
simultaneously withdrawing Ameri-
can forces from Iraq and Afghanistan.
He calls this policy “ending wars.”
Most reasonable people recognize this
approach as losing wars.
When Mr. Obama took the oath of
office on Jan. 20, 2009, Iraq was
stable. Following the surge ordered
by President George W. Bush, al
Qaeda in Iraq had largely been de-
feated, as had the Shiite militias.
The situation was so good that Vice
President Joe Biden predicted, “Iraq
will be one of the great achieve-
ments of this administration.”
T
oday, Iraq’s border with Syria
has been erased by the most
successful and dangerous ter-
rorist organization in history. Islamic
State has established its “caliphate”
across a large swath of territory in
the heart of Syria and Iraq, from
which it trains, recruits, plots and
launches attacks.
On Aug. 20, 2012, Mr. Obama
drew a red line making clear he
would take military action if Syrian
President Bashar Assad used chemi-
cal weapons. A year later, Mr. Assad
launched a sarin-gas attack on his
own people in the suburbs of Da-
mascus. Mr. Obama did nothing—a
failure that destroyed America’s
credibility and strengthened the
hand of our adversaries.
We now know that the president’s
refusal to act came as the Iranians
and the U.S. were engaged in secret
talks about Iran’s nuclear program.
In his new book, “The Iran Wars,”
The Wall Street Journal correspon-
dent Jay Solomon writes that ac-
cording to Iranian sources, “Tehran
made it clear to the American dele-
gation that the nuclear negotiations
Some Hard Truths About Easy Money
that market forces would gradually
drive it to whatever the sustainable
level might be. His successor in
2006, Ben Bernanke, had newfound
confidence in the Fed’s judgment. He
and MIT economist Olivier Blanchard
crowed at a 2005 conference in Bos-
ton that monetary policy had become
a science: When money warrants
tightening or loosening, experts will
know it and act.
In reality, the economy was
headed for a crash. It is always the
same story—even if the personae
may change: Some people had
made bad investments, other play-
ers had gone too deep into debt,
and the resulting fear put a halt to
much investment activity. The Fed
was wrong in believing that low
and steady inflation is a reliable
sign that the unemployment rate is
on the right track. The theorists
Robert Thomson
Chief Executive Officer, News Corp
William Lewis
Chief Executive Officer and Publisher
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Professional Information Business:
Christopher Lloyd, Head;
Ingrid Verschuren, Deputy Head
OPINION
Sept. 11, 2001, in New York.
would be halted if the U.S. went
ahead with its attack on Assad.” The
Iranians were now in the driver’s
seat, not just regarding their own
policy in the Middle East, but in de-
termining America’s.
President Obama and Secretaries
of State Hillary Clinton and John
Kerry were so concerned with pleas-
ing Iran’s ruling mullahs that they
were willing to overlook the Ameri-
can blood on Iranian hands and de-
cades of Iran’s activities as the
world’s leading state sponsor of ter-
ror. In pursuit of the nuclear deal,
they made concession after danger-
ous concession.
Every promise made to the Ameri-
can people about the Obama nuclear
agreement has been broken. We were
promised a “world-class” verification
process. Instead, the Iranians are al-
lowed in key instances to verify
themselves.
We were promised the agreement
would “block every pathway” to an
Iranian nuclear weapon. Instead, the
Obama-Clinton agreement virtually
guarantees an Iranian nuclear
weapon, gives them access to the lat-
est in centrifuge technology and will
likely usher in a nuclear arms race
across the Middle East.
We were promised that non-
nuclear sanctions, including those
that block Iran’s access to hard cur-
rency and our financial systems,
would remain in place. Instead, the
Obama administration has paid the
mullahs at least $1.7 billion in cash,
which includes at least $1.3 billion in
U.S. taxpayer money, the first install-
ment of which was ransom for the
release of American hostages.
In case there is any doubt that
the regime will use these funds to
support terror, Iran’s Parliament re-
cently passed Article 22 of its
2016-17 budget, mandating that all
such funds be transferred directly
to the Iranian military. Fifteen
years after 3,000 Americans were
killed by Islamic terrorists, Amer-
ica’s commander in chief has be-
come the money launderer in chief
for the world’s leading state spon-
sor of terror.
Iran isn’t the only adversary bene-
fiting from the age of Obama. Russia
is threatening NATO, invading sover-
eign territory, selling air-defense sys-
who believed that market partici-
pants dependably make the right
bets under the circumstance were
also wrong.
Today, once more, some asset
prices are very high—commercial
real estate, for example. The S&P
500, which hit 17 times operating
earnings in 2007, is 20 times this
year. The unemployment rate is
down to 4.9%. Yet the Fed hasn’t
raised the near-zero fed-funds rate
to more normal levels, let alone to
abnormally high levels. Once again
the Fed appears to see the steadi-
ness of the inflation rate as evi-
dence that the economy is in no
danger of a financial crisis.
Besides the risk of easy money,
one can question the policy objec-
tive. Fed governors observe that,
though unemployment is low, male
labor-force participation is ex-
tremely weak. In response, they ad-
vocate maintaining easy money to
induce young working-age people to
enter, and discouraged workers to
re-enter, the labor force. But there
are problems.
First, the Fed seems not to have
appreciated that the participation
rate of men age 15 to 65 has been
driven down largely by structural
forces more than 40 years old, such
as globalization, and the “great pro-
ductivity slowdown” that took hold
in the late ’60s. Among this group,
labor participation shrank to 82.6%
in 2000-04 from 92.2% in 1965-69. It
dropped slightly to 81.5% in the cri-
sis years, 2005-09, and slid further
to 78.5% in both 2014 and 2015 as
the baby boomers retired. Restoring
participation rates to the levels of
old would be daunting.
Second, the Fed conveys no
sense of how far it would like to go
with its ambition to boost partici-
pation. As it populates the labor
Monday, September 12, 2016 | A13
tems to the Iranians, using its mili-
tary to defend the Assad regime,
bombing American-backed rebels in
Syria and playing a larger role in the
Middle East than at any time since
Anwar Sadat expelled his Soviet ad-
visers from Egypt in 1972.
Across the region, nations that
previously were strong American al-
lies are making different calculations.
Russia is seen as a reliable ally
standing with Mr. Assad, while the
U.S. walks away from its friends. The
steady stream of visitors from the
Middle East to Moscow, including
most recently Israeli Prime Minister
Benjamin Netanyahu, is evidence of
Moscow’s growing role in the region.
Neither Russia nor Vladmir Putin
shares America’s interests.
China is also ascendant—threaten-
ing freedom of navigation through the
South China Sea and developing
weapons systems that directly
threaten American military superior-
ity. North Korea represents a growing
nuclear threat to the U.S. homeland.
Mr. Obama’s announced pivot to Asia
turned out to be hollow, further alien-
ating our allies and emboldening our
enemies in the region.
Undoing this damage will require an
effort of historic proportions. Our next
president must abandon Mr. Obama’s
fantasy that unilaterally disarming, re-
treating and abandoning our allies will
bring peace and security. We must be-
gin at once to rebuild our military.
This means ending sequestration and
returning to a Defense Department
budget built around defeating the
threats to our nation. We must remedy
readiness shortfalls, modernize and
upgrade our nuclear arsenal, develop
and build a robust missile-defense sys-
tem and invest in technologies neces-
sary to maintain our military
superiority, particularly against
advances by adversaries like Russia,
China, Iran and North Korea.
Among the most important
lessons of 9/11 was that terrorists
must be denied safe havens from
which to plan and launch attacks
against us. On President Obama’s
watch, terrorist safe havens have ex-
panded around the globe.
Our next president must recog-
nize that Islamic terrorists pose an
existential threat to the U.S., and
must instruct the military to
force with more of the young and
the discouraged workers who are
on the whole less employable than
the others, the overall unemploy-
ment rate, being an average, will in-
crease. In other words, the Fed is in
a dilemma: It cannot have both the
unemployment rate and the partici-
pation rate it wants.
The Fed’s reluctance to
raise interest rates is eerily
similar to its precrisis
policies a decade ago.
Concerns about Fed policy go
deeper. There are reasonable
doubts about whether the Fed, by
easing or tightening money, has the
power, generally speaking, to con-
trol the unemployment rate indefi-
nitely—contrary to Keynesianism.
When the Fed shifts to easier
money, is it assured that employ-
ment will increase? There is, for
one thing, the familiar theory, be-
gun in 1968 by Milton Friedman
and myself, that the effect will ulti-
mately fall wholly on the wage and
price levels, leaving employment in
the end unchanged.
An even worse possibility arises
from the peculiar structure of the
U.S. economy. It is highly integrated
with financial markets overseas, so
financial yields cannot differ much.
Yet it is too large and too distant to
depend much on exports and im-
ports, so its prices may differ quite
a lot. As in any open economy, an
interest-rate cut by the central
bank causes the currency to drop in
foreign-exchange markets. But the
peculiar structure of America’s
open economy has radical conse-
provide plans necessary to defeat
them and deny them safe havens.
These should include expanding the
pace of our air campaign against Is-
lamic State, removing the onerous
rules of engagement, and dedicating
additional special operators and
other U.S. forces as necessary to de-
feat our enemies.
Winning the war against Islamic
terrorists will also require that we
rebuild our intelligence capabilities.
Our next president should reinstate
the Enhanced Interrogation Program,
ensure that Guantanamo remains
open so we have a facility to hold en-
emy combatants, and increase our in-
telligence activities so we can iden-
tify and disrupt plots before they are
carried out.
We must make clear that we won’t
allow Iran to obtain a nuclear
weapon or become nuclear capable.
Our next president should renounce
the Obama-Clinton nuclear agree-
ment, develop a strategy in consulta-
tion with our allies in the region to
address Iran’s state sponsorship of
terror, and make clear that all op-
tions are on the table where Iran’s
nuclear program is concerned.
We must also rebuild our relation-
ships with allies across the globe so
that we can build the coalitions nec-
essary to defeat Islamic terrorism
and restore our strength and power.
This includes reinvigorating NATO
and affirming America’s unshakable
commitment to the most effective
military alliance in history.
G
enerations before have met
and defeated grave threats to
our nation. American
strength, leadership and ideals were
crucial to the Allied victory in World
War II and the defeat of Soviet Com-
munism during the Cold War. It will
be up to today’s generation to re-
store American pre-eminence so
that we can defend our freedom and
defeat Islamic terror.
Since World War II, America has
been freedom’s defender—for our-
selves and for millions around the
world. We do this because our secu-
rity depends upon it and because
there is no other nation that can.
As Americans calculate the costs
of leadership, we must remember
that the costs of failing to lead—or of
inaction—are much higher. Imagine a
world where Russia, Iran, China and
North Korea set the rules; where mil-
itant Islam spreads its evil ideology
unchallenged across the globe; where
parts of Europe are once again en-
slaved by Russia, our NATO alliance
impotent; and where China achieves
military superiority over the U.S. and
dominates Asia and beyond.
Finally, imagine a world where the
terrorists and their leading state
sponsor have nuclear weapons. Fif-
teen years after 9/11, we can say with
certainty that this is the world that
will be created by withdrawal and re-
treat—by Barack Obama and Hillary
Clinton’s policies—if we don’t re-
verse course.
Mr. Cheney was U.S. vice presi-
dent from 2001-09. Ms. Cheney is
the Republican nominee for Wyo-
ming’s at-large seat in the House.
quences made clear in a theoretical
model that economists Hian Teck
Hoon, Gylfi Zoega and I conceived
and built in 2004.
The finding from our model
concerns how domestic firms re-
spond to the shift to easy money.
The interest rate cut, in weaken-
ing the dollar, adds to their pro-
tection from entry by overseas
competitors. The domestic firms
promptly respond by raising their
prices—their markups over wages,
roughly speaking. This rise of
markups, in shrinking the demand
for labor, reduces real wage rates
and employment.
The implication for Fed policy is
clear: Through this channel, the
continuation of easy money may be
causing or contributing to the stub-
born gap between output or em-
ployment and their trend paths—
thus a lull in the growth of output
and employment.
Do we see evidence of dollar
weakness that could be traced to
easy money? We do. The U.S. dollar
was strikingly weak against the
yuan until mid-2015, when China
devalued. The dollar was weak
against the euro too, until early
2015, when the European Central
Bank acted. There is also the high
share of profits in business output
in recent years, which can be attri-
buted to the protection that dollar
weakness has offered.
The Fed, it appears, would do
well to cast off its Keynesianism,
resist easy money and embrace a
strong dollar.
Mr. Phelps, the 2006 Nobel lau-
reate in economics and director of
Columbia University’s Center on
Capitalism and Society, is the au-
thor of “Mass Flourishing” (Prince-
ton University Press, 2013).
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A14 | Monday, September 12, 2016 THE WALL STREET JOURNAL.

WEATHER & CROSSWORD

Third Parties Needn’t Be Spoilers Choosing a Winner

Conducting and tallying a vote using ranked-choice voting

1 Voters rank each 4TH

When Ralph Nader si- whether to adopt it for dependents have been Pierce County, Wash. 2ND 3RD
1ST OI CE CHOICE
of the candidates CH OI CE CH
phoned 2.7% of the popular statewide elections. elected governor with less In each case, the re- CHOICE
in order of
vote as a third-party presi- Proponents of ranked- than 50% of the votes. searchers found that be-
preference. Smith
dential candidate in 2000, choice voting, also called in- No voting system is flaw- cause of ballot exhaustion,
he provoked an ongoing de- stant-runoff voting, say it less, and ranked choice is the winners of the elections Brown
bate about whether he cost eliminates spoilers and al- no exception. Ideally, every received less than a major- Jones
Al Gore the election. lows citizens to vote for the valid ranked-choice ballot ity of the total number of
But here’s a convenient candidate they most gets counted, but in reality, votes cast. Davis
truth: Voting doesn’t have strongly support, even if it’s localities may limit the Pierce County has since
to work like that. a long shot. In the current number of candidates voters abandoned ranked-choice 2 The number of first-choice votes is tallied for each candidate.
An alternative system al- presidential campaign, can rank, or voters may voting, as has Burlington,
lows voters to rank candi- ranked-choice voting might choose to rank fewer candi- Vt., where detractors of the Sm
ith Br Jo
dates in order have altered the outcome of ow ne Da
dates than a ballot allows. If system say the ranked- n s vis
of preference. the primaries, and in a gen- all of a voter’s choices are choice winner in 2009 was
If no first- eral election it could im- eliminated before the final the wrong candidate. 11 6 8 5
choice candi- prove the chances of a In that instance, the
date captures third-party candidate. ranked-choice winner
the majority of This year, for example,
A different election wasn’t the “Condorcet” win-
3 With 30 votes cast, 16 are needed to win. If nobody has a
majority, the one with the fewest votes is eliminated.
THE votes, the can- voters who support Gary system could enable ner. Named for the 18th- Those ballots are reassigned to the second-choice candidate.
NUMBERS didate receiv- Johnson, the American busi- century French mathemati-
JO CRAVEN ing the fewest nessman who is the Liber-
voters to follow cian who promoted the
MCGINTY is eliminated tarian nominee for presi- their hearts. concept, a Condorcet win- Sm Br
ow +4 Jo +1
and the votes dent, or Jill Stein, the ner is the one who would ith ne Da
n s vis
are trans- Harvard-trained physician beat all other candidates
ferred to the second choice who is the Green Party’s tally, the ballot is “ex- one-on-one. 11 10 9
marked on the ballot. choice, could follow their hausted” and excluded from In Burlington, five candi-
If a winner emerges, it’s hearts. any remaining vote redistri- dates were vying for the of-
over. If not, the process re- Michael Bloomberg, the butions. fice of mayor. None won a 4 Since no candidate has a majority yet, the person with the next
peats. The weakest candi- billionaire and former New “Our complaint was they majority of votes in the lowest total is eliminated and those ballots are reassigned. If the
dates are jettisoned in suc- York City mayor who de- were saying this produces a first round. After the two second choice of those voters has been eliminated, their votes
cessive rounds until cided not to run as an inde- true majority winner,” said weakest candidates were get allocated to the third choice. The process continues until one
someone wins the election pendent for fear it would Craig Burnett, a political eliminated, a Republican led candidate has a majority.
by a majority of votes. propel Donald Trump or scientist at Hofstra Univer- the field with 3,294 votes; Br
ow +9
“The Iowa caucuses are Ted Cruz to victory, might sity. “We said no, that the Progressive Party in- Sm n
ith Jo
almost exactly the same,” have reconsidered if that doesn’t seem to be the case. cumbent placed second with ne Da
s vis
said Rob Richie, executive concern were erased. It comes with a risk that 2,981 votes; and a Democrat
director of FairVote, a non-
profit organization that
In the U.S., the most
common system is plurality
your vote may not end up
counting in the final tally.”
was third with 2,554 votes.
When the Democrat was
11 19
promotes ranked-choice or “first past the post” vot- To assess ballot exhaus- eliminated and his ballots Source: San Francisco Dept. of Elections Randy Yeip/THE WALL STREET JOURNAL.
voting. ing: Each voter chooses one tion, Dr. Burnett and a col- were redistributed, the in-
The process may sound candidate in a race, and the league analyzed more than cumbent emerged as the
radical, but it isn’t new. Ire- one who gets the most 600,000 ballots cast in four ranked-choice winner. But mathematician at the Uni- choice and should win. But
land and Australia have votes wins, even if the win- recent elections that used in a plurality vote, the Re- versity of Kansas who uses that’s not a mathematical
used ranked-choice voting ner receives less than a ma- ranked-choice voting, in- publican would have won. examples like this in some question.”
for decades. Ten U.S. cities jority. cluding mayoral races in And one-on-one, the Demo- of his classes. “You can So, which system is best?
use the system in local elec- In Maine, for example, San Francisco, Oakland and crat would have cleaned up. make a case that a candi- We could vote on it. But
tions. And this fall, voters since 1974, two Democrats, San Leandro, Calif., and a “This is pure mathemat- date who is everyone’s sec- how would we tally the re-
in Maine will decide two Republicans and two in- county executive’s race in ics,” said Jeremy Martin, a ond choice is a better sults?

More Pro Football Players Join Pregame Protests, Citing Concerns on Racial Injustice in U.S.
Kansas City Chiefs corner-
back Marcus Peters raised a
black-gloved fist, foreground,
during the U.S. national an-
them before the National Foot-
ball League opener against San
Diego, backing up his promise
to show support for protests
started last month by the San
Francisco 49ers’ quarterback
Colin Kaepernick.
Peters’ was the only such
gesture visible during the early
games Sunday, the 15th anni-
versary of the Sept. 11 attacks.
Officials with the NFL Play-
ers Association, who have been
providing its union members
with guidance on what pro-
tests are prohibited under the
labor agreement, expected
players on several teams to
pursue some form of protest.
NFLPA spokesman George
JOHN SLEEZER/ASSOCIATED PRESS
demonstration of unity at the
kickoff of their game against
Miami later on Sunday after-
noon.
Peters said he was “100
percent behind” Kaepernick,
who chose to sit and take a
knee during the anthem in pre-
season games to call attention
to what he termed the oppres-
sion of blacks and other minor-
ities.
“He spoke up about some-
thing he felt he needed to
speak up about,” Peters said. “I
salute him for that.”
Peters’ gesture was also a
tribute of sorts to U.S. sprint-
ers Tommie Smith and John
Carlos, who won the gold and
bronze medals, respectively, in
the 200-meter race at the 1968
Olympics. Both then appeared
on the medal stands with

Atallah said that players can’t raised, black-gloved fists

violate the dress code—for ex- throughout the U.S. national
ample, by writing on their hel- anthem in what they called a
mets—and can’t interrupt the “human rights salute.”
game. Apart from that, Mr. Atal- The International Olympic
lah said, players can express Committee ordered Smith and
themselves as they choose. Carlos expelled from the
The Seattle Seahawks had Games because of the protest.
said that they were planning a —Associated Press

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
-15 1 2 3 4 5 6 7 65 Longtime
8 9 10 11 27 “Everywhere
12 13
-10 Chinese chairman you want to be”
-5 14 15 16
Riga 66 The common card
0
asgo
Glasgow C p h g
Copenhagen osco
Moscow 17 18 19 connection 28 Tofu base
5
shared by the 33 Wyoming
10 20 21 22 23
answers to the
15
mountain range
D bli
Dublin
Berlin
li 24 25 26 27 28 asterisked clues 34 In the past
A t d
Amsterdam 20
arsa
Warsaw 67 Microscope part 35 Dopey
25 29 30 31
Lond
London
Brussels 30 68 End for east, 37 FDR’s Scottie
kf
Frankfurt Pra
Prague Kiev
e west, north or
35 32 33 34 35
south 38 Capital of Italia
Paris Munich
i h
Vienna
36 37 38
Down 39 Compete
Warm
d p
Budapest 39 40 41 42 43 44 45 1 Watering can 40 Outstanding
Geneva Cold
parts athlete
Milan 46 47 48 49
h
Bucharest Stationary
2 Bubbling hot 41 Sheer,
50 51 52 53 54 informally
Showers 3 Begun liking
44 Outing for the
Rome t b
Istanbul 55 56 57 58 4 Watchdog Bucks or the
Madrid
d id Rain warning
59 60 61 62 Bulls
L b
Lisbon
T-storms 5 Coral formation 45 Unit of
Algiers
Al i
63 64 65 6 Chemically atmospheric
Tunis
T i Ath
Athens
Snow inactive pressure
66 67 68
7 Challenging 47 Psychiatrist, in
Flurries
Rabat
b puzzle slang
Ice WHAT’S THE CONNECTION? | 8 Affleck of “Argo” 49 Makes known
Global Forecasts Today Tomorrow Today Tomorrow By Martin Leechman 9 Bumpy 51 Evergreen of
City Hi Lo W Hi Lo W City Hi Lo W Hi Lo W
s...sunny; pc... partly cloudy; c...cloudy; sh...showers; Across 23 Ductwork 47 ___-pitch 10 Meal for Oliver the Southwest
Geneva 28 16 pc 29 15 t Ottawa 23 11 s 26 14 pc
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice opening (softball variety) Twist 52 Bottom line
Hanoi 30 25 t 33 26 sh Paris 30 19 pc 32 18 pc 1 Plopped oneself
Havana 31 23 t 31 22 t Philadelphia 28 17 s 30 20 s down 24 Not flabby 48 Exxon’s sister 11 Collects figure
Today Tomorrow Hong Kong 32 25 t 31 27 pc Phoenix 37 24 t 38 23 pc
City Hi Lo W Hi Lo W 4 Firm hold 26 •They’re really brand 12 Vain activity 53 Humiliation
Honolulu 31 24 pc 31 24 c Pittsburgh 26 15 s 29 17 s
Amsterdam 28 18 s 30 19 pc Houston 31 23 t 32 23 t Port-au-Prince 34 21 t 34 22 pc 8 Rubbed the going places 50 •Ones who work 13 Lair for a bear 57 Yoked team
Anchorage 17 11 sh 15 8 c Istanbul 28 22 pc 27 21 pc Portland, Ore. 26 10 s 27 10 s 29 Indian lute for peanuts? 18 Sewing machine 59 Have a bite
Athens 29 21 pc 29 21 s Jakarta 32 25 c 32 24 pc Rio de Janeiro 31 23 s 33 25 s
wrong way
Atlanta 30 22 t 29 21 pc Johannesburg 26 12 s 28 10 s Riyadh 40 23 s 40 21 s 14 Sch. fundraiser, 30 Cacophony 54 “___ of Two activator 60 Web designer’s
Baghdad 42 24 s 42 23 s Kansas City 28 18 s 26 16 t Rome 27 18 pc 28 18 pc often 31 Where Simone Cities” 22 Cotton-pickin’ language: Abbr.
Baltimore 27 17 s 29 19 pc Las Vegas 35 23 s 32 18 pc Salt Lake City 27 13 c 28 14 t Biles won gold 55 Recipe 25 Sum of eins and 62 Ones who were
Bangkok 31 25 t 31 25 t Lima 21 15 pc 22 15 pc San Diego 22 18 pc 22 17 pc 15 Gambling center
Beijing 28 18 s 29 18 t London 25 18 pc 30 18 pc San Francisco 19 14 pc 22 14 pc near Lake Tahoe 32 Valuable vein instruction zwei elected
Berlin 30 18 s 30 17 s Los Angeles 24 17 pc 22 13 pc San Juan 31 25 pc 32 25 sh 16 Send over the 33 Price holders 56 Area of
Bogota 19 9 c 19 9 c Madrid 34 18 pc 25 11 r Santiago 17 2 pc 24 5 s downtown Previous Puzzle’s Solution
Boise 22 8 s 21 10 s Manila 33 26 r 31 27 t Santo Domingo 32 22 t 31 23 pc
edge 35 Guessing
Sao Paulo 29 19 s 31 20 s 17 •Homes for pastime played Manhattan
Boston 22 15 s 27 18 s Melbourne 12 7 sh 12 10 sh
Brussels 29 18 pc 30 18 pc Mexico City 24 11 t 24 11 t Seattle 23 11 s 25 11 s some squirrels “with my little 58 “___ You Babe”
Buenos Aires 21 10 r 17 10 pc Miami 31 25 t 31 25 t Seoul 29 19 pc 29 19 pc eye” 59 Like some
Cairo 34 23 s 33 23 s Milan 31 18 pc 31 18 pc Shanghai 29 24 pc 29 24 pc 19 Impulse-
Calgary 12 1 pc 18 5 s Minneapolis 25 14 pc 19 8 pc Singapore 31 26 c 31 26 pc transmitting 36 •Whistle-blower cuisines
Caracas 31 24 pc 31 25 pc Monterrey 34 21 pc 33 21 pc Stockholm 21 10 pc 22 11 pc cell at the beach 61 •Their work is
Charlotte 28 20 pc 29 19 pc Montreal 23 11 s 26 16 s Sydney 21 14 s 21 13 pc
Chicago 26 16 s 26 17 pc Moscow 22 9 c 15 7 pc Taipei 31 26 pc 31 26 t
20 Ride-requesting 39 Bud bearer picking up
Dallas 34 23 s 34 23 pc Mumbai 30 25 c 31 26 c Tehran 33 20 s 30 20 s company 42 Molecule part 63 Burr and
Denver 24 7 pc 20 8 c Nashville 31 18 s 34 20 s Tel Aviv 31 24 s 30 24 s 21 Wilma 43 Sound from a sty Copland
Detroit 24 14 s 27 17 pc New Delhi 36 26 s 35 26 t Tokyo 28 23 sh 27 23 r Flintstone’s 46 Spot of land in la 64 Reply from the
Dubai 39 30 s 41 32 s New Orleans 33 27 t 33 26 t Toronto 25 14 s 28 17 s
Dublin 19 13 r 18 12 r New York City 26 17 s 27 20 s Vancouver 20 10 s 20 10 s husband mer congregation The contest answer is SUBTEXT, found by reading
Edinburgh 21 15 sh 22 13 pc Omaha 27 16 t 19 12 c Washington, D.C. 29 20 s 31 22 pc the letters between the I’s (the “lines”) in the four
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s

Frankfurt 31 17 s 31 18 s Orlando 31 24 t 30 24 t Zurich 28 14 s 28 13 t longest Across answers.

For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THALES, SES TO OFFER BROADBAND FOR AIR PASSENGERS TECHNOLOGY | B3
Euro vs. Dollar
1.15
BUSINESS & FINANCE
1.1211 t 0.45% FTSE 100
1.10
1.05
1.00
J J A J
As of 4 p.m. ET Friday
© 2016 Dow Jones & Company. All Rights Reserved.
Tough Choices for UniCredit CEO
Italy’s biggest bank
must decide between
dumping bad loans or
selling valued assets
BY GIOVANNI LEGORANO
MILAN—For UniCredit
SpA, the summer of discontent
for Italy’s banks looks likely to
stretch well into the fall—and
possibly beyond.
UniCredit, Italy’s largest
lender by assets, emerged as
one of the weakest big banks
in Europe in July’s stress
tests, showcasing the failure of
its attempts to respond to
rock-bottom interest rates and
a huge pile of bad loans.
Now, as Jean-Pierre Must-
ier, the bank’s new chief exec-
utive, readies a big-bang plan
to revive UniCredit’s fortunes,
Innovation
Evolves in
New Ways
For Devices
E
arly reviews of Apple
Inc.’s new iPhone 7
were, in a word,
“meh.” Pundits praised the
many improvements in the
device, but a consensus
emerged that Apple hadn’t
given existing iPhone owners
a compelling reason to up-
grade.
Why is that? Why are the
iPhone, and other computing
devices like
PCs and
tablets, not
changing as
quickly as
they once
did? There
KEYWORDS are many
CHRISTOPHER reasons, but
MIMS the central
issue is
this: It is
harder than ever—more tech-
nically difficult, more expen-
sive and more time consum-
ing—to advance the state of
the art. Our devices are so
complicated that, at their
most fundamental level, ad-
vancing them further pushes
against the boundaries of
physics.
That is no reason for de-
spair. The technology inside
these devices is evolving in a
way that opens opportunities
for new types of devices and
new experiences.
Intel Corp., which makes
the brains inside most per-
sonal computers, is in a simi-
lar boat to Apple. Both have
Please see MIMS page B3
Steadier Oil Prices Reflect
New Reality in the Market
BY NICOLE FRIEDMAN
After a long period of boom
or bust, the new reality for oil
prices is a narrower trading
range that is frustrating many
longer-term investors but has
eased some pressure on big oil
companies.
U.S. oil prices are entering
their sixth month of trading
roughly between $40 and $50
a barrel. Many investors are
betting the market may be
choppy but will remain in that
range through year’s end.
The relative calm reflects
how U.S. producers, whose
booming output from shale-oil
fields pushed the global mar-
ket into oversupply in 2014,
have changed the industry’s
dynamics. Their ability to
7000
6776.95 t 1.19% Gold
6500
6000
5500
J A
he faces a series of unpalat-
able choices: Aggressive action
to cut the bank’s €80 billion
($89.9 billion) in bad loans—
the largest of any European
bank—would force the Mila-
nese lender to raise billions in
fresh capital, while an asset
sale could help bolster its cap-
ital position but would hurt al-
ready thin profit.
Meanwhile, the travails of
Italy’s No. 3 lender, Banca
Monte dei Paschi di Siena
SpA, promise to only compli-
cate Mr. Mustier’s job. On
Thursday, Monte dei Paschi
said its CEO, Fabrizio Viola,
had agreed with the bank’s
board to resign, in a surprise
move that came as that bank
works on a plan to shed €28
billion in bad loans.
Troubles at UniCredit,
which has a vast business in
Germany and Eastern Europe,
Li Daxio, or ‘Admiral Li,’ takes a photo with a fan in Beijing. Mr. Li has become one of China’s most popular investment gurus.
The ‘Last Bull’ in China’s Market
BY WEI GU
One of China’s most famous
investment gurus is a 52-year-
old economist at Yingda Secu-
rities Co., a medium-size
state-owned brokerage in the
southern city of Shenzhen.
Li Daxiao, or “Admiral Li”
as some fans call him, didn’t
study finance—he started out
as an electrical engineer—and
he has never worked in a
bulge-bracket firm like Gold-
man Sachs Group Inc. or even
a big Chinese investment bank
like Citic Securities Co.
Yet Mr. Li has become one
quickly start or stop produc-
tion has the market stabilized
at lower prices.
Prices above the current
range would encourage U.S.
shale producers to boost out-
put, while a move below $40
would force those same com-
panies to cut spending further.
Another large drop in prices
could also prompt big export-
ing countries like Saudi Arabia
and Russia to further explore
capping or cutting production.
While many oil companies
are still struggling, the current
levels offer some relief to an
industry that reeled as oil fell
to a 13-year low earlier this
year. Fewer producers are
bleeding cash, though prices
are still too low for most to
encourage the investment in
1400
1330.10 t 0.50% WTI crude
50
45.88 t 3.65% German Bund
1350 45
1300 40
1250 35
J J A J J A
THE WALL STREET JOURNAL.
European Union has upended
Europe’s status quo, making
the financial system more sen-
sitive to shocks. Investors are
watching UniCredit closely, as
EMILIO ANDREOLI/EUROPEAN PRESSPHOTO AGENCY
they expect its fate to affect
both Italy and potentially
other lenders on the conti-
nent.
“Fixing UniCredit is of para-
mount importance for Italy’s
banking system, for the coun-
try’s economy and for the eu-
rozone,” said Fabio Caldato, a
London-based partner at asset
manager Olympia Wealth
Management.
Like most of its Italian
UniCredit’s chief executive, peers, UniCredit has sustained
Jean-Pierre Mustier a double whammy of ultralow
could threaten not only Italy’s
ailing economy but also the
interest rates—Italian mort-
gage rates are as low as 1%—
and a decade of economic dol-
continent’s already fragile fi-
nancial stability.
Britain’s vote to leave the
drums in Italy, which have
helped drive up bad loans and
batter profits.
of China’s most popular stock- tion and cultivate a more-so-
market prognosticators, with ber investment style among
2.4 million followers on Chi- mom-and-pop traders. Many
nese microblogging site Weibo other popular market analysts
and a name at the top of do- in China have stopped produc-
mestic search-engine Baidu’s ing flashy videos and snappy
search rankings for business commentary, and Mr. Li says
people. His secret: colorful, he thought about deleting his
folksy market tips dispensed Weibo account in May, when
over social media, featuring the government stepped up
photos and videos of himself pressure on economists and
performing antics such as pos- analysts to be optimistic.
ing with bull statues or jug- But Mr. Li, whose com-
gling oranges. ments were already bullish,
Chinese securities regula- decided to stay the course,
tors have been trying to rein and says Chinese authorities
in such playfulness, as they at- haven’t asked him to stop
tempt to curb market specula- what he is doing.
Home in the Range
With crude oil trading between $40 and $50 a barrel in recent months, speculative traders
have been using the range to move in and out of upside and downside positions.
Nymex crude oil
$60 a barrel
new production that many an-
alysts say the market will need
in the coming years. 50
U.S. consumers and fuel-de-
pendent industries such as air- 40
lines are continuing to reap
the benefits of low fuel prices. 30
Because of the narrow price
range, many investors appear
to be taking a shorter-term 20
approach by quickly moving in
and out of oil positions to cap-
10
ture small gains, according to
Commodity Futures Trading
0 –60,000
Commission data.
Hedge funds and other J F M A M J J A
speculative investors posted Sources: WSJ Market Data Group (crude oil); Commodity Futures Trading Commission (positions)
their biggest-ever one-week
increase in bets on lower oil on record.
prices in the week ended July “It’s a trading market if I’ve
26. Then four weeks later, they ever seen one,” said Lee Kay-
cut their wagers on falling ser, portfolio manager at Rus-
prices by the largest amount sell Investments, which man-
0.10
yield 0.013% 10-Year Treasury
0.00
-0.10
-0.20
J J A J
For several years, the bank
responded by gradually raising
commissions, selling assets
and cutting costs. The push
has yielded little. In the last
two years, commissions inched
up 2% to €7.9 billion for 2015.
That failed to offset an 8%
drop in net interest income—
the difference between inter-
est the bank receives on loans
and what it pays on deposits—
to €12 billion last year.
As a result, a plan to reach
net profit of €5.3 billion in
2018 appears wildly optimis-
tic, with net profit last year at
just €1.7 billion. At the same
time, the bank has had to
write down €24 billion in bad
loans in three years.
These problems have con-
spired to leave UniCredit’s
common equity Tier 1 ratio, an
important measure of banks’
Please see BANK page B2
“Most people are boring, so
life needs some spice,” says
Mr. Li, in an office decorated
with awards for things like
“Strongest Financial Voice,
2009” and “2012 Oscar Award
of the Financial Industry.” “Fi-
nance itself is boring.” he says.
Mr. Li’s appeal is a testa-
ment to the still immature
state of China’s markets,
which are known for roller-
coaster trading prompted by
rumors and speculation. Retail
investors—many of them un-
sophisticated day traders—
constituted around 87% of
Please see ANALYST page B2
Speculative trading position
Change from previous week
40,000
Long
20,000
Friday 0
$45.88
–20,000
–40,000
S J F M
ages $244 billion, including
$1.2 billion in commodities. “It
just seems there are a lot of
short-term players in the mar-
ket right now…due to this
2.25
yield 1.671%
1.50
0.75
0.00
J A
Sources: Tullett Prebon; SIX Financial
Monday, September 12, 2016 | B1
Playing Catch-Up
Huawei is investing heavily to
boost its server business.
Server vendors’ global
market share, by shipments
100%
Hewlett
Packard
80 Enterprise
Dell
60
Lenovo
Huawei
40
Inspur
20 Others
0
1Q’15 1Q’16*
*Estimate
Source: Gartner
THE WALL STREET JOURNAL.
Huawei
Makes a
Push Into
The Cloud
BY JURO OSAWA
Huawei Technologies Co. is
already one of the world’s top
three makers of telecom-net-
working gear and smartphones
by market share. Now, the Chi-
nese technology giant is taking
aim at the market for cloud
computing largely dominated
by Western heavyweights.
Huawei is taking on Hewl-
ett Packard Enterprise Co.,
Dell Inc. and Cisco Systems
Inc. in the supply of servers
and other equipment used in
data centers, the key compo-
SHAWN KOH FOR THE WALL STREET JOURNAL
nents of cloud computing, by
adopting the strategy it has
used to expand in its smart-
phone and telecommunica-
tions-equipment sales over the
years: competitive pricing and
hefty investment in research
and development.
“Undoubtedly, we will be a
leader in this sector. We have
the capability,” said Deputy
Chairman Guo Ping in an inter-
view, adding that the company
plans to spend at least $1 bil-
lion of its research-and-devel-
opment budget every year on
equipment and operating sys-
tems for data centers. Last
year, Huwei’s R&D investment
totaled roughly $9 billion.
Shenzhen-based Huawei,
founded three decades ago by
former Chinese army engineer
Ren Zhengfei, has little chance
to expand in the U.S., where its
telecom equipment has been
effectively banned because of
security concerns. Analysts
say the Chinese company is
unlikely to become a supplier
for Amazon.com Inc., Facebook
Inc. and Alphabet Inc., which
build their own data centers to
offer the cloud services that
enable businesses and con-
Please see CLOUD page B3
Short
A M J J A
THE WALL STREET JOURNAL.
choppiness.”
U.S. oil for October delivery
settled down $1.74, or 3.7%, at
$45.88 a barrel Friday on the
Please see OIL page B2
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Monday, September 12, 2016
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-C
Abraham Trading........B2
Albemarle....................B8
Alphabet......................A2
Anheuser-Busch InBev
.....................................B4
Apple...........B1,B2,B3,B4
Banca Monte dei Paschi
di Siena.....................B1
Bank Polska Kasa Opieki
.....................................B2
Betterment ................. B7
Cisco Systems.............B1
Cohen & Steers...........B2
Columbia Threadneedle
Investments..............B2
Comcast.......................B4
Compagnie Financiere
Richemont.................B2
Cowen Group...............B3
Credit Suisse Asset
Management.............B2
D-E
Dell..............................B1
Deutsche Bank............B8
Deutsche Telekom......A2
Dow Chemical.............B4
Edmond de Rothschild
Group.........................B5
INDEX TO PEOPLE
A G
Abraham, Salem.........B2
Aschenbrenner, Thomas
.....................................B3
B Hartnett, Michael.......A2
Barnard, Chris.............B3
Battista, Rich..............B4
Baxter, Tim.................B3
C Katz, Ian......................B5
Caine, Patrice..............B3
Caldato, Fabio.............B1
Cheong, Rebecca.........A2
Coffee, John................B8
Coulson, Cromwell......B8
Cox, Sean .................... B4
D Li, Miao.......................B2
Domingos, Pedro.........B7
E
Egan, Daniel................B7
Ellison, David..............B5
F Morfit, Mason.............B8
Farrar, Tim. ................. B3
Fine, Camden R...........B5
Fu, Yuanhui.................B2
EU Defends Ruling
Over Apple’s Tax Bill
BY VIKTORIA DENDRINOU
AND JULIA-AMBRA VERLAINE
BRATISLAVA, Slovakia—The
European Union’s ruling that
Ireland should recoup €13 bil-
lion ($14.5 billion) in allegedly
unpaid taxes from Apple Inc.
wasn’t an attack against the
U.S. or American companies,
the bloc’s taxation chief Pierre
Moscovici said Saturday.
“It is not a message that in-
vestors from U.S. companies
are not welcome, this is of
course not the case,” Mr. Mos-
covici said, adding that U.S.
investment is “an important
driver of growth and employ-
ment in Europe.”
Speaking after a meeting of
EU finance ministers in Bratis-
lava, Mr. Moscovici said that
all companies operating in the
EU, whatever their origin,
must pay their fair share of
taxation on the profits they
make in the country where
they make them.
His comments come less
than two weeks after the Eu-
ropean Commission—the EU’s
antitrust regulator—demanded
OIL
Continued from the prior page
New York Mercantile Ex-
change.
The oil-price collapse from
more than $100 a barrel in
mid-2014 to less than $30 in
the first quarter this year was
a boon for trend-followers
who bet on falling prices and
held on for months or years.
The current market—vola-
tile but directionless—reflects
a new era in the oil-price
downturn, analysts say. Since
April 8, U.S. oil prices have
settled between $39.51 and
$51.23 a barrel on the Nymex,
the longest stretch in such a
narrow range since the first
eight months of 2014.
Few expect prices to drop
to new lows or to rise signifi-
cantly in the coming months.
Economists surveyed this
month by The Wall Street
Journal forecast a U.S. oil
price of $47.02 a barrel, on av-
erage, on the last day of 2016.
Fewer extreme moves in the
oil market could be welcomed
by some stock and bond inves-
tors, after two years of falling
oil prices roiling their portfo-
lios. Energy junk bonds have
rebounded since the first
quarter, a sign that the cur-
rent price range offers some
cushion for smaller producers
and reduces the risk of de-
faults across the sector.
Still, some analysts warn
that oil prices might breach
the current range sooner than
many think. Crude could spike
THE WALL STREET JOURNAL.
BUSINESS NEWS
E.I. DuPont de Nemours Ubezpieczen..............B2
.....................................B4 Qualcomm...................B3
Exane BNP Paribas.....B2 Russell Investments...B1
F-G Samsung Electronics..B3
Seagate Technology....B8
Facebook................A1,A6 SES..............................B3
Fincantieri...................B4
Shanghai International
FinecoBank..................B2 Port (Group).............B5
FMC ............................. B8
Sociedad Química &
General Motors...........B4 Minera de Chile........B8
Goldman Sachs Group
STX..............................B4
............................... B1,B8
Google.........................A2
T-U
Telefonica....................A2
H-K
Tesco............................B4
Hanjin Group...............B2 Tesla Motors...............B4
Hanjin Shipping.....A6,B2 Thales..........................B3
Hewlett Packard Tianqi Lithium
Enterprise.................B1 Industries..................B8
HNA Group..................B5 Time ............................ B4
Huawei Technologies UniCredit.....................B1
............................... B1,B3 Union Investment.......B2
Intel........................B1,B3 V-Y
Intesa Sanpaolo..........B2
Korean Air Lines.........B2 ValueAct Capital
Management.............B8
M-S Vanguard Group..........B7
Microsoft .................... A1 Volkswagen.................B4
Pacific Investment Wealthfront ................ B7
Management.............B2 Wells Fargo.................B5
Powszechny Zaklad Yingda Securities........B1
ANTHONY KWAN/BLOOMBERG NEWS
R
Gersh, Bruce ............... B4 Rosenberg, David ....... A2
Gilbert, Pamela...........B3 Rosengren, Eric .......... A2
H Rother, Christopher....B4
S
J Sabbagh, Karim .......... B3 Sales at Richemont, owner of Cartier, are seen falling 12% for the five months ending in August from the same period last year.
Jacobsen, Brian .......... A2 Schiller, Phil................B3
Luxury Firm Faces Slowdown
Sharenow, Greg..........B2
K Shaw, Jessica ............. B4
Smith, Jim .................. B5
Kayser, Lee..................B1
T
Krzanich, Brian ........... B3
Tas, Steven.................A2
L
Tischler, Allen.............B5
Langert, Dan...............B4 Tucker, Leslie..............B4
BY MANUELA MESCO year and is particularly pro- timepieces are buying back wake of terrorist attacks in
Lewis, Dave.................B4 nounced in Asia. For the past thousands of items from Europe have also hurt reve-
Li, Daxiao....................B1 V
Falling sales in Asia and four years, the sector has en- dealers, analysts estimate. nues.
Viola, Fabrizio.............B1
fewer tourists in Europe are countered a double whammy: As a result, some wonder Even one of the most ex-
Longo, Vicenzo............B2 Vollmer, Chris ............. B4
likely to weigh on Cie. Finan- A crackdown by the Chinese whether the weakness in clusive brands in the indus-
Luczo, Stephen ........... B8 W
cière Richemont’s earnings, government on gifting by watches extends beyond try, Hermes International
M Walter, Brian .............. B7
with analysts expecting a party officials as part of an short-term macroeconomic SCA, saw first-half sales ris-
Macron, Emmanuel .... A2 Y steep drop in five-month rev- anticorruption campaign and problems. Instead, the appeal ing only 6% this year, com-
Mansfield, Bob............B4
Yang-ho, Cho...............B2 enue that could also reflect the introduction of snazzy of tony Swiss watches— pared with a 20% growth in
Moscovici, Pierre ........ B2 Z deeper problems for the new smartwatches. which can cost tens of thou- the first half of 2015.
Musk, Elon..................B4 Zadesky, Steve ........... B4 Swiss watch industry. However, according to sands of francs—may be wan- Operating profit for the
Mustier, Jean-Pierre...B1 Zeping, Ren.................B2 Sales at the Geneva-based Barclays analysts, those fac- ing for wealthy shoppers. period, which will be released
owner of Cartier, Montblanc, tors should begin easing now. Richemont, thanks to the next week, is expected to
and Vacheron Indeed, 2016 should be the strength of brands such as have grown about 9% to €818
THE WEEK Constantin,
AHEAD which will be
released on
first year of growth in the
mainland Chinese luxury
market after three consecu-
Vacheron Constantin or Jae-
ger-LeCoultre, could be some-
what insulated from such a
million, according to Exane
BNP Paribas, sharply off the
20% year-over-year growth it
Wednesday
morning, are seen falling
about 12% for the five
tive years of flat or negative
performance, according to re-
search by Bain.
trend in the long term, ac-
cording to Bernstein analysts,
because of the strength of
notched up for the first half
2015.
The maker of Birkin and
that Ireland recover roughly months ending in August Instead, the decline in their brands. Meanwhile, Kelly bags said in July that
€13 billion of unpaid taxes ac- compared with the same pe- Swiss watch exports appears Richemont should also get a the current state of emer-
cumulated over more than a riod last year, according to to be accelerating. For in- boost from the fast-growing gency in France following ter-
decade by Apple. Exane BNP Paribas. stance, exports to Hong Kong, branded jewelry business, rorists’ attacks in Europe
The commission said that That is a sharp reversal on long the top market for Swiss thanks to brands such as weighed heavily on its French
arrangements the government the 16% year-to-year sales watches, plunged nearly 33% Cartier. sales and would likely con-
offered Apple in 1991 and 2007 growth the Swiss luxury be- in July, compared with a 14% The problems in the Swiss tinue to deter tourists from
allowed it to pay from almost hemoth reported in the five decline globally from a year watch business reflect a coming to France.
zero to around 1% tax on its months ending in August earlier. The U.S. saw a 15% broader slowdown in luxury LVMH Moet Hennessy
European profits between 2015. drop, with total Swiss watch goods, which is far from the Luis Vuitton, a bellwether for
2003 and 2014. The fall could be the latest exports of 179 million Swiss double-digit growth of a few the industry, also saw sales
Ireland’s government main- sign of persistent weakness francs. Sales have been so years ago. Currency swings, slowing down in some areas
tains that it didn’t award Apple in the luxury watch sector, slow that makers of Cartier, volatile markets and weaker of Europe because of fewer
favorable tax treatment and which accelerated earlier this Tag Heuer and other luxury consumer confidence in the visitors to the continent.
agreed earlier this month to
launch an appeal in European
courts against the commission’s
ruling, which it fears could
threaten future investment in
ANALYST too early. When the index fell
to around 2,100 in 2012, he
coined the phrase “diamond
feeding chickens—a play on
the similarity between the
Chinese word for “chicken”
questioned Li Miao, a coal an-
alyst at Shanghai-based Hai-
tong Securities who became
the country. Apple has also said bottom” to indicate that some and “opportunity”—and a famous for posting videos of
it is appealing the decision. Continued from page B1 stocks with strong fundamen- video in which he is juggling herself reading her coal re-
The size of the tax demand trading on the Shanghai mar- tals had become as valuable as two oranges, one labeled with port, prettied up with editing
risks further unsettling multi- ket last year, according to the diamonds. Within two months, the Chinese character for app Meipai, according to a
national companies, which face exchange. To win their atten- the Shanghai market re- “bull” and the other “bear.” person familiar with the situa-
a broader international effort to tion, many analysts have tried bounded by 15%. He called an- The Shanghai benchmark in- tion. The regulators wanted to
curb aggressive tax avoidance. to make reports and pitches other “diamond bottom” on dex has risen 17% since the make sure the content of her
Mr. Moscovici said he more entertaining, and have Jan. 16 this year that didn’t go January plunge, but is still videos didn’t deviate from her
wasn’t concerned about a become celebrities on social as well: Shanghai stocks contin- down 13% this year. published reports, the person
backlash to the decision from media in the past few years. ued to tumble a further 8.5%. After stock-market col- said. Ms. Li has since stopped
American companies. Mr. Li estimates he makes After the January stock lapses last year and earlier producing the videos and
“This isn’t a politicized de- 500 national media appear- rout, Mr. Li started calling this year, Chinese regulators couldn’t be reached for com-
cision. It is based on facts,” he ances a year and has tens of himself the “last bull in the started to pay more attention ment. Haitong says it adjusts
said. thousands of posts on the in- [blue-chip] A-share market,” to analyst shenanigans. its communications based on
ternet. He declined to com- posting a photo of himself In May, Shanghai regulators clients’ needs.
ment on his speaking fees, but
higher if the Organization of
the Petroleum Exporting
Countries reaches an agree-
an event manager familiar
with them says he can charge
as much as 100,000 yuan
ment to freeze or cut produc- ($15,000). Fans have sent him
tion, or if political uprisings or everything from rice and po-
natural disasters cut deeply ems to a pastry that looks like
into supply. Crude prices could the head of a bull.
also tumble below the $40 Besides his colorful videos,
level if new data show sharp Mr. Li—who has been in the
SHAWNKOH FOR THE WALL STREET JOURNAL
rises in global inventories. securities industry since
But for now, many investors switching from an engineering
are positioning their funds to job in 1996—is known for a
profit from where prices have few successful market calls, as
been for months. well as some duds.
Investment firms including In 2015, when the Shanghai
Cohen & Steers Inc., Credit stock benchmark was between
Suisse Asset Management, 4,000 and 5,000, he said the
Union Investment and Co- “top of the earth” had arrived;
lumbia Threadneedle Invest- a few months later, stocks fell,
ments said they would likely though some investors com-
add exposure to oil if prices plained he had called the top Li Daxiao, shown tossing an orange, estimates he makes 500 national media appearances a year.
fall to $40 or lower and re-
duce exposure around $50—
effectively betting that the
current price range will hold.
One strategy, called “selling
strangles,” uses options to wa-
BANK However, a few weeks later,
the stress tests showed that a
downturn would leave the
bank with a dangerously thin
A major move to unload
bad loans, perhaps as much as
€20 billion, “will be key for a
rerating of the stock,” said Vi-
Meanwhile, UniCredit has been
in talks to sell its remaining
40% stake in Pekao to Polish
insurer PZU SA, but the latter
ger that prices will hold within Continued from the prior page capital buffer of just over 7%. cenzo Longo, a Milan-based is now interested in buying
a specific range—but the trade capital, at 10.51% at the end of The bank’s stock fell 13% in strategist at IG Markets. just 30%, according to people
can lead to big losses if prices the second quarter, just a hair the days after the stress tests. However, Monte dei Paschi familiar with the situation.
move outside the higher or over regulatory requirements It has picked up since but is presented a plan in July to sell Any capital increase could
lower limits. of 10% and lower than the still down 55% in the past €28 billion of bad loans at 27% also collide with Monte dei
“If you do that, you’re not 12.7% for its Italian rival In- year. of face value. That has effec- Paschi’s plans for a €5 billion
going to make a lot of money," tesa Sanpaolo SpA. Now, Mr. Mustier faces tively set a new benchmark for share sale this winter, amid a
said Greg Sharenow, portfolio UniCredit ousted its chief some tough choices as he the pricing of Italian bad market with little appetite for
manager at Pacific Invest- executive this spring, hiring readies a new strategic plan loans. Since UniCredit attri- Italian banking shares. Indeed,
ment Management Co., which Mr. Mustier in June. slated before year’s end. First, butes a higher value to its bad Monte dei Paschi is consider-
manages $1.5 trillion, includ- With the stock down more he plans to fatten UniCredit’s loans, a sale of €20 billion of ing asking investors to convert
ing $13 billion in commodities. than 60% since the start of the capital cushion by at least €8 loans would force it to take €2 riskier bonds into shares to re-
Abraham Trading Co., year, Mr. Mustier sought to billion, according to a person billion in write-downs—thus duce its capital increase.
which manages $265 million buttress investor confidence in familiar with his thinking. increasing the size of a capital Finally, Mr. Mustier can’t
and uses trend-following in- July by announcing two trans- But the figure could be increase. present his plan until after a
vestment strategies to identify actions immediately after tak- higher if the bank decides to Mr. Mustier could also sell national referendum in Italy—
sustained price movements, ing the helm: the sale of 10% sell a large chunk of its bad assets to beef up capital, but likely in late November—that
profited from oil in recent stakes in two of the bank’s loans in one go—an option in- such prospects have worsened threatens to topple Italian
years but is now nearly out of crown jewels—online broker vestors are pushing for and recently. Turmoil in Turkey Prime Minister Matteo Renzi’s
that market, said Salem Abra- FinecoBank SpA and Poland’s Mr. Mustier is considering, the would make it hard to sell the government and is already un-
ham, the firm’s president. Bank Pekao SA. person said. bank’s Turkish business. nerving investors.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Monday, September 12, 2016 | B3

TECHNOLOGY @wsjd | wsjd.com

Thales, SES to Team Up Intel Supplies Chips

They plan to offer
enhanced broadband-
For Some iPhones
via-satellite connections BY DON CLARK until research firms have a
chance to disassemble new de-
to airline passengers Apple Inc. is using wireless vices after they go on sale. In-
chips from Intel Corp. in some dustry executives say deci-
Europe’s largest satellite- models of the new iPhone 7, sions can change at the last
services provider and the re- people familiar with the matter minute as companies conduct
gion’s leading aircraft-elec- said, a widely expected break- final negotiations over pricing
tronics maker are teaming up through in the chip giant’s mul- and other terms.
to offer enhanced broadband- tiyear quest to find a foothold Apple provided new clues
via-satellite connections to in popular smartphones. Wednesday about its decision
airline passengers. The Intel baseband modem along with specifications for
LUKE MACGREGOR/BLOOMBERG NEWS

chips are a replacement for the iPhone 7, which is sched-

By Robert Wall those sold by Qualcomm Inc., uled to appear in stores on Fri-
in London a longtime Apple supplier day. The company disclosed
and Andy Pasztor which is expected to supply that some models don’t sup-
in Los Angeles wireless chips for the remain- port a cellular technology
der of the iPhone 7 handsets. called CDMA, or code-division
After months of negotia- Some analysts believe Intel multiple access, which is used
tions and decisions to scale could wind up supplying chips in some cellular networks and
back their initial plans, for as many as half the hand- not others. Inc. use different
France’s Thales SA and Lux- sets Apple is likely to sell. technology.
embourg-based SES SA, with a Many companies have been scrambling to shape a new market for airborne connectivity. Intel’s milestone, following Qualcomm, which helped
global fleet of more than 50 years of failures in the mobile popularize CDMA, builds in
satellites, on Monday will an- for global connectivity. Thales and other hardware are prom- Co. and Airbus Group SE jetlin- market, isn’t a surprise. One support for the technology and
nounce they are jointly enter- and SES likely won’t be able to ising to change that dynamic, ers. Thales will begin offering reason is that Qualcomm man- others in all its baseband
ing the already crowded field match such coverage until at with airline managements in- its new connectivity for the agers had signaled earlier in chips, while Intel doesn’t. So,
of companies marketing such least the middle of the next de- creasingly viewing upgraded Americas starting next year us- the year that they expected to analysts concluded that the
high-bandwith links. cade, even if they opt to invest cabin connectivity as an im- ing two existing SES satellites. lose some iPhone chip non-CDMA models are pow-
By 2020, the partners hope in additional satellites. portant way to attract and re- The service will be bolstered sales. Bloomberg in June re- ered by Intel chips and that
to leapfrog competitors with a The move comes as airlines, tain customers. with the addition of the planned ported that Intel would win a models that work on the other
powerful new satellite de- satellite operators and equip- Paris-based advisory firm SES-17 aircraft three years later. share of modem sales in the networks use Qualcomm chips.
signed specifically for efficient ment makers are scrambling Euroconsult estimates that the The new offerings are in- next iPhone. —Robert McMillan
and low-cost cabin connectiv- to shape a new market for air- number of commercial aircraft tended for planes coming off But some component and Thomas Gryta
ity to airliners flying across borne connectivity. Despite es- with in-flight connecting will the assembly lines, as well as choices often aren’t confirmed contributed to this article.
the U.S., Latin America and calating passenger expecta- grow to 23,100 by 2025 from retrofits of existing fleets.
busy trans-Atlantic routes. For tions for faster connections, 5,300 last year. Sales from Inmarsat has launched
passengers, the service aims many airlines world-wide are passenger connectivity would three of its Global Xpress sat-
to be “the equivalent of what still struggling to figure out see a 23% annual growth rate ellites to beam signals glob-
you have at home with fiber how to make money from such over the period. ally, with the first airlines in-
connectivity,” Thales Chief Ex- cabin features. Yet “airlines don’t know cluding Deutsche Lufthansa
ecutive Patrice Caine said in For years carriers have been how their ultimate business AG already signed on. The sys-
an interview. That would in- offering in-flight connections to models will work out,” accord- tem is due to go live soon.
clude streaming movies in passengers for a fee, or in some ing to Tim Farrar, a Northern ViaSat also is launching
high definition, videogames cases free. But the connection California satellite consultant. new, powerful satellites to ser-

DAVID PAUL MORRIS/BLOOMBERG NEWS

and live television. speeds often have been limited, Faster speeds are expected to vice airlines. It counts Ameri-
But two entrenched rivals, frustrating some passengers ea- lure more customers. Industry can Airlines Group Inc., the
London-based Inmarsat PLC ger to do more than send text leaders, however, “still can’t U.S. biggest airline by traffic,
and ViaSat Inc. of Carlsbad, Ca- messages or emails. As a result, agree what the best technol- among its customers.
lif., already have or soon will overall usage rates have been ogy will be or ultimately how But SES CEO Karim Sabbagh
have significant capacity in or- depressed, making a number of they can make back their in- said the SES-17 spacecraft, to be
bit to serve the same fast- carriers ambivalent about in- vestment,” Mr. Farrar said. built by Thales Alenia Space, a
growing segment—and both vesting in new satellite services Thales already serves the Franco-Italian joint venture ma-
can build on longstanding rela- and upgraded equipment on segment through its FlytLive jority owned by Thales, will
tionships with certain carriers. board. broadband unit, as well as its have an advantage because it
Current competitors also rely But now, more powerful Avant in-flight entertainment will be designed to optimally Apple’s iPhones offered improvements and a better camera—two
on capable satellites designed satellites, advanced antennas equipment installed on Boeing serve flight routes. rear-facing cameras, shown above, on the iPhone 7 Plus.

Samsung Phone Recall Intensifies MIMS

BY JOSH BECKERMAN affected inventory and
AND GEORGIA WELLS stopped sales and shipments
of those devices.”
Users of Galaxy Note 7 Investors on Friday wiped
smartphones should turn them more than $10 billion off Sam-
off and not use them, Samsung sung’s market value following
Electronics Co. and the U.S. the U.S. Federal Aviation Ad-
Consumer Product Safety Com- ministration’s warning that the
mission said Friday, citing re- phones shouldn’t be used on
ports of fires involving lithium- planes “in light of recent inci-
ion batteries in some of the dents and concerns.” This
devices. prompted airlines to issue
The warning followed a vol- warnings to passengers about
untary global recall of the Note using the phones on board or
7 that Samsung announced ear- putting them in checked lug-
lier this month. gage. In Seoul, Samsung
Samsung said Friday that shares closed at 1.575 million
users should exchange their won ($1,432), down 3.9%, be-
Note 7s, which are the latest fore the CPSC’s announcement.
addition to the company’s The Samsung recall marks a
phone lineup, through a swap rare instance of a company
program for another device. pulling its products without
The South Korean company acting in conjunction with the
also said it has “identified the U.S. safety watchdog.
“It is illegal for a company
to know that it has a danger-
ous product and not inform
the CPSC,” said Pamela Gil-
bert, a partner with Washing-
ton’s Cuneo Gilbert & LaDuca
LLP and a former executive di-
rector of the CPSC. “This is an
unusual situation.”
Typically, the commission
announces recalls in coopera-
tion with manufacturers, after
consultation. But no agreement
on a recall notice has been
reached yet with Samsung.
The move follows a warning
late Thursday from the Federal
Aviation Administration say-
ing the phones shouldn’t be
used on planes “in light of re-
cent incidents and concerns.”
The CPSC’s statement was
also unusual in that it warned
owners not to use the product
at all.
“This is an even more seri-
ous warning,” said Scott Wolf-
son, the CPSC’s communica-
tions director. “As soon as
possible, consumers deserve
clear information about the
hazard, the scope of products
involved and what the ac-
cepted remedy is.”
Samsung has been working
with the commission following
the voluntary recall on a “cor-
rective action plan” to expedite
a CPSC-approved recall of the
product, President of Samsung
Electronics America Tim Baxter
said in a statement Friday.
Samsung is the world’s big-
gest smartphone maker by
market share, followed by Ap-
ple.
—John McKinnon
contributed to this article.
Continued from page B1
traditionally made major up-
grades to their core products
every two years, but are slow-
ing that pace.
Intel now says it will deliver
new technology allowing it to
cram more transistors on a
chip every three years. It calls
its latest processor, Kaby Lake,
an “optimization” of prior
technology. That means smaller
improvements in PCs and re-
lated devices, contributing to
slower sales in those arenas.
The iPhone, too, was on
schedule for a major redesign
this year, two years after the
iPhone 6 and 6 Plus delivered
Apple’s first large-screen
phones. Instead, Apple offered
improved battery life, a faster
processor, water resistance
and a better camera—two
rear-facing cameras on the
iPhone 7 Plus. In the words of
my colleague Geoffrey Fowler,
PCs and smartphones. They’re
finding applications in artifi-
cial intelligence, machine vi-
sion, audio processing and
other tasks, says Mark Hung, a
vice president of research at
Gartner Inc.
With improved imaging and
display capabilities, for exam-
ple, Apple and its competitors
are moving us toward a 3-D fu-
ture—3-D video and 3-D play-
back in the form of virtual re-
ality. Other specialized chips
enable the machine vision be-
hind self-driving cars, and the
deep learning, a form of artifi-
cial intelligence, powering vir-
tual assistants like Apple’s Siri,
Microsoft Corp.’s Cortana and
Amazon.com Inc.’s Alexa.
In the words of Mr. Hung,
the Gartner analyst, these spe-
cialized chips are part of a
trend called “heterogeneous
computing,” where devices
serving different purposes are
powered by different chips. At
Apple’s event last week, for ex-
ample, the company high-
lighted three new chips: the

CLOUD Deep Pockets

Huawei’s research budget has
grown rapidly.
budget, but also beefing up its
sales workforce overseas.
Those efforts are starting to
pay off. Overseas markets now
Deutsche Telekom, also works
with Cisco.
Some Huawei clients said
part of the Chinese vendor’s
“practical, but not jaw-drop-
ping.”
On closer inspection,
though, both companies’ tech-
A10 at the heart of the iPhone
7; an improved S1 chip in Ap-
ple Watch Series 2; and the W1
chip in its AirPod wireless
Continued from page B1 account for about 40% of Hua- appeal is its competitive pric- nology will enable an ever- headphones.
sumers to access applications Growth in total research and wei’s revenue from internet in- ing. Neither Huawei nor its cli- growing list of new features In other words, Apple laid
and store information re- development investment frastructure products and ser- ents disclose any pricing infor- and applications. out an ecosystem of devices
motely. 60 billion yuan vices, compared with 25% last mation, but in the global Take Intel’s latest micropro- with custom chips, each in-
But in Europe, Russia and year, thanks to growth in Eu- market for servers, for exam- cessor. It may be only margin- tended for different tasks. It is
Africa, where Huawei’s wire- rope, Russia and Africa, Mr. ple, the company’s presence so ally faster at traditional com- a form of heterogeneous com-
less networks are already be- Guo said. The company gener- far is mainly in the low-end puting tasks, but it comes with puting that transcends the
40
ing used, it is well-positioned ates nearly 60% of its total segment. Huawei was the a graphics processor that is es- chip, and is visible at the de-
to expand, they say. Huawei’s revenue outside China, accord- fourth-largest server vendor timated to be twice as fast as vice level.
data-center clients include ing to its 2015 figures. by shipments in the first quar- its predecessor. The chip can Apple is hardly alone on
Deutsche Telekom AG and Rus- 20 Outside China, a challenge ter. But based on revenue, it also handle 4k video, with four this path. Intel has been on an
sia’s central bank. for Huawei will be building al- wasn’t among the top-five ven- times as many pixels as tradi- acquisition spree, buying chip
As more corporate clients liances with business partners dors, according to research tional HD video. On its own, companies that specialize in
become cautious about infor- who have longstanding rela- firm Gartner. that may not mean much. But vision, artificial intelligence,
mation security, companies are 0 tionships with Western equip- Still, Mr. Guo said custom- in a world in which virtual re- servers and the Internet of
building their own exclusive 2011 ’12 ’13 ’14 ’15 ment suppliers, said Chris Bar- ers who buy Huawei’s low-end ality could be the next killer Things.
cloud platforms and Huawei is Note: 10 billion yuan = $1.49 billion nard, analyst at research firm gear will eventually let the app for PCs, it’s big. With these advances, Apple
trying to expand into that lu- Source: the company IDC. “Huawei has to try harder company be the main builder Apple, too, built an im- and Intel are putting technol-
crative segment to supply THE WALL STREET JOURNAL. than its competitors,” Mr. Bar- of their private cloud-comput- proved graphics processor into ogy in the hands of developers
highly customized equipment nard said, adding that the ing platforms. the A10 chip at the heart of who will create the next must-
and software for private data used in data centers. In China, company still needs to prove In China, Huawei is already the new phone. That supports have capabilities, from 3-D in-
centers. Huawei plays the role of a itself in terms of services and a supplier of data-center the new camera, which Apple terfaces and indoor mapping
The move is yet another cloud-service provider similar technical support. equipment, helped in part by marketing head Phil Schiller to the kinds of artificial intelli-
ambitious plan by the world’s to Amazon.com. To that end, Huawei has challenges facing foreign com- calls a “supercomputer for gence that could give rise to
third-largest smartphone ven- Huawei posted revenue last been trying to forge more in- petitors. Chinese government photos.” Apple touted the new methods of interacting
dor, which aims to surpass Ap- year of 395 billion yuan ($59 ternational partnerships. agencies have been shifting to- iPhone 7’s significantly im- with computers.
ple Inc. and Samsung Electron- billion), with roughly 60% Last week, Huawei invited ward homegrown technology proved graphics as a boon for It is worth remembering
ics Co. to become the market coming from telecom equip- 20,000 clients, business part- suppliers because of national- gamers, but it also could lay that “incremental” advances
leader in five years. ment and 33% from consumer ners and industry experts to a security concerns. Huawei’s the groundwork for an iPhone from Apple and its rivals have
For Huawei, internet infra- products such as smartphones. cloud-computing conference in domestic clients include China supporting virtual or aug- yielded some of the most valu-
structure is an extension of its The company doesn’t disclose Shanghai where speakers in- Merchants Bank Co. and local mented reality, which the com- able startups in history, from
telecom-equipment business, its data-center-related sales, cluded top executives from In- television broadcasters. pany is rumored to be working Uber Technologies Inc. to
as carriers build more data part of which is included in its tel Corp. and business-soft- But in the U.S. market, cy- on. Airbnb Inc. My favorite exam-
centers to offer cloud storage telecom-equipment revenue. It ware provider SAP SE. bersecurity tensions between These features are just the ple of how a seemingly trivial
and applications. Technologi- employs about 170,000 work- “In terms of the technology Washington and Beijing are beginning. Hardware makers’ innovation can lead to a huge
cally, there is an overlap be- ers world-wide, including used for cloud computing, likely to severely limit Hua- primary response to the slow- shift is an addition that ap-
tween telecom and data-center nearly 80,000 R&D employees. Huawei isn’t behind its West- wei’s prospects, analysts say. down in improvements in chip peared first on Android smart-
equipment, the company says. The number of researchers ern competitors,” said Thomas Huawei acknowledges the performance has been to cre- phones in 2003, but had its
Huawei competes globally and engineers working on Aschenbrenner, sales and mar- challenges. “We realize that ate customized chips for spe- biggest impact when Apple in-
with HPE, Cisco and China’s technologies for data centers keting director at T-Systems the U.S. market is a stronghold cific tasks. troduced it on the iPhone 4 in
Lenovo Group Ltd. in equip- has increased sharply to International GmbH, which of- for a lot of other vendors,” Mr. These chips can accomplish 2010. Who would have pre-
ment and with EMC Corp.’s 16,000 this year from 3,000 in fers a cloud-computing plat- Guo said, adding that Huawei things much faster than the dicted that adding a front-fac-
VMware Inc. and Microsoft 2012, Mr. Guo said. Huawei form using Huawei’s technol- is still exploring opportunities general purpose chips that ing camera would give rise to
Corp. in operating systems isn’t only increasing its R&D ogy. T-Systems, a unit of in the U.S. have long been the “brains” of Snapchat Inc.?
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Monday, September 12, 2016 THE WALL STREET JOURNAL.

BUSINESS NEWS

Tesla Modifies VW Engineer Admits Scam

AutopilotSystem
BY TIM HIGGINS
Tesla Motors Inc. is pre-
paring an updated version of
its Autopilot technology fol-
lowing a fatal crash in May in-
volving a driver using it.
The new version will rely
more on radar signals to help
guide Tesla vehicles, and in-
cludes safeguards to keep
drivers using the feature en-
gaged at high speed.
“Ultimately, this will proba-
bly be a threefold improve-
ment in safety,” Chief Execu-
tive Officer Elon Musk told
killed Tesla driver Joshua
Brown in May, Mr. Musk said.
Telsa’s Autopilot has come un-
der scrutiny since that event,
the first known death involv-
ing a driver using the system.
Tesla’s Autopilot uses cam-
eras, radar and sensors to
steer vehicles and adjust their
speed. It is viewed as an ag-
gressive step toward self-driv-
ing cars, though Tesla warns
users that the technology
doesn’t, in fact, make Tesla ve-
hicles autonomous and that
drivers must remain ready to
take control.
Plea document says
engine couldn’t meet
new U.S. standards,
so car maker cheated
BY ARUNA VISWANATHA
AND CHRISTINA ROGERS
A Volkswagen AG engineer
pleaded guilty to helping the
auto maker’s admitted efforts to
cheat on emissions tests, becom-
ing the first person criminally
convicted in the U.S. in a wide-
ranging scandal that has cost the
German giant billions of dollars.
The engineer, James Liang,
who has been with the company

VIRGINIA LOZANO/ASSOCIATED PRESS

reporters Sunday on a confer-
ence call. “This isn’t going
from bad to good, it’s going
from good to, I think, great.”
The software updates will
be rolled out within the next
two weeks and delivered to
vehicles over the air, he said.
They will affect Tesla vehicles
built since October 2014. Be-
fore the, the hardware that
Autopilot uses wasn’t included
in the vehicles.
The changes may have pre-
vented the Florida crash that
SPENCER PLATT/GETTY IMAGES
Among the changes, Autopi-
lot will disengage if drivers re-
peatedly ignore warnings to
keep their hands on the steer-
ing wheel.
As he responds to Tesla
safety concerns, Mr. Musk also
faces controversy for propos-
ing to combine Tesla and So-
larCity Corp., where he is
chairman, and questions about
why one of his Space Explora-
tion Technologies Corp. rock-
ets exploded during routine
fueling on Sept. 1.
since 1983, agreed to cooperate
in the continuing U.S. investiga-
tion, according to his plea agree-
ment filed in federal court in De-
troit. That cooperation suggests
prosecutors are preparing cases
against others at the company.
Mr. Liang was charged with
conspiring to defraud the U.S.,
commit wire fraud and violate Volkswagen engineer James Liang pleaded guilty in connection with the emissions-rigging scandal.
the Clean Air Act. He is sched-
uled to be sentenced in Janu- proval to sell the cars in the U.S. from Germany in May 2008 to ernment in the investigation
ary, and faces up to five years “That is why I am guilty,” help Volkswagen launch its and prosecution of others,” the
in prison and a fine of up to Mr. Liang told U.S. District “clean diesel” vehicles in the agreement says. The deal also
$250,000. He also has been Judge Sean Cox. He declined to U.S. and now lives in Newbury requires Mr. Liang to cooperate
mentioned in a civil suit as be- comment later to reporters. Park, Calif., the Justice Depart- with German law enforcement.
ing a developer of devices that “This will certainly have an ment said. Investigators began The document says that if
helped certain models appear impact on proceedings in Eu- looking at Mr. Liang early on, the government determines that
to burn cleaner in emissions rope,” said Christopher Rother, confiscating his passport in No- Mr. Liang’s cooperation
tests than they did on the road. a Berlin attorney representing vember 2015, according to a “amounts to substantial assis-
The plea marks the first European plaintiffs suing Volks- person familiar with the matter. tance in the investigation or
time an individual has faced wagen in Germany. “He is one of many at Volks- prosecution of others,” it will
sanctions in the sprawling U.S. According to the plea agree- wagen who got caught up in seek a reduced sentence for him.
investigation into the emissions ment, Mr. Liang and colleagues this emissions scandal, and he Volkswagen last year admit-
scandal. Volkswagen AG re- began designing a new engine is very remorseful for what took ted to misleading environmen-
mains in discussions with the around 2006 but “soon real- place,” Daniel Nixon, Mr. Liang’s tal regulators and consumers
U.S. on a criminal settlement ized…that the engine could not lawyer, said after the hearing. by installing illegal emissions-

and is expected to face a finan- meet both customer expecta- The Justice Department last cheating software on nearly
cial penalty as part of that in- tions as well as new, stricter year publicly stepped up efforts 600,000 diesel-powered vehi-
vestigation, people familiar U.S. emissions standards.” In- to charge individuals in corpo- cles in the U.S. Volkswagen has
with the matter have said. stead, the plea said, they de- rate investigations, after facing said the software is on some 11
A company spokeswoman signed software to recognize criticism that it heavily penal- million vehicles world-wide.
said Volkswagen is continuing when the car was being tested ized firms for corporate wrong- Questions about Volkswagen
to cooperate in the probe but and turn on emissions controls. doing but prosecuted few exec- emissions first arose in 2014,
wouldn't comment on Mr. Li- The Justice Department said utives for the same conduct. when West Virginia University
Tesla’s updated Autopilot technology will rely more on radar. ang’s case. the conspiracy began in Novem- Friday’s plea deal suggests researchers identified discrepan-
Mr. Liang, 62 years old, said ber 2006, involved Jetta, Golf the Justice Department envi- cies between what the cars emit-
in a Detroit courtroom on Friday and other vehicles with model sions a different approach this ted on the road and in testing

Apple Puts Brakes that he knew Volkswagen hadn’t

disclosed the “defeat devices” to
regulators. Those omissions en-
years between 2009 and 2015,
and continued until the cheating
was revealed in September 2015.
time, with Mr. Liang helping
prosecutors pursue other indi-
viduals at Volkswagen. “Defen-
situations. Volkswagen didn’t ad-
mit to the software at the time.
—William Boston

On Part of Car Effort abled the company to get ap- Mr. Liang moved to the U.S. dant agrees to assist the gov- contributed to this article.

BY ROBERT MCMILLAN

Time Enters Video-Streaming Fray

Apple Inc. has shut down
some elements of its effort to
build an electric self-driving
car and laid off several dozen
employees, according to a per-
son familiar with the matter.
The changes to Apple’s se-
cretive initiative, code-named
Project Titan, were imple-
reinvent the automobile. Al-
phabet Inc., Google’s parent
company, has experimented
with self-driving cars for
years, racking up more than
1.5 million test miles. Tesla
Motors Inc. is already on the
road with a feature called Au-
topilot, a step toward self-
driving cars, that uses cam-
eras, radar and sensors to
BY JEFFREY A. TRACHTENBERG buy with a Time Inc. franchise,
such as a package related to
The coming special “The the Sports Illustrated swimsuit
Children of 9/11: 15 Years issue.
Later” focuses on five teenag- Ms. Tucker said her clients
ers born after the terror at- would want viewership guar-
tacks who never knew their fa- antees and a low price to get
MICHAEL NAGLE/BLOOMBERG NEWS

mented by Bob Mansfield, a
veteran Apple executive who
took over the project in July,
the person said Friday. Project
Titan’s overall head count re-
mains essentially the same,
the person said.
Apple has never publicly ac-
knowledged that it is working
on a car, but people familiar
with the matter have previ-
ously said the effort includes
hundreds of employees includ-
ing software and automotive
experts, as well as autono-
mous-driving technology engi-
neers.
The effort has hit stumbling
blocks, however. Earlier this
year, the project’s leader,
Steve Zadesky, left the com-
pany, citing personal reasons.
Mr. Mansfield succeeded Mr.
Zadesky.
Details on which Project Ti-
tan efforts were closed
weren’t available. Bloomberg
reported in July that Apple
had shifted to prioritize devel-
opment of an autonomous-
driving system. News of the
layoffs was first reported by
the New York Times.
Apple’s effort to build a car,
first revealed in early 2015,
pits it against a competitive
pack of companies looking to
steer the vehicle and adjust its
speed.
Uber Technologies Inc. said
last month that it would ex-
periment with ferrying cus-
tomers around Pittsburgh in
self-driving taxis, although the
experimental cars would oper-
ate with one Uber employee in
the driver’s seat in case of a
glitch.
Traditional auto makers such
as General Motors Inc., Ford
Motor Co., and BMW AG are all
working toward driverless cars.
Ford said in August that it
plans to release within the next
five years a fully autonomous
vehicle—one without a steering
wheel or pedals. BMW said in
July that it was teaming with
Intel Corp. and Mobileye NV to
have a self-driving car in pro-
duction by 2021.
Apple’s steps toward build-
ing a car sent fears through the
automotive industry that the
iPhone maker might one day
outshine them like it did cell-
phone makers. Tesla Chief Ex-
ecutive Officer Elon Musk com-
plained to Bloomberg
Businessweek in early 2015 that
Apple was trying to hire away
his automotive employees.
—Tim Higgins
contributed to this article.
thers. But viewers won’t find started until the scale of the
the almost hourlong program venture and interest among
on any of the major television viewers is proven out.
networks. “The question is whether
Instead, it will make its de- their programming will be
but as part of the Tuesday compelling enough for people
launch of the People/Enter- to be incentivized to go there,”
tainment Weekly Network, Ms. Tucker said. “This isn’t the
Time Inc.’s advertising-sup- same as people going to Net-
ported, streaming video ser- Time Inc. now produces most of its video lineup in-house. Above, flix, where there is must-see
vice. the company’s headquarters in New York last year. programming.”
The channel, which will be The People/Entertainment
available as an app and which will be available to market where dozens of digital Weekly Network has a broad
streaming service on popular watch live or on demand, will video services—from Sony Pic- assortment of launch partners,
web-connected devices and on focus on celebrities, human-in- tures’ Crackle, home of “Come- including Roku, Google’s media
People’s website, represents terest stories, coverage of such dians in Cars Getting Coffee,” streamer Chromecast, Apple
Time Inc.’s latest bet on digital entertainment franchises as to anime-centric Crunchyroll TV, Amazon Fire TV, Comcast
advertising. As print ad-page “Game of Thrones” and “Star and Verizon’s free mobile Corp.’s Xfinity X1 set-top boxes
sales continue to decline, the Wars,” and live events, includ- video app go90—are compet- and the Xfinity TV app and
launch represents an opportu- ing the coming Emmy Awards. ing for viewers (especially website, and Pluto TV, the ad-
nity for the magazine pub- It will live stream 24/7 with younger consumers) and a supported online TV service.
lisher to diversify by gaining five hours of original program- slice of the advertising pie. “Much like the CD was an
audience and scale in the fast- ming a week and syndicated Spending in the U.S. on dig- overpriced bundle of things,
growing video advertising shows from its websites and ital video advertising is ex- people don’t want traditional
business. Time Inc. archives. pected to hit $28.1 billion in TV,” said Ken Parks, the execu-
“This is the new frontier,” New series include “Binge- 2020, up from $9.9 billion in tive chairman of Pluto TV and
said Rich Battista, the veteran Worthy,” a program in which 2016, according to estimates the former chief content offi-
TV and digital executive re- hosts Jessica Shaw and Touré from financial-services firm cer for Spotify.
cently promoted to president discuss the hottest shows on Cowen & Co. Time Inc. is expecting the
of brands at Time Inc. “We’re TV. Time Inc. now produces Leslie Tucker, the media di- new network to become a des-
launching it in a new world most of its video lineup in- rector for the Richards Group tination, where consumers
and a new ecosystem where house but is in discussions to Inc., an independent Dallas- seek out its original content, at
the future of long-form video acquire programming from based advertising agency, said the same time many media
is and where consumption outside producers. she might be interested in the companies are focusing on dis-
habits are going and where ad- Time Inc. is wagering its new network if it is included tributing their videos as
vertisers are going.” premium lifestyle program- as an incremental charge to widely as possible on Facebook
The free video service, ming can break into a crowded marketers as part of a larger and YouTube.

GENERAL MOTORS can detect if a driver is dozing building Co., a person with direct
Business New Tech to Monitor off or not watching the road,
and uses audible and visual
knowledge of the matter said
Friday. “It’s down to Fincantieri
Watch Driver’s Attentiveness alerts to grab the person’s at- and Damen,” the person said. “If
DYLAN THOMAS FOR THE WALL STREET JOURNAL

TESCO
Three Ex-Executives
Charged With Fraud
The U.K.’s Serious Fraud Of-
fice has charged three former
Tesco PLC executives with false
accounting and abusing their po-
sitions, the first charges dis-
closed by the office in its probe
of Britain’s biggest grocer.
The SFO opened a criminal in-
vestigation into Tesco in late
2014 after the retailer said it
had overstated its profit by £263
million ($349 million) due to
Customers in a Tesco grocery store in Watford, England.
questionable accounting practices
that included the early booking
of income. The SFO said its in-
vestigation into Tesco continues.
The SFO has charged former
U.K. finance director Carl Rog-
berg, former U.K. managing direc-
Future buyers of General Mo-
tors Co.’s semiautonomous driv-
ing system will have to be com-
fortable with Big Brother sitting
in the passenger seat.
The nation’s largest auto
maker aims to release its Super
Cruise on a Cadillac next year, and
will feature eye tracking in the
cabin, a first for a U.S. car maker.
GM will duel with Volvo Car
Corp.’s Pilot Assist and Tesla
Motors Inc.’s Autopilot, both
driver-assistance systems that
tor Chris Bush and former U.K. can control a moving vehicle.
food commercial director John While Tesla’s Autopilot requires
Scouler with one count of abuse periodic handling by the driver,
of position and one count of GM’s system is expected to go a
false accounting. The three men step further in monitoring the
must appear in court on Sept. 22. alertness of human drivers.
—Saabira Chaudhuri GM’s Super Cruise software
tention. If the alerts don’t work, there is a deal, it could be an-
a representative with the auto nounced as early as this month.”
maker’s OnStar information ser- STX France, which specializes
vice will activate the vehicle’s in- in building cruise ships, is the
tercom and communicate with only profitable unit of STX, with
the car’s operator. If the driver a full order book for the next
doesn’t respond, the car will pull seven years. STX, which filed for
over on the road and stop. receivership in May, is a unit of
—Gautham Nagesh conglomerate STX Corp. STX is
active in shipping, construction
STX FRANCE and energy around the world.
The sale of the French yard is
Italian, Dutch Firms a key part of a restructuring
Eye Shipbuilder plan by STX, which also includes
Italian shipbuilding giant Fin- cutting by 35% its 2,090 staff in
cantieri SpA and Dutch counter- Korea by the end of September.
part Damen Shipyards Group are The company’s creditors will de-
in the running to buy STX cide in October whether to ac-
France, which has been put on cept the plan. If it is rejected,
the block by Korean debt-ridden the company will be liquidated.
parent STX Offshore & Ship- —Costas Paris
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Monday, September 12, 2016 | B5

FINANCE & MARKETS

At Last, Spitzer v. Greenberg At Wells, a Solid
Image Is At Risk
Eleven years after BY EMILY GLAZER
former AIG Chief Falling Fast
A $185 million fine is small
Executive Maurice change for Wells Fargo & Co.,
The KBW Bank Index sank Friday,
but Wells Fargo fell further
‘Hank’ Greenberg was which had profit last year of
1%
almost $23 billion. But the
sued for financial reputational blow from claims KBW Bank Index
fraud, the case is of “widespread illegal” sales 0 ▼1.0%
practices could prove costly.
finally set to The San Francisco bank,
go to trial. with its folksy stagecoach logo, –1
has positioned itself as a solid,
Main Street lender that
avoided the excesses of the fi- –2
nancial crisis and other mis- Wells Fargo
steps on Wall Street. That im- ▼2.4%
–3
age is in danger now of being
challenged by disclosures of 9:30 10 11 noon 1 2 3 4
improper account activity by Note: one-minute intervals; all times EDT
employees unveiled in an en- Source: FactSet
FROM LEFT: J. KEMPIN/FILMMAGIC; CHIP EAST/REUTERS

forcement action the bank en- THE WALL STREET JOURNAL.

Former New York
Attorney General
Eliot Spitzer
BY LESLIE SCISM
The year was 2005. The
iPhone didn’t exist yet. New
York’s attorney general was El-
iot Spitzer. And he filed a fi-
nancial-fraud lawsuit against
Maurice “Hank” Greenberg,
chief executive of American
International Group Inc., then
one of the most powerful fi-
nancial firms in the world.
This week, the case—span-
ning three attorneys general,
the resignation of Mr. Green-
berg from AIG and a nearly
$185 billion government bail-
out of the firm under his suc-
cessors—is finally set to go to
trial.
In the civil lawsuit, the gov-
ernment seeks to prove Mr.
Greenberg, now 91 years old,
approved two financial maneu-
vers between 2000 and 2003
aimed at duping shareholders
into believing AIG’s core oper-
ating results were better than
they were. If found liable, he
may be ordered to hand over
millions of dollars from past
bonuses and barred from be-
coming an officer of a publicly
traded company.
Over his nearly 40 years of
running AIG, Mr. Greenberg
rose to prominence by trans-
forming the company from an
obscure insurer into a global
behemoth.
But in the past decade,
much of his time has been
spent trying to defend his rep-
utation in the wake of Mr.
Spitzer’s challenge.
The trial is to kick off Tues-
cial filings.
The lawsuit details two al-
leged sham transactions.
In one, authorities allege
that Mr. Greenberg initiated a
transaction with Berkshire
Hathaway Inc.’s General Re
unit to help AIG improperly
boost its claims reserves in
2000 and 2001 by about $500
million, misleading investors
about the amount of losses
that AIG could absorb. Berk-
shire isn’t named as a defen-
dant in the lawsuit.
The other deal allegedly
was designed to mischaracter-
ize underwriting losses in an
auto-warranty business as cap-
ital losses. Insurance investors
closely watch underwriting re-
sults as core to a company’s
operations.
Mr. Greenberg rose to prominence by
transforming AIG into a global behemoth.
Former AIG Chief Financial
Officer Howard Smith, 71 years
old, also is named as a defen-
dant.
Mr. Greenberg and Mr.
Smith could be forced to pay
back about $25 million in total
bonuses, plus interest, in the
case. Mr. Greenberg’s legal ex-
penses are expected to exceed
$25 million by the time the
trial is completed, according to
his attorney.
In 2013, a federal court ap-
proved a settlement of class-
action litigation against Mr.
Greenberg brought by AIG
tion, including two mediations,
weren’t successful, a person
familiar with the matter said,
in part because the initial
claim was so high.
In the initial years of the
case, the state had sought
$6 billion in damages.
“Mr. Greenberg has always
been prepared to discuss a
reasonable resolution of this
case,” said David Boies, the
lawyer who heads Mr. Green-
berg’s defense.
Mr. Greenberg has main-
tained the lawsuit was wrongly
brought by Mr. Spitzer as a
steppingstone for his success-
ful run for governor.
Two successors to Mr.
Spitzer continued the case,
however, which is being ar-
gued under the Martin Act—a
95-year-old statute that has
been a popular tool in civil and
criminal cases.
Its popularity stems from
the fact that it doesn’t require
the showing of a suspect’s in-
tent to defraud, which has
been criticized by some for be-
ing too low a standard. Other
critics have railed against the
statute for its relatively lenient
penalties.
Despite the criticism, the
law has been used to combat
fraud on Wall Street.
The case involving Mr.
Greenberg became controver-
Former AIG Chief
Executive Maurice
“Hank” Greenberg
him following the op-ed, which
Mr. Spitzer has denied.
In the years following the
case, Mr. Spitzer, a Democrat,
was felled by a sex scandal.
He stepped down in March
2008 as the state’s 54th gover-
nor, less than two years after
taking office.
Mr. Greenberg is prepared
to take the stand in his own
defense, say his attorneys.
“For years, Mr. Greenberg
has financed a relentless cam-
paign to dodge accountability”
in the case, current New York
Attorney General Eric Schnei-
derman said Thursday. “But af-
ter a decade of avoiding trial,
Mr. Greenberg will now face
the same justice system as
anyone else. We look forward
to proving our claims in open
court...No one, no matter how
rich or powerful, can evade re-
sponsibility for misconduct.”
Mr. Boies said that his team
has used legitimate legal op-
tions to seek to get the state’s
case thrown out.
The trial will feature a large
volume of testimony intro-
duced through depositions
given that many of the wit-
nesses have retired or left the
state. Under court rules, wit-
nesses who live outside the
state can’t be compelled to ap-
pear in person.
In one instance, the two
sides have jointly compiled
about 14 hours of videotaped
testimony by a former execu-
tive of the General Re unit.
“It’s going to be difficult to
go back and try to recount ex-
tered into Thursday.
In that action, the bank was
fined and had to submit to a
consent order to settle civil
claims brought by the Office of
the Comptroller of the Cur-
rency, the Consumer Financial
Protection Bureau and the Los
Angeles City Attorney’s office.
In other high-profile en-
forcement cases such as multi-
billion-dollar settlements re-
lated to mortgage under–
writing and the sales of
mortgage bonds, banks often
have been able to use an
agreement to put bad behavior
behind them and move on. But
in the case of Wells Fargo,
banking specialists, analysts
and investors say the damage
may be just starting.
“This scandal, easy to un-
derstand and not nearly as
complex as mortgage-backed
securities, seriously under-
mines Wells Fargo’s Main
Street image,” wrote Ian Katz,
director at research firm Capi-
tal Alpha Partners LLC.
In a release, the bank said
the settlement with regulators
was reached “consistent with
our commitment to customers
and in the interest of putting
this matter behind us.”
Even so, public opprobrium
on the internet and social me-
dia had the bank in damage
control mode. Jim Smith, head
of virtual channels for Wells
Fargo, wrote in a message to
employees Thursday the bank
had a robust communications
plan to support staff. “The
next few days will likely be
very busy days…during this
time, we take it one interac-
tion at a time—one customer
at a time,” Mr. Smith said in
the message reviewed by The
Wall Street Journal.
Wells Fargo’s shares fell
2.4% Friday, a worse drubbing
than other bank stocks in a
down day for markets overall.
An immediate worry for in-
vestors is how customers react
to news of how employees be-
haved. Regulators, for in-
stance, said that Wells Fargo
employees, often chasing sales
goals and bonuses, created
fake accounts for customers,
invented personal identifica-
tion numbers and moved funds
between accounts without au-
thorization.
Those allegations could hurt
the bank’s ability to attract
new customers, could prompt
current customers to look for
another bank and affect the
amount of products and ser-
vices Wells Fargo is able to sell
to new or existing customers,
said Allen Tischler, a senior
vice president at Moody’s who
focuses on U.S. banks.
A curtailment of the ability
to cross-sell products to cus-
tomers could crimp profits.
The community banking seg-
ment at Wells Fargo, which
handles most retail-banking
products and services, gener-
ated $12.2 billion in revenue in
the second quarter and net in-
come of $3.2 billion.
That was equal to 55% and
57%, respectively, of revenue
and net income for the bank as
a whole.
ERIC THAYER/BLOOMBERG NEWS

day with opening statements.
The case is a vestige of the
early 2000s, when Enron Corp.
and other once-prominent
companies were embroiled in
accounting controversies,
prompting a wave of crack-
downs as authorities looked at
the minutiae of complex finan-
shareholders, and, in 2009, Mr.
Greenberg resolved a Securi-
ties and Exchange Commission
complaint related to the same
matters, neither admitting nor
denying wrongdoing.
Mr. Greenberg was amena-
ble to settling this case, too,
but attempts to reach a resolu-
sial quickly.
Within days of the suit’s fil-
ing in 2005, former Goldman
Sachs Group Inc. Chairman
John Whitehead defended Mr.
Greenberg in the editorial
pages of The Wall Street Jour-
nal. Mr. Whitehead later
claimed Mr. Spitzer threatened
actly what happened” some 15
years ago, Mr. Boies said.
“These were two out of thou-
sands of transactions [for Mr.
Greenberg as CEO]. His mem-
ory at 91 is a lot better than
mine at 75, but nobody’s mem-
ory can really remember all of
the details.” Wells Fargo had avoided the excesses of the financial crisis.

U.S. Court Dismisses All Ears Tuned to the Fed Chinese

Fannie Profit Lawsuit BY STEVEN RUSSOLILLO Loose Lips President Eric Rosengren
Lender’s
BY JOHN CARNEY

Investors in Fannie Mae

and Freddie Mac suffered an-
other setback in their attempt
to sue the federal government
over its claim to the profits of
mortgage-finance giants.
A judge in the U.S. District
Court for the Eastern District
of Kentucky on Friday dis-
missed claims against the Fed-
eral Housing Finance Agency
and the Department of Trea-
sury over a 2012 change to
Fannie’s and Freddie’s bailout
agreements in which they
must send most profits to the
U.S. Treasury, an arrangement
known as the net-worth sweep.
The lawsuit was filed by an
investor who contended her
investments in Fannie and
Freddie were damaged. Similar
lawsuits have been dismissed
by federal courts in Iowa and
Washington, D.C. A federal
court in Virginia last month
dismissed a lawsuit brought by
an investor seeking to examine
the records of the companies.
U.S. District Judge Karen
Caldwell said the Housing and
Economic Recovery Act, or
HERA, barred courts from in-
terfering in the FHFA’s author-
ity as conservator of Fannie
and Freddie. Judge Caldwell
ruled federal law didn’t re-
quire the FHFA to restore the
firms to a “sound and solvent
condition” or to “preserve and
conserve” their assets. The
provisions in HERA setting
forth the power to restore the
companies and preserve their
assets were permissive, not
mandatory, she ruled.
The opinion also concluded
that the FHFA is permitted by
the law to begin winding down
Fannie and Freddie when act-
ing as a conservator. The
plaintiff had argued that the
FHFA could do this only if ap-
pointed as a receiver.
The judge said the plaintiff
lacked standing to argue the
Treasury Department coerced
the FHFA into agreeing to the
net-worth sweep, which they
had claimed violated a provi-
sion of the law that says when
the FHFA acts as conservator
it “shall not be subject to the
direction or supervision of any
other agency.” Since that pro-
vision exists to protect the
FHFA’s independence, it can’t
be used by investors to sue the
FHA or Treasury, Judge
Caldwell wrote.
Talk about a reality
check.
Conflicting signals from
the Federal Reserve on the
timing of the next rate in-
crease jolted fi-
AHEAD nancial mar-
OF THE kets on Friday.
TAPE Soon, though,
investors may
be pining for
more of the Fedspeak that
they have been cursing.
While odds are still good
that the Fed will hold rates
steady at next week’s policy
meeting, as has been ex-
pected all summer, recent
comments from some Fed of-
ficials have sown doubts.
Tuesday marks the onset of
a one-week quiet period
ahead of the Federal Open
Market Committee’s Sept.
20-21 meeting.
The information vacuum
will be especially irritating if
a once-reliable dove changes
her tune before it begins.
Fed Governor Lael Brain-
ard’s remarks slated for
Monday afternoon will be
followed closely. The talk has
exaggerated importance be-
cause most traders only be-
S&P 500 daily percentage
changes
1%
0
–1
–2
–3
Aug.
Source: FactSet
THE WALL STREET JOURNAL.
came aware of it last Thurs-
day, adding to Friday’s
market anxiety that saw a
nearly 400-point plunge in
the Dow Jones Industrial Av-
erage.
An about-face by Ms.
Brainard would not only
raise eyebrows but also
could be “an important op-
portunity for the Fed to raise
market expectations” ahead
of the September meeting,
said Peter Hooper, chief
economist at Deutsche Bank
Securities. A hawkish speech
from her “would carry a lot
of credibility,” he said.
Last week, Boston Fed
said “a reasonable case can
be made” for tightening in-
terest rates to avoid over-
heating the economy.
And Fed Governor Daniel
Tarullo said Friday on
CNBC that he wouldn’t rule
out the possibility of a rate
increase.
But this is a good time to
remember that talk is cheap.
Jon Faust, a former Federal
Reserve adviser who is now
Sept. director of the Center for Fi-
nancial Economics at Johns
Hopkins University, suggests
viewing these Fed speeches
with caution, particularly as
policy changes draw closer.
“Only [Fed Chairwoman
Janet] Yellen is empowered
to speak for the Committee,”
Mr. Faust wrote recently.
“Whenever anyone else
speaks you need to ask your-
self a question: Are they ex-
plaining the committee or
lobbying it?”
One useful and counterin-
tuitive aspect of Fedspeak is
that it acts as a trial balloon,
intentionally or not. Judging
from Friday’s reaction, at
least, the prospect of tighter
policy went down like a lead
one.
IPO Gets
5 Backers
HONG KONG—Postal Sav-
ings Bank of China Corp. is
expected to have five corner-
stone investors for its coming
initial public offering in Hong
Kong, according to people fa-
miliar with the matter.
By Julie Steinberg,
Kane Wu
and Alec Macfarlane
The people said the corner-
stone investors—those that
agree to buy stocks at the of-
fering price and hold them for
a set period—are China State
Shipbuilding Corp., Shanghai
International Port (Group)
Co., Chinese conglomerate
HNA Group, State Grid Corp.,
with $300 million and private
bank Edmond de Rothschild
Group.
China’s sixth-largest lender
will kick off global promotions
on Tuesday and price its IPO
on Sept. 20 in New York, ac-
cording to people familiar with
the plans.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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B6 | Monday, September 12, 2016 THE WALL STREET JOURNAL.

MARKETS DIGEST Data as of Friday, September 9, 2016

Nikkei 225 Index STOXX 600 Index S&P 500 Index 4 p.m. New York time
Last Year ago
16965.76 s 6.99, or 0.04% Year-to-date t 10.86% 345.52 t 3.80, or 1.09% Year-to-date t 5.55% 2127.81 t 53.49, or 2.45% Trailing P/E ratio * 24.86 20.77
High, low, open and close for each 52-wk high/low20012.40 14952.02 High, low, open and close for each 52-wk high/low 385.43 303.58 High, low, open and close for each P/E estimate * 18.52 16.42
trading day of the past three months. All-time high 38915.87 12/29/89 trading day of the past three months. All-time high 414.06 4/15/15 trading day of the past three months. Dividend yield 2.12 2.20
All-time high: 2190.15, 08/15/16

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

17500 360 2200

65-day moving average 17000 65-day moving average 350 2160

16500 340 2120

16000 330 2080

Session high
DOWN UP
15500 320 65-day moving average 2040
t

Session open Close

Close Open
t

15000 310 2000

Session low
Bars measure the point change from session's open
14500 300 1960
June July Aug. Sept. June July Aug. Sept. June July Aug. Sept.

International Stock Indexes Data as of 4 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 3 p.m. ET
World The Global Dow 2442.70 –47.13 –1.89 2047.44 • 2489.83 4.5 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1707.27 –25.65 –1.48 1491.52 • 1779.25 –0.5 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 909.32 –17.97 –1.94 688.52 • 927.29 14.5 3.250 Australia 2 1.560 77.0 74.2 77.0 113.2 1.516 1.480 1.877
4.250 10 1.973 29.8 27.4 39.3 54.7 1.871 1.944 2.748
Americas DJ Americas 514.56 –13.56 –2.57 433.35 • 529.33 5.6
1.250 Belgium 2 -135.2 -134.4 -132.8 -92.3 -0.570 -0.618 -0.178
-0.562
Brazil Sao Paulo Bovespa 57999.73 –2231.92 –3.71 37497.48 • 60231.65 33.8
1.000 10 0.245 -143.0 -143.3 -141.2 -117.9 0.164 0.139 1.022
Canada S&P/TSX Comp 14540.00 –263.26 –1.78 11843.11 • 14813.02 11.8
1.000 France 2 -0.577 -136.7 -135.7 -127.8 -90.2 -0.584 -0.568 -0.157
Mexico IPC All-Share 46459.17 –957.80 –2.02 40265.37 • 48694.90 8.1
0.500 10 0.243 -143.2 -142.9 -141.1 -117.5 0.169 0.140 1.026
Chile Santiago IPSA 3188.04 –10.52 –0.33 2759.77 • 3251.19 8.3
0.000 Germany 2 -0.629 -141.9 -141.4 -132.9 -96.7 -0.640 -0.619 -0.222
U.S. DJIA 18085.45 –394.46 –2.13 15660.18 • 18636.05 3.8
0.000 10 0.013 -166.2 -165.6 -162.8 -150.2 -0.059 -0.077 0.698
Nasdaq Composite 5125.91 –133.57 –2.54 4266.84 • 5283.93 2.4
0.250 Italy 2 -0.070 -86.0 -84.9 -81.3 -63.4 -0.075 -0.103 0.111
S&P 500 2127.81 –53.49 –2.45 1829.08 • 2190.15 4.1
1.600 10 1.251 -42.4 -44.4 -43.7 -34.7 1.153 1.114 1.854
CBOE Volatility 17.50 4.99 39.89 11.34 • 28.14 –3.9
0.100 Japan 2 -0.211 -100.1 -96.9 -89.5 -73.1 -0.195 -0.185 0.014
EMEA Stoxx Europe 600 345.52 –3.80 –1.09 303.58 • 385.43 –5.5 0.100 10 -0.024 -169.9 -163.3 -163.0 -183.7 -0.036 -0.079 0.364
Stoxx Europe 50 2876.75 –27.05 –0.93 2566.26 • 3293.71 –7.2 4.000 Netherlands 2 -0.593 -138.4 -137.0 -131.5 -95.7 -0.596 -0.605 -0.212
Austria ATX 2394.53 –18.92 –0.78 1957.05 • 2501.60 –0.1 0.500 10 0.121 -155.4 -155.1 -153.8 -131.3 0.046 0.013 0.888
Belgium Bel-20 3582.28 –38.57 –1.07 3130.76 • 3760.89 –3.2 4.450 Portugal 2 0.488 -30.3 -29.2 -33.6 -45.1 0.482 0.374 0.294
France CAC 40 4491.40 –50.80 –1.12 3896.71 • 4984.15 –3.1 2.875 10 3.152 147.8 146.7 123.5 31.7 3.064 2.786 2.517
Germany DAX 10573.44 –101.85 –0.95 8752.87 • 11382.23 –1.6 0.250 Spain 2 -0.129 -91.9 -92.3 -88.7 -64.7 -0.149 -0.177 0.098
Greece ATG 566.80 0.22 0.04 440.88 • 727.38 –10.2 1.950 10 1.084 -59.1 -61.2 -55.8 -12.6 0.986 0.993 2.075
Hungary BUX 28445.83 –59.70 –0.21 20610.76 • 28642.84 18.9 4.250 Sweden 2 -0.596 -138.6 -138.1 -137.5 -120.9 -0.607 -0.665 -0.464
Israel Tel Aviv 1458.46 … Closed 1382.34 • 1595.26 –4.6 1.000 10 0.281 -139.4 -141.4 -143.1 -154.8 0.184 0.119 0.653
Italy FTSE MIB 17156.48 –219.25 –1.26 15103.58 • 22736.86 –19.9 1.250 U.K. 2 0.178 -61.2 -62.8 -61.0 -10.5 0.146 0.100 0.640
Netherlands AEX 452.88 –6.62 –1.44 382.61 • 472.24 2.5 2.000 10 0.768 -90.7 -93.6 -96.6 -44.0 0.661 0.585 1.761
Poland WIG 47326.14 –803.01 –1.67 42152.70 • 51801.58 1.8 0.750 U.S. 2 0.790 ... ... ... ... 0.774 0.710 0.745
Russia RTS Index 987.87 –25.24 –2.49 628.41 • 1013.11 30.5 1.500 10 1.675 ... ... ... ... 1.597 1.551 2.201
Spain IBEX 35 9025.50 –75.60 –0.83 7645.50 • 10478.30 –5.4
Sweden SX All Share 512.00 –4.86 –0.94 435.21 • 528.37 1.4 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 8264.13 –51.07 –0.61 7496.62 • 9016.56 –6.3 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 53347.30 97.05 0.18 46282.02 • 54609.01 5.2 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 9/8/2016
Turkey BIST 100 77053.54 –789.95 –1.01 68567.89 • 86343.65 7.4
One-Day Change Year Year
U.K. FTSE 100 6776.95 –81.75 –1.19 5536.97 • 6941.19 8.6 Commodity Exchange Last price Net Percentage high low
340.00 1.50 0.44% 449.00 314.75
Asia-Pacific DJ Asia-Pacific TSM 1477.49 –17.54 –1.17 1190.45 • 1496.02 6.3 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 978.00 1.25 0.13 1,186.25 868.00
Australia S&P/ASX 200 5339.20 –46.60 –0.87 4765.30 • 5587.40 0.8
Wheat (cents/bu.)
CBOT
CBOT 402.50 -3.50 -0.86% 551.50 386.75
China Shanghai Composite 3078.85 –17.10 –0.55 2655.66 • 3651.77 –13.0
Live cattle (cents/lb.) CME 105.150 2.550 2.49 125.500 101.275
Hong Kong Hang Seng 24099.70 180.36 0.75 18319.58 • 24099.70 10.0
Cocoa ($/ton) ICE-US 2,752 -133 -4.61 3,216 2,728
India S&P BSE Sensex 28797.25 –248.03 –0.85 22951.83 • 29045.28 10.3
Coffee (cents/lb.) ICE-US 151.50 -3.40 -2.19 157.65 119.40
Japan Nikkei Stock Avg 16965.76 6.99 0.04 14952.02 • 20012.40 –10.9
Sugar (cents/lb.) ICE-US 20.69 -0.19 -0.91 21.37 13.48
Singapore Straits Times 2873.33 –21.15 –0.73 2532.70 • 3083.07 –0.3
Cotton (cents/lb.) ICE-US 69.18 -0.11 -0.16 77.98 54.19
South Korea Kospi 2037.87 –25.86 –1.25 1835.28 • 2066.53 3.9 Robusta coffee ($/ton) ICE-EU 1912.00 -15.00 -0.78 1,932.00 1,423.00
Taiwan Weighted 9164.88 –98.01 –1.06 7664.01 • 9262.89 9.9
Copper ($/lb.) COMEX 2.0915 -0.0085 -0.40 2.3290 1.9710
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1332.50 -9.10 -0.68 1,384.40 1,066.00
Silver ($/troy oz.) COMEX 19.125 -0.553 -2.81 21.250 13.865
Currencies London close on Sept. 9 Aluminum ($/mt)* LME 1,585.50 -13.50 -0.84 1,700.50 1,451.50
Tin ($/mt)* LME 19,525.00 -25.00 -0.13 19,625.00 13,225.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Fri YTDchg Copper ($/mt)* LME 4,636.00 -25.00 -0.54 5,070.50 4,320.50
Country/currency in US$ per US$ (%) Lead ($/mt)* LME 1,900.00 -38.00 -1.96 1,967.00 1,598.00
20%
Europe Zinc ($/mt)* LME 2,307.00 -32.00 -1.37 2,364.00 1,467.00
Bulgaria lev 0.5736 1.7435 –3.1 Nickel ($/mt)* LME 10,340.00 115.00 1.12 10,950.00 7,750.00
10
WSJ Dollar index Croatia kuna 0.1499 6.670 –4.9 Rubber (Y.01/ton) TCE 157.60 -1.20 -0.76 159.60 149.50
s sYen Euro zone euro 1.1211 0.8920 –3.1
0 Palm oil (MYR/mt) MDEX 2640.00 31.00 1.19 2,669.00 2,171.00
Czech Rep. koruna-b 0.0415 24.106 –3.1
s Euro Denmark krone 0.1506 6.6398 –3.4 Crude oil ($/bbl.) NYMEX 45.85 -1.77 -3.72 53.02 33.28
–10 0.003626 275.75 –5.1
Hungary forint NY Harbor ULSD ($/gal.) NYMEX 1.4536 -0.0483 -3.22 1.6112 1.0272
Iceland krona 0.008730 114.55 –12.0 RBOB gasoline ($/gal.) NYMEX 1.3655 -0.0510 -3.60 1.5121 0.9930
–20 Norway krone 0.1210 8.2624 –6.6
0.2586 3.8663 –1.5
Natural gas ($/mmBtu) NYMEX 2.887 -0.030 -1.03 3.1480 2.1680
2015 2016 Poland zloty
Russia ruble-d 0.01545 64.728 –10.0 Brent crude ($/bbl.) ICE-EU 48.48 -1.95 -3.87 54.12 33.05
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1176 8.5025 0.7 Gas oil ($/ton) ICE-EU 421.00 -12.75 -2.94 477.50 298.00
Fri Fri
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0232 0.9773 –2.5
Turkey lira 0.3363 2.9737 1.9 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1289 7.7572 0.1
Ukraine hryvnia 0.0375 26.6860 11.2
Argentina peso-a 0.0661 15.1255 16.9
India rupee
Indonesia rupiah
0.0150
0.0000759
66.8750 1.0
13175 –4.8
U.K. pound 1.3261 0.7541 11.1 Cross rates London close on Sep 9
Brazil real 0.3063 3.2643 –17.6 Middle East/Africa
Japan yen 0.009722 102.86 –14.5
Canada dollar 0.7674 1.3032 –5.8 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002953 338.66 –0.03 Bahrain dinar 2.6524 0.3770 –0.02
Chile peso 0.001490 671.30 –5.3 Australia 1.3242 1.7561 1.3548 0.0129 0.1707 1.4843 1.0161 ...
Macau pataca 0.1247 8.0201 0.2 Egypt pound-a 0.1126 8.8836 13.5
Colombia peso 0.0003448 2900.15 –8.6 Canada 1.3032 1.7281 1.3335 0.0127 0.1680 1.4607 ... 0.9842
Malaysia ringgit-c 0.2436 4.1045 –4.6 Israel shekel 0.2658 3.7618 –3.4
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.7328 1.3646 –6.8 Kuwait dinar 3.3177 0.3014 –0.7 Euro 0.8920 1.1830 0.9127 0.0087 0.1150 ... 0.6845 0.6738
Mexico peso-a 0.0530 18.8507 9.6
Pakistan rupee 0.0096 104.302 –0.6 Oman sul rial 2.5976 0.3850 0.003 Hong Kong 7.7572 10.2860 7.9373 0.0754 ... 8.6946 5.9526 5.8582
Peru sol 0.2950 3.3900 –0.7
Philippines peso 0.0211 47.416 1.2 Qatar rial 0.2747 3.641 –0.05 Japan 102.8560 136.3800 105.2300 ... 13.2590 115.2800 78.9200 77.6700
Uruguay peso-e 0.0342 29.280 –2.1
Singapore dollar 0.7357 1.3592 –4.2 Saudi Arabia riyal 0.2666 3.7510 –0.1 0.9773 1.2961 ... 0.0095 0.1260 1.0957 0.7499 0.7380
Venezuela bolivar 0.100150 9.99 58.4 Switzerland
South Korea won 0.0009026 1107.88 –5.8 South Africa rand 0.0694 14.4176 –6.8
U.K. 0.7541 ... 0.7715 0.0073 0.0972 0.8455 0.5786 0.5695
Asia-Pacific Sri Lanka rupee 0.0068573 145.83 1.1 Close Net Chg % Chg YTD % Chg
0.7552 1.3242 –3.5 Taiwan dollar 0.03167 31.580 –4.1 U.S. ... 1.3261 1.0232 0.0097 0.1289 1.1211 0.7674 0.7552
Australia dollar WSJ Dollar Index 86.59 0.49 0.57 –3.98
China yuan 0.1493 6.6984 3.2 Thailand baht 0.02869 34.850 –3.3 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 0.52689% 0.20655% ¥ TakedaPharm 4502 4710.00 0.64 -22.34 CHF RocheHldgctf ROG 240.00 -1.11 -13.17 Last: 143.87 t 1.85, or 1.27% YTD s 5.6%
Three month 0.85222 0.33720 Asia Titans HK$ TencentHoldings 0700 213.80 -0.56 40.01 £ RoyDtchShell A RDSA 1880.00 -1.80 23.20
145
Six month 1.25000 0.54070 51.30 0.79 10.09 78.85 High
HK$ AIAGroup 1299 ¥ TokioMarineHldg 8766 4039.00 -1.32 -14.28 € SAP SAP -1.50 7.45
One year 1.55678 0.85555 1578.00 -0.50 -8.87 70.35
¥ AstellasPharma 4503 ¥ ToyotaMtr 7203 6171.00 -0.31 -17.59 € Sanofi SAN -1.15 -10.50 Close 140
Euro Libor AU$ AustNZBk ANZ 26.76 -1.18 -4.19 AU$ Wesfarmers WES 42.65 -1.07 2.50 € SchneiderElectric SU 59.40 -2.37 13.01 Low 135
One month -0.37286% -0.11357% AU$ BHP BHP 20.78 2.57 16.35 AU$ WestpacBanking WBC 29.54 -1.63 -11.98 € Siemens SIE 104.80 -1.36 16.60 t
Three month -0.31871 -0.04286 HK$ BankofChina 3988 3.72 0.54 7.51 AU$ Woolworths WOW 22.85 -1.80 -6.73 € Telefonica TEF 9.73 -0.23 -4.95 130
Six month -0.20614 0.03129 HK$ CKHutchison 0001 102.30 0.83 -2.01 € Total FP 43.85 -1.33 8.41 50–day
125
One year -0.07686 0.14386 HK$ CNOOC 0883 9.69 0.62 20.07 Stoxx 50 CHF UBSGroup UBSG 14.47 1.62 -25.87
moving average
120
Euribor ¥ Canon 7751 3005.00 -0.50 -18.23 CHF ABB ABBN 21.87 -0.82 21.77 € Unilever UNA 41.03 -1.65 2.31
One month -0.36900% -0.10400% ¥ CentralJapanRwy 9022 17185 -1.26 -20.44 € ASMLHolding ASML 92.08 -0.63 11.54 £ Unilever ULVR 3530.00 -1.60 20.62 10 17 24 1 8 15 22 29 5 12 19 26 2 9
Three month -0.30100 -0.03800 HK$ ChinaConstructnBk 0939 6.10 1.16 14.88 € AXA CS 19.82 1.07 -21.42 € Vinci DG 67.28 -2.12 13.76 July Aug. Sept.
Six month -0.19800 0.03700 HK$ ChinaLifeInsurance 2628 21.40 4.14 -14.74 € AirLiquide AI 95.62 -1.59 -7.75 £ VodafoneGroup VOD 221.30 -0.72 0.14
One year -0.05700 0.15700 HK$ ChinaMobile 0941 98.00 1.82 12.00 € Allianz ALV 136.55 0.66 -16.51 CHF ZurichInsurance ZURN 258.00 0.39 -0.15
Yen Libor AU$ CmwlthBkAust CBA 70.87 -1.65 -17.14 € Anheuser Busch ABI 111.05 -1.29 -2.93
DJIA Stoxx 50
One month -0.07514% 0.05300% ¥ EastJapanRailway 9020 9061.00 -0.13 -20.86 £ AstraZeneca AZN 4819.00 -0.98 4.39
Last: 2876.75 t 27.05, or 0.93% YTD t 7.2%
Three month -0.03243 0.08714 ¥ Fanuc 6954 17250 0.67 -18.17 € BASF BAS 72.58 -1.57 2.63 $ AmericanExpress AXP 65.12 -1.69 -6.37
Six month -0.00150 0.12586 ¥ Hitachi 6501 489.90 -0.41 -29.15 € BNP Paribas BNP 47.93 0.22 -8.23 $ Apple AAPL 103.13 -2.26 -2.02 2925
One year 0.08700 0.23829 TW$ Hon Hai Precisn 2317 77.70 -1.02 92.33 £ BT Group BT.A 390.05 -1.18 -17.31 $ Boeing BA 128.53 -3.29 -11.11
$ Caterpillar CAT 80.79 -3.29 18.88 2850
Offer Bid ¥ HondaMotor 7267 3136.00 -0.98 -19.80 € BancoBilVizAr BBVA 5.70 -0.97 -14.65
KRW HyundaiMtr 005380 139500 0.36 -6.38 € BancoSantander SAN 4.20 -0.50 -7.83 $ Chevron CVX 101.27 -2.74 12.57 2775
Eurodollars
HK$ Ind&Comml 1398 5.06 ... 8.12 £ Barclays BARC 174.75 0.89 -20.17 $ CiscoSystems CSCO 30.85 -1.97 13.61
One month 0.6000% 0.5000%
$ CocaCola KO 42.27 -3.12 -1.61
2700
Three month 0.9500 0.8500 ¥ JapanTobacco 2914 3966.00 -0.48 -11.30 € Bayer BAYN 95.02 -1.22 -17.94
¥ KDDI 9433 3097.00 -1.02 -1.81 £ BP BP. 432.15 -1.14 22.08
$ Disney DIS 92.42 -1.77 -12.05 2625
Six month 1.3500 1.2500
¥ Mitsubishi 8058 2216.00 0.39 9.27 £ BritishAmTob BATS 4695.50 -1.82 24.52
$ DuPont DD 68.43 -1.79 2.75 2550
One year 1.6500 1.5500
546.20
$ ExxonMobil XOM 86.84 -2.48 11.40
Latest 52 wks ago ¥ MitsubishiUFJFin 8306 0.40 -27.86 CHF FinRichemont CFR 59.15 -1.66 -17.96 10 17 24 1 8 15 22 29 5 12 19 26 2 9
$ GenElec GE 30.11 -3.00 -3.34
¥ Mitsui 8031 1394.50 0.87 -3.53 € Daimler DAI 63.46 -0.45 -18.20 July Aug. Sept.
Prime rates $ GoldmanSachs GS 168.57 -1.80 -6.47
¥ Mizuho Fin 8411 180.10 0.33 -26.04 € DeutscheTelekom DTE 14.78 -1.60 -10.56
U.S. 3.50% 3.25% $ HomeDepot HD 127.74 -2.68 -3.41
¥ NTTDoCoMo 9437 2601.00 -1.55 4.71 £ Diageo DGE 2080.00 -1.07 12.04
Canada 2.70 2.70 $ Intel INTC 35.44 -2.74 2.87
AU$ NatAustBnk NAB 27.30 -1.34 -9.60 13.77 -1.85 -0.22
Japan
Hong Kong
1.475
5.00
1.475
5.00 ¥ NipponStl&SmtmoMtl 5401 2138.50 0.47 -11.49
€
£
ENI
GlaxoSmithKline
ENI
GSK 1599.50 -1.54 16.50
$
$
IBM
JPMorganChase
IBM
JPM
155.69
66.65
-2.08 13.13
-0.89 0.94
Dow Jones Industrial Average P/E: 20
¥ NipponTeleg 9432 4629.00 -1.89 -4.28 £ HSBC Hldgs HSBA 578.00 0.82 7.80 $ JohnsJohns JNJ 118.23 -1.04 15.10 Last: 18085.45 t 394.46, or 2.13% YTD s 3.8%
Policy rates
ECB 0.00% 0.05%
¥ NissanMotor 7201 1049.00 0.43 -18.01 € INGGroep INGA 11.32 -0.61 11.58 $ McDonalds MCD 114.58 -1.37 -3.01
Britain 0.25 0.50
¥ NomuraHldgs 8604 486.60 1.27 -28.35 £ ImperialBrands IMB 3925.00 -1.84 9.44 $ Merck MRK 62.49 -1.19 18.31 18500
Switzerland 0.50 0.50
¥ Panasonic 6752 1047.00 0.72 -15.60 € IntesaSanpaolo ISP 2.17 -1.19 -29.86 $ Microsoft MSFT 56.21 -2.12 1.32
HK$ PetroChina 0857 5.22 -0.19 2.55 € LVMHMoetHennessy MC 152.20 -1.23 5.04 $ NikeClB NKE 55.33 -1.50 -11.47 18000
Australia 1.50 2.00
HK$ PingAnInsofChina 2318 43.05 -0.58 0.35 £ LloydsBankingGroup LLOY 59.31 0.76 -18.83 $ Pfizer PFE 34.10 -1.79 5.64
U.S. discount 1.00 0.75 17500
Fed-funds target 0.25 0.00
$ RelianceIndsGDR RIGD 31.20 0.32 1.96 € LOreal OR 167.15 -1.94 7.63 $ Procter&Gamble PG 86.24 -1.75 8.60
Call money 2.25 2.00
AU$ RioTinto RIO 48.60 1.21 8.70 £ NationalGrid NG. 1054.50 -1.08 12.48 $ 3M MMM 175.64 -2.48 16.60 17000
KRW SamsungElectronics 005930 1575000 -3.90 25.00 CHF Nestle NESN 78.30 -0.32 5.03 $ TravelersCos TRV 114.44 -2.10 1.40
Overnight repurchase rates 16500
U.S. 0.54% 0.22%
¥ Seven&I Hldgs 3382 4460.00 -0.47 -19.64 CHF Novartis NOVN 77.40 -0.83 -10.83 $ UnitedTech UTX 102.68 -2.90 6.88
Euro zone n.a. n.a.
¥ SoftBankGroup 9984 6899.00 0.79 12.38 DKK NovoNordiskB NOVO-B 296.10 -2.15 -25.96 $ UnitedHealthGroup UNH 133.62 -1.34 13.58 10 17 24 1 8 15 22 29 5 12 19 26 2 9
¥ Sumitomo Mitsui 8316 3592.00 -0.22 -22.01 £ Prudential PRU 1400.00 0.14 -8.56 $ VISAClA V 81.33 -1.98 4.87 July Aug. Sept.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 120.90 0.08 28.96 £ ReckittBenckiser RB. 7181.00 -2.42 14.33 $ Verizon VZ 51.82 -3.32 12.12 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 179.50 -1.91 25.52 £ RioTinto RIO 2350.00 -0.82 18.72 $ WalMart WMT 70.30 -2.13 14.68 Sources: WSJ Market Data Group; Birinyi Associates
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL. Monday, September 12, 2016 | B7

FINANCE & MARKETS

For Financial Guidance, Ask a Half-Machine

Your next financial adviser
might be a centaur—not half-
human, half-horse, but half-
human, half-machine.
You might have heard of
centaurs in chess, where a
person and a computer form a
team that together can beat
the best human or computer
playing alone.
The idea, popularized after
IBM’s computer Deep Blue
learned chess well enough to
defeat world
champion
Garry Kasp-
arov in
2003, is in-
filtrating fi-
THE nancial plan-
A human financial adviser another to look at your bank
can comprehensively under- account and tell you what it is
stand a client’s situation, and what causes it to change
moods, goals and dreams, but over time.”
a computer can manage more Other firms, including At-
data than any person possibly lanta-based online financial
can. adviser Wela, Total Alignment
Here, machine learning Wealth Advisors of New York
isn’t about picking stocks, but and McLean Asset Manage-
about predicting human be- ment Corp. in McLean, Va.,
havior. are exploring how to use arti-
Backed by artificial intelli- ficial intelligence to improve
gence, a human adviser clients’ outcomes.
should be better able to pre- Machine learning also
vent a change in emotions or could help spread the benefits
circumstances from knocking of financial advice more
you off track to meet your evenly. A human adviser in
goals. isolation, handling hundreds
Your adviser can listen for of clients, might neglect your
stress or fear in your voice— needs in favor of people with

INTELLIGENT ning.
INVESTOR In artifi-
JASON ZWEIG cial intelli-
gence or ma-
chine
learning, computers effec-
tively program themselves to
analyze data and solve prob-
lems. That is how IBM’s Wat-
son beat champions Ken Jen-
nings and Brad Rutter on the
television quiz show “Jeop-
ardy” in 2011. And it could
help make financial-planning
advice cheaper, more reliable
and more widely available.
In chess, a centaur is bet-
ter than either the human or
the computer alone because
“the human and the computer
have complementary
strengths and weaknesses,”
machine-learning researcher
Pedro Domingos of the Uni-
versity of Washington has
said.
but only if you happen to talk
to her on a given day. A com-
puter can parse your emails
and social-media posts to
learn whether your use of
particular words foretells
changes in what you do with
your money.
It can trawl through your
actions—saving, borrowing,
spending, prepaying a mort-
gage, buying a car, trading
stocks and so on—to see how
they correlated to economic
conditions, news headlines or
changes in your family situa-
tion. The computer can then
attempt to predict how you
will react in a similar combi-
nation of circumstances.
All this might sound like
fodder for a dystopian novel
by George Orwell or Philip K.
Dick. But financial companies
already know a ton about you.
“The point is not to be creepy,
but to better serve your
needs,” says Brian Walter,
who heads the wealth-man-
agement initiative at IBM’s
Watson Group in New York.
Analyzing your past finan-
cial actions, a computer could
pick up on subtly interacting
variables that help “predict
when you might engage in
dangerous behavior and which
recommendations you are
most likely to implement,
rather than just listen to,”
says Daniel Egan, director of
behavioral finance and invest-
ing at Betterment, a New
York-based online investment
adviser that manages $5.8 bil-
lion.
A spokesman for Van-
guard Group, which manages
$3.8 trillion and has $41 bil-
lion in its largely automated
online Personal Advisor Ser-
vices unit, says the firm is
“exploring a range of possible
artificial-intelligence and ma-
chine-learning enhancements”
to serve individual clients bet-
ter.
IBM’s Mr. Walter says the
technology is being used by a
“steadily growing number” of
firms offering financial plan-
ning.
Among other uses, advis-
ers are applying artificial in-
telligence to pick up on sig-
nals that clients may be
CHRISTOPHE VORLET
more money or the squeaky
wheels who crave the most
attention; observing that, the
computer could automatically
bump you up on your ad-
viser’s list of priorities. “Ad-
dissatisfied and to detect ma- vice is going to be democra-
jor changes in life circum- tized,” says Mr. Walter of
stances that people might not IBM.
mention in conversation. Above all, artificial intelli-
Adam Nash, chief executive gence should enable human
of Wealthfront, a Palo Alto, advisers to spend more time
Calif.-based online investment at what they excel at: under-
adviser, says his firm doesn’t standing the personal aspects
have an exact timetable but is of their clients’ financial lives
“moving in the direction” of and building a bond of trust.
using artificial intelligence to Meanwhile, the computer side
improve its advice. of the centaur should cut the
Financial planning has tra- cost of organizing data, ana-
ditionally been based largely lyzing choices and delivering
on “conversations, anecdotes advice.
and stories instead of data,” What many advisers view
says Mr. Nash. as a threat seems much more
“It’s one thing for me to likely to leave almost every-
ask you what you think your one better off. You shouldn’t
savings rate is,” he says, “and need Watson to tell you that.

new preliminary data show,
Finance lending fuel to a drive by Saudi
Arabia and its allies to persuade
Watch Iran to join a petroleum-produc-
tion freeze this month.
Amid a flurry of phone calls
and closed-door meetings, offi-
cials from the big oil producers
have been citing the numbers to
OPEC argue that the time has come to
cap oil output after two years of
Oil Output Falls slumping prices caused by a
To a 3-Month Low global glut. Crude-oil prices on
OPEC crude-oil output slid to Friday were below $46 a barrel,
a three-month low in August, compared with $100 a barrel or
more before the slump began in
2014.
The new data show that to-
tal production by the Organiza-
tion of the Petroleum Exporting
Countries fell by about 200,000
barrels a day to 33 million bar-
rels a day in August, its lowest
level since May.
The data were compiled last
week by OPEC and are set to be
released officially on Monday.
The Wall Street Journal re-
viewed preliminary parts of the
report.
Meanwhile, the OPEC officials
said, the new data show that
Iran’s production is stalling out
at 3.6 million barrels a day,
roughly the same level in August
as in May.
—Benoit Faucon
and Summer Said
CHINA
Creditors Urged
To Work Together
China’s banking regulator on
Friday encouraged creditors of
distressed companies to work eral decisions to withdraw loans
together in committees as a
way of helping firms out of their
early or freeze borrowers’ as-
sets. Analysts say the banking
debt problems.
Establishing a committee of
regulator is seeking to promote
cooperation among creditors..
creditors can help distressed In practice, some banks are
firms in restructuring, among working together already. But
other issues, ultimately helping the government “is talking lot
the development of China’s about deleveraging, and we are
economy, the China Banking seeing more defaults, so it is
Regulatory Commission said on necessary to institutionalize this
its website. kind of committee,” said Xia Le,
As the strain of China’s debt a Hong Kong-based economist
pile grows, there have been with BBVA.
cases of creditors making unilat- —Pei Li and Chao Deng

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Issued by Eaton Vance Management (International) Limited (“EVMI”), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom and is located at 125 Old Broad Street, London, EC2N 1AR. EVMI is
a wholly owned subsidiary of Eaton Vance Management (“EVM”). EVM is an investment adviser registered with the United States Securities and Exchange Commission (SEC) and is a wholly owned subsidiary of Eaton Vance Corp.
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B8 | Monday, September 12, 2016 THE WALL STREET JOURNAL.

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

Central Banks Are Pushing Bond Yields Up Blackout for

Early Sales
Is it tantrum time again? All of this speaks to the
After weeks of tiny moves in
yields, global government
bond markets have suddenly
Backing Up
Yield on 10-year German government bond
enormous sensitivity of bond
markets to even the slightest
deviation by central banks
Of iPhones
woken up—but more because 0.02% from market expectations. In their obsession over all
of what central banks aren’t With bond prices in unprece- things Apple, investors have
0.01
doing than what they are. dented territory, even a grown addicted to tracking

EUROPEAN PRESSPHOTO AGENCY

Long-dated bonds sold off 0.00
slight drop in confidence in opening weekend sales for
sharply Friday, sending central-bank buying can new iPhones.
yields to their highest levels –0.01 prove costly to investors. There may be a bit of
in months. The 10-year Ger- Having waded so deeply withdrawal this year. Apple,
man yield entered positive –0.02 into markets, central banks which has provided launch-
territory, while 10-year Trea- are finding that they are vul- weekend sales data for the
sury yields rose to their –0.03 nerable to the technical past eight years, says it no
highest since June. Thirty- forces that drive short-term longer will do so. The com-
–0.04 At one-minute intervals Friday*
year German yields have prices just as much as the pany’s reasoning is that ini-
risen 0.2 percentage point in 11 noon 1 2 3 5 fundamental economic risks tial sales are more a function
just two days as prices fell *Central European Time Mario Draghi, president of the that they usually worry of available supply and thus,
seven points, a reminder of Source: Tullett Prebon THE WALL STREET JOURNAL. European Central Bank about. While central bankers no longer serve as a “repre-
how much money can be lost might think of the size of sentative metric” for mea-
in bonds after the huge re- bond-buying program will be tion so far below target, it points, or over 2%, the first their balance sheets as the suring iPhone demand.
cent gains. overhauled, potentially eas- can’t give up. move of 1% or more in either deciding factor, it is the flow The timing is certainly
Central banks lie at the ing distortions that have Adding to the nerves is direction in two months. of purchases that drives convenient, given the
root of the moves. First, pushed 10- and 30-year the looming Federal Reserve The selloff in Europe also markets. That is why the iPhone’s current slump.
there is apparent disappoint- yields to record lows. But meeting, with Fed officials echoes events in Japan, words from the Fed and ECB, But opening weekend
ment with Thursday’s Euro- combined with his failure to continuing to talk about a where the Bank of Japan’s which didn’t signal any sig- sales haven’t always been the
pean Central Bank inaction. announce a new, later date rate rise. News of a coming introspection on its policy nificant changes in policy, best indicator anyway. Unit
Even though expectations for the end of the current speech Monday by governor choices has coincided with a has such a big impact on sales jumped 30% in last
were low, President Mario program, that roiled mar- Lael Brainard, who is known sharp rise in long-dated Jap- markets. year’s launch weekend, but
Draghi appears to have un- kets. to oppose rate increases, fur- anese bond yields. The move It may be too early to call that benefitted from the in-
dershot them. For long-dated The best bet is still that ther jolted markets. there has been even bigger: it a full-blown tantrum. But clusion of China. Sales have
German bonds, he may have the ECB does deliver on Stocks in the U.S. fell, with From a low close to zero in the summer lull clearly is still fallen 9% this fiscal year.
delivered a double blow. He bond purchases for a good the Dow Jones Industrial Av- July, 30-year yields have over. The inclusion of China last
signaled that the ECB’s period to come. With infla- erage down nearly 400 risen to 0.5%. —Richard Barley year was just the latest ex-
ample of how launch-week-
end sales data was tweaked

China Will Continue to Exert Low Prices OVERHEARD

over the years as the com-
pany added countries.
Apple has added 17 mar-
The end to falling prices That is seen most acutely in a basket of currencies, the kets to this year’s product
at China’s factories may be the effect Chinese produc- yuan is 7% weaker than a Add one more metal to ble up this other nonrenewable launch, which could help ini-
near. That doesn’t mean tion has had on prices of year ago. A weaker yuan China’s global resource grab: resource. Goldman Sachs tial sales but also could pull
China will stop exporting de- things globally, like steel and could keep downward pres- lithium. Group estimates one Tesla sales forward from future
flation. aluminum. sure on Chinese import Tianqi Lithium Industries, Model S battery contains more quarters. Maynard Um of
China’s producer-price in- A recent paper by econo- prices to the U.S. They have one of China’s largest produc- lithium than 10,000 smart- Wells Fargo cited this as a
dex fell 0.8% in August from mists at the Hong Kong In- headed lower each month ers of the silver-white metal phones. risk when he downgraded
a year earlier, the 54th stitute for Monetary Re- this year even as import known as “white petroleum,” So Tianqi’s sweeping up Apple to a “market perform”
month in a row of falling search analyzed China’s prices from industrialized said Friday that it intends to supply might arouse worries rating on Thursday.
prices. But that was the effect on 11 neighboring countries as a group have bid for a 23% stake in New that China could corner the Estimates for iPhone sales
smallest decline since April economies and found China’s started to rebound. York-listed Chilean rival Socie- market, except that there is no in the coming year are mod-
2012, two months after the sharp declines in producer And because China’s con- dad Química & Minera de shortage to exploit. The U.S. est already, and a large num-
deflationary trend started. prices created spillover ef- sumer-price inflation re- Chile. Tianqi and SQM, to- Geological Survey estimates ber of Apple’s customers
Much of the rebound is fects on other countries that mains weak, rising just 1.3% gether with North Carolina- global reserves at 14 million may take time to decide on
because commodity prices were separate from the ef- in August, policy makers will based Albemarle and Pennsyl- tons, or more than 400 years’ upgrading now or waiting
have stabilized. For China, fect of commodities. continue to stay on an easing vania-based FMC, dominate supply based on last year’s until next year. That likely
however, falling producer So it is good news then bias, including allowing the the global lithium market. production. Near-term prices al- means less of a pop for the
prices aren’t just a reflection that China’s factory-price de- yuan to depreciate further. Deutsche Bank expects lith- ready have been buoyed by the opening weekend, even with
of commodities prices, but flation has ebbed. But there China’s producer prices ium demand to nearly triple by expected growth in demand. the added countries. Inves-
also about overcapacity in is a countervailing force: The may turn positive eventually, 2025. Electric cars may reduce But the higher prices go, the tors have placed too much
the industrial sector, which yuan has notably weakened but the effect on the world reliance on fossil fuels, but more lithium that will come to faith in this data before.
itself exerts downward pres- in the past year. On a real isn’t necessarily changing. their lithium-ion batteries gob- the surface. Now, Apple won’t let them.
sure on commodity prices. trade-weighted basis against —Alex Frangos —Dan Gallagher

FINANCE & MARKETS

U.S. House Gives Microcaps a Hand Seagate Brings in

BY DAVE MICHAELS

The smallest public compa-

Activist as an Ally
nies, including some penny-
stock firms, would be granted BY DAVID BENOIT a reputation for helping older
access to a regulatory shortcut technology giants adapt to
for selling stock under legisla- Seagate Technology PLC is changing market conditions.
tion approved by the U.S. turning to a surprising ally as Mason Morfit, the firm’s
House of Representatives. it adapts to changing dynamics president, has served on the
The House voted 236-178, in the data-storage business: boards of Microsoft Corp. and
largely along party lines, on an activist investor. Adobe Systems Inc., two soft-
Thursday to approve legisla- ValueAct Capital Manage- ware giants that have grappled
tion that would allow micro- ment LP has reached a deal to with big changes in consumer
cap companies, which include buy a 4% stake in Seagate, a computing behavior. Mr.
ANDREW HARNIK/ASSOCIATED PRESS

penny stocks, to tap a method transaction the company itself Morfit gained both board seats
of issuing shares that typically arranged after a big share- without the kind of public
involves less oversight. Regu- holder said it planned to sell. fights often waged by activists.
lators warn that microcaps are The purchase will make Val- Seagate Chief Executive Ste-
more susceptible to manipula- ueAct, an activist hedge fund phen Luczo was a director at
tion by swindlers and com- that has invested in a number Microsoft when ValueAct
pany insiders. Republicans of technology companies, one bought a stake in the software
who supported the legislation of Seagate’s largest sharehold- giant.
said it would let smaller com- ers and give it an “observer” Mr. Luczo, who briefly
panies use a fundraising tool The SEC, whose building in Washington is shown, says microcaps are among the riskiest securities. seat on the company’s board. served on Microsoft’s board
that has been restricted to The deal is yet another sign with Mr. Morfit, was im-
bigger companies. Microcaps have historically would open the door to more value of their shares available that some activist investors pressed with ValueAct’s pro-
“Extending these cost-sav- been more vulnerable to fraud stock scams. “A company to the public is at least $75 are taking a gentler approach cess and maintained a rela-
ing provisions to smaller com- because the shares trade infre- could easily bid up the price of million. with companies, helping them tionship with the firm, people
panies that large companies quently and their price can be its stock, and then immedi- Cromwell Coulson, chief ex- through transitions rather familiar with the matter said.
are currently able to enjoy is moved by company insiders or ately dump a large amount of ecutive of OTC Markets Group than pushing for significant ValueAct has traded in and
absolutely critical, and makes stock promoters who sell the new stock on investors at the Inc., which operates venues changes. out of Seagate over the years.
a difference for their ability to shares among themselves. The artificially inflated prices,” where microcap stocks are Seagate is trying to adjust Recent discussions with man-
issue additional offerings, ex- SEC warns they are among the said Rep. Carolyn Maloney (D., traded, said the legislation to a fast-moving shift from agement convinced the firm
pand their business and create riskiest securities that individ- N.Y.). Only two Democrats would encourage small compa- physical data-storage devices that Seagate could adapt to
more jobs,” said Rep. Ann ual investors can buy. voted for the legislation, and nies to raise money in the to cloud-based storage. the changing data-storage
Wagner (R., Mo.), who spon- An SEC spokeswoman the White House has threat- public markets, instead of pri- Seagate shares are down landscape, according to a per-
sored the legislation. Only one didn’t respond to a message ened to veto it. vately selling shares or con- about 28% over the past year son familiar with the conversa-
Republican opposed it. seeking comment. Under the legislation, com- vertible debt at a discount to compared with a 7.8% gain in tions.
The bill, which doesn’t have “What this really means is panies could use the regula- hedge funds in a transaction the technology-heavy Nasdaq Seagate’s profit fell 86% in
a Senate sponsor, would allow there will be no prior SEC re- tory shortcut, known as a shelf that often leads to a decline in Composite. Its shares were the fiscal year that ended in
microcap companies, including view for microcap offerings,” offering, provided their stock the share price when an- trading down 0.6% at $36.09. July, partly due to restructur-
those that don’t meet ex- said John Coffee, a securities is traded on an exchange, nounced. The company has a market ing costs and a gain in the
change-listing standards, to law professor at Columbia which imposes investor pro- He said the fundraising tool value of about $10.8 billion. prior year. Revenue slid 19%.
offer stock on a rolling basis University. “The company can tections such as periodic fi- could be used only by smaller ValueAct isn’t as aggressive
without having each sale ap- file and sell, and it doesn’t nancial results and requires companies that regularly re- as some other activists, and
proved by the Securities and have to get through an SEC re- listed firms to have a mini- port financial results to inves- companies recently have be-
Exchange Commission. The view person who says, ‘I don’t mum number of public share- tors and that most wouldn’t come more receptive to the
SEC defines microcaps as think your financial state- holders. Unlisted firms, which be penny-stock firms. ideas and support of an elite
companies whose shares out- ments are right.’” face lower standards than ex- That designation covers the group of activists. General
ANDREW GOMBERT/EUROPEAN PRESSPHOTO AGENCY

standing are valued at less Democrats overwhelmingly change-traded companies, smallest and riskiest compa- Electric Co., for example, wel-
than $300 million. opposed the bill, saying it could use the shortcut if the nies, with share prices below comed Trian Fund Manage-
$5 with and small balance ment LP’s $2.5 billion invest-
sheets. ment last year.
Advertisement INTERNATIONAL INVESTMENT FUNDS The White House’s veto
threat “was written by people
Still, companies rarely seek
out big investments from ac-
in an Ivory Tower who only tivists, as Seagate did.
[ Search by company, category or country at europe.WSJ.com/funds ] really care about S&P 500 and The company tapped Value-
blue-chip companies raising Act to buy 9.5 million shares,
NAV —%RETURN— capital,” Mr. Coulson said. worth about $350 million at
FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR
The provision was included today’s price, from an uniden-
n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866
Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg
in a bill that would loosen tified investor that wished to
CAM-GTF Limited OT OT MUS 09/02 USD 319501.51 14.1 17.9 -5.6 fundraising requirements for sell. Seagate plans to purchase
startups and small businesses, another three million shares Steve Luczo, Seagate’s
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, a theme of Republican finan- from the same investor. chairman and CEO, briefly
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 cial legislation over the past ValueAct, with about $18 served on Microsoft’s board
All performance figures are calculated using the most recent prices available. 2504; email: freda.fung@wsj.com several years. billion in assets, has cultivated with ValueAct’s president.