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The Secret to
Sweating Less
PERSONAL JOURNAL | A8
DJIA 17251.53 À 0.13%
What’s
News
Business & Finance
V aleant shares plunged
by nearly half after the
drugmaker slashed its guid-
ance and warned of the pos-
sibility of a debt default. A1
 Deutsche Telekom sold
$5 billion in bonds as firms
flocked to the euro-debt
market on the ECB decision
to buy corporate debt. A1
 European lawmakers
grilled multinationals, in-
cluding Google and Apple,
on their tax structure, as
they seek more revenue. B1
 The Bank of Japan left
its monetary policies un-
changed but downgraded its
view of the economy, open-
ing the door to easing. A5
 The EU heading toward
filing charges against Google
for allegedly favoring its own
apps for its Android smart-
phone operating system. B1
 Insurers in China are
closing payment channels
that let customers buy poli-
cies offshore to move money
out of the country. B5
 Campari agreed to buy
Grand Marnier’s maker in a
$758.9 million deal aimed at
the classic cocktail market. B1
 The U.K. fraud office
closed a foreign-exchange-
probe, saying there was “in-
sufficient evidence.” B5
 Oracle earnings fell 14%
as the currency crunch off-
set gains from its Web-based
computing business. B3
World-Wide
 Russian warplanes re-
turned from Syria as peace
talks began, suggesting the
Kremlin is pressing Assad to
engage in the process. A1
 Turkey said a female
member of a Kurdish sepa-
ratist group carried out
Sunday’s deadly car bomb-
ing in Ankara. A3
 The EU’s migrant deal
with Turkey faces myriad
hurdles to passage, includ-
ing a demand by Cyprus
for full recognition. A3
 Four police officers were
hit by gunfire as Belgian
and French authorities
raided a house in Brussels
tied to the Paris attacks. A3
 The White House eased
U.S. rules on Cuban trade
and travel, including lifting
a ban on tourist visits. A4
 Brazil’s president was
accused by a senator of
knowing about wrongdoing
at the state oil company. A4
 Ex-President da Silva
was in talks about joining
Brazil’s government. A4
 The Republican Party
filed four more lawsuits for
records relating to Clinton’s
time as secretary of state. A7
 Myanmar lawmakers
voted to confirm a Suu Kyi
confidant as president. A5
 U.S. health officials re-
leased guidelines to limit opi-
oid painkiller prescriptions
as addiction rates soar. A7
CONTENTS
Arts & Ent............. A12
Business & Tech. B1-4
Crossword.............. A12
Heard on Street. B10
Markets Digest..... B8
Money & Inv... B5-10
€3.20; CHF5.50; £2.00;
U.S. Military (Eur.) $2.20
s Copyright 2016 Dow Jones &
Company. All Rights Reserved
* * WEDNESDAY, MARCH 16, 2016 ~ VOL. XXXIV NO. 33
S&P 500 2015.93 g 0.18% NIKKEI 17117.07 g 0.68%
SOKOLOVA IRINA/TASS/ZUMA PRESS
Russian military officers on Tuesday feted the pilot of a fighter bomber, one of the first to return to Russia from Syria.
Russia Shifts Focus in Syria
Partial withdrawal of
forces as peace talks
commence shows bid
for political influence
Secretary of State John
Kerry said he would travel to
Moscow next week to discuss a
political solution to Syria’s
five-year war, as the U.S. and
key players strain to figure out
how Russia’s partial military
withdrawal changes the dy-
Terror Raid Results in Gunfire
LAURENT DUBRULE/EUROPEAN PRESSPHOTO AGENCY
TAKE POSITION: Four police officers were injured in a gunfight on
Tuesday in Brussels as Belgian and French authorities conducted
an investigation into the November Paris terror attacks. A3
Bangladesh Theft:
A Fed Whodunit
BY SYED ZAIN AL-MAHMOOD
DHAKA, Bangladesh—
Someone using official codes
stole $100 million from Ban-
gladesh’s account at the New
York Fed over a recent week-
end. Authorities in four coun-
Opinion.............. A10-11 tries are still piecing together
Personal Journal...... A8-9
Property Report... B9
what happened.
Technology............... B3 The breach funneled $81
U.S. News.................. A7 million from the country’s ac-
Weather................... A12 count at the New York Federal
World News........ A2-5
Reserve to personal bank ac-
counts in the Philippines. An
additional $20 million was di-
rected to a bank in Sri Lanka.
In scenes that would be
right at home in Hollywood,
the unknown criminals sent 35
transfer requests through the
Swift interbank messaging
system, a Bangladesh Bank of-
ficial and an official of the
Ministry of Finance have said.
STOXX 600 340.86 g 1.10% OIL 36.34 g 2.26% GOLD 1230.40 g 1.13% EURO 1.1111 À 0.05%
namics of the conflict and na- “We have reached a very
scent peace talks. important phase in this pro-
Mr. Kerry said Tuesday he cess,“ Mr. Kerry said.
would meet with Russian Pres- Russian warplanes began
ident Vladimir returning from
Putin and For- By Nathan Hodge Syria on Tues-
eign Minister in Moscow, day. State televi-
Sergei Lavrov. Nour Malas in Geneva sion showed
The visit follows and Felicia Schwartz Su-34 bomber
Russia’s sur- in Washington pilots being
prise announce- greeted by fami-
ment Monday that it would lies and news crews at an air
withdraw most of its troops base in western Russia, follow-
from Syria, as the cease-fire ing an engagement that
there entered its third week. claimed a handful of Russian
ECB’s Bond-Buying Plan
Spurs Flurry of Debt Sales
BY CHRISTOPHER WHITTALL
Deutsche Telekom AG
wasted little time Thursday
after learning that the Euro-
pean Central Bank would start
buying corporate bonds later
this year.
That afternoon, officials at
Germany’s telecom giant be-
gan lining up the company’s
first euro-debt deal since 2013,
to take advantage of the sharp
drop in borrowing costs that
the ECB’s plan should trigger,
according to a person familiar
with the matter.
By the end of Monday,
Deutsche Telekom had sold
€4.5 billion ($5 billion) of
bonds after receiving about
Kitsch in Synch: ‘That Painting’ Wins Fans in Vegas
It’s a reminder of a less-refined era; Clint or Travolta?
BY ALEXANDRA BERZON
Whoever made the requests
had the necessary codes to au- LAS VEGAS—People here
thorize Swift transfers and put can no longer be dazzled by
in the payment requests on a “the world’s largest rhine-
weekend, the officials said. stone” or watch showgirls
The incident has led to re- prance in ostrich-feather head-
criminations, with Bangla- dresses. These have vanished.
desh’s finance minister accus- But when a reality-television
ing the Fed of irregularities, show took down a painting
and questions being raised with a cult following among
about the quality of security in patrons at Vickie’s Diner, kitsch
the South Asian country. In an enthusiasts drew the line.
early sign of fallout from the “It’s a crappy painting, but
breach, Bangladesh’s central- we love it,” said Allison Hay-
bank governor, Atiur Rahman, ward, who created a Facebook
resigned Tuesday. page dedicated to the image—
Mr. Rahman had come un- known as “That Painting”—
der fire from senior ministers which depicts a gun-toting man
who said he didn’t tell the floating above a serene,
government about the theft wooded landscape.
quickly enough. Although the At more than 60 years old,
theft took place Feb. 5, Bangla- the 24-hour diner, which once
desh Bank, the central bank, served as the lunch counter of a
didn’t make a public an- pharmacy, is historic by Las Ve-
Please see BREACH page A6 gas standards. “That Painting”
Andrew Browne
Censorship
Meets Defiance
CHINA’S WORLD | A2
WSJ.com EUROPE EDITION
DLR ¥112.87 g 0.83%
Valeant
Slashes
Guidance;
Stock Hit
BY MICHAEL RAPOPORT
Investors punished Valeant
Pharmaceuticals International
Inc. on Tuesday, sending its
shares down by nearly half af-
ter the drugmaker slashed its
guidance and said it could be
in danger of defaulting on
some of its debt.
Shares dropped more than
51% to $33.51 in midafternoon
trading in New York, to their
lowest level since 2011. As re-
cently as August, shares of the
one-time highflier traded
above $262. In October, a
short seller named Andrew
Left shocked the market when
he blasted Valeant’s account-
ing over its relationship with a
mail-order pharmacy and gave
the stock a $50-per-share tar-
get. That triggered a months-
long tumble in the stock as
other issues with the Canadian
Please see VALEANT page A2
 Short who got Valeant right
is on trial in Hong Kong...... B5
Bitter Pill
lives. Valeant share-price performance
“Putin said we would not be
in for a long time,” said Ruslan $300
Pukhov, the director of the
Moscow-based defense think 200
tank CAST. “Sometimes, it’s
worth taking the man liter-
ally.” 100 Tuesday*
The withdrawal announce- $33.51
ment coincided with the begin- t51%
ning of United Nations-led 0
peace talks in Geneva, suggest- 2015 ’16
ing that Russia wants to influ- *As of 4 p.m. in New York
ence a political settlement and Source: WSJ Market Data Group
Please see SYRIA page A6 THE WALL STREET JOURNAL.
€18 billion of orders from in- soared after the ECB’s surprise
vestors. announcement Thursday, de-
The speedy debt sale—and spite details of the plan re-
its enthusiastic reception from maining sketchy.
investors—signals how the The buoyant mood spilled
ECB’s almost unprecedented over to U.S. corporate-bond
program has altered the com- markets, which also moved
plexion of Europe’s corporate- higher.
bond market. The rally has sparked a
“Companies have reacted, flurry of bond deals from Eu-
and they’ve reacted quickly, to ropean companies, which have
take advantage of the better been snapped up by investors
market conditions after the ahead of a huge new buyer
ECB” announcement, said Jeff coming into the market.
Tannenbaum, a managing di- Monday was the second-
rector at Bank of America busiest day of the year for
Corp. new debt sales of euro-denom-
“The market feels as busy, inated investment-grade cor-
and it feels as good as it has porate bonds, according to
been the whole year,” he said. data provider Dealogic.
European credit markets Please see ECB page A2
i i i
hung for a decade and serves as show, said Amanda Freitag, a
an important reminder for a cer- chef and co-host on the show.
tain circle here of a less-refined The once-red vinyl booths
era, when the city was a hub of were turned hot pink. The Tif-
lowbrow art and entertainment. fany-style lamps above the
Tastes change. Big-name ar- counter were replaced with
chitects, tech hip- sleek metal models.
sters and third-wave That Painting was
coffee have come to taken down without
Las Vegas. The Liber- mention and replaced
ace Museum, home with framed vintage
of the putatively re- photos of Las Vegas
cord-setting ersatz landmarks.
diamond, shut down Ms. Freitag said
more than five years ‘That Painting’ the team typically
ago. The only re- finds a lot of clutter
coffee mug
maining showgirl ex- on the walls of old
travaganza on the Strip closed diners, which it tries to clean
last month. out. “It’s part of what we see
Creating a more stylized when we first walk into a place
Vickie’s—and a throwback to the and realize how much help
tourist-friendly idea of old Las they need,” she said, adding
Vegas—was the goal when the that she didn’t remember see-
Food Network came in recently ing That Painting.
to quickly revamp the diner for Diner owner Vickie Kelesis
its “American Diner Revival” Please see KITSCH page A6
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Wednesday, March 16, 2016
China’s Censors Confront Mounting Defiance
CHINA’S WORLD
ANDREW BROWNE
SHANGHAI—Yang Jisheng
knows all about censorship.
His book “Tombstone,” an
epic account of Mao Ze-
dong’s great famine, is
banned in China.
His former employer, Xin-
hua News Agency, refused to
let him go to the U.S. to pick
up an award at Harvard last
week. That didn’t stop the
retired journalist from writ-
ing a speech,
which trium-
phantly
noted that
pirated edi-
tions of
“Tombstone”
circulate even in the remot-
est parts of China, despite
the efforts of censors.
He said he knows this be-
cause readers send him fer-
vent letters of support, what
he termed testament to “the
power of truth to break
through the bronze walls
and iron ramparts con-
structed by the government.”
It was a message of defi-
ance: Despite a monumental
edifice of controls, censor-
ship is losing.
Lately, President Xi Jin-
ping’s administration has
run into mounting resistance
to its efforts to tighten its
VALEANT
Continued from Page One
company surfaced.
Tuesday’s plunge came as
Valeant outlined the potential
for a default, its cuts to quar-
terly and annual guidance, and
tweaks to its business model
that would scrap many of the
practices that defined the
company.
Much of the news came
during a lengthy and long-
awaited earnings call, which
the Canadian company had de-
layed in February after Chief
Executive Michael Pearson re-
turned from a two-month
medical leave. Valeant has
faced an assortment of bad
news recently, including a de-
lay in filing its annual report, a
Securities and Exchange Com-
mission investigation and a
possible earnings restatement.
If Valeant doesn’t file its
10-K report by April 29, the
company said during the earn-
ings call, its bank lenders will
be able to accelerate payment
under Valeant’s credit agree-
ment—and if it isn’t filed by
mid-May, holders of Valeant’s
notes could do the same if at
least 25% of the holders of any
series of notes demand it.
The company’s best esti-
mate is that the 10-K will be
filed in April, but it “can’t
commit to that,” Mr. Pearson
said. Valeant said it would
start discussions next week
with its bank lenders to at-
tempt to head off a possible
default by extending its dead-
line for filing the 10-K, as well
ECB
Continued from Page One
Before that, it had been the
slowest start to the year for
such sales since 2011, during
the Continent’s sovereign-debt
crisis.
The buoyant mood ex-
tended to the dollar-bond
market, where UBS Group AG
on Monday sold the first con-
tingent convertible, or CoCo,
bonds in nearly two months
following a sharp selloff in
this new breed of risky debt in
February.
More companies flocked to
the euro-debt market on Tues-
day, including lenders Royal
Bank of Scotland Group PLC
and Banco Santander SA, Ger-
man conglomerate Thyssen-
Krupp AG and Portuguese
company Brisa-Concessão Ro-
doviária SA.
“The market had pretty
much been closed up until the
ECB,” said Chris Telfer, a port-
folio manager at ECM Asset
Management. “The ECB has
certainly kick-started things.”
The central bank hasn’t said
how much, or exactly which,
corporate bonds it plans to
vise even more completely
over the country’s printed
works, its airwaves and digi-
tal networks, while it
strengthens the Great Fire-
wall to keep out foreign con-
tent.
This pushback is going
well beyond the passive
kind, like Mr. Yang’s secret
readers; much of it is now
active and in the open.
L
ast month, the retired
property mogul Ren
Zhiqiang, who has a
following of tens of millions
on social media, directly as-
sailed Mr. Xi after he paid
visits to Xinhua, the People’s
Daily and China Central Tele-
vision to lecture their edi-
tors on the need to toe the
Communist Party line. These
organizations “bear the sur-
name ‘party,’ ” Mr. Xi de-
clared.
That was too much for
Mr. Ren, nicknamed “the
Cannon,” who fired off an
online salvo saying that Chi-
nese media organizations are
supposed to represent the
public, which pays their sala-
ries through taxes, not the
party. Censors promptly shut
down his social media ac-
counts.
Then the influential busi-
ness publication Caixin hit
back when authorities forced
it to take down an article
posted on its Chinese-lan-
guage website that quoted
one of the government’s own
advisers, the Shanghai pro-
fessor Jiang Hong, defending
the right to free speech. In
response, Caixin posted an
as its first-quarter 10-Q quar-
terly report.
While the stock market
didn’t take to the news well,
bonds proved more resilient,
with a bond maturing in 2025
declining roughly 7%, while a
bond maturing in 2018 de-
clined about 3.5%.
Valeant cut its guidance
dramatically for the first quar-
ter and all of 2016, compared
with its previous guidance is-
sued in December. For the first
quarter, the company expects
adjusted earnings of $1.30 to
$1.55 a share, sharply below
its previous guidance of $2.35
to $2.55 a share. Revenue is
expected to be between $2.3
billion and $2.4 billion, down
from prior guidance of $2.8
billion to $3.1 billion.
For the full year, Valeant
says adjusted earnings are ex-
pected to be $9.50 to $10.50 a
share, down from previous
guidance of $13.25 to $13.75.
Revenue is expected to be $11
billion to $11.2 billion, down
from $12.5 billion to $12.7 bil-
lion.
The company blamed a vari-
ety of factors for the lower
guidance, including more con-
servative revenue assump-
tions, the cancellation of price
increases, higher-than-ex-
pected inventory reductions
and increased investment in
functions like government re-
lations and investor relations
that Valeant has previously
said it needed.
The company affirmed it
was essentially scrapping
much of what previously made
it stand out from the pharma-
ceutical industry pack—for the
Alive and Kicking
Europe's corporate-bond market has sprung back to life.
Euro-debt issuance by
investment-grade companies*
€120 billion €53.55 billion
100
80
60
40
20
0 60,000
2008 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16
*From the start of each year through March 14 †Annual cost of insuring against a default on
$10 million of European investment-grade debt for five years using credit-default swaps
Sources: Dealogic (debt); Markit (protection)
buy. It has ruled out buying
bank debt and said it would be
restricted to investment-grade
euro-denominated debt be-
longing to nonfinancial euro-
zone companies.
The program will form part
of the bank’s broader bond
buying, which the ECB has ex-
panded to €80 billion a month
from €60 billion.
WORLD NEWS
China has banned a book on its years of famine. Above, villagers in 1961 awaiting meager rations.
account of the censorship on
its English-language website,
illustrated by a picture of a
mouth taped shut. That arti-
cle, too, disappeared.
The full implication of
these events isn’t yet clear.
They may indicate deeper
undercurrents in a political
system that is increasingly
under stress, buffeted by Mr.
Xi’s anticorruption campaign
within the bureaucracy and
his sweeping reorganization
of the armed forces that
have produced resentful se-
nior officials and disgruntled
generals. Mr. Ren is a party
insider, a member of the so-
called Red Aristocracy whose
opinions carry weight;
Caixin’s editor in chief, Hu
The Canadian drugmaker’s business strategy has stalled out.
better on Wall Street but for
the worse in Washington. It
said it was canceling price in-
creases and wouldn’t be on the
hunt for acquisitions of drugs
on which it could raise prices.
“We’re no longer in the
market for underpriced as-
sets,” Mr. Pearson said.
The call was Mr. Pearson’s
first public pronouncement
since he returned to Valeant in
late February. He was fre-
quently apologetic as he came
under fire from analysts for
the company’s financial de-
cline. “If we don’t deliver,
that’s on me,” Mr. Pearson said
during the call. Much of
Valeant is “at a bit of a start-
ing-over point,” he said.
“Our business is not operat-
ing on all cylinders,” Mr. Pear-
son said. But “we are commit-
ted to getting it back on
track,” he said, and he ex-
Cost of default protection†
$120,000
110,000
100,000
90,000
80,000
70,000
Tuesday: $76,000
2016
THE WALL STREET JOURNAL.
Investors reacted to the an-
nouncement by buying first
and asking questions later.
In Europe, the annual cost
of insuring against a default
on European investment-grade
corporate debt for five years
fell Friday to its lowest level
since August, according to
Markit.
“If you’ve got the ECB com-
THE WALL STREET JOURNAL.
nic minority figures and fem-
inists.
S
tudents are flocking to
the West for a liberal
college education.
Writing in The Australian
newspaper last week, Jas-
mine Yin, who identifies her-
self as the granddaughter of
YOMIURI SHIMBUN/SHIKASHIGE HARAI/ASSOCIATED PRESS
one of Mao’s favorite gener-
als and who is now studying
at New York’s Columbia Uni-
versity, used the Chinese
proverb “same bed, different
dreams” to describe the gulf
that separates young Chinese
people from Mr. Xi and his
peers in the party. The wish
list of her millennial genera-
tion: “Less political interfer-
ence in our lives, more open-
ness to the outside world,
dismantling the detested
Great Firewall.”
At age 75, Mr. Yang, the
“Tombstone” author, is old
Shuli, has close links to the protest. enough to have experienced
economic-reform wing of the Some engage in online all the brutal excesses of the
government led by central- jousting with censors, using Mao era.
bank Gov. Zhou Xiaochuan. word play to disguise criti- Yet, he can’t escape Mao’s
At the very least, though, cisms of government poli- political legacy. His book
the episodes suggest that cies and puns to identify top deals with the 1958-62 fam-
Mr. Xi’s pervasive controls leaders. For instance, Mr. Xi ine that grew out of the di-
may be pushing sections of becomes “tricky too-big” or sastrous policies of Mao’s
society beyond their limits “breathe spirit-bottle”— Great Leap Forward. Mr.
of tolerance. nonsense terms now Yang concludes that 36 mil-
banned. lion people starved to death,
T
his isn’t the Mao era, Others vote with their making it the worst famine
however much Mr. Xi feet; the wealthy are apply- in history. The party doesn’t
would like to revive ing for passports en masse. want that story out, fearing
some of the language and Although the exodus is the damage to Mao’s godlike
political practices of that driven mainly by economic image—and its own legiti-
time, including public con- insecurities, the atmosphere macy.
fessions and “self-criticism” of political repression is a It no longer has a choice,
sessions at party meetings. factor, not just censorship though: The bulwarks of cen-
Today’s population is not so but detentions and disap- sorship may be made from
easily cowed—and it has pearances of human-rights iron, but they’re far from im-
many more ways to register lawyers, labor activists, eth- pregnable.
agement and governance of
the company.”
Over all, Valeant reported a
fourth-quarter loss of $336.4
from Philidor was recorded too
early.
Valeant said Tuesday that
its alliance with Walgreens
million, or 98 cents a share Boots Alliance Inc., which be-
under standard accounting gan in January and is intended
rules, on revenue of $2.8 bil- to take the place of its now-
lion. The company posted a ended relationship with Phili-
profit of $1.56 a share and rev- dor, is “off to a terrific start.”
enue of $2.3 billion in the Mr. Pearson also said
fourth quarter of 2014, but Valeant is considering divest-
Valeant has indicated that ing noncore assets, and would
quarter’s results may be re- use the proceeds to help pay
CHRISTINNE MUSCHI/REUTERS
stated. down some of its $31 billion in
Under Valeant’s adjusted debt. Valeant said Tuesday it
method, the company posted a is committed to paying down
profit of $2.50 a share in the at least $1.7 billion in debt this
latest quarter, below analysts’ year.
expectations of $2.51 a share. Valeant said it projects dou-
Valeant’s guidance is also ble-digit growth in its gastro-
based on that adjusted mea- intestinal and contact-lens
sure of earnings, which strips businesses, and that it is “very
out various expenses and excited” about the prospects
pressed optimism that Valeant doesn’t follow standard ac- for Xifaxan, a drug to treat ir-
could surpass its more conser- counting rules. ritable bowel syndrome that
vative forecasts. Valeant’s share price had was by far Valeant’s biggest
Activist investor William soared to more than $260 last seller in the fourth quarter,
Ackman, whose Pershing August, as the company fol- with $210 million in sales. The
Square Capital Management lowed a model of acquiring company says it stands by its
LP owns a significant chunk of other drugs and drug compa- projection that Xifaxan will
Valeant shares and who has nies and sometimes boosting take in $1 billion in annual
defended Valeant in lengthy the prices of products, rather sales.
conference calls, said Tuesday than relying on its own re- Valeant also said Addyi, the
in a statement that Pershing search and development to highly touted female-libido
would take a “much more pro- create new drugs. drug it bought last year,
active role at the company to But a series of woes have wouldn't meet the company’s
protect and maximize the crushed the company’s stock previous projections of $100
value of our investment.” since then, including govern- million to $150 million in sales
Last week, Pershing Vice ment criticism over its pricing this year. Addyi wasn’t among
Chairman Steve Fraidin joined and its relationship with a Valeant’s top 30 drugs by sales
Valeant’s board. Mr. Ackman mail-order pharmacy, Philidor in the fourth quarter.
said Tuesday that he still finds Rx Services LLC, to help place —Mike Cherney, Jonathan D.
Valeant stock undervalued and its often higher-priced drugs. Rockoff and Jacquie McNish
that its underlying businesses Valeant is facing multiple gov- contributed to this article.
are “worth multiples of the ernment investigations, includ-
current market price. Getting ing from the SEC, and the
to those values, however, will
require restoration of share-
company has said it might
have to restate past earnings
CORRECTIONS 
holder confidence in the man- because $58 million in revenue AMPLIFICATIONS
Readers can alert The Wall Street
Journal to any errors in news
ing to buy potentially up to Marco Baldini, a managing articles by emailing
wsjcontact@wsj.com.
€15 billion of corporate bonds director at Barclays PLC, said
per month, you know that [the it is too early to tell whether
market is] going to react,” the ECB’s program will un- THE WALL STREET JOURNAL.
said Bryan Wallace, a portfolio leash a much larger bond sup- Europe Edition ISSN 0921-99
manager at J.P. Morgan Asset ply, or whether companies will The News Building, 1 London Bridge Street,
London, SE1 9GF
Management. wait for borrowing costs to
Mr. Wallace said it has be- fall further. Thorold Barker, Editor, Europe
Bruce Orwall, Senior Editor, Europe
come difficult to buy bonds in “Does the ECB unlock more Cicely K. Dyson, News Editor, Europe
the secondary market since issuance rather than lock it Margaret de Streel, International Editions Editor
Darren Everson, Deputy International Editor
the ECB’s program was an- up? That’s the big debate,” Mr.
nounced. Baldini said. Joseph C. Sternberg, Editorial Page Editor
That means investors have European credit markets Anna Foot, Advertising Sales
had to rely on primary mar- fell slightly Tuesday, weighed Jacky Lo, Circulation Sales
Stuart Wood, Operations
kets—buying directly from the down by the recent heavy Jonathan Wright, Commercial Partnerships
issuer—if they want to obtain bond supply and a selloff in
corporate debt. stock markets. As a result, Katie Vanneck-Smith,
Global Managing Director & Publisher
That led to bumper order new bond deals weren’t being
books on new bond deals priced as aggressively as on Advertising through Dow Jones Advertising
Sales: Hong Kong: 852-2831 2504; Singapore:
Monday. Monday, said Bank of Amer- 65-6415 4300; Tokyo: 81-3 6269-2701;
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Printers: France: POP La Courneuve; Germany:
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€2 billion, to €4.5 billion. The average yield on invest- Qualiprinters s.r.l.; United Kingdom: Newsprinters
(Broxbourne) Limited, Great Cambridge Road,
UBS’s $1.5 billion CoCo deal ment-grade euro-denominated Waltham Cross, EN8 8DY;
received $8 billion in orders debt was 1.3% before the ECB Registered as a newspaper at the Post Office.
and ended up paying an inter- meeting, according to Bar- Trademarks appearing herein are used under
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est rate of 6.875%—below ini- clays. The yield, which falls as ©2015 Dow Jones & Company. All rights reserved.
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mer, before the convulsions data.
that have hit the European Ultimately, the ECB’s buying NEED ASSISTANCE WITH
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Still, bankers say the deluge fundamentally. Companies By web: http://services.wsje.com
By email: subs.wsje@dowjones.com
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apace. Mr. Telfer said.
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THE WALL STREET JOURNAL.
Cyprus Feud Snarls EU-Turkey Deal Officers
Are Shot
Longstanding dispute
is one of many hurdles
facing proposed accord
to stem migrant flow
A decadeslong feud be-
tween Turkey and Cyprus
threatened to hold up the Eu-
ropean Union’s grand bargain
with Ankara to halt the flow of
migrants into Europe, the lat-
est in an array of legal, politi-
cal and practical obstacles fac-
ing the proposed accord.
By Valentina Pop
in Brussels and
Emre Peker in Istanbul
EU leaders are seeking to
complete this week a draft
agreement that stipulates that
Turkey take back all migrants
crossing illegally into the EU,
in return for more aid, visa-
free travel for Turkish citizens
in Europe and an acceleration
of Turkey’s EU membership
bid.
But the deal must be ap-
proved by all 28 EU countries,
a potential hurdle as member-
states weigh in with their
problems with the agreement.
“The objective is to conclude
the negotiations Thursday and
Friday this week, but we
aren’t there yet,” said Euro-
pean Council chief Donald
Tusk, on a Tuesday visit to Cy-
prus to shore up support for
the deal.
Cyprus became the most re-
cent EU member to voice ob-
jections on Tuesday, as the
country’s President Nicos An-
astasiades said his country
wouldn’t lift its veto on Tur-
key’s EU membership negotia-
tions until the Turkish govern-
ment fully recognized Cyprus
as a sovereign state—a condi-
tion set by the EU that Turkey
Ankara Says Syrian Kurdish Militants Trained Bomber
BY EMRE PEKER
ISTANBUL—Turkey blamed
Kurdish militants for a deadly
attack in the capital this week
and linked the woman it said
carried out the car-bombing to
Syrian Kurdish militants work-
ing over the border with the
U.S. against Islamic State.
Sunday’s car-bombing, the
second in Ankara in a month,
was the latest sign that insur-
gents are expanding their cam-
paign—and targeting civil-
ians—in apparent retaliation
for the state’s sweeping crack-
down on the Kurdistan Work-
ers’ Party, or PKK, which has
been designated a terrorist or-
ganization by Turkey, the Eu-
ropean Union and the U.S.
Ankara has been pressing
its Western allies to sever
links with the PKK’s cross-bor-
* *
European Council chief Donald Tusk, left, with Cyprus President Nicos Anastasiades on Tuesday.
still hasn’t met.
The two countries have
been embroiled in a frozen
conflict ever since Turkey in-
vaded the northern part of Cy-
prus in 1974, which nine years
later declared its indepen-
dence. Turkey is the only
country that recognizes the
north as independent. In re-
turn, Cyprus has blocked sev-
eral areas of negotiations—or
so-called chapters—in Tur-
key’s EU membership bid.
“It is unwarranted, counter-
productive and not to mention
unacceptable to shift the bur-
den of responsibility for the
migration crisis on my shoul-
ders or on the shoulders of the
Republic of Cyprus,” Mr. Anas-
tasiades said. He noted that
the timing was particularly
sensitive as reunification talks
between north and south of
the island country have en-
tered a critical phase.
der affiliate in Syria known as
the YPG, asserting that they
are all part of the same organi-
zation seeking to undermine
the Turkish state. But Syrian
Kurdish militants have
emerged as the most effective
ground force fighting Islamic
State over the past couple of
years.
Turkey’s Interior Ministry
on Tuesday blamed the bomb-
ing on Seher Cagla Demir, born
in 1992 in the eastern province
of Kars. It said she had joined
the PKK in 2013 and been
trained in Syria by the YPG.
The ministry said she drove
a bomb-laden vehicle into a
bus stop, killing at least 37
people, including herself, and
injuring more than 125.
A dozen people have been
detained in connection with
the bombing and the Interior
AN ICON JUST GOT LARGER
WORLD NEWS
Mr. Tusk denied putting any
pressure on Cyprus to lift its
veto on the chapters that it is
blocking. But several coun-
tries, notably Germany, are
keen on opening negotiations
on two of the chapters blocked
by Cyprus, focused on justice
and human rights.
The German minister for EU
affairs, Michael Roth, on Tues-
day said that opening chapters
“is not about political conces-
sions. It’s about opening a dia-
logue on what concerns us in
Turkey,” referring to Turkey’s
record of jailing journalists
and other media freedom is-
sues.
Under the draft plan out-
lined last week by EU leaders,
member countries would take
one Syrian refugee directly
from Turkey for each Syrian
refugee returned. The idea is
to discourage refugees from
paying smugglers to help them
Demonstrators held pictures of blast victims Tuesday in Ankara.
Ministry said the operation
was continuing.
No group has claimed re-
sponsibility for the blast.
Wednesday, March 16, 2016 | A3
Every migrant would need
to have a chance to file for
asylum in Greece, get his claim
assessed individually and be
returned to Turkey “only when
key legal safeguards are guar-
anteed” in Turkey, according
to the UNHCR. Turkey cur-
rently only partially applies
international refugee law,
granting temporary protection
only to Syrian refugees, not
other nationalities.
Ankara is also seeking visa-
free travel to Europe for Turk-
ish citizens. EU and Turkish
PETROS KARADJIAS/ASSOCIATED PRESS
leaders last week tentatively
agreed to the end of June as a
target date, provided that Tur-
key meets a set of 72 condi-
tions, including the full recog-
nition of Cyprus.
So far, only 19 of the crite-
ria have been fully met. June
is pretty unrealistic, said one
EU official familiar with the
talks. “It all depends on what
Turkey manages to do by then,
come to Europe illegally and, recognizing Cyprus, among
instead, motivate them to ap- other things,” the official said.
ply and wait for EU asylum in The EU official also said
Turkey. that a draft bill being debated
The swap, though, has in Turkish parliament that
drawn criticism from some would grant sweeping excep-
capitals and human rights tions over data privacy rights
groups. In addition, legal ques- on national security grounds
tions still need to be ironed could be a hurdle.
out to allow for migrants ar- The bill would also make it
riving illegally to Greece to be more difficult for Turkish po-
returned to Turkey, amid con- lice to cooperate with the EU
cerns about Turkey’s record on investigating cross-border
on press freedom and privacy. crimes, including on human
Spanish foreign minister trafficking rings—a key re-
José Manuel García-Margallo quirement both for visa-free
said on Monday that the draft travel and for the migration
proposal was “absolutely un- deal.
acceptable” and in breach of “The bill in its current form
EU and international law. still raises concerns,” EU Am-
In a legal assessment sent bassador Hansjorg Haber in
to leaders and seen by The Ankara wrote in a Feb. 4 letter
Wall Street Journal, the to Turkey’s justice minister,
United Nations High Commis- according to a copy seen by
sioner for Refugees said that the Journal. “Additional effort
EU and international law is needed to meet EU stan-
banned any mass returns. dards.”
and Syria highlights the gov-
ernment’s growing frustration
with its North Atlantic Treaty
Organization allies.
“Certain circles in our coun-
try and across the world are at
a crossroads: they will either
stand with us, or they will
stand with the terrorists,”
President Recep Tayyip Erdo-
gan said Monday, reiterating
his call to sever links with Syr-
ian Kurdish militants.
UMIT BEKTAS/REUTERS
Turkey has shelled Syrian
Kurdish militants for alleged
border violations and on na-
tional security grounds despite
pleas from to its allies in the
U.S.-led coalition against Is-
lamic State to stop.
Following Sunday’s attack,
That Turkey is definitively Turkey expanded its crack-
blaming the attack on Kurdish down against the PKK, detain-
militants seeking to carve au- ing more than 230 suspects in
tonomous enclaves in Turkey nationwide raids, and killing
THE NAVITIMER 46 mm
In Brussels
Home Raid
BY MATTHIAS VERBERGT
AND LAURENCE NORMAN
BRUSSELS—Four police of-
ficers were injured in a gun-
fight on Tuesday as Belgian
and French authorities con-
ducted an investigation into
the November Paris terror at-
tacks, Belgian authorities said.
An exchange of gunfire left
one suspect dead, national
broadcasters and local newspa-
pers reported. Police said one or
more people involved in the
shootout remained at large.
Police wouldn’t say if the
suspects remained in the
apartment or had fled the area
of Place Saint-Denis, a mixed
neighborhood where some
Muslim immigrants have made
their home.
The officers were slightly
wounded at the start of a raid
on an apartment in the southern
Brussels district of Forest at
about 2:30 p.m., said Marie Ver-
beke, a spokeswoman for the
Brussels-South police zone.
The police officers were
shot through the door when
they knocked on it, federal
prosecutors said.
Police were investigating if
the suspects may have fled the
apartment on rooftops after the
exchange of gunfire, and for
hours after the gunfight police
helicopters circled overhead.
Officials wouldn’t identify
the injured officers, but one
official said they were Belgian.
A spokesman for Belgium’s
interior minister said the raid
was linked to the Nov. 13 Paris
attacks, in which 130 people
were killed within a few hours.
more than 60 Kurdish mili-
tants during urban clashes in
the country’s southeast and in
airstrikes in northern Iraq, of-
ficials said.
The international wrangling
over Kurdish militias comes
amid a deteriorating security
and political background in
Turkey.
Hundreds of civilians, sol-
diers, police and militants have
been killed since a two-year
truce between the PKK and
Turkey collapsed in July.
“The PKK is expected to re-
sume its fighting with the ar-
rival of spring, and above all, in
the wake of the empowerment
of the Kurds in Syria, the Kurd-
ish equation now looks much
more challenging than it used
to,” said Wolfango Piccoli,
managing director at risk-con-
sulting firm Teneo Intelligence.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Wednesday, March 16, 2016
Testimony Points to Brazil Leader U.S. Eases
Rules on
Court statements of
top senator suggest
Rousseff knew about
shady Petrobras deal
SÃO PAULO—A top ruling
party senator accused Brazil
President Dilma Rousseff of
knowing about wrongdoing at
state oil company Petrobras,
the first time she has been
linked to a massive corruption
scandal threatening to topple
her government.
By Jeffrey T. Lewis,
Rogerio Jelmayer
and Luciana agalhaes
In plea-bargain testimony
released Tuesday by Brazil’s
Supreme Court, Sen. Delcídio
do Amaral of Ms. Rousseff’s
Workers’ Party said the presi-
dent was aware of all the de-
tails of the purchase of a
Texas oil refinery by Petróleo
Brasileiro SA, which is at the
center of the sprawling probe.
Prosecutors suspect Petro-
bras intentionally overpaid for
the refinery in 2006, generat-
ing kickbacks allegedly used to
Former President Is in Talks to Join Cabinet
BY PAULO TREVISANI
BRASÍLIA—Brazil’s polar-
izing ex-president, Luiz Iná-
cio Lula da Silva, was negoti-
ating a return to government
on Tuesday, a move that
could strengthen his legal
protections amid a sprawling
graft probe and bolster his
embattled successor, Dilma
Rousseff, according to people
familiar with the situation.
Mr. da Silva was in discus-
sions with Ms. Rousseff to
become the secretary of gov-
ernment, a cabinet post in
charge of bridging relations
between the administration
and congress, the people
said.
The former president’s
nomination wasn’t yet a
done deal and could be de-
railed, these people said.
It also wasn’t clear how
Mr. da Silva and Ms. Rousseff
would patch up their differ-
ences, for instance in eco-
nomic policy, a critical area
in which they have diverged,
with Mr. da Silva opposing
his successor’s austerity
measures, particularly her
efforts to overhaul the coun-
try’s pension system. The
charismatic former president
could also overshadow Ms.
Rousseff, they said.
The mere consideration of
Mr. da Silva’s return re-
flected the depths of Ms.
Rousseff’s woes as her ad-
ministration struggles with a
brutal recession, a damaging
bribery scandal and rising
calls for her impeachment.
On Sunday, Brazilians took
to the streets in the nation’s
largest-ever antigovernment
World
Watch
UNITED KINGDOM
Parliament Backs
Intelligence Overhaul
Prime Minister David Cam-
eron secured overwhelming sup-
port in the House of Commons
for controversial proposals to
overhaul Britain’s spying powers,
paving the way for the bill to be
passed by the end of the year.
In a parliamentary vote, 281
lawmakers voted in favor of the
bill and 15 voted against. The bill
must now clear the House of
Lords before coming into law.
The Investigatory Powers Bill
would bring major changes to
the use and oversight of investi-
gatory powers. The government
says it needs to keep pace with
advancements in technology to
combat terrorism and other
crimes.
The bill was met with opposi-
tion by parliamentarians, who
said it was overreaching and
vague. Civil-liberties groups have
said the bill would allow mass
surveillance without sufficient
oversight.
The bill would grant authori-
ties the right to get information
about what websites individuals
have visited, including apps or
social media accessed through a
pay for millions of dollars of
bribes and personally benefit
some Petrobras executives, ac-
cording to the plea documents.
Ms. Rousseff’s office had no
immediate comment on the re-
lease of the testimony. She has
previously denied having any
knowledge of wrongdoing in-
volving the refinery or Petro-
bras.
The court documents re-
leased Tuesday also said Ms.
Rousseff pressured Justice
Minister Eduardo Cardozo to
free jailed suspects in the
graft probe. Mr. Cardozo left
his post in late February, say-
ing he was weary of “political
and personal pressure,” with-
out being more specific.
Mr. Cardozo couldn’t be
reached to comment Tuesday.
Nicknamed Operation Car
Wash, the Petrobras corrup-
tion probe has toppled one
major political and business
figure after another over the
past two years in an investiga-
tion that has crept ever closer
to the presidential palace.
Prosecutors say crooked
suppliers collaborated with
politicians to siphon billions
from the company to help
bankroll the ruling Workers’
Former President Luiz Inácio Lula da Silva greeted supporters Sunday at his home near São Paulo.
protest to demand her
ouster, turning up the heat
on lawmakers to move for-
ward with impeachment pro-
ceedings that have been
stalled for months. Ms. Rous-
seff is accused by lawmakers
of manipulating public ac-
counts to mask a growing
deficit, allegations she de-
nies.
Bringing Mr. da Silva into
active service would be a
gambit aimed at repairing
links between the ruling
Workers’ Party, known as the
PT, and leaders of allied par-
ties in congress who have
distanced themselves from
smartphone. It also spells out
the rules that govern authorities’
powers to hack computers to
gain access to communications.
—Jenny Gross
VATICAN
Date Set to Canonize
Mother Teresa
The Vatican said Pope Francis
will declare Mother Teresa of
Kolkata a saint on Sept. 4, one
day before the 19th anniversary
of her death.
Pope Francis issued the de-
cree setting the date of the late
missionary’s canonization at a
meeting with cardinals in the
Vatican’s Apostolic Palace. The
Vatican later confirmed that the
pope would perform the cere-
mony in Rome.
The event will likely prove a
highlight of the current Holy
Year of Mercy, which the pope
inaugurated at the Vatican on
Dec. 8 and which will conclude
on Nov. 20. In April 2014, the
double canonization of Popes
John Paul II and John XXIII in St.
Peter’s Square drew an esti-
mated 800,000 pilgrims to
Rome. —Francis X. Rocca
ITALY
Hostage’s Family
Seeks Death Details
The family of Italian hostage
Giovanni Lo Porto, killed in a U.S.
antiterrorism drone strike in
Pakistan in January 2015, for-
mally appealed to U.S. President
Barack Obama, calling for com-
HK JP KO ML SI IN UK
WORLD NEWS
President Dilma Rousseff spoke last week in the capital, Brasília.
Party, or PT, and its congres-
sional allies, allegations the
parties deny.
The testimony of Mr. do
Amaral, the PT’s former leader
in the Senate and a member of
Ms. Rousseff as her popular-
ity has sunk since her re-
election in 2014.
Mr. da Silva is a PT
founder and his popularity
was key to electing Ms.
Rousseff in 2010.
A top post could shield Mr. da Silva from
potential prosecution in a corruption probe.
“There has been great
pressure from the PT for him
to join the administration,”
said PT Sen. Paulo Paim, an-
other party founder who said
he supports Mr. da Silva’s re-
pensation and detailed docu-
ments on the operation that led
to Mr. Lo Porto’s death, together
with American hostage and fel-
low aid worker Warren Wein-
stein.
Lawyers representing Mr. Lo
Porto’s family said the formal re-
quest filed to the U.S. adminis-
tration is just one of the legal
steps aimed at seeking the “full
truth” about the death of Mr. Lo
Porto.
Messrs. Weinstein and Lo
Porto were killed in January
when a Central Intelligence
Mother Teresa, seen with Pope John Paul II at the Vatican in 1997, will be canonized on Sept. 4.
FR MN PR THE WALL STREET JOURNAL.
far because it’s the most hard
hitting….It involves President
Dilma for the first time in ir-
regularities,” said Carlos Melo,
Cuba Trade
a political analyst at business
school Insper in São Paulo.
“The chances of her impeach-
And Travel
ment, I would say, are at about BY CAROL E. LEE
70%.” AND FELICIA SCHWARTZ
Ms. Rousseff is facing im-
peachment on separate WASHINGTON—The Obama
charges that she manipulated administration unveiled some
government accounts to hide a of the most extensive changes
growing budget deficit. She to U.S. regulations on trade,
has denied those allegations. financial transactions and
The release of the court travel to Cuba in decades, in-
testimony comes two days af- cluding a provision that effec-
ter Brazilians took to the tively lifts the long-standing
streets in the largest antigov- ban on American tourists vis-
ERALDO PERES/ASSOCIATED PRESS
ernment protest in the coun- iting the country.
try’s history, demanding the The new measures, pre-
president’s ouster and putting sented Tuesday, ease restric-
pressure on lawmakers to tions on American financial
move forward with the im- institutions to significantly
peachment proceedings, which broaden Cuba’s access to the
have been stalled for months. global economy. They allow
Arrested in November for Cuban citizens to earn sala-
his alleged involvement in the ries from U.S. companies and
case, Mr. do Amaral chose to to have American bank ac-
cooperate with authorities, counts for limited purposes,
the government’s inner circle, seeking leniency. He was re- as well as permit the use of
was a major blow to Ms. Rous- leased to home detention last U.S. dollars in financial trans-
seff and could strengthen calls month. actions with Cuba.
for her ouster. Mr. do Amaral’s lawyer de- The changes, which the Cu-
Mr. do Amaral’s “plea bar- clined to comment on his cli- ban government has pushed
gain is the most important so ent’s testimony. for, come five days before
President Barack Obama is
scheduled to arrive in Havana
for a historic trip designed to
advance his policy of restor-
ing relations with the country.
Mr. Obama will be the first
Party and its allies. sitting U.S. president to visit
Mr. da Silva hasn’t been Cuba in nearly 90 years.
charged in the Petrobras While the U.S. embargo on
case. He has strenuously de- Cuba remains in effect unless
nied wrongdoing. Congress votes to lift it, these
Joining Ms. Rousseff’s executive changes further
cabinet would help shield chip away at its impact.
him from any potential pros- The White House hopes
ecution, since ministers and granting Cuba access to the
other sitting officials in Bra- dollar will spur changes from
zil can be tried only by the the Cuban government, includ-
nation’s Supreme Court. The ing allowing foreign firms to
so-called Operation Car Wash hire Cubans directly and abol-
case is being driven by fed- ishing a 10% penalty on ex-
eral prosecutors who would changing dollars, said Ben
have to petition the nation’s Rhodes, a deputy national-se-
attorney general to take up curity adviser who led Mr.
the case against Mr. da Silva. Obama’s rapprochement effort
A spokesman for Mr. da with Cuba.
Silva declined to comment on “The very restrictions
his possible ministerial job. we’ve imposed on Cuba disin-
Despite the corruption centivized the Cubans from
LEO BARRILARI/ZUMA PRESS
probe, Mr. da Silva remains a making those changes be-
towering figure in Brazilian cause they were unable to ac-
politics. His political cha- cess those types of interna-
risma, some believe, could tional transactions or unable
help mend fences with coali- to process dollars on the is-
tion parties, particularly the land,” he said. “So part of
Brazilian Democratic Move- what we’re doing is creating
ment Party. additional incentives for Cuba
The PMDB is Brazil’s larg- to continue to evolve its eco-
turn. “He has a great power est political party and an ally nomic model going forward.”
to bring people together.” to Ms. Rousseff since 2010. It is Mr. Obama’s decision
The move carries risks. The PMDB’s Michel Temer to allow individuals to legally
Mr. da Silva is under investi- has been her running mate travel to Cuba, however, that
gation in the corruption for both of her successful is poised to have the most ob-
scandal centered on state oil presidential runs. vious effect on average Amer-
firm Petróleo Brasileiro SA, On Saturday, the PMDB icans, who for more than five
said it was considering decades have been barred
breaking up the alliance. from visiting Cuba as tourists.
It is unclear whether Mr. Under the new provision,
da Silva could indeed make American travelers can travel
peace within the coalition. to Cuba on their own and jus-
When asked on Monday if tify a visit simply by interact-
or Petrobras. Prosecutors say the former president’s return ing with Cubans or touring a
as president he helped direct to Brasília would reduce the museum while there.
a graft ring that skimmed possibility of a breakup, “This is essential to what
billions of dollars from the PMDB Sen. Romero Jucá we’re trying to do with our
company to illegally fund said: “In my view, not. But I policy of engagement,” Mr.
campaigns for the Workers’ can’t talk for all others.” Rhodes said.
Agency drone opened fire on an lies but said he had no further tion of a ballistic-missile war-
al Qaeda compound close to
Pakistan’s border with Afghani-
comment. —Giada Zampano head’s ability to withstand the
heat and pressure of its descent
stan. U.S. officials said the CIA
didn’t know the hostages were
NORTH KOREA
Kim Claims Advance
to target, the nation’s state
news agency reported. The date
inside the compound. of the test wasn’t given.
The two families have been In Missile Testing Photos on the front of North
seeking compensation from the Kim Jong Un claimed a key Korea’s main newspaper showed
U.S. government but Washing- advance in ballistic-missile tech- Mr. Kim watching what the re-
ton has resisted their requests. nology, and the dictator called port called a warhead tip being
In response to the announce- for further missile and nuclear- blasted with heat at a test stand.
ment from Rome, White House warhead tests in a short time, Mr. Kim said the successful
National Security Council the latest in a string of recent simulation showed North Korea
spokesman Ned Price acknowl- threats aimed at creating fear of had mastered a significant tech-
edged the administration’s war in the U.S. and South Korea. nical step in developing an effec-
pledge to compensate the fami- Mr. Kim observed a simula- tive ballistic-missile capability.
He called for further field tests
to improve Pyongyang’s nuclear
missile threat. —Alastair Gale
GERMANY
Crime, Not Terror,
Linked to Car Blast
A car explosion that killed a
man driving on a busy Berlin
street on Tuesday morning is
believed to be linked to orga-
nized crime rather than terror-
ism, a spokesman for the Berlin
police said.
The prosecutor’s office identi-
fied the driver as a 43-year-old
man with Turkish nationality
who had been known to Berlin
police up until 2008 for being in-
volved in the drug scene, dis-
semination of counterfeit bills
and illegal gambling.
ASSOCIATED PRESS
The prosecutor’s spokesman
said investigators are looking
into whether the man was the
target of the attack.
—Ruth Bender
and Zeke Turner
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, March 16, 2016 | A5

WORLD NEWS

Bank of Japan Holds Fire Suu Kyi Proxy

Central bank leaves its
policies unchanged
Is Confirmed as
but downgrades view
of the economy Myanmar Leader
BY TAKASHI NAKAMICHI BY SHIBANI MAHTANI “This is a victory for the
AND MEGUMI FUJIKAWA AND MYO MYO people of this country,” Mr.
Htin Kyaw said in a brief com-
TOKYO—The Bank of Japan NAYPYITAW, Myanmar— ment to reporters carried by
left its major monetary poli- Lawmakers voted to confirm the Associated Press.
cies unchanged Tuesday but Htin Kyaw, a trusted confidant The outcome sets up a
downgraded its view of the of Aung San Suu Kyi, as Myan- tricky balance of power be-
economy, opening the door to mar’s president. tween Mr. Htin Kyaw, a 69-
further action in the months The outcome of Tuesday’s year-old writer whose chief
ahead. vote was never in doubt as Mr. asset is the deep trust that
The decision followed the Htin Kyaw was elected by a Ms. Suu Kyi places in him, and
European Central Bank’s huge majority of lawmakers Mr. Myint Swe, who doesn’t
moves last week to cut nega- who won November’s elections come from the reformist wing
KIYOSHI OTA/BLOOMBERG NEWS

tive rates further and expand in which Ms. Suu Kyi’s Na- of the military and is close to
its asset-buying program, un- tional League for Democracy former military strongman
derscoring the struggles major swept both houses of parlia- Than Shwe.
central banks are facing trying ment, ending a half-century of Many of Myanmar’s 51 mil-
to counter slowing global military dominance. lion people view Ms. Suu Kyi,
growth. Mr. Htin Kyaw is expected who has long embodied their
The BOJ stood pat despite to act as Ms. Suu Kyi’s proxy struggle for democracy, as
the trouble facing Abenomics, while she remains barred by a their rightful leader and her
Prime Minister Shinzo Abe’s Mr. Kuroda said Tuesday the BOJ needed more time to assess the effects of its negative rate policy. military-imposed constitution party retains the goal of see-
growth program. Conditions from becoming head of state.
have improved little—some target of 2%, with options in- problem” and “developments bank savings into investments. The military retains a re-
have worsened—since the BOJ cluding purchasing more as- in the U.S. economy and the The central bank also said served quarter of seats in par-
Hard-line former
decided in late January to im- sets and pushing rates further influences of its monetary-pol- it would ease the burden of liament. Its members rallied general to be vice
pose negative rates, an un- into negative territory. icy response to them on the negative rates on commercial solidly behind a hard-line for-
orthodox step seen as a des- BOJ Governor Haruhiko global financial markets.” banks if they borrow more mer general, Myint Swe, en-
president, setting up
perate attempt to ignite Kuroda said during a news The latter phrase referred from the BOJ’s special loan suring his selection as the potential for tension.
growth. conference that the negative to the possibility that the U.S. programs. more powerful of two vice
Japan’s economy, which rate policy was lowering bor- Federal Reserve will continue The BOJ in late January in- presidents. Henry Van Thio, an
shrank in the fourth quarter, is rowing costs but the central raising rates this year if the troduced a rate of minus 0.1% NLD lawmaker, was chosen as ing her become president. The
expected to grow only slightly, bank needed more time to U.S. economy strengthens, de- on some bank reserves, and second vice president. military, which has veto power
at best, during the current measure its effects, particu- spite potential damage to said it would cut the rate fur- In a historic moment in se- over constitutional changes
one. The central bank said ex- larly on the real economy. other countries. ther as necessary. By charging lecting the country’s most through its reserved seats in
ports and production “have Still, he said the central Any resulting global market banks for parking cash at the democratic government since parliament, has indicated it
been sluggish due mainly to bank wouldn’t wait too long to turmoil might cause Japan’s BOJ, officials aim to drive bor- the military seized power in would be a few years before
the effects of the slowdown in take additional action if the inflation trend to be “nega- rowing costs lower in the 1962, lawmakers cast paper the issue could be considered.
emerging economies,” and risks to the economy war- tively affected,” the BOJ said, hope of spurring consumption ballots in careful proceedings The military’s choice of Mr.
added the word “trend” to its ranted. “I don’t think we have in a phrase that could justify and investment. in the capital. Myint Swe as vice president
description of Japan’s recov- to wait until after we know further easing. The BOJ quickly faced a The first to cast a ballot casts some doubt on the will-
ery. the full impact” of negative Some slight adjustments to backlash over the negative Tuesday was Ms. Suu Kyi, 70, ingness of the generals to co-
In downgrading its assess- rates, he said. its negative rate policy indi- rate, leaving Mr. Kuroda and wearing a navy blue tradi- operate with Ms. Suu Kyi’s
ment, the BOJ may have set Japanese stocks fell after cated the BOJ is sensitive to a other central-bank officials tional longyi and with signa- party. Mr. Myint Swe was a
the stage for further easing at the BOJ’s decision was an- backlash at home. It said it scrambling to explain them- ture flowers in her hair. Hun- senior member of the military
its next policy meeting in nounced. The Nikkei Stock Av- would exempt from the nega- selves in recent weeks. dreds of members of her party junta that drove the Southeast
April, said Yusuke Sakai, se- erage lost 0.7% after rising tive rate what is known as The BOJ policy board voted followed her, many of them Asian country into isolation
nior trader at T&D Asset Man- 1.7% Monday. money-reserve funds, or cash 7-2 to keep the rate on some former political prisoners who and poverty before a civilian
agement. “This may be a stra- The yen rose against the parked at stock brokerages by commercial banks’ reserves at spent decades in jail. government, composed mostly
tegic move ahead of the April U.S. dollar, trading as low as individual investors. There minus 0.1%. It also voted 8-1 to Soldiers in military uni- of former generals, was in-
meeting,” he said. ¥113.02 in the afternoon in To- have been concerns that pe- leave the size of the asset-pur- forms formed a highly visible stalled in 2011.
The BOJ also said inflation kyo, versus ¥113.79 late Mon- nalizing these depositors chase program, previously its contrast with the civilian law- Last year, Mr. Myint Swe
expectations have recently day in New York. would discourage consumers primary policy tool, un- makers. authorized the use of a civilian
weakened. It repeated its In its policy statement, the from buying stocks, in a blow changed at ¥80 trillion ($705 Mr. Htin Kyaw captured 360 militia to crack down on stu-
usual statement that it will BOJ said Japan’s economy still to the government’s long- billion) a year. votes, far above the 213 for dent protesters in downtown
take additional easing steps if faced risks from overseas, in- stated goal of encouraging —Kosaku Narioka Mr. Myint Swe with Mr. Thio Yangon, tactics that evoked
necessary to meet its inflation cluding the “European debt people to shift more of their contributed to this article. trailing at 79. those of the military era.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A6 | Wednesday, March 16, 2016
China Aims Cash, Coercion at Labor Unrest
Government pursues
strategy of ‘buying
stability’ as prospect
of more layoffs looms
BY CHUN HAN WONG
AND MARK MAGNIER
BEIJING—A protest by Chi-
nese coal workers over unpaid
wages drew a swift, expected
response: payoffs to get them
off the streets and threats of
police action if they don’t. The
effort underscores the govern-
ment’s long-standing worries
about labor strife and its newly
cautious approach to restruc-
turing unprofitable state firms.
Unrest in the northeastern
city of Shuangyashan appeared
to ease as Longmay Mining
Holding Group Co., a huge em-
ployer, started disbursing some
back pay on Monday, workers
said. Hundreds took to the
streets there last week, draw-
ing a large police presence, af-
ter the provincial governor said
Longmay didn’t owe its miners
wages.
The response by Longmay
and Heilongjiang province Gov.
GINGER BRUNER
An artwork known as ‘That Painting,’ which hangs in Vickie’s Diner in Las Vegas, intrigues fans.
KITSCH
Continued from Page One
cried out of happiness when
she saw the makeover, particu-
larly because the show had re-
placed flooring that had long
been overdue for refreshment.
She filmed a joyous unveiling
scene and danced on the coun-
ter with co-host Ty Penning-
ton, the show’s on-air designer.
“It’s awesome,” she said on
the episode which aired last
week, as she walked in amid a
crowd including an Elvis im-
personator and women
dressed in showgirl costumes.
After the cameras left, Ms.
Kelesis said she began to get
phone calls and emails from
fans concerned that That
Painting had disappeared.
She put it back above one of
the booths where customers
gather to snap selfies.
“This is mine,” Ms. Kelesis
said of That Painting. “Nobody
is going to take it away.”
That Painting juxtaposes a
soothing trees-and-waterfall
BREACH
Continued from Page One
nouncement until last week.
The Fed declined to com-
ment Tuesday. It has said it is
working with Bangladesh to
investigate the transfer and
said none of its systems were
compromised.
Interviews with several offi-
cials at Bangladesh’s Finance
Ministry and its central bank
depict a well-planned interna-
tional caper spanning at least
four countries.
The breach began on a
quiet Friday last month, when
a series of payment instruc-
tions arrived at the New York
Fed seeking the transfer of
nearly $1 billion out of the
Bangladeshi account.
The transfer requests,
which the Fed says were fully
Lu Hao, who later said he had
misspoken about the wage ar-
rears, mirrored past efforts by
Chinese officials to ease labor
unrest with a mix of cash, coer-
cion and pledges of redress.
Chinese call the strategy “buy-
ing stability,” part of the gov-
ernment’s well-worn playbook
for defusing public anger.
Beyond being a troubled
coal company, Longmay is a
test case for government re-
solve in carrying out a key eco-
nomic initiative—the restruc-
turing of uncompetitive state
industries whose drain on re-
sources is impeding a transi-
tion to an economy driven
more by services and consum-
ers.
Many Longmay workers in
Shuangyashan are among the
1.8 million steel and coal work-
ers Beijing plans to lay off over
the next five years. The re-
trenchment, and the allocation
of 100 billion yuan ($15.4 bil-
lion) in restructuring funds to
pay for workers’ severance, re-
training and relocation, are
part of a five-year economic
program Chinese lawmakers
are set to adopt at the end of
their annual session in Beijing
scene, reminiscent of the late
artists Bob Ross or Thomas
Kinkade, with the startling im-
age of a long-haired man bran-
dishing two shotguns.
What is the allure?
“I suppose we wouldn’t nec-
essarily put it in a museum to-
day, but one way to under-
stand it is as a physical object
that people gather around to
create an imagined community
of what it means to be from
Las Vegas,” said Susanna New-
bury, an assistant professor of
art history at the University of
Nevada Las Vegas.
She likened it to the Ameri-
can painting tradition that
evokes traditional morals or
values through landscapes.
The diner painting is all-
hours fodder for amateur anal-
ysis over giant plates of eggs
and hash browns. Is the man
in the painting Clint Eastwood
or John Travolta? Is the work
hideous or fabulous?
“I argue with people all the
time,” said Ginger Bruner, a lo-
cal tuba player and Vickie’s
regular. “I take the Clint East-
wood side.”
authenticated with the correct
bank codes, asked to move the
money to private accounts in
the Philippines and Sri Lanka
and appeared to come from
the Bangladeshi central bank’s
servers in the capital, Dhaka.
But Friday is the weekend
in Bangladesh and the central
bank’s offices were closed. By
the time officials at Bangla-
desh Bank returned to work,
five requests moving about
$100 million had gone
through. Further transfers to-
taling roughly $850 million
were blocked after the Fed
raised a money-laundering
alert, a spokesman for Bangla-
desh Bank said. The fact that
the money was being wired to
personal bank accounts in the
Philippines rang alarm bells.
The $81 million that did
leave the bank for the Philip-
pines ended up in the account
of a local businessman before
FROM PAGE ONE
on Wednesday.
Economists have said China
needs deeper cuts to shed ex-
cess industrial capacity and di-
vert labor and capital to more
productive industries.
Instead, the government is
encouraging businesses to keep
workers on the payrolls, often
at reduced hours and pay,
avoiding fueling a continuing
surge in labor unrest at the
cost of dragging out an eco-
nomic transition.
“It’s not so easy for the local
governments to let go of these
zombie companies,” said Jenny
Huang, a Shanghai-based ana-
lyst at Fitch Ratings.
Companies and government
agencies are taking a variety of
steps to forestall unemploy-
ment. In one measure expanded
last year, businesses may apply
for refunds from the govern-
ment unemployment-insurance
fund for use in retaining em-
ployees or retraining them.
Longmay’s employment rolls
are huge for Heilongjiang, a
province abutting Russia with
legions of struggling state busi-
nesses. Longmay has about
224,000 workers, according to
provincial officials.
It was actually painted only
a decade or so ago by a deliv-
ery man at the diner, said Ms.
Kelesis, then a waitress whose
uncle had once owned the
diner under another name. She
doesn’t recall the last name of
the painter, who left That
Painting and several others be-
fore he parted and told her she
could keep them. They were
hung amid a decidedly uncu-
rated collection of art and
photos amassed over decades.
He told her the image was
supposed to be Clint East-
wood, but didn’t explain why,
she says.
That Painting has left
scores here confused and even
created a minor legal spat.
A few years ago, CafePress,
the online retailer, took down
a page of T-shirts featuring
That Painting Ms. Hayward set
up because it said it could be
infringing on the copyright of
the Clint Eastwood Western
“The Outlaw Josey Wales.”
Ms. Hayward, an elections
disclosure and ethics attorney
who grew up in Las Vegas and
now lives in California, pro-
making its way to at least two
local casinos, the executive di-
rector of the country’s Anti-
Money Laundering Council, a
government task force, said at
a hearing at the Philippine
Senate on Tuesday.
Julia Bacay-Abad, executive
director of the Anti-Money
Laundering Council, said the
money had apparently been
used to buy gambling chips.
The council’s investigation
ended at the casino’s doors,
however. Gambling facilities
aren’t covered by the Philip-
pines’ anti-money laundering
law.
“Manila has returned only
$68,000 of the money which
was left in the bank accounts,”
said a Bangladesh Bank official
close to the investigation.
“Whoever planned it had
thought well ahead.”
The $20 million transferred
to Sri Lanka went to the ac-
Labor Pains
Incidents of unrest among Chinese workers are proliferating as
China’s economy slows.
Number of strikes, protests and
other job actions by workers
3,000
First Full
quarter year
2,000
1,000
0 0
2012 ’13 ’14 ’15
*Through March 12
Sources: China Labour Bulletin (job actions); National Bureau of Statistics (GDP)
Heilongjiang’s governor, Mr.
Lu, cast Longmay as ripe for
restructuring, given that it uses
48 workers for every 10,000
tons of coal it produces, three
times the national average.
While attending the legislative
session in Beijing this month,
he said Longmay must make
“painful” cuts, but expressed
confidence those laid off could
find work.
tested in a response email in
2014. “My design is a photo of
a truly awful painting, which
hangs on the wall of a diner in
Las Vegas,” she wrote. “Sev-
eral of us who go there regu-
larly have decided this mon-
strosity is worth celebrating.”
A CafePress representative
agreed to put the page back in
December 2014, explaining, “It
may be, as you described, a[n]
Eastwood/Travolta-esque gun-
slinging ‘everyman.’ ”
Brian Paco Alvarez, a cura-
tor for online retailer Zappos,
an arts commissioner for the
city of Las Vegas and a fan of
That Painting, said the appeal
is difficult to explain. “It’s so
random,” he said. “I think it’s
just become a sacred oracle. ”
Fans said they aren’t sur-
prised that design and renova-
tion experts wouldn’t under-
stand its significance, but that
is precisely what makes That
Painting so important to them.
“It wasn’t something some-
body decided was beautiful
and had to be there,” Ms. Hay-
ward said. “There’s a lot of ac-
cidental wonderful stuff.”
count of a newly formed non-
governmental organization,
according to the officials in
Dhaka.
The Sri Lankan bank han-
dling the account reported the
unusual transaction to the
country’s central bank under
that country’s money-launder-
ing laws, and authorities re-
versed the transfer.
Swift uses a multilayered
process to authenticate the fi-
nancial institutions that are
sending and receiving millions
of messages each day between
one another. A spokeswoman
said the messaging system’s
core services hadn’t been af-
fected, and said Swift was
working with Bangladesh Bank
“to resolve an internal opera-
tional issue at the central
bank.”
—Cris Larano in Manila and
Katy Burne in New York
contributed to this article.
* *
GDP growth, change from
previous year
15%
10
5 took place, but declined to
’16* 2012 ’11 ’12 ’13 ’14
THE WALL STREET JOURNAL.
Mr. Lu showed reporters a
promotional film about Hei-
longjiang that featured upbeat
reviews of its dairy-farming
and tourism sectors, which of-
ficials are earmarking to ab-
sorb laid-off workers. He said
Longmay didn’t owe any wages
to its miners, even though the
firm has problems paying its
other employees.
His remarks angered many
SYRIA
Continued from Page One
that the Kremlin is trying to
pressure Syrian President
Bashar al-Assad to engage
fully in the process.
Diplomats in Geneva cau-
tiously cited progress in indi-
rect negotiations between the
main warring parties.
U.N. envoy Staffan de Mis-
tura has met separately with
both delegations, and subse-
quent meetings over the next
week and a half should focus
on the issues at the heart of
the Syrian conflict: forging a
compromise for a political
transition.
The Syrian opposition dele-
gation said it outlined for him
its broad views on how to
move forward, a day after the
government delegation offered
its own plan.
The government wants to
create a national unity govern-
ment drawing in the opposition
and leaving the fate of Presi-
dent Assad up to voters. The
opposition wants a transitional
body with executive powers
that would strip Mr. Assad of
authority and ultimately see
him out of power.
Mr. de Mistura wouldn’t go
into the details of either plan
Tuesday, but he said he felt a
new sense of urgency to resolve
the crisis. “I do feel there is a
difference,” he told reporters.
Mr. Putin intervened in Syria
last fall with an aim of saving
the Syrian government. With
regime forces consolidating
gains, Western and Arab diplo-
mats and officials said Moscow
had become frustrated in recent
weeks with what they described
as Mr. Assad’s continued defi-
ance toward the peace process.
U.K. Foreign Secretary
Philip Hammond expressed
skepticism about the Kremlin’s
surprise withdrawal, question-
ing whether Russia was back-
ing a genuine political transi-
tion. “It is worth remembering
that Russia announced with-
drawal of forces in Ukraine,
which later turned out merely
to be routine rotation of
forces,” Mr. Hammond said.
U.N. Secretary-General Ban
Ki-moon sought to raise the
pressure on all sides, reiterating
his call for the Security Council
to authorize an investigation of
war crimes in Syria by the In-
ternational Criminal Court.
It wasn’t clear how many
Russian troops and aircraft
would remain in Syria. Kremlin
spokesman Dmitry Peskov said
Monday evening that Russia
would maintain the military
air base it built up last year in
Hmeimim, near the port city of
A Russian Su-34 bomber landing after returning from Syria at an
air base near the western Russian city Voronezh on Tuesday.
THE WALL STREET JOURNAL.
workers in Shuangyashan, a
city of 1.5 million people where
some of Longmay’s 40 or so
mines are located. Crowds
started gathering in front of
government and Longmay of-
fices there on March 9, swelling
as the week unfolded, accord-
ing to photos, videos and wit-
ness accounts shared by work-
ers on social media.
A police officer at Shuang-
yashan’s public-security bureau
confirmed that the protests
elaborate. Spokesmen for Long-
may and the Heilongjiang gov-
ernment didn’t respond to re-
’15 quests to comment.
After an emergency meeting
Saturday between Mr. Lu and
other Heilongjiang officials to
discuss Longmay, the govern-
ment took a different tack. Mr.
Lu told Chinese media he made
a “mistake” about Longmay’s
arrears. The company’s Sh-
uangyashan unit committed to
paying two months of back
wages to miners, as well as
other benefits, as requested by
local authorities.
—Kersten Zhang
and James T. Areddy
contributed to this article.
Latakia, and a decades-old na-
val installation at Tartus.
The Assad regime’s next
steps also aren’t clear. It hasn’t
reclaimed from rebels all of the
territory it sees as important,
and it isn’t clear if it can do so
without Russian firepower.
Regular Syrian troops are
worn thin after five years of
conflict, and many military-
aged males fled as refugees to
Europe to avoid conscription.
The army relied increasingly
on Shiite paramilitaries from
Iraq, Lebanon’s Hezbollah, and
Afghanistan to drive the most
difficult ground operations.
The regime “is confident
and cocky, but they were over-
stretched—no question about
that,” a Western diplomat
tracking the war in Syria said.
Syrian opposition activists
on Tuesday marked what many
consider the fifth anniversary
of the antiregime uprising.
Mostly peaceful protests then
were met with a regime crack-
down that degenerated into a
war that has killed more than
250,000 people and displaced
roughly half the population,
creating more than four mil-
lion refugees.
Rebels and activists cele-
brated news of the withdrawal.
“Many people here think it’s a
position that will strengthen
the opposition,” said Hadi Ab-
dullah, an activist in Idlib
province. “Now we’ll have
maybe two or three jets flying
in the sky and bombing us, not
12 or 13 at a time.”
Mr. Abdullah said rebels in
Idlib fired their guns in the air
to celebrate the news all night
Monday.
Observers have long said
Mr. Putin aimed to use the
Syria campaign as a way to
end Russia’s international iso-
lation, by offering a common
front against Islamic State,
which controls territory in
both Syria and Iraq.
But while the Kremlin cast
its air war as a counterterror
campaign, U.S. and Western
officials complained that Rus-
sian warplanes also targeted
relatively moderate Syrian op-
position groups.
“A sizable drawdown could
mean that Russian President
Putin calculates he has gotten
his maximum military bang for
the buck in Syria, and that
anything further would en-
counter diminishing returns,”
said Frederic Hof, senior fellow
at the Atlantic Council. “Sav-
ing Assad from defeat and per-
haps making him impervious
to demands that he step aside
are no small feats.”
—Asa Fitch in Geneva,
Thomas Grove in Moscow
and Jenny Gross in London
contributed to this article.
OLGA BALASHOVA/ASSOCIATED PRESS
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Agency Releases Painkiller Guidelines
CDC seeks to limit
prescriptions of opioid
medications amid
abuse, overdose deaths
BY BETSY MCKAY
The Centers for Disease
Control and Prevention re-
leased long-awaited guidelines
Tuesday to limit prescriptions
of opioid painkillers, the over-
use of which has contributed
to a pervasive and deadly epi-
demic in the U.S., the agency’s
director said.
The guidelines, which are
voluntary, urge primary-care
clinicians—doctors, physician
assistants and nurse practitio-
ners—to offer patients alterna-
tive treatments for chronic
pain, such as nonopioid pain-
killers like ibuprofen and physi-
cal therapy. The guidelines also
recommend prescribing the
lowest effective dosage possi-
ble to patients who do need
opioid drugs and monitoring
each patient carefully because
the drugs are highly addictive.
The CDC also suggests lim-
iting opioid prescriptions for
patients suffering short-term
acute pain to three days or
fewer in most conditions and
says that more than seven
days’ worth of opioid drugs
“will rarely be needed.”
“If you’re prescribing an
opiate to a patient for the first
time, that’s a momentous deci-
sion,” CDC Director Tom Frie-
den said in an interview. “That
may change that patient’s life
for the worse forever. So
you’ve really got to think care-
fully before doing it.”
“What we’re trying to do
GOP Escalates Fight Over Clinton’s Records
BY BYRON TAU
The Republican National
Committee is escalating its le-
gal battle against the State De-
partment, filing four more law-
suits for records related to
former Secretary of State Hil-
lary Clinton’s time in office.
The suits, filed in U.S. Dis-
trict Court in Washington on
Monday, seek a wide variety of
records from the State Depart-
ment, including visitor logs for
Mrs. Clinton’s office, training
documents on the handling of
classified information and
communications between de-
partment officials and the
Clinton family foundation. All
four lawsuits cite the Freedom
of Information Act—the law
that gives the public access to
executive-branch records.
“For too long the State De-
partment has been running in-
terference for Hillary Clinton
by blocking our requests, a
stance which disregards the
rights of voters asking ques-
tions in a presidential-election
year about how she conducted
herself as secretary of state,”
RNC Chairman Reince Priebus
said. “These lawsuits are in-
tended to expedite the release
of records covered under FOIA
that will allow Americans to
hold Hillary Clinton account-
able.”
The lawsuits come on top of
Retail Sales Declined in February—and January
BY JEFFREY SPARSHOTT
American consumers are
showing renewed signs of cau-
tion amid continued financial-
market volatility, clouding the
outlook for a segment of the
economy that had been a
bright spot.
U.S. retail sales fell in Feb-
ruary and figures for January
were revised down sharply
amid a drop in spending on
gasoline and autos, according
to Commerce Department data
released Tuesday.
Sales at retail stores and
restaurants fell 0.1% from the
prior month to a seasonally
adjusted $447.31 billion in Feb-
ruary, the report said. January
retail sales dropped 0.4%, ver-
sus the initially reported 0.2%
increase.
The latest snapshot of con-
sumer spending recasts what
had seemed a more upbeat
start to 2016.
“This year seems to have
gotten off to an especially
wobbly start in terms of the
economy,” Michael O’Sullivan,
president and chief operating
Federal health officials Tom Frieden and Anthony Fauci at a congressional hearing last month in Washington.
with this guideline is chart a
safer course that allows pa-
tients with severe pain to be
treated but recognizes that for
most patients with chronic pain,
the risks of prescription opiates
will far outweigh the uncertain
benefits,” he said. While opioid
drugs are effective for short-
term pain, evidence is lacking to
show that the drugs control
chronic pain effectively, he said.
The CDC was under pressure
Republicans have sued in a bid to gain access to records from Hillary Clinton’s time as secretary of state.
two other FOIA suits filed last
week by the RNC that relate to
records from Mrs. Clinton’s
time in office, bringing the to-
tal number of RNC suits for
Mrs. Clinton’s records to six.
Mrs. Clinton, who currently
leads the delegate race for the
Democratic presidential nomi-
nation, isn’t named as a defen-
dant in any of the suits. Her
campaign didn’t respond to a
request for comment but
officer at Ross Stores Inc., told
investors this month. “So
that’s one reason for caution.”
Retail sales are a key ba-
rometer for overall consumer
spending, which accounts for
about two-thirds of economic
output in the U.S. American
households have benefited
from cheaper gasoline—the
average weekly price of a gal-
lon fell to the lowest level in
seven years last month—and
steady job creation.
But other measures of the
economy have been mixed.
And while sales figures can be
choppy from month to month,
the overall trend has reflected
economic cross-currents and
some financial-market jitters.
Americans have been spending
selectively in recent months
while also saving at a higher
rate than before the recession.
“Consumers remain cau-
tious and hesitant to spend,
despite an improving jobs pic-
ture and evidence of accelerat-
ing wage increases,” said Alan
MacEachin, corporate econo-
mist at Navy Federal Credit
Union.
U.S. NEWS
to set national standards as
soaring addiction rates and
overdose deaths have led doc-
tors’ offices, insurers and some
states to impose their own pre-
scribing limits. The rate of drug-
overdose deaths from opioids,
including prescription painkill-
ers and heroin, tripled between
2000 and 2014. Deaths from
opioid painkillers alone rose 9%
in 2014, according to the CDC.
That year, opioids were involved
called the last round of RNC
lawsuits “frivolous.”
“As is standard, the depart-
ment does not comment on
matters in litigation,” said
State Department spokesman
John Kirby.
The department is respon-
sible for managing records
and has repeatedly acknowl-
edged shortcomings in its re-
sponse time to FOIA requests.
The suits are the latest
So far this year, lower gaso-
line prices are responsible for
much of the softness in overall
retail spending. Gasoline sales
were down 4.4% in February
from the prior month.
Excluding motor vehicles,
retail sales were down 0.1% in
February. Excluding gasoline,
sales were up 0.2%. Excluding
both categories, sales grew
0.3% last month.
Americans spent more on
Sales rose last month at building-supply stores like Home Depot, shown.
Wednesday, March 16, 2016 | A7
pain aren’t mandatory. In addi-
tion, while three days or fewer
of opioid medication might be
fine for acute pain for minor
injuries, “when the pain comes
from trauma or a surgery, that
could last weeks sometimes.”
He said he was disappointed
the final guidelines don’t ap-
pear to reflect suggestions
pain-management groups made
in response to the draft version.
“I’m sick and tired of being
labeled an addict, a drug
seeker, when I ask for pain
meds,” a woman from Ken-
tucky who suffers from disc
problems in her back and neck
wrote in one of 4,372 public
comments posted in response
to the draft guidelines.
The prescription-drug-
abuse epidemic has affected
urban and rural areas, rich
and poor communities, babies
and adults alike, Dr. Frieden
said. “It really is a pervasive
epidemic that has been trig-
MARK WILSON/GETTY IMAGES
gered in very large part by ex-
cessive prescribing of these
medications,” he said. The
CDC says 249 million prescrip-
tions for opioid pain medica-
tion were written by health-
care providers in 2013.
The guidelines apply to pri-
mary-care clinicians treating
patients for certain types of
in 28,647 deaths, or 61% of all agement organizations and pa- chronic pain, but not for pa-
drug-overdose deaths. tients with chronic pain, who tients in cancer treatment or in
The crisis also has prompted say the guidelines could pave palliative or end-of-life care.
congressional action; the Sen- the way for more regulation at The recommendations were
ate passed a bill last week to state and local levels. written by CDC scientists with
expand grants for the preven- Bob Twillman, executive di- input from experts and include
tion and treatment of prescrip- rector of the American Acad- refinements based on comments
tion-drug and heroin abuse. emy of Pain Management, an from more than 160 organiza-
But the CDC’s guidelines, organization for pain-manage- tions and the public, Dr. Frieden
when proposed, also drew re- ment providers, said it would said. “This is a CDC document
sistance from some groups be important for clinicians to written by CDC scientists who
funded by the pharmaceutical understand that the limits on reviewed the entire world litera-
industry and from pain-man- opioid quantities for acute ture on this,” he said.
U.S.
Watch
leased with some redactions,
but the other lawsuits are
seeking travel schedules, com-
munications from top depart-
ment officials and other elec-
tronic and paper documents INTERIOR DEPARTMENT
from her time running the de-
partment, 2009 to 2013.
White House Halts
Few recent presidential Atlantic Oil Lease
candidates have run for office The Obama administration, in
with such a large public paper a significant reversal, on Tues-
trail from their time in gov- day said it was withdrawing a
ernment. As a cabinet official, planned oil and natural-gas lease
all of Mrs. Clinton’s records off the southeast Atlantic coast.
are potentially subject to the In the Interior Department’s lat-
FOIA, though much of the ma- est offshore-leasing blueprint, the
terial can be redacted or with- government removed the one lease
held. The FOIA, however, it had planned to offer in 2021 in
JUSTIN SULLIVAN/GETTY IMAGES
doesn’t apply to members of the waters between Virginia and
Congress, such as Mrs. Clin- Georgia. Interior Secretary Sally
ton’s chief Democratic rival, Jewell said the department acted
Vermont Sen. Bernie Sanders, in part out of concerns by the De-
or Republican presidential fense Department that drilling
candidates Sens. Ted Cruz and could interfere with its operations.
Marco Rubio. “We heard from many corners
The latest round of RNC that now is not the time to offer
lawsuits asks for communica- oil and gas leasing off the Atlantic
tions between senior State De- coast,” Ms. Jewell said.
front in the battle over re- partment officials and employ- The blueprint, required by law
cords from Mrs. Clinton’s time ees of the Clinton family’s every five years, governs off-
in office. A trove of files docu- personal offices. Former Presi- shore leasing for oil and natural-
menting her management of dent Bill Clinton and daughter gas drilling in federal waters be-
the department may be re- Chelsea Clinton both have per- tween 2017 and 2022. Three
leased in the coming months. sonal staff members. leases planned for waters around
Dozens of other lawsuits by Other lawsuits seek diplo- Alaska, along with 10 in the Gulf
news organizations and advo- matic cables, records related of Mexico, remain in the plan.
cacy groups over Mrs. Clin- to the renovation of the De- Those leases could be removed
ton’s records are being liti- partment’s diplomatic recep- before the proposal is finalized,
gated in federal court. tion rooms, and department fi- but no new ones can be added.
Mrs. Clinton’s inbox emails nancial disclosure and ethics The plan is subject to a 90-
have already been publicly re- training material. day public-comment period.
—Amy Harder
PENNSYLVANIA
Retired Priests Are
Charged With Coverup
an array of goods, including But consumers don’t ap- Pennsylvania Attorney Gen-
building materials and garden pear to be spending all of eral Kathleen Kane announced
equipmen, sporting goods, their windfall from lower fuel felony criminal charges Tues-
books and music, health and bills. day against three now-retired
personal-care items, and cloth- “We haven’t seen much of a leaders of a Franciscan order,
ing. Restaurants and bars also bump from gas prices,” said saying they conspired to cover
saw a bump in sales. Matt Verbin, chief financial of- up a serial predator’s sexual
And overall, consumer ficer at online retailer Tanga. abuse of dozens of students at
spending is still contributing “We’re seeing consumers are a Catholic high school in Johns-
to economic growth. February saving more than they would town.
sales excluding gasoline, for have in prior years. There’s a Special agents and prosecu-
example, were 4.8% higher lot of uncertainty.” tors filed criminal charges Mon-
than a year earlier. The Federal Reserve closely day against the priests—Giles A.
watches consumer-spending Schinelli, 73; Robert J. D’Aversa,
data as a gauge of economic 69; and Anthony M. Criscitelli,
growth, and Fed officials 61—for allegedly taking part in a
pointed to solid outlays as a conspiracy to endanger the wel-
factor in their decision to raise fare of children, Ms. Kane
interest rates in December for said Tuesday.
the first time in nearly a de- The charges focus on as-
cade. saults at Bishop McCort High
Fed officials were meeting School by the late Brother Ste-
Tuesday and Wednesday to phen Baker from 1992 to 2010.
MICHAEL NAGLE/BLOOMBERG NEWS
determine their next step on The three priests aren’t ac-
rates. Economists don’t expect cused of sexually abusing chil-
them to make any moves. dren themselves but are being
The retail-sales data are ad- held criminally responsible for
justed for seasonal variations covering up and enabling the
but not for price changes. The abuse. Lawyers for the three
report doesn’t include esti- didn’t respond to requests for
mates for most services, which comment.
make up the bulk of consumer —Scott Calvert and
spending. Kris Maher
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A8 | Wednesday, March 16, 2016 THE WALL STREET JOURNAL.

PERSONAL JOURNAL.

Give Twitter a Second Chance

With new features, the
Burning Question
What Makes Some
People Sweat More
social media platform is
Than Others?
fixing its biggest problems; A trip to the gym can leave some
people’s shirts unusually soaked. For
Return, Twitter quitters others, shaking hands with the boss
can be a physically stressful moment.
BY JOANNA STERN The reasons some people sweat a
lot while others stay dry aren’t
Twitter’s biggest problem is completely understood. Still, one
MIKE SUDAL/THE WALL STREET JOURNAL

@hannahjeanbarz. #hasntlogged- expert, Harmik J. Soukiasian, chief of

inforayear #uhohtwitter thoracic surgery at Cedars-Sinai
Here’s the longer-than-140- Medical Center, in Los Angeles, has
character version: Hannah Barz, a some wisdom on the matter. Dr.
22-year-old New York University Soukiasian also heads Cedars-Sinai’s
student, signed up for Twitter in clinical team for hyperhidrosis, or
2013 and really wanted to get into excessive sweating.
it. But she gave up, because she —Heidi Mitchell
just couldn’t catch on. Who was
she supposed to follow? How could To Sweat Is Human
she keep up with the fast-paced Sweating is a natural process. “If it’s
timeline? When she tweeted, was To Heal an Injured Bird too hot, you sweat, and as the water
anybody listening? Ms. Barz hasn’t Twitter works as a real-time news network, above right, for live events. ‘Timeline personalization,’ below left, is buried in evaporates, you cool down,” he says.
logged into the service in a year. ‘Settings.’ Go there to select Tweets based on their popularity and what you may have ‘liked’ in the past. Perspiring serves other functions, too.
My own love for Twitter bor- It helps keep the skin hydrated. And it
ders on unhealthy. helps maintain the body’s balance of
It’s the first thing fluids, though in doing so it removes
I look at in the electrolytes and salts. “You need to
morning and the replenish them with something beyond
last before I go to water if you are exercising or sweating
bed. You really heavily,” he says.
can’t get the news faster or in Studies have shown that less-fit
greater breadth on any other so- people tend to sweat more than gym
cial media platform. But nearly rats because their bodies require more
half of my 84,000 followers, in- work to cool down, Dr. Soukiasian says.
cluding @hannahjeanbarz, change However, fit people start sweating
DREW EVANS/THE WALL STREET JOURNAL (3)

their Brita filters more often than earlier during equivalent exercises. That
they tweet. Many of their profiles is likely because people who are
look like deserted bird’s nests, accustomed to exercise have bodies
with the default egg profile image that run efficiently. They start to cool
and no sign of fresh tweets. down as soon as their core
I’d blame my own boring temperature rises, he says.
tweets, but they’re certainly not Nervousness can tip the body into
the cause of Twitter’s most recent survival mode, which can trigger the
business woes. Not only is the release of adrenaline, boost a person’s
company failing to attract new us- heart rate and send sweat glands into
ers, but it reported a decline in overdrive. “Emotional sweating is part
monthly active users last quarter. of the ‘fight-or-flight’ response and is
As a result, Twitter has been des- normal,” Dr. Soukiasian says. But
perately releasing features to ad- news stories shared on the service, tweet from every account, in re- he says. Hashtag pages, where you “sweating while sitting on your couch
dress the issues of newbies and and the best tweets about them. verse chronological order.) can see trending topics, are now and listening to classical music is not
veterans alike. The tweets are chosen based on easier to read. Soon, there will be a the norm.”
To find out if these features How do I keep up? their popularity and what you may way to respond to someone so ev-
knock down the biggest road- One of the best parts about have “liked” in the past. Selected eryone can see, a move which now Bringing It On
blocks, I tracked down dozens of Twitter is customizing your experi- tweets aren’t marked—you may requires an awkward workaround. Many medications, including insulin,
my followers who have abandoned ence by following the accounts and just notice a tweet from two hours While the company explores ex- antidepressants and even aspirin, can
the network. It turns out, Twitter people you’re most interested in. ago at the top of your timeline. panding the famous 140-character cause perspiration as a side effect, Dr.
does deserve a second chance. When you sign up for the ser- This is a giant step in the right text limits on tweets, you can up- Soukiasian says. Caffeine, alcohol and
Still, it has a long way to go in fix- vice, Twitter allows you to select direction, but its setting is buried. load a screenshot of text—try the smoking can increase sweat production,
ing its biggest problem: explaining people, products and media outlets You must go into Settings > Ac- OneShot app—or use the new GIF since they can boost heart rates and
why you’d add it to your already to follow based on your interests. count > Timeline personalization button to insert some fun anima- core temperatures. Spicy foods—
packed social media repertoire of Though Twitter doesn’t offer users then select “Show me the best tions. Mr. Seibert says Twitter is including those with capsaicin, a
Facebook, Instagram and LinkedIn. a similar tool after the sign-up Tweets first.” even considering letting you edit chemical found in peppers—can trigger
process, anyone can find interest- Another buried feature, Lists, tweets after they’re posted. short bouts of sweating, but typically
What is Twitter for anyway? ing things to follow initially by allows you to organize accounts in these only last a few minutes and can
I heard it a lot: Facebook and tapping the little man icon in the themed clusters, like work col- Who am I supposed to talk to? be alleviated by drinking cold milk, “since
Instagram are for connecting with top left corner of the mobile app, leagues or cooking. Twitter can feel like yelling in a the proteins in milk have a detergent
friends, LinkedIn with business and then selecting either Popular If you want to see what’s trend- soundproof room: No one seems to effect” that can wash away the burning
colleagues. So what exactly am I (for everyone) or Tailored (for ing in your immediate circles now, be listening. Many Twitter quitters in the mouth that sets off sweating.
supposed to do with this thing? you). the best bet is Nuzzel. When you expressed confusion about who Obese people also seem to sweat
It’s time to stop thinking of Now, beware: Twitter’s timeline sign in with your account, it shows they were tweeting to—if anyone.
Twitter as a social network. It’s is like Facebook’s newsfeed on caf- you the top stories being circu- Know when you should abso-
more of a news network. I spend feine pills. People told me they lated by accounts you follow. lutely tweet? When you have a
75% of my time in the app getting stopped coming back to Twitter problem with a company or prod-
news on everything from politics because of the frenetic pace of How do I use this thing? uct and need assistance. Many
to technology to, yes, the Kar- their feeds. You just have to let go The most interesting complaint brands actively engage with users,
dashians. Twitter is one of the few of the idea that you’ll be able to I heard was some variation of this: and Twitter recently released a
places where you can get direct read everything. “I’m very tech savvy but the whole customer-service messaging tool
access to the newsmakers, too, and Once you’ve accumulated a rea- service confuses me. I didn’t know so they can talk to you directly.
eavesdrop on conversations be- sonably sane number of news and if I was using it right.” Last month, Apple also launched
tween people you’ll never meet. entertainment sources, say 50, Usability has become a major its @AppleSupport account and is
ISTOCK

Log into your account, skip turn on the new Best Tweets time- area of focus, Jeff Seibert, Twit- responding to most inquiries.
over the home tab and tap on the line setting. It shows you the top ter’s head of consumer product, @NikeSupport, @zappos_service
lighting bolt that is Twitter’s Mo- tweets from those you follow. (Un- tells me. The “favorite” star icon and @KLM are among the other
ments tab. Here Twitter surfaces like Facebook, if you scroll down a became a small “like” heart, and top customer service accounts on more, although Dr. Soukiasian says he
the most current and popular bit, you’ll eventually see every millions more are now clicking it, the network. hasn’t seen good research on why this
is. It might be because they have to
work harder to carry around more
weight, or perhaps because their

Virtual or Reality, Mustang Shelby Roars

Dan Greenawalt with his 2015 Ford
Mustang Shelby GT350. Details above and
below. Ford built 100 GT350s for the model
JORDAN STEAD FOR THE WALL STREET JOURNAL (3)
bodies are better insulated against the
cold, he suggests.
Sweat glands are all over the body,
but are concentrated in the palms of
the hands, the armpits and the soles
of the feet. Excessive sweating occurs
when one of the gland clusters gets
overactivated by very little stimulation,
like a subtle rise in temperature, and
the faucet can’t be shut off, Dr.
Soukiasian says. Experts aren’t totally
sure why this happens. The condition
affects an estimated 1% to 3% of the
population, he says.
“I have seen students who can’t
take a test because their palms are
sweating so much they smudge the
paper,” he says.

year 2015 for the car’s 50th anniversary.

Stemming the Flow
Dr. Soukiasian first advises healthy
but sweaty people to dress in loose,
natural fabrics and use an over-the-
counter, aluminum-based antiperspirant
on the super-sweaty areas that cause
embarrassment, like the hands or feet.
If the problem persists, the next step
is to get a prescription from a
dermatologist for an antiperspirant
with a higher aluminum content, he
says. The aluminum damages the cells
in the glands, thus decreasing sweat
Dan Greenawalt, 42, creative di- thing about the cars that appear in be built. You cannot build a V-8 en- GT350 harks back to the golden production. (It can also irritate
rector at Microsoft’s Turn 10 Stu- them. We find the cars, photograph gine bigger than 5-liters with a flat age of sports car racing. Today, sensitive skin.)
dios (maker of the Forza Motor- them, record their audio, study plane crank, naysayers said, be- racing cars are like alien technol- Botox, a paralytic agent, is the final
sport videogame series) from their physics, and measure every- cause it will shake itself apart. To ogy made by some future race of defense before surgery, which Dr.
Kirkland, Washington, on his 2015 thing from the circumference of a explain what that means would brain surgeons. Back then, it was Soukiasian only recommends after all
Ford Mustang Shelby GT350, as tie rod to the weight of a driveline. take a full newspaper page, but just trial, error, passion, and dan- other options have been exhausted.
told to A.J. Baime. That way we can build the cars so suffice to say that this V8 has the ger. That’s what the original GT350 While menopause or a feverish flu
I’ve always been a car geek, they perform in the game as they benefits of a racing engine that can represents, that era when rebels can result in excessive sweating, the
since I was a child do in real life. There is never a function in a car you can commute like Shelby could take on the world condition generally isn’t related to
MY RIDE rolling Matchbox time when I am not thinking about in. And Ford did this in a car that and win. other common disorders, Dr. Soukiasian
cars down my drive- these things, even in my sleep. costs less than $60,000. I love to take the car out to says.
way. My dad worked In 2015, I bought a car for my I love the history too. Ford only stretch its legs. But Washington is “Unless you’re sweating while you
on cars. My uncle worked on cars. commute—the Ford Mustang made 100 of these in model year a heavily patrolled state. The fun sleep or you are embarrassed to do
When I got my license, I worked on Shelby GT350. Why this car? I love 2015, because it’s the 50th anniver- must be had at a safe and sane your job or school work, your sweat
cars. Now I work on cars in a dif- the look of it, but what I really sary of the original 1965 Mustang level. level is probably nothing to worry
ferent way. bought was an engine—the so- GT350 built by Carroll Shelby. about,” Dr. Soukiasian says. Just
When we build the Forza Mo- called Voodoo engine. It’s an en- (Mine is #78 of the 100. The rest Contact A.J. Baime at shower more frequently and travel
torsport games, we research every- gine that engineers said could not are 2016 models.) The original Facebook.com/ajbaime. with a change of clothes.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL. Wednesday, March 16, 2016 | A9

PERSONAL JOURNAL.

Is Your Medicine Just Right for Your Metabolism?

Genetic testing may tell the drug.
Scientists have since discovered
who will benefit from a Same Pill, Different Reactions that about 75% of prescription and
drug and who won’t Medication can help some patients but over-the-counter drugs depend on
harm others because some people absorb a handful of liver enzymes to be
BY MELINDA BECK absorbed and eliminated from the
it more rapidly, and others more slowly, body. An enzyme called CYP2D6 is
Because of gene variations, co- than normal. Small differences in the genes responsible for metabolizing many
deine, frequently prescribed to re- that regulate key enzymes are to blame. antidepressants, pain relievers and
lieve pain, has little effect on as heart medications.
much as 20% of the population, Minor variations in the genes
while 2% of people that regulate those enzymes are
HEALTH have such a strong very common—95% of people have
JOURNAL reaction that a nor- at least one.
mal dose can be life- People who get two impaired
threatening. About copies of an enzyme gene—one
25% of people can’t effectively me- from each parent—are likely to be
tabolize Plavix, a clot-busting drug, “poor metabolizers” and break
putting them at increased risk for down drugs so slowly that even a
a heart attack or stroke. normal dose can become toxic. “In-
People can respond to drugs termediate metabolizers”—with
very differently. A medication that one impaired and one normal
brings relief for some patients gene—allow drugs to build up in
might show no benefit at all in the body and over time can cause
others, or even cause harmful side side effects. People sometimes get
effects. Even everyday drugs such extra copies of enzyme genes,
as Advil and Motrin, for pain and which can make them “ultrarapid
inflammation, and Zocor, to lower metabolizers” of some drugs and
cholesterol, can have widely vary- flush them out of the body so fast
ing effects. they have little effect.
JASON MECIER FOR THE WALL STREET JOURNAL

A growing array of genetic tests Some tests for gene reactions

is designed to help predict how to individual drugs have been
people are likely to respond to available for years. More lab com-
many common medications, from panies, including Assurex Health
antidepressants and antihistamines Inc., in Mason, Ohio, and OneOme
to pain relievers and blood thin- LLC, in Minneapolis, offer panels
ners. The tests, which are contro- of tests aimed at advising patients
versial, look for tiny variations in with psychiatric, cardiac or
genes that determine how fast or chronic-pain conditions what med-
slow we metabolize medications. ications would be the best fit
Testing patients for gene varia- based on their genes.
tions could avoid some of the Genelex Corp., in Seattle, says
700,000 serious drug reactions in its YouScript software program an-
the U.S. each year, some experts DRUGS DRUGS alyzes how multiple medications,
say. Proponents of the tests, which over-the-counter drugs and supple-
are done with a cheek swab, say Pain relievers codeine or oxycodone, including Acid reducers Prilosec (omeprazole) and ments react with each other and
they also could help doctors rely Tylenol 3 and Percocet Prevacid (lansoprazole) with patients’ DNA. The testing
less on trial and error in choosing and analysis costs roughly $1,000.
the right drug and the right dos- ENZYME PATHWAY AT WORK ENZYME PATHWAY AT WORK “Your results don’t change; you’ll
age for individual patients. have that information the rest of
The Food and Drug Administra- CYP2D6 CYP2C19 your life,” says Genelex Chief Exec-
tion has included cautionary infor- IMPACT IMPACT utive Kristine Ashcraft.
mation for people with certain “Pharmacogenomics is never
gene variations on the labels of A standard dose can have little effect in up to Up to 15% of people metabolize these drugs going to be a crystal ball to tell
more than 100 prescription medi- 20% of people, while as many as 2% can have very slowly, resulting in a higher effective you which medications will work
cations. As yet, only about 20% of and which won’t. Too many other
a life-threatening reaction. dose and greater risk of side effects.
doctors order such tests, according factors come into play,” says Dr.
to a survey by the American Medi- Sources: Clinical Pharmacogenetics Implementation Consortium; Genelex Note: Population incidence reflects Caucasians; other ethnic groups vary.
Mark Dunnenberger, who heads
cal Association, and many patients the NorthShore University clinic.
don’t know they exist. “But we can take advantage of a
There are no large, randomized only covered by some insurers in such drug-gene interactions was childhood leukemia had a gene patient’s DNA and say, ‘You have a
controlled trials showing the tech- some cases. identified at the Mayo Clinic in variation that made the drug thio- high likelihood of a suboptimal re-
nique significantly improves pa- How people’s genes affect their Rochester, Minn., in the 1970s. Re- purine destroy bone marrow. Now, sponse from these drugs, so let’s
tient care. And the tests, which response to medications is called searchers discovered that about 1 children are routinely tested be- try another medication that works
range from $500 to $2,000, are pharmacogenetics. One of the first in 300 children being treated for fore undergoing treatment with a different way.’ ”

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A10 | Wednesday, March 16, 2016 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK Barack Obama Checks Out
Barack Obama—do you place in 1983?” bin Laden asked in his
The African Terror Front remember him?—will
remain in office for an-
1996 declaration of war on the U.S.,
which also cited Bill Clinton’s abrupt

A
mericans have long associated the campaign against Islamic State in Libya. other 310 days. But not withdrawal from Somalia after the 1993
fight against Islamist terrorism with In 2013 the U.S. set up a drone base in Niger, really. The president Black Hawk Down incident. “You left the
has left the presidency. area carrying disappointment, humilia-
the Middle East, as Sunday’s attack in which has borders with Nigeria, Algeria, Mali
The commander in tion, defeat and your dead with you.”
the Turkish capital of Ankara and Libya—all of which have GLOBAL
chief is on sabbatical. As for current threats, Mr. Goldberg
reminds us. But that geo- The threat is spreading had major jihadist uprisings. VIEW
He spends his time asks Mr. Obama what he would do if
graphical horizon is also in- Niger may become particu- By Bret
creasingly out of date. Wit-
faster than Western larly important in the fight Stephens
hanging out at a festi- Mr. Putin made a move against Mol-
val in Austin, Texas. dova, “another vulnerable post-Soviet
ness the expanding grip of efforts to contain it. against a resurgent al Qaeda And with the cast of state.” Mr. Obama’s answer—“if it’s re-
jihadist groups in Africa—and in the Maghreb, which has re- “Hamilton,” the Broadway musical. ally important to somebody, and it’s
the Obama Administration’s cently perpetrated attacks on And with Justin, the tween sensation not that important to us, they know
belated but increasingly urgent attempts to Western targets in Burkina Faso, Mali and, on from Canada. that, and we know that”—is of the
fight it. Sunday, in Ivory Coast. In his place, an exact look-alike of April Glaspie school of diplomacy. So
This is apparent from the March 5 air Altogether, the U.S. operates surveillance Mr. Obama is giving interviews to Jef- long, Moldova.
frey Goldberg of the Atlantic, interviews Mr. Goldberg also discloses that Mr.
strike, by manned and unmanned U.S. planes, flights from about 12 small sites in Africa.
that are so gratuitously damaging to Kerry has begged the president to launch
on an al Shabaab training camp in Somalia Camp Lemonnier, in Djibouti, the only perma- long-standing U.S. alliances, interna- cruise-missile strikes against the Assad
that killed an estimated 150 terrorists. Four nent U.S. base in Africa, is home to several tional security and Mr. Obama’s reputa- regime in Syria, for the sake of a little le-
days later U.S. Special Forces assisted the So- thousand personnel. The question is whether tion as a serious steward of the Ameri- verage in negotiations. Mr. Obama has
mali military in taking down another Shabaab it’s enough. can interest that the words could not brushed the requests away. Mr. Assad
camp. In both cases Pentagon officials cited The Bush Administration established the U.S. possibly have sprung from the lips of can at last rest easy, if he isn’t already.
intelligence suggesting an imminent threat of Africa Command in 2007 as one of the Penta- the president himself.
attacks by the al Qaeda-allied group, whose gon’s six geographic combatant commands, but I was a bit late in reading Mr. Gold-
name means “the youth.” even today it has only 2,000 military, civilian berg’s long article, “The Obama Doc- A journalist takes a deep dive
Ostensibly, U.S. Special Forces are in Soma- and contractor personnel, most stationed in Ger- trine,” which appeared last week and is into the president’s shallow
lia to train and assist the African Union Mis- many. Judging by his recent interviews, Presi- based on hours of conversation with the
sion in Somalia, or Amisom, which helps So- dent Obama considers his intervention in Libya
president, along with ancillary inter- mind. Crises to follow.
views with John Kerry, Hillary Clinton,
malia’s federal government. Shabaab is a to be the biggest mistake of his Presidency, and Leon Panetta, Manuel Valls of France,
menace to all of East Africa, the White House has resisted calls to launch ma- Benjamin Netanyahu of Israel and other U.S. allies fare less well under Mr.
with outrages including the jor strikes on Islamic State’s Libya bases. boldface names. Kudos to Mr. Goldberg Obama’s gaze. David Cameron comes in
2013 attack on the Westgate The risk here—as with the Administration’s for his level of access, the breadth of his for a scolding on U.K. military spend-
Mall in Nairobi and last year’s half-hearted antiterror fights in Yemen, Iraq, reporting, the sheer volume of juicy ing, as well as for getting “distracted”
rampage at Kenya’s Garissa Syria and Afghanistan—is that the U.S will quotes and revealing details. on Libya. Nicolas Sarkozy, the former
College that massacred 148 keep playing catch up against a threat growing Still, it’s a deep dive into a shallow and possibly future president of
Christian students. faster than we can destroy or even contain it. mind. Mr. Obama’s recipe for Sunni- France, is dismissed by Mr. Obama as a
But Shabaab is also a men- The U.S. treated Boko Haram as mostly a local Shiite harmony in the Middle East? posturing braggart. Regarding the
The two sides, says Mr. Obama, “need president’s commitment to Israel’s se-
ace to the West, including the threat until it pledged allegiance to Islamic
to find an effective way to share the curity, Mr. Goldberg reports, citing Mr.
U.S. mainland. A Shabaab State last year. Then-U.N. Ambassador Susan neighborhood,” sounding like Mr. Rog- Panetta, that the president “has ques-
member broke into the home Rice dismissed French pleas to act until Mali ers. The explanation for the “sh— tioned why the U.S. should maintain Is-
of Danish cartoonist Kurt was nearly overrun by al Qaeda; it was saved show” (the president’s words) in rael’s so-called qualitative military
Westergaard in 2010 and tried Barack Obama thanks to François Hollande’s quick decision Libya? “I had more faith in the Europe- edge, which grants it access to more
to kill him with an ax in re- to send in the Foreign Legion. ans,” he says, sounding like my 12- sophisticated weapons systems than
venge for drawing the prophet Mohammed. The U.S. can’t hope to counter every poten- year-old blaming her 6-year-old sister America’s Arab allies.”
Shirwa Ahmed of Minneapolis became the first tial terrorist threat in Africa, but that doesn’t for chores not done. The recipe for bet- As for those allies, Mr. Obama treats
known American suicide bomber when he drove mean it can’t do more. An aggressive campaign ter global governance? “If only every- the Saudis with such naked contempt
a truck bomb into a Somali government com- against Islamic State-controlled territory in one could be like the Scandinavians, that it prompted former intelligence
pound, killing 20. An estimated 40 U.S. citizens Libya would remove a clear danger to Africa this would all be easy,” he says, sound- minister Turki al-Faisal to denounce the
ing like—Barack Obama. president in an op-ed: “Could it be,” the
have traveled to Somalia to join Shabaab, which and Europe and signal that the U.S. won’t toler-
Then there’s Mr. Obama the political prince asked, “that you are petulant
has called for attacks on U.S. malls, including ate terrorist groups seeking statelets of their theorist. “Real power means you can get about the Kingdom’s efforts to support
the Mall of America. If Islamic State can radi- own. Strikes against Shabaab in Somalia and what you want without having to exert the Egyptian people when they rose
calize the San Bernardino killers from afar, Sha- Boko in Nigeria would strengthen legitimate violence,” the president says in connec- against the Muslim Brothers’ govern-
baab can do the same. governments. tion to Vladimir Putin’s gambles in ment and you supported it?”
The Obama Administration has sent 300 All this also requires greater resources—a Ukraine and Syria. That’s true, in a Yoda Summing up the president’s world-
troops to Cameroon to fight the Islamist terror- reminder that global security depends on a sort of way. But isn’t seizing foreign ter- view, Mr. Goldberg describes him as a
ists of Boko Haram in neighboring Nigeria, and well-funded U.S. military with the ships, planes ritory without anyone doing much to “Hobbesian optimist”—which philo-
it’s an open secret that the U.S. operates a and manpower to meet current and emerging stop you also a form of “real power”? Is sophically must be the equivalent of a
drone base in Garoua in northern Cameroon. threats. That’s a far cry from what Mr. Obama dictatorial power fake because it de- Jew for Jesus. But Mr. Obama has
A U.S. air strike last month near the Libyan city will bequeath his successor, who will have to pends on the threat of force? shown that he lacks Hobbes’s under-
Elsewhere, Mr. Obama airily dis- standing that Leviathan must fill the
of Sabratha killed an Islamic State leader and rebuild America’s strengths quickly lest the misses the concept of “credibility” in vacuums that will otherwise be filled by
48 terrorist comrades, and the Pentagon is re- Mideasternization of Africa become a template U.S. foreign policy, noting that Ronald an Islamic State or a Putin, or an opti-
ported to be drawing up plans for a broader air for the spread of jihad everywhere. Reagan’s decision to pull U.S. troops mist’s belief that American power can
from Lebanon after the 1983 Marine shape the world for the better.
barracks bombing didn’t affect U.S. The French diplomat Charles de Tal-
So Much for Putin’s Syria ‘Quagmire’ credibility with China or Russia. That’s leyrand once said of the (restored)

A
debatable. But the withdrawal affected Bourbon dynasty that “they had learned
fter Vladimir Putin sent Russian forces Mr. Assad can continue his offensive against our credibility with Iran, which was be- nothing and forgotten nothing.” Given
to Syria in September, President the opposition while making few diplomatic hind the bombing, and with a young the mix of score-settling and delusion
Obama offered this prediction: “An at- concessions. Mr. Putin has also consolidated Saudi named Osama bin Laden. on display in this interview, that may
“Where was this false courage of well be the president’s foreign-policy
tempt by Russia and Iran to his alliance with Iran while di-
yours when the explosion in Beirut took epitaph, too.
prop up [Bashar] Assad and The Kremlin has minishing U.S. influence.
try to pacify the population By withdrawing some
is just going to get them
achieved its goal of forces, or at least appearing LETTERS TO THE EDITOR
stuck in a quagmire and it propping up Assad. to, Mr. Putin is also hoping to
won’t work.”
As quagmires go, Mr. Putin
coax concessions from the
U.S. and Europe. The Russian
Deflationary Fears, Bad Government Policy
will take it. On Monday he announced that Rus- wants the West to ease its sanctions against George Melloan is on target re- wealth similarly overstated? If the
sia will begin withdrawing the “main part” of Russia for snatching Ukrainian territory, and garding the threats posed by the gov- U.S. does this as the world’s largest
its forces in Syria having accomplished his he knows Mr. Obama is looking for a way get ernment’s debt explosion and central- borrower, with its dollar the interna-
strategic goals at little cost. back to business as usual with Russia. The bank monetization of that debt tional currency, how can this not be
(“Rising Global Debt and the Defla- an international phenomenon?
Mr. Putin rescued Mr. Assad when Russia’s withdrawal announcement may be an attempt
tion Threat,” op-ed, March 9). How The Federal Reserve’s monetary
Middle Eastern client was in danger of falling to give Mr. Obama diplomatic cover for one the U.S. government is overleverag- intervention might have worked if
and has put him in a much stronger position. more “reset” in relations before Mr. Obama ing itself reflects that risk. U.S. tax, regulatory and other public
Russia focused its bombing on Mr. Assad’s leaves the White House. Since 2008, the publicly held debt policy were trying to grow the econ-
moderate Sunni opponents, not Islamic State. Russia’s intervention won’t end the Syrian as a share of gross domestic product omy, too. But the government wanted
The bombing and Hezbollah’s ground forces civil war, and Islamic State still controls much has doubled to 73% from 36%, but to expand control over the economy,
have broken the opposition’s hold on Aleppo of the country. But countering terrorism never net interest cost as a share of GDP not expand the economy. With the
and consolidated a larger safe zone in the Syr- was Mr. Putin’s goal. He wanted to show the has dropped 30%, to 1.2% from 1.7%. Fed taking it on itself to save the U.S.
ian west for the Alawite regime. world that Russia stands by its allies and to ac- Last year, Uncle Sam leveraged $60 economy from Americans, it has done
Having established these facts on the quire new leverage in the Middle East and Eu- of debt per $1 of interest cost—3.5 little more than balloon-mortgaged
times the prior 40-year average of the dollar and overleveraged the na-
ground, Mr. Assad is now well placed to exploit rope. Any more such quagmires and he’ll be
$17 of debt per $1 of interest. Nor- tional debt. That path will soon end,
the U.S.-Russia brokered Syrian peace talks. back sipping cocktails at the next G-8 summit. malized interest rates would perma- for when capitalist economies perma-
nently add $566 billion to annual nently pay capital nothing, how can

Deadlocked in Dublin debt cost or require a $10 trillion cut

in America’s publicly held debt to
that not be deflationary, contraction-
ary and ultimately self-destructive?

T
around $3 trillion. If U.S. national MICHAEL SOLON
he Celtic Tiger is back, with the Irish face, though, and there are plenty of reasons debt is so overleveraged, is U.S. Alexandria, Va.
economy growing 7.8% last year, the for voters to be frustrated. The costs of re-
fastest rate in Europe. It’s all the form were borne disproportionately by the
more jarring, then, that the private economy. Capital-
Crisis in the developed gains taxes, gift and inheri-
We Don’t Need a Mirror, We Need a Leader
country remains mired in a
Regarding Holman Jenkins’s Republican leaders. He forgets that
prolonged political stale- world’s fastest- tance taxes, pension-fund
“Trump Voters Need a Mirror” (Busi- while the tea party was electing con-
mate. levies and a “universal social ness World, March 3): When I look in servatives at the local level with no
Ireland’s major parties growing economy. charge” on income were nec- the mirror, I see 16-plus years of Mid- support from Washington, the party
have been wrangling over a essary to balance the books western education and values. When I was doing all it could to destroy the
new government since voters and repay creditors. Govern- look in the mirror, I see someone who legitimacy of this honest, grass-roots
went to the ballot box on Feb. 26. Voters fled ment employees, by contrast, received raises from the first opportunity in 1968 movement rather than inviting us to
the right-left governing coalition led by of up to 7% last year. pulled the lever for Richard Nixon the table to join ranks and build a
Prime Minister Edna Kenny’s Fine Gael (FG) Although Ireland’s corporate-tax rate of and has been voting Republican ever true majority. He ignores the fact that
party, with Labour as the junior partner. FG 12.5% is highly competitive for most firms, since. I see someone who has worked while the tea party was calling for the
took 50 of the 158 seats in the new lower house it isn’t across the board: Some unfavored in- for privately held companies that elimination of ObamaCare the party
of Parliament, while the center-right Fianna dustries such as petroleum and minerals pay were leveraging resources on a daily nominated a man for president who
basis, and not for public unions. I see wrote the same policy for the state of
Fail (FF) opposition party came second with 44. 25%, while some “knowledge”-based indus-
someone who is tired of being told by Massachusetts.
The remaining seats were divided among the tries pay 6.25%. That, and reversing a mini- this administration how I have to MARK L. WOOLSEY
hard-left Sinn Fein, Labour and a smattering mum-wage cut implemented by the previous change my thinking on the definition Cincinnati
of smaller parties. FF government, slanted the recovery toward of marriage, change my view of illegal
So add Ireland to Portugal and Spain on the urban, white-collar workers. That helps ex- immigration, change my view on my In the words of that great philoso-
list of countries where voters don’t seem to plain why, despite a significant fall, the un- Second Amendment rights and on and pher Pogo: “We have met the enemy,
want to take growth for an answer. The FG-La- employment rate was still at 9.4% in 2015, on. When I look in the mirror, I see and he is us.”
bour coalition led by Mr. Kenny took over in compared to 6.4% in 2008. someone who is tired of the weak- B. BEANE
2011 as unemployment peaked at above 15% No wonder voters didn’t seem convinced kneed Republican leadership not chal- Palatine, Ill.
amid a sovereign-debt crisis triggered by gov- by any party last month. An FG-FF coalition lenging the administration. When I
look in the mirror, I see someone who
ernment support for failing banks. Dublin re- is probably a nonstarter, owing to historic an- Letters intended for publication should
wants to make America great again. be addressed to: The Editor, 1211 Avenue
quired an international bailout of €67.5 billion imosities dating back to the 1920s. The more HARRY J. SHEA of the Americas, New York, NY 10036,
($75.14 billion) in 2010. likely outcome is a minority government that Seminole, Fla. or emailed to wsj.ltrs@wsj.com. Please
Dublin implemented some spending cuts sets the stage for fresh elections later this include your city and state. All letters
and maintained Ireland’s low personal- and year. The lesson for the rest of Europe is that Mr. Jenkins ignores the spawning are subject to editing, and unpublished
corporate-tax rates, and the country exited while faster economic growth is paramount, of the tea party and the disdain that letters can be neither acknowledged nor
returned.
its bailout program in 2013. Scratch the sur- it also matters how that growth is achieved. its members received at the hands of
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THE WALL STREET JOURNAL.
The Big Question in Banking Regulation
By Richard Barwell
O
ne of the many lessons of
the Great Recession was
that fundamentally flawed
bank regulations were a
major contributor to the
crisis. In an attempt to correct that
mistake, authorities around the
globe are now trying to compensate
with a raft of new reforms, including
some that haven’t been properly
thought through.
Authorities are developing
new tools to boost
financial stability. But
they need a clearer idea of
what ‘stability’ means.
Among the more familiar regula-
tory tools, standards on capital have
been tightened up while new stan-
dards on liquidity have been intro-
duced. Healthy skepticism has re-
placed a tick-box supervisory culture.
Authorities are even getting serious
about tackling the problem of too-
big-to-fail institutions.
Now comes the introduction of a
macroprudential regime, designed to
complement these microreforms by
counteracting the destabilizing
It’s Time to Seal the Deal on Global-Trade Reform
By Roberto Azevêdo
I
magine if a government proposed
to its citizens that the poor
should pay more than the rich for
food, clothing and other essentials.
Universal outrage would ensue. But
in the global economy, the fact is
that poor countries are paying nearly
twice as much as rich countries to
bring goods into their markets.
Trade costs in developing coun-
tries are, on average, the equivalent
of a 219% import tariff. For each dol-
lar it costs to make a product, it
costs a further $2.19 to bring it to
developing-countries consumers. For
high-income countries, this cost is
closer to $1.34—still a substantial
surcharge. Cutting trade costs would
therefore have a dramatic effect
around the world: A reduction of 1%
would support a 3% to 4% increase in
trade growth.
American Students Bruise the Superbanana
By Julie Kelly
S
tudent activists at Iowa State
University are up in arms after
researchers offered to pay them
almost a thousand dollars to eat
some genetically modified banana.
The bananas, created by an Austra-
lian scientist, contain high levels of
beta carotene, which converts to vita-
min A when eaten.
Vitamin A deficiency, which can
cause blindness, stunting and even
death, is a devastating problem
throughout the developing world. In
Uganda roughly 40% of children un-
der age 5 are vitamin-A deficient, ac-
cording to a 2011 health survey.
Research on the vitamin-
fortified fruit could help
malnourished Africans,
but well-fed collegians
want no part in it.
The hope is that fortified super-
bananas could help prevent such mal-
nutrition. To test their efficacy, Iowa
State students were offered $900 to
eat the bananas for four days during
three trial periods, then have their
blood tested to measure vitamin ab-
sorption. The research is led by ISU
professor Wendy White, an expert on
vitamin A-enriched crops.
But some of the healthy, well-fed
college students in America’s heart-
land were outraged. In February they
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swings in the financial cycle. This
macro regime will try to insulate fi-
nancial institutions from the latent
risks that can build up in a boom so
that they are better placed to provide
core services during a bust. Should
the commercial-property market
start to overheat, for example, a
macroprudential policy maker might
require that banks start funding
more of their commercial-property
loans with loss-absorbing capital.
This ambitious macroprudential
agenda has already been put into
practice in the U.K. by the Financial
Policy Committee.
The FPC is supposed to make the
U.K. financial system more resilient
and thereby protect the supply of core
financial services. But beyond that,
there is a complete lack of detail.
There are no targets, for example, for
the level of resilience or the provision
of core services that the FPC is sup-
posed to deliver. Is the FPC supposed
to eliminate financial crises alto-
gether, even at the cost of draconian
limits on the banks’ capacity to pro-
vide services or offer innovative fi-
nancial products? Or is the objective
to keep the frequency of crises, and
the serious disruption to the supply of
core financial services that follows,
down to some tolerably low level,
whether that should be at most once
a century or some other limit? With-
out that explicit target, the FPC can-
In addition to tariffs, trade costs
can include transportation, customs
fees and border delays. But some of
the biggest cost-reduction opportu-
nities can be achieved with little ef-
fort. Something as simple as harmo-
nizing trade documents could help
improve efficiency for exporters,
bringing substantial benefits to
low-income countries. Automation
and streamlining of customs proce-
dures, and transparent customs du-
ties on imports, would deliver even
greater gains.
In 2013 the world came together
and secured a landmark accord: the
World Trade Organization’s Trade
Facilitation Agreement (TFA). Full
implementation of the TFA, accord-
ing to a study last October by WTO
economists, could reduce trade costs
for members by an average of nearly
15%. This would have a bigger im-
pact than reducing to zero every re-
delivered a petition with more than
57,000 signatures to the university to
oppose the so-called human feeding
trials. The petition was also deliv-
ered to the Seattle headquarters of
the Bill and Melinda Gates Founda-
tion, which is investing more than $2
billion to improve agriculture in the
developing world, including through
the banana project.
“While we can all support the
rights of Ugandans to have access to
safe, nutritious, and culturally appro-
priate food, Ugandans have expressed
increasing concern that genetically-
modifying bananas are not meant to
serve that purpose,” a group of stu-
dents wrote in the Ames Tribune. “In-
stead, many suspect the GM bananas
to be an attempt to corporately cap-
ture the domestic seed market.”
They sound like they’re trying to
save an organic garden in Berkeley.
“Those students are acting out of ig-
norance,” Jerome Kubiriba, the head
of the National Banana Research Pro-
gram in Uganda, tells me. “It’s one
thing to read about malnutrition; it’s
another to have a child who is con-
stantly falling sick yet, due to limited
resources, the child cannot get imme-
diate and constant medical care. If
they knew the truth about the need
for vitamin A and other nutrients for
children in Uganda and Africa, they’d
get a change of heart.”
He’s more optimistic than I am.
Genetically engineered crops are
anathema to the far left. An article
last year in the Ecologist called the
fortified bananas “a globe-trotting
case of biopiracy,” and said the proj-
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OPINION
not make coherent decisions about
the adequacy of regulatory require-
ments on capital or liquidity.
Likewise, there is no working def-
inition of what constitutes an appro-
priate provision of core financial
services. At what point does an in-
crease in rationing at the micro
level, with low-income households
unable to get access to credit, be-
come a macro problem that the FPC
should deal with?
When it comes to raising capital
requirements to increase resilience,
some economists argue that there is
no such thing as too much. There is
maining tariff around the world,
boosting global merchandise exports
by up to $1 trillion a year, with de-
veloping countries seeing most of
these benefits.
A WTO agreement to cut
red tape would reduce costs
of trade by around 15%.
In addition, the TFA will help
countries attract foreign direct in-
vestment and promote good business
practices. It will enable developing
countries to diversify their exports
and participate in global value
chains, reducing their dependency on
commodities. It will also help reduce
corruption and improve the collec-
tion of customs duties and other bor-
der taxes. Many of the world’s poor-
ect’s secret ambition is profit—“to
enter the international banana trade,
setting itself up as the United Fruit of
the 21st Century.”
A field-trial in Uganda of a different
genetically modified banana, one de-
signed to resist wilt, is protected by
barbed-wire fences and security guards.
Three years ago in the Philippines anti-
GMO protesters destroyed fields of vi-
Hillary Clinton’s Soft Despotism
Donald Trump is Hit-
ler. Donald Trump is
a fascist. Donald
Trump is a dictator.
Certainly Mr.
Trump has a mouth,
and he’s not afraid to
MAIN
use it. He also speaks
STREET
to adoring crowds
By William
who cheer when he
McGurn
says to respond in
kind to activists try-
ing to disrupt his rallies. Even so, the
over-the-top claims that Mr. Trump is
the new Il Duce may be distracting at-
tention from the soft despotism that
Tocqueville deemed the far likelier
menace to American liberties.
This kind of authoritarianism
doesn’t come with goose steps or
brown shirts or large populist move-
ments. It prefers bureaucracy to
bombast. It presents itself as a solu-
tion to the complexities of modern
government. It’s called the adminis-
trative state.
Philip Hamburger—a Columbia law
professor and author of the 2015 book
“Is Administrative Law Unlawful?”—
defines the administrative state as the
substitution of regulatory edicts for
laws passed by the people’s elected
representatives. In the American iter-
ation, this often means the same fed-
eral agency that writes the rules also
enforces and adjudicates them—a con-
fluence of powers Madison once called
the “very definition of tyranny.”
Mr. Hamburger maintains that the
threat of the administrative state is
nothing new, notwithstanding the as-
sumption of some conservatives who
would date it to the progressive theo-
ries of Woodrow Wilson or the rise of
the New Deal. Mr. Hamburger says
the Founders well understood this
threat, familiar as they were with
English constitutional history and the
centuries-long struggle to limit the
extralegal prerogatives of kings (Star
Chambers anyone?).
Now, it’s certainly possible that a
President Trump would seed the fed-
Wednesday, March 16, 2016 | A11
GETTY IMAGES
no downside, according to this view,
to forcing banks into funding a
greater share of their business with
capital. Under certain assumptions,
raising regulatory capital require-
ments has no impact on, say, the sup-
ply of credit.
However, practical policy makers
don’t buy into that model and in-
stead see a trade-off between the re-
silience of the banking system and
the terms on which it provides its
services. This includes the numbers
of households and companies that
are effectively rationed out of credit
markets, and the cost of credit for
est countries depend on this income.
But it’s the small- and medium-size
enterprises that stand to gain the
most from this deal, since they are
the ones that suffer most from cus-
toms red tape and are more sensitive
to border delays.
Before these benefits can be real-
ized, however, the agreement must
be ratified by two-thirds of the
WTO’s membership. Seventy mem-
bers, including Australia, China, the
European Union, Japan and the U.S.,
have already ratified. We need
about 40 more. Some members,
such as Brazil and India, are well on
their way to ratification. I will be
writing to urge the others to fast-
track their domestic processes. It’s
time we saw through the commit-
ments made in 2013.
It’s important to note that the
TFA is a new kind of trade deal. In-
stead of imposing stringent, catch-
tamin A-enhanced Golden Rice.
Prof. White insists that the ISU
study will go on—despite protests to
deny the advances of biotechnology to
the people who need it most. “It would
be great to see small farmers in Africa
benefit from genetic-engineering tech-
nology specific to their customary
crops, such as cassava and banana,”
says Kevin Folta, a plant geneticist at
eral agencies with those who would
abuse their powers for Trumpian out-
comes. In real life, however, the com-
pulsion to decree to one’s neighbor
what’s best for him (and use the fed-
eral government to enforce it) is an
affliction of modern American liber-
alism. The kind of people Hillary
Clinton, if elected, would rely on to
fill the federal bureaucracies, every
last one of them eager and willing to
impose rules on the American people
that would never fly in Congress.
She prefers the hidden
authoritarianism of the
administrative state.
What kind of rules and regula-
tions? Here are a few recent examples:
• In the run-up to the 2012 presi-
dential election, the IRS targets
groups regarded as enemies of the
president—pro-Israel, pro-life, pro-
tea-party, etc. When this became pub-
lic, its officials, including the new IRS
commissioner, John Koskinen, make
clear their contempt for congressional
panels trying to investigate.
• In an assault on religious lib-
erty, the Department of Health and
Human Services issues a mandate
that would force the Little Sisters of
the Poor, Catholic nuns who run
homes for the elderly poor, to offer
their employees contraceptives the
sisters regard as a violation of their
faith. They are threatened with fines
of $100 per employee per day if they
refuse, which adds up to $70 million
a year—about a third of their oper-
ating budget.
• Andy Johnson builds a pond on
his Wyoming property to provide wa-
ter for his horses and cattle after se-
curing all the required local and state
permits. The Environmental Protec-
tion Agency steps in and accuses him
of violating the Clean Water Act (even
though he in fact has created a wet-
those who can still get access. Politi-
cians therefore need to give macro-
prudential policy makers much
clearer guidance about how to man-
age this trade-off.
The current set-up also rules out
genuine accountability. How can
there be an assessment of whether
the FPC has failed or not if its objec-
tives haven’t been clearly outlined?
The recent intervention in the mort-
gage market illustrates this account-
ability deficit. The FPC introduced a
cap on the proportion of new mort-
gages that banks could originate at
loan-to-income multiples in excess of
4.5. The committee acted not because
those loans threatened financial sta-
bility but because they were judged
to pose a threat to the nebulous con-
cept of economic stability. Whatever
the merits of the intervention, the
committee’s justification for action
involved an elastic interpretation of
its remit. And yet there was little
scrutiny of the decision.
The macroprudential agenda is
worth persevering, but policy makers
need to improve their understanding
of how the financial system behaves.
Politicians need to provide greater
clarity on the objectives of the re-
gime. The sooner the regime is put
on a proper footing, the better.
Mr. Barwell is a senior economist
at BNP Paribas Investment Partners.
all conditions, it was designed to re-
spond to the needs of each country.
It allows for developing and least-
developed countries to undertake
the necessary reforms at their own
pace. But it also ensures that they
will receive practical support in do-
ing so. Donor countries and agencies
have made it clear that they are
ready to provide the necessary sup-
port to ensure full implementation
of the agreement.
Against a backdrop of sluggish eco-
nomic growth, implementing the
Trade Facilitation Agreement would
deliver a fast and easy boost to
growth around the world. By making
sure the agreement enters into force
this year, we would take a sledgeham-
mer to the trade costs that shackle
economic growth and recovery.
Mr. Azevêdo is director-general of
the World Trade Organization.
the University of Florida. “Solutions
exist, but are slow to deploy, and much
of that comes from resistance borne in
the industrialized world.”
For any lucky American college
student to take part in that resistance
is, well, bananas.
Ms. Kelly is a food writer in Orland
Park, Ill.
lands) and orders him to undo what
he’d done—or face fines of $37,500 a
day. As Mr. Johnson fights, he has ac-
cumulated fines of $20 million.
According to the most recent “Ten
Thousand Commandments”—the
Competitive Enterprise Institute’s an-
nual survey of federal regulations—in
2014 federal agencies issued 3,554
regulations while Congress passed
only 224 new laws. That’s 16 new reg-
ulations for every new law.
The result is the effective transfer
of power from the American people
acting through their elected repre-
sentatives to the American people
being told what to do—and threat-
ened with crushing fines if they do
not—by federal bureaucracies that
use the vague congressional language
in everything from Dodd-Frank to the
Affordable Care Act to impose their
own interpretations. Even worse, un-
der the Supreme Court’s 1984 Chev-
ron decision, the courts are basically
told they must defer.
President Obama didn’t create rule
by the administrative state. But he
may have best captured its spirit two
years ago when, in response to a ques-
tion about congressional resistance to
his agenda, he declared his pen might-
ier than the law: “I can use that pen to
sign executive orders and take execu-
tive actions and administrative ac-
tions that move the ball forward.”
And he has.
Now he hopes to pass the pen to
Mrs. Clinton. And surely the one Hil-
lary promise we can all believe is
that, when it comes to ruling by exec-
utive fiat and using the federal bu-
reaucracies to impose her agenda,
she stands to outdo even Mr. Obama.
Which leaves us here: At a mo-
ment when the media is thick with
characterizations of Donald Trump as
the new Hitler, America might do
well to devote some attention to the
soft despotism of the woman who
promises to further embolden this
unelected, unaccountable and out-of-
control fourth branch of government.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A12 | Wednesday, March 16, 2016 THE WALL STREET JOURNAL.

ARTS & ENTERTAINMENT

Regal in Size and Beauty

REVIEW
DAVID MERMELSTEIN

Woven Gold: Tapestries of

Louis XIV
Getty Center, Through May 1

Los Angeles
EVEN NOW, centuries after European roy-
alty’s heyday, nothing proclaims the Divine
Right of Kings like an enormous tapestry.
And no monarch better projected power
through this medium than Louis XIV,
France’s Sun King, who ruled from 1643 to
1715. Evidence of his prowess can be seen
in “Woven Gold,” an exhibit of 15 breath-
taking tapestries produced between the
mid-16th century and the end of Louis’s
reign, on view at the Getty Center in this
city’s Brentwood neighborhood through

LE MOBILIER NATIONAL/LAWRENCE PERQUIS

May 1.
The show, which will not travel, is billed
as the first major tapestry exhibition in the
Western U.S. in four decades and consists
primarily of materials on loan from the Mo-
bilier National in Paris, a storage facility
created during Louis’s reign and still the
primary repository for decorative artifacts
collected during the Bourbon dynasty.
Eleven of the tapestries have never before
been displayed in the U.S.
These works, which were meant to be ap-
preciated from a distance, rise from over 10 Charles Le Brun’s large (16¼ by 26½ feet) tapestry ‘Entry of Alexander Into Babylon.’
feet in height—most are over 15—and span
an even greater length across, the widest factured at the famed Gobelins factory, es- corresponding signs of the Zodiac. The sec- their metallic threads still radiating author-
reaching nearly 27 feet. So it’s a privilege to tablished under Louis’s aegis in 1662. ond, a copy woven for an unidentified pa- ity nearly four centuries on. A much busier
see them hung at something close to eye Art lovers may debate the relative gran- tron, is more squat and fit for an imposing scene unfolds among the threads of “Winter,
level, for close viewing provides a rare op- deur of these hangings, the subtleties of but lesser abode. Both find Louis on a boar Cybele Begs for the Sun’s Return,” designed
portunity to appreciate more fully the ex- their characters’ expressions, the ornateness hunt, with the chateau in the background. by Pierre Mignard, in which Boreas, the
traordinary labor and exquisite craft of their of their borders, even the degree to which But whereas the original features a border Greek god of the North Wind, blows snow
construction. Scores of anonymous weavers age has dimmed their colors, but one’s over- with monarchic symbols and a virtual aviary and hail on a reclining Cybele as the Pleia-
and dyers produced these tapestries—made all appreciation of them will only be height- in the foreground, the copy substitutes a des drench her with rain. The weather ef-
from silk, wool and metallic threads—but ened on seeing surviving portions of the plainer flora-and-foliage frame and fewer fects are spectacularly limned, but the vivid
the designs were often the handiwork of painted canvas (or “cartoon”) used to guide birds. And though the later version is more waterfowl in the foreground are no less im-
such marquee names as Raphael, Rubens the weavers for Le Brun’s “Entry of Alexan- crudely rendered in every respect, its colors pressive.
and Charles Le Brun. der Into Babylon.” Instinct tells us that the remain far brighter. Power passes—as that Rubens tapestry
The subjects range from the mythological final product (a copy of a copy, as it were) Two other tapestries, each set at the aptly suggests—but its trappings can sur-
(“Neptune and Cupid Plead With Vulcan for should appear cruder than its model. But shore, also encourage close comparison. The vive well beyond their animating force. The
the Release of Venus and Mars”) to the bib- the opposite is true: Despite its size (16¼ by first, “Constantius Appoints Constantine as political aspects of these objects no longer
lical (“The Daughter of Jephthah”) to the 26½ feet), the tapestry is rife with delicate His Successor,” designed by Rubens, chroni- concern the casual viewer, but that hardly
historical (“The Battle of Arbela”), yet the shading and intricate detail. cles the passing of power from father to blunts their artistic impact. “Woven Gold”
organizing principle here focuses not on In the last gallery, visitors will find an son, symbolized by the exchange of an orb. acknowledges the complex origins of these
what inspired these works, but rather how especially interesting juxtaposition: two Beneath them sits the most realistic-looking, pieces while celebrating their far more basic
they found their way into Louis’s posses- similar but not identical depictions of and saddest, figure in this exhibit, an old appeal.
sion. Thus the exhibit’s first section displays Louis’s chateau at Monceaux hanging oppo- and spent Neptune, leaning naked on his
tapestries purchased for Louis; the second, site each other. The first, sized for a palace, now-useless trident. Waves, sand and sea- Mr. Mermelstein writes for the Journal on
those inherited by him; and the third, those is part of a series by Le Brun pairing royal shells are illustrated with exceptional verisi- classical music and film and has a
commissioned by him—these last all manu- residences with the months of the year and militude, as are the two monarchs’ robes, longstanding interest in Louis XIV.

Weather The WSJ Daily Crossword | Edited by Mike Shenk

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BUSINESS & TECH.

INSIDE:

MONEY &
INVESTING
Sony Delays PlayStation VR
PATRICK PLEUL/DPA/ZUMA PRESS

Hard Lesson for

Emerging Markets
October launch gives competitors a head start TECHNOLOGY | B3 FINANCE | B5
© 2016 Dow Jones & Company. All Rights Reserved. * * THE WALL STREET JOURNAL. Wednesday, March 16, 2016 | B1

EU Heads
Toward
Multinationals Defend Tax Stance
Executives at Google wring out more corporate up to legislators to change Apple, whose tax structure in much of the sales of its gad-

Charges and Apple parry

questions from
tax revenue.
In a sometimes tense ses-
sion, legislators accused
them.
“We make use of tax incen-
tives, tax structures that are
Ireland is currently under in-
vestigation by the European
Commission, the European
gets through a company
called Apple Sales Interna-
tional, leaving its units that

On Google European lawmakers

BY NATALIA DROZDIAK
BRUSSELS—The European
Union is edging closer to filing
formal charges against Alpha-
bet Inc.’s Google for allegedly
abusing its position as the
maker of the Android smart-
phone operating system to fa-
vor its own apps, people famil-
iar with the matter said.
The European Commission,
the bloc’s antitrust authority,
has requested that rival com-
the companies of using com-
plex structures to funnel tens
of billions of dollars of profit
BY SAM SCHECHNER out of Europe without paying
AND NATALIA DROZDIAK what lawmakers argued was a
fair amount of tax.
BRUSSELS—European law- “Does this activity embar-
makers on Tuesday grilled rass Alphabet or you,” Paul
multinationals, including Al- Tang, a Dutch member of the
phabet Inc.’s Google, Apple Socialists and Democrats alli-
Inc. and McDonald’s Corp., on ance, asked a Google execu-
their tax structures in Europe, tive.
raising political pressure on Company representatives
the firms as governments said that their structures fol-
across the bloc attempt to lowed current laws and it was
well-known, that are widely
accessible and used by most
multinationals,” said Adam
Cohen, head of economic pol-
icy for Google in Europe.
The back-and-forth comes
as governments, particularly
in Europe, are pushing to
change international tax trea-
ties and national laws to force
multinational firms to pay
more in income tax in coun-
tries where they have custom-
ers. It also marked a rare pub-
lic appearance on taxes for
Union’s antitrust watchdog,
for potentially breaching
state-aid rules.
“We feel we’ve paid every
cent of tax that is due in Ire-
land,” said Cathy Kearney, vice
president of European opera-
tions at Apple. “We don’t be-
lieve there has been any state
aid.”
At issue is how much busi-
ness companies like Google
and Apple actually conduct in
individual European countries.
Apple, for instance, handles
operate retail or online stores
with razor-thin margins.
Google for its part collects all
of its revenue from European
clients through its Irish head-
quarters, not from units in in-
dividual countries, and then
pays hefty royalties to a unit
based in Bermuda.
Company executives said
they pay all the tax that is due
in EU countries. Apple and
Google referred to their off-
shore holding companies
Please see TAX page B2

U.S. Shale-Oil Producers Are Hamstrung

panies provide nonconfidential
versions of information about
Android previously sent to the
EU.
According to people famil-
iar with the matter, this sug-
gests the EU is readying a so-
called statement of objections
against Google because, once it
lays out any charges, the EU
would have to share with the
U.S. technology company the
evidence on which they are
based.
While the case team gener-
ally tries to keep files up to
date, for example by asking re-
spondents for follow-up infor-
mation after a submission,
some of the documents the EU
requested to be made noncon-
fidential weren’t recent, a per-
son familiar with the matter
said. “That suggests a more
complete cleanup than they
normally might,” the person
said.
The U.S. was supposed to
be the world’s new swing oil
producer, able to nimbly open
and close the taps in response
to market forces, thanks to its
bounty of shale fields.
By Alison Sider,
Chester Dawson
and Erin Ailworth
But as oil prices show some
signs of stabilizing, American
producers and oilfield-services
companies are warning that
they may not be able to jump-
start drilling.
The reason: Many indepen-
dent companies are too finan-
cially strapped, have let go too
many workers, or have idled
too much equipment to imme-
diately ramp up again.
ANDREW CULLEN/REUTERS

The move mimics steps “The balance sheets of

taken by the EU last year, be-
fore it filed formal charges
against Google for allegedly
abusing its position as the
leading search engine by fa-
voring its own shopping ser-
vice. The commission also
opened the formal probe into
Google’s conduct with Android
at the time. Google denies alle-
gations it breaches the bloc’s
antitrust rules.
The European Commission
declined to comment. Google
declined to comment.
The commission’s requests
to make the submissions non-
confidential reflect progress in
its continuing investigation,
but any decision to file formal
charges wouldn’t be final until
EU Competition Chief Mar-
grethe Vestager signs off on it.
Ms. Vestager has said she
would also closely watch
Google’s conduct in Europe in
other areas, including how
Google copies rivals’ Web con-
tent, but so far hasn’t issued
any formal charges in those ar-
eas. News Corp, owner of The
Please see ANDROID page B3
these shale-only producers
have to be repaired for them
to get back to drilling,” said
John Hess, the chief executive
of Hess Corp. “That’s going to
curb any recovery.”
Just as U.S. output fell Sunflower stalks punctuate the snow in January near idled drilling rigs in Dickinson, N.D., close by the state’s Bakken oil fields.
more slowly than predicted—
even as oil plunged from idled during the downturn, ac- supply glut that ultimately sees a meaningful uptick in
around $100 a barrel in 2014 cording to IHS Energy, which made prices worse. drilling activity, said Lynn A Lasting Drop
to $30—it is likely to be estimates it would take two “At $40, I doubt we’re go- Helms, Director of North Da- U.S. oil production isn’t
slower in recuperating, even if months for some of that ing to see a lot of accelera- kota’s Department of Mineral expected to recover for at least
prices rebound to $50 a barrel equipment to return. tion,” said Taylor Reid, presi- Resources. another year.
or more, some oil executives It isn’t clear that oil prices dent and chief operating “If you’ve been on a strict
10 million barrels a day
and analysts now say. will continue their recent officer of Oasis Petro- diet for a long period of time,
More than three dozen U.S. rally: Global crude prices fell leum Inc., at an energy confer- it takes a while to put the forecast
oil and gas producers plan to 2.1% Monday to $39.53 as a ence in Denver last week. weight back on,” he told re- 8
cut their capital spending for tentative agreement by key One reason output re- porters Friday.
2016 by nearly half, on aver- members of the Organization mained robust last year is that The U.S. Energy Informa-
age, compared with last year, of the Petroleum Exporting drilling and fracking wells got tion Administration estimates 6
according to a Wall Street Countries to freeze production cheaper. Producers leaned on that U.S. oil output in Febru-
Journal analysis of company ran into obstacles. services companies to cut ary was down 600,000 barrels
financial filings. Still, even if prices return costs, and certain wells were a day from last year’s peak of 4
Some of the largest U.S. oil- to levels where shale drillers still profitable even at lower close to 9.7 million barrels a
field-services firms have laid can make money again, many prices. But now many compa- day—a 6% drop—and some of
2
off 110,000 people in the past companies are vowing to be nies say they have cut as much the biggest U.S. shale pro-
year, Evercore ISI analysts es- cautious. Some are tempered as they can. ducers have said they plan to
timate, and many of those by what occurred last spring, In the Bakken Shale region, curb production by another 0
workers have no plans to re- when producers jumped back prices will need to be above 10% this year.
turn to the industry. into drilling new wells after oil $60 for benchmark West Texas Experts such as IHS’s Daniel 2012 ’13 ’14 ’15 ’16 ’17
Close to 60% of the fracking prices briefly hit $60 a barrel, Intermediate crude for at least Yergin have predicted that U.S. Source: U.S. Energy department
equipment in the U.S. has been inadvertently worsening a three months before the area Please see SHALE page B4 THE WALL STREET JOURNAL.

Campari Deal Toasts U.S. Market Go Champion Bows

BY SAABIRA CHAUDHURI
Italian spirits company Da-
vide Campari-Milano SpA has
agreed to acquire the maker of
Grand Marnier liqueur, in a
$758.9 million deal aimed at
cashing in on a resurgent mar-
ket for classic cocktails in the
U.S.
Campari’s agreement to buy
Société des Produits Marnier
Lapostolle SA marks the latest
in a string of deals for the
spirits industry.
The business remains
highly fragmented as new dis-
tillers continue to crop up,
particularly in easy-to-enter
categories such as vodka and
gin.
The U.S. alone boasts more
than 600 spirits distill-
eries—10 times the number a
decade ago, according to data
from Exane BNP Paribas.
Among recent deals, Saz-
erac Co. in January agreed to
purchase liqueur brands
Southern Comfort and Tuaca
from Brown-Forman Corp. for
$543.5 million.
France’s Terroirs Distillers
last year agreed to buy Louis
Royer, a cognac unit of Japan’s
Suntory Holdings Ltd.
Mixing It Up
ates 60% of its revenue.
Paris-based Marnier,
Italian spirits producer Campari is buying the French maker of Grand founded in 1827, has produced
Marnier, the latest in a string of dealmaking in the sector. Below, the Grand Marnier, a blend of co-
Bitter Sweet, a cocktail blending Campari and Grand Marnier. gnacs and oranges, since 1880.
It had revenue of €151.7 mil-
lion ($168.5 million) last year.
In Manhattan, a 375-millili-
ter bottle of Grand Marnier
sells for $21.99 at Astor
Wines.
“Campari wanted some-
thing in the cordials and li-
queurs business that’s pre-
mium and very cocktail-use
heavy,” said Bernstein analyst
Other recent liqueur deals Milena Redzic. “They didn’t
Target: Brown-Forman's really have anything like this
liqueur brands in their portfolio.”
Acquirer: Sazerac Cordials make up about
Amount: $543.5 million 9.3% of the U.S. spirits market
by volume, according to the
Target: Fratelli Averna
Acquirer: Campari
Distilled Spirits Council of the
Amount: €103.75 million U.S., a trade group known as
($115.19 million) Discus.
Grand Marnier is used to
Target: First Ireland Spirits make classic cocktails such as
Acquirer: Quintessential Brands margaritas, the Sidecar and
Amount: Undisclosed the Cosmopolitan.
It “is a must in all high-end
Source: Dealogic; Photo: Associated Press THE WALL STREET JOURNAL.
bars,” said Campari Chief Ex-
ecutive Bob Kunze-Concewitz.
Campari, known for its buying Marnier would allow it “It’s a high-margin product.”
eponymous bitter liqueur and to further capitalize on the Spirits companies globally
the milder Aperol, both popu- cocktail revival, particularly in have been increasingly focused
lar cocktail ingredients, said the U.S., where Marnier gener- Please see CAMPARI page B2
To Google Software
BY JONATHAN CHENG
SEOUL—Humanity didn’t
stand a chance.
South Korean Go grandmas-
ter Lee Se-dol on Tuesday lost
the final round of the chess-
like game—and the match—to
AlphaGo, an artificial-intelli-
gence machine developed by
Alphabet Inc.’s Google.
Mr. Lee, the 33-year-old
representing human intelli-
gence, had on Sunday mus-
tered his first victory in the
five-game match, which
gripped many in Asia by juxta-
posing the swift progress of
computer intelligence and hu-
manity’s struggles to outwit
advancing technology against
the backdrop of a slow-moving
ancient game that hasn’t
changed much in millennia.
But despite high hopes, he was
unable to record another win.
Go, hugely popular in
China, Korea and Japan, where
most of the board game’s 40
million players live, was in
many ways an ideal testing
ground for artificial intelli-
gence. Played on a 19-by-19
grid, players place stones on
each intersection and try to
claim the most territory.
Experts say the game relies
as much on intuition as on cal-
culation, putting it beyond the
reach of supercomputers that
attempt to overwhelm their
human opponents with brute-
force computing power.
AlphaGo uses programming
modeled on neural processes
to replicate human instincts,
and has also learned through
millions of matches against it-
self.
Mr. Lee’s loss Tuesday
capped a humbling week for
the player, who came into the
$1 million match last Wednes-
day confidently predicting a
5-0 victory over the machine.
The prize money is earmarked
for charities and Go organiza-
tions.
Instead, Mr. Lee eked out
just one win, and joined Rus-
sian chess legend Garry Kasp-
arov—who was bested by In-
ternational Business
Machines Corp.’s Deep Blue
computer in the closely
watched 1997 chess match—in
the annals of artificial intelli-
Please see GO page B3
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Wednesday, March 16, 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.
All In Pay Network
A
Service ...................... B7
Alphabet ................ B1,B3
Altice.........................B10
Amazon.com........B5,B10
Apollo Global
Management.............B5
Apple......................B2,B3
Avon Products ............ B2
AvtoVAZ......................B2
B
Banco Santander. ....... A2
Bank of America.......B10
Barington Capital ....... B2
Blackstone Group ....... B5
BOC Group Life
Assurance ................. B5
Box.............................B10
Brown-Forman............B1
C Hong Kong's Securities
Cedars-Sinai Medical
Center ....................... A8
Cerberus Capital
Management.............B2
Chesapeake Energy .... B5
China Life Insurance...B5
Citigroup....................B10
Continental Resources
.....................................B5
D LG Electronics.............B3
Daiwa House REIT
Investment ............. B10
Davide Campari-Milano
.....................................B1
Deutsche Telekom......A1
INDEX TO PEOPLE
A
Adrogue, Ricardo........B6
Alvarez, Scott...........B10
Andersson, Bo.............B2
B Rhett.........................B7
Blankfein, Lloyd........B10
Bouygues, Martin.....B10
Buffett, Warren........B10
C L
Chen Zhenggao...........B7
D Lewis, Ken.................B10
Draghi, Mario............B10
F Lu Kehua.....................B7
Fairfax, Lisa ................ B7
Fiedler, Frank..............B6
G Maure, Nicolas............B2
Greene, Diane ........... B10
Greenspan, Alan....... B10
TAX
Continued from the prior page
as mechanisms for deferring
U.S. taxes—rather than for
avoiding European ones.
“We are functionally orga-
nized and managed in the
U.S.,” Ms. Kearney said. “Our
income that is not taxed in Eu-
rope is due in the U.S. and de-
ferred.”
Ms. Kearney also said Apple
invests heavily in Europe and
described the company as the
largest taxpayer in the world.
She and a colleague declined,
however, to say how much in-
come tax the company pays in
the EU.
The EU is also investigating
McDonald’s tax affairs and
opened a full probe in Decem-
ber to examine whether a
2009 tax ruling granted to a
Luxembourg unit of the res-
taurant chain, McDonald’s Eu-
rope Franchising, had allowed
CAMPARI
Continued from the prior page
on the U.S. as they grapple
with a slowdown in China and
other emerging markets while
Western Europe remains slug-
gish.
Liquor, in particular pre-
mium liquor, is enjoying a re-
vival in the U.S. as drinkers in-
creasingly visit trendy cocktail
bars and spend on Old Fash-
ioneds and Manhattans in-
stead of beer.
Liquor’s market share in
the U.S. rose to 35% last year
from 29% in 2000, according
to Discus.
Liquor, in particular
premium liquor, is
enjoying a revival
in the U.S.
Diageo PLC in 2014 agreed
to swap its Irish whiskey
brand Bushmills in exchange
for full control of tequila
brand Don Julio from Jose Cu-
ervo.
The market for Tequila,
which is often used in marga-
ritas and other cocktails, is
growing in the U.S., rising
9.4% by value in 2015, accord-
ing to data from Bernstein.
Also in 2014, Suntory Hold-
ings agreed to buy Beam Inc.,
the owner of Jim Beam,
Maker’s Mark and Knob Creek
bourbons and the second-larg-
est maker of American whis-
key behind Brown-Forman, for
$13.6 billion.
* * THE WALL STREET JOURNAL.
BUSINESS NEWS
Diageo ......................... B2
E
eCashier ...................... B7
Euronav.......................B4
N
News Corp...................B1
Nissan Motor..............B2
Numericable-SFR......B10
AvtoVAZ Gets New Leader
BY JASON CHOW 74-billion-ruble ($1.2 billion)
Evergrande Real Estate O-P
Group.........................B5 loss in 2015. Three days after
Orange.......................B10
F PARIS—Nicolas Maure, the interview, Renault-Nissan
Prudential....................B5
chief executive at Romanian said Mr. Andersson was going
Facebook......................B3 R car maker Dacia SA, will take to step down from his post.
Faurecia.......................B2 Renault........................B2 over as the new boss at Rus- “AvtoVAZ has modernized
FedEx...........................B5 Renault ............................ sian auto manufacturer Av- its lineup and manufacturing
Fidelity Investments..B9 Royal Bank of Scotland toVAZ, said the Renault-Nis- processes, and significantly
AVTOVAZ/EUROPEAN PRESSPHOTO AGENCY
Fossil Group................B2 Group ........................ A2 san Alliance, the majority improved product quality,”
Fratelli Averna............B2 S owner of AvtoVAZ. said Carlos Ghosn, chief execu-
G Salesforce ................. B10 Mr. Maure, 55 years old, tive at both Renault and Nis-
Goldman Sachs Samsung Electronics will succeed Bo Andersson san. “With Nicolas Maure, we
Group ...................... B10 ............................... B2,B3 on April 4, the car-making alli- plan to continue on this strat-
Google ....................... B10 Sazerac........................B1 ance that unites France’s Re- egy despite the short-term
H Société des Produits nault SA and Japan’s Nissan challenges, and we remain
Marnier Lapostolle...B1 Motor Co. said on Tuesday. bullish about the long-term fu-
Hess.............................B1 Sony.............................B3 The companies said last week ture of the Russian market and
Spotify.......................B10 that Mr. Andersson would step AvtoVAZ as the leading do-
and Futures
Commission .............. B5
Suntory Holdings........B1 down after a stint at the job mestic auto maker.”
that lasted just over two years. Dacia’s Nicolas Maure will move to the Russian car maker in April. Mr. Chemezov said he
I-L T-U
For the past two years, Mr. hopes AvtoVAZ’s Lada brand
ThyssenKrupp.............A2
Iliad............................B10 Maure has led Dacia, the Ro- makers Faurecia and Valeo owns a minority share. will increase its market share
UBS Group .................. A2
Industrial & Commercial manian car maker that is SA. Earlier this month, Rostec in Russia and develop its sup-
Bank of China...........B9 UnionPay.....................B5
United Parcel Service.B5 wholly owned by Renault and The swift change at the CEO Sergei Chemezov told The ply base within Russia. “We
International Business a fast-growing budget car CEO office marks an effort to Wall Street Journal that Mr. expect the new CEO to con-
Machines...................B1 V
brand. He has been working at calm the tumult at the top at Andersson was going to be tinue improvements and
Leucadia National.....B10 Valeant Pharmaceuticals Renault since 2000, following AvtoVAZ, in which the Russian fired, blaming the Swedish- capably meet new challenges,”
International.......A1,B5
stints at French auto-parts state conglomerate Rostec born executive for AvtoVAZ’s he said.
M Valeo............................B2
VMware.....................B10
Fossil Group Pushes Back
Microsoft...................B10
Jet Unit
Volkswagen.................B6
Mizuho Financial
Group ...................... B10 W
myPrudential...............B7 Workday....................B10
BY JOHN REVILL cording to IDC, a market re-
searcher. By 2019, IDC
sales from pricey Swiss time-
pieces that can cost tens thou-
At Boeing
H
Hassabis, Demis.........B3
P
Pandit, Vikram..........B10
ZURICH—U. S. watchmaker
Fossil Group Inc. is launching
more than 100 new products
forecasts shipments will reach
88.3 million units. Meanwhile,
Swiss watch exports fell 1.6%
sands of dollars.
Fossil’s devices will use
technology acquired when the
Gets an
Overhaul
J Paulson, Henry..........B10 across eight brands this year last year to 28 million units, company bought Misfit Inc. for
Peirce, Hester.............B7 as it and other traditional with many analysts expecting $260 million last November.
Jeppson, Matthew
Prince, Chuck ............ B10 watchmakers try to head off the market to be flat this year. Misfit, which specializes in
K R rising competition from tech- “We believe the wrist-worn connected devices, brought BY JON OSTROWER
Redzic, Milena ............ B1 nology companies such as Ap- wearable market will be worth with it battery technology and
Kunze-Concewitz, BobB1
Reed, John ................ B10
Kuroda, Haruhiko......B10 ple Inc. and Samsung Elec- $35 billion to $45 billion in the access to a cloud platform that Boeing Co. said Tuesday it
Reichold, Steffen........B5 tronics Co. next three to five years,” said can be used to host and down- is consolidating portions of its
Lee Se-dol...................B1
S Fossil said it plans to offer Greg McKelvey, Fossil’s chief load apps, as well as its own commercial jet unit in a bid to
Schindler, Philipp........B3 features such as activity track- strategy and digital officer. activity trackers. reduce its overhead costs.
Liu Cigui......................B7 Sinn, David..................B9 ers and message alerts on its That, he said, is about equal in Mr. McKelvey said the As part of the reorganization,
W new smartwatches and other size to the so-called under smartwatch strategy would al- Boeing’s newly elevated senior
M Wallace, Bryan............A2 so-called wearable devices, $1,000 watch market that Fos- low Fossil, based in Richard- vice president of Airplane Pro-
Macchiaroli, Mike ..... B10 Weill, Sandy..............B10 such as fitness bands. The sil specializes in. son, Texas, to raise its prices grams, Pat Shanahan, won’t be
Y company makes products for Fossil’s approach differs and increase its profit margin. replaced after he joins Chief Ex-
O Yao, Rosealea..............B7 brands including Michael Kors from that of Swiss watchmak- “We are finding that custom- ecutive Dennis Muilenburg’s ex-
Okun, Andy ................. B3 Yellen, Janet.............B10 and Skagen. ers that have been largely dis- ers want more technology, ecutive council on April
Smartwatch shipments are missive of the devices pro- they want more functions, and 4, overseeing companywide
expected to hit 34.3 million duced by Apple and Samsung, if we deliver that with style supply chain and operations.
it to avoid paying corporate
tax in either Luxembourg or
the U.S.
“Do you think tax rulings
units in 2016, up from 21.3 mil-
lion units shipped in 2015, ac-
saying they appeal to different
consumers and won’t take
and branding you can add $50
or more to the price,” he said.
Boeing has been under
competitive pressure from Eu-
ropean rival Airbus Group SE
for decades, which has slowly
are useful because they give eroded its market share and
you legal certainty or is it be- forced jet prices lower.
cause you can significantly re- The company in February
duce your tax burden,” asked announced it was moving to
Sergio Gaetano Cofferati, an cut costs and has sought to
Italian member of the Social- eliminate layers of executive
ists and Democrats alliance. management “to lean out our
“It doesn’t look like you’re structure from the top down
giving much back” to the com- while continuing to perform
munity with your fiscal and on our development programs
tax policies. and keep our delivery commit-
Irene Yates, McDonald’s ments to customers,” Boeing
vice president for corporate Commercial Airplane Chief Ex-
tax, said the fast-food chain ecutive Ray Conner wrote in a
has paid on average around note to employees on Tuesday.
27% tax in Europe for the past Boeing also is working to
five years. “I believe that’s a offset the high development
strong indication of social re- and production costs of the
sponsibility,” she said. 787 Dreamliner and maintain
Swedish furniture company its forecast goal of recovering
IKEA has also faced increased nearly $30 billion in deferred
PATRICK PLEUL/DPA/ZUMA PRESS
scrutiny from the European expenses from building its
Parliament over its tax struc- first several hundred aircraft.
tures, but the EU’s antitrust “Given the competitive en-
watchdog hasn’t opened a for- vironment we face, it makes
mal probe into the matter. sense to realign our leadership
in a big-picture way,” said Mr.
Conner.
Mr. Kunze-Concewitz called
the U.S. the “cradle of our in-
dustry’s trends,” and said the
A Vattenfall power plant in Jaenschwalde, Germany, in 2015. Bidders for the company’s coal-fired
power plants in Germany are expected to ask the utility to inject $2.2 billion into the operations.
The moves follow last
week’s announcement of the re-
tirement of Chief Technology
company has exploited the Officer John Tracy and broader
cocktail-culture revival there holding company for its opera- ing U.S. operation to Cerberus’s management changes that ele-
to promote Campari-based
cocktails such as the Negroni.
Business tional units, roughly tripled the
size of its staff in recent
hands.
—Sharon Terlep
vate four executives, including
Mr. Shanahan, to Mr. Muilen-
The classic-cocktail move-
ment has now spread from big Watch months as it moves from an
intense period of acquisitions VATTENFALL
burg’s executive advisory group.
The shift eliminates a dedi-
U.S. cities to Europe, he said. to a new phase of investing in cated executive link between
“These are trends that last its units’ networks and on
Utility to Face Calls the chief executive of Boeing’s
at least a generation,” he marketing efforts. Altice also To Invest in Plants commercial unit and the pro-
added. named new executive commit- Sweden’s state-owned utility duction operations of its five
As part of the deal to buy ALTICE tees to many of its major Vattenfall AB will likely need to commercial jet programs. Boe-
Marnier, Milan-based Campari, businesses in 2015. spend billions of euros to sell its ing’s commercial program gen-
which also makes Skyy vodka
Subscriber Growth —Nick Kostov coal-fired power plants in Ger- eral managers will now report
and Wild Turkey bourbon, will Likely to Aid Results many, according to people famil- directly to Mr. Conner
get roughly 20% of Marnier’s Altice NV, the telecommuni- AVON PRODUCTS iar with the matter, a fresh re- to “strengthen ties between the
shares immediately and will cations group buying Cablevi- minder of the costs of energy manufacturing and operations
acquire a 28.8% stake held by sion Systems Corp. for $10
Cosmetics Company transformation in Europe’s larg- parts of the business,” he wrote.
the French company’s control- billion, said Tuesday it expects To Move to U.K. est economy. The effort also takes Boe-
ling family shareholders from an improving trend in revenue Avon Products Inc. said Vattenfall invited bids for its ing’s two oldest and lowest
2021.
It also plans to file a public
in 2016 after its French unit
swung to subscriber growth in
Monday that it would eliminate
about 2,500 jobs and move its
German lignite generation and
mining assets last fall. With final
volume twin-aisle jet programs,
the 767 and 747 jumbo jet, and
tender offer on all outstanding last year’s final three months. corporate headquarters to the bids due Wednesday, the re- consolidates them under the
Marnier shares to take full
control of the company.
The company, founded by
billionaire entrepreneur Patrick
U.K., the latest step in a years-
long turnaround of the strug-
maining bidders will now ask
Vattenfall to inject at least €2
oversight of Elizabeth Lund,
the site leader for the com-
Campari, which traces its Drahi, reported flat revenue gling beauty company. billion, or roughly $2.2 billion, in pany’s Everett, Wash., jet fac-
roots to 1860, when Gaspare year-over-year at €17.5 billion The company, founded some additional cash into the opera- tory. Ms. Lund is currently vice
Campari invented his name- ($19.4 billion). Its French mo- 130 years ago, said it would tions, people familiar with the president and general manager
sake bright-red aperitif, is a bile-phone and cable business gradually move its corporate matter said. of the long-range 777 program.
serial acquirer. It has pur- SFR, accounting for more than headquarters from New York It is unclear whether Vatten- Mr. Conner announced that
chased 24 brands since 1995, half of Altice’s sales, said reve- City to the U.K., although it will fall will accept the condition or its 767 general manager,
excluding Tuesday’s deal. nue fell 3.5% to €11.04 billion, maintain its New York incorpo- opt to keep the operations. Brad Zaback, will serve as Ms.
In 2014, the company while revenue at Portugal ration. The call for a massive cash Lund’s deputy on the 777 pro-
agreed to buy Forty Creek Dis- Telecom dropped 7.3% to A company representative injection comes as a result of gram and Bruce Dickinson,
tillery Ltd. for 185.6 million €2.34 billion as Altice worked said that the move of its head- German government plans to who now runs the 747 jumbo
Canadian dollars (US$140 mil- to restructure the two units. quarters to the U.K. wasn’t for wean the country off fossil and jet program, will oversee the
lion). Shortly after, it struck a Overall, Altice reported an tax purposes, but rather to nuclear fuels while boosting re- newly consolidated 747 and
deal to buy Fratelli Averna 18% year-over-year rise in ad- move the corporate functions newable sources of energy. Any 767 programs.
SpA, a maker of bitter liqueur, justed earnings before interest, closer to the bulk of company buyer of Vattenfall’s operations The 747 and 767, closely lo-
grappa and limoncello. taxes, depreciation and amorti- operations. would have to set aside billions cated in Boeing’s factory, are
Despite its growth, Campari zation—something analysts The actions come about two to shut down the five lignite almost entirely produced today
has a 0.8% share of the global say is an important measure weeks after Avon completed mines and four lignite-fired as freighter aircraft, or—in the
spirits market, compared with of the company’s perfor- the sale of its North American power plants. case of the 767—as the U.S. Air
9.3% held by Diageo and 4.5% mance—to €6.67 billion. operation to private-equity firm Vattenfall has 8,200 employ- Force’s new aerial refueling
by Pernod Ricard SA, accord- Mr. Drahi faces a challenge Cerberus Capital Management ees in its German lignite opera- tanker. Boeing has announced
ing to Euromonitor. to prove he can grow the top LP, in a complex deal that pro- tions, which recorded €2.3 billion plans to cut production of the
—Manuela Mesco line of his businesses while vided Avon with a cash injec- in revenue in 2014. jumbo jet to six annually start-
contributed to this article. keeping costs low. Altice, the tion and moved its slow-grow- —Eyk Henning ing in September.
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.
Most Androids Escape Encryption
Some handset makers
have resisted, saying
it would slow less
expensive models
BY JACK NICAS
Had San Bernardino shooter
Syed Rizwan Farook used an
Android phone, investigators
would have had a better chance
at accessing the data. The rea-
son? Few Android phones are
encrypted.
Google, Android’s maker,
doesn’t want it that way. The
Alphabet Inc. unit has pushed
encryption for Android phones
and automatically encrypts its
own line of Nexus devices.
But other handset makers
have resisted because they are
concerned that encryption—
scrambling data such as con-
tacts, photos and videos—hurts
a phone’s performance. And
Google hasn’t insisted for fear
of driving device makers away
from the official Android model,
where it makes the most money.
The result: Experts estimate
fewer than 10% of the world’s
1.4 billion Android phones are
encrypted, compared with 95%
of Apple Inc.’s iPhones. That
includes Mr. Farook’s iPhone,
now the center of a high-
ANDROID
Continued from page B1
Wall Street Journal, has filed a
formal complaint with the
commission regarding Google’s
competition practices.
In the Android case, the EU
has been investigating allega-
tions that Google requires
smartphone and tablet-com-
puter makers to pre-install a
suite of its own apps for mes-
sages, search, email and other
functions if a manufacturer
wants to include any of them.
The commission has also
been looking into accusations
that Google prevents phone
makers from developing modi-
Sony Delays PlayStation VR
BY TAKASHI MOCHIZUKI
TOKYO—Sony Corp. de-
layed the release of its Play-
Station VR virtual-reality sys-
tem by several months, giving
competitors a half-year head
start on a technology expected
to create a major market.
The headset for the flagship
PlayStation 4 console will go
on sale globally in October,
Sony said, after previously
saying it would become avail-
able by June. It will cost $399
in the U.S., €399 ($443) in Eu-
rope, £349 ($499) in the U.K
and ¥44,980 ($395) in Japan.
“To make sure that we are
able to prepare and deliver
enough units of PlayStation VR
and a wide variety of software
titles to consumers world-
wide, we have decided to
launch it in October 2016,”
Andrew House, president and
GO
Continued from page B1
gence’s advance.
Demis Hassabis, the head of
the U.K.-based team that de-
veloped AlphaGo, earlier de-
scribed Go as the “Mount
Everest” challenge of game-
GOOGLE/GETTY IMAGES
playing for artificial-intelli-
gence developers. Facebook
Inc. has been developing its
own artificial intelligence pro-
gram for playing Go.
Unlike chess, which has a fi-
nite number of possible moves
at any given moment that a
computer can quickly crunch,
Go presents a nearly bound-
less range of possible moves.
“It’s the deepest and most
profound game that mankind
has devised,” Mr. Hassabis
said on Tuesday.
As Mr. Lee struggled to
scratch out a victory, he at-
tracted viewers in South Korea
and in neighboring China and
Japan for his determination
against a faceless opponent.
Go fans had believed a victory
of machine over human was
perhaps a decade away.
“I don’t think Google real-
ized how much of a shock
wave that this was for a mas-
sive cultural institution out
here in Asia,” said Andy Okun,
the American Go Association’s
president, who was in Seoul to
* *
stakes clash between Apple
and the U.S. government that
raises questions about privacy
and security in the digital age.
The disparity between the
two dominant mobile-operating
systems underscores Google’s
challenge in corralling the
sprawling Android network of
more than 400 manufacturers
and 4,000 devices.
Google gives away its An-
droid software to attract more
users to its services. Google re-
quires device makers to comply
with certain requirements to
use the Android brand and key
Google services such as search
and maps. Ultimately, though,
device makers are free to use
the software as they wish.
Apple, by contrast, controls
both the hardware and software
on iPhones. It prods users to
adopt the latest version of its
iOS software, fueling the spread
of encryption.
“There is a push and pull
with what Google wants to
mandate and what the [manu-
facturers] are going to do,” said
Andrew Blaich, lead security an-
alyst at Bluebox Security Inc.,
which helps secure mobile apps.
In some ways, Google is “at the
mercy of the larger (manufac-
turers) like Samsung and LG
that are driving the ecosystem.”
When phones aren’t en-
fied versions of the Android op-
erating system despite the tech
company’s claim that Android is
an open mobile platform.
The EU has asked some re-
spondents to make their entire
responses to questionnaires
nonconfidential and has given
them about 10 days to submit
those versions, the person fa-
miliar said. That deadline has
already passed for some.
One of the commission’s
questionnaires, which were sent
to app makers, telecommunica-
tions companies and phone
makers, posed to companies
questions such as: “Have those
arrangements prevented you
from selling some phones with
alternate apps?” according to
global chief executive of Sony
Computer Entertainment Inc.,
said in a written statement.
Virtual reality, which pro-
vides users with an immersive
experience, is expected to gen-
erate a huge market in the
coming years, with applica-
tions far beyond videogames,
including travel, health care
and education. Researchers
at Gartner Inc. forecast nearly
40 million headsets will be
sold world-wide by 2020.
PlayStation VR’s main rivals
include the $599 Oculus Rift
from Facebook Inc. and the
$799 Vive from HTC Corp.,
scheduled for release later this
month and in April, respec-
tively—well ahead of Sony’s
headset.
Even with the delay, ana-
lysts see advantages for Sony.
The Rift and Vive, already
priced higher than the PlaySta-
Lee Se-dol, center, tried to play down the implications of his loss.
watch the match. “Google
thought they were beating a
hobby game, like ‘Snakes and
Ladders.’”
The match, dubbed “the
showdown of the century” by
the South Korean press,
adorned the front pages of al-
most all of the country’s news-
papers for most of the past
week, with some of them fea-
turing move-by-move recaps
of the games, while the coun-
try’s major television net-
works devoted hours of live
news coverage to the match.
In all, more than 100 million
people tuned into the match,
Google said.
Mr. Lee didn’t emerge di-
minished by the thrashing he
received from AlphaGo. The
weeklong match has turned
TECHNOLOGY
Slices of Software
Nearly all iPhones are encrypted but few Android phones are.
About 2% of Android phones run the latest software
codenamed Marshmallow, which requires higher-end devices to
be encrypted, while Google has also encrypted its Nexus
devices since version 5.0 (Lollipop).
iOS versions
Requires encryption of some or all devices
iOS 8 iOS 9
16% 79%
Earlier versions
5%
Note: Android has allowed users to turn on encryption since version 4.0. Apple iOS 8 and 9
automatically encrypt phone data.
Source: The companies
crypted, law enforcement can
more easily view their contents.
Authorities use specialized soft-
ware to crack passcodes on
locked—but unencrypted—An-
droid devices in about an hour,
said an investigator for France’s
Gendarmerie Nationale.
Google is pushing harder on
device makers. Its latest version
of Android—dubbed 6.0, or
Marshmallow—requires device
another person familiar with
the matter.
The commission has also
asked about how Google shares
revenue from integrated Google
searches on Android devices,
because that revenue is some-
thing manufacturers might
need to forgo if they didn’t take
all of the bundled Google apps,
two of the people said.
Based on the timing of the
EU’s moves, the commission
could issue any formal charges
against Google on Android in a
matter of several weeks, one of
those people said.
If the commission were to
file charges in the Android case,
Google would have about three
months to make a case that its
tion VR, require high-end Win-
dows computers to operate—
bringing the total cost to more
than $1,500. The total cost for
the Sony system, including a
$349.99 PlayStation 4, will be
less than $1,000. Sony offer-
ings such as music and movies
are also a plus, they added.
“Sony is better positioned
than its rivals when it comes
to attracting casual users, and
I don’t think the release timing
would be a problem as long as
the product is ready by the
coming year-end holiday sea-
son,” said Yu Okazaki, an ana-
lyst at Nomura Securities.
It could be a crowded shop-
ping season in the videogame
aisle. Sony rival Nintendo Co.
is preparing a next-generation
system code-named “NX,”
which some analysts believe
could be available as early as
October.
Mr. Lee, already a legend
among Go players, into a
household name in South Ko-
rea. Fans relished details of
his life story, including his
childhood on a remote island
and his struggles with a neu-
rological disorder called apha-
sia.
As the shock of AlphaGo’s
victories sank in among the Go
community, Mr. Lee tried to
play down the implications of
his loss.
“I wasn’t able to win, but I
don’t think my defeat is a de-
feat for humanity,” Mr. Lee
told a packed ballroom of re-
porters after the final game.
“It’s my weakness, not the
weakness of humanity.”
—Min-Jeong Lee
contributed to this article.
Android versions
5–5.1 4.0.3–4.4
36%
6
2.2–
2% 2.3.7
3%
THE WALL STREET JOURNAL.
makers to encrypt phones that
contain high-powered proces-
sors. As a result, higher-end An-
droid phones released this year
and beyond will come en-
crypted.
Still just 2.3% of Android de-
vices now run Marshmallow,
which was released in October.
By contrast, 79% of iPhones run
Apple’s iOS 9, which was re-
leased in September, according
actions don’t violate EU law—or
it could propose a settlement
that would address any charges.
After assessing Google’s case,
the regulator would issue its fi-
nal decision—which could then
be appealed to the Luxembourg
courts.
Google has also been ready-
ing its response to potential
formal charges from the EU on
Android, people familiar with
the matter say.
European telecom compa-
nies—while not official com-
plainants—have been pushing
behind the scenes for the EU to
file antitrust charges against
Google over its conduct with
Android, telecom executives
say. They say that bundling in-
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MARCH 19, 2016 | 8:30 PM
Wednesday, March 16, 2016 | B3
to company statistics.
Ken Hong, a spokesman for
LG Electronics Inc., one of the
largest makers of Android
phones, said many devices
aren’t updated to new versions
of Android because manufactur-
ers must tweak the software for
each phone model, and each
wireless carrier. Manufacturers
typically update only their
59%
more-expensive models.
LG and HTC Corp. said many
of their 2016 phones will be en-
crypted. A spokesman for Sam-
sung Electronics Co., the world’s
leading maker of Android
phones, said its new Galaxy S7
phone is encrypted but declined
to comment on other devices.
Google accelerated its en-
cryption push in September
2014, saying it would require a
new phone running the then-lat-
est version of Android, dubbed
Lollipop, to be encrypted “from
the first time you turn it on.”
The announcement came days
after Apple said it would begin
encrypting iPhones.
Android security chief
Adrian Ludwig said the com-
pany aims to eventually man-
date encryption on all Android
devices as components get less
expensive.
—Jonathan Cheng
and Sam Schechner
contributed to this article.
terferes with their ability to of-
fer competing email, chat or
cloud services on the handsets
they sell to consumers.
Google’s chief business offi-
cer, Philipp Schindler, said in
January that the company was
facing the most intense compe-
tition he has seen in the past 10
years, especially from Facebook
Inc.’s apps Instagram and
WhatsApp.
Google on Monday failed to
overturn a ruling by Russia’s
competition watchdog that it
had abused its dominant posi-
tion by pre-loading its own
apps and services on its An-
droid mobile operating system.
—Sam Schechner in Paris
contributed to this article.
@wsjd | wsjd.com
Oracle’s Profit
Declines 14%
On U.S. Dollar
BY JAY GREENE
Oracle Corp. earnings fell
14% in the third quarter as the
currency crunch offset gains
generated by its rapidly grow-
ing Web-based, on-demand
computing business.
Shares rose 4% to $40.30 in
recent after-hours trading as
the company’s per-share earn-
ings exceeded analysts esti-
mates, on an adjusted basis,
and Oracle said it was adding
$10 billion to its existing
stock-buyback plan. The stock
had fallen 8.6% over the past
year.
Because Oracle books over-
seas sales in foreign curren-
cies, the strong U.S. dollar
meant that quarterly revenue
fell 3%, rather than increase
1% had it been measured in
constant currency.
The Redwood City, Calif.,
maker of business software
has beefed up its cloud offer-
ings, and that is paying off as
customers shift from running
applications such as Oracle’s
databases on their own com-
puters to buying subscriptions
for Web-based applications.
In the latest quarter, Ora-
cle’s total cloud revenue rose
40% to $735 million. The com-
pany said the cloud revenue
would actually have gained
44% if not for the impact of
the strong dollar.
For the period ended Feb.
29, Oracle reported a profit of
$2.14 billion, or 50 cents a
share, down from $2.5 billion,
or 56 cents a share, a year ear-
lier.
Excluding stock-based com-
pensation and other items,
per-share earnings were 64
cents. Oracle had forecast per-
share earnings on an adjusted
basis between 63 cents and 66
cents.
Revenue dropped 3% to
$9.01 billion from $9.33 bil-
lion. Oracle had forecast reve-
nue growth between flat to up
3% for the third quarter.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Wednesday, March 16, 2016
Pressures Build in Oil-Shipping Business
Coming big tankers
and possible tighter
supplies could push
industry’s rates lower
BY DAN STRUMPF
A wave of new tanker con-
struction and the prospect of
tighter oil supplies are putting
pressure on the booming busi-
ness of shipping oil, a rare
bright spot for the global mari-
time industry.
Low oil prices and surging
production has been a boon for
the 2,000-vessel-strong oil-
tanker business. The cost to
charter tankers soared to near-
records last year, while low
fuel prices have boosted the
profitability of ships.
One sign of the good times:
Many ports are so congested
with crude vessels that tankers
are plying their routes at a
slower pace. The average
tanker in recent months has
cut its speed by 10%, on aver-
age, to minimize downtime,
said Paddy Rodgers, chief exec-
utive of the big Belgian fleet
operator Euronav NV.
But analysts and ship bro-
kers are forecasting choppier
waters ahead for the hundreds
of companies that ferry oil
around the world. Built mainly
in Asia’s vast shipyards, that
fleet is set to expand by more
SHALE
Continued from page B1
shale drillers would emerge as
the world’s new swing produc-
ers, stepping into a role tradi-
tionally filled by Saudi Arabia
and other OPEC nations. The
research firm said it still ex-
pects the U.S. will play that
role in global markets, thanks
to shale, but said current
headwinds could delay a re-
sponse to higher prices.
U.S. oil producers have built
up an inventory of drilled but
un-fracked wells, a dormant
source of oil that could trans-
than 200 new tankers through
2017, the fastest pace of new
shipbuilding in four years, ac-
cording to Drewry Maritime
Research.
More than 40% of those new
vessels will be among the larg-
est class of tankers, known as
Very Large Crude Carriers, or
VLCCs, massive ships that can
each ferry more than 2 million
barrels of oil, enough to fill 140
Olympic swimming pools or
meet Germany’s oil needs for a
day.
A further one-third will be
in the so-called Suezmax seg-
ment, the next-largest ships.
Suezmax vessels are the big-
gest capable of plying the Suez
Canal.
Those new ships—queued
up when capacity was tighter—
are expected to push shipping
rates lower, and come as re-
cent shifts in the oil market
are working against oil ship-
pers. Oil prices are on the rise
again, and major oil producers
are signaling a willingness to
at least discuss the possibility
of a production freeze. U.S. oil
output is falling, while the In-
ternational Energy Agency says
demand growth is slowing.
Taken together, that means
that the world-wide crude glut,
which has delivered a windfall
for tanker operators, could be-
gin to shrink. Some tanker
leasing rates have already
started to wane. The Baltic
late into a quick burst of new
supplies. Such wells could
churn out 620,000 barrels a
day for six months if they
were all brought online at
once, Goldman Sachs analysts
wrote in a research note last
week.
But companies that want to
put rigs back to work right
away are likely to be limited
by a smaller workforce and
depleted equipment, which
could make it difficult to coor-
dinate a ramp-up.
A recent survey by Hays
PLC found that 72% of laid-off
oil and gas workers around
the world are looking for jobs
in other industries.
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BUSINESS NEWS
New Ships Make Waves
Rates are expected to sink as 200 vessels join the world’s tanker fleet.
One-year tanker rates*
$60,000 per day
40,000
20,000
0 0
2013 ’14 ’15
*Based on Very Large Crude Carrier (VLCC) vessels. VLCCs are among the largest oil tankers,
capable of carrying up to 2.2 million barrels of crude.
Source: Drewry Maritime Research
The Starla carried Iranian crude oil to South Korea last month.
Dirty Tanker Index, a bench-
mark for tanker rates, has
fallen 40% from a recent high
in early July. Drewry expects
Basic Energy Services Inc.,
a fracking firm that has cut
more than 40% of its work-
force since the downturn be-
gan, has estimated that only
one in five laid-off workers
will return, taking with them
the expertise they developed
during the years when com-
panies mastered techniques
like drilling and fracking
wells that extended thou-
sands of feet horizontally un-
derground.
“We have lost a lot of good
people. They won’t be back,”
Chief Executive Roe Patterson
said at a conference last week.
Among those not planning
to return to oil work is supply
WATCH WSJ COME TO LIFE.
through to produce award-winning journalism.
Total number of new vessels
150
Total
Estimates
VLCC
100 vessel
50
’16 ’17 2011 ’12 ’13 ’14 ’15 ’16 ’17
THE WALL STREET JOURNAL.
one-year leasing rates for VL-
CCs to fall 6% this year, after
they rose almost three-fourths
to $46,500 a day in 2015.
chain expert Brent Janezic,
who worked for Schlumberger
Ltd. for nearly five years.
After transferring from
Houston to Calgary in 2013 to
oversee the Canadian
unit’s logistics and purchasing
of the sand and nitrogen gas
used in fracking, he lost his
job last month. Now he
is looking at companies in
other industries that have
large supply chains, where his
skills could transfer easily.
“I can’t afford to wait idle
on the sidelines for prices to
recover,” said Mr. Janezic, 33.
“I’ve got to get things rolling.”
Some companies—including
Schlumberger, the world’s
THE WALL STREET JOURNAL.
“Crude prices can only stay
low for so long,” said Denis
Petropoulos, group president
of Asia at Braemar Shipping
Services PLC, a London-head-
quartered ship brokerage.
Estimates “There is a lot of new [tanker]
building over the next two
years, and those ships entering
the market are eventually
likely to affect rates, regardless
of crude prices.”
The clutch of new tanker
construction was meant to ad-
dress a recent squeeze in oil
vessels. During the financial
crisis, the oil-tanker business
struggled as global crude de-
mand dried up. But a quick re-
covery in demand, soaring U.S.
output and steady supplies
from large oil exporters stoked
a swift recovery.
The recovery in the tanker
business coincided with a
yearslong shift eastward in the
YONHAP NEWS/NEWSCOM/ZUMA PRESS
global oil trade. A reduction in
U.S. oil imports has diverted
crude from the Middle East
and Africa toward thirsty new
demand centers in Asia. Those
routes tend to be longer,
lengthening the average oil
tanker’s voyage, tying up ships
for longer periods and boost-
ing tanker rates, they said.
“As earnings improved in
2014 to [2015], the tanker in-
dustry embarked on a major
ordering spree and [that’s] the
primary reason why we expect
rates to soften this year,” said
largest oilfield-services firm—
are trying to manage their
layoffs to head off what some
see as a looming brain drain.
Schlumberger has said
some 1,700 of its young engi-
neers with two or three years
of experience are effectively
on extended leave—receiving
some elements of salaries and
benefits, but not costing the
company much until they are
needed again.
“Quite a few of those guys
have no problem taking a year
off, traveling the world,” said
Patrick Schorn, Schlum-
berger’s president of opera-
tions, at the Credit Suisse An-
nual Energy Summit last
© 2016 Dow Jones & Co., Inc. All rights reserved. 6DJ1753
Rahul Kapoor, director of eq-
uity research at Drewry.
Tanker owners say the mar-
ket can handle the wave of new
ships, and point to other rea-
sons to stay optimistic about
their business. The recent lift-
ing of the U.S. oil-export ban
stands to boost tanker charter-
ing if exports take off, they say.
Firm crude demand from China
continues to prop up tanker
demand, and has led to conges-
tion in some ports that can
leave a ship waiting weeks to
unload its cargo.
“There is already an ele-
ment of storage at sea,” said
Mr. Rodgers, the Euronav CEO,
who added that short-term
tanker rates have climbed after
an early-year slowdown.
A wild card for the industry
is demand for so-called float-
ing storage, in which producers
and traders sock away spare
oil in tankers to sell it later at
a profit. About 32 million bar-
rels were tied up in floating
storage as of March 11, accord-
ing to estimates by Thomson
Reuters, down by almost half
from recent highs in Novem-
ber.
“If there is a significant
pickup in floating storage, then
tanker rates could very quickly
spike up again and quickly take
tanker-loading capacity out of
the market,” said Erik
Broekhuizen, head of tanker re-
search at Poten & Partners.
month. “When there is an up-
turn, those are the first guys
we call back.”
Still, many new workers
will have to be hired and
trained—a process that could
take months, analysts say. And
they will be working with rigs
and pumps that have deterio-
rated or sometimes stripped
apart to cheaply repair work-
ing equipment as it broke
down.
“Coming back this time is
going to be tough, no question
about it,” said Tom Petrie,
chairman of Petrie Partners, a
boutique investment banking
firm. “These cutbacks have
been painful.”
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
TUESDAY’S MARKETS B6 | MARKETS DIGEST B8 | HEARD ON THE STREET B10 | FINANCE WATCH B10
Adult Dorms Tackle
A Need in U.S. Cities
THE PROPERTY REPORT | B9
© 2016 Dow Jones & Company. All Rights Reserved.
As of 4 p.m. ET EUR/GBP 0.7842 À 0.98%
Insurers in China Close Cash Exit
Companies have been
clamping down on the
practice of buying
policies overseas
BY WEI GU
Insurance companies are
clamping down harder on a
popular method for mainland
Chinese to move money out
of the country: purchases of
policies overseas.
During the past week, in-
surers including Prudential
PLC, BOC Group Life Assur-
ance Co. and China Life In-
surance (Overseas) Co. have
Probe Into
Forex Dies
With No
Charges
BY PHILIP GEORGIADIS
The U.K.’s Serious Fraud Of-
fice has closed an investiga-
tion into the foreign-exchange
market, saying there was “in-
sufficient evidence for a real-
istic prospect of conviction.”
The agency said Tues-
day that it had uncovered
“reasonable grounds to sus-
pect the commission of of-
fenses involving serious or
complex fraud,” but that the
evidence wouldn’t be enough
to merit prosecution.
The investigation lasted
more than 18 months and in-
volved more than half a mil-
lion documents, it said.
The fraud office began in-
vestigating the global curren-
cies market in 2014, following
a referral from the U.K.’s Fi-
nancial Conduct Authority.
While the FCA investigates fi-
nancial crime, the SFO focuses
on investigating and prosecut-
ing serious and complex fraud.
A wider international inves-
tigation into the manipulation
of currency markets involving
global regulators began in
2013 and has resulted in more
than $10 billion in fines im-
posed on some of the world’s
largest banks that deal in for-
eign exchange.
Delivering news and insight
on finance and markets
from London
Download on the App Store
FedEx Will Fight to Go Forward A Short’s Battle in Hong Kong
BY STEVEN RUSSOLILLO
For FedEx Corp., the e-
commerce boom giveth and
the e-commerce boom taketh
away.
The shipping giant, fresh
off a busy holiday season, is
handling many more pack-
ages than
AHEAD OF usual due to
THE TAPE the surge in
online shop-
ping. Demand
was so heavy, in fact, that
FedEx was unable to deliver
all its packages in time for
Christmas.
While seemingly a good
problem to have, it is a fresh
worry, too. Amazon.com Inc.
is embarking on ways to take
more control of its supply
chain, thereby eventually re-
ducing its reliance on carri-
ers such as FedEx and
United Parcel Service Inc.
The online behemoth is
building up a ground net-
work of couriers and new
warehouses for faster and
cheaper delivery. While
likely years away from frui-
YEN/DLR ¥112.87 g 0.83% GOLD 1230.40 g 1.13%
told their agents in Hong
Kong that some online-pay-
ment channels are being
closed, according to internal
memos seen by The Wall
Street Journal. These chan-
nels have made it easier for
mainland customers to buy
foreign-currency policies off-
shore.
Prudential and China Life
didn’t respond to requests for
comment. BOC Group Life
said its action was driven by
a notice from an online-pay-
ment provider.
Mainlanders’ purchases of
overseas policies have soared
recently as customers real-
ized that the savings-type
Half Full
Emerging markets have
rallied this year, but
they remain dependent
on China for growth.
A Chinese ship is loaded with
soybeans at a port in Brazil.
PHOTO: PAULO WHITAKER/REUTERS
Emerging Markets: A Hard Lesson
BY KEN BROWN
Investors have an impres-
sive ability to convince
themselves that they are tak-
ing on little risk when the
risks are obvi-
ANALYSIS ous and large.
Two prime ex-
amples: Sub-
prime mortgages were safe,
and 401(k)s were the path to
retirement riches.
Add this to the list: buy-
ing emerging-market bonds
issued in local currencies in-
stead of dollars.
Foreign investors poured
billions into these bonds. But
recently, instead of earning a
little extra yield, they have
lost about a third of their in-
vestments.
In this case, the buying
had a bright spot. Emerging-
market countries such as In-
Prime Number
FedEx Ground segment revenue
$20 billion
Forecast
16
12
8
4
0
FY’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16
Note: Fiscal year ends in May
Source: FactSet
tion, those efforts could eat
into one of FedEx’s growth
businesses and remain as a
headwind for the struggling
stock.
In the short term, FedEx’s
fiscal third-quarter results,
out Wednesday, should be
fine. Analysts polled by Fact-
Set estimate earnings for the
period ending in February of
$2.35 a share, up 17% from a
year before. Revenue is ex-
pected to have risen 6% to
THE WALL STREET JOURNAL.
products are a good way to
park money offshore, and
that some types of transac-
tions sidestep the country’s
capital controls. Chinese resi-
dents are limited to buying
$50,000 in foreign currency a
year, but credit-card pur-
chases overseas were often
overlooked—though insurers
were supposed to cap the
amount charged per transac-
tion.
The yuan’s sharp deprecia-
tion starting last summer
spurred individuals and com-
panies to hold more savings
in foreign currencies, contrib-
uting to record capital out-
flows from China.
donesia and Brazil were able
to sell bonds in rupiah and
reais at reasonable yields.
When their currencies tum-
bled, their debt payments
didn’t jump, as they would
have if they had sold bonds
issued in dollars. In the past,
that mismatch left them
hemorrhaging much-needed
hard currency.
Instead, cheaper curren-
cies served as a cushion for
their economies, helping
them grapple with a series of
shocks to the system without
a debt or balance-of-pay-
ments crisis.
“That’s the way it’s sup-
posed to work,” said Steffen
Reichold, an emerging-mar-
kets debt portfolio manager
and economist at Stone Har-
bor Investment Partners.
The losers this time were
performance-chasing foreign-
$12.4 billion.
In the longer term,
FedEx’s evolving relationship
with Amazon is sure to have
a material impact. Analysts
at RBC Capital Markets esti-
mate that Amazon in the U.S.
last year accounted for about
$1.5 billion of FedEx’s reve-
nue. That makes up roughly
10% of FedEx’s Ground seg-
ment. Losing that “would al-
most certainly leave a mark,”
RBC says.
FedEx’s stock has strug-
gled since hitting a record in
June, shedding one-third of
its value through January.
And the stock still remains
well off last year’s peak.
Granted, it looks cheaper
on a relative basis. The stock
trades at about 12 times for-
ward earnings, down from 18
in December 2014. But that
is still far from the single-
digit multiples the stock
fetched at previous bottoms
in March 2009 and October
2011. Investors shouldn’t
count on this delivery.
Email: tape@wsj.com
Big Investors Sue VW
Over Share-Price Fall
INVESTING | B6
OIL 36.34 g 2.26%
The value of new insurance
policies sold to mainland visi-
tors in Hong Kong in 2015
was up 30% from the year be-
fore, at 31.6 billion Hong
Kong dollars (US$4.1 billion),
according to the latest avail-
able data from the Office of
the Commissioner of Insur-
ance in Hong Kong. That rep-
resented 24.2% of the total
sold in the city.
As concern over capital
outflow has mounted in
China, authorities have
pushed financial institutions
to increase scrutiny and close
loopholes. In February,
UnionPay, the dominant card
issuer in China, told insur-
U.S. junk bonds
Emerging-market
dollar bonds
U.S. investment-
grade debt
2002 ’05
Data are as of Friday
Sources: FactSet; J.P. Morgan
ers who poured more than
$35 billion into these mar-
kets in 2012 and 2013, ac-
cording to J.P. Morgan Chase
& Co.
They were entranced by
yields in the upper single
digits or higher during a
time when central banks
were driving interest rates
down. The sector returned
more than 80% from 2009 to
2012, pushing valuations to
their highest levels in years.
What could go wrong?
Pretty much all the things
that repeatedly go wrong in
emerging markets. First
came the 2013 taper tantrum
when investors feared the
Federal Reserve would start
raising rates. Then came the
collapse of commodity
prices, which make up large
portions of exports, and
more recently worries about
BY JULIE STEINBERG
HONG KONG—When it
comes to Valeant Pharmaceu-
ticals International Inc.,
short seller Andrew Left was
on the money. In Hong Kong,
he is on trial.
Hong Kong’s Securities and
Futures Commission is accus-
ing Mr. Left of spreading false
and misleading information
about Chinese property devel-
oper Evergrande Real Estate
Group Ltd.
Mr. Left says he stands by
his research and published
what he thought was the
truth. A two-week hearing into
the matter just wrapped up.
The civil case highlights
regulators’ discomfort with
analysts and traders who call
out alleged problems at com-
panies and bet that their share
prices will fall—sometimes
even when they might be on to
something.
Valeant, another target of
broadsides from Mr. Left’s Cit-
ron Research, was in the news
in striking fashion Tuesday. Its
shares plunged by nearly half
Wednesday, March 16, 2016 | B5
3-MONTH LIBOR 0.64195%
ance companies overseas that
it would strictly enforce the
existing $5,000-per-transac-
tion limit on overseas insur-
ance purchases.
Insurance companies often
allowed customers to pay
much larger premiums with
Chinese credit or debit cards,
according to China’s foreign-
exchange regulator and
UnionPay. Insurance agents
said they allowed clients to
swipe their cards multiple
times to purchase policies
costing more than $5,000.
Insurers also often used
online payment services from
UnionPay and other third-
Please see CHINA page B7
Yields 20 %
15
10
5 hedge against further declines
0 selves.
’10 ’15
THE WALL STREET JOURNAL.
global growth, particularly in
China.
The sector lost one-third
of its value from 2013 to
2015. “Many people are
learning the hard way,” Mr.
Reichold said.
According to J.P. Morgan,
investors pulled out nearly
$13 billion from the sector in
2014 and 2015, and that has
accelerated this year with
$3.5 billion pouring out so
far.
Sadly for those who gave
up, this year local-currency
emerging-markets bonds
have jumped, returning 7.4%,
while most other global mar-
kets were weak. The boost
was driven by the rebound in
oil and less concern about
growth in China.
The buyers of these bonds
were Western and Japanese
Please see BROWN page B6
Andrew Left, seen here in 2014, says he stands by his research.
after the company warned it
may not be able to file its an-
nual report in time to avoid
being found in default on its
debts. Its shares fell below
$37—vindication of Mr. Left’s
call in October that they could
drop to $50.
The Los Angeles-based
short seller’s battle in Hong
Kong could determine how far
investors and analysts can go
when voicing negative views
on companies in that market.
The legal action is the Securi-
10-YR TREAS À 1/32 yield 1.961%
J. PAT CARTER/GETTY IMAGES
A drilling rig in Oklahoma City.
Investors
Short Oil
To Hedge
Credit Bet
BY CHRISTIAN BERTHELSEN
Some of the biggest bears
in the oil market this year
have been investors who are
actually hoping to see the
market recover.
Hedge funds that own
poorly performing high-yield
debt issued by energy produc-
ers such as Continental Re-
sources Inc. and Chesapeake
Energy Corp. have been short-
ing the market as a way to
in the bonds. The paradoxical
result is that these big inves-
tors are betting against them-
U.S. oil futures fell 2.3% to
$36.34 a barrel Tuesday on
the New York Mercantile Ex-
change.
Blackstone Group LP’s GSO
Capital Partners and Apollo
Global Management LLC are
among many firms that have
shorted oil to hedge their po-
sition in high-yield debt, ac-
cording to people familiar
with the matter. They are tak-
ing these actions because the
previous mechanism for hedg-
ing oil-company debt, through
contracts known as credit de-
fault swaps, is much less ac-
tive, and the bonds have been
hard to sell without taking
steep losses.
Instead, these investors are
having to hedge their debt po-
sitions by shorting oil prices,
as a proxy.
It is unclear how large the
bond investors’ short posi-
tions are, or how much they
have weighed on the oil mar-
ket. But they bring at least
some pressure on oil prices
and come from an unexpected
source.
The conditions in the credit
market “have turned everyone
Please see CRUDE page B6
MICHAL CZERWONKA FOR THE WALL STREET JOURNAL
ties and Futures Commis-
sion’s first against a short
seller—a trader who bets on a
stock’s decline—with ramifica-
tions for free speech in Hong
Kong’s markets, lawyers and
the judge overseeing the case
said. The case hinges on
whether the regulator can
show Mr. Left knowingly dis-
seminated materially false or
misleading information, or
was reckless or negligent.
Shareholder activists
Please see LEFT page B10
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B6 | Wednesday, March 16, 2016
Big Investors Sue VW
Over Share-Price Fall
BY WILLIAM BOSTON
BERLIN—Attorneys repre-
senting nearly 300 institu-
tional investors, including the
largest U.S. public pension
fund in the U.S., are suing
Volkswagen AG for €3.3 bil-
lion ($3.67 billion) as a result
of the sharp drop in the car
maker’s share price in the
wake of its emissions-cheating
scandal.
“The filing of this first law-
suit for billions of euros was
necessary because, according
to our information and experi-
ence, Volkswagen AG isn’t
willing to discuss a settlement
or an extension of the statute
of limitations,” said plaintiffs’
attorney Andreas Tilp, manag-
ing director of law firm Tilp
and its subsidiary TISAB.
The court confirmed that it
received the lawsuit on Mon-
day on behalf of 278 institu-
tional investors. The court
also said it has received 70
lawsuits from largely individ-
ual investors suing for dam-
ages of between €600 and €2
million.
The California Public Em-
ployees’ Retirement System,
with about $280 billion in as-
sets as of the end of February,
confirmed that it is part of the
lawsuit but declined to com-
ment further. Volkswagen de-
clined to comment.
The attorneys said Tuesday
that their claim for damages
SEAN GALLUP/GETTY IMAGES
Investors are seeking $3.67 billion tied to the emissions scandal.
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Investments
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alleges that Volkswagen failed
to inform financial markets in
a timely fashion about the
risks associated with an inves-
tigation by U.S. environmental
authorities when they discov-
ered that Volkswagen had
rigged some diesel engines to
manipulate emissions tests.
The company’s shares have
lost about a third of their
value since mid-September.
Separately, the car maker’s
financial-services arm is set to
cut expenditures further to
help offset the impact of the
scandal on its financing costs.
The unit aims to reduce
spending by more than €300
million this year and next,
having lowered costs by €100
million last year, said finance
chief Frank Fiedler.
The pledge to reduce costs
came as the German auto
maker’s banking unit, which
provides financing and leasing
services for Volkswagen cus-
tomers, said operating profit
rose to €1.9 billion last year
from €1.7 billion in 2014. The
gain came despite a €286 mil-
lion charge to cover potential
losses on the value of cars it
has financed.
The unit put its bond-issu-
ance program on hold last fall.
“We’re hopeful to resume issu-
ing these bonds in the first
half of this year,” Mr. Fiedler
said.
—Eyk Henning
contributed to this article.
MONEY & INVESTING
Commodities Weigh on Stocks
BY RIVA GOLD
AND LESLIE JOSEPHS
A renewed drop in com-
modities prices dragged most
global stock markets lower
Tuesday, although the Dow re-
covered earlier losses near the
close of trading.
The Dow Jones Industrial
Average rose 22.40 points, or
0.1%, to 17251.53. The S&P 500
fell 0.2%, while the Nasdaq
Composite was off 0.5%.
In Europe,
TUESDAY’S the Stoxx Eu-
MARKETS rope 600 lost
1.1% to 340.86.
A decline in
oil and metals prices pushed
down energy and mining com-
panies, two sectors that have
rallied in recent weeks.
Shares in U.K.-listed mining
giants Anglo American and
BHP Billiton fell 11% and 6.5%,
respectively, while shares in
Antofagasta declined 4.5% af-
ter the Chilean copper pro-
ducer reported disappointing
results and opted not to pay a
final dividend.
An index of energy compa-
nies in the S&P 500 fell, as
U.S. oil futures dropped 2.3%
to settle at $36.34 a barrel as
traders returned their focus to
an oversupply of crude.
Despite Tuesday’s declines,
U.S. oil futures have risen
more than 7% so far this
month on expectations for
lower production.
Investors were cautious
amid a two-day meeting by
Federal Reserve officials,
which began Tuesday. While
no change to monetary policy
is expected, investors will
watch the bank’s policy state-
ment and economic projec-
CRUDE
Continued from page B5
to short positions in oil,” said
Jason Thomas, head of re-
search for private-equity firm
Carlyle Group, in an interview.
“It turns into a one-sided mar-
ket, and that’s where you have
downward pressure on prices.”
©2016 Dow Jones & Co. Inc.
All rights reserved.3DJ3356
An employee works at an Eli Lilly factory in Fegersheim, France. The company’s shares declined.
tions, as well as a news con-
ference to be held by
Chairwoman Janet Yellen on
Wednesday.
“The market and the Fed
are worlds apart when it
comes to what they predict
about interest rates,” said Jo-
han Javeus, chief strategist at
Scandinavian bank SEB.
When the Fed raised rates
in December, officials pro-
jected another four rate in-
creases in 2016. But markets
are pricing in a roughly 50%
chance of a rate increase in
June, and a roughly 75%
chance of a rise by December,
Fed-funds futures indicate.
“The more the Fed adjusts
to the market, the more opti-
mistically the message will be
The short positions
weighed on the oil market
during the deep downturn
early this year, and helped in-
tensify the recent rally in
crude prices as investors un-
wound some of the hedges.
Short positions in the bench-
mark U.S. crude contract
reached a record last month.
Mr. Thomas said in a recent
note to clients that investment
firms hedging by betting on
falling oil prices could be un-
dermining their own bond po-
sitions by keeping a lid on the
market, which makes it harder
for borrowers to pay back
debt and “increases default
risks.”
It is unclear if Carlyle is
participating in the trade. Mr.
Thomas declined to comment.
At their peak, the short
trades had a market value of
more than $5.8 billion and
represented more than 190
million barrels of oil, about 10
days’ worth of U.S. consump-
tion.
These short positions can
weigh on oil prices, cutting
into any price rebound. They
can also make the market
much more volatile, since
traders might look to close
these positions during market
rallies, amplifying the gains.
Oil prices have surged more
than 40% over the past few
weeks, wiping out some of
BROWN
Continued from page B5
investors, big and small. As-
sets in the Pimco Emerging
Local Bond Fund, by far the
biggest U.S. mutual fund in the
sector, jumped to $14.4 billion
at the end of 2012 from $1.9
billion in 2009, according to
Pimco. The fund was down to
$4.7 billion at the end of Feb-
ruary.
For big institutions, the bad
timing says a lot about the
power of consultants over how
pension funds, endowments
and the like invest their
money. After the financial cri-
sis, the consultants saw local-
currency emerging-markets
bonds as a smart way to cap-
ture growth, especially when
developed markets were still
struggling.
They made their recommen-
dations, investors searched out
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THE WALL STREET JOURNAL.
received,” Mr. Javeus said.
Global stocks have staged a
recovery in the past month,,
spurred by improving U.S. eco-
nomic data and relative stabil-
ity in commodities prices.
“I believe the rally is sus-
tainable, just not at the rate
we’ve seen,” said Dennis
Mitchell, portfolio manager at
Sprott Asset Management.
While he sees some im-
provements in oil prices and
reassurance around China’s
economy, “nothing is growing
at its long-term pace, includ-
ing corporate earnings, global
gross domestic product, indus-
trial production and global
trade,” Mr. Mitchell said.
In economic news, U.S. re-
tail sales declined 0.1% in Feb-
these short positions. But
bond investors are having to
short the oil market because
their previous vehicle for
hedging has all but disap-
peared.
Credit default swaps, a type
of security used to guard
against price declines in
bonds, have dried up in the af-
termath of the financial crisis,
as tough new regulations have
crimped banks’ ability to take
the other side of such risky
trades. That’s left investors
without the most direct means
of hedging their positions.
Short positions can
weigh on oil prices,
cutting into any
price rebound.
And unlike the ability of in-
vestors in investment-grade
debt to turn to credit indexes
for risk protection, the lack of
swaps available on high-yield
names has made indexes a
poor proxy to offset price de-
clines, forcing the unusual
turn toward the futures mar-
ket.
Investors in energy securi-
ties have suffered in the oil-
market downturn, particularly
for those holding high-yield
bonds. The pain is widespread:
managers, did their due dili-
gence and eventually put
money into the sector, at just
the wrong time.
Every time investors get de-
luded by an investment, it is
because they have missed an
obvious risk. Mortgages made
to people with dodgy credit
shouldn’t be considered risk-
free. Individual investors really
don’t have the expertise to run
pension funds, which is what
401(k)s really are.
In this case, investors for-
got that emerging-markets
currencies can move, a lot.
Many currencies are down
20% with some falling 50%,
more than wiping out the yield
on the bonds.
What is surprising is that
this asset class was long con-
sidered a way to play emerg-
ing-markets currencies, which
typically rose due to their
economy’s fast growth. That is
one reason the sector has been
so popular with Japanese in-
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FREDERICK FLORIN/AGENCE FRANCE-PRESSE/GETTY IMAGES
ruary from the prior month,
while retail sales for January
were revised to a 0.4% de-
crease, compared with an ini-
tially reported 0.2% increase.
The data aren’t enough to
counter recent upbeat read-
ings on the economy, including
a strong employment report
earlier this month, said Scott
Wren, a strategist at Wells
Fargo Investment Institute.
Pharmaceutical companies
declined following a stock-
price plunge by Valeant Phar-
maceuticals. Eli Lilly lost 3.5%
by late afternoon.
Earlier Tuesday, Japan’s
Nikkei Stock Average fell 0.7%
after the Bank of Japan down-
graded its assessment of the
economy.
by some measures, energy
companies comprise as much
as a fifth of the high-yield uni-
verse.
Overall, the nearly half-tril-
lion dollars in outstanding en-
ergy debt is valued at about
65 cents on the dollar, though
some high-yield names have
gone for as little as 10 cents to
25 cents on the dollar.
As a group, the bonds’
value fell more than 19% be-
tween the start of the year
and mid-February, according
to the Bank of America Merrill
Lynch High Yield Energy In-
dex, before recovering some-
what since then in tandem
with the rebound in oil prices.
The banks no longer main-
tain large inventories of
bonds, and are less willing to
buy risky positions from in-
vestors and hold them on their
books.
The number of short posi-
tions in the $80 billion deriva-
tive market tied to the bench-
mark U.S. oil contract began to
skyrocket in October, as prices
fell below $45 a barrel, the
level at which the industry is
generally believed to break
even on operations.
“It’s been a common strat-
egy throughout the last year,”
said a credit trader at one
hedge-fund firm.
Still, he said, “you’re shoot-
ing against yourself.”
vestors, who are well-known
currency traders.
Investors might have paid
attention to currencies if they
weren’t blinded by the reach
for yield, which itself was
driven by massive central bank
stimulus, which drove down
interest rates as it flooded the
world with cash. With money
sloshing across the globe, it
was hard to imagine the big
pullback from emerging mar-
kets that we’ve seen.
After suffering for three
years, fund managers are ea-
ger to talk about their sector,
saying valuations are compel-
ling and fundamentals are
pretty good.
“Once performance starts to
turn around, the supposed les-
sons people have learned
about being cautious will go
out and people will come back
in,” said Ricardo Adrogue,
head of emerging-markets
debt at Babson Capital Man-
agement.
NAV —%RETURN—
GF AT LB DATE CR NAV YTD 12-MO 2-YR
OT OT MUS 03/04 USD 287158.88 2.5 -14.4 -7.7
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
The Professor and the Regulation Critic
BY ANDREW ACKERMAN
WASHINGTON—Lisa Fairfax
and Hester Peirce, nominees to
fill two vacancies at the U.S.
Securities and Exchange Com-
mission, moved toward taking
those roles Tuesday, beginning
testimony before the Senate
Banking Committee.
Lisa Fairfax
Ms. Fairfax wasn’t the
White House’s first choice to
fill a slot at the U.S.’s securi-
ties regulator. The 45-year-old
law professor symbolizes the
struggles roiling the Demo-
cratic Party over its ties to big
business and the best ap-
proach to regulate finance.
Ms. Fairfax has written ex-
tensively in favor of share-
holder rights, shareholder ac-
tivism, and gender and racial
diversity on corporate boards.
Yet she is a blank slate on
some core matters before the
SEC she would serve, such as
capital-raising issues and the
nuts-and-bolts of corporate
regulatory compliance.
Those were more specialties
of the Obama administration’s
first pick floated to lawmakers
last summer: a well-known cor-
porate securities lawyer who
represented, among other cli-
ents, the American Petroleum
Institute. That prompted a
backlash from liberal Demo-
crats who have tried to curb
the party’s tendency over the
past quarter century to fill eco-
nomic policy positions with
nominees close to the indus-
tries they would oversee.
Ms. Fairfax has the backing
of key Democrats, including
Ohio Sen. Sherrod Brown, the
party’s top representative on
the Senate Banking Committee
considering the nomination.
Mr. Brown recommended her
to the White House partly be-
cause he wanted a nominee
who didn’t come from what is
SEC Nominees Face Sharp Questions From Senators
BY DAVE MICHAELS
Two lawyers nominated to
join the Securities and Ex-
change Commission faced
questions from U.S. senators
on Tuesday about how their
past work as academic re-
searchers would influence
their priorities as members of
the top U.S. markets regulator.
Law professor Lisa Fairfax,
who is a Democrat, took heat
from Republicans for signing a
legal brief that argued that
Wal-Mart Stores shareholders
should have a greater say in
Diverging Housing Prices Vex Beijing
BY ESTHER FUNG
AND CHUIN-WEI YAP
China is having a harder
time managing a property
market that is diverging, the
country’s housing minister
said Tuesday.
“The differences are severe,
and it is worsening,” Chen
Zhenggao said at a news con-
ference on the sidelines of the
National People’s Congress.
“The situation in the first-tier
cities and the third- and
fourth-tier cities are differ-
ent, which brings about chal-
lenges to our regulatory work,
and is a major issue.”
Alarmed by a nationwide
property-sales decline in 2014,
the central government loos-
ened policies, prompting a
sales rebound in 2015. But as
the government has worked to
warm up property markets in
smaller cities, home prices in
the top-tier cities have been
showing signs of overheating
in recent weeks.
There are rising concerns
about a dangerous property
bubble forming in Beijing,
Shanghai, Shenzhen and
Guangzhou, which have re-
corded sharp gains in housing
prices since the Lunar New
Year holiday in February.
The average price of a new
home in Shenzhen rose 51.9%
in January from a year ear-
lier; in Shanghai, prices
rose 17.5%.
“This is a trade-off,” said
Rosealea Yao, an analyst at
Gavekal Dragonomics. “On one
hand, you want rural workers
to buy homes,” she said. “But
there is a need to prop up
housing prices because Chi-
nese people only buy homes
when prices are rising. Inad-
vertently, this then fuels sharp
Lisa Fairfax, left, is the Democratic nominee to fill one of two slots at the U.S. SEC. Hester Peirce is the Republican nominee.
considered a revolving door of
Wall Street officials who go on
to take powerful Washington
jobs. “Lisa Fairfax fit the bill,”
a Brown spokesman said.
Ms. Fairfax didn’t respond
to a request for comment.
She is likely to win Senate
approval, because of the tradi-
tion of maintaining partisan
balance on the five-member
commission, with the tie bro-
ken by the chairman chosen by
the party controlling the
White House. She would fill a
slot left vacant by a Democrat,
Luis Aguilar, who left the SEC
last year. She has been paired
with a nominee chosen by Re-
publicans to fill another va-
cancy on the commission,
Hester Peirce, also 45, an out-
spoken critic of postcrisis
rules and a researcher at a
free-market think tank known
for skepticism of regulation.
A Harvard-educated lawyer,
Ms. Fairfax started her legal ca-
reer in 1995 as an associate at
Ropes & Gray LLP in Boston
whether the retailer sells
semiautomatic rifles. Republi-
can Hester Peirce, a scholar at
a conservative think tank,
faced a grilling over articles
she edited or wrote that criti-
cized such landmark financial
regulations as the Volcker
rule, which bans taxpayer-in-
sured banks from making risky
trading bets with their own
money.
The pointed volley at their
confirmation hearing before
the Senate Banking Committee
underscored the intense politi-
cal scrutiny financial regula-
Chen Zhenggao said housing regulators face challenges.
gains in home prices in first-
tier cities.”
The top cities are rolling
out measures to stabilize
housing prices, including
strictly enforcing home-pur-
chase limits and taxes, in-
creasing the land supply and
the supply of small and me-
dium-size homes, Mr. Chen
said.
Addressing a question on
whether China’s housing mar-
ket resembles Japan’s frothy
real-estate market in the 1980s
and if it might similarly crash,
he said that China’s urbaniza-
tion rate, level of economic
growth and macroeconomic
policies are different from
Japan’s metrics during that
time and its property market
shouldn’t be put on par with
Japan’s.
Delegates to the annual leg-
islative sessions have said they
are trying to calibrate their re-
sponses to changes in their re-
spective housing markets.
“Housing prices are shaped
by market forces,” said Liu Ci-
gui, governor of southern
MONEY & INVESTING
and Washington. Her practice Ms. Fairfax and Ms. Peirce, the
included venture-capital trans- SEC would have a record four
actions, public offerings, pri- women on the commission.
vate placements, and mergers They would join Ms. White,
and acquisitions, according to an independent, Democratic
her résumé. commissioner Kara Stein, and
She stayed in private prac- Republican Michael Piwowar.
tice for only about five years,
spending the past 16 in aca- Hester Peirce
demia, initially at the Univer- In Ms. Peirce’s opinion,
sity of Maryland, and since Washington has gotten just
2009 at George Washington about everything wrong trying
University. to prevent a repeat of the
In addition to her academic 2008 financial crisis. She will
work, Ms. Fairfax coleads Di- likely have a chance soon to
rectWomen Board Institute, a try to change that strategy, as
group that trains women for a member of the Securities
corporate boards. and Exchange Commission
Ms. Fairfax’s interest in tasked with writing and imple-
board diversity meshes with menting postcrisis rules.
the agenda of SEC Chairman Ms. Peirce, a 45-year-old
Mary Jo White, who has made senior research fellow at the
it a priority for what is likely to right-leaning Mercatus Center,
be her final year at the agency. has attacked everything from
The SEC may try this year to new curbs on banks’ betting
require companies to tell inves- with their own money, to
tors more about the gender tighter oversight of money-
and racial makeup of board market mutual funds. She has
nominees. blasted a new panel known as
Should the Senate approve the Financial Stability Over-
tors face eight years after the subjects. “No one hires a
financial crisis. Both Ms. Fair- watchdog who isn’t committed
fax and Ms. Peirce vowed to to enforcing the rules.”
finish regulations mandated by Ms. Peirce defended her
Congress and said their aca- regulatory bona fides, noting
demic records shouldn’t be she worked as an SEC staff
viewed as evidence of bias. member for eight years before
“The question is whether joining the right-leaning Mer-
someone should be put in catus Center at George Mason
charge of enforcing laws that University.
they think are unnecessary or “I would work on imple-
counterproductive,” said Sen. menting the rules as best as
Elizabeth Warren (D., Mass.), they could be implemented
as she ticked off a list of com- and pointing out where I
ments made by Ms. Peirce that thought there might be issues
criticized rules related to exec- Congress should look at
utive compensation and other again,” she said.
aiming for a 60% urbanization
rate in 2020 compared with
the current 56.1%.
Property inventory totaled
739 million square meters at
the end of February, up 15.7%
from a year earlier and up
from the 718 million square
meters recorded at the end of
2015.
In some overbuilt cities in
inland provinces, develop-
LI XIN/XINHUA/ZUMA PRESS
ers estimate that they would
need seven to eight years to
work through their current
housing stock.
In a bid to reduce the glut,
many smaller cities are trying
to expand the pool of home
buyers to include rural mi-
grants. They are offering hous-
China’s Hainan province, add- ing-purchase subsidies and ur-
ing that if housing prices are ban-residency permits to
rising too quickly because of prospective customers so that
strong demand, the local au- they can have access to educa-
thorities should increase sup- tion and health-care benefits.
ply. Some state-owned banks
Government statistics show also are offering looser collat-
that while housing sales re- eral requirements for mort-
bounded last year, most of the gage applicants from rural ar-
gains were recorded in large eas.
cities, leaving smaller cities The housing ministry also is
saddled with hefty inventories. looking into making changes
Real-estate investment in to local housing funds, made
hundreds of smaller cities has up of monthly contributions
declined as builders become from residents and their em-
more cautious in oversupplied ployers.
markets. This has been a drag Such funds provide cheaper
on the broader economy, low- loans to first-time home buy-
ering demand for everything ers and the authorities remain
from cement and steel to fur- in discussions on ways rural
niture. migrants can contribute and
“The property sector re- get access to these funds, said
mains an important driver of Vice-Housing Minister Lu Ke-
economic growth in China,” hua.
Mr. Chen said, adding that the But Mr. Chen warned
value-added output from the against down-payment loans
property sector accounted for offered by property developers
6.1% of China’s GDP last year. or third-party agencies in a
China’s property market bid to boost transactions. He
still has room to grow, he ar- reiterated the central bank’s
gued, noting the continuing stance that loans for down
flow to China’s cities. China is payments are forbidden.
Wednesday, March 16, 2016 | B7
sight Council, charged with
detecting risks that could lead
to another crisis, as careless
and akin to a helicopter parent
smothering industry.
By far her biggest target is
the 2010 Dodd-Frank law,
which she says has rewarded
the regulators who missed the
financial crisis with greater
power to oversee Wall Street.
“Giving regulators more le-
vers to pull and buttons to
push with respect to the finan-
cial system only creates a false
sense of security,” she said in
the introduction to a 2012
book titled “Dodd-Frank, What
It Does and Why It’s Flawed,”
which she coedited.
If confirmed, Ms. Peirce
would succeed Daniel Gal-
lagher, another Republican
who stepped down from the
SEC in October.
Ms. Peirce would likely ex-
tend the partisan divide at the
SEC, which has seen more
party-line votes in recent
years, on both rule-making
Both Ms. Peirce and Ms.
Fairfax, who were nominated
by President Barack Obama
last fall, resisted taking a clear
position on the thorny issue of
forcing public companies to
report their political spending.
Senate Democrats have pushed
SEC Chairman Mary Jo White
to begin drafting a rule that
would require the disclosure,
while Republicans say the
amounts are immaterial and
shouldn’t have to be disclosed.
“I think there is certainly an
argument to be made that it is
material,” Ms. Fairfax said. Ms.
CHINA
Continued from page B5
party networks to let custom-
ers charge more than $5,000
in one transaction, according
to insurance agents.
In an internal memo dated
March 11 and seen by the
Journal, China Life told a
Hong Kong-based business
partner that clients could no
longer use UnionPay’s online
channel to buy insurance
overseas.
The memo cited a request
by China’s central bank to
UnionPay’s online division in
Guangzhou.
The central bank didn’t re-
spond to requests for com-
ment. UnionPay said the
$5,000 limit applies to both
online and offline transac-
tions and isn’t a new policy.
Prudential said in a memo
to a broker dated March 11
that insurance buyers using
UnionPay banking cards
through online channels such
Scrambling for Coverage
Purchases of insurance by mainland Chinese in Hong Kong jumped as
the yuan weakened.
Policies issued to mainland
visitors in Hong Kong
HK$30 billion
25
20
15
10
5 6.5
0 6.6
2011 ’12 ’13 ’14
HK$1 billion = $128.8 million
Sources: Office of the Commissioner of Insurance in Hong Kong (policies); Wind Info (currency)
SECURITIES AND EXCHANGE COMMISSION HISTORICAL SOCIETY (LEFT); CHRIS MADDALONI/CQ ROLL CALL
and enforcement actions.
Ms. Peirce didn’t respond to
a request for comment.
A Yale-trained lawyer, Ms.
Peirce previously worked at
the SEC from 2000 to 2008
before taking a job as counsel
to Republicans on the Senate
Banking Committee, the panel
set to weigh in on her nomina-
tion this week.
At the SEC, she worked ini-
tially in a division responsible
for overseeing the fund indus-
try and had a hand in a 2003
report that laid the ground-
work for the eventual registra-
tion of hedge funds—though
she didn’t personally embrace
those recommendations. She
has subsequently suggested
hedge-fund registration is a
mistake because it diverts SEC
resources away from protect-
ing mom-and-pop investors.
In 2012, Ms. Peirce joined
Mercatus—a think tank known
for research critical of regula-
tion, based at George Mason
University in northern Vir-
ginia—and from that perch
she has criticized a number of
postcrisis SEC rules through
research reports, congressio-
nal testimony and frequent
online columns.
In addition to FSOC, Ms.
Peirce has criticized the SEC’s
fellow markets regulator, the
Commodity Futures Trading
Commission, which she said
would benefit from a smaller
budget despite pleas of under-
funding from the agency. An-
other focus of her skepticism:
the Financial Industry Regula-
tory Authority, Wall Street’s
overseer of brokerage firms.
“Although commonly per-
ceived to be a self-regulator,
Finra is not accountable to the
industry in the way a self-reg-
ulator would be,” she wrote in
a report last year. “Nor is it
accountable to the public,
Congress, the president, or the
courts.”
Peirce said she would want to
read the details of any disclo-
sure requirement before taking
a position.
Sen. Charles Schumer (D.,
N.Y.) later told the women he
was “leaning against both of
your nominations” because
their answers weren’t straight-
forward enough for his liking.
Committee Chairman Rich-
ard Shelby (R., Ala.) said the
panel would likely vote on
April 7 on the pair, along with
Matthew Rhett Jeppson, nomi-
nated to be director of the U.S.
Mint.
as eCashier and myPruden-
tial are subject to a daily cap
of 30,000 yuan ($4,615). Pru-
dential didn’t reply to a re-
quest for comment.
BOC Group Life said in a
memo to a broker dated
March 11 that “to cooperate
with mainland regulators’ lat-
est directive,” it was barring
the use of Shanghai-based
online-payment vendor All In
Pay Network Service Co. by
Chinese residents to pay for
insurance policies overseas.
A BOC Group Life spokes-
man said All In Pay had sus-
pended the service, adding
that the insurer had been al-
lowing transactions exceeding
$5,000.
All In Pay wasn’t available
for comment.
One Hong Kong-based in-
surance broker said agents
expect that buying overseas
policies will continue to be-
come harder for mainland
Chinese, and that customers
are rushing to purchase now
before more loopholes are
closed.
How many yuan one U.S.
dollar buys
6.0 yuan
6.1
6.2
6.3
6.4
Scale inverted to show
weakening yuan
’15 2013 ’14 ’15 ’16
THE WALL STREET JOURNAL.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B8 | Wednesday, March 16, 2016 THE WALL STREET JOURNAL.

MARKETS DIGEST
Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
17117.07 t 116.68, or 0.68% Year-to-date t 10.07% 340.86 t 3.80, or 1.10% Year-to-date t 6.82% 2015.93 t 3.71, or 0.18% Trailing P/E ratio * 23.02 20.19
High, low, open and close for each 52-wk high/low20868.03 14952.61 High, low, open and close for each 52-wk high/low 414.06 303.58 High, low, open and close for each P/E estimate * 16.72 17.55
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 2.27 1.98
All-time high: 2130.82, 05/21/15

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

20000 370 2100

65-day moving average
65-day moving average
19000 355 65-day moving average 2050

18000 340 2000

17000 325 1950

Session high
DOWN UP
t

Session open Close 16000 310 1900

Close Open
t

15000 295 1850

Session low
Bars measure the point change from session's open
14000 280 1800
Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar.

International Stock Indexes Data as of 4 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 3 p.m. ET
World The Global Dow 2272.26 –18.58 –0.81 2033.03 • 2643.78 –2.7 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1636.45 –16.43 –0.99 1471.88 • 1956.39 –4.7 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 789.46 –13.99 –1.74 691.21 • 1067.74 –0.6 5.500 Australia 2 2.030 107.0 110.6 116.6 122.6 2.065 1.875 1.887
4.250 10 2.679 71.7 74.2 78.0 44.5 2.703 2.528 2.562
Americas DJ Americas 481.49 –2.09 –0.43 433.38 • 525.25 –1.2
3.500 Belgium 2 -132.7 -135.2 -115.2 -82.0 -0.392 -0.442 -0.159
-0.367
Brazil Sao Paulo Bovespa 47040.83 –1826.51 –3.74 37046.07 • 58574.79 8.5
0.800 10 0.566 -139.6 -144.0 -114.8 -174.3 0.522 0.600 0.374
Canada S&P/TSX Comp 13395.15 –82.39 –0.61 11531.22 • 15524.75 3.0
4.250 France 2 -0.411 -137.1 -137.0 -112.4 -79.7 -0.410 -0.414 -0.136
Mexico IPC All-Share 44198.15 –493.65 –1.10 39256.58 • 46078.07 2.8
1.000 10 0.590 -137.3 -142.1 -113.2 -161.4 0.540 0.616 0.503
Chile Santiago IPSA 3067.21 –4.42 –0.14 2730.24 • 3361.36 4.2
0.500 Germany 2 -0.449 -140.9 -141.1 -121.3 -89.1 -0.451 -0.504 -0.230
U.S. DJIA 17251.53 22.40 0.13 15370.33 • 18351.36 –1.0
0.500 10 0.319 -164.3 -167.9 -150.8 -189.5 0.282 0.240 0.222
Nasdaq Composite 4728.67 –21.61 –0.45 4209.76 • 5231.94 –5.6
4.500 Italy 2 0.014 -94.6 -100.2 -64.7 -48.8 -0.042 0.063 0.173
S&P 500 2015.93 –3.71 –0.18 1810.10 • 2134.72 –1.4
2.000 10 1.377 -58.5 -65.6 -13.8 -96.8 1.306 1.610 1.149
CBOE Volatility 17.11 0.19 1.12 10.88 • 53.29 –6.0
0.100 Japan 2 -0.151 -111.1 -112.8 -85.0 -63.6 -0.168 -0.140 0.025
EMEA Stoxx Europe 600 340.86 –3.80 –1.10 303.58 • 414.06 –6.8 0.100 10 -0.022 -198.4 -200.5 -165.5 -169.5 -0.044 0.093 0.422
Stoxx Europe 50 2848.26 –32.55 –1.13 2556.96 • 3602.76 –8.1 0.500 Netherlands 2 -0.443 -140.3 -141.4 -121.2 -84.1 -0.454 -0.502 -0.180
Austria ATX 2298.69 –24.84 –1.07 1929.73 • 2695.57 –4.1 0.250 10 0.414 -154.8 -158.5 -136.6 -181.5 0.376 0.383 0.302
Belgium Bel-20 3419.61 –27.26 –0.79 3117.61 • 3910.33 –7.6 4.350 Portugal 2 0.311 -64.9 -66.9 -5.2 -59.1 0.291 0.658 0.070
France CAC 40 4472.63 –33.96 –0.75 3892.46 • 5283.71 –3.5 2.875 10 2.793 83.1 78.6 163.6 -56.8 2.747 3.384 1.549
Germany DAX 9933.85 –56.41 –0.56 8699.29 • 12390.75 –7.5 4.500 Spain 2 0.024 -93.6 -95.9 -64.8 -51.2 0.001 0.061 0.149
Greece ATG 579.30 13.10 2.31 420.82 • 857.92 –8.2 2.150 10 1.514 -44.8 -50.8 -4.8 -96.2 1.453 1.700 1.155
Hungary BUX 25608.69 … Closed 18488.60 • 25731.27 7.1 3.750 Sweden 2 -0.619 -157.9 -157.7 -132.9 -85.9 -0.617 -0.619 -0.198
Israel Tel Aviv 1483.36 –4.38 –0.29 1383.34 • 1728.89 –3.0 2.500 10 0.649 -131.3 -134.3 -123.9 -150.1 0.618 0.509 0.616
Italy FTSE MIB 18765.37 –216.40 –1.14 15773.00 • 24157.39 –12.4 1.250 U.K. 2 0.541 -41.9 -41.1 -33.5 -26.7 0.549 0.375 0.394
Netherlands AEX 442.00 –2.08 –0.47 378.53 • 510.55 0.04 2.000 10 1.538 -42.4 -40.8 -31.8 -37.9 1.553 1.430 1.738
Poland WIG 47114.63 –184.88 –0.39 41747.01 • 57460.44 1.4 0.750 U.S. 2 0.960 ... ... ... ... 0.960 0.710 0.661
Russia RTS Index 821.64 –8.90 –1.07 607.14 • 1092.52 8.5 1.625 10 1.962 ... ... ... ... 1.961 1.748 2.117
Spain IBEX 35 8988.30 –154.40 –1.69 7746.30 • 11884.60 –5.8
Sweden SX All Share 487.46 –5.01 –1.02 432.78 • 564.90 –3.5 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 7953.93 –64.43 –0.80 7425.05 • 9537.90 –9.8 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 52253.79 –217.93 –0.42 45975.78 • 55355.12 3.1 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 3/14/2016
Turkey BIST 100 79031.07 –1079.81 –1.35 68230.47 • 88651.88 10.2
One-Day Change Year Year
U.K. FTSE 100 6139.97 –34.60 –0.56 5499.51 • 7122.74 –1.6 Commodity Exchange Last price Net Percentage high low
368.25 -0.50 -0.14% 378.25 354.25
Asia-Pacific DJ Asia-Pacific TSM 1334.43 –10.89 –0.81 1188.42 • 1621.10 –4.0 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 892.25 -3.50 -0.39 897.00 856.00
Australia S&P/ASX 200 5111.40 –74.10 –1.43 4765.30 • 5982.70 –3.5
Wheat (cents/bu.)
CBOT
CBOT 477.00 -1.75 -0.37 493.50 442.25
China Shanghai Composite 2864.37 4.87 0.17 2655.66 • 5166.35 –19.1
Live cattle (cents/lb.) CME 130.225 1.400 1.09% 130.650 118.775
Hong Kong Hang Seng 20288.77 –146.57 –0.72 18319.58 • 28442.75 –7.4
Cocoa ($/ton) ICE-US 3,055 -26 -0.84 3,215 2,738
India S&P BSE Sensex 24551.17 –253.11 –1.02 22951.83 • 29044.44 –6.0
Coffee (cents/lb.) ICE-US 125.40 -1.80 -1.42 128.25 113.35
Japan Nikkei Stock Avg 17117.07 –116.68 –0.68 14952.61 • 20868.03 –10.1
Sugar (cents/lb.) ICE-US 15.25 -0.17 -1.10 15.44 12.61
Singapore Straits Times 2839.44 –7.62 –0.27 2532.70 • 3539.95 –1.5
Cotton (cents/lb.) ICE-US 58.14 -0.15 -0.26 64.30 54.53
South Korea Kospi 1969.97 –2.30 –0.12 1829.81 • 2173.41 0.4 Robusta coffee ($/ton) ICE-EU 1417.00 -21.00 -1.46 1,568.00 1,342.00
Taiwan Weighted 8611.18 –136.72 –1.56 7410.34 • 9973.12 3.3
Copper ($/lb.) COMEX 2.2340 -0.0055 -0.25 2.3040 1.9440
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1233.60 -11.50 -0.92 1,287.80 1,061.90
Silver ($/troy oz.) COMEX 15.300 -0.221 -1.42 16.005 13.760
Currencies London close on March 15 Aluminum ($/mt)* LME 1,547.00 -12.50 -0.80 1,588.50 1,451.50
Tin ($/mt)* LME 17,000.00 75.00 0.44 17,225.00 13,225.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Tue YTDchg Copper ($/mt)* LME 4,975.00 43.00 0.87 4,989.50 4,320.50
10% Country/currency in US$ per US$ (%) Lead ($/mt)* LME 1,853.00 17.50 0.95 1,888.00 1,598.00
8
s
Euro
Europe Zinc ($/mt)* LME 1,813.00 20.00 1.12 1,843.00 1,467.00
6
Bulgaria lev 0.5680 1.7607 –2.2 Nickel ($/mt)* LME 8,760.00 -50.00 -0.57 9,400.00 7,750.00
4
Croatia kuna 0.1470 6.803 –3.0 Rubber (Y.01/ton) TCE 167.90 0.20 0.12 180.00 154.10
2
Euro zone euro 1.1111 0.9000 –2.3
0 Palm oil (MYR/mt) MDEX 2611.00 18.00 0.69 2,653.00 2,425.00
Czech Rep. koruna-b 0.0411 24.334 –2.2
–2 Denmark krone 0.1490 6.7126 –2.3 Crude oil ($/bbl.) NYMEX 38.20 -0.64 -1.65 41.35 29.85
–4 s
Hungary forint 0.003580 279.36 –3.8 NY Harbor ULSD ($/gal.) NYMEX 1.1911 -0.0158 -1.31 1.2563 0.8950
–6 s WSJ Dollar index Yen
Iceland krona 0.007883 126.85 –2.6 RBOB gasoline ($/gal.) NYMEX 1.4439 -0.0121 -0.83 1.5782 1.1488
–8 Norway krone 0.1168 8.5615 –3.2
0.2586 3.8669 –1.4
Natural gas ($/mmBtu) NYMEX 1.948 0.034 1.78 2.5490 1.7310
2015 2016 Poland zloty
Russia ruble-d 0.01406 71.127 –1.1 Brent crude ($/bbl.) ICE-EU 39.45 -0.71 -1.77 42.08 29.31
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1203 8.3106 –1.6 Gas oil ($/ton) ICE-EU 356.25 -3.25 -0.90 377.50 266.50
Tue Tue
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0142 0.9860 –1.6
Turkey lira 0.3451 2.8979 –0.7 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1289 7.7600 0.1
Ukraine hryvnia 0.0377 26.5100 10.5
Argentina peso-a 0.0688 14.5310 12.3
India rupee
Indonesia rupiah
0.0148
0.0000758
67.4303
13194
1.8
–4.6
U.K. pound 1.4167 0.7059 4.0 Cross rates London close on Mar 15
Brazil real 0.2680 3.7315 –5.8 Middle East/Africa
Japan yen 0.008860 112.87 –6.2
Canada dollar 0.7479 1.3371 –3.4 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002914 343.17 1.3 Bahrain dinar 2.6525 0.3770 –0.03
Chile peso 0.001454 687.90 –2.9 Australia 1.3398 1.8982 1.3587 0.0119 0.1727 1.4886 1.0021 ...
Macau pataca 0.1252 7.9879 –0.2 Egypt pound-a 0.1117 8.9519 14.3
Colombia peso 0.0003149 3175.28 0.02 Canada 1.3371 1.8944 1.3561 0.0119 0.1723 1.4856 ... 0.9979
Malaysia ringgit-c 0.2407 4.1545 –3.5 Israel shekel 0.2566 3.8969 0.1
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.6610 1.5129 3.4 Kuwait dinar 3.3215 0.3011 –0.8 Euro 0.9000 1.2753 0.9129 0.0080 0.1160 ... 0.6732 0.6718
Mexico peso-a 0.0558 17.9188 4.2
Pakistan rupee 0.0095 104.750 –0.1 Oman sul rial 2.5978 0.3849 –0.01 Hong Kong 7.7600 10.9935 7.8701 0.0688 ... 8.6210 5.8028 5.7913
Peru sol 0.2984 3.3515 –1.8
Philippines peso 0.0214 46.729 –0.3 Qatar rial 0.2747 3.641 –0.05 Japan 112.8710 159.9100 114.4800 ... 14.5450 125.4000 84.4182 84.2500
Uruguay peso-e 0.0311 32.140 7.5
Singapore dollar 0.7242 1.3808 –2.6 Saudi Arabia riyal 0.2667 3.7499 –0.1 0.9860 1.3970 ... 0.0087 0.1271 1.0955 0.7374 0.7359
Venezuela bolivar 0.158590 6.31 0.01 Switzerland
South Korea won 0.0008354 1197.02 1.8 South Africa rand 0.0629 15.9087 2.8
U.K. 0.7059 ... 0.7158 0.0063 0.0910 0.7842 0.5279 0.5268
Asia-Pacific Sri Lanka rupee 0.0068999 144.93 0.5 Close Net Chg % Chg YTD % Chg
0.7464 1.3398 –2.4 Taiwan dollar 0.03046 32.833 U.S. ... 1.4167 1.0142 0.0089 0.1289 1.1111 0.7479 0.7464
Australia dollar –0.3 WSJ Dollar Index 88.44 0.15 0.17 –1.92
China yuan 0.1536 6.5103 0.3 Thailand baht 0.02848 35.110 –2.6 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

Key Rates Top Stock Listings 4 p.m. New York time

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Close Chg Chg Cur Stock Sym Close Chg Chg Cur Stock Sym Close Chg Chg Asia Titans 50
One month 0.44125% 0.17750% ¥ TakedaPharm 4502 5451.00 -0.37 -10.12 £ RioTinto RIO 1921.50 -4.00 -2.93 Last: 128.53 t 1.02, or 0.79% YTD t 5.7%
Three month 0.64195 0.26935 Asia Titans HK$ TencentHoldings 0700 151.30 -1.30 -0.92 CHF RocheHldgctf ROG 246.40 -0.56 -10.85
150
Six month 0.91230 0.40610 HK$ AIAGroup 1299 42.55 -0.23 -8.69 ¥ TokioMarineHldg 8766 3983.00 -2.09 -15.47 £ RoyDtchShell A RDSA 1657.50 -0.54 8.62
One year 1.23700 0.71335 50–day
¥ AstellasPharma 4503 1555.50 1.53 -10.16 ¥ ToyotaMtr 7203 6087.00 -1.82 -18.71 € SAP SAP 71.25 0.25 -2.90
moving average 140
Euro Libor AU$ AustNZBk ANZ 25.39 -1.40 -9.09 AU$ Wesfarmers WES 41.27 -0.55 -0.82 € Sanofi SAN 74.19 -1.03 -5.61
130
One month -0.31986% -0.01286% AU$ BHP BHP 17.13 -3.44 -4.09 AU$ WestpacBanking WBC 32.30 -1.76 -3.75 € SchneiderElectric SU 55.05 -1.15 4.74 t
Three month -0.24286 0.01929 HK$ BankofChina 3988 3.13 -0.63 -9.54 AU$ Woolworths WOW 22.79 -1.34 -6.98 € Siemens SIE 90.53 -0.70 0.72 High 120
Six month -0.12943 0.07286 HK$ CKHutchison 0001 98.90 -0.20 -5.27 € Telefonica TEF 10.00 -1.57 -2.30 Close 110
One year -0.00614 0.20357 HK$ CNOOC 0883 8.82 -2.86 9.29 Stoxx 50 € Total FP 41.49 -1.39 0.56 Low 100
Euribor ¥ Canon 7751 3386.00 0.21 -7.86 CHF ABB ABBN 18.10 -0.82 0.78 CHF UBSGroup UBSG 16.57 -0.66 -15.11
One month -0.31300% -0.01200% ¥ CentralJapanRwy 9022 19725 0.54 -8.68 € AXA CS 21.73 0.53 -13.87 € Unilever UNA 39.88 0.31 -0.55 18 25 31 8 15 22 29 5 12 19 26 4 11
Three month -0.22700 0.02500 HK$ ChinaConstructnBk 0939 4.83 -1.02 -9.04 € Allianz ALV 146.10 -0.10 -10.67 £ Unilever ULVR 3143.50 1.06 7.42 Jan. Feb. Mar.
Six month -0.13000 0.09500 HK$ ChinaLifeInsurance 2628 18.40 0.11 -26.69 € Anheuser Busch ABI 105.05 -0.76 -8.17 £ VodafoneGroup VOD 219.90 0.14 -0.50
One year -0.00600 0.20900 HK$ ChinaMobile 0941 85.50 -0.75 -2.29 £ AstraZeneca AZN 4022.00 -0.74 -12.88 CHF ZurichInsurance ZURN 227.30 -0.35 -12.04
Yen Libor AU$ CmwlthBkAust CBA 75.45 -1.83 -11.79 € BASF BAS 64.97 -0.81 -8.13
DJIA Stoxx 50
One month 0.22875% 0.23523% ¥ EastJapanRailway 9020 10025 0.25 -12.45 € BNP Paribas BNP 47.02 -1.54 -9.98
17975 -2.44 -14.73 59.22 -0.59 -14.85 Last: 2848.26 t 32.55, or 1.13% YTD t 8.1%
Three month 0.56516 0.38929 ¥ Fanuc 6954 £ BT Group BT.A 454.15 -1.70 -3.72 $ AmericanExpress AXP
Six month 0.89583 0.54000 ¥ Hitachi 6501 530.20 -0.95 -23.33 € BancoBilVizAr BBVA 6.35 -2.96 -5.76 $ Apple AAPL 104.58 2.01 -0.65 3400
One year 1.27464 0.84000 TW$ Hon Hai Precisn 2317 82.30 -2.02 1.86 € BancoSantander SAN 4.31 -4.43 -5.35 $ Boeing BA 126.33 -0.01 -12.63
¥ HondaMotor 7267 3144.00 -0.66 -19.59 £ Barclays BARC 163.55 0.18 -25.29 $ Caterpillar CAT 72.41 -0.44 6.55 3200
Offer
KRW HyundaiMtr 005380 147000 -1.01 -1.34 € Bayer BAYN 100.00 -0.25 -13.64 $ Chevron CVX 94.16 -0.11 4.67 3000
Eurodollars
HK$ Ind&Comml 1398 4.21 -0.47 -10.04 £ BP BP. 342.00 -1.00 -3.39 $ CiscoSystems CSCO 27.66 -0.14 1.86
One month 0.4500% 0.3500%
45.24
2800
Three month 0.6500 0.5500
¥ JapanTobacco 2914 4567.00 -0.39 2.15 £ BritishAmTob BATS 4128.00 0.66 9.47 $ CocaCola KO -0.11 5.31
¥ KDDI 9433 3046.00 1.03 -3.42 CHF FinRichemont CFR 64.85 -2.99 -10.06 $ Disney DIS 98.24 -0.58 -6.51 2600
Six month 0.9000 0.8000
¥ Mitsubishi 8058 2050.50 -1.39 1.11 CHF CreditSuisse CSGN 15.00 -3.16 -30.84 $ DuPont DD 62.83 -0.74 -5.66 2400
One year 1.2500 1.1500
¥ MitsuUFJFin 8306 569.80 -1.49 -24.74 € Daimler DAI 66.43 0.23 -14.37 $ ExxonMobil XOM 82.81 0.49 6.23
Latest 52 wks ago
1410.00 30.28 0.03 -2.79 18 24 31 8 15 22 29 5 12 19 26 4 11
¥ Mitsui 8031 -2.02 -2.46 € Deutsche Bank DBK 18.05 -2.59 -19.87 $ GenElec GE
Prime rates 184.80 -0.22 -24.11 $ GoldmanSachs GS 152.08 -0.92 -15.62 Jan. Feb. Mar.
¥ Mizuho Fin 8411 € DeutscheTelekom DTE 15.89 -0.50 -4.82
U.S. 3.50% 3.25% ¥ NTTDoCoMo 9437 2545.50 -0.78 2.48 £ Diageo DGE 1896.00 0.37 2.13 $ HomeDepot HD 129.71 0.68 -1.92
Canada 2.70 2.85 AU$ NatAustBnk NAB 27.79 -1.84 -7.98 € ENI ENI 13.20 -1.42 -4.35 $ Intel INTC 31.65 0.70 -8.13
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥ NipponStl&SmtmoMtl 5401 2240.50 -2.71 -7.26 £ GlaxoSmithKline GSK 1416.00 0.43 3.13 $ IBM IBM 142.93
59.20
0.10
0.14
3.86
-10.34
Dow Jones Industrial Average P/E: 18
¥ NipponTeleg 9432 4851.00 0.14 0.31 £ HSBC Hldgs HSBA 452.95 0.09 -15.53 $ JPMorganChase JPM
Policy rates ¥ NissanMotor 7201 1094.00 -1.71 -14.50 € INGGroep INGA 11.60 -1.44 -6.83 $ JohnsJohns JNJ 107.76 0.09 4.91 Last: 17251.53 s 22.40, or 0.13% YTD t 1.0%
ECB 0.05% 0.05% ¥ NomuraHldgs 8604 534.70 -0.52 -21.26 £ ImperialBrands IMB 3757.00 0.13 4.75 $ McDonalds MCD 123.42 0.42 4.47
$ Merck MRK 52.42 -1.24 -0.76 18000
Britain 0.50 0.50 ¥ Panasonic 6752 996.70 -1.37 -19.65 € IntesaSanpaolo ISP 2.65 -1.05 -14.18
Switzerland 0.50 0.50 HK$ PetroChina 0857 5.31 -1.48 4.32 € L'AirLiquide AI 98.28 -1.23 -5.18
$ Microsoft MSFT 53.59 0.79 -3.41 17400
Australia 2.00 2.25 HK$ PingAnInsofChina 2318 35.00 -0.85 -18.41 € LVMHMoetHennessy MC 155.85 -2.29 7.56
$ NikeClB NKE 61.41 0.99 -1.74
16800
U.S. discount 1.00 0.75 $ RelianceIndsGDR RIGD 30.05 -0.66 -1.80 £ LloydsBankingGroup LLOY 69.21 -1.56 -5.28
$ Pfizer PFE 29.54 -1.86 -8.49
Fed-funds target 0.25 0.00 42.97 -3.37 -3.89 $ Procter&Gamble PG 81.30 0.16 2.38 16200
AU$ RioTinto RIO € LOreal OR 157.65 -0.16 1.51
Call money 2.25 2.00 KRW SamsungElectronics 005930 1253000 -0.16 -0.56 £ NationalGrid NG. 972.60 0.53 3.74
$ 3M MMM 162.47 0.41 7.85 15600
4887.00 1.26 -11.95 $ TravelersCos TRV 113.92 0.98 0.94
Overnight repurchase rates ¥ Seven&I Hldgs 3382 CHF Nestle NESN 71.40 -0.28 -4.23 15000
5928.00 0.39 -3.44 $ UnitedTech UTX 96.24 -0.61 0.18
U.S. 0.45% 0.23% ¥ SoftBankGroup 9984 CHF Novartis NOVN 72.30 -0.96 -16.71
3713.00 -0.19 -19.39 $ UnitedHealthGroup UNH 124.85 -0.30 6.13 18 24 31 8 15 22 29 5 12 19 26 4 11
Euro zone n.a. n.a. ¥ Sumitomo Mitsui 8316 DKK NovoNordiskB NOVO-B 378.00 -2.07 -5.48
94.55 -0.32 0.85 $ VISAClA V 71.90 0.57 -7.29 Jan. Feb. Mar.
HK$ SunHngKaiPrp 0016 £ Prudential PRU 1317.50 -2.12 -13.95
Sources: WSJ Market Data Group, SIX 154.50 -0.96 8.04
$ Verizon VZ 52.69 0.28 13.99 Note: Price-to-earnings ratios are for trailing 12 months
TW$ TaiwanSemiMfg 2330 £ ReckittBenckiser RB. 6649.00 0.18 5.86
Financial Information, Tullett $ WalMart WMT 68.08 1.07 11.06 Sources: WSJ Market Data Group; Birinyi Associates
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THE WALL STREET JOURNAL. Wednesday, March 16, 2016 | B9

THE PROPERTY REPORT

Solution for Housing Woes: Adult Dorms
BY ELIOT BROWN
AND LAURA KUSISTO

Venture capitalists think

they have an answer to the
growing housing crunch in San
Francisco and other big cities
across the U.S.: adult dorms.
Shared office space giant
WeWork Cos., recently valued
at $16 billion, and a handful of
smaller startups are experi-
menting with “coliving,” a
concept that involves tiny
apartments, shared kitchens
and lounges, and a communal
atmosphere.
Unlike traditional invest-
ments in the real-estate sector,
which tends to be a slow-
COMMON (2)

growth market with moderate

returns, financial backers in-
cluding Fidelity Investments
and consumer-focused ven- Venture capitalists are betting on startups experimenting with ‘coliving’ spaces in big cities with high rents. New York-based Common has a 19-bedroom building in
ture-capital fund Maveron are Brooklyn, above, that offers weekly potluck dinners, furnished bedrooms and cleaning services. WeWork has products in Manhattan and the Washington suburbs.
betting on hyper-fast expan-
sion and startup-like profit. the young. four, five-story buildings in a 24-year-old copywriter for a than $2,000 a month. All rent- charged its members weren’t
The wager is that 20-some- The market is centered on the Williamsburg neighbor- tech company who pays $1,550 ers have access to a lounge enough to meet costs and pro-
thing residents moving to new the biggest U.S. cities experi- hood of Brooklyn. Stage 3 is a month for a room in a 19- area with free food at special vide a needed cushion of
cities will pay a premium to encing the most-acute prob- seeking venture-capital back- bedroom building in Brook- events, roof deck, pool, maid profit.
live in clusters of small apart- lems with housing affordabil- ing. lyn’s Crown Heights neighbor- service and a visit from Alfred, One of the main challenges
ments packed with peers in ity. Other companies, including hood run by Common. The a butler service that comes is that a more organic model
similar places in their lives. New York-based WeWork, San Francisco-based Open space has weekly potluck din- once a week to do tasks like of the same concept—sharing
Apartment rents in big cities backed by more than $1.4 bil- Door, take control of entire ners, furnished bedrooms and pick up prescriptions or drop an apartment with room-
are high, furnishing an apart- lion from venture capital and townhouses then lease out cleaning services. off dry cleaning. mates—has long been a rite of
ment is expensive and finding money managers, inaugurated rooms. Still Open Door—which “Trying to find a place in The economics of the busi- passage for young adults in
housing on Craigslist can be its “WeLive” co-living product isn’t backed by venture capital New York is the biggest head- ness are tricky. Prices need to pricey cities.
daunting, the thinking goes. earlier this year in lower Man- and has slower expansion ache in the world,” Mr. Ken- be low enough to appeal to Even as a business, Coliving
“You have this incredibly hattan and the Washington plans—also wants to partner nedy said. Coliving offers a young workers, but high has long existed in urban
large category, which there’s suburbs, where tiny apart- with developers on new apart- group of like-minded people, enough to make more sense America by other names,
not that much venture activity ments are clustered around ments custom designed for the mostly in their 20s, with for landlords than other uses though with less emphasis on
in, that needs to be reimag- large dining and lounge concept. whom to chat or go out for a like microapartments. creating community and at
ined,” said Jason Stoffer, a spaces. All the companies and their drink, he said. “It’s jump-start- The coliving model has al- lower price points.
partner at Maveron, which is WeWork, which declined to investors are trying to find ing your ability to make ready proved unworkable for Variants include rooming
backing New York-based coliv- comment, has previously fore- ways to capture a slice of U.S. friendships.” one startup, called Campus, houses, boardinghouses and
ing startup Common. There is, cast having about 70 WeLive housing spending by the Another startup, Stage 3, which folded in 2015 after single-room occupancy hotels,
he said, “insanely high con- locations with more than young. The typical renter be- which does business under the opening more than 30 clusters all of which offered housing
sumer demand for reimagining 30,000 residents by 2018, and tween 22 and 34 years old liv- brand Ollie, is slated to run a of rooms in two years. for new arrivals and others in
how millennials live in urban its backers predict coliving ing alone would have to spend 425-bed project now under de- The company, which re- the working class, often with
environments.” will account for about 20% of 53% of his or her income to velopment in Long Island City, ceived backing from PayPal co- common facilities like shared
The risk is that young its revenue. pay the median apartment just across the East River from founder Peter Thiel’s venture- bathrooms and in some cases
workers will balk at paying the Smaller companies are roll- rent in the U.S., according to Manhattan. capital firm, was renting a few ground-floor dining rooms.
high prices the startups are ing out more-modest offerings real-estate research company The company, run by broth- apartments at a time—paying These offerings largely dis-
counting on—upward of with ambitions to rapidly Zillow. Spending 30% of one’s ers Christopher and Andrew market rates to landlords— appeared, as subpar living
$1,800 a bed a month in some grow larger, such as New York- income on rent is considered Bledsoe, plans to rent rooms and then trying to sublet them conditions led to new regula-
cases—to live in what is es- based Stage 3 and Common, financially sustainable. for about $1,600 a month— out room-by-room at higher tions, which encouraged large,
sentially an upscale college which just opened a 51-bed- The startups are targeting less than a typical studio in rent. airy units aimed at families in-
dorm or a retirement home for room property split among people such as Cole Kennedy, the area that rents for more In the end, the prices it stead.

Hot Property ADVERTISEMENT

Growing numbers of foreign students are fueling an accommodation boom in Australia, where the returns
on investments in student housing are among the best in the world. Business Real Estate & Auctions
International student International student Yields on investment in student
enrollment in Australia enrollment by top five housing, top five countries ROMANIA
Change
countries, in thousands from
600,000 0 50 100 150 2014 0 2 4 6 8%
500,000 2015
China 11% Australia
2014
400,000
India 15% Spain
300,000
Vietnam 2% U.S.
200,000
South
100,000 Korea 2.5% Netherlands

0 Thailand France
9%
2006 ’10 ’15
Sources: Department of Education and Training, Australia (student enrollment); Savills World Research THE WALL STREET JOURNAL.

Australia Looks to Students

BY REBECCA THURLOW oper building a 350-bed stu- housing in recent years. The
dent apartment in inner-city U.S. student-housing market
Global property develop- Melbourne, for A$21 million. is the world’s most mature,
ers are circling in on the lat- The deal is the first step to- and some investors see it as
est hot property market in ward a target of 25,000 stu- fully priced.
Australia: student housing. dent beds in Australia for “Simply there aren’t
As the recent fall in the GSA, which started with just enough student beds to meet
Australian dollar spurs for- over 100 beds in the U.K. in the requirement of the stu-
eign student numbers, com- 1991 and now operates in dent population in Australia
panies from Dubai to China eight countries including at the moment,” said David
to South Africa are spending China and Japan. Sinn, head of real estate for
big on buying land or high- “Only one in 10 students Australia and Asia at Herbert
rise blocks that can be rede- that study in Australia have Smith Freehills.
veloped to cater to students purpose-built housing,” said In November, Industrial &
studying at universities. Simon Loveridge, GSA’s Asia- Commercial Bank of China
Australia is attracting re- Pacific managing director. Ltd. made its largest ever in-
cord student numbers as its “We see it being the next vestment in Australian real
economy tacks to service in- emerging student accommo- estate, pouring around
dustries like education to dation market.” A$100 million into a joint
pick up the slack created by Australia has previously venture with U.K. student ac-
the end of a decadelong min- lagged behind other coun- commodation group Scape
ing boom. tries in building student Student Living and Dutch
Student housing in Aus- housing. Analysts say that pension fund APG Asset
tralia offers yields of 7% ver- makes it a surer investment Management, which entered
sus 5.75% in the U.S. and 5% bet than residential property the market several months
in the U.K., according to after the country’s central earlier. Mr. Sinn advised
Savills World Research. bank last year warned of a Scape on the property deals.
Property yields are calcu- possible supply glut of apart- The venture has been buy-
lated by dividing the annual ments in inner-city Mel- ing up properties in the east-
rental income on a property bourne and Brisbane. ern Australian state capitals
by how much it cost to buy. Overseas enrollments at of Sydney, Brisbane and Mel-
Education is Australia’s Australian educational insti- bourne. It is planning a 50-
third-largest export after tutions hit 645,000 in 2015— story tower near Melbourne’s
commodities such as iron with more than a quarter of RMIT University that will in-
ore, generating about 18 bil- those students from China, clude rooftop sky gardens
lion Australian dollars government data show. The and collaborative workspaces
(US$13.53 billion) in export enrollments are up 25% from where students can team up
revenue in the 2014-2015 fis- 2012 when the Australian with businesses on startup
cal year. dollar was near its peak and ideas.
Dubai-headquartered made it cheaper to study in Among the most active
property developer GSA re- the U.S. and Britain. foreigners are several Singa-
cently made its first foray Australia is the third- porean investors. Just south
into Australian real estate, ranked destination globally of Brisbane’s inner-city dis-
homing in on a city that the for foreign students, after trict, clapboard homes are
country’s central bank has the U.S. and Britain, accord- making way for high-rise
warned is at risk of an apart- ing to the latest data from towers set to house more
ment supply glut. the Organization for Eco- than 1,600 students in a
Earlier this month, GSA nomic Cooperation and De- combined retail, office and
said it would buy privately velopment. apartment development be-
held Campus Estates, a stu- The U.K. has seen an in- ing built by Singapore’s Wee
dent-accommodation devel- flux of investment in student Hur Holdings Ltd.
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To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B10 | Wednesday, March 16, 2016 THE WALL STREET JOURNAL.

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

French Telecom War Isn’t Over OVERHEARD Euro Stuck

Between the
French consumers can Orange, argues Jerry Dellis, The Bank of Japan wasn’t
Broader-Band
now buy a monthly 4G cell-
phone package, including in-
ternational calls, for less
Number of homes passed with
an analyst at Jefferies.
Bouygues Telecom was
early to invest in 4G but late
shy when it launched into
negative interest rates in late
January. The BOJ reined in
ECB and Fed
fiber by operator
than the price of a coffee, to lay fiber. If the boss can rhetoric Tuesday by removing The balance of power has
and download speeds are = 1 million homes be convinced he can’t com- forthright language on further shifted in the currency wars.
getting faster. Numericable-SFR pete in this capital-intensive cuts into subzero territory The European Central Bank
Price cuts have been the 8 race, he may accept a lower from its policy statement. As has moved back from the
most visible aspect of the vi- price. That would benefit Or- important, it ironed out a front line, its firepower now
cious competition unleashed Orange ange, but also Iliad and Nu- wrinkle in how negative rates directed at credit markets,
by Iliad’s mobile launch in 5 mericable-SFR, which are ne- affected Japan’s short-term not currencies.
2012. But there is another gotiating to buy 4G towers, investment funds. Negative The result could be frus-
front: investment. Unfortu- Iliad shops and other assets in the rates meant investors who trating for euro bulls and
nately for shareholders, the 3 sales needed to appease reg- drew on these funds for daily bears alike.
investment war is spreading Bouygues ulators. liquidity may not get back The ECB’s withdrawal
just as the price war shows If the much-discussed their principal intact. means the bigger influence
signs of petering out. 2 deal goes ahead, it should Asset managers like Miz- on the euro/dollar exchange
Numericable-SFR, the No. Sources: Altice; Bloomberg News (photo) A Numericable store in spell the end of the invest- uho and Daiwa started turn- rate should be the U.S. Fed-
2 French telecom operator, THE WALL STREET JOURNAL. Toulouse, France ment war in 4G. ing away cash from their eral Reserve. The U.S. bond
owned by Patrick Drahi’s Al- But the bad news for in- short-term funds in February. market has started to enter-
tice SA, invested €1.9 billion Having been late to invest gain in the fourth. vestors is that the fight for Nikko shut down two funds. tain the notion of higher in-
($2.11 billion) in 2015, or 17% in 4G, SFR, the embattled Meanwhile, Orange spent high-speed broadband cus- In its reconsidered policy terest rates again; Fed Chair-
of sales. This year “acceler- mobile network bought by more than half its €6.5 bil- tomers seems likely to con- Tuesday, the central bank ex- woman Janet Yellen’s
ated investments” will re- Numericable in 2014, has lion 2015 capital budget lay- tinue. Meanwhile, there may empted money-reserve funds comments Wednesday will
duce Altice’s free cash flow, been making up for lost time. ing fiber-optic cables directly be a fight ramping up in con- from negative rates. be closely watched.
the company said Tuesday. The proportion of France to households. The objective tent. Altice made a number Gov. Haruhiko Kuroda But the road to higher
Other players struck a covered by its network in- is to take market share from of investments in content should have seen it coming: U.S. rates still looks like a
similar note. Iliad’s 2015 cap- creased from 33% at the end Numericable. Iliad and last year, including a video- Europe’s money-market funds long and bumpy one. Despite
ital budget was €1.2 billion, of 2014 to 64% last year, and Bouygues also have started on-demand service and the went through this very chal- the renewed rise in U.S. two-
28% of sales, with a “slight management has set a target to roll out fiber to the home. right to broadcast England’s lenge, for instance, but have year Treasury yields, the
increase” expected this year. of 90%—on par with Or- The capital-spending plans soccer Premier League. since improvised. Investors euro has remained stuck in a
Orange, France’s incumbent ange—by the end of 2017. An could be designed to pres- France’s telecom market should hope Japan’s mone- range centered around $1.10.
operator, indicated that in- exodus of customers in the sure Martin Bouygues, chair- looks set to remain a battle- tary policy surprises are bet- Even if the Fed were to
vestment will continue to first three quarters of last man of the group, into sell- ground one way or another. ter planned next time around. sound more confident than
rise until 2017. year turned into a small net ing his telecom business to —Stephen Wilmot expected about rate in-
creases, a markedly stronger
dollar may lead to markets

Cloud Scale Is Worth Price for Amazon, Google, Microsoft becoming less certain they
can be achieved, with re-
newed worries about the im-
For the firms that have in- panies like Amazon.com, nies digest earlier invest- segment’s operating margin host its first cloud-user con- pact on U.S. companies and
vested billions in building Microsoft and Google, who ments. A roster of 18 cloud- jumped to 24%—far above ference next week. global growth. That could
cloud-based business ser- are spending billions on data service companies tracked the 3% operating margin for The company also recently short-circuit the Fed’s prog-
vices, the market’s winter centers and other infrastruc- by RBC Capital raised their Amazon’s much larger retail scored a high-profile cus- ress—and any euro rally.
chill has a silver lining. ture to serve this need. Ama- capital spending by 6% in business. Microsoft’s Intelli- tomer win with music But while the ECB may no
Recent quarterly reports zon is launching a new ser- 2015 compared with a 29% gent Cloud business grew streaming giant Spotify, longer be relying on an ever
from companies like Sales- vice Tuesday to help its surge the year before. The revenue by 6% for the six- which pointed to Google’s weaker euro, it will not want
force.com, Workday and customers make the transi- broker projects that number month period ended Dec. 31. data-analytics capabilities as to see the single currency
Box showed that business tion to the cloud even faster. will step up the pace by the only one of the com- the main selling point that strengthen markedly either.
demand for cloud services The bill for building a growing 15% this year. pany’s three business seg- convinced the service to That would simply add to
remained strong even amid cloud business is staggering. That should come as no ments that grew during that move from AWS. the headwinds that the euro-
signs of a broader economic Amazon, Microsoft and surprise, as the companies time. Gartner projects the mar- zone already faces. While
slowdown. Those reports Google combined had nearly with a commanding position Google trails the other ket for public cloud services ECB President Mario Draghi
covered fiscal quarters that $26 billion in capital expen- in the cloud need badly to two. Morgan Stanley esti- is expected to grow by appeared to rule out further
ended in January, when mar- ditures in 2015. Not all of stay there. Amazon and Mi- mates Google’s cloud reve- nearly 17% this year. A slow- rate cuts last week, he did
kets went into a tailspin. this went to data center crosoft’s cloud businesses nue totaled about $500 mil- ing economy drives busi- note that conditions could
But fears of a global slow- buildup, but all three compa- have become major compo- lion last year, about 6% the nesses to wring more effi- change.
down haven’t curbed the nies have described the nents underpinning their size of AWS. But the Internet ciency from their technology The upshot: The euro is in
drive of businesses shifting cloud as a major area of in- market values. giant is running quickly to budgets. Wagering billions no man’s land. Neither parity
more of their computing and vestment. Revenue at Amazon’s AWS catch up. It has VMware co- on cloud services designed nor a pronounced rise seem
software needs to the cloud. Capital spending can be cloud business surged 70% to founder Diane Greene lead- to deliver that looks like a likely from here.
That is a good sign for com- lumpy, especially as compa- $7.9 billion in 2015 while ing its cloud effort and will safe bet. —Dan Gallagher —Richard Barley

MONEY & INVESTING

Excerpts: Report on Financial Crisis LEFT

sonal Disney World.”
On the day the report was
published, Evergrande’s share
price fell as much as 20% be-
New documents on the 2008 Continued from page B5 fore closing down 11.4% at 3.97
financial crisis reveal some un- worry a ruling against Mr. Hong Kong dollars (around 51
usually frank assessments and Left—who could be banned U.S. cents). The company has
admissions by key figures. Here from dealing in Hong Kong se- denied the allegations.
are some excerpts from the curities or be forced to give up Mr. Left later took down his
documents, released Friday by profits from the short sale— Evergrande report at the sug-
the National Archives following would chill market partici- gestion of his lawyers, who
a five-year embargo. pants. Stock analysts, as an ex- thought doing so would create
ample, might be too afraid to goodwill with the Hong Kong
Warren Buffett didn’t see publish damaging opinions regulator, which announced in
the bubble about companies they cover December 2014 it would
Of the nearly 200 interview for fear of being targeted by launch civil proceedings.
JEREMY BALES/BLOOMBERG NEWS

transcripts released, one of regulators. Those began last month before

the most striking is the full “Everyone says ‘why are the city’s Market Misconduct
transcript of a May 26, 2010, you doing this, you can’t beat Tribunal, whose chairman, Mi-
interview with Warren Buffett the system there, you’re chael Hartmann, returned re-
on the causes of the financial throwing money in the gar- peatedly to the theme of free
crisis. Mr. Buffett said he bage,’” Mr. Left said in a speech.
missed the housing bubble like phone interview. “I don’t be- “The last thing that this tri-
most other Americans: “If I lieve the system is rigged, and bunal wants to do is inadver-
had seen what was coming, I I’m just going to fight it for tently to reduce” free speech,
would have behaved differ- A Lehman Brothers employee leaves company headquarters on Monday, Sept. 15, 2008. That the good that can come of it.” he said. “If you cannot feel
ently,” he told the commission. morning, the firm filed for bankruptcy, an event that triggered the financial crisis. Mr. Left said he didn’t at- free to make comment…you
Asked whether monetary pol- tend the hearing over con- don’t have a transparent mar-
icy caused the financial crisis, incentives…it’s not just that the bought Merrill Lynch in the amount of our gross assets ver- cerns about his safety. Law- ket.” He said people have an
Mr. Buffett said no. “I think elephant was too big for the days following the failure of sus our equity,” he said. “I al- yers represented him at the “obligation” not to release
the primary cause was an al- tent—the elephant was ugly!” Lehman Brothers, “the system ways thought of it in terms of hearing. misleading information, how-
most universal belief, among he said. would have stopped.” He risk of the way our balance The 45-year-old Mr. Left in- ever.
everybody and I don’t ascribe muses about writing a fic- sheet was run." vests only his own money and Witnesses included Ever-
particular blame to any part of Greenspan unbowed tional book titled “If Ken said he has made profits every grande’s chief financial officer,
it—whether it’s Congress, me- Former Federal Reserve Lewis Hadn’t Answered the Tell us how you really year since he started short bullish analysts who covered
dia, regulators, homeowners, Chairman Alan Greenspan de- Phone,” telling a story about feel selling 15 years ago. He gained Evergrande and a Pricewater-
mortgage bankers, Wall Street, fended the central bank’s ac- what would have happened. In a 2010 interview with the prominence last fall when he houseCoopers auditor who
everybody—that house prices tions in the lead-up to the fi- “It would be a hell of a book. commission, John Reed, the slammed Valeant. said he hadn’t detected any-
would go up.” nancial crisis, saying Fed I’m not sure what the ending former Citigroup chief execu- Hong Kong and Chinese thing amiss with the com-
officials are often no better at would be.” tive, let loose. Among his opin- regulators, who tend to be pany’s finances.
Paulson blasts Fannie, predicting the future than the ions: The structure of combin- suspicious of short sellers, are Moody’s Investors Service
Freddie rest of us. “Could we have done Blankfein confronts ing retail and investment trying to curb short specula- in January of this year down-
Former Treasury Secretary better? Yes, if we could forecast leverage banking—basically, Citigroup’s tion in the markets. graded Evergrande’s debt
Henry Paulson called the busi- better. But we can’t,” he told Goldman Sachs CEO Lloyd entire model—is questionable. Mr. Left has a history of deeper into junk territory
ness model for Fannie Mae and the commission’s staff, adding Blankfein acknowledged he Sandy Weill wasn’t the right tangling with Chinese compa- amid concerns about the de-
Freddie Mac—private housing- that the Fed’s Board of Gover- didn’t understand leverage as a person to be CEO. And neither nies, including Qihoo 360 veloper’s debt-funded growth
finance companies with govern- nors had got a bad rap. “meaningful metric” to gauge was Chuck Prince. Neither Mr. Technology Co. and Harbin strategy. Still, for the six
ment charters—“perverse” and the financial condition of his Weill nor Mr. Prince was avail- Electric Inc. In 2012, a group months ended June 30, 2015,
seemingly inconceivable. Their Did Ken Lewis save the company, according to a para- able for comment. of more than 60 executives, in- profit attributable to share-
flaws, he said, were “flimsy world? phrased June 2010 interview. —Ryan Tracy, Donna Borak, vestors and entrepreneurs holders grew 33% from a year
capital” and a regulator with no That’s Mr. Buffett’s view. “Until recently, I wasn’t even Christina Rexrode, signed a letter accusing China- earlier, while revenues were
power. The companies had a He points out that if the Bank conscious of what our leverage Rachel Witkowski focused short sellers—particu- up 22.7%. While financial re-
“very bad model with very bad of America CEO hadn’t was, in the sense of, the and David Harrison larly Citron—of “targeting le- sults have been good, some
gitimate companies” and analysts are skeptical about
hurling baseless accusations. the company. An Evergrande
choppy markets and concerns over chief executive, and Brian Friedman, 2017, the date of the group’s an- Mr. Left says he began spokesman declined to com-
Finance economic growth.
The firm, a unit of Leucadia Na-
chairman of Jefferies’s executive
committee, wrote in a statement.
nual shareholder meeting.
Munich Re has appointed man-
working on Evergrande after
receiving papers in March
ment on the hearing.
Closing arguments will take
Watch tional Corp., reported a net loss of
$166.8 million during its fiscal first
“A quiet December was followed by
an extremely challenging January
agement board member Joachim
Wenning as new chief executive,
2012 from an anonymous
whistleblower.
place in June and a ruling is
expected later this year.
quarter, compared with a profit of and first few weeks of February.” effective the next day. He published an analysis on As part of its case, the
$12.9 million a year earlier. Revenue —Justin Baer Mr. von Bomhard has been at his website in June of that Hong Kong regulator said Mr.
fell 49% to $299 million. the helm of Munich Re since Jan. 1, year, claiming Evergrande was Left sold short 4.1 million
“Our overall first-quarter results MUNICH RE 2004. During his tenure, sharehold- “insolvent” and had used “at shares of Evergrande before
JEFFERIES GROUP reflect an exceptionally volatile and ers saw their annual dividends rise least six accounting shenani- publishing the report and
turbulent market environment dur-
Insurer Picks a CEO more than four-fold to €8.25 gans” to hide it. He said the bought them back for a total
Trading Brings Loss ing our first fiscal quarter, although Germany’s Munich Re AG, the ($9.16) a share for the 2015 busi- company’s chairman had bo- realized profit of HK$1.7 mil-
Jefferies Group LLC swung to a our core businesses performed rea- world’s biggest reinsurer, said Chief ness year, from €2.00 a share for gus academic credentials and lion.
loss during its first quarter, as trad- sonably, considering the environ- Executive Nikolaus von Bomhard, 2004. managed Evergrande as —Michael Rapoport
ing revenue tumbled due in part to ment,” Rich Handler, chairman and 59 years old, will retire on April 26, —Ulrike Dauer though it were “his own, per- contributed to this article.