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What’s
News
Business & Finance
ohnson Controls and
J Tyco are in advanced
talks to combine in a deal
that could be valued as
high as $20 billion. A1
 Several market gauges
are fueling expectations for
further U.S. stock declines,
with some investors antici-
pating a bear market. A1
 U.S. health inspectors
found serious deficiencies
at Theranos’s blood-test lab
in Northern California. B1
 China’s central bank
has voiced concerns about
boosting liquidity without
weakening the yuan. A8
 Twitter is revamping its
top ranks in an effort to re-
vive the social-media firm
and win investors’ trust. B1
 Greenlight is set to ap-
point a SunEdison director
after a plunge in the solar-
power firm’s stock. C1
 Canada’s efforts to curb
carbon emissions raise
questions about the ability
to tap oil-sands reserves. B1
 U.S. banks are cutting
off more Mexican custom-
ers in the wake of mount-
ing regulatory warnings. C1
 CFIUS is scrutinizing
more deals in which nei-
ther party is American. B3
 Iran’s transport minister
said his country is open to
buying Boeing planes. B7
World-Wide
 Trump personally plans
his attacks on rivals with
little research or prepara-
tion as he campaigns in
early primary states. A1
 Cruz and Trump are
mounting a furious effort
to place first in Iowa. A4
 Primary voters were
split on the news Bloomberg
might enter the race. A4
 The East Coast began dig-
ging out from a record-brak-
ing snowstorm that left more
than two dozen dead. A3
 A North Carolina law
requiring voter ID will be
challenged in a federal trial
set to begin Monday. A3
 EU ministers are con-
sidering steps to seal off
Greece from the border-
free Schengen area. A7
 Syrian regime forces
backed by Russian air-
strikes seized control of a
rebel stronghold. A9
 The U.S. seeking a deal
between Turkey and Iraq
over a plan to take back Mo-
sul from Islamic State. A9
 The Taliban detailed pre-
conditions for Afghan peace
talks, saying foreign troops
must leave the country. A8
 Kerry is expected to
press China about North
Korea’s nuclear test. A8
 The Broncos defeated
the Patriots 20-18 and the
Panthers beat the Cardi-
nals 49-15 to advance to
the Super Bowl. B8
CONTENTS
Business News. B2-3,6-7
Campaign Wire..... A6
Crossword................. B7
Global Finance........ C3
Heard on Street.... C6
Journal Report.. R1-6
s Copyright 2016 Dow Jones &
Company. All Rights Reserved
* * * * *
NASDAQ 4591.18 À 2.3%
Clear Skies for Blizzard’s Cleanup on East Coast
RICKEY ROGERS/REUTERS
DIGGING DEEP: A Union City, N.J., resident Sunday cleared snow across the Hudson River from Manhattan a day after the winter storm. A3
A Method to Trump Attacks
The GOP front-runner
personally plots and
improvises his barbs,
policy proclamations
BY MONICA LANGLEY
NASHUA, N.H.—Donald
Trump made his decision to
start skewering Sen. Ted Cruz
as his private jet was ap-
proaching here earlier this
month.
“Ted is hanging around the
top too long,” the Republican
presidential front-runner an-
nounced on the plane, accord-
ing to his campaign manager.
“Time to take him down.”
Mr. Trump’s airborne ver-
dict to strike at his closest
GOP rival and a look at other
decisions like it reveal a truth
behind his famously pointed
attacks: Mr. Trump, not his
Bad Omens
Some market metrics suggest there's more pain ahead
for U.S. stocks.
Number of S&P 500 stocks
in a bear market
300 stocks
200
100
0 58
2015
*NYSE Advance/Decline Line
Sources: FactSet; Ned Davis Research
Recent Bounce Fails
To Calm Market Fears
BY BEN EISEN
AND DAN STRUMPF
Several market indicators
Moving the Mkt.... C2 are fueling expectations for fur-
Opinion............... A11-13
Sports.......................... B8 ther declines in U.S. stocks as
Technology............... B4 investors grapple with the tur-
U.S. News............. A2-6 bulence that has marked the
Weather..................... B7
World News........ A7-9
start of the year.
Thursday and Friday brought
a pause to January’s selling,
> pushing the S&P 500 to its first
weekly gain this year. But sev-
eral gauges of the stock mar-
ket’s strength, such as the per-
formance of transportation
shares and the proportion of
stocks down more than 20%
ADVERTISEMENT
MONDAY, JANUARY 25, 2016 ~ VOL. CCLXVII NO. 19 WSJ.com HHHH $3.00
STOXX 600 338.36 À 2.6% 10-YR. TREASURY g 5/32 , yield 2.052% OIL $32.19 À $1.80 EURO $1.0799 YEN 118.77
Johnson
Controls
In Talks
With Tyco
Johnson Controls Inc. and
Tyco International PLC are in
advanced talks to combine, ac-
cording to people familiar
with the matter, in a deal that
could value Tyco as high as
$20 billion and signal that
companies are still willing to
embark on large mergers de-
spite being shaken by recent
market volatility.
By Dana Mattioli,
Dana Cimilluca
and Michael Siconolfi
The agreement, details of
which could be announced as
soon as Monday, comes as
both companies struggle to
bolster their stock prices.
While exact terms couldn’t
be learned, Johnson Controls
has a market value of about
$23 billion, while Tyco’s was
about $13 billion as of Friday’s
close. A deal could value Tyco
at between $15 billion and $20
billion.
Johnson Controls, based in
Milwaukee, produces auto
seating and heating, ventila-
tion and air-conditioning
equipment, and replacement
staff or consultants, person- batteries for cars, among
ally drives them, and they are other things.
both calculated and impro- The company’s shares have
vised to adapt to news and been hit in the past year amid
polls, with little research or concerns about its growth,
extensive prep work. falling by more than 20%.
Mr. Trump proceeded to Shares of Tyco—based in Ire-
question whether Mr. Cruz’s land and with a U.S. headquar-
Canadian birth disqualified ters in Princeton, N.J.—mean-
him. A week later, he tore into while, have fallen by more
SCOTT MORGAN/REUTERS
the Texas senator about a than 25% in the same period.
loan he took from Goldman Should a deal come to frui-
Sachs to finance his political tion, it would signal that re-
career and about his notoriety cent waves of selling in mar-
as a Senate “nasty guy.” The kets for everything from oil to
onslaught seemed to stall Mr. stocks haven’t derailed the his-
Cruz’s rise in Iowa, where toric mergers-and-acquisitions
polls show Mr. Trump holding boom that drove M&A activity
an advantage. Iowa Home Stretch Bloomberg Stirs to a record high of $4.7 trillion
In a repeated pattern, Mr.
Trump has fired personal at-
Tests Clinton Election Waters last year, according to Dea-
logic.
tacks at rivals when they Although takeover activity
emerge as a challenge. While In closing pitches to Iowa Michael Bloomberg’s possible had gotten off to a relatively
his attacks and policy pro- voters, Clinton emphasized her entrance in the presidential race slow start this year, the deal
nouncements often appear to experience while Sanders argued as an independent received a could signal that companies
be off-the-cuff, hours spent for change in Washington. A town mixed response from voters in are still willing to attempt the
Please see TRUMP page A6 hall debate is set for tonight. A4 early primary states. A4 Please see TYCO page A8
RUSSIAN OIL: OUTPUT UP,
Gauge of number of stocks
rising vs. falling*
PROSPECTS DOWN
64
Plummeting prices, U.S.-led sanctions threaten Putin’s ambitions
62
BY SELINA WILLIAMS AND JAMES MARSON While recent increases in Russian oil output
have helped cushion the sharp price fall, Mr.
60 IMILOR OIL FIELD, Russia—In the frosty Putin is so squeezed for cash, his government
swamplands of West Siberia, the drilling rigs of postponed a planned reduction in oil-export
oil giant OAO Lukoil are helping raise Russia’s duties this year. Executives say they fear the
oil output to its highest levels since the postponement could be extended, diverting
’16 2011 ’12 ’13 ’14 ’15 breakup of the Soviet Union a quarter century money to Moscow that could be invested in
ago. new drilling and exploration to supplement ag-
THE WALL STREET JOURNAL. But falling crude prices, U.S.-led sanctions ing oil fields.
and diminished oil exploration threaten Rus- “We will have to limit our spending and
sia’s oil industry and raise questions about its Please see OIL page A10
capacity to continue underwriting President
Vladimir Putin’s ambitions at home and abroad.  Heard on the Street: Oil isn’t everything......... C6
In Australia, Cowboys Home In on the Range
from recent highs, are flagging. i i i
These signals, combined
with the S&P 500’s 6.7% drop so Ranchers saddle up satellites to track herds; water-trough weigh-ins
far in 2016, have reinforced
Wall Street’s dour outlook as BY RACHEL PANNETT often lost weight on the trek
the bull market stumbles into back to pasture after being
its seventh year. Murray Grey has a beef with weighed, costing Mr. Grey thou-
The market could easily rally traditional ranching methods. sands of dollars in profit.
in coming weeks following the Each year in punishing heat, Recently, the 30-year-old
swift declines this year. Some in- Mr. Grey has mounted a horse cowboy has been trying some-
vestors say now is the time to to round up some 5,000 cattle thing different. He has swapped
buy stocks that have been across a swath of the Australian the saddle for the sofa, and his
bruised by a broad selloff that Outback more than twice the bullwhip for a mobile phone.
has pushed all but two S&P 500 size of New York City. Camping “The time it takes to do any-
Please see STOCKS page A2 under the stars would be ro- thing with a horse, it’s a luxury
mantic if not for the buzzing of nowadays. By the time you catch
 Warnings mount, but recession bush flies and the threat posed the horse, you brush it, you sad-
may not come to pass........... A2 by venomous reptiles. The cattle Please see COWS page A10
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Monday, January 25, 2016
Warnings Mount, but Recession May Not Come to Pass
E
very U.S. recession
since World War II has
been foretold by sharp
declines in industrial produc-
tion, corporate profits and the
stock market.
Those ill omens have
aligned again.
Does this portend an econ-
omy tilting into recession? Or
can the declines in profits and
production be explained by
the collapse in
THE oil prices, and
OUTLOOK the plunge in
JOSH stocks be ex-
ZUMBRUN plained by in-
vestors’ overre-
acting to those
dynamics?
The dark clouds first.
Industrial production has
declined in 10 of the past 12
months, and is now off nearly
2% from its peak in December
2014. Corporate profits
peaked around the summer of
2014 and were off by nearly
5% as of the third quarter of
last year, according to the
Commerce Department.
Stocks have fallen viciously so
far this year, with the Dow
Jones Industrial Average
down 7.6%, despite a rally late
last week.
“The economy is like a car
with a six-cylinder engine and
more and more cylinders are
breaking,” said Joseph LaVor-
gna, chief U.S. economist for
Deutsche Bank in New York.
One reason worries for the
U.S. are elevated is that so
much of the world is beset
with low or declining growth.
MELISSA GOLDEN FOR THE WALL STREET JOURNAL; DOROTHY NIXON WILLIAMS (ISAIAH NIXON)
Thanks to an Emory University student project, Dorothy Nixon Williams found the grave of her father, Isaiah Nixon, below, who was
shot after voting in a 1948 Georgia election. The students concluded his killing was racially motivated.
Class Probes Jim Crow-Era Killings
BY CAMERON MCWHIRTER
UVALDA, Ga.—Dorothy Nixon
Williams stepped through the
rain-soaked rural graveyard to
see something she hadn’t seen
since she was a little girl: her fa-
ther’s grave.
The 73-year-old, dressed in
black, ran her hand across the
worn gravestone, bearing “ISA-
IAH NIXON” and “FATHER”
roughly drawn in cement.
“Lord have mercy,” she said,
CORRECTIONS 
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Last week, the International
Monetary Fund forecast the
eurozone would grow just
1.7% and Japan 1% in 2016.
Growth in the world’s sec-
ond-largest economy, China,
is expected to slow further
this year, amid doubts over
Beijing’s ability to make the
Chinese economy more reliant
on domestic consumption and
less dependent on debt-fueled
infrastructure projects. Russia
and Brazil are forecast to con-
tract, the IMF said.
“It is going to be a year of
great challenges,” IMF chief
economist Maurice Obstfeld
said. “Unless the key transi-
tions in the world economy
are successfully navigated,
global growth could be de-
railed.”
Of the warning signs, the
decline in U.S. industrial pro-
duction has one of the best
track records. The output
from mines, factories and
utilities has always begun to
decline before recession
strikes.
“Manufacturing tends to
lead the economic cycle and it
tends to be an indicator of
the swings,” said Thomas
Costerg, senior economist at
Standard Chartered. “Manu-
facturing is struggling.”
A strong U.S. dollar and
weak economies internation-
ally are taking a toll. But un-
like past declines in industrial
production, today’s decline
has been driven primarily by
the collapse in the oil indus-
try. The output from U.S. fac-
sobbing into her son’s shoulder.
Ms. Williams was 6 years old
when she saw her father, a black
farmer, shot by two white men,
according to eyewitnesses, on
the day of the primary election
for Georgia governor. She moved
with her mother and family to
Florida and hadn’t been able to
relocate his grave for decades.
That she could finally see his
gravestone last week resulted
from the work of about 15 un-
dergraduates in an unusual class
at Emory University near At-
lanta. The Georgia Civil Rights
Cold Cases Project investigates
Jim Crow-era murders of black
people in Georgia and publishes
its findings online, part of a
broader effort by several U.S.
universities to document racial
violence under segregation.
Building on earlier research
by Northeastern University law
students, the Emory class ob-
tained 235 pages of the original
Federal Bureau of Investigation
case, as well as other records.
They concluded Mr. Nixon was
killed because he dared to vote.
Last November, an Emory
student discovered Mr. Nixon’s
overgrown grave at the ceme-
tery’s far edge. On Friday, Ms.
Williams drove with her family
from Jacksonville, Fla., down
rain-slicked red-clay roads to
reach the Old Salem Cemetery,
about 160 miles southeast of At-
lanta. There she met members of
the Emory class.
“Isaiah Nixon matters; his life
matters and his death and disap-
pearance from history matter,”
said Hank Klibanoff, one of the
class’s professors, his sonorous
voice competing with nearby
croaking frogs. “What matters
more is his reappearance now
and I think that is miraculous.”
No one knows exactly how
many killings of African-Ameri-
cans from the South’s long pe-
U.S. NEWS
Looking for Clues
Stocks, corporate profits and industrial production have declined near
the beginning of every post-World War II recession. But they have
sometimes declined without signaling an imminent recession.
Percentage decline from previous peak
Stocks (Dow Industrials)
–25
Recessions
–50
’50 ’60 ’70
Corporate profits
–25
–50
’50 ’60 ’70
Industrial production
–25
–50
’50 ’60 ’70
Sources: WSJ Market Data Group (stocks); Commerce Dept. (corporate profits);
Federal Reserve (industrial production)
THE WALL STREET JOURNAL.
tories has been little changed
over recent months. But min-
ing output has fallen over
10%, driven by a 62% decline
in oil- and gas-well drilling.
riod of institutional segregation
were racially motivated, or how
many went unreported or
weren’t properly investigated,
said Paula Johnson, a Syracuse
University law professor and co-
director of that school’s Cold
Case Justice Initiative.
In 2008, President George W.
Bush signed into law the Em-
mett Till Unsolved Civil Rights
Crime Act that authorized the
Justice Department to investi-
gate unsolved civil rights mur-
ders before 1970. Since then, the
department has investigated
cases, but the work hasn’t led to
any prosecutions. Officials in the
department’s media office didn’t
return calls for comment.
Jay Shelledy, who heads a
similar project at Louisiana State
University, said researchers hope
their work leads to prosecutions
in some cases, and in most of the
others—since suspects often are
long dead—findings that can
help families and communities
heal.
Mr. Nixon, 28, was shot only a
few years after all-white prima-
ries had been declared unconsti-
tutional by the U.S. Supreme
Court. After Mr. Nixon voted on
Sept. 8, 1948, brothers J.A. and
Johnny Johnson confronted him
at his home in Alston, Ga.
Ms. Williams remembered
when white men drove up and
Zero indicates new peak
Decline of more
than 25% with
no recession after
’80 ’90 ’00 ’10
Decline of more
than 10% with
no recession after
’80 ’90 ’00 ’10
Peaked throughout
the ’80s and ’90s
’80 ’90 ’00 ’10
Corporate profits, too,
have been weighed down by
the energy industry. An analy-
sis from Goldman Sachs
Global Investment Research
called for her father to come
with them, she said. He refused
and they opened fire, one with a
shotgun and one with a pistol,
she said. Mr. Nixon was hit but
kept standing, as her mother ran
out of the house shouting, “Fall,
Isaiah, fall,” Ms. Williams said.
Mr. Nixon died two days later.
The coroner ruled his death a
homicide. The shooting drew the
attention of the FBI, the National
Association for the Advance-
ment of Colored People and sev-
eral newspapers at the time.
J.A. Johnson was charged in
state court with murder and
Johnny was charged as an acces-
sory to murder. They said they
had gone to hire Mr. Nixon but
ended up arguing and were
forced to shoot Mr. Nixon in self-
defense. In a one-day trial, an
all-white jury acquitted J.A.
Johnson. The charges against his
brother were dropped.
Jack Johnson, a 65-year-old
nephew of the two brothers,
who are deceased, said Satur-
day that no one in his family
ever said why the shooting hap-
pened. He did hear “a little hint
about it, but I never pursued it,”
he said. Mr. Johnson said he
didn’t remember his uncles say-
ing anything against blacks.
In November, Ellie Studdard
was walking alone while visiting
the cemetery with some of her
classmates, where it was be-
lieved Mr. Nixon was buried,
when she found a slab with the
letters “ISA” visible beneath
mud and leaves. Beneath the de-
bris, she discovered the grave.
At her father’s graveside Fri-
day, Ms. Williams, a retired psy-
chiatric nurse, recalled that she
was filled with anger about her
father’s death when the students
first contacted her about rein-
vestigating his killing.
“The anger now is completely
released,” she said.
* * THE WALL STREET JOURNAL.
found that profit margins
among the companies in the
S&P 500 stock index—if en-
ergy companies are ex-
cluded—have been little
changed over the past year. It
is only by including major
laggards like Exxon Mobil
Corp., Chevron Corp. and
Valero Energy Corp. that U.S.
corporate profit margins
shrink.
If it were just oil compa-
nies in decline, the worries
would be easier to dismiss,
but the falling stock market
could unnerve many consum-
ers who hadn’t previously
been alarmed. In a recession,
falling confidence—which
hasn’t shown up so far—typi-
cally leads households to pull
back on purchases, causing a
more widespread decline in
company profits and layoffs.
Industrial production, cor-
porate profits and stocks have
sounded false warnings be-
fore. Industrial production,
for instance, declined about
as much as today in the
mid-1960s and mid-1980s, and
those weren’t immediately
followed by recessions. And
multiple bear markets have
come without an economic
downturn.
O
n the bright side, the
U.S. job market is per-
haps the best recession
indicator of all, and it isn’t
flashing trouble.
In the past 50 years, every
recession has seen the num-
ber of jobs in the economy
STOCKS
Continued from Page One
sectors into the red for the year.
A rebound from intraday lows
Wednesday may have marked
the bottom of this rout, some
portfolio managers say.
The latest selloff was spurred
by worries about the pace of
global growth, especially in
China. Even if the U.S. and global
economies continue to click
along without falling into reces-
sion, some investors say they are
anticipating that stocks will fall
into a bear market, defined as a
decline of 20% or more from a
previous peak.
“There is no doubt that this
will be classified as a bear mar-
ket,” said Doug Ramsey, chief in-
vestment officer at Leuthold
Weeden Capital Management,
which has $1.8 billion in assets
under management in Minneap-
olis. “Something is going on un-
derneath the surface.”
While the Dow Jones Indus-
trial Average and S&P 500 are
down 12% and 11%, respectively,
from their records, most stocks
in the S&P 500 have already
fallen by more than 20% from
their recent highs—a sign that
many analysts say points to
deeper rot. A handful of compa-
nies with large market capital-
izations, such as McDonald’s
Corp., AT&T Inc. and Google par-
ent Alphabet Inc., have limited
the declines in broader indexes,
portfolio managers said.
Price-to-earnings ratios, a
measure of how expensive
stocks are, have come down, but
so have profits of S&P 500 com-
panies, raising questions about
what might propel the next up-
turn in share prices.
Thirty-five out of 45 major
country stock indexes had fallen
by 20% or more as of Friday, ac-
cording to a count by Bank of
The latest selloff was
spurred by worries
about the pace of
global growth.
America Merrill Lynch.
The U.S. could soon be next to
enter bear-market territory,
which would technically end the
long bull market, based on the
indicators watched by chart-
savvy investors.
After rising for much of the
last five years, the NYSE Ad-
vance/Decline Line—a measure
of the proportion of shares mov-
ing higher over time—has been
falling this year, according to
Ned Davis Research, a sign to
some that the market is losing
steam. The S&P 500 is also well
under its 200-day moving aver-
age, which some investors also
interpret as a bearish signal.
Technical factors aren’t the
only worry. Companies in the
S&P 500 are expected by ana-
lysts to report a fall in fourth-
quarter earnings from a year
decline by at least 1%. And
jobs have never declined by
that much outside of a reces-
sion. Today, the number of
jobs in the U.S. has been
growing briskly—up 292,000
in December and up 2.7 mil-
lion over the past year. This is
why many economists remain
confident the U.S. can avoid
recession.
“I just don’t buy for a sec-
ond the idea that U.S. house-
holds are so terrified by
what’s happening that they’re
going to behave like Germans
and wean themselves off buy-
ing stuff,” said Ian Shepherd-
son, chief economist at Pan-
theon Macroeconomics,
referencing the high-saving
and low-consumption German
economy.
The ultimate call on
whether the U.S. has entered
a recession would be made by
a group of economists known
as the business cycle dating
committee at the National Bu-
reau of Economic Research.
The committee studies
gross domestic product and
income, employment, infla-
tion-adjusted retail sales and
industrial production, to de-
termine the timing of when
precisely economic activity
began to shrink.
For now, it is far too soon
for any NBER pronouncement.
Asked for his personal assess-
ment, Robert Hall, a Stanford
University economist who
heads the committee, said,
“I’m plenty worried about the
world and U.S. economies.”
earlier. That would be the third
straight quarterly decline, the
first time that has happened
since 2009.
Last week, Union Pacific Corp.
reported a 22% drop in fourth-
quarter earnings, while United
Continental Holdings Inc. posted
higher earnings but said it is
feeling downward pressures on
fares. Shares of both companies
are down by double-digit per-
centages this year.
Optimists argue that stocks
will avoid a bear market as long
as the U.S. economy remains re-
silient. The economy is near full
employment, housing construc-
tion is growing at the fastest
pace since 2007 and auto sales
set a record last year.
Only three of the 13 bear mar-
kets since the Great Depression
have taken place in the absence
of an economic recession, de-
fined as two straight quarters of
contraction, according to Bank of
America Merrill Lynch. The last
time it happened was 1987, when
the S&P 500 fell 34% in the wake
of the “Black Monday” selloff.
Wall Street’s favorite gauge of
fear, the CBOE Volatility Index,
hasn’t surpassed levels seen last
August, when it spiked to its
highest since 2011. A measure of
the volatility of the VIX, known
as VVIX, hasn’t surpassed levels
seen last month.
“That says that people aren’t
positioned for this to turn into a
major explosion of volatility,”
said Rocky Fishman, an equity
derivatives strategist at
Deutsche Bank AG.
Other markets aren’t flashing
red. The difference between 10-
year Treasury yields and two-
year yields has remained rela-
tively large at nearly 1.2
percentage points. When the dif-
ference gets small or becomes
negative, it can signal a reces-
sion. A December junk-bond rout
hasn’t spread to higher-quality
companies or intensified within
sectors of the market beyond en-
ergy. Gold, which is seen by
many as a haven asset and often
jumps when investors are wor-
ried, is up just 3.5% this year.
“There doesn’t seem to be a
significant amount of panic,”
said Chris Gunster, head of
fixed-income portfolio manage-
ment for U.S. Trust.
Yet even if the optimists say a
further selloff isn’t imminent,
they acknowledge that a return
to the peaks of last year looks
difficult, too. Stock valuations
still aren’t cheap on a historical
basis. Last week, the S&P 500
traded at 16.2 times the past
year’s earnings, above its aver-
age of 15.7 times over the past 10
years, though down from 18
times at the end of last year.
For now, some bulls are con-
tent to buy stocks that look like
bargains.
“I wouldn’t say that the mar-
ket as a whole is cheap,“ said
David Rosenberg, chief econo-
mist and market strategist at
Toronto money manager Gluskin
Sheff & Associates Inc. But “cer-
tainly there are areas of the
market that are attractive.”
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.
East Coast Grapples With Storm Cleanup
New York City airports
resumed flights; at
least 29 storm-related
deaths were reported
BY CHRISTOPHER M. MATTHEWS
AND JON OSTROWER
Cities across a broad swath
of the East Coast turned their
efforts to digging out Sunday
after a crippling winter storm
that shut down air and road
travel and claimed more than
two dozen lives.
New York City-area airports
were starting to get back to
normal Sunday. Runways in
Washington, D.C., remained
closed but were expected to
resume operating Monday.
Carriers had canceled more
than 12,000 flights from Friday
to Tuesday, including more
than 3,500 Sunday, according
to flight-tracking website
FlightAware. More than 1,100
Monday flights were canceled
and airlines were starting to
cancel Tuesday flights.
Authorities reported at
least 29 storm-related deaths,
mostly from car crashes or
snow shoveling, according to
the Associated Press.
Glengary, W.Va., was cov-
ered with 42 inches of snow,
the National Weather Service
said. New York City recorded
26.8 inches in Central Park,
while Washington got 22.4
inches at the National Zoo.
Federal government offices
in the Washington area will be
closed Monday, the Office of
Personnel Management said
Sunday evening.
Saturday’s storm was just
what Richard Peyser and his
fiancée, Alexandra Zelubowski,
were looking for: a picturesque
backdrop for engagement pho-
tos in Meridian Hill Park in
Washington.
Voter-ID
Law Faces
Challenge
In Court
BY CHRISTOPHER M. MATTHEWS
The legality of a 2013 North
Carolina law requiring identifi-
cation to vote will be challenged
in a trial set to begin in federal
court Monday ahead of March
U.S. presidential primaries in
the state.
The trial in Winston-Salem,
the second to stem from the
law, is one of several closely
watched voting-rights lawsuits
unfolding as the election season
gets under way.
In 2013, Republican Gov. Pat-
rick McCrory signed a law bar-
ring people without photo iden-
tification from voting. The
move sparked a number of law-
suits by the U.S. Justice Depart-
ment, the National Association
for the Advancement of Colored
People and others that were
eventually consolidated into
one suit claiming that the law
disproportionately affected
black and other minority voters
who are less likely to have ac-
cess to birth certificates and
other documents needed to ob-
tain photo identification.
The North Carolina law was
one of several passed by states
after the U.S. Supreme Court
said in 2013 it was unconstitu-
tional to require states to get
federal approval before chang-
ing voting laws based on histor-
ical data of discrimination.
Defenders of the North Caro-
lina law, including lawyers for
Mr. McCrory and the North Car-
olina Department of Justice, say
it was necessary to prevent
voter fraud and that an amend-
ment made in June of last year
resolved potentially discrimina-
tory effects. The amendment al-
lowed voters to cast provisional
ballots without one of six speci-
fied forms of ID if they could
claim there was “reasonable im-
pediment” to showing the ID.
The Justice Department and
NAACP have argued the fix
wasn’t enough because state of-
ficials haven’t properly edu-
cated the public and poll work-
ers about what ID is needed to
vote, and because the “reason-
able impediment” exception will
be left entirely to poll workers’
discretion.
A spokeswoman for the
North Carolina Department of
Justice said she couldn’t com-
ment on a pending case.
* * * * * Monday, January 25, 2016 | A3
U.S. NEWS
The couple were waiting
until the first significant accu-
mulation of snow before
Blanketed 48-hour snowfall totals as of Sunday afternoon
Total accumulation (inches) New York City
The blizzard snarled air and road
shooting their photos. They
travel across a swath of the East
1 2 4 8 10 12 15 18 21 24 30 Road travel was
banned from noon
got more than they bargained
for when a crowd of several Coast. Flights are expected to start Saturday to 7 a.m. N.H.
getting back to normal Monday. Sunday. Central
hundred Washington residents Park’s 26.8 inches
descended on the park around Flights canceled nationwide of snow narrowly MASS.
noon for a massive snowball 5,000 MICH. missed a record.
fight. The couple found a rela- N .Y. CONN. R.I.
Milwaukee
tively quiet corner for photos. Detroit
Muhyi Eldeen Salih, a native
of Sudan, got to see his first Cleveland PA.
Chicago
snowstorm but wound up ex- 4,000 Harrisburg N . J. New Jersey
periencing it while stuck in a West Virginia Pittsburgh
The state saw some Philadelphia The storm caused
Philadelphia hostel after his widespread power
of the storm’s highest Baltimore
Washington-bound flight was outages and severe
snowfall totals, with
diverted. Mr. Salih had been 3,000 DEL. flooding on the state’s
ILL. I N D . about 40 inches in parts
traveling from New Mexico, of the eastern panhandle. southern coast.
W .V A .
where he is volunteering at a
nonprofit, to a weeklong train-
ing in Washington. Frankfort Charleston VA . Washington, D.C.
2,000 Richmond The House canceled
“It’s a delay but it’s still a votes for the week amid
good thing that we saw Phila- travel problems, including
delphia,” he said. “It’s really canceled flights and
K Y.
cold and I can’t feel my fin- suspended mass transit.
gers, but it is really amazing.” 1,000 N.C. Raleigh
Raleigh
Experts said it was too
Nashville TENN. Charlotte
early to assess the storm’s full
economic impact. Paul Walsh, Note: Categories are generalized based on
vice president of weather ana- Jan. daily avg.: 137 flights known snowfall totals at specific locations.
0 Local totals may be higher or lower.
lytics at the Weather Co., put S.C.
the initial estimate at more Fri. Sat. Sun. Mon.
MISS. ALA. GA. Source: NOAA (map); FlightAware (flights)
than $500 million in lost pro-
ductivity over two days in a
region that produces around pare for the impact of weather The state’s direct costs will
$16 billion a day in economic events. “If people can’t get to reach tens of millions of dollars,
activity. Mr. Walsh said that work Monday, our estimates Mr. Hogan’s spokesman said, in-
while the loss is significant for are going to go up.” The firm cluding overtime payments and
the region, it is small when estimates the storm cost $850 the mobilization of more than
considered as a share of total million in lost productivity. 700 Maryland National Guard
U.S. gross domestic product. The storm brought severe soldiers and support staff.
“Restaurants, hotels, tourist flooding to New Jersey’s In Pennsylvania, rescue
venues, all those businesses southern coast. Although the workers on Sunday freed the
have basically lost a weekend,” destruction didn’t appear as last of hundreds of travelers
CAROLYN KASTER/ASSOCIATED PRESS
Mr. Walsh said. “For retailers, severe as from 2012’s super- stuck on a 16-mile section of
it’s more of a wash. They lost storm Sandy, the flood damage the westbound PA Turnpike.
sales this weekend, but likely will likely qualify for federal Some, including the Duquesne
got some increased spending disaster relief, said Stewart University men’s basketball
on the front-end as people Farrell, director of the Coastal team, had been stranded since
prepared for the storm.” Research Center at Stockton Friday night, when several
Restoring roads, air travel University in New Jersey. tractor-trailers jackknifed and
and public transportation is Maryland Gov. Larry Hogan brought traffic to a standstill.
critical, said Scott Bernhardt, said Sunday he would seek di- —Andrew Ackerman
president of Planalytics, a com- saster relief from the Federal and Scott Calvert contributed Washington, D.C., was digging out Sunday after a blizzard that
pany that helps businesses pre- Emergency Management Agency. to this article. brought the area and much of the East Coast to a standstill.
In Oregon, Patience for Standoff Wears Thin
BY JIM CARLTON federal officials in 2014 over through boxes of artifacts in a that would lead to a swift end in order to prevent violent
The occupation of an Ore-
gon wildlife refuge by an
grazing fees.
“The major concern is the
damn screwballs following
Facebook video his group
posted Jan. 20. Mr. Finicum
said in the video that it was
to the occupa-
tion dimmed Friday when Mr.
Finicum said in a Facebook
outcomes like those at Ruby
Ridge, Idaho, in 1992 and
Waco, Texas, in 1993. But in-
armed group protesting U.S.
land-management policies is in
its fourth week, and local and
Bundy around,” said Joseph
Fine, 66 years old, a local
rancher who sympathizes with
the U.S. Fish and Wildlife Ser-
vice that had damaged arti-
facts, such as by leaving them
video statement the group has
no intention of leaving yet.
“All of those of you who are
creasingly, many Harney
County residents want the FBI
to take action to end the siege.
state officials are losing pa- Mr. Bundy’s call for less fed- in boxes exposed to rats. worried that we are about to Local and state law-enforce-
tience with the federal law-en- eral control over public lands, Fish and Wildlife officials negotiate a withdrawal with ment officials have begun in-
forcement strategy to let the but denounces his tactics. “It’s said Friday the artifacts, the FBI, that is not the case,” dependently taking action
standoff fizzle out on its own. time for them to go.” which include spears and said Mr. Finicum, repeat- against the armed protesters
Residents of Harney County The occupation is also tools, are supposed to be left ing demands the wildlife facil- and their supporters.
are expressing growing anger drawing increased criticism untouched, and that the oc- ity be taken out of federal con- In recent days, Oregon au-
over the standoff that began from other quarters, includ- cupiers were damaging them trol and handed over to thorities have arrested or
Jan. 2 at the Malheur National ing the Burns Paiute Tribe of and other places in the refuge Harney County. “We are not sought some of Mr. Bundy’s
Wildlife Refuge, in part they Native Americans, which by, for example, bulldozing a going anywhere. We are here supporters on charges includ-
say because it puts their com- in a Jan. 15 statement con- new road in the desert. to do a job.” ing felony possession of a fire-
munity at risk from an out- demned Mr. Bundy’s group for After Oregon Gov. Kate Neither he nor Mr. Bundy arm and driving federal vehi-
break of violence by support- continuing to “desecrate” arti- Brown appealed to President could be reached for comment. cles stolen from the refuge.
ers of occupation leader facts at the refuge. Barack Obama for help in end- An FBI spokesman declined to Many openly carry firearms
Ammon Bundy. He is the son Tribal members expressed ing the occupation, Mr. comment. when they travel to nearby
of Cliven Bundy, a Nevada fresh outrage after a spokes- Bundy on Thursday initiated Federal authorities gener- Burns, Ore., including at a
rancher who was involved in a man for Mr. Bundy, LaVoy Fin- talks with the Federal Bureau ally have been reluctant to en- community meeting Jan. 20
similar armed standoff with icum, was seen rummaging of Investigation. But hopes gage with such armed protests where they were booed.
Homes Expand in Size, Price
BY LAURA KUSISTO
The size of new homes rose
last year, suggesting Ameri- APPRECIATE THE ASSET
GERRY BROOME/ASSOCIATED PRESS
cans’ love of space remains
strong but making new homes The Gulfstream G550 yields unmatched speed and
less affordable for a bigger
swath of buyers. range and the lowest operating cost in its class.
The average size climbed to Appreciate the asset with every flight.
about 2,720 square feet in 2015
from about 2,660 square feet the www.gulfstream.com
previous year, according to data
released by the National Associ-
ation of Home Builders at its an- Average home size grew as building tilted toward the high end.
nual trade show.
Almost half of the homes save for down payments or be ministration, which tend to be
started last year had four or approved for mortgages. more appealing to first-time
more bedrooms, and one out of The average price of new buyers because they have lower
four had garages with room for homes for sale in 2015 climbed down-payment requirements.
three or more cars. to $351,000, up $100,000 from The share of first-time buyers
That isn’t necessarily a sign 2009. of U.S. homes fell to 32% of all
of strength in the housing mar- The average new-home size purchasers in 2015 from 33% the
ket, however. bottomed during the 2008 fi- previous year, according to the
Home sizes have grown nancial crisis at about 2,360 National Association of Realtors,
lately because new construc- square feet and climbed sharply its lowest level in three decades.
tion has been tilted toward the before leveling out in 2014 and A major topic of conversation
high end. Builders do aim to then jumping again in 2015. Rose at this year’s International Build-
draw young buyers in at lower Quint, assistant vice president of ers’ Show was how to entice
price points, so that there is a survey research at the builders younger buyers to begin pur-
market for some of their more association, said she expected chasing homes again. Ideas
expensive products over the square footage might begin to ranged from more communal
long term. But they haven’t decline as more first-time buy- amenities, such as pools and
made more starter homes in ers came back into the market. clubhouses, to mimicking high-
recent years mainly because of “Last year I was expecting, end rentals to smaller homes
land prices, construction costs and I wasn’t alone, that the aver- with more outdoor space that
and lack of available mortgages age size of homes would actually tend to be cheaper.
for less-affluent buyers. fall … because there were new “It’s a little bit concerning,”
Those potential buyers, who measures that were supposed to said Jeff Roos, a regional presi-
may also be younger, help bring bring in a wave of first-time dent for Lennar Corp. He said SCOTT NEAL +1 912 965 6023
down the average size of new home buyers,” Ms. Quint said. the company is looking at inte- scott.neal@gulfstream.com
homes because they tend to live “That didn’t happen.” grating technology and designs
in smaller spaces than their Measures to help entice that appeal to younger buyers.
older counterparts. They have younger buyers into the market “As the millennials get older
been slow to purchase homes included lowering fees on loans they’ll see the value of buying
because they are struggling to from the Federal Housing Ad- versus renting.”
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Monday, January 25, 2016
BRENDAN HOFFMAN/GETTY IMAGES
Some Hillary Clinton backers say she should stop emphasizing her government background as Bernie Sanders calls for major change.
Clinton Tactic Questioned
BY PETER NICHOLAS
CLINTON, Iowa—In her clos-
ing pitch to Iowa voters, Hillary
Clinton is casting herself as the
one Democrat who has the expe-
rience to make the life-or-death
choices that come with the presi-
dency.
It echoes the argument she
made in 2008, when she ran an
ad saying a president must be
ready for a “3 a.m. phone call”
warning of imminent peril. It
didn’t work then and some peo-
ple close to the Clintons worry it
won’t succeed now.
Vermont Sen. Bernie Sanders
has narrowed Mrs. Clinton’s lead
in Iowa ahead of the Feb. 1 cau-
cuses. He could scramble the
race should he notch a victory
there and in New Hampshire. His
theme is direct: He is the cham-
pion of voters who are disillu-
sioned with Washington politics
and impatient with an economy
that lavishes rewards on a tiny
fraction of families.
“I am angry…and the Ameri-
can people are angry,” Mr. Sand-
ers said Sunday on CBS.
He is promising a political
“revolution.” Even if his ideas
may be difficult to achieve in a
polarized, Republican-controlled
Congress—a point Mrs. Clinton
often makes—his message is
overshadowing Mrs. Clinton’s fo-
cus on experience, some Clinton
allies said. They want to see her
return to an argument more cen-
tral to her campaign when she
POLITICS COUNTS | Aaron Zitner
Wild Card May Swing Caucus
A poll of likely Iowa caucusgoers shows Bernie Sanders and Donald Trump,
unlike their chief rivals, are favored more among people who haven’t participated
in past caucuses. That represents an opportunity, but also a challenge.
Participated in past caucuses
Democratic caucus-goers
51%
41% 42%
Clinton Sanders
Share of caucus-goers
Past caucuses Newcomers
2008 43%
2016*
*Marist assessment in 2016 caucuses
Sources: WSJ/NBC/Marist poll (poll); 2008 Iowa entrance polls, WSJ/NBC/Marist Assessment (share)
Traditionally, the people most
likely to show up on a cold Iowa
night for the first-in-the-nation
nominating contests have previ-
ously attended caucuses. But if
Democrat Bernie Sanders and
Republican Donald Trump can
Heard on
the Stump
No Health Concerns,
Clinton Tells Voters
Hillary Clinton assured Iowans
Saturday night that she is up to
any physical test the presidency
poses.
Responding to a woman at a
town-hall-style event who said
she heard on Fox News that
entered the race nine months
ago: that she will shake up the
system.
Mrs. Clinton, Mr. Sanders and
former Maryland Gov. Martin
O’Malley will face voters Monday
night in a televised town-hall
event in Des Moines, Iowa, their
last such meeting before the cau-
cuses.
One longtime Clinton ally,
speaking on condition of ano-
nymity, said Mrs. Clinton’s focus
on her credentials as a former
secretary of state, first lady and
U.S. senator is out of step with
the nation’s mood. By embracing
President Barack Obama more
tightly as voting nears, she
seems to be opting for continu-
ity, this person said.
James Carville, who helped
steer Bill Clinton’s victory in the
1992 election, said in an inter-
view that Mrs. Clinton faces a
quandary: She is running against
a self-described socialist who by
definition is seen as wanting
wholesale reordering.
“It’s an argument you’re not
going to win, because the guy is
a socialist who is always going to
be for change,” Mr. Carville said.
“But there’s no question that no
one can ever run for president
saying the next four years are go-
ing to be just like the last eight.”
Clinton aides dismiss the idea
that she is repeating a mistake
from eight years ago, saying the
political dynamics this time are
different. Robby Mook, Mrs. Clin-
ton’s campaign manager, said
Have not participated in past caucuses
Republican caucus-goers
51%
32% 32%
21%
Trump
57% 2012
73% 27% 2016*
persuade newcomers to turn out,
they could gain substantially.
Each candidate is doing well
among people who say they
would be caucusing for the first
time, while their chief rivals lead
among people who say they have
Mrs. Clinton was “ailing,” the 68-
year-old tried to put her mind at
ease.
“You know, they say nearly
anything about me,” she said.
“There are several themes they
keep beating the drums on. I’ll
match my endurance against
anybody.”
In 2012, toward the end of
her four-year stint as secretary
of state, Mrs. Clinton was hospi-
talized for a blood clot in her
head. Doctors discovered the clot
after she fainted and fell, suffer-
ing a concussion.
P W L C 10 11 12 H T
that in 2008, many voters were
eager for something different af-
ter eight years of the Bush presi-
dency. “Voters right now are
looking for someone to build on
progress Obama has made and
get something done,” he said.
Campaigning in Iowa over the
weekend, Mrs. Clinton again
played up her time spent hud-
dled with powerful officials with
the nation’s security on the line.
She talked about sessions in the
White House Situation Room ad-
vising Mr. Obama to launch the
raid that killed Osama bin Laden.
“I was able to bring my years
of experience to the forefront in
evaluating what I was hearing
Focus on Washington
experience doesn’t
excite voters, some
Democrats say.
and what I was seeing and what
needed to be done,” she said at a
town hall-style event Saturday.
“So this is one of the biggest
parts of the decision as you head
toward Feb. 1st that I want you to
keep in mind.”
A new ad released by the Clin-
ton campaign shows images of
her leaving government air-
planes, speaking at lecterns and
reading paperwork. It is a vivid
contrast to a new Sanders ad
that, using the Simon and Gar-
funkel song “America,” shows
20%
14% 13%
Cruz Rubio
2% didn’t answer
60% 38%
67%
THE WALL STREET JOURNAL.
attended prior caucuses.
The challenge for Messrs.
Sanders and Trump: teaching
newcomers the unfamiliar me-
chanics of the caucuses requires
a campaign to invest in training
and outreach.
In July, her campaign released
a two-page letter from her doc-
tor saying she was in “excellent
physical condition.”
Perhaps the most famous en-
durance test Mrs. Clinton faced
thus far in her candidacy was
her 11-hour appearance in Octo-
ber before a House committee
looking into a terrorist attack in
Benghazi, Libya. Clinton surro-
gates are invoking that mara-
thon appearance as a highlight
of her campaign and evidence
she is up to the job.
—Peter Nicholas
G K B F A M 1 2 3 4 5 6
images of everyday people and
droves of supporters cheering at
Sanders rallies. There is no nar-
rator, no mention of policy and
no reference to Mr. Sanders’s
credentials.
Polling shows the risk Mrs.
Clinton takes in showcasing her
résumé. A Wall Street Journal-
NBC News poll this month found
just 29% of all registered voters
believe the country is moving in
the right direction, compared
with 63% who believe it isn’t.
Even a large chunk of registered
Democrats aren’t happy with the
nation’s trajectory: 40% said the
country was on the wrong track,
compared with 48% who are
happy with how things are going.
“I feel like she’s your typical
politician and I feel like Bernie
isn’t, which is why I’m interested
in him,” said Katie Ruedas, 25, a
stay-at-home mom from Fort
Dodge, Iowa.
Chris Kofinis, a Democratic
strategist who has been conduct-
ing focus groups of party voters,
said they already see Mrs. Clin-
ton as more experienced so it
doesn’t do her much good to
make the point anew.
Addressing Mr. Sanders’s ap-
peal, he said: “The question you
have to ask is: What are voters
looking for? Experience is a fac-
tor they admire, but what they
want to hear is a vision. They’re
getting it from Sanders, but not
from her.”
—Laura Meckler
contributed to this article.
Voters Split Over Bloomberg
BY HEATHER HADDON
AND JENNIFER LEVITZ
MANCHESTER, N.H.—Oppo-
sition, uncertainty and curios-
ity were among the reactions
that voters in early primary
states offered upon the news
that former New York City
Mayor Michael Bloomberg
might enter the presidential
race as an independent.
A gambit by Mr. Bloomberg,
who wouldn’t face voters until
November, would likely rest on
his ability to attract centrists
from both parties who admire
his tight fiscal policies and lib-
eral social attitudes.
Among voters from across
the political spectrum inter-
viewed over the weekend in
33% Iowa and New Hampshire,
solid Republicans largely
turned up their noses.
“I’m not interested. He’s too
liberal for me,” said Linda
Bodensteiner, 54, an Epping,
N.H., Republican who was try-
ing to pick among the GOP
centrist candidates.
Some supporters of Demo-
crat Hillary Clinton weren’t
thrilled with the prospect of
his run. “It scares me a little
bit. He’s certainly formidable,”
said Bob Graf, 57, who at-
tended a Clinton event in Dav-
enport, Iowa, this weekend.
One Clinton supporter was
intrigued. “I’m at that sort of
Clinton fatigue stage,” said Da-
vid Grooters, 42, an indepen-
dent voter from Mason City,
Iowa, leaning toward Mrs.
Clinton. “So yeah, Bloomberg
would be an interest.”
Mr. Bloomberg, who has
dabbled with the idea of presi-
dential run before, has previ-
ously praised Mrs. Clinton’s
work when she served as New
York’s senator during his may-
7 8 9 O I X X ** THE WALL STREET JOURNAL.
GOP Candidates
Fight to Avoid
Iowa Winnowing
BY REID J. EPSTEIN
AND JENNIFER LEVITZ
PELLA, Iowa—After a year
that saw political convention
turned on its head, Iowa in a
week will finally deliver the
first official verdict of the 2016
Republican presidential cam-
paign.
Front-runners Donald
Trump and Sen. Ted Cruz are
mounting a furious effort to
place first, while others are vy-
ing for a third-place finish in
the Feb. 1 caucuses that could
beat expectations and slow any
momentum for potential rivals.
Jeb Bush trails far behind in
Iowa, but the super PAC back-
ing the former Florida gover-
nor has spent more than $20
million slamming Sen. Marco
Rubio, hoping to damage his
fellow Floridian before primary
contests later in February.
“If Rubio can finish a strong
third and separate himself
from the pack, that will help
build momentum through New
Hampshire,” said Kevin Mad-
den, a top aide to Mitt Rom-
ney’s presidential campaigns
who is unaffiliated this cycle.
For many of the approxi-
mately 130,000 Republicans
who will vote in next week’s
caucuses, the contest has yet
to bring definitive conclusions.
“I don’t like to commit too
fast because things can
change,” said Rick Simpson, a
community-college program
director from nearby Eddyville,
after a Trump rally here.
Complicating matters for
him, the 58-year-old said, is
that he prefers back-of-the-
pack candidate Carly Fiorina,
but worries his vote would be
wasted on her. Mr. Simpson is
now looking at Messrs. Rubio,
Cruz and Trump, and antici-
pated he would “probably go
to Trump.”
Part of the calculus for mid-
dle-of-the-pack candidates is to
damage their closest competi-
tors for specific slices of the
electorate. With so many rivals
in the race, that strategy is
producing a complicated score-
card for voters to follow.
Mr. Rubio is attacking Mr.
Cruz because they are compet-
ing for evangelical voters. Mr.
Bush is attacking Mr. Rubio be-
cause they are each aiming to
become the choice of the
party’s establishment wing.
Retired neurosurgeon Ben
Carson, whose campaign has
Former New York Mayor Michael Bloomberg gets ready to speak
in connection with the U.N. climate summit in Paris in December.
oral administration.
The wealthy former mayor
appeared more likely to enter
the race if Mrs. Clinton falls
behind her rival, Vermont Sen.
Bernie Sanders. Mr.
Bloomberg has also watched
the rise among Republicans of
Donald Trump, a fellow New
Yorker and businessman, with
alarm, his allies said.
Some Sanders supporters
said they liked the idea of a
third-party candidate, but only
if he were viable. “I think it’s
probably too late at this
point,” said Jeremiah King, 24,
a Democrat from Merrimack,
N.H. “I would love to see an
opportunity for an indepen-
dent party to be popular
enough to sway people, but I
think we are kind of stuck in
the two-party system.”
If Mr. Trump or Texas Sen.
Ted Cruz won the Republican
nomination, there could be an
opening for a third-party can-
didate among voters who
don’t support their antiestab-
suffered a shake-up as top
aides have publicly sparred
with each other, has fallen in
national polls, but still has a
substantial following in Iowa
among evangelicals. If Mr. Car-
son manages to re-energize his
base and place third, it would
scramble the lineup anew as
the contest moves to New
Hampshire.
For such lagging candidates
as Mrs. Fiorina, the former
Hewlett-Packard Co. chief ex-
ecutive, Iowa represents a last
gasp for campaigns running on
fumes.
She, along with Mike Hucka-
bee, Rick Santorum and Sen.
Rand Paul of Kentucky, was
relegated to the second tier of
the last televised debate, and
will likely be there again for
another showdown Thursday
night in Des Moines. Each
faces the real danger that a
poor showing here will end
their candidacies.
“Bush has to beat Rubio,
Rubio has to beat Cruz, Cruz
has to beat Trump, and Trump
has to beat 50%,” said Brad
Todd, who served as a top ad-
viser to former Louisiana Gov.
Bobby Jindal, who suspended
his presidential campaign in
November. “Rubio can’t win if
Cruz is succeeding. Cruz prob-
ably can’t win if Trump contin-
ues to fly high.”
An irony for some campaign
watchers is that all the fire-
power aimed by the middle of
the pack at each other has left
Mr. Trump, one of the most ef-
fective attackers in the race,
relatively unscathed.
One sign that the GOP es-
tablishment is conceding—or
even pushing for—an Iowa win
by the New York businessman
was the appearance by six-
term Sen. Chuck Grassley at a
Trump rally here on Saturday.
Mr. Grassley didn’t make an
endorsement, but he sent a
clear signal about where he
stands in the Trump-Cruz ri-
valry.
“You could make the argu-
ment that Trump, more than
Cruz, has the ability to bring
out voters who haven’t partici-
pated in recent elections,” said
Brian J. Walsh, a former top
aide to Senate Republicans. “At
the end of the day, he’s more
of a deal-maker. He could shift
his tone for the general.”
—Heather Haddon
in Nashua, N.H.,
contributed to this article.
CHRIS RATCLIFFE/BLOOMBERG NEWS
lishment bent, analysts said.
But with his high-profile
support for gun-control mea-
sures and for regulations re-
lated to health issues such as
the overconsumption of sugar,
Mr. Bloomberg would be a
hard sell for these voters, said
Patrick Murray, executive di-
rector of the Monmouth Uni-
versity Polling Institute.
“I think there is an opening
for an independent. It’s just
not Mike Bloomberg,” he said.
Jerry Solberg, 70, a Trump
supporter from Des Moines,
Iowa, said there was “no way”
he would support Mr.
Bloomberg, because of his
stance on gun control.
John Paul Muelhaupt, 68, a
Democrat from West Des
Moines who is leaning toward
Mrs. Clinton, was blunt in his
distaste for a Bloomberg can-
didacy. “Tell him, ‘Thank you
very much, but no thank
you,’ ” Mr. Muelhaupt said.
—Peter Nicholas
contributed to this article.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL. Monday, January 25, 2016 | A5

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A6 | Monday, January 25, 2016
TRUMP
Continued from Page One
interviewing Mr. Trump and
watching him behind the
scenes show how he plots
them, most often alone in his
jet as he flies to early primary
states.
“We do have a very big
staff,” Mr. Trump said in an
interview backstage just be-
fore an Ames, Iowa, appear-
ance, “but I do like to make
up my own mind on what I
want to say.”
Mr. Trump flies the cam-
paign trail with just a few se-
nior aides. On a Jan. 18 flight
to Concord, N.H., sitting in his
cream-colored leather club
chair at a pearlwood desk
trimmed in 24-carat gold, he
read and watched news re-
ports on the race, jotting
notes on his perceptions of
candidates’ flaws.
Ten minutes before land-
ing, he grabbed paper, scrawl-
ing five points—15 words—on
what to say before his next
adoring crowd. “I’m strategic,
but trying to do the right
thing and only saying what I
have a very strong opinion on
before going into battle,” he
said on the plane. “Interest-
ingly, people say that’s what
everybody’s thinking but no-
body wants to say it.”
His jotted items: “SELF-
FUNDING SUPER PACS,”
“NOW BLOCK SYRIAN REFU-
GEES,” “2ND AMENDMENT,”
“HILLARY CLINTON A DISAS-
TER,” “STOCK MARKET.”
At the event, he loosely fol-
lowed his note, talking
broadly and then returning to
items on his list. After ex-
pressing support of the Sec-
ond Amendment, he pointed
out a few big men in the audi-
ence. “If we had you, and you,
and you, with weapons, think
how different the result would
have been in Paris and San
Bernardino.”
A key to his unscripted ap-
proach is his conversational
style of speaking extempora-
neously, incorporating the
day’s news and gauging the
crowd’s reaction. “Without a
photographic memory, you
can’t speak without notes,”
IOWA GOV. TERRY BRANSTAD
JANUARY 28TH
8:00 - 10:00 AM CST
DES MOINES, IOWA
REGISTER NOW AT WSJPLUS.COM/ELECTIONSERIES
WSJ+ membership is complimentary for Wall Street Journal subscribers.
Explore more at wsjplus.com using your wsj.com log-in information.
GOP candidate Donald Trump departs after attending church service in Muscatine, Iowa, on Sunday.
Mr. Trump said. “My memory
is one of the greats.”
Mr. Trump has shown a
flair for touching the popular
zeitgeist, such as in his posi-
tion on immigration. But his
campaign-by-counterpunch
approach has critics charging
him with eroding civility and
raising the question of
whether he has any positive
message.
‘I’m self-funding my
campaign,’ Mr. Trump
said; ‘no one can tell
me what to say or do.’
He drew new criticism for
his weekend assertion in Iowa
that he could “stand in the
middle of Fifth Avenue and
shoot somebody, and I
wouldn’t lose voters.”
“Trump’s style degrades
people and public discourse,”
said Pete Wehner, a former
White House adviser and
The State of the Presidential Race
Join us as we travel across the country for a series of in-depth discussions on the 2016
presidential race, moderated by Washington Bureau Chief Gerald F. Seib
speechwriter for President
George W. Bush. “His keen
sense to go for the jugular
and play to the Kardashian
culture is effective, but dan-
gerous for failing to offer a
positive vision for the coun-
try.”
“I’m doing it from the
heart—and the brain,” Mr.
Trump said. “A lot of it reso-
nates.”
He has attacked former
Florida Gov. Jeb Bush as “low
energy,” Ben Carson by mock-
ing the retired neurosurgeon’s
story that a belt buckle spared
a person he tried to stab as a
teenager and Florida Sen.
Marco Rubio for his “profuse
sweating.”
Mr. Bush and Mr. Cruz have
responded to his taunts by
questioning his conservative
credentials. Mr. Rubio and Mr.
Carson repeatedly resisted op-
portunities to respond di-
rectly to his remarks.
In late December, Mr.
Trump took on Democratic
front-runner Hillary Clinton
W S J + TA L K
DEMOCRATIC POLLSTER JOEL BENENSON
FEBRUARY 5TH
8:00 - 10:00 AM EST
MANCHESTER, NEW HAMPSHIRE
* *
president of the Family Re-
search Council, who suggested
its usage in the Liberty
speech.
With social and cable me-
dia highlighting his gaffe, Mr.
Trump blamed it on a momen-
tary lapse of listening to
someone other than himself.
“I’m self-funding my cam-
paign; no one can tell me
what to say or do,” Mr. Trump
said. “I do better that way.”
Mr. Perkins said: “I gave
him the reference as you
would find it in any English
Bible.”
Mr. Trump, under fire for
what some regard as his at-
tacks on women, also is de-
ploying his older daughter,
Ivanka. Last week, the 34-
year-old Trump Organization
senior executive appeared
with him at two events. “Stay
near me so I point you out,”
ANDREW HARNIK/ASSOCIATED PRESS
he told Ms. Trump, who is
eight months pregnant with
her third child, backstage.
On Mr. Trump’s jet next
morning, a senior aide
brought an Esquire magazine
with the cover of Mr. Trump
and the headline: “Hater in
Chief.” At the rally that eve-
ning when Sarah Palin en-
dorsed him, a few protesters
after she said he had “demon- yelled: “A vote for Trump is a
strated a penchant for sex- vote for hate.” The crowd
ism.” drowned them out: “U.S.A.!
“If Hillary thinks she can U.S.A.! U.S.A!.”
unleash her husband, with his In his motorcade in Des
terrible record of women Moines, Iowa, Mr. Trump said
abuse, while playing the he wasn’t deterred by charges
women’s card on me, she’s he is running a negative cam-
wrong!” he tweeted. paign. “A lot of times I sound
Last week, Mr. Trump al- negative, but ultimately I’m
ternated attacks between Mr. positive,” he said. “ ‘Make
Cruz and Mrs. Clinton. At Lib- America Great Again’ is a very
erty University in Lynchburg, positive campaign.”
Va., Mr. Trump held his fire If his campaign doesn’t
against Mr. Cruz, who is pop- succeed, “the worst thing that
ular with the evangelical audi- happens, I’ll be standing in
ence. “I didn’t want to be hit- the middle of Turnberry with
ting anybody” at the Christian waves hitting me in the face,”
school, Mr. Trump said after- Mr. Trump said, referring to a
ward. Trump golf resort on Scot-
He uncharacteristically land’s coast. “I’m either going
used one scripted line, citing to do it right, or I’m not going
a Bible verse from “two Corin- to do it at all.”
thians” instead of “Second
Corinthians,” drawing some VIDEO
chuckles from the audience.
Back on his plane, an angry Watch an
Mr. Trump reviewed his page
of notes and saw he copied “2
Corinthians” exactly as
WSJ
.COM
interview with
candidate
Donald Trump at
emailed from Tony Perkins, wsj.com/pageone.
U.S. REP. JAMES E. CLYBURN
FEBRUARY 19TH
8:00 - 10:00 AM EST
COLUMBIA, SOUTH CAROLINA
© 2016 Dow Jones & Co., Inc. All rights reserved. 6DJ3139
THE WALL STREET JOURNAL.
HHHHH
CAMPAIGN
WIRE
HHHHH
IOWA
Clinton, Rubio Get
Paper’s Endorsement
The Des Moines Register,
Iowa’s most influential newspa-
per, endorsed Hillary Clinton in
the Democratic presidential
nomination fight and Florida
Sen. Marco Rubio in the Republi-
can contest, giving both a
needed boost before the Feb. 1
Iowa caucuses.
The newspaper seemed taken
with Mrs. Clinton’s résumé and
experience in selecting her over
Vermont Sen. Bernie Sanders.
In choosing Mr. Rubio from a
crowded Republican field, the
newspaper said that he has “the
potential to chart a new direc-
tion for the party, and perhaps
the country, with his message of
restoring the American dream.”
—Peter Nicholas
REPUBLICAN PRIMARY
Bush Defends PAC’s
Negative Advertising
Jeb Bush defended negative
ads that a super PAC supporting
him has run against his rivals,
saying that “politics isn’t bean-
bag.”
During a town-hall event in
New Hampshire on Saturday
night, the former Florida gover-
nor took a question from a voter
who said he had grown tired of
overwhelmingly negative ads
that are blanketing the airwaves
in early primary states.
“I bet you have a lot of
them,” Mr. Bush joked in return.
The ex-governor said Right to
Rise, the independent political-
action committee supporting his
bid, had run a lot of ads early on
about “how great I was as gov-
ernor of Florida.”
But Mr. Bush said that “com-
paring and contrasting” candi-
dates was also warranted.
“This is actually pretty tame
compared to other campaigns
I’ve been involved in terms of
the attacks,” Mr. Bush said.
—Heather Haddon
@wsjplus #wsjplus
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.
Europe to Press Athens to Tighten Border
EU ministers consider
sealing off Greece
from Schengen area in
bid to control migrants
BY VALENTINA POP
BRUSSELS—European gov-
ernments are weighing op-
tions that could temporarily
seal off Greece from the bor-
der-free Schengen area and
prolong border controls for up
to two years, in reaction to the
migration crisis, according to
two European Union officials
familiar with the talks.
At a meeting Monday in
Amsterdam, EU interior minis-
ters will discuss steps that
could be taken against Greece
in the coming months allowing
for the extension of border
checks within the 26-nation
Schengen area, if all other
measures to stem the influx of
migrants fail, the EU officials
said.
More than a million refu-
gees and migrants from coun-
tries such as Syria, Iraq and
Afghanistan arrived in Europe
last year, mostly via Turkey
and Greece and then continued
their journey through the Bal-
kans to Austria, Germany and
the Nordic countries.
Security concerns about the
identity of some of the mi-
grants have risen after the
revelation that at least two of
the terrorists in the Paris at-
tacks in November traveled on
the migrant route through
Greece and posed as Syrian
refugees. A series of sexual as-
In Germany, Some Refugees Want to Go Home ‘Professor’
BY RUTH BENDER
AND MOHAMMAD NOUR ALAKRAA
BERLIN—In October, Amer
sold all his belongings in Syria
and took his family to a safer
life in Germany. Four months
later, he wants to return to a
country still at war.
Once in Germany, Amer dis-
covered an unexpected reality:
Instead of the small house he
was hoping for and money to
help him open a business, he
was given a bare room in an
old administrative building
turned into an emergency
shelter. Now he is packing his
bags again. “I came to Ger-
many because everyone was
saying it was heaven. Now I
regret that decision,” said the
30-year-old from Damascus.
Last year, 1.1 million mi-
grants—mainly Arabs, Afghans
and Africans—came to Ger-
many to escape war and hard-
ship, many of them risking
their lives to make the danger-
ous journey. Authorities have
scrambled to accommodate
the influx and Chancellor An-
gela Merkel is facing growing
public discontent, especially
after the alleged role of for-
eign-born men in the mass as-
saults in Cologne on New
Year’s Eve.
But many who arrive find
the country doesn’t match
Why Eurozone Can Weather World’s Market Turmoil
EUROPE FILE
SIMON NIXON
There are many reasons
to be concerned about the
economic outlook for Eu-
rope. Risks are arising from
political in-
stability in
Spain and
Portugal, a
looming
standoff be-
tween Greece
and its creditors, a possible
British decision to quit the
European Union, and fallout
from the potential unravel-
ing of Europe’s Schengen
passport-free travel zone.
But one risk that has pre-
occupied many investors in
recent weeks can largely be
discounted: the fear that the
recent slide in world mar-
kets, including the price of
oil, is foretelling a global
growth slowdown that could
Migrants arrived at the port of Piraeus near Athens on Saturday after traveling aboard a passenger ferry from the island of Lesbos.
saults and robberies carried
out in German cities on New
Year’s Eve by men of North Af-
rican or Middle Eastern origin,
some of whom were registered
asylum seekers, have added to
those concerns.
In November, EU govern-
ments piled pressure on
Greece and floated the pros-
pect of suspending the coun-
try from Schengen if it doesn’t
Migrants looked out from a container residence at a Berlin camp
in September. More than a million have fled war to Germany.
their often inflated expecta-
tions. They balk at modest
benefits, poor job prospects,
and harsh treatment at immi-
gration offices, and voice
other complaints ranging from
bland food to Germans’ open
attitudes about sex.
Some recent arrivals are
now contemplating leaving,
shining light on the enormous
challenge the country faces
integrating the record num-
bers who continue to stream
in. Ms. Merkel has said the
best path to integration is
through work, but most mi-
grants face a long road from
the cots of emergency shelters
derail the eurozone’s fragile
recovery. The truth is that
there is little evidence to
support those concerns. The
recent market gyrations
could even work to Europe’s
economic advantage.
Many European stock
markets had fallen by more
than 10% in little more than
three weeks and 20% since
last summer, pushing them
into bear-market territory,
before some soothing words
from European Central Bank
President Mario Draghi on
Thursday sparked a rally.
B
ut all signs point to
this market slide—
which began mysteri-
ously on the last trading day
of 2015 without any obvious
news to trigger the rout—as
having been a liquidity-
driven event most likely
sparked by a New Year
change in investment strat-
egy by a major, or several
major, investors.
If the rout really had
been prompted by global
growth concerns or worries
over systemic market stress,
then one might have ex-
pected the slide to start in
WORLD NEWS
step up registration for incom- Austria, Germany, Sweden,
ing migrants. They also in- Denmark and Slovenia have all
sisted on EU border patrols at put in place border checks, in
Greece’s sea border with Tur- a bid to slow down the migra-
key and on land at its north- tion influx within the Schen-
ern border with Macedonia. gen area and better control
Greece did step up registra- who is entering their territory.
tion, and EU patrols were de- Under current rules, inter-
ployed, but to some EU gov- nal border checks can be kept
ernments, notably Austria, the only for a limited period. The
efforts are still insufficient. deadline for Austria and Ger-
In the past few months, many, which were the first to
pected,” said Hannelore
Thoelldte, who heads the
counseling service for volun-
tary returnees at Berlin’s of-
AXEL SCHMIDT/AGENCE FRANCE-PRESSE/GETTY IMAGES
fice for health and social af-
fairs, where asylum seekers
have to register when they ar-
rive.
There are no official statis-
tics on migrants leaving Ger-
many on their own accord.
Germany’s immigration office
said it only keeps statistics of
migrants leaving Germany
through programs run in con-
junction with the International
Organization for Migration,
which covers travel costs for
people who prove they can’t
pay for their own trip back.
Syrians currently aren’t eli-
to finding housing and em- gible for support to return to
ployment. While some politi- Syria because of the security
cal leaders say the new mi- situation, officials said. But
grants will help offset a dearth that isn’t hindering some from
of German workers in the fu- making their way back on
ture, critics say they could be- their own, according to Ms.
come a long-term burden on Thoelldte.
German taxpayers. Certain areas of Syria, in-
As it begins to dawn on cluding regime-held central
some new arrivals that it Damascus and western coastal
could take months for them to provinces, have been spared
leave their rudimentary camps from the regular bombings
and possibly years before they and violence engulfing wide
are allowed to bring over their swaths of the country, mi-
families or learn the language, grants and diplomats say,
some are giving up. making it possible for civilians
“Of course many are fleeing there to lead relatively normal
war, but what they are finding lives.
here isn’t what they had ex- Abdullah Alsoaan, a 51-
the sovereign-bond markets this. Despite an emerging
rather than the equity mar- market economic slowdown,
kets, and for much bigger eurozone economic indica-
moves in government-bond tors continued to strengthen,
yields as investors rushed to buoyed by cheap oil, ultra-
traditional havens and loose monetary policy, ex-
dumped riskier assets. pansionary fiscal policy and
a devalued exchange rate.
Meanwhile, European
Current volatility governments are considering
may give the ECB how they can best take ad-
vantage of the collapse in oil
the room it needs to prices to address domestic
extend its stimulus. challenges. For more than a
decade, high oil prices have
acted as a giant tax on Euro-
Similarly, one might have pean economies paid to
expected the sharp falls in emerging markets; now Eu-
European bank stocks to ropean governments have an
have been accompanied by opportunity to collect a bit
equally sharp rises in the of that tax themselves.
cost of insuring European
T
bank credit, which has been hat doesn’t mean eu-
largely absent. Instead, the rozone policy makers
relatively uniform falls in Eu- are complacent. They
ropean stock markets point worry declining equity prices
to broadly based divestment, and slower emerging market
aggravated by the lack of growth could knock corpo-
secondary market liquidity, rate confidence and deter
itself a reflection of the ef- the investment needed if the
fect of postcrisis regulations current cyclical recovery is
on bank business models. to broaden into a sustainable
A hard landing for the long-term secular shift.
Chinese economy would have Prolonged weakness in
an impact on the eurozone. credit markets might also
But so far there is no sign of lead to an unwelcome tight-
Monday, January 25, 2016 | A7
borders, said one EU official
familiar with the talks.
Greece would then have
three months to remedy the
situation. If by then the influx
continued at its current pace
and the commission found
Greece still wasn’t properly
guarding its borders, ministers
would have to approve
Greece’s suspension, and Ger-
many and Austria could con-
tinue their border checks be-
yond May, the official said.
A spokeswoman for the
German interior ministry said
that since no reduction of the
refugee influx is foreseeable,
the government seeks to pro-
long existing border controls
in line with Schengen rules.
Slovenian Prime Minister
Miro Cerar, whose country
would become the first Schen-
gen country on the migrant
trail if Greece were to be sus-
ALKIS KONSTANTINIDIS/REUTERS
pended, insists on the need to
secure Greece’s northern bor-
der with Macedonia—so that
migrants don’t cross through
the Balkans in the first place.
Greek Prime Minister Alexis
Tsipras in the past months has
repeatedly warned against
turning Greece into a massive
refugee camp and insisted that
introduce border checks in the problem lies in Turkey, not
September, runs out in May. Greece. EU leaders in Novem-
The only way to extend them ber struck a deal with Turkey
for up to two years is if there and pledged to pay €3 billion
is a systemic failure at one of ($3.2 billion) and offer visa-
the bloc’s external borders. free travel for Turkish citi-
If ministers agree to go zens, in return for Turkey
down that road, the European stemming the flow.
Commission would need to But so far, arrivals have re-
publish a report in the coming mained at around 2,000 a day,
two weeks saying that Greece according to the International
isn’t properly guarding the Organization for Migration
year-old dentist from Deir Ez-
zour in eastern Syria, said he
Is Elected
came to Germany 10 months
ago with the help of the President
United Nations to receive
treatment for complications of
diabetes. Now he is waiting for
a new passport to return to
Of Portugal
the 10 children he left behind BY PATRICIA KOWSMANN
in Syria. After seeing teenag-
ers kissing in public, he said LISBON—Portuguese voters
he couldn’t raise his daughters elected conservative TV com-
here. “The problem isn’t with mentator Marcelo Rebelo de
the Germans or Germany, peo- Sousa as the next president, a
ple are very nice,” said Mr. Al- role that while largely ceremo-
soaan. “But they have their nial could be key in maintain-
way of living their lives and ing political stability with a
we have ours.” fragile new government.
Others have reached similar While Portugal’s executive
conclusions. When Amer found power lies with its prime min-
his 5-year-old son stumbling ister, the president can dis-
upon an erotic program on solve parliament and veto cer-
television recently, he saw it tain laws or refer them to the
as confirmation he would country’s constitutional court.
never be able to adapt to a The 67-year-old Mr. Rebelo
new life here. Before leaving de Sousa—who is popularly
Syria, Amer said he had heard known as “Professor Mar-
refugees in Germany got celo”—said in the campaign
around €500 ($546) a month that he would seek stability
in benefits—a relatively accu- and consensus.
rate estimate. But he hadn’t The task ahead may prove
realized everything in Ger- tricky for the law professor,
many costs far more than in who was a founding member
Syria, he said. of his center-right Social Dem-
Having spent €15,000—ev- ocratic Party.
erything he owned—to bring Portugal sank into political
his wife, son and brother-in- crisis in October after a coali-
law to Germany, Amer said he tion led by then-Prime Minister
doesn’t yet know how he will Pedro Passos Coelho, a member
pay for their return. of Mr. Rebelo de Sousa’s party,
finished first in a parliamentary
election but lost its majority in
parliament. Socialist leader
António Costa then gathered
the support of three far-left eu-
roskeptic parties, including Left
ening of credit conditions, Bloc, to win a majority and
pushing up real interest form a new government.
rates. Similarly, this year’s Mr. Costa’s government is
steep falls in the oil price facing pressure to keep its
will bear down further on al- leftist allies happy by an-
ready weak nominal infla- nouncing antiausterity mea-
tion and further drag down sures while obeying European
inflation expectations, which Union rules on budget control.
would also have the effect of Mr. Rebelo de Sousa
pushing up real interest “will probably not be shy of
rates while making it harder using his prerogative of dis-
for stressed countries to solving parliament to solve
bring down their debt bur- political impasses, particularly
dens. But the ECB has al- if cracks emerge in the ruling
ready signaled that it is pre- left-wing alliance and govern-
pared to act robustly to ing the country becomes in-
address these risks. creasingly difficult,” said An-
The current market vola- tonio Barroso, an analyst at
tility may provide the pre- political risk consultancy Te-
text it needs for a further neo Intelligence.
JOSE SENA GOULAO/EUROPEAN PRESSPHOTO AGENCY
substantial extension of its
bond-buying program that
the markets had anticipated
in December. The further
into the future the ECB can
extend its quantitative eas-
ing program beyond its cur-
rent March 2017 scheduled
end, the more it can mini-
mize the one eurozone risk
that still has the power to
spook the markets: the fear
that without ECB support,
some eurozone government
debts would once again look Marcelo Rebelo de Sousa gave a
unsustainable. victory speech Sunday in Lisbon.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A8 | Monday, January 25, 2016
Threat of Cash Crunch Weighs on Beijing
Currency concerns
haunted officials at
recent meeting of
China’s central bank
BY LINGLING WEI
China’s central bank faces a
tough balancing act, trying to
ease credit in the financial sys-
tem without adding to pres-
sures weakening the Chinese
currency.
Concerns about the yuan
and the annual cash crunch
ahead of next month’s Lunar
New Year holiday dominated a
meeting held by the People’s
Bank of China on Tuesday, ac-
cording to minutes of the meet-
ing reviewed by The Wall
Street Journal and to accounts
from banking executives close
to the PBOC.
Central-bank officials de-
layed using a traditional credit-
easing tool for fear that it could
add more downward pressure
on the yuan, according to the
minutes and the executives. In-
stead, to meet the rising cash
needs from banks, the central
bank turned to short-term and
medium-term loan facilities to
pump about 1.6 trillion yuan
($243 billion) of temporary li-
quidity into the banking system
in the past week.
The decision highlights the
bank’s deepening dilemma in
helping to cushion the slowing
Chinese economy.
Just a year ago, the PBOC
JASON FRANSON/ASSOCIATED PRESS
Residents of La Loche consoled each other after church Sunday, struggling to make sense of Friday’s shooting that left four dead.
Canada Town Reels From Shooting
BY KIM MACKRAEL
LA LOCHE, Saskatchewan—
Hundreds of people packed
into the Catholic church Sun-
day morning as members of
this remote aboriginal commu-
nity struggled to make sense
of a shooting spree that killed
four people Friday and left
seven others injured.
A teacher, an assistant and
two teenage brothers were
killed after shootings at a
home and school. Police ar-
rested a 17-year-old suspect
and seized a firearm, though
the alleged gunman hasn’t
been named because Canadian
law prohibits identification of
suspects younger than 18. Po-
lice have declined to comment
on a possible motive.
Still, several people here
said they believed the sus-
pect was a relative of the
TYCO
Continued from Page One
big takeovers that character-
ized last year’s surge.
It also is conceivable that it
could be structured as a so-
called inversion, a type of
transaction that has become
popular—and controversial—
in recent years. Inversions
typically take the form of a
U.S. company acquiring a for-
eign-based rival and assuming
its lower-tax domicile.
U.S.-based companies that
have acquired other foreign-
based Tyco businesses in re-
cent years have switched their
corporate registries to take
advantage of the favorable tax
status.
As part of an effort to boost
Johnson Controls stock, Chief
Uneasy Money
China's central bank is trying to ease credit at home without adding
to pressure driving down the yuan.
Benchmark rates on loans of
up to a year’s duration and
on one-year deposits
6%
5 Lending rate
4 6.30
3 6.40
2 Deposit rate
1 6.60
0 6.70
2015
Sources: People’s Bank of China via CEIC Data (rates); WSJ Market Data Group (yuan)
addressed preholiday cash de-
mands by resorting to a more
typical method—cutting the
amount banks are required to
keep in reserve.
Since then, the economic
slowdown and volatility in the
stock markets have led to a
flood of capital leaving China,
as Chinese investors seek bet-
ter returns abroad. The yuan,
also known as the renminbi,
has been battered harder than
the central bank would like,
even as it faces calls to keep
easing credit and rekindle
growth.
“Currently, we need to put a
high emphasis on maintaining
the renminbi’s stability when
managing liquidity,” Zhang Xi-
aohui, an assistant governor at
two slain teenage brothers.
“Everybody’s so, so heart-
broken. Everybody,” Francine
Sylvestre said outside the
church, which serves as a cen-
tral gathering place for the
community of 2,600.
“We all know each
other.…It’s a small town, and it
hits everybody.”
Police identified the victims
as Marie Janvier, a 21-year-old
teaching assistant, who was
found dead at the school after
police entered the building
around 1 p.m. local time.
A teacher, Adam Wood, 35,
died in the hospital from gun-
shot wounds. Two other vic-
tims, teenage brothers Dayne
and Drayden Fontaine, were
found dead in a home near the
school.
Rachel Janvier, an aunt to
Marie, said she is coping with
her niece’s death and also the
Executive Alex Molinaroli has
been pivoting the company
away from low-margin auto-
motive markets to try to be-
come a more profitable “multi-
industrial” company.
Mr. Molinaroli, who became
CEO in 2013, has said he
wouldn’t rule out acquisitions
to expand the company’s in-
A deal could signal
that companies are
still willing to
attempt big takeovers.
dustrial reach. If a deal is
completed, it would be the
largest in Johnson Controls’
more than 100-year history.
It is expected that Mr. Mo-
linaroli would run the com-
bined company, according to
WORLD NEWS
How many yuan
one U.S. dollar buys
6.10
6.20
6.50
SCALE INVERTED TO SHOW
WEAKER YUAN
’16 2015
THE WALL STREET JOURNAL.
the central bank, said at the
Tuesday meeting, according to
the minutes. Ms. Zhang said
cutting the reserve requirement
would send “too strong an eas-
ing signal,” so the bank should
turn to other tools.
A reduction in so-called re-
serve-requirement ratio frees
up funds for banks to lend on a
permanent basis, while inject-
ing liquidity through short-
term and medium-term tools
means the money can be taken
back by the central bank when
those loans expire.
Ms. Zhang told officials at
the meeting that the combina-
tion of cuts to interest rates
and reserve requirements made
by the central bank in late Oc-
tober contributed to the pres-
trauma experienced by her
two daughters, who were at
the school during the shoot-
ing. Ms. Janvier said her youn-
ger daughter is still hearing
gunshots and screams two
days after the shooting. “And
my oldest daughter, she’s just
crying.”
La Loche, about 380 miles
north of Saskatoon, is among
dozens of small aboriginal
communities dotting the north
of Saskatchewan, a prairie
province rich in a swath of
natural resources that made it
among Canada’s wealthiest,
until the recent commodities
rout.
But northern communities
like La Loche are isolated from
the rest of the province; the
nearest outlet of the ubiqui-
tous Canadian coffee shop
chain Tim Hortons is more
than an hour’s drive south. At
FROM PAGE ONE
one of the people familiar with
the matter.
Mr. Molinaroli has been
planning to spin off the com-
pany’s automotive-seating
business this fall, its largest
unit and the world’s biggest
competitor in that segment. It
is unclear how a Tyco pact
would affect those plans.
When Edward Breen took
over for former Tyco CEO L.
Dennis Kozlowski before Mr.
Kozlowski was convicted in
2005 and later served prison
time for looting his em-
ployer—he began disassem-
bling the serial acquirer’s for-
mer empire.
In 2007, Mr. Breen broke up
what was then a company
with nearly 240,000 employ-
ees by spinning off medical-
products company Covidien
PLC and electronics-compo-
nent maker Tyco Electronics
THE WALL STREET JOURNAL.
decelerated to 6.9% growth last
year, and whether the yuan will
Kerry to Seek
collapse have become a worry
for global investors. That anxi-
ety has been noticed by Beijing.
China’s Help
At the World Economic Fo- On North Korea
CHINAFOTOPRESS/GETTY IMAGES
rum in Switzerland last week,
Chinese officials sought to allay VIENTIANE, Laos—Secretary
fears of a hard economic land- of State John Kerry is ex-
ing, pointing to the progress pected to press China to do
made in moving the economy more to address North Korea’s
away from manufacturing and recent nuclear test and try to
toward consumption. While calm increasing tensions stem-
pledging to continue that re- ming from maritime disputes
Yi Gang, a deputy governor at structuring, the officials also in the South China Sea.
the People’s Bank of China. said China needs to keep the Mr. Kerry, who arrived here
economy growing at a reason- Sunday to kick off a three-day
sure on the yuan. “Because of able rate. Asia tour, will travel to China
the double reductions, there A series of surprises and re- Tuesday for meetings with Chi-
’16
was too much liquidity and de- versals over the past six nese President Xi Jinping and
preciation pressure on the ren- months—a devaluation, a new other senior officials, the State
minbi,” she said. way to fix the yuan’s rate for Department said.
Ahead of Tuesday’s meeting, foreign-exchange trades each At the top of Mr. Kerry’s
China’s big banks called on the day, and a move to use a basket agenda will be getting Beijing
central bank to cut the reserve of currencies, not just the U.S. to step up pressure on Pyong-
requirement in the lead-up to dollar, for valuing the yuan— yang as world powers discuss
the holiday. But the central contributed to selloffs of the new sanctions in response to
bank balked at doing that be- currency and left investors North Korea’s nuclear test this
cause of worries over the sta- scratching their heads. month, a senior official traveling
bility of the yuan, the banking Speaking at the Tuesday’s with Mr. Kerry said. The U.S.
executives close to the PBOC PBOC gathering, Yi Gang, a wants Beijing to support tough
said. deputy central bank governor, sanctions and to take indepen-
“They decided to put off the warned banks against encour- dent steps to press Pyongyang
reserve-requirement cut until aging their customers to ex- to change course. Beijing holds
later,” one of the executives change their Chinese currency considerable leverage, supplying
said. The executive said the for dollars at a time of growing nearly all of Pyongyang’s oil and
central bank would have to expectation for a weaker yuan. has close trade and military ties
make the cut “at some point” The $50,000 limit hasn’t with the impoverished state.
because the surge in money changed, Mr. Yi said, according China has said that it alone
leaving China, as well as the to the meeting’s minutes. can’t persuade North Korea to
PBOC’s efforts to buy yuan to “I want to remind everyone,” abandon its nuclear program.
prop up its value, is squeezing he said, “if anyone dissemi- Chinese officials couldn’t be
liquidity. nates false information and reached to comment on Mr.
The state of the Chinese causes any panic, such actions Kerry’s visit.
economy, which Beijing says will be investigated.” —Felicia Schwartz
Taliban Offer Terms
For Afghan Talks
BY JESSICA DONATI drawal of foreign troops from
AND MARGHERITA STANCATI Afghanistan and to the estab-
lishment of an Islamic sys-
DOHA, Qatar—Taliban en- tem.”
voys laid out preconditions for It was the first time mem-
peace talks to begin during bers of the group’s political
meetings with people close to commission have publicly dis-
the Afghan government on cussed reconciliation initia-
Sunday, reiterating that a for- tives since President Barack
mal process can’t start as long Obama dropped plans in Octo-
as foreign troops remain in ber to withdraw almost all
the country. U.S. troops from Afghanistan
The Taliban also called for by the end of this year. The
lifting United Nations sanc- U.S. will keep at least 5,500
tions that ban the group’s U.S. troops in bases across the
leaders from flying interna- country until Mr. Obama
tionally and tie up their finan- leaves office in January 2017.
cial assets. They also said The closed-door forum was
their political office in Qatar organized by the international
should reopen before peace group Pugwash Conferences
talks start. The office was shut on Science and World Affairs,
down days after it opened in which works on conflict reso-
2013 following protests by the lution. It followed a similar
Afghan government. event organized by the same
“As long as foreign forces group in May. The Afghan gov-
are in Afghanistan, peace and ernment opposed the event
this time of year, the sun rises stability is impossible,” Mo- and tried to stop it, fearing in-
at 9:30 a.m. and it gets dark hammad Naim Wardak, a terference with simultaneous
by 5:30. member of the Taliban delega- Pakistan-brokered efforts to
The town already faced a tion, said on the sidelines of restart peace talks.
number of the social ills that the event. “We will take every The government said for-
plague many aboriginal com- path which leads to the with- eign troops had a legal right
munities across Canada. Be- to remain in Afghanistan, and
fore Friday’s shooting, La complained that the interna-
Loche was known for its high tional platform gave the Tali-
number of suicides relative to ban undue legitimacy.
its small population. “The government is open to
While gun violence is rela- talking with Taliban groups
tively rare in La Loche, crime and is ready to discuss their
JESSICA DONATI/THE WALL STREET JOURNAL
rates here are five times the concerns, but for the Taliban
provincial average. Less than to set condition for talks is
half of the town’s residents unacceptable,” said Zafar
have completed high school, Hashemi, a spokesman for Af-
and rates of teen suicide and ghan President Ashraf Ghani.
substance abuse are stub- The conference provided a
bornly high. rare opportunity for Taliban
“A lot of people are suffer- representatives to engage with
ing in silence,” said Buckley Afghan lawmakers, civic activ-
Belanger, a politician who rep- ists and others associated
resents northwestern Sas- with the government and
katchewan at the provincial Mohammad Naim Wardak, a speak on their conditions for
legislature. Taliban delegation member joining a peace process.
Ltd. Medtronic Inc. last year
bought Covidien for about $40
billion.
Today, Tyco focuses on fire,
It is unclear what the board
composition of a combined
Johnson Controls-Tyco would
be and whether Mr. Breen
The combination would
come on the heels of Shire
Plc’s agreement this month to
buy drugmaker Baxalta Inc.
security and video surveillance would have a role. for $32 billion—though that
for commercial buildings With Tyco’s security and was publicly in the works for
through brands such as Ameri- fire suppression business lines, months. It also would follow
can Dynamics, Chemguard and Johnson Controls would ex- a series of comments from
Sensormatic. Tyco has had pand its equipment and ser- corporate and bank chief ex-
slowing sales growth in recent vices for commercial buildings ecutives who have indicated
quarters and its sales and where developers and building that despite market gyra-
profit outlook for 2016 lagged managers often look for suppli- tions, the underpinnings of a
behind analysts’ expectations. ers with broad product lines. strong M&A market remain
Mr. Breen remains on The company already provides intact.
Tyco’s board of directors and heating and air conditioning One way companies could
serves as its chairman. He has gear under the York brand and continue agreeing to merge
been busy on the M&A front of climate-control systems. through the volatility is by
late, as chemical giant DuPont Johnson Controls has been swapping shares if both
Co., where he recently became interested in acquisitions to stocks have fallen by compa-
CEO, in December struck a complement its businesses and rable amounts. Indeed, the
landmark merger agreement replace lost revenue from the Johnson Controls-Tyco deal
with Dow Chemical Co.—a spin off of the seating busi- would involve at least a par-
$120 billion transaction that ness. But analysts expected the tial share swap, according to
would be followed by a three- company to continue its recent one of the people.
way split of the combined practice of adding smaller ac- —Bob Tita
company. quisitions and joint ventures. contributed to this article.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Monday, January 25, 2016 | A9

WORLD NEWS

U.S. Woos Syria Reclaims Rebel Stronghold

Turkey to BY RAJA ABDULRAHIM

Help Fight BEIRUT—Syrian regime

forces backed by Russian air-

Terrorism strikes seized control of a

BY CAROL E. LEE
AND DION NISSENBAUM
ISTANBUL—The Obama ad-
ministration is trying to bro-
ker a deal in coming weeks be-
tween Turkey and Iraq that
rebel stronghold on Sunday,
the latest in a series of gains
in northwestern Latakia prov-
ince aided by Moscow’s inter-
vention in the conflict.
The advances in the heart-
land of Syrian President
Bashar al-Assad’s Alawite mi-
nority put the regime within

GEORGE OURFALIAN/AGENCE FRANCE-PRESSE/GETTY IMAGES

would reduce rising tensions
between the two countries
over the presence of Turkish
forces at a training camp in
northern Iraq, senior adminis-
tration officials said.
The administration is seek-
ing a deal under which both
sides agree to coordinate on
an emerging U.S. military plan
to take back the key Iraqi city
of Mosul from Islamic State,
which a senior administration
official described as in “hard-
core planning” stages, though
not imminent.
The U.S. is also vetting sev-
eral hundred Sunni Arabs in
Syria, as well as some Turks,
whom Turkey says its govern-
ment has identified as poten-
tial fighters to help the U.S.
close the roughly 60 miles of
border with Syria that remain
under Islamic State control,
officials said. And the admin-
istration is hoping to finalize
in coming weeks a package of
new technological assistance
for Turkey to aid in securing
that stretch of border.
The initiatives, pushed by
Vice President Joe Biden on
Saturday in more than seven
hours of meetings with Turk-
ish leaders, are designed to
expand Ankara’s role in the
fight against Islamic State in
ways the U.S. has been seeking
for more than a year.
“We are increasingly mak-
ing progress, and I am confi-
dent that progress will be
sped up as a consequence of
our meeting today,” Mr. Biden
said Saturday after meeting
with Turkish Prime Minister
Ahmet Davutoglu. “Today we
agreed to do even more.”
striking distance of neighbor-
ing Idlib, the only province al-
most entirely under rebel con-
trol.
Just a few months ago,
rebel fighters were advancing
through the Idlib countryside
toward Latakia and looked
poised to deal more blows to
the regime. But the Russian
intervention in late Septem-
ber has given the regime’s mil-
itary the upper hand there.
These gains have given the
regime a stronger hand ahead
of peace talks that had been
set for this week in Geneva, if
they go ahead as planned.
“All of the regime and Rus-
sian plan and all of the opera-
tions that the Russian officers
are overseeing are with the
goal of advancing before the
talks,” said Fadi Ahmad, a
spokesman with the U.S.-
backed First Coastal Division,
a faction of the Free Syrian
Army rebel group, which has
received training from the
World
Watch
MALAYSIA
Police Arrest Seven,
Alleging Terror Links
Police said they arrested
seven people with suspected
links to Islamic State, days after
a suspect was held on suspicion
of planning a suicide attack.
Syrian pro-government forces adjusted a portable antitank system while holding a position in Aleppo’s eastern countryside on Sunday.
Central Intelligence Agency, as
well as American antitank mis-
siles.
The regime and allied
forces from the Lebanese mili-
tant group Hezbollah captured
the town of Rabia, which has
been under opposition control
since 2012, opposition activ-
ists and rebels said. The vic-
tory came after days of
clashes and the regime contin-
National police chief Khalid
Abu Bakar said the seven sus-
pects, all Malaysians ranging
from 26 to 50 years old, were
detained on information ob-
tained from operations this
month that netted the alleged
would-be suicide bomber on Jan.
15 and three Malaysians who
had been deported from Turkey
for trying to illegally cross the
border into Syria.
Mr. Khalid said the latest sus-
pects were involved in identify-
ing targets for terrorism across
Malaysia, a predominantly Mus-
lim nation of some 30 million
people. —Yantoultra Ngui
ued to advance through sur-
rounding villages after taking
Rabia, they said.
This followed another im-
portant gain for the regime
less than two weeks ago
against U.S.-backed and Isla-
mist fighters, when it took
control of the town of Salma—
the largest rebel-held town in
the Latakia mountains. It was
captured with the help of
ISRAEL
Ex-President Peres
Is Hospitalized
Former Israeli President Shi-
mon Peres was taken to a hos-
pital near Tel Aviv with chest
pain late Sunday, a spokes-
woman said, less than two
weeks after suffering a mild
heart attack.
The 92-year-old will stay
overnight for observation and
tests, she said, and isn’t ex-
pected to undergo surgery or
other invasive procedures.
Mr. Peres had also com-
plained of heart pain and was
more than 120 Russian air-
strikes over two days in addi-
tion to hundreds of rockets
and missiles fired against the
rebels, according to the U.K.-
based Syrian Observatory for
Human Rights, an opposition
monitoring group.
The Russian intervention
has continued to add to the ci-
vilian death toll of the nearly
five-year conflict, activists
diagnosed with an irregular
heartbeat by medics before be-
ing admitted.
Mr. Peres completed a seven-
year presidential term in 2014.
His public career has spanned
seven decades.
As Israeli foreign minister, he
shared the 1994 Nobel Peace
Prize with then-Prime Minister
Yitzhak Rabin and Palestinian
leader Yasser Arafat after nego-
tiating the Oslo Accords. The
agreements outlined steps to-
ward the establishment of a
two-state solution for peace in
Israel and the Palestinian territo-
ries. —Rory Jones
said. More than 100 civilians
have been killed in Russian
and regime airstrikes in the
past three days in the country-
side of the eastern city of Deir
Ezzour, local activists and the
Observatory said.
On Friday, Russia’s military
defended the accuracy of its
aerial campaign.
—Nathan Hodge in Moscow
contributed to this article.
THAILAND
Nation’s Second Case
Of MERS Confirmed
Health officials confirmed the
country’s second case of Middle
East respiratory syndrome.
The patient, a 71-year-old
Omani national, arrived in Bang-
kok on Friday to seek treatment
for a persistent fever and cough.
He was tested and found posi-
tive for the virus.
Health officials said they
have quarantined and are moni-
toring 37 people who had close
contact with the man.
—Wilawan Watcharasakwet
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A10 | Monday, January 25, 2016
OIL
Continued from Page One
that will lead to a fall in produc-
tion,” Lukoil Chief Executive
Vagit Alekperov said in an inter-
view at the Russian company’s
international headquarters in
Vienna.
Russian officials acknowl-
edged that the higher-than-
planned taxes could lead to a
decrease in investment and pro-
duction, but said they were
needed for the budget.
U.S. and European sanctions
over the past 18 months also
weigh on Russia’s future pros-
pects by choking Western fi-
nancing for exploring potential
finds in the Arctic Ocean and
for tapping Siberian shale for-
mations.
Oil and natural gas revenues
make up about half of Russia’s
federal government revenue,
and exports account for one-
third of national output. Energy
revenues are central to Mr. Pu-
tin’s power as he faces off with
the West over Ukraine and the
2014 annexation of Crimea. He
has deployed military forces in
Syria’s war to back President
Bashar al-Assad.
Oil money extends Mr. Pu-
tin’s reach, allowing him the fi-
nancial resources to issue cheap
loans to favored leaders and pay
for military adventures abroad.
Output expansion
Mr. Putin oversaw rapid ex-
pansion of an oil industry crip-
pled by the fall of the Soviet
Union. Production in Russia fell
as low as 6.1 million barrels a
day in 1996, compared with a
Soviet-era high of 11.4 million a
day in 1987.
As oil prices and production
rose in the 2000s, Mr. Putin ex-
panded social spending to im-
prove Russian living standards,
cementing his position as an au-
tocrat and winning approval
ratings that at times exceeded
80%.
Mr. Putin said at the end of
last year that the price of $50
per barrel of crude used to cal-
culate Russia’s 2016 budget was
too optimistic, and ministers
have in recent weeks warned of
spending cuts and, potentially,
Oil and natural gas
revenues make up
about half of Russia’s
federal revenue.
“prolonged stagnation.” Oil
prices slid below $30 a barrel
last week before rebounding.
Russia’s energy revenues are
also under threat from new
competition in Europe, where it
provides about a third of natu-
ral gas supplies. The first ship-
ments of U.S. liquefied natural
gas are expected to start arriv-
ing in Europe this spring, with
the potential to weaken Mos-
cow’s energy hold. Russian offi-
cials say U.S. gas will be too ex-
pensive to compete.
Few see an immediate threat
to Mr. Putin. The U.S. and Euro-
pean sanctions successfully
hobbled new sources of Russian
oil production—the Arctic and
shale oil—but have had little
COWS
Continued from Page One
dle it, you ride it out to where
you’re going,” Mr. Grey says.
“We’re using a lot more machin-
ery to do the job.”
The image of the whip-crack-
ing, tobacco-chewing cowboy
made famous by actors such as
John Wayne is under attack
from a very modern foe: tech-
nology. Mr. Grey and other
ranchers across Outback Austra-
lia are part of a trial that uses
data collected by National Aero-
nautics and Space Administra-
tion satellites to help manage
their herds.
Australian farms are so big,
and so remote, that ranchers
rarely travel out to the far
reaches of their property. They
see only about 2% of their land-
holdings on a regular basis. The
benefit of using satellite and
other data collected remotely is
that ranchers are able to assess
cattle as they roam the scrub.
Also appealing to ranchers: the
prospect of becoming a little less
saddle sore.
At Undoolya Station, the old-
est cattle ranch in the Northern
Territory, a sparsely populated
area twice the size of Texas,
country-music writer John Wil-
liamson once penned an ode
called “Three Sons,” celebrating
the ranch’s “Six generations
where camels run free…Three
short-term impact on output.
They were imposed in 2014,
when oil prices were close to
$100 a barrel and the worry
was of global supplies falling
short of demand.
China, not a party to the
sanctions, sells Russia the sup-
plies and equipment it needs to
boost production at existing oil
fields, such as here in Imilor,
where rigs helped Russia last
year produce 10.73 million bar-
rels a day of oil and gas conden-
sate, a type of ultra light crude,
up from 10.58 million barrels a
day in 2014.
Lukoil and state-owned OAO
Rosneft—Russia’s largest pro-
ducer—are flush with cash and
generating sufficient funds to
meet dividends, while some of
their U.S. and European coun-
terparts are struggling to cover
spending and dividends. Some
Russian oil company shares in-
creased, even as profits fell,
while Western energy compa-
nies’ stocks have generally de-
clined.
Without new investment,
Russia’s oil future is less bright.
In West Siberia, where some
two thirds of the country’s oil is
produced, companies battle de-
clining production rates after
decades of oil extraction. “It’s
unlikely we can stabilize pro-
duction in West Siberia,” said
Mr. Alekperov of Lukoil. “We
can only slow the decline.”
The Russian Energy Ministry
forecasts that national oil pro-
duction will remain at current
levels through 2035. The Inter-
national Energy Agency, a Paris-
based monitor of energy trends,
expects Russian oil output to
stop growing this year. By 2020,
Russian oil production could fall
to 10.5 million barrels a day, the
IEA said, and sink to 9 million
barrels a day by 2040.
“Russian oil production has
been very resilient, but I don’t
think we can have production
forever at this level with low oil
prices and sanctions restricting
access to Western finance and
technology,” said Fatih Birol, the
IEA’s executive director.
Russian oil companies have
benefited from three factors
that may not last: an industry-
friendly taxation system, cheap
production costs and the deval-
uation of the ruble.
Russia’s tax system has
helped shield oil companies
from the worst of the price
drop. Russia’s two main oil pro-
duction levies—the export duty
and the mineral extraction tax—
are pegged to price. Last year,
the government’s share fell with
oil prices, but companies still
earned after-tax revenues aver-
aging $13 per barrel of oil, ac-
cording to a report from Citi-
group.
Ronald Smith, a Moscow-
based oil analyst at Citigroup,
said after-tax revenues from oil
production have been “rela-
tively stable in Russia because
of the tax regime.”
The Russian government is
considering tax changes the in-
dustry opposes. The finance
ministry has said it could take
an additional 200 billion rubles
in taxes, about $3.6 billion, from
the oil industry this year,
mostly by temporarily abandon-
ing plans to reduce export
taxes.
Oil executives and Russia’s
energy minister warned this
Ranchers in Australia are part of a trial that uses data from NASA satellites to help manage their herds.
sons in their swags ‘round the
stock camp with me.”
Nowadays, the 5,000-cattle
ranch, which once employed
some 20 people, is a two-person
team: 43-year-old Ben Hayes and
his wife Nicole, 42. Helicopters
have long since replaced horses
as a way to round up cattle and
even they could be on the way
out after a successful trial of the
latest in farming technology.
The Outback project is the
first in the world to rely only on
technology to monitor beef cat-
tle, and in such remote areas, ac-
cording to a state government
agency which is running the five
ranch trial. Satellites take im-
ages of every 820 square feet of
the ranches daily. On the ground,
automatic weighing stations
measure cattle each time they
come to the water trough.
FROM PAGE ONE
Russian oil output is at its highest levels since the Soviet Union breakup; drilling rig in East Siberia.
could reduce investment and
cause production to fall, espe-
cially if oil prices don’t recover
and the government extends the
measure into next year.
Some companies, however,
are optimistic they can produce
more because much of Russia’s
oil is onshore, making it rela-
tively cheap to pump.
Gazprom Neft, the oil arm of
the state gas company, PAO
Gazprom, can make a profit on
oil extracted from existing fields
even if the oil price falls to $15
per barrel, chief executive Alex-
ander Dyukov told state TV in
December.
Russia’s currency, the ruble,
provided a lift for oil companies
when it plunged in value after
imposition of U.S.-led sanctions
and the initial drop in oil prices
in 2014. It has since largely
risen and fallen with oil prices,
touching a record low Thursday
of almost 86 to the U.S. dollar.
Before Russia invaded Ukraine,
a dollar bought 35 rubles.
The devaluation of the ruble
has slashed costs for an indus-
try that generally sells its crude
oil for dollars and pays its
workers and buys equipment
with Russian currency. Lukoil
told investors in November that
its costs for getting oil out of
the ground had decreased by
around a third in the first nine
The data are crunched by a
computer program and sent to
farmers. They can then make de-
cisions ranging from whether
there is sufficient feed for graz-
ing to exactly when each animal
meets the ideal weight for mar-
ket.
Mrs. Hayes doesn’t think the
pioneers who first tamed the
ranch would turn in their graves
at the tech-savvy shift. In an in-
terview several years ago, Ben’s
grandfather was asked what it
was like to farm in the “good old
days.” His response? Modern
conveniences like air condition-
ing, electricity and a refrigera-
tor, meant he was living “the
good old days,” Mrs. Hayes re-
calls.
Not everyone is happy,
though.
During a recent New Zealand
Russian Resilience
The Russian oil industry has pumped at post-Soviet records
despite U.S.-led sanctions and low oil prices.
Russian oil production*
12 million barrels a day
10
8
6
4 Russian troops. Russia has said
2 EU in December extended re-
0
1994 ’96 ’98 ’00 ’02 ’04
*includes crude oil, condensates and natural gas plant liquids, or NGPLs
Source: U.S. Energy Information Administration
months of 2015, compared with
a year earlier. The ruble depre-
ciated about 40% over the same
period, encouraging a switch to
cheaper Russian suppliers.
“If before we could buy two
Russian pumps for the price of
one Western one, now we can
buy four,” said a reservoir engi-
neer working at one of Rosneft’s
giant oil fields in east Siberia.
The savings has allowed Lu-
koil to increase its capital ex-
penditure in rubles as U.S. and
MAYFIELD
vacation, Mr. Grey juggled child-
minding duties with checking up
on his cattle on his mobile
phone, prompting his wife to
complain: “Can’t you leave work
at home?”
He also sheepishly admits to
sneaking a look on his laptop to
see how his cattle were faring in
2013 while he was honeymoon-
ing in Ireland.
Harnessing the technology
hasn’t been without problems.
Temperatures topping 110 de-
grees can make solar panels
used to power the scales and
electronic ear-tag sensors mal-
function. Dust storms often
blanket the red-clay landscape,
coating the face of the panels.
Flocks of cockatoos—a native
parrot—chew through cables
that connect the equipment.
Convincing many ranchers
THE WALL STREET JOURNAL.
the monitoring agency at Rus-
sia’s energy ministry. Such wells
are drilled parallel to an oil or
gas formation and can boost
yields as much as five times
that of a vertically drilled well.
It is a technique that helped fuel
the U.S. oil boom of the past
few years.
“Russia was late to this,” said
Sergei Alekseev, director of
marketing at TMK, Russia’s
largest manufacturer of steel
pipes for the oil industry. “But
now we see it everywhere.”
The technology has allowed
Russia to squeeze more oil out
of older fields across Russia and
particularly in Siberia, where
Lukoil is pumping at Imilor, but
is only staving off the inevita-
ble, executives said. Many of the
big West Siberian oil fields have
produced for more than five de-
cades and yield less every year.
Output across the Khanty
Mansiysk region, which includes
Imilor and accounts for just un-
der half of Russia’s output, fell
2.8% in the first 11 months of
2015 versus a 1.6% decline for
2014 overall, according to IHS
Energy, a consulting firm.
At Rosneft’s Varyegannefte-
gaz division in West Siberia, oil
production has fallen almost 6%
in the first nine months of 2015
compared with the same period
a year earlier. Rosneft posted a
crude oil production decrease of
1% in the same nine-month pe-
riod because of declines in older
fields, despite new output from
offshore projects and East Sibe-
ria.
GUY CHAZAN/THE WALL STREET JOURNAL
Uncertain future
Moscow had hoped the coun-
try’s vast shale oil would drive
new production over the next
five to 10 years, followed by the
Arctic. Russian companies
signed deals with Western firms
to obtain needed technology
and expertise.
Sanctions have largely put
those plans on hold. In 2014,
Exxon Mobil Corp. suspended
exploration work with Rosneft
in the Kara Sea in the Arctic,
while France’s Total SA and
Royal Dutch Shell PLC have
halted plans to tap shale oil in
West Siberia.
Q2 2015: 11 million The sanctions could result in
a loss of Arctic and shale oil
production of around 1 million
barrels a day by 2035, according
to IHS Energy.
The U.S. and the EU say they
will start removing sanctions
once Russia fulfills a peace deal
for eastern Ukraine and remove
it had no troops in Ukraine. The
strictions for another six
months.
For now, Lukoil aims to bring
’06 ’08 ’10 ’12 ’14 its decline rate down to around
3% a year from around 5%. The
THE WALL STREET JOURNAL. company has been opening five
to seven small fields a year in
European oil companies re- West Siberia, in addition to the
duced their spending by billions more substantial Imilor field.
of dollars. The new fields make sense to
The extra rubles aren’t just develop because they are in the
buying cheap pumps. They have heart of Russian oil country,
also helped fuel the burgeoning with an existing network of
use of such Western technology pipelines, processing plants and
as horizontal drilling and hy- other infrastructure, Mr. Alek-
draulic fracturing in oil forma- perov said.
tions not targeted by sanctions. But they are tiny, he said, a
Horizontal drilling last year drop in the bucket compared
made up about a third of all with what Russia needs to
drilling in Russia, up from 11% maintain current levels of oil
in 2010, according to CDU TEK, production.
that the technology passes mus-
ter is perhaps the hardest job of
all, says Sally Leigo, research
leader of the Precision Pastoral
to drought. A dry spell that
spanned 2001 to 2009 forced
many ranchers off the land for
good, and contributed to farm
Management Tools Project, a debts rising. Experts say tech-
state government initiative nology may help conquer the
aimed at encouraging farmers to barren Outback landscape that
use data collected remotely. in places looks more like Mars
At first, some ranchers didn’t than Earth.
believe cattle used to roaming “I’d hate to say it’s the end of
tracts of land without human the stereotypical drover,” Simon
contact could master the weigh- Talbot, chief executive of the Na-
ing machines, which require tional Farmers’ Federation says.
them to walk through a narrow “But certainly people need to
gate to access the water trough, have a new mind-set around
she said. what it is to operate Australia’s
What do the animals think? vast landscape.”
Without humans, their noisy Mr. Grey’s sprawling half-a-
trucks and their horses, they million acre ranch in Western
“behave like a bunch of old Australia state is located 2-1/2-
dairy cows,” nosing their way to hours from the closest town, in-
the trough one after the other, cluding more than 50 miles
Ms. Leigo says. along unpaved roads. Fresh pro-
“There’ll be people who won’t visions arrive once a week by
touch [the technology] with a mail truck.
10-foot pole,” Mr. Grey says. What will cowboys of the fu-
“But we can measure how much ture look like if farms can be
difference it is making, and it’s managed at the click of a
yielding more kilograms of mouse?
beef.” There are some jobs that
Australia ranks behind only can’t be supplanted by comput-
Brazil among the world’s biggest ers, Mr. Grey said one recent
exporters of beef, and lawmak- morning as he headed out to
ers and farmers think the coun- rake the manure from his cattle
try could become a food bowl trailers.
for Asia where people are in-
creasingly adding protein to VIDEO
their diets.
However, the Outback’s frag- See how Aussie
ile environment has often re-
sisted efforts to drive up live-
stock and crop yields. Much of
WSJ
.COM
ranchers use
NASA satellites
to herd cattle at
northern Australia is vulnerable wsj.com/ahedvideo.
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.
Rhodes Must Not Fall
W h i l e
Ameri-
can uni-
versities
cave to
demands
INFORMATION for “safe
spaces,”
AGE
Oxford
By L. Gordon
Univer-
Crovitz
sity is-
sued an
ultimatum demanding intel-
lectual freedom. Chancellor
Chris Patten this month told
students to open themselves
to challenging ideas or “think
about being educated else-
where.”
Mr. Patten was answering
demands that the university
expunge its history with Cecil
Rhodes, including removing a
statue of its imperialist gradu-
ate and benefactor. Rhodes
scholars last year insisted
that their traditional dinner
toast at Oxford to the
founder—whose largess pays
each student’s $100,000 in
annual education expenses—
exclude his name.
“That focus on Rhodes is
unfortunate, but it’s an exam-
ple of what’s happening on
American campuses and Brit-
ish campuses,” Mr. Patten
told the BBC. “One of the
points of a university, which
is not to tolerate intolerance—
to engage in free inquiry and
debate—is being denied. Peo-
ple have to face up to facts in
history which they don’t like
and talk about them and
debate them.”
Cuba’s Democrats Need U.S. Support
Miami
Cuban dissi-
dent leader
Antonio Ro-
diles has been
harassed,
AMERICAS beaten, im-
prisoned and
By Mary
may have
Anastasia
been injected
O’Grady
with a foreign
substance—
more on that in a minute—by
Castro goons. Yet he is calm
and unwavering: “They are not
going to stop us,” Mr. Rodiles
recently told me over lunch
here with his wife, Ailer
González.
Soviet-style Cuban intelli-
gence is trained to crush the
spirit of the nonconformist.
Yet the cerebral Mr. Rodiles
was cool and analytical as he
described the challenges faced
by the opposition since Presi-
dent Obama, with support
from Pope Francis, announced
a U.S. rapprochement with
Castro’s military dictatorship
in December 2014.
One of the “worst aspects of
the new agenda,” Mr. Rodiles
told me matter-of-factly, “is
that it sends a signal that the
regime is the legitimate politi-
cal actor” for the country’s
future. Foreigners “read that it
is better to have a good rela-
tionship with the regime—and
not with the opposition—be-
cause those are the people that
are going to have the power—
political and economic.”
The Cuban opposition is
treated as superfluous in this
new reality. U.S. politicians vis-
Trump Laid Out His Playbook 30 Years Ago
By Ben Jenkins
D
onald Trump’s six-month
stay atop the Republican
presidential field has
confounded political pros.
Rather than follow the play-
book that has long guided cam-
paigns through the arduous
primary calendar, the bombas-
tic billionaire is charting his
own path, filled with insults
and vainglorious preening that
theoretically shouldn’t attract
voters.
But Mr. Trump laid out how
he would run his campaign 30
years ago in his best seller
“The Art of the Deal.” Perhaps
if more strategists had read
the book, this race would be
tighter. So let’s parse what Mr.
Trump wrote.
“I play to people’s fanta-
sies” and a “little hyperbole
never hurts.” Mr. Trump has
proposed a 2,000-mile-long
wall at the Mexican border, a
“deportation force” to expel an
estimated 11 million undocu-
mented immigrants, and a ban
on all noncitizen Muslims
entering the country. Those
pledges represent the extreme
Mr. Patten, the last British
governor of Hong Kong, is
recalled fondly there for bol-
stering local freedoms. “You
go to China, where they are
not allowed to talk about
Western values, which I regard
as global values,” he said in
the BBC interview. “No, it’s
not the way a university
should operate.”
The “Rhodes Must Fall”
movement wants to eliminate
memories of a man the stu-
dents say offends them. A
true understanding of Rhodes
acknowledges that the beliefs
of his time differ from ours
but recognizes that his ideals,
including on racial issues, put
him ahead of his times.
This will outrage some of
my fellow Rhodes scholars,
but Rhodes should be cele-
brated, not vilified, for his
imperial values. Soon after
leaving England in 1870 for
Africa, the 24-year-old Rhodes
surprised dinner guests in a
remote diamond-mining town
by declaring: “Gentlemen, the
object of which I intend to
devote my life is the defense
and extension of the British
Empire.”
He said the empire stood
for “the protection of all the
inhabitants of a country in
life, liberty, property, fair play
and happiness and is the
greatest platform the world
has ever seen for these
purposes and for human
enjoyment.” He aimed to pro-
mote ideals of liberty—com-
mon law, property rights and
iting the island used to meet
with dissidents. Now, Mr.
Rodiles says, “contact is almost
zero.” When the U.S. reopened
its embassy in Havana last
year it refused to invite impor-
tant dissidents like Mr. Rodiles
or even Berta Soler, the leader
of the Ladies in White, to the
ceremony.
Mr. Rodiles said the mission
of pro-democratic Cubans is
critical and urgent: “We need
to change the message,” mak-
ing it clear that the regime is
“not the future of Cuba.” And
this, he says, is the defining
moment.
If the Castros hope to
transfer power to the next
generation—be it to Raúl’s
son Alejandro or a Cuban Tom
Hagen—as Russia’s KGB
forced Boris Yeltsin to yield to
KGB veteran Vladimir Putin,
they need to do it soon.
Yet at the same time, Mr.
Rodiles says, “if they give the
country to their families in the
condition it is in right now, it
will be like handing them a
time bomb” about to go off.
That’s why, he tells me, this is
a unique opportunity for free-
dom to emerge: The odds of
successfully passing the baton
in the current economic melt-
down are low.
Or at least they would be if
Mr. Obama were not offering
the regime legitimacy and U.S.
greenbacks while refusing to
officially recognize the opposi-
tion.
Mr. Rodiles has a master’s
degree in physics from Mex-
ico’s Autonomous National
wish-list items of Mr. Trump’s
most ardent fans. They are
also completely unrealistic.
But Trump supporters say
they like him for two reasons:
He isn’t afraid to tell it like it
is, and he isn’t a prisoner to
political correctness. He is an
outlet for the hyperbolic fanta-
sies of voters who believe that
the economy and politicians
are leaving them behind.
His presidential
campaign is ‘The Art
of the Deal’ in action.
Back to the playbook:
“Sometimes, part of making a
deal is denigrating your compe-
tition.” Mr. Trump’s campaign
has been marked by personal
insults that any other politician
would shun—or that would get
him shunned. He has derided
former Hewlett-Packard execu-
tive Carly Fiorina’s looks;
mocked the energy level of
former Florida Gov. Jeb Bush;
and insinuated worse about
Fox News’s Megyn Kelly.
OPINION
representative government.
By his 30s, Rhodes was a
mining magnate and prime
minister of the Cape Colony,
proudly expanding Queen Vic-
toria’s realm. “We are the
finest race in the world,” he
said, “and the more of the
world we inhabit, the better it
Oxford’s sensitive
students demand
a statue’s removal.
Time to stand firm.
is for the human race.” In the
1988 Rhodes biography “The
Founder,” Robert Rotberg con-
cluded: “For him, England was
both mighty and right. It was
obligated to extend its grasp
. . . to make the world a better,
purer place.”
The Cape Colony under
Rhodes was liberal for its day.
Africans could vote if they
met the same property-hold-
ing or income requirements as
whites. Rhodes might have
bent too far to placate the
Boers, the Dutch settlers
whose support he needed to
rule the colony. But at the end
of his political career, Rhodes
opposed a Boer plan to submit
Africans to a literacy test
before they could vote. Only
after Rhodes left office did
the Boers establish apartheid
as official policy.
When Rhodes created his
scholarship in 1902, he in-
University and a master’s de-
gree in mathematics from Flor-
ida State University. The 43-
year-old returned to Cuba in
2010 and is a founder of
Estado de SATS, a project to
“create a space for open de-
bate and pluralism of thought.”
Obama has helped
the dictatorship but
ignored the dissidents.
The police state views this
as dangerous and has come
down hard on the couple.
Amnesty International was
among those that called for
his release when he was jailed
in 2012 for 19 days. In July a
state-security agent punched
him in the face while his
hands were cuffed behind his
back.
On Jan. 10 he and Ms.
González, along with other
government critics, were again
attacked by a rent-a-mob on
the streets of Havana. This
time they were left with what
looks like identical needle
marks on their skin.
Those wounds are worri-
some. More than once the for-
mer leader of the Ladies in
White, Laura Pollán, was left
with open wounds after being
clawed and scratched by
plainclothes government en-
forcers. After one such inci-
dent in 2011 she mysteriously
fell ill and died in the hospi-
tal. The government immedi-
ately cremated her body and
Mr. Trump claims to be good
to those who treat him well,
but his reaction to criticism is
nuclear. The more outlandish
his assaults on anyone who
challenges him, the more voters
seem to like it. He doesn’t mind
alienating people along the
way.
Another Trump mantra:
“Controversy, in short, sells.”
The media feed on controversy
and Mr. Trump knows it better
than any other candidate. Even
harsh stories that hurt him
personally can be valuable
professionally.
Which brings us to: “Good
publicity is preferable to bad,
but from a bottom-line per-
spective, bad publicity is
sometimes better than no
publicity at all.” In his busi-
ness life, controversy is a
theme. He’s happy to play the
media to inflame that contro-
versy—it can be good for busi-
ness, helping him leverage
lower prices for whatever he’s
trying to buy. In politics, his
love for controversy has
bought him more media atten-
tion than other candidates
could dream of.
cluded a clause far ahead of
its time. His will specifies that
no student will be “qualified
or disqualified on account of
his race or religious opinions.”
The first black Rhodes
Scholar, Alain Locke, was
elected in 1907. Locke’s Ameri-
can peers shunned him; some
threatened to resign their
scholarships in protest. An
official history of the scholar-
ship explains why the Rhodes
trustees rejected the com-
plaints: “There was plenty of
‘color’ in the British Empire,”
they said, and no one “was
going to be debarred from a
Rhodes scholarship on that
ground.” Locke became a lead-
ing writer and scholar.
Instead of trying to erase
Rhodes, Nelson Mandela em-
braced him. In 2002 the South
African statesman posed for a
photo in Cape Town beside a
portrait of Rhodes. Mandela
wagged a finger at him and
said: “Cecil, now you and I are
going to work together.” The
Mandela-Rhodes Foundation
funds education for Africans.
“Combining our name with
that of Cecil Rhodes in this
initiative is to sign the closing
of the circle and the coming
together of two strands of our
history,” Mandela said.
Rhodes must not fall. He
put his wealth behind the
optimistic conviction that free
inquiry would make the world
a better place, expanding an
empire of liberty. For that he
deserves to be remembered—
and toasted.
the dissident community has
long suspected that she was
intentionally infected with a
fatal virus by the regime.
Under normal circum-
stances, the Castro family
would have reason to fear the
future. Totalitarian regimes
collapse, Mr. Rodiles reminds
me, “when the people inside
the system, not just the elite,
but the people who are in the
middle, the ones who sustain
the system, start to go and
look for another possibility.”
They do this because they
recognize the future is else-
where so they “move or at
least they no longer cooper-
ate.”
Today young Cubans are
looking for that alternative.
The regime’s promise to Mr.
Obama of economic opportu-
nity and growth through
small-business startups is a
farce because the Castro fam-
ily operates like a mafia, “and
always has,” says Mr. Rodiles.
To do well in the current
environment the young have
to join the system, or else
they flee.
Those who join are not ide-
ological but only seek power.
“If we can show that we are
the ones with the power to
transform the country, then
these people for sure are
going to prefer to be with us.”
Failure is unthinkable for
Mr. Rodiles. “We cannot allow
the transfer of power because
if they transfer the power, we
can have these people for the
next 20 or 30 years.”
Write to O’Grady@wsj.com.
And then: “I like making
deals, preferably big deals.
That’s how I get my kicks.”
The Trump campaign style has
the freewheeling feel of a real-
ity-TV show, and he’s getting
plenty of kicks from address-
ing big crowds that have
waited in line hours to see
him. The deals that Mr. Trump
closes, whether for Manhattan
real estate or votes in Iowa
and New Hampshire, are how
he keeps score.
Finally: “If you ask me ex-
actly what the deals . . . all
add up to in the end, I’m not
sure I have a very good
answer. Except that I’ve had a
very good time making them.”
Given the scantiness of his
policy proposals and seeming
indifference to the details of
governance, it’s not exactly
clear what it all adds up to or
why Mr. Trump wants to be
president. But he is clearly
having a very good time along
the way.
Mr. Jenkins is a Republican
strategist and a principal at the
Locust Street Group, a public-
affairs firm in Washington, D.C.
Monday, January 25, 2016 | A11
BOOKSHELF | By Matthew Rees
Advice From the
Anti-Steve Jobs
A Passion for Leadership
By Robert M. Gates
(Knopf, 239 pages, $27.95)
I
t has become almost a ritual of American politics to ask
officeholders and candidates to disclose what books
they happen to be reading. The titles they offer can
seem like political posturing even if, by chance, they are
not. In 2014 Hillary Clinton told the New York Times that
Maya Angelou’s “Mom & Me & Mom” was on her
nightstand and John McCain’s “Faith of My Fathers” on her
bookshelf. At the moment, more than one candidate may be
(discreetly) thumbing through “The Art of the Deal.” But
the book they should all admit to reading—and actually
read—is “A Passion for Leadership” by Robert M. Gates.
Mr. Gates is best known
as secretary of defense, first
under George W. Bush (re-
placing Donald Rumsfeld) and
then under Barack Obama
(until 2011). But his public
service began in the 1960s,
and in the intervening years
he worked in several senior
posts, including a stint as CIA
director under George H.W.
Bush. Drawing on his own
experience and his observations
of others at the highest eche-
lons of power, Mr. Gates has
compiled a list of recommenda-
tions for leaders of all sorts—
from Boy Scout troop leader to branch manager to
corporate CEO to cabinet secretary—with a special empha-
sis on the challenges of guiding a large organization.
Many of Mr. Gates’s recommendations are common sense
(as he acknowledges): set deadlines, don’t micromanage
change, empower subordinates, cooperate with the media,
be prepared to act alone. As obvious as such advice may
seem, it bears repeating because it is so routinely ignored.
Among the more surprising suggestions: Don’t focus on
reorganizing staff or structure, since it is distracting to the
organization; be wary of consensus (which “inevitably
yields the lowest common denominator”); and set short
deadlines (doing so will “focus attention on an effort and
signal its importance, creating momentum”).
Confronted with President Obama’s wish to end the ban
on openly gay people serving in the military, Mr. Gates
describes how he set up a task force, which surveyed
400,000 service members and 150,000 service spouses, and
held multiple focus-group meetings. “The review group
paved the way for successful incorporation of the biggest
personnel policy change in the U.S. military since women
were brought into the ranks in significant numbers,” he
writes. Among the keys to success in this case, he says,
were inclusiveness and open internal debate.
Gates preaches the value of civility and of work-
life balance. While heading the Pentagon, he
says, he never went to the office on a Saturday.
The same principles applied when he was faced with cut-
ting dozens of major defense programs. Believing that leaks
would undermine his proposals, he “led an intensive con-
sultative process” with military and civilian leaders and
asked all participants to sign a nondisclosure agreement. In
the end, Congress didn’t block his proposals, which he at-
tributes to getting “buy-in” from the senior officials who
were consulted.
Befitting the only cabinet official to serve in both the
Bush and Obama administrations, “A Passion for
Leadership” is refreshingly nonideological. Implicit in his
recommendations is that there is no “Republican” or
“Democratic” way of leading. Indeed, there is as much in
the book for Mrs. Clinton as there is for Donald Trump.
Mr. Gates appears to be the polar opposite of the leader
who has been deified in recent years: the late Apple
founder Steve Jobs. Where Jobs was often a petty tyrant
who prized secrecy, Mr. Gates preaches the value of civility,
internal transparency and work-life balance. (He boasts
that, while heading the Pentagon, he never went to the
office on a Saturday.) He praises the CEO of Starbucks,
Howard Schultz, for communicating with all the company’s
employees on strategy, culture and performance.
But there are fewer compliments than criticisms in “A
Passion for Leadership.” Mr. Gates indicts many of those
charged with overseeing major institutions—Congress,
universities, corporations—for their parochialism and
short-term outlook. He asserts that, in the public sector,
leaders “vary dramatically in expertise, diligence,
understanding, and just plain smarts,” adding that many
“haven’t got a clue about how to run anything.”
Mr. Gates unloads on the former Republican governor of
Texas (and two-time presidential candidate) Rick Perry. Mr.
Gates recounts that, upon his being offered the presidency
of Texas A&M, Gov. Perry privately pressured him to
withdraw. (Mr. Perry had reportedly promised the job to
former Texas senator and A&M professor Phil Gramm.) Mr.
Gates stood firm and served at A&M in 2002-06 but says
that he and Mr. Perry had an “adversarial relationship” for
his entire tenure. “The governor was a pain in the neck.”
But Mr. Gates kept his feelings about Mr. Perry private
and emphasizes throughout the book that, in general, it
behooves leaders to schmooze with the governing class,
since small deeds can pay lasting dividends. He once wrote
a letter to the Washington Post defending Sen. Robert Byrd
following a critical editorial. “This small gesture,” he
writes, “made Byrd my friend and personal ally on the Hill”
when he was CIA director and, later, at the Pentagon.
While Mr. Gates’s book may persuade some readers to
take the rudiments of authority and command more
seriously than before and even pursue leadership training—
part of the multi-billion-dollar “leadership industry”—Mr.
Gates notes that his only formal training came in 1959,
when he attended a program sponsored by the Boy Scouts,
an organization he now heads. He is skeptical that
leadership qualities—such as devotion to duty, sincerity,
fairness and good cheer—can be taught in a classroom.
“How can any training program inculcate personal
character and honor?” When it comes to office holders and
office seekers, questions of character may be even more
important than their reading lists.
Mr. Rees, who served in the Bush administration in
2001-05, is president of the speechwriting firm Geonomica
and a senior fellow at Dartmouth’s Tuck School of Business.
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A12 | Monday, January 25, 2016 * * THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK LETTERS TO THE EDITOR

The Bloomberg View Refugees, Supply, Demand, Jobs and Housing

Y
ou read it here last week. As the odds Mr. Bloomberg’s appeal is harder to discern Regarding Giovanni Peri and Vasil Messrs. Peri and Yasenov try to as-
rise of extreme outcomes in the presi- on the political right, though that also de- Yasenov’s “New Evidence on Immi- sert that there is no difference be-
grants and Jobs” (op-ed, Jan. 19): To tween the relatively modest immigra-
dential election, so do the chances of a pends on the GOP nominee. He has a stellar re- conclude that the Cubans who fled in tion of Cubans in the 1980s and the
serious third-party candidate cord reducing crime in New the Mariel boat lift didn’t impact proposed inflows of predominantly
getting into the race, espe- Why the former mayor York and he fought the teach- low-income jobs in Miami is seem- Muslim Syrians now. Perhaps these
cially Michael Bloomberg. may think he can win ers union for school choice ingly to assume that all immigrant ivory tower scholars have missed the
Now word has leaked that the and accountability. He’s a so- groups that come here can be evalu- spate of recent carnage in France,
former three-term mayor of the White House. cial liberal loathed by the Na- ated according to the same measures. mass sexual assaults in Germany, the
New York is actively exploring tional Rifle Association and However, that is an assumption that 14 dead in San Bernardino or the at-
the possibility. he has a nanny-state ten- dismisses the courage and skills of tempted assassination of a Philadel-
Mr. Bloomberg considered a run in 2008 dency (his failed big-soda ban) that irritates the Cubans who got on those boats. phia policeman, in addition to the
and 2012, only to conclude he couldn’t win, free-marketeers. The Mariel immigrants, even the many thwarted attempts like that of
poor ones, were by and large com- the Belgian train killer. The Cubans
and that may be what happens this year too. But if Republicans nominate Donald Trump,
mitted capitalists. Many had an en- were not religious fanatics hellbent
The U.S. political system is tilted against who is also no conservative, Mr. Bloomberg’s trepreneurial bent and have been on eliminating our religious pluralism
third-party candidates, which is why the last pitch would include his governing experience successful in their new home, some and establishing a new world order;
one to take the White House was Abraham Lin- in New York and that he’s not a leap in the policy with the help of highly educated and they embraced what is best about
coln in 1860 as the nominee of the antislavery dark. He might also find a lane up the political successful earlier immigrants driven America. In contrast, the Syrian refu-
Republicans. middle if the GOP nominates Ted Cruz, whose out of Cuba. An element that should gees will include some jihadists,
Third-party candidates have made other no- belief that he can win merely with conservative have been included in the analyses is strong young men, whom the FBI
table runs but their influence has mainly been voters means he could struggle in swing states how many new businesses were cre- says it has no way to screen.
as spoilers or to force the major-party candi- like Iowa, Florida, Colorado and New Hamp- ated by those Cubans in the five or WES POTTER
dates to confront issues they’d ignored. Teddy shire, among others. 10 years following the boat lift. On West Palm Beach, Fla.
Roosevelt ruined William Howard Taft’s chances As a self-financing billionaire, Mr. Bloomberg the whole, Mariel immigrants didn’t
have the low expectation of a mini- The immutable economic laws of
for re-election in 1912, and Ross Perot contrib- could get on the ballot and field a strong cam-
mum wage job forever. supply and demand don’t apply to the
uted to George H.W. Bush’s defeat in 1992 though paign in every state. He might do well enough NEIL GAFFNEY labor market? Boatloads of new im-
he won no electoral votes. He split the Reagan in the polls to get into the autumn debates where Chicago migrants and the tens of thousands
coalition by winning he would compete on
19% of the vote and
Independent Fates equal terms. That’s how
coming through our southern border
During the Mariel boat lift period have new jobs waiting for them? Does
helped Bill Clinton win How prominent 20th-century third-party presidential Mr. Perot finished Cubans arrived and took the low-pay- this magic work also with an instant
candidates did on Election Day
with only 43%. strong after he had pre- ing jobs away from the locals. Per- supply of new, low-cost housing and
We’ve been skepti- Populuar Electorial viously dropped out of haps the Cuban community wanted to an instantly available increased sup-
vote share votes help other Cubans. The real effect ply of medical care? How convenient
cal of a third-party the race. Mr. Bloomberg
Bloomberg candidacy Teddy Roosevelt 1912 27.5% 88 could figure that many was that the low-paid locals moved is this scholarly research for those in
in the past, but this Robert La Follette 1924 Republicans might find out. Many went to the Tampa-St. Pe- Washington, D.C., who see no prob-
16.5 13
tersburg, Fla., area, where the crime lem opening wide our gates to anyone
year’s tumult has him more palatable as rate and homelessness skyrocketed. who wants in.
Strom Thurmond 1948 2.5 39
thrown convention Commander in Chief WARREN DUNKEL GEORGE A. LAIGLE
out the window. Mr. George Wallace 1968 13.5 46 than the say-anything Chandler, Ariz. Houston
Bloomberg is looking John Anderson 1980 7 0 style of Mr. Trump.
at the primary chaos The big question is
and figuring he may Ross Perot 1992 19 0 whether Mr. Bloomberg No Backdown: The DOD and Taxpayers Won
have a chance if the parties nominate flawed could win enough states to deny 270 electoral
or polarizing candidates who struggle to unite votes to the other candidates. That would throw Your Aug. 22 editorial “The Pro- of Veterans Affairs and the fourth
their parties. the election to the House of Representatives, gressive Principle” criticizes Demo- largest recipient of tuition assistance
The 73-year-old’s opening would widen on which would presumably still be controlled by crats for “encourag[ing] students to through the DOD.
load up on taxpayer-guaranteed When the university was found,
the left if the Democrats nominate avowed so- Republicans, though you never know if the GOP
debt” leading to an increasing num- through a DOD investigation, to be in
cialist Bernie Sanders. He’d probably not run if presidential nominee trailed badly. Mr. ber of Americans who aren’t able to violation of a its Memorandum of Un-
Hillary Clinton is nominated—unless she is Bloomberg would then have to make the case make payments on their student derstanding with the Department of
wounded by an indictment or plea deal for hav- that he would be better for the country and the loans. Defense, it was placed on probation
ing mishandled classified information. Mr. GOP than its nominee. On the other hand, a Jan. 19 edito- as stipulated in the agreement—the
Bloomberg tilts left enough on guns, climate All of this would require events that almost rial “The Vindication of Phoenix” primary source of protection for DOD
change and immigration that many Democrats never happen in American politics. But Mr. praises Republicans for encouraging funding flowing to this company.
would find him politically congenial. He’s more Bloomberg is a serious man who wouldn’t waste the Defense Department (DOD) not to Instead of “backing off” the univer-
centrist on economics, and somewhat hawkish his money or time if he didn’t sense an opportu- enforce the terms of an agreement sity because of political pressure, as
on foreign policy, but many Democrats would nity. If we’ve learned anything so far in this tu- with the University of Phoenix, whose this editorial page puts it, the Defense
not find those views disqualifying amid 2% multuous election season, it’s that the elector- students cumulatively owe more in Department removed the University
student-loan debt than any other edu- of Phoenix’s probationary status after
growth and the rise of Islamic State. ate is volatile enough that anything can happen.
cational institution in the U.S.—$35 the for-profit company made changes
billion, only 1% of which has been re- to satisfy the DOD that the violations

West Virginia’s Right to Work paid.

In 2014 the University of Phoenix
had been corrected. The Defense De-
partment has sent a clear message to

W
received over $3 billion from federal all of higher education: It will take
est Virginia has suffered economi- Charleston Gazette-Mail last week that Mr. taxpayers. Of all public, private, non- enforcement of its agreements with
cally as President Obama tries to kill Tomblin “does not believe West Virginia profit and for-profit institutions of schools seriously to protect both ser-
the coal industry, but now comes needs a right-to-work law.” higher education, the University of vice members and taxpayers.
some economic hope. The The Governor’s veto may Phoenix is the largest recipient of GI SEN. DICK DURBIN (D., ILL.)
Mountaineer State could soon The struggling state be overridden with a simple Bill funding through the Department Washington
become the 26th to pass a may allow more majority of both houses. Re-
right-to-work law. publicans currently control
On Thursday the state Sen- worker freedom. both chambers, and their
ate voted 17-16 to approve chances to override got a Petraeus Should Pay for Mishandling Secrets
right to work, which lets work- boost on Friday when the Your editorial “The Petraeus Ven- of highly classified documents. I
ers choose for themselves whether to join a West Virginia Supreme Court of Appeals ruled detta” (Jan. 20) illustrates your lack would say this is another example of
union. Unions portray the idea as radical when- that Republicans will be able to fill a vacant of understanding of the importance Democratic partisanship on the part
ever a new state considers it, but it merely out- seat in the closely divided Senate. of security within the military. As a of the Obama administration.
laws “closed shops” in which unions can force Right-to-work laws aren’t the only driver of Navy yeoman with a “secret” clear- MAJ. RANDALL W. KLOTZ, USAF (RET.)
employees to pay dues to keep their jobs. economic growth, but many businesses won’t ance, I was well trained in maintain- Germantown, Ohio
The odds are good the measure will pass consider building a new plant in a state without ing security within my squadron’s
command. All classified material re- The Obama administration’s move
the state House, where Republicans hold a it. After New Mexico’s 6.8%, West Virginia is
ceived by my squadron had to be to strip former four-star general and
64-36 majority, and the fight is raging over tied with Nevada for the nation’s second high- signed in and out by every officer. former CIA Director David Petraeus
what will happen if West Virginia Democratic est state jobless rate at 6.5%. The state desper- What Gen. David Petraeus did was to of one of his stars reminds me of
Governor Earl Ray Tomblin vetoes the bill. ately needs to make itself more competitive, compromise the information en- Lyndon Johnson’s wry observation:
A spokesman for the Governor told the and right to work would help. trusted to him. Whether that com- “You know the difference between
promise led to a promulgation of the liberals and cannibals? Cannibals

Obama vs. the Manatees

information or not was irrelevant. If I only kill and eat their enemies.”
had done what he did, my next duty DAVID P. CARTER
station would have been at Fort Seminole, Fla.

T
he U.S. Fish & Wildlife Service this quires states to implement the generator shut- Leavenworth, Kan., for the next 20
month proposed a new rule to crack downs, this isn’t a federal issue, and so the con- years.
down on predator control in Alaska, sultation requirement doesn’t apply. Never MICHAEL CLAPROOD The Weak Dollar Fueled
Elmira, N.Y.
claiming it wants to better pro- mind that states are acting Oil’s Price Rise, Not Shale
tect wildlife on national ref- Evading the Endangered only because the feds are The question one must ask in light Mark P. Mills asserts that produc-
uges. If only the Obama Ad- Species Act to impose forcing them. of this is why the Obama administra- tion from American shale oil compa-
ministration cared as much House Natural Resources tion isn’t pursuing criminal charges nies “is a principal cause of the
about the protected critters new climate rules. Chairman Rob Bishop last against Hillary Clinton who “mishan- global [oil] glut” (“After the Carnage,
that are getting in the way of year uncovered documents dled” hundreds, perhaps thousands, Shale Will Rise Again,” op-ed, Jan.
its climate-change agenda. showing the EPA knew of the 19). In the same piece he writes that
President Obama’s Clean Power Plan imposes consultation problem and worked to evade its U.S. producers achieved a “record-
new rules to force the closure of coal-fired responsibilities. One email from an EPA em- Bikes Compete Favorably breaking rise in production of four
million barrels a day” from 2009 to
power plants in the name of climate change. ployee in 2014 notes that questions about con- With India’s Lamborghinis 2015. While there’s no quibble with
Among those most likely to be shut down are the sultation are “lurking” and that the agency As a naturalized American origi- his production numbers, the price of
Big Bend Power Station and the Crystal River may need to “speak informally” to someone at nally from India, I am awestruck on a barrel of oil tripled from 2009 to
Plant in Florida. Problem is, both plants have Fish & Wildlife. my visits to India by the increasing 2014. If increased U.S. supply was re-
been designated as primary warm-water refuges Fish & Wildlife director Dan Ashe told Con- presence of expensive luxury and ally the principal cause of falling
for manatees—listed as endangered in the 1960s gress in March that EPA had not consulted the sports cars that can accelerate in prices as Mr. Mills argues, wouldn’t
and now considered “threatened.” service, though “there’s a very direct and obvious seconds with a slight nudge on the this have shown up in plummeting
One threat to manatees is a plunge in water impact and relationship between that water dis- gas pedal. The price tags on these oil prices throughout this period of
temperature, which causes lesions, gastrointes- charge and those manatees.” Mr. Ashe has since automobiles are mind-boggling. In- record-breaking production?
tinal disorders, infections and death. The Fish walked back that statement, and Fish & Wildlife terestingly, in major cities like Mum- It would have if oil had ever been
& Wildlife Service, which runs a manatee recov- is now deferring to the EPA. It would never be this bai, Kolkata and New Delhi, the aver- scarce in the first place, as opposed
age traffic speed is rarely above 10 to expensive in the illusory sense
ery plan, estimates that two-thirds of manatees accommodating to a private company.
miles an hour, and you could be rid- thanks to a weak dollar. Mr. Mills is
rely on coal plants that discharge heated water. The Administration knows this is legally risky ing in a three-wheeler faster than a surely right that “Shale 2.0 will
Many plants are required to have Manatee Pro- business. In 2011 a federal appeals court blocked BMW or a Porsche because of the emerge,” and it will when a future
tection Plans, which are embedded in their fed- a Bureau of Land Management regulation on congested, narrow, ill-kept, bumpy Treasury secretary pursues the poli-
eral Clean Water Act permits. grazing, rejecting the agency’s claim that it roads (“India’s Superrich Have Su- cies of devaluation that Treasury em-
Section 7 of the Endangered Species Act is would have “no effect” on species. But the White percars, but Nowhere to Drive,” page braced in the 1970s and 2000s.
clear: Federal agencies are required to consult House and EPA are willing to risk a legal rebuke one, Jan. 19). JOHN E. TAMNY
with Fish & Wildlife or the National Marine on manatees on the bet that its climate regime Unless Prime Minister Narendra Reason Foundation
Fisheries Service if an agency action—such as will be too entrenched by the time a court con- Modi maintains the balance of India’s Washington
a new rule—“may affect” (good or bad) a feder- siders it. Mr. Obama is in a rush to get his new progress with the infrastructural
ally protected species. Yet the Administration’s climate machinery in place so a future President growth of better roads and clean-en- Letters intended for publication should
ergy cars, I am afraid the traffic on be addressed to: The Editor, 1211 Avenue
draft climate regulation in January 2014 didn’t will find it hard to dismantle.
India’s roads will halt to a gridlock of the Americas, New York, NY 10036,
mention consultation over the manatees. GOP The Endangered Species Act is a flawed law and entail a loss of millions of pro- or emailed to wsj.ltrs@wsj.com. Please
Senators David Vitter and Jim Inhofe noticed that needs an overhaul, but Democrats have con- ductive man-hours, and worsen pollu- include your city and state. All letters
and in March 2014 sent EPA a letter demanding sistently blocked efforts to reform it. As long as tion and environmental degradation. are subject to editing, and unpublished
answers. it’s the law of the land, they should have to live ATUL M. KARNIK letters can be neither acknowledged nor
returned.
The EPA’s reply is that since the rule re- with it like everyone else. Woodside, N.Y.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
The Climate Snow Job
By Patrick J. Michaels
A
n East Coast blizzard howl-
ing, global temperatures
peaking, the desert South-
west flooding, drought-
stricken California drying
up—surely there’s a common thread
tying together this “extreme” weather.
There is. But it has little to do with
what recent headlines have been say-
ing about the hottest year ever. It is
called business as usual.
Surface temperatures are indeed
increasing slightly: They’ve been
going up, in fits and starts, for more
than 150 years, or since a miserably
cold and pestilential period known as
the Little Ice Age. Before carbon diox-
ide from economic activity could
have warmed us up, temperatures
rose three-quarters of a degree Fahr-
enheit between 1910 and World War
II. They then cooled down a bit, only
to warm again from the mid-1970s to
the late ’90s, about the same amount
as earlier in the century.
A blizzard! The hottest year
ever! More signs that global
warming and its extreme
effects are beyond debate,
right? Not even close.
Whether temperatures have
warmed much since then depends on
what you look at. Until last June,
most scientists acknowledged that
warming reached a peak in the late
1990s, and since then had plateaued
in a “hiatus.” There are about 60
different explanations for this in the
refereed literature.
That changed last summer, when
the National Oceanic and Atmospheric
Administration (NOAA) decided to
overhaul its data, throwing out satel-
lite-sensed sea-surface temperatures
since the late 1970s and instead rely-
ing on, among other sources, readings
taken from the cooling-water-intake
tubes of oceangoing vessels. The
Where Does All That Aid for Palestinians Go?
By Tzipi Hotovely
O
ne often-cited key to peace
between Israel and the Pales-
tinians is economic develop-
ment. To that end, there seems to
be broad agreement about the
importance of extending develop-
ment aid to help the Palestinians
build the physical and social infra-
structure that will enable the emer-
gence of a sustainable, prosperous
society. But few have seriously
questioned how much money is sent
and how it is used.
Such assistance will only pro-
mote peace if it is spent to foster
tolerance and coexistence. If it is
used to strengthen intransigence it
does more harm than good—and
the more aid that comes in, the
worse the outcome. This is exactly
what has been transpiring over the
past few decades. Large amounts of
foreign aid to the Palestinians are
spent to support terrorists and
deepen hostility.
For years the most senior figures
in the Palestinian Authority have
supported, condoned and glorified
terror. “Every drop of blood that
has been spilled in Jerusalem,”
President Mahmoud Abbas said last
September on Palestinian television,
“is holy blood as long as it was for
Allah.” Countless Palestinian offi-
cials and state-run television have
repeatedly hailed the murder of
Jews.
This support for terrorism
doesn’t end with hate speech. The
Palestinian regime in Ramallah pays
monthly stipends of between $400
and $3,500 to terrorists and their
families, the latter of which is more
than five times the average monthly
salary of a Palestinian worker.
According to data from its bud-
getary reports, compiled in June
2014 by Israel’s Ministry of Foreign
Affairs, the PA’s annual budget for
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scientific literature is replete with
articles about the large measurement
errors that accrue in this data owing
to the fact that a ship’s infrastructure
conducts heat, absorbs a tremendous
amount of the sun’s energy, and ves-
sels’ intake tubes are at different
ocean depths. See, for instance, John
J. Kennedy’s “A review of uncertainty
in in situ measurements and data sets
of sea surface temperature,” pub-
lished Jan. 24, 2014, by the journal
Reviews of Geophysics.
NOAA’s alteration of its measure-
ment standard and other changes
produced a result that could have
been predicted: a marginally signifi-
cant warming trend in the data over
the past several years, erasing the
temperature plateau that vexed
climate alarmists have found diffi-
cult to explain. Yet the increase
remains far below what had been
expected.
It is nonetheless true that 2015
shows the highest average surface
temperature in the 160-year global
history since reliable records started
being available, with or without the
“hiatus.” But that is also not very
surprising. Early in 2015, a massive El
Niño broke out. These quasiperiodic
reversals of Pacific trade winds and
deep-ocean currents are well-docu-
mented but poorly understood. They
supporting Palestinian terrorists
was then roughly $75 million. That
amounted to some 16% of the for-
eign donations the PA received
annually. Overall in 2012 foreign aid
made up about a quarter of the PA’s
$3.1 billion budget. More recent
figures are inaccessible since the
Palestinian Authority is no longer
transparent about the stipend
transfers.
An outsize share of per
capita international aid,
even as the Palestinian
Authority funds terrorists.
Embarrassed by public revela-
tions of the misuse of the foreign
aid, in August 2014 the Palestinian
Authority passed the task of paying
stipends to terrorists and their fam-
ilies to a fund managed by the
Palestine Liberation Organization,
also led by Mr. Abbas. Lest there be
any doubt as to the purely cosmetic
nature of the change, Palestinian
Prime Minister Rami Hamdallah
made assurances as recently as
September 2015 that the PA will
provide the “necessary assistance”
to ensure these terror stipends.
This procedural ruse apparently
calmed the consciences of donor
governments that continue to trans-
fer aid. It is difficult to think of
another case in which such a for-
giving attitude would be taken
regarding foreign aid to an entity
that sponsors terror.
This situation is particularly dis-
turbing given the disproportionate
share of development assistance the
Palestinians receive, which comes
at the expense of needy populations
elsewhere. According to a report
last year by Global Humanitarian
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DJ Media Group:
Almar Latour, Publisher; Kenneth Breen,
Commercial; Edwin A. Finn, Jr., Barron’s;
Professional Information Business:
Christopher Lloyd, Head;
Ingrid Verschuren, Deputy Head
Monday, January 25, 2016 | A13
OPINION
is the world likely to warm as civili-
zation continues to exhale carbon
dioxide, and does warming make the
weather more “extreme,” which
means more costly?
Instead of relying on debatable
surface-temperature information,
consider instead readings in the free
BRENDAN SMIALOWSKI/AFP/GETTY IMAGE
atmosphere (technically, the lower
troposphere) taken by two indepen-
dent sensors: satellite sounders and
weather balloons. As has been shown
repeatedly by University of Alabama
climate scientist John Christy, since
late 1978 (when the satellite record
begins), the rate of warming in the
satellite-sensed data is barely a third
of what it was supposed to have been,
according to the large family of global
climate models now in existence.
Balloon data, averaged over the four
suppress the normally massive up- extant data sets, shows the same.
welling of cold water off South Amer- It is therefore probably prudent to
ica that spreads across the ocean (and cut by 50% the modeled temperature
is the reason that Lima may be the forecasts for the rest of this century.
most pleasant equatorial city on the Doing so would mean that the
planet). The Pacific reversal releases world—without any political effort at
massive amounts of heat, and there- all—won’t warm by the dreaded 3.6
fore surface temperature spikes. El degrees Fahrenheit by 2100 that the
Niño years in a warm plateau usually United Nations regards as the climate
set a global-temperature record. What apocalypse.
happened this year also happened The notion that world-wide
with the last big one, in 1998. weather is becoming more extreme is
Global average surface tempera- just that: a notion, or a testable
ture in 2015 popped up by a bit more hypothesis. As data from the world’s
than a quarter of a degree Fahrenheit biggest reinsurer, Munich Re, and
compared with the previous year. In University of Colorado environmen-
1998 the temperature rose by slightly tal-studies professor Roger Pielke Jr.
less than a quarter-degree from 1997. have shown, weather-related losses
When the Pacific circulation re- haven’t increased at all over the past
turns to its more customary mode, all quarter-century. In fact, the trend,
that suppressed cold water will surge while not statistically significant, is
to the surface with a vengeance, and downward. Last year showed the
global temperatures will drop. Tem- second-smallest weather-related loss
peratures in 1999 were nearly three- of Global World Productivity, or GWP,
tenths of a degree lower than in 1998, in the entire record.
and a similar change should occur Without El Niño, temperatures in
this time around, though it might not 2015 would have been typical of the
fit so neatly into a calendar year. post-1998 regime. And, even with El
Often the compensatory cooling, Niño, the effect those temperatures
known as La Niña, is larger than the had on the global economy was de
El Niño warming. minimis.
There are two real concerns about
warming, neither of which has any- Mr. Michaels, a climatologist, is
thing to do with the El Niño-en- the director of the Center for the
hanced recent peak. How much more Study of Science at the Cato Institute.
Assistance, in 2013 the Palestinians and social development. Tragically,
received $793 million in interna- as seen in Hamas-run Gaza, it pre-
tional aid, second only to Syria. fers to use the funds on its terrorist
This amounts to $176 for each infrastructure and weaponry, such
Palestinian, by far the highest per as cross-border attack tunnels and
capita assistance in the world. the thousands of missiles that have
Syria, where more than 250,000 rained down in recent years on
people have been killed and 6.5 mil- Israel.
lion refugees displaced since 2011, In Judea and Samaria, the “West
received only $106 per capita. Bank,” the situation is equally dis-
A closer look at the remaining turbing. Aside from funding terror-
eight countries in the top 10—Sudan, ists and investing in hate speech,
South Sudan, Jordan, Lebanon, the PA stubbornly refuses to re-
Somalia, Ethiopia, Afghanistan and move hundreds of thousands of
the Democratic Republic of Congo— Palestinians from “refugee” rosters,
is even more alarming. CIA Fact- deliberately keeping them in a state
book data show that these coun- of dependence and underdevelop-
tries have a combined population of ment for no purpose other than to
284 million and an average per cap- stoke animosity toward Israel.
ita GDP of $2,376. Yet they received It is difficult to come away from
an average of $15.30 per capita in these facts without realizing the
development assistance in 2013. deep connection between the huge
The Palestinians, by comparison, amounts of foreign aid being spent,
with a population of 4.5 million, the bizarre international tolerance
have a per capita GDP of $4,900. for patently unacceptable conduct
In other words, though the Pales- by the Palestinians and the lack of
tinians are more than twice as progress toward peace on the
wealthy on average than these eight ground.
countries, they receive more than 11 Donors to the Palestinians who
times as much foreign aid per support peace would do well to
person. The Democratic Republic of rethink the way they extend assis-
Congo is a case in point: Its 79 mil- tance. Money should go to
lion people have a per capita GDP economic and civic empowerment,
of $700, yet they receive only $5.70 not to perpetuate a false sense of
in aid per person. victimhood and unconditional
Between 1993 (when the Oslo entitlement. It should foster values
Process began) and 2013, the Pales- of tolerance and nonviolence, not
tinians received $21.7 billion in the glorification and financing of
development assistance, according terrorism.
to the World Bank. The Palestinian
leadership has had ample opportu- Ms. Hotovely is the deputy foreign
nity to use these funds for economic minister of Israel.
Notable & Quotable
Historian Forrest McDonald, who instance, the Catholic church’s chari-
died Jan. 19 at age 89, writing in a ties and the Salvation Army, which
1999 Commentary magazine sympo- have been traditional carriers of reli-
sium on the results of the 1998 mid- gion and morality as well as of
term elections: succor, now refrain from espousing
religion and morality, lest they lose
Still—to turn to the editors’ second their government funding.
question—there can hardly be room It is federal money that corrupts:
to doubt that the nation has under- take their money and they own you.
gone a grave decline in its moral stan- Most people probably know this but
dards. Relativism and permissiveness are willing to take the money any-
have won; “sensitivity” toward the way. I once heard Frank Sinatra say
behavior of others, no matter how on a talk show that it was easy
despicable, has won; the notion that enough to get along with the Mafia.
self-esteem is more important than “Just don’t ever let them do you a
achievement has won. favor.” The same advice applies to
Many reasons for the decline can the federal government.
be adduced, not least among them Nevertheless, despite the general
being the intrusiveness into our lives moral decline, I would insist that
of the corruption that pervades there is no widespread neo-Puritan
Washington. Earlier, the Grant and impulse among conservatives. It is
Harding administrations were cor- leftists, not conservatives, who are
rupt, but the scandals had virtually Puritans, who want to make people
no impact upon society; the federal over in accordance with their
government had nothing to do, for views—in myriad ways, ranging from
example, with the way parents stamping out smoking to imposing
raised their children. Now, by con- correct thought; and that has been
trast, the government pokes its nose true since Rousseau. They constitute
into everything, including standards the most serious threat to our cher-
of morality. To cite but one kind of ished freedoms.
How the Feds
Use Title IX
To Bully
Universities
By Jacob E. Gersen
I
n the past several years politi-
cians have lined up to condemn
an epidemic of sexual assault on
college campuses. But there is a genu-
ine question of whether the Education
Department has exceeded its legal
authority in the way it has used Title
IX to dictate colleges’ response to the
serious problem of sexual assault.
When an administrative agency
makes rules and regulations—which
are a form of law every bit as binding
as those passed by Congress—it must
follow the requirements of the
Administrative Procedure Act, the
bible of the bureaucracy. The process
most often used involves “notice and
comment”: The agency must publish
the proposed regulation and respond
to comments before issuing the final
rule. This can take months or years,
and at the end of the process parties
affected by the new rule can chal-
lenge it in court.
Lowering the burden of
proof for sex-assault cases
isn’t required—but schools
don’t dare challenge it.
There’s a point to making the gov-
ernment jump through these hoops:
By demanding transparency and
facilitating public participation and
judicial review, we can be more confi-
dent that the bureaucracy is up to
good rather than ill.
The trick is that the Administrative
Procedure Act contains an exception
for nonbinding “general statements of
policy.” If the agency isn’t announcing
new requirements, but merely offering
general guidelines or clarifying what
the law already requires, then no pro-
cedures are needed. The government
can simply post the new policy state-
ment. But it really must be nonbind-
ing; if an agency announces a policy it
claims is nonbinding, but treats it as
binding in the real world, courts will
not allow its enforcement.
Which brings us back to colleges.
In 2011 the Education Department’s
Office for Civil Rights issued a “Dear
Colleague” letter to explain what
schools must do to comply with Title
IX. On its own terms, this letter was
one of those nonbinding documents.
Yet it contains obligations that exist
nowhere else in federal law. For exam-
ple, in 2014 the office found that Har-
vard Law School violated Title IX
because, among other things, it did not
use a “preponderance of the evidence”
standard in its disciplinary proceed-
ings for allegations of sexual assault.
Instead, it used a higher standard of
“clear and convincing evidence.”
But the requirement that such pro-
ceedings follow the “preponderance”
standard does not exist in the law. It
was announced for the first time in
the “Dear Colleague” letter. Regard-
less, in the end Harvard agreed to
adopt the new standard and overhaul
the way it handles sexual miscon-
duct—as has every university facing
investigation under Title IX. Although
the letter is allegedly nonbinding, the
Education Department has used it as
leverage. College presidents, faced
with an announcement that their
school is being investigated, a poten-
tial loss of federal funds, and a
public-relations nightmare of being
seen as soft on sexual assault, have
declined even to challenge the over-
reach, much less to sue the govern-
ment for acting unlawfully.
With this method, the agency has
achieved complete adherence to its
desired policy, without that pesky
and time-consuming public input and
litigation. The regulated schools are
not so insulated. Many now face law-
suits from students disciplined under
the new procedures. Courts are
taking these claims seriously. Not our
fault, the Education Department
might say. After all, that letter wasn’t
legally binding.
This kind of policy-making pro-
cess—or, rather, policy-making without
process—is unlawful and wrong. The
country ought to be embarrassed when
officials who make law exempt them-
selves from legal requirements, as they
too often do. The Fifth Circuit Court of
Appeals concluded that President
Obama’s immigration policies were
likely issued without the right admin-
istrative process. Now that the
Supreme Court has taken up the case,
we will find out if the justices agree.
Americans often disagree about
what policy is best, but they have long
agreed on the legitimate procedures
for making law. In education, immi-
gration or any other field, administra-
tion in the shadows is no way to
lead—and surely no way to be led.
Mr. Gersen is a professor at Har-
vard Law School.
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A14 | Monday, January 25, 2016 THE WALL STREET JOURNAL.

Cognitive sports is here.

Sports teams lose hundreds of millions of dollars to injuries
each year. IBM Watson™ is now helping analyze training
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GETTY IMAGES
Knicks struggle on the perimeter
WSJ.com/NY
T-B: PETER J. SMITH FOR THE WALL STREET JOURNAL; DALE GERHARD/ASSOCIATED PRESS
Cars were encased in snow in Queens on Sunday, while a man
paddled down flooded Third Avenue in Stone Harbor, N.J. See
more photos of the storm and the cleanup at WSJ.com/NY.
Westchester Heats Up
As Rental Destination
BY KEIKO MORRIS
Renters priced out of New
York City are boosting de-
mand for apartments in down-
town sections of bordering
Westchester County and mak-
ing a compelling case for de-
velopers to launch new rental
projects.
Real-estate executives and
government officials have
noted an uptick in rental de-
velopments proposed or under
way in Westchester, particu-
larly on its
PROPERTY southern end
and along com-
muter train
lines. Real-estate researcher
Reis Inc. projects almost 3%
growth in rental units this
year. That follows three years
of growth below 1%.
“I’ve been doing this now
for 34 years, and it is the most
in the pipeline that I have ever
seen for rentals,” said William
Cuddy Jr., an executive vice
president at CBRE Group Inc.
and the chairman of the eco-
nomic development task force
for the Westchester County
Association, a regional busi-
ness group.
Places like New Rochelle,
Yonkers, Port Chester, Sleepy
Hollow and White Plains have
caught the eye of developers.
“Millennials and others
want to live in dynamic 24-7
communities, but at a certain
point, pricing becomes an is-
sue,” said Peter Chavkin, se-
35°
Weather
Real Feel
TODAY’S
9 a.m. 27°
HIGH
5 p.m. 33°
Record High
60° (1967)
MOSTLY Sunrise/Sunset
SUNNY 7:12 a.m./5:05 p.m.
Tuesday’s High
41°
URBAN GARDNER A16 | CITY NEWS A16, A17 | HEARD & SCENE A19 | ARTS A19
Getting Defensive
* *
nior vice president at SunCal,
which has joined with Diversi-
fied Realty Advisors LLC to
build a large, mixed-use proj-
ect that includes rental and
condominium apartments,
shop space, offices and a hotel
on a former General Motors
plant in Sleepy Hollow. “Are
you going to spend half your
income on housing and be
rent poor or are you going to
cast a wider net?”
Last year, the weighted av-
erage asking rent for all sizes
of Westchester residences was
$2,048, according to Reis. In
Manhattan, the asking rent
was $4,466, and in Brooklyn it
was $2,246.
While developers sense a
new opportunity, Westchester
has historically had strong de-
mand for rentals from down-
sizing empty-nesters and
young professionals, who com-
mute to jobs within the county
as well as to New York City
and Fairfield County, Conn.,
said both real-estate execu-
tives and government officials.
Adding to the draw for devel-
opers: the rental supply is
tight. The vacancy rate in 2015
was 3%, according to Reis.
Many municipalities and lo-
cal governments also have be-
come more encouraging of
mixed-use projects in their
downtown areas. In 2013, Port
Chester instituted a rezoning
that allowed for more retail
and residential development
Please see RENT page A18
N.Y. Sports Lineup
7 p.m. Monday
Sabres @ Rangers
7 p.m. Monday
Red Wings @
Islanders
For N.Y. sports coverage, see A20
SPORTS | A20
THE WALL STREET JOURNAL.
Whiteout
This winter’s first major storm came in as the
second largest on record in New York City.
The 10 biggest snowstorms since 1869 as recorded in Central Park
1) Feb. 11-12, 2006
2) Jan. 22-23, 2016
3) Dec. 26-27, 1947
4) March 12-14, 1888
5) Feb. 25-26, 2010
6) Jan. 7-8, 1996
7) Dec. 26-27, 2010
8) Feb. 16-17, 2003
9) Jan. 26-27, 2011
10) Jan. 22-24, 1935
10) March 7-8, 1941
Source: The National Weather Service
New York Plays a Role at Sundance
BY STEVE DOLLAR
As he began to write his
first feature film, Tahir Jetter
knew he didn’t need to look
far for locations. He could
shoot in his own backyard: the
Brooklyn neighborhoods of
Clinton Hill, Prospect Heights
and Crown Heights.
“There’s a lot of different
subcultures that mingle,” said
Mr. Jetter, who is 28 years old.
The rich urban demo-
graphic was ideal for “How to
Tell You’re a Douchebag,” a
comedy about the complicated
love life of a young, ego-driven
African-American blogger
whose carefree attitude is
shaken when he clashes with a
sophisticated journalist, then
falls for her.
“Douchebag” premieres
Monday at the Sundance Film
Festival, where it is among
several films made by New
Deal Shows the Mets’ Willingness to Spend
BY JARED DIAMOND
Until this weekend, years of
financial austerity, on-field in-
eptitude and general misman-
agement had left the Mets
saddled with perhaps the
worst reputation of any organ-
ization in professional sports.
The refusal to spend the
money to attract top talent
cast doubts on their ability
and willingness to invest in a
competitive roster.
At the same time, a misera-
ble stretch of six consecutive
sub-.500 seasons raised ques-
tions about whether top talent
would choose to play for the
Mets even if they could afford
to pay for their services.
Not even the team’s recent
run to the World Series could
completely erase a perception
that had become so deeply in-
grained over such a long pe-
riod of time.
But by shocking the base-
ball world Friday night and
26.9 inches
26.8
25.8
21.0
20.9
20.2
20.0
19.8
19.0
18.1
18.1
THE WALL STREET JOURNAL.
Yorkers that also happen to
explore vivid aspects of the
city’s culture—instead of
merely using it as a backdrop.
They include “Kiki,” a docu-
mentary about LGBT youth of
color engaged in vibrant dance
competitions, and “Uncle How-
The three films
explore the city
instead of just using
it as a backdrop.
ard,” which explores the leg-
acy of filmmaker Howard
Brookner and 1970s downtown
bohemia.
Mr. Jetter knows that his
isn’t the first Brooklyn sex
comedy about confused mil-
lennials to play Sundance.
Such films are nearly a staple
of the festival, which each
agreeing to terms with star
outfielder Yoenis Cespedes,
the Mets quashed both of
these narratives in one fell
swoop.
The Mets committed $75
million to Cespedes over three
years, the largest average an-
nual value of any contract
awarded to a position player
this winter. The deal includes
an opt-out clause after the
first year, which, if exercised,
would result in Cespedes earn-
ing a whopping $27.5 million
in 2016.
In the process, the Mets
raised their payroll to around
$140 million, returning to lev-
els unseen since a historic
drop that coincided with the
revelation of Bernard L. Mad-
off’s investment fraud, which
affected the finances of the
team’s owners.
This happened at least in
part because Cespedes, in an
unusual move for a high-price
Please see METS page A20
Eastern Union’s
Game Changers
PROPERTY MONDAY | A18
Monday, January 25, 2016 | A15
Cleanup Begins
After the Storm
Takes Heavy Toll
Travel ban ends, transit systems gear back up
and residents dig out after the historic blizzard
BY CORINNE RAMEY
After a massive snowstorm
battered the New York region
with a surprisingly hard punch
this weekend, local authorities
and residents slowly began to
dig out on Sunday and prepare
for a messy Monday commute.
The storm left 26.8 inches of
snow in Central Park, which of-
ficials described as the second-
largest total on record in New
York City. Some corners of the
city were blanketed with more
than 30 inches of snow.
On Sunday, coastal towns in
southern New Jersey were
dealing with major flooding,
portions of Queens remained
buried under heavy snow and
the region’s public-transporta-
tion systems gradually returned
to service.
“We survived, and then
some,” said New York Gov. An-
drew Cuomo during a news
conference Sunday morning.
Authorities lifted a ban on
all road travel in New York City
and Long Island early Sunday,
but officials warned commuters
to expect difficulties and delays
as they head to work Monday
morning. With temperatures
expected above freezing this
week, city officials said they
were concerned about icicles
falling from skyscrapers and
construction sites.
Schools in some cities, in-
cluding Newark, were canceled
on Monday. New York City
schools were set to open.
January presents some of the
most promising new talent in
American independent cinema.
“There’s a canon of those
movies that are relationship-
oriented,” said Mr. Jetter, who
can look further back to exam-
ples by Spike Lee, Woody Al-
len and Nora Ephron.
The comedy, Mr. Jetter
said, reflects his own romantic
troubles, situated within a
community of African-Ameri-
can professionals and artists.
The story was inspired by
“this failed quasi-relationship
thing that I had,” he said. In
its wake, “I started looking at
myself and a lot of my atti-
tudes.”
Mr. Jetter used those to
shape his alter-ego Ray Living-
ston (played by Charles Brice),
an incessant womanizer who
writes a confessional blog
called “Occasionally Dating
Black Women.” To give Ray’s
The Mets committed $75 million to Yoenis Cespedes over three
years, but the deal includes an opt-out clause after the first year.
New York City’s Department
of Sanitation, which is respon-
sible for clearing snow, as-
signed staff to work two 12-
hours shifts, deploying 2,300
workers for each one.
Mayor Bill de Blasio praised
the agency’s response, but he
said some Queens neighbor-
hoods, including Woodside,
Sunnyside, Jackson Heights and
Corona, were in need of addi-
tional snow removal. In Jackson
Heights, more than 34 inches of
snow fell, according to the Na-
tional Weather Service.
“I’m certainly not satisfied
with the condition of some of
the roads and some of our
neighborhoods in Queens,”
said Mr. de Blasio, echoing the
concerns of some of his con-
stituents.
Dmytro Fedkowskyj, a mem-
ber of Community Board 5 in
Queens, said a main road near
his home in Middle Village had
been plowed but he said the
“side streets are just horren-
dous.”
“It’s dangerous and we’ve
got some seniors on the block
that require medical attention,”
said Mr. Fedkowskyj, 50 years
old. “We’ve got school tomor-
row, and how are the parents
Please see STORM page A16
 Cities along East Coast deal
with storm’s aftermath....... A3
 Ralph Gardner Jr. waxes poetic
on nature’s magic show..... A16
 Snow is a delight for some, a
hassle for others................... A17
thoughts a viral presence, the
filmmaker created an actual
website of the same name.
Ray exemplifies “the privi-
leged male attitude that a lot
of women writers I know com-
plain about,” said Mr. Jetter,
who studied film as an under-
graduate at New York Univer-
sity. His leading man isn’t the
only character who gets skew-
ered.
“In a city like Brooklyn,”
Mr. Jetter said, “the reality of
how people live their lives is
significantly different from
how they present themselves
online or in person.”
Identity is an even more
powerful theme in “Kiki,”
which bounces from Chelsea
to the Bronx to downtown
Brooklyn as the film captures
the new generation of ball-
room performers on a gender-
fluid scene that first won
Please see FILMS page A16
JIM MCISAAC/GETTY IMAGES
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A16 | Monday, January 25, 2016
Nature Works Its Magic
The best thing that hap-
pened to me all week is that
my car broke down. If it
hadn’t, I’d have fled the city
Friday evening, as I do most
weekends,
and missed
the snow-
storm. Be-
cause it
snowed lit-
URBAN tle, if at all,
GARDNER where we go
RALPH upstate.
GARDNER JR. But once I
came to
peace with
braving the blizzard, I real-
ized I must promptly join the
crowds that were descending
on local supermarkets before
their shelves were bare.
I suspect I’m not alone in
feeling a thrill at an ap-
proaching blizzard. Espe-
cially in a place like New
York City. Just so long as the
power doesn’t go out.
Cities in general, and New
York in particular, would
seem to stand as civiliza-
tion’s triumph over brute na-
ture. But we all know that’s a
ruse. Nature in the form of
floods, hurricanes and snow-
storms can assert itself
whenever it chooses.
So planning accordingly
doubles as a form of respect,
even reverence.
L-R: RICKEY ROGERS/REUTERS; PETER MORGAN/ASSOCIATED PRESS
Snow buried cars along a street in Union City, N.J., above, on Sunday. At right, people were out clearing snow along
Henry Street in Manhattan’s Chinatown neighborhood. The storm left 26.8 inches of snow in Central Park, a total
described as the second-largest on record in New York City. Some corners of the city received more than 30 inches.
STORM
Continued from page A15
supposed to get out?”
On Sunday evening, officials
at the Metropolitan Transpor-
tation Authority said most out-
door subway service had re-
sumed and would operate
normally on Monday, with the
exception of the Q train in
Brooklyn and the Franklin Ave-
nue Shuttle. Metro-North train
service was largely restored, al-
though southbound trains
weren’t stopping at the Melrose
and Tremont stations, the au-
thority said.
Alternate-side parking rules
FILMS
Continued from page A15
wider public attention in the
1990 documentary “Paris Is
Burning.”
Sara Jordenö, a Swedish
artist who moved to New York
in 2005, spent four years ex-
ploring a world in which she
was an outsider.
“This film made me a New
Yorker,” said Ms. Jordenö, 41,
whose film premieres Tuesday
at Sundance.
While working on another
project, the filmmaker was be-
friended by Twiggy Pucci Gar-
çon, a gatekeeper of the Kiki
subculture who co-wrote and
steered her through the proj-
ect. The most sensational foot-
age comes from the balls,
monthly competitions between
houses—or families—of per-
formers, which take place at
auditoriums all over the city.
“The balls are an explosion
of creativity and sound,” the
filmmaker said. “It’s like a
And snow is beautiful to
boot. I’m sure other planets
in this and other galaxies put
on their displays. But you
could do worse than crystal-
line flakes of water that fall
softly from the sky.
Also, New York is a place
that has a talent for provok-
ing the suspicion that, no
matter how hard you work or
play, you’re still missing out
on something. Someone you
know is doing better or hav-
ing more fun than you are.
You could do worse
than crystalline flakes
of water that fall
softly from the sky.
But a blizzard is a great
equalizer. It demands one
slow down, relax and stop
chasing the proverbial car-
rot. Because there’s suddenly
nowhere to go and nothing
to do.
Whether Donald Trump is
leading the polls in Iowa or
Bernie Sanders in New
Hampshire, this season’s leit-
motif loses all urgency. What
counts are snow totals: how
much of the stuff has fallen
in Central Park and whether
we’ll beat the old record.
in the city were suspended
through Feb. 1, the mayor said.
He urged New Yorkers to avoid
digging out their cars if possi-
ble because the snow would
end up in the middle of the
street.
Local airports were open,
though many flights were can-
celed. La Guardia Airport had
more than 700 cancellations
Sunday, and Newark had about
600 cancellations, according to
the Port Authority of New York
and New Jersey.
Seven of the 12 branches of
the Long Island Rail Road will
be fully operating by 5 a.m.
Monday, the authority said.
Service to Atlantic Terminal, in
Brooklyn, is suspended. Many
A scene from ‘Kiki,’ a documentary set in New York that is screening at the Sundance Film Festival.
shock to the system.”
But Ms. Jordenö gives more
screen time to young African-
American and Latino subjects
as they talk about the intense
challenges they face as mem-
bers of the LGBT community.
CITY NEWS
And in the same way that
one stockpiles snacks for a
major sporting event, such as
the Super Bowl, so one pro-
visions for the approaching
storm.
Though my first stop in
search of staples wasn’t Fair-
way or D’Agostino but a li-
quor store to score a bottle
of single malt scotch.
From there it was onto
Eli’s, where I picked up good
cheese, prosciutto and dark-
chocolate-covered graham
crackers. Who knew how
many days, especially in this
age of global weirding, the
storm might last?
My social life doesn’t nor-
mally include accompanying
my wife, Debbie, and our
dog, Wallie, on their daily ex-
cursion to Central Park. But
it seemed the only place to
be, besides bed, on Saturday
morning.
In the same way that the
Apollo Theater serves as a
citadel for gospel, jazz and
soul, or what the Fillmore
West did for rock 'n' roll, so
Olmsted and Vaux’s master-
piece was the logical destina-
tion to watch nature in ac-
tion.
Plus dogs, like seasoned
skiers, love playing in fresh
powder.
We’re fortunate to live
LIRR yards were buried in
snow, and the authority must
clear snow from tracks, third
rails and switches, officials
said.
“The problem we are still
having is with the Long Island
Rail Road, which has sustained
significant damage in the
yards,” Mr. Cuomo said.
PATH trains will be opera-
tional Monday, although sus-
pended between Newark Penn
Station and Journal Square.
Five people in New York
died from storm-related causes,
such as heart attacks while
shoveling snow, Mr. Cuomo
said.
In New York City, a 67-year-
old man on Staten Island and
“It was very important to
get really close, when that was
allowed, so that the nuance of
their personal stories could
come across,” she said. “It feels
important that they aren’t re-
duced to entertainment.”
Ralph Gardner Jr.’s wife, Debbie, and their dog, Wallie, pass the Metropolitan Museum in the storm.
near the Metropolitan Mu-
seum. And we envisioned
having the place to ourselves
Saturday afternoon.
It was surprisingly
crowded, yet somehow the
blizzard raging outside—the
Charles Engelhard Court in
the American Wing was
bathed in an ethereal light
from all the snow blocking the
skylights—made it easier to
commune with the paintings.
Whether it was Asher B.
Durand’s Catskill Mountain
views, Albert Bierstadt’s
Rockies or Winslow Homer’s
two men in Queens, 78 and 80,
died Saturday afternoon, police
said. Neighbors reported seeing
the 78-year-old shoveling and
the 80-year-old was found out-
side, police said.
In New Jersey, the storm
caused major flooding in the
state’s southern barrier islands
in Cape May County. Damage
was widespread throughout the
county’s 16 towns, which also
had power outages, wind dam-
age and beach erosion, said Di-
ane Wieland, a county spokes-
woman.
“The biggest problem we
have here is the winds were
holding the tidal water in, so it
wasn’t able to recede,” Ms.
Wieland said. “So when the
LUCAS MILLARD
“Uncle Howard” celebrates
the New York underground of
an earlier era. The diaristic
film pays homage to Howard
Brookner, the promising di-
rector of the 1983 documen-
tary “Burroughs: The Movie”
* * THE WALL STREET JOURNAL.
roiling seascapes, you felt on
the artists’ wavelength. The
storm imbued you with
something like the cadences
of 19th century America.
One of the pleasures of
the city, also for its rarity, is
when streets and avenues,
usually the preserve of cars
and buses, are turned into
pedestrian malls. That hap-
pened, more or less, to the
entire city, after a travel ban
was imposed at 2:30 p.m.
Saturday.
People realized it was just
as safe, and easier, to walk in
next tide came in, it brought
more water.”
In Wildwood, N.J., floodwa-
ters floated ice chunks and de-
bris along the streets. Saturday
morning’s high tide was the
worst the town has seen since
the 1960s and caused wide-
spread damage, said Daniel
Dunn, Wildwood’s emergency
management coordinator.
“I can tell you for the shore
towns down here in Cape May,
flooding was absolutely higher
and worse than Hurricane
Sandy was,” Mr. Dunn said.
New Jersey Gov. Chris Chris-
tie, who is campaigning for the
Republican presidential nomi-
nation, left New Hampshire Fri-
day to oversee his state’s storm
and the 1920s period drama
“Bloodhounds of Broadway,”
with Madonna in one of her
early film roles.
The filmmaker died in
1989, amid a wave of AIDS-re-
lated deaths sweeping
through New York’s gay com-
munity.
He lived on, though, in the
imagination of his nephew
Aaron Brookner, whom he
first encouraged to become a
filmmaker.
“I have very strong memo-
ries of my uncle,” said Mr.
Brookner, 34, who grew up in
the West Village. During the
five years he spent making
“Uncle Howard,” the film-
maker discovered he wasn’t
alone, enlisting several of his
uncle’s colleagues and
friends, such as filmmakers
Jim Jarmusch, Sara Driver
and Tom DiCillo, to partici-
pate in the film. “I could see
how vivid his memory was in
so many people.”
Much of the project, which
premieres on Tuesday at Sun-
dance, takes the form of a
RALPH GARDNER JR
the middle of plowed streets
rather than on haphazardly
cleared sidewalks.
Park Avenue, filled with
falling snow and free of cars,
seemed a gift as evening fell.
I passed a family building
a snowman on one of the
traffic islands, as Wallie
dragged me along behind her
down the middle of the ave-
nue.
Even dogs seemed to real-
ize this was an opportunity
that shouldn’t be wasted.
ralph.gardner@wsj.com
response.
On Sunday morning, he held
a news conference and said the
state had weathered the storm
well. Mr. Christie was back on
the campaign trail in New
Hampshire in time for a town-
hall meeting early Sunday af-
ternoon.
Authorities said the timing
of the storm, hitting the region
over the weekend, was ideal,
because it didn’t interrupt the
workweek and many people
stayed indoors.
“We were blessed by
that…despite the huge amount
of snow,” Mr. de Blasio said.
—Kate King
and Mark Morales
contributed to this article.
scavenger hunt, as Mr.
Brookner uncovers original
footage of his uncle’s films in
far-flung archives and on
dusty subterranean shelves,
such as those at The Bunker,
the former Bowery compound
of Beat legend William Bur-
roughs. While the film offers
a loving family portrait of a
spirited iconoclast, it also
opens a portal to another
world.
“This was like time travel-
ing,” Mr. Brookner said, “to
this new planet called New
York City in the late ’70s.”
We Want to Hear
From You
Have something to say about
an article in Greater New
York? Email us, along with
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THE WALL STREET JOURNAL. * * Monday, January 25, 2016 | A17

CITY NEWS

Greater
New York
Watch
NEW YORK
Lobbying, Legislation
Data Linked Online
New York’s attorney general
has relaunched the office’s web-
site containing public information
to match lobbying disclosures
with specific legislation proposed
and passed by state lawmakers.
According to the attorney
general’s office, NYOpenGovern-
ment.com now links Joint Com-
mission on Public Ethics filings
by lobbyists with specific bills,
enabling people to more easily
track issues that lobbyists and
their clients are advocating for,
as well as the results.
The website is intended to
promote the public’s right to
know about governmental deci-
Snow Brings Mix of Mirth and Frustration
BY ZOLAN KANNO-YOUNGS
One of the most brutal bliz-
zards in New York City history
sparked both frustration and
delight on Sunday, with some
New Yorkers grumbling while
they shoveled out their cars
and others laughing as they
sled in Central Park.
Dan Entenberg, a 36-year-
old Upper West Side resident,
hauled his two children
through Central Park for much
of Sunday afternoon as 5-
year-old Lilah and 2-year-old
Shiloh enjoyed the sights from
a sled.
“They’re having a good
time—Daddy’s working hard
pulling them through the
snow,” Mr. Entenberg said.
“Pulling is better than carry-
ing.”
There were plenty of op-
portunities for sledding after
snow piled across the region
on Saturday. The 26.8 inches
of snow in Central Park was

SPENCER PLATT/GETTY IMAGES

sion-making. It includes data on
campaign financing, lobbying,
charities, state contracts, legisla-
tor grants, corporate registrations,
elected officials and legislation.
—Associated Press
CONNECTICUT
Task Force Considers
Smoking Ban in Cars
A legislative task force is ex-
pected to decide whether to rec-
ommend that Connecticut law-
makers vote to ban smoking in
vehicles when a child is inside.
The proposal has been met
with opposition from lawmakers
concerned about the potential
for invasion of privacy or
whether it could lead to profiling
by police looking to pull over par-
ticular drivers. Other lawmakers
have questioned whether such a
law would even be enforceable.
The task force has expanded
its scope and plans to recom-
mend that lawmakers spend
more money on smoking cessa-
tion and prevention programs.
The panel is scheduled to
meet Wednesday, days before
the legislature convenes its reg-
ular session on Feb. 3.
—Associated Press
the second largest total on re-
cord in New York City since
1869, officials said.
Keith Nelson, who lives in
Washington Heights, said he
looked forward to hitting the
high snow hills in northern
Manhattan with his children.
But first he needed their cir-
cular elastic sled to dig his car
out.
As he was leaving his home
on Sunday morning, the su-
perintendent of his building
lent him a shovel.
“I came out last night and
did about 15 minutes of work
and 15 now,” Mr. Nelson, 33,
said. “Not a problem.”
Galdino Xlo, 40 years old,
also offered to shovel for his
fellow Brooklyn residents. The
restaurant he works at was
closed because of the weather,
so he started shoveling for
tips at 7 a.m. on Sunday.
“I’m a little tired just like
everyone else but what can
you do,” Mr. Xlo said.
Flushing, Queens, resident
Robin Caraballo, 52, said many
streets and walkways near her
were still buried in snow. The
city was slow to plow her
neighborhood, she said.
Prospect Park in Brooklyn was transformed into a winter wonderland for young and old on Sunday after the historic snowfall.
“This is ridiculous,” Ms.
Caraballo said. “Even the
plows that are plowing the
sidewalk are getting stuck.
The snow is so deep because
they’re just starting on it.”
The effects of the blizzard
ruined plans for some New
Yorkers.
Marcos Mestisa, 17, waited
an hour and a half in upper
Manhattan on Sunday morning
for a bus to take him to his
soccer game at the Grand Con-
course in the Bronx. But it
never came.
“My game was at 9:30, now
it’s 9:55 and I left at 8,” Mr.
Mestisa said as he waited for a
taxi to take him to another
game in Queens.
In South Orange, N.J., David
and Lauren Freedman cele-
brated daughter Abigail’s bas
mitzvah on Sunday after syna-
gogue officials said the event,
originally planned for Satur-
day, needed to be canceled be-
cause of the storm. Mr. Freed-
man said the rare Sunday bas
mitzvah had one bright spot—
lots of extra food, because 25
of the family’s out-of-town
guests couldn’t be there.
“We’re setting up our
neighbors with leftovers,” he
said.
In Washington Heights, My-
chele Bustamante, 49, had to
carry her whimpering dog,
Justin, because he could
barely walk on the frigid side-
walk.
“The poor dog, his poor lit-
tle feet are frozen,” Ms. Busta-
mante said. “He was crying.”
Ms. Bustamante, whose
work was canceled, didn’t see
the day getting much better.
She said her rental car was
due back on Sunday and it was
still trapped under 6 feet of
snow.
“I’m scared,” she said. “Oh
my gosh.”
Julie Heagney, a tourist
from Ireland, said she was
concerned about icicles falling
from tall Manhattan buildings.
“If it’s falling from a 100-story
building, that could be danger-
ous,” Ms. Heagney, 29, said.
Some escaped the cold by
visiting the American Museum
of Natural History, which had
a delayed opening at noon on
Sunday.
Even though most trains
were operating, patrons still
had difficulties getting to the
entrance of the museum. One
staircase at the 81st Street
train stop was frozen over
with snow and sleet.
Richard Alvarez, 42, trav-
eled to the city from Florida
for business but all of his
meetings were canceled be-
cause of the storm. He was
happy to spend the day at the
museum with his wife, Marcia,
and niece, Beatriz Oquendo,
21.
“I don’t have to shovel it, I
don’t have to drive in it so it’s
really not that stressful for
me,” Mr. Alvarez said.
Ms. Oquendo said she had
never before seen snow. And
after experiencing it, she said
she preferred the weather in
Miami.
“Walking on the snow I feel
like I’m going to bust my [be-
hind],” she said. “It’s not that
great. Day two, I’m done.”
—Mark Morales,
Charles Passy
and Corinne Ramey
contributed to this article.

GREATER
NEW YORK
THEATER TUESDAY

EDUCATION FOR LIFE

It won’t be the first Broadway show to hit the small screen,

but Fox’s “Grease: Live” is taking an uncommon risk—taping
with a live audience. Find out what that means for the talent
behind the show.

Read more tomorrow in the Greater New York section.

GREATER NEW YORK

LEARN MORE. CALL 866.467.7651 OR VISIT WWW.OUTWARDBOUND.ORG © 2016 Dow Jones & Co., Inc. All rights reserved. 3DJ3151
 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
A18 | Monday, January 25, 2016
What’s the
Deal
BROOKLYN
Warby Parker Leases
Space in Cobble Hill
Eyeglass company Warby
Parker is the latest tenant to sign
a lease in Cobble Hill, a Brooklyn
neighborhood that’s becoming in-
creasingly attractive to national
retail tenants.
The store will be Warby
Parker’s first in New York outside
of Manhattan. The chain, which
sells designer eyewear, has three
stores in Manhattan and about
20 elsewhere the U.S., according
to co-founder Neil Blumenthal.
“Everyone already thought we
were based in Brooklyn, so we
thought it was time to open a
store there,” he said.
The company signed a 10-year
lease for about 2,080 square feet
at 55 Bergen St., according to
Paul Webber, the Cushman &
Wakefield broker who repre-
sented the landlord. Mr. Webber,
who has since left Cushman &
Wakefield, declined to comment
on the asking rent.
“Ownership was seeking a so-
cially conscious and successful re-
tail tenant that would help com-
plement the existing stores on
the block,” Mr. Webber said.
Mr. Blumenthal said Warby
Parker chose Cobble Hill because
“we wanted to be a member of
that creative community.” He said
the company is aiming to open
this spring. The neighborhood has
gained attention from national re-
tailers in recent years. Companies
such as Barney’s, Urban Outfitters
and Lululemon are moving in.
“Cobble Hill is seeing tremen-
dous growth from a retail per-
spective,” Mr. Webber said. “We
are seeing rents continue to rise
and seeing an interest in retail
space by diverse enterprises with
local, domestic and international
roots.”
—Emily Nonko
VISUALHOUSE
A rendering of Life Time Fitness’s club at Sky on West 42nd Street.
RENT
Continued from page A15
downtown, said Mayor Dennis
Pilla. That followed the lifting
of local restrictions on live
performances. Now, the village
has become a destination for
restaurants, shopping and en-
tertainment. New apartment
buildings have risen down-
town, which also has a Metro
North train station.
“Over the past five years
millennials have been moving
into Port Chester from the
outer boroughs of New York
City and also the surrounding
communities,” Mr. Pilla said.
He added, “Many like the di-
versity we have and they like
the vibe of a cosmopolitan
downtown and the quietness
of the bedroom communities.”
In the past two years, the
Westchester County Industrial
Development Agency has ap-
proved financial incentives for
seven multifamily or mixed-
use projects, according to the
county’s Office of Economic
Development. The projects
represent more than 1,600
units, over $650 million in pri-
vate sector investment and
nearly 4,000 permanent or
construction jobs created or
retained, the office says.
The county agency’s proj-
ects are a snapshot of the
county’s mixed-use and rental
projects because the tally
doesn’t include other ventures
assisted by industrial-develop-
ment agencies in various
Westchester communities.
In December, New Rochelle
approved a master plan rezon-
ing 274 acres of land around
its train station and in its
downtown area. The rezoning
plan, developed with the com-
munity by a joint venture of
RXR Realty and Renaissance
Downtowns LLC, will allow for
new shops, offices and 5,500
MANHATTAN
Life Time Fitness
Plans Facility in City
Luxury fitness company Life
Time Fitness Inc. will open its
first New York City location in
March in a high-end tower on
Manhattan’s far West Side devel-
oped by the Moinian Group.
Life Time and Moinian formed
a partnership two years ago to
create the almost 70,000-square-
foot facility at the 69-story rental
high-rise called Sky, said Mitchell
Moinian, of the Moinian Group.
Located at 605 W. 42nd St., the
club will include two outdoor in-
finity pools, an indoor pool, pro-
fessional-size indoor basketball
court and spa.
“A lot of buildings’ gyms are
afterthoughts,” Mr. Moinian said.
“...We said to ourselves, ‘Let’s ac-
tually make an amazing A-plus
gym.’ ”
Life Time is known for its
large, amenity-filled health clubs
in affluent suburbs. Though its
typical facility is about 120,000
square feet or more, Life Time
Chief Executive Bahram Akradi
said Life Time Athletic at Sky is
still much larger than the typical
Manhattan gym.
—Keiko Morris
MANHATTAN
Workspace Advisory
Rents a Floor in City
A provider of upscale flexible
office space has signed a long-
term lease for a floor at 519
Eighth Ave.
Workspace Advisory Group
LLC, a new venture launched by
Joseph DeTrano, has taken
16,000 square feet at the 26-
story Garment District building
in a 10-year lease with the Kauf-
man Organization and Kaufman
8th Avenue Associates LP. The
deal solidifies the building’s pro-
file as an office destination and
underscores the avenue’s office
transformation over the years,
said Steven Kaufman, president
of the Kaufman Organization.
“It’s become a much more ac-
ceptable address than before,”
Mr. Kaufman said.
—Keiko Morris
apartments.
Seth Pinsky, RXR executive
vice president, said historic
downtown sections in the sub-
urbs, many of which floun-
dered in the 1960s and 1970s,
are gaining new traction. RXR
is part of a joint venture
building a complex in down-
town Yonkers that includes
442 apartments and up to
40,000 square feet of retail
space.
“Historically what we have
done when we look to the sub-
urbs is created sprawl,” said
Mr. Pinsky. “Now we have the
opportunity to look back to
the future and…create some-
thing new and potentially ap-
pealing to a different type of
person on a small part of the
land mass in these communi-
ties.”
East & Hudson Real Estate
LLC, based in Manhattan, also
is focusing its development
Top, the Tarry Lodge in Port Chester, N.Y., was established in 1906 but was reincarnated as an Italian trattoria by Mario Batali and Joe Bastianich in 2008. Above left,
the Castle apartment building in Port Chester, N.Y., and at right, a view of buildings next to the New Rochelle station on Metro North’s New Haven Line.
PROPERTY MONDAY
Mortgage Broker Rewrites the Rules
Eastern Union Funding, a
midsize commercial-mort-
gage broker, caused a ripple
last year when it capped its
fee on any deal at $135,000,
partly because Eastern exec-
utives saw that the real-es-
tate-lending business was
becoming increasingly
streamlined.
Now Eastern Union,
which was founded in
Brooklyn, is
THE taking its
COMMISH willingness
PETER to bend on
GRANT fees to an-
other level.
The firm
continues to provide tradi-
tional mortgage-broker ser-
vices, in which the borrower
pays a commission once a
loan closes.
But the firm, which has
about 110 employees and
handled more than $3 bil-
lion of loans last year, also
offers some owners of prop-
erties that have strong cash
flows an a la carte range of
services on more of a con-
sulting basis. For example,
Eastern Union might charge
a borrower as little as
$15,000 for the firm’s help
in getting a so-called term
sheet from a lender that
lays out the terms of a loan
but is well short of a done
deal.
“We’re telling clients, if
the traditional mortgage
broker doesn’t work for you,
can we have a relationship
where I provide you por-
tions of what you need,”
said Abraham Bergman,
Eastern Union’s managing
partner and co-founder. “I
can provide you value, we
can negotiate a price and
you’ll pay me for that.”
Eastern Union’s competi-
tors say it is trying to buy
business and that mortgage
brokers are well worth what
they earn in traditional com-
missions because of their
market knowledge, relation-
ships with a wide range of
lenders and skill in getting
deals closed.
“There is that old adage
that you get what you pay
for,” said Peter Hauspurg,
chief executive of Eastern
Consolidated, which oper-
ates a mortgage-brokerage
business alongside its well-
known sales-brokerage oper-
ation.
But Eastern Union execu-
tives say that their flexibil-
ity on fees reflects major
changes taking place in the
commercial-real-estate fi-
strategy around transit-ori-
ented developments around
Manhattan and Brooklyn in
places like Westchester
County, Nassau County on
Long Island and New Jersey’s
Hudson waterfront.
Abraham Bergman, managing partner, left, and Ira Zlotowitz, president, of Eastern Union Funding.
nance industry, partly be-
cause of new technology. In-
creasingly, the process is
becoming standardized and
it’s becoming easier to do
larger deals.
As a result, some borrow-
ers are pressuring brokers
to cut their commissions,
calling them excessive. “At
one point it’s going to give,”
said Ira Zlotowitz, the firm’s
president and co-founder. “I
waited it out. I enjoyed the
ride.”
The jockeying over fees
and commissions in the
mortgage-brokerage busi-
ness comes as technology is
making big changes
throughout the real-estate
industry, but with varying
degrees of impact on tradi-
tional players. A large num-
ber of residential mortgage
brokers have been displaced
by online players like
Quicken Loans.
But leasing and sales bro-
kers in commercial real es-
tate have retained their mar-
ket clout, especially in big
transactions. Many in com-
mercial-mortgage brokerage
say that it, too, will remain
strong because of the com-
plexity involved in deals.
Mortgage-broker commis-
sions, paid by the borrower,
traditionally equal 1% of the
loan value, although lower
rates often are negotiated
with bigger loans. “If you
have a really good, experi-
The company is working
with Megalith Capital Manage-
ment LLC to build a 6-story,
71-unit luxury rental develop-
ment geared toward millenni-
als in New Rochelle.
The train ride between New
* *** THE WALL STREET JOURNAL.
enced mortgage broker who
brings repeat business and
doesn’t waste the banker’s
time, your loan will get at-
tention, while the other
guy’s will not,” Mr. Haus-
purg said.
Messrs. Zlotowitz and
Bergman, who originally met
at a Yeshiva in Israel,
launched Eastern Union in
2001. Before that they both
worked at Meridian Capital
Group, one of the largest
U.S. mortgage brokers in the
country, with more than $30
billion in annual volume.
Mr. Zlotowitz said that,
while at Meridian, he in-
creased that firm’s volume
by recognizing that part of
the business could be stan-
dardized and handled by
employees who were essen-
tially telemarketers. The “se-
cret sauce” was figuring out
when to hand off a possible
client from the telemarketer
to a more senior executive
with lender relationships.
Eastern Union began
thinking about capping fees
as the commercial-real-es-
tate market recovered from
the downturn following
2008. Banks were getting
bigger, loans were becoming
more formulaic, and borrow-
ers were become more so-
phisticated and going di-
rectly to lenders without a
mortgage broker, said Mr.
Zlotowitz.
“I said there was going to
Rochelle and Grand Central
Terminal could take the same
amount of time as a commute
from Brooklyn or the Upper
West Side Manhattan to mid-
town Manhattan, said Anup
Misra, chief executive of East
PETER GRANT/THE WALL STREET JOURNAL
come a point where more
people are going to go direct
and people are going to beat
up the brokers fees more.”
Eastern Union executives
said they decided to get out
in front of these trends. In
2014, the firm capped its
fees at $250,000, a move
which had a negligible im-
pact on business because
the firm tended to do
smaller loans.
Volume rose much more
last year, when Eastern
Union reduced the cap to
$135,000, they said. “Busi-
ness started flying” partly
because technology has di-
minished the difference be-
tween doing large loans and
small loans, Mr. Zlotowitz
said. “The same lenders and
loan officers that are closing
my $25 million or $50 mil-
lion loan are also doing the
$200 million loan.”
Initially there was “push-
back” from brokers working
for Eastern Union, con-
cerned that the cap would
limit their compensation,
Mr. Zlotowitz said. But
they’ve come to realize that
they’ve made up in volume
what they may have lost on
smaller fees from the bigger
deals, he said.
“Did we lose out on a few
deals on which otherwise
would have collected higher
fees? No doubt,” he said.
“But on a net basis, no bro-
ker lost out.”
& Hudson.
“It’s desirable to be in Man-
hattan, but once they get out-
priced…the option is to go to
the burbs where you get al-
most the same lifestyle,” Mr.
Misra said.
STEVE REMICH FOR THE WALL STREET JOURNAL (3)
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.
A Well-Plated Evening for Pediatrics Funding
Though at this point it
seems as long ago as the Tri-
assic period, there was a
time before winter storm Jo-
nas hit New York City.
And in that time, people
got dressed up and went to
parties. This occurred as re-
cently as Thursday night.
That’s when a lot of
folks—in particular fancy
young Manhat-
tan parents—
ventured to
the Mandarin
Oriental for
the annual
MARSHALL Plates for Pe-
HEYMAN diatrics gala,
which this
year raised a
record $1.2 million for the
pediatric programs at the
Komansky Center for Chil-
dren’s Health at NewYork-
Presbyterian/Weill Cornell.
When this party first
started six years ago it actu-
ally had something to do
with plates. Artists were
commissioned to design and
paint unique dinner plates
that were then sold at auc-
tion to raise funds for the
hospital.
Nobody interviewed at
Thursday’s party seemed to
know exactly what happened
to the plates or where they
went, but that conceit was
trucked off to the vintage
store. Still, the name of the
party—Plates for Pediatrics—
stuck. That’s philanthropic
branding for you in 2016.
In lieu of plates, the live
auction featured items for
potential donation to the
hospital: a $25,00 Giraffe
Isolette, for instance, or
$15,000 reclining chairs for
Kangaroo Care. Nearly 40
people in attendance bid on
$1,000 “Wacky Wednesdays,”
which enables the hospital to
fund entertainment sessions
at the hospital.
“That’s almost a year of
Wacky Wednesdays,” noted
the fashion designer Veron-
ica Swanson Beard.
Perhaps the one nod to the
evening’s moniker was the
fact that the actual dinner
Where Art Lies in Ruins
And Along Urban Streets
Beyond Ruin Porn
 Front Room Gallery
147 Roebling St., Brooklyn
718-782-2556
Through Feb. 21
“Ruin porn” is photography of ur-
ban decay and abandoned indus-
trial complexes. The 17 pictures
in this
ON group show
PHOTOGRAPHY were se-
WILLIAM lected be-
MEYERS cause the
sites, al-
though no
longer serviceable, have social,
historical or cultural relevance.
The three pictures by Sasha
Bezzubov and Jessica Sucher
were taken in 2006 at the Ma-
harishi Mahesh Yogi’s ashram in
Rishikesh, India, where, in 1968,
Fred Stein’s ‘Vendor, Paris’ (1935)
* * * *
HEARD & SCENE
The annual Plates for Pediatrics event, held at the Mandarin Oriental, brought out, clockwise from
above, Drew Barrymore and Will Kopelman; Merrill Curtis and Travis Acquavella; Patricia Lansing
and her mother, Carolina Herrera; Naveen Nataraj, Lisette DeLuca and Courtney Nataraj; Candice
Postel and Allison Aston; Jill and Harry Kargman; and Dr. Gerald Loughlin and Barbara Loughlin.
KELLIE WALSH
plates—on which beef ten- port committee, and perhaps
derloin was served with baby even others in attendance.
beets, cherry tomato confit “I know,” joked Ms. Aston,
and potato leek gratin—were as she held a yellow-and-
glass. They sat on chargers black charger up to her
emblazoned with a yellow dress. “I could have saved
and black print from the cur- some money and just made
rent Resort 2016 season of an outfit out of them.”
the fashion designer Carolina Because the evening
Herrera, whose company un- raises money for the hospi-
derwrote the evening. tal’s pediatric services, it at-
Said chargers also hap- tracts in particular parents
pened to match outfits worn with young children. Among
by event co-chair Allison As- the guests were Stephanie
ton and Candice Postel, the and Chase Coleman, Arriana
chair of the pediatric sup- and Dixon Boardman, Nancy
ARTS & ENTERTAINMENT
the Beatles famously sought en- tures from 2013 of the interior
lightenment; it was abandoned in of the Domino Sugar factory in
1997. The first picture shows the Williamsburg, Brooklyn, show
decorative metal gate that now the incredible complexity of the
leads to a shabby vestibule; the equipment used to refine, sort
second, a large room with graffiti and package sugar; one looks
on the wall and a collapsing ceil- like a monstrous sculpture, and
ing; the third, the overgrown another the engine room of a
beehive-like meditation huts. sci-fi spacecraft.
Phillip Buehler’s three prints Stephen Mallon’s “Throttle”
are of the Greystone Park Psy- (2009) is on the control panel of
chiatric Hospital in Morris Plains, the US Airways Airbus A320
N.J.; from 1956 to 1961 folk that pilot Chesley Sullenberger
singer Woody Guthrie was a pa- successfully landed in the Hud-
tient there, dying from Hunting- son River; it is covered with
ton’s disease. The hospital has mud. Like Wordsworth’s Tintern
since been demolished, but in Abbey, ruins give us pause.
2004 Mr. Buehler recorded the
rooms with peeling paint, falling The World of Fred Stein
plaster and, in one, a sad up-  Rosenberg & Co.
right piano. 19 E. 66th St.
Paul Raphaelson’s three pic- 212-202-3270
Through Feb. 12
Fred Stein’s son, Peter, was in
the gallery when I was there,
and he told me that his father
was a great conversationalist.
To be one, you not only need to
speak well but to have some-
thing to say; it also helps to
have a talent for listening. Stein
exhibits the visual equivalents in
his photographs: clarity, curiosity
and sympathy. Stein was born
in Dresden, Germany, in 1909;
left that country in 1933 to
avoid the Gestapo; lived in Paris
until 1939, when he was in-
terned as an enemy alien; and
escaped and made his way to
Marseilles, France, where he em-
barked for the U.S. In New York,
as he had in Paris, he practiced
street photography and took
portraits of cultural figures. He
died in 1967.
THE ESTATE OF FRED STEIN/ROSENBERG & CO.
Rosenberg is showing 51
prints from Germany, France and
New York. Still-lifes, such as
“Fish Platter, Brittany” (1935),
and streetscapes, such as
“Wrought Iron Staircase, New
York” (1945), show a refined
Bauhausian modernism. But
most of the pictures are of peo-
ple shot in public, such as the
“Vendor, Paris” (1935) sitting
outside with goods in her hand;
the five women in a “Knitting
KELLIE WALSH
and George Walker, Marcie
and Jordan Pantzer, Naomi
Waletzky and Rowan Hajaj,
Jill and Harry Kargman, Ali
Wise, and Will Kopelman and
Drew Barrymore.
As the honorary chair, Ms.
Barrymore brought a dash of
celebrity to the proceedings,
one that was recognized pro-
fusely by Dr. Gerald M.
Loughlin, the pediatrician-in-
chief at NewYork-Presbyte-
rian.
“My wife is reading your
book,” Dr. Loughlin told Ms.
‘Bin Distributor,’ one of Paul Raphaelson’s photographs from an old sugar refinery in Brooklyn. The
2013 work is part of an exhibition at Front Room Gallery entitled ‘Beyond Ruin Porn.’
Circle, New York” (1948) intent
on their needles; and the two
geezers having a “Chess Game,
New York” (1947) on a park
bench. Their mundane activities
are invested by Stein with enor-
mous dignity. There are wonder-
ful pictures of children, and his
photograph of two girls in swim-
suits and sun hats caught on a
“Swing, Paris” (1934) at its apo-
gee is pure joy.
PM New York Daily:
1940-48
 Steven Kasher Gallery
515 W. 26th Street
212-966-3978
Through Feb. 20
PM, the determinedly leftist
New York tabloid daily, an-
nounced in its first issue, “PM is
against people who push people
around.” But also, “PM’s sole
source of income is its readers,”
and it never had enough to sus-
tain its publication. Although
short-lived, it published a distin-
guished roster of writers and
photographers. Weegee (Arthur
Fellig) was in the second issue,
June 19, 1940, with a photo of a
car wreck, and many of his most
frequently reproduced pictures
appeared in PM, such as “The
Critic, Opening Night at the Met-
ropolitan Opera” (Nov. 22, 1943)
and “Their First Murder” (Oct. 9,
1941). The images are shown as
Monday, January 25, 2016 | A19
Barrymore, who wore a
dress from a capsule collabo-
ration with Carolina Herrera
and Jeffrey New York.
(Coincidentally, Ms. Barry-
more’s father-in-law, Arie
Kopelman, serves as the co-
chair of the Winter Antiques
Show, which had its opening-
night party across town at
the Park Avenue Armory in
honor of the East Side House
Settlement on Thursday
night as well.)
Meanwhile, Ms. Coleman,
the chair of the children’s
prints and in yellowing pages
from the paper.
At PM, Margaret Bourke-
White and Mary Morris became
the first female press photogra-
phers on staff at a daily paper
in the U.S. Several of Lisette
Model’s portraits from “Prome-
nade des Anglais (Nice, French
Rivera)” (1937) ran with an arti-
cle about prewar European dec-
adence, and Helen Levitt’s sig-
nature “Third Ave., Upper East
Side, Offers no Trees or Cliffs
for Kids to Climb, but Porch of
Abandoned Building is Excellent
‘The Esposito Episode. Heroic Taxi Driver, Leonard Weisberg,
Lying Dead at Deadly “Mad Dog” Shoot-Out in Manhattan’ (1941),
by Max Peter Haas, is on display at Steven Kasher Gallery.
DIANE BONDAREFF/ASSOCIATED PRESS (4)
KELLIE WALSH
advisory council, was pre-
sented with the Light Up a
Life Award. The actual award
was a framed stethoscope
featuring a baby chick on it,
the logo of the Komansky
Center.
All of the guests went
home with a children’s first-
aid kit courtesy of the acces-
sories company Lolo that in-
cluded Band-Aids, an Ace
bandage and a flashlight,
something that no doubt
came in handy for the im-
pending storm.
PAUL RAPHAELSON/FRONT ROOM GALLERY
Substitute” (July-August 1940)
was used to advocate for more
parks. Morris Engel, Irving Hab-
erman and Arthur Leipzig were
PM photographers whose repu-
tations continue, but those in
the show such as Leo Leib, Max
Peter Haas and Gene Badger,
competent but forgotten photo-
journalists, also contributed
their share of politicians, crooks,
sports figures and babes in
bathing suits to PM’s pages.
Mr. Meyers writes on pho-
tography for the Journal.
STEVEN KASHER GALLERY, NEW YORK
 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
A20 | Monday, January 25, 2016 * * THE WALL STREET JOURNAL.

SPORTS
Heard On Knicks Defense Frays at the Edges
The Field Porous perimeter defense
is beginning to undermine
strategic improvements
and solid rim protection
BY CHRIS HERRING

There are many factors behind

the Knicks’ one-year jump from hap-
less to respectable, but one of the
most overlooked is also one of the
most significant. After years of flail-
ing about on defense, the team fi-
DANIEL KOPATSCH/GETTY IMAGES

nally has a firm plan of how it wants

to defend.
The Knicks’ strategy is to take
away the 3-point shot by crowding
opposing guards on the perimeter,
forcing wing players to put the ball
on the floor and challenge the team’s
twin towers, Kristaps Porzingis and
Robin Lopez, in the paint.
While this idea has generally
Agassi, Roddick to Hit

(T-B) YONG KIM/ZUMA PRESS, FRANK FRANKLIN II/ASSOCIATED PRESS

Brooklyn for Tennis
Brooklyn is adding tennis to a
professional sports calendar that al-
ready includes boxing, basketball,
minor-league baseball, semi-pro
football, and both men’s and
women’s hockey. On Monday, Bar-
clays Center will announce its first
tennis event, the PowerShares QQQ
Cup, a one-day tournament consist-
ing of retired ATP World Tour stars
Andre Agassi (pictured), Andy Rod-
dick, Jim Courier and James Blake,
on Saturday, Dec. 3.
“I enjoyed indoor tennis,” said
Agassi, the 1994 and 1999 U.S.
Open winner. “More offensive tennis;
the first person to get a hold of it
usually is gonna take control of the
point.”
The PowerShares Series events
feature two one-set semifinal
matches, followed by a one-set
championship. Roddick, the 2003
U.S. Open champion, took the series
last year, winning eight events,
while Blake, a native of Yonkers, fin-
ished second.
Brooklyn is certainly not known
for tennis—this is the first signifi-
cant professional tennis event in the
borough since the Open era began
in 1968.
But the sport isn’t completely
foreign to Brooklyn, which is dotted
with public courts from McCarren
Park in Greenpoint all the way to
Coney Island’s Kaiser Park. Bill Til-
den won the 1935 U.S. Pro Tennis
Championship at Brooklyn’s Terrace
Club in 1935, and the United States
took the second-ever Davis Cup at
the Crescent Athletic Club back in
1902.
Agassi has never been to Bar-
clays Center, but he expects a typi-
cal New York crowd.
“There’s a high-standard of enter-
tainment,” Agassi said. “There’s a
bar that you have to clear, they ex-
pect you to lay it all out there…
They’re a crowd that usually has an
appreciation for the finer moments
in a tennis match and it’s recognized
by their silence. I’ve said this before:
there’s nothing quite so loud as
20,000 silent New Yorkers.”
As for facing the younger Blake,
36, and Roddick, 33, Agassi sees
some advantages for him and Cou-
rier, both of whom are 45.
“I do believe those closer to play-
ing possess a real inherent advan-
tage, but they also don’t have the
experience of negotiating their bod-
ies and knowing what they can and
can’t cover,” he said. “At this stage
of playing, I’ve really recalibrated my
sense of where to be on a court.”
—Alex Raskin
worked—New York ranks inside the
NBA’s top-10 in both rim protection
and 3-point percentage defense—
there has been one noticeable issue
with that strategy of late: The
Knicks’ wing defenders have come to
rely on it far too often.
Jose Calderon and Arron Afflalo,
the Knicks’ starting backcourt, gen-
erally aren’t quick enough laterally
to stay with the league’s best guards.
They often have to rely on team-
mates to switch defensive assign-
ments or hope that Porzingis or Lo-
pez will make a stop at the rim.
On occasion, that’s completely
fine. No player is going to seal off
every drive, and for players like Cal-
deron and Afflalo—counted on more
for their offense than defense—it’s
expected they will allow opponents
to get to the rim more frequently.
The Knicks’ big men have generally
answered the bell, too, often at the
same moment.
Porzingis and Lopez have simulta-
neously contested 52 shots at the
rim so far, according to a video anal-
ysis of each close-range attempt
against the 7-footers this season. Of
those 52 tries, 29 have gotten
blocked. (Only 14, or a little over
26%, have turned into baskets.)
Chris Paul drove to the
basket 10 times against
the Knicks, up from his
average of six per game.
Together, the duo has blocked
6.34 shots per 100 possessions when
sharing the court, the highest block
rate for a pair of 7-footers since
2002, according to Stats LLC.
“Sometimes we have to avoid
bumping into each other, because we
get there [to block shots] right at
the same time,” Lopez said, alluding
to the rhythm he and Porzingis have
developed. “It’s been pretty easy to
play with him on that side of the
floor. I don’t think we’re making too
many mistakes.”
But solid rim protection hasn’t
been able to cover for the team’s po-
rous perimeter defense in every sce-
nario, especially over the past few
weeks, as coach Derek Fisher has be-
gun playing Porzingis more often on
his own at center—without Lopez
sharing the floor.
In particular, opponents have col-
lapsed the Knicks’ defense far too
easily in recent games. With only a
drive and a pass or two, opponents
have been getting open looks from 3-
point range or making a lob pass to
a rolling big man as Lopez or Porzin-
Top: Robin Lopez, left, and Kristaps
Porzingis have jointly contested 52
shots at the rim. Bottom: Chris Paul,
left, drives against Jose Calderon,
whose lack of lateral quickness has
been exposed by opponents of late.
gis steps up to challenge the pene-
trating guard.
Chris Paul danced his way to the
basket 10 times during the Clippers’
blowout win Friday, up from his av-
erage of six drives per game, per
NBA.com. Charlotte’s Jeremy Lin, av-
eraging 7.5 drives per contest, sped
toward the basket 12 times in a win
over the Knicks on Saturday. Ish
Smith, Philadelphia’s point guard,
drove a mindboggling 26 times in
the Knicks’ double-overtime win
over the Sixers, more than double
his season average of 11 drives per
game. (Even Clippers guard Pablo
Prigioni, who almost never drives,
got to the basket six times against
his former team earlier this week.)
The struggles to contain guard
penetration have coincided with op-
posing teams hitting threes at a
much higher rate. After ranking
dead-last in the NBA in 3-point per-
centage defense last season, the
Knicks began this season by leading
the league in the category for the
first month and a half of play. But ings on defense signaled anything lights the team’s curious decision in
after limiting opponents to 29.8% about the need for more athleticism free agency last summer to sign an
from deep in November and 32.1% in on the wings, Fisher rejected the no- abundance of big men as opposed to
December, the Knicks are surrender- tion. “We’re the same team we were stocking up on wing players and fol-
ing 3-pointers on 37.7% of attempts a week ago, or three days ago, when lowing the NBA’s small-ball trend.)
so far this month, which ranks ninth- we had enough to beat whoever we “[Thomas] is very important to
worst. were playing at the time,” he said us,” Porzingis said. “Defensively, he’s
Left unsolved, the flaw could see Friday, adding that the Clippers, the always helping. He brings a lot of
the Knicks struggle even more with opponent that night, are unusually energy to the team. Maybe that’s
defensive rebounding and fouls—two fast and athletic. what we’re missing a little bit—you
areas where they already rank Some of that is true. But there is can see how important it is for us.”
among the league’s bottom-10 teams. also one key difference: The recent It’s true that the Knicks need
Relying too much on bigs to make absence through injury of Lance Thomas. But with Oklahoma City’s
plays at the basket inevitably leads Thomas, the team’s best and most Russell Westbrook and reigning NBA
to more fouls, and potentially leaves versatile perimeter defender, has MVP Stephen Curry coming to town
those same players out of position to hurt the club, loosening what had this week, the team would also bene-
clean the glass at the end of a play. become a much tighter, more consis- fit from a more strategic way to cut
Asked whether the recent show- tent rotation. (His injury also high- off the paint, too.

METS tunity presented itself. In September,

he and his agents amended a clause
in his previous contract that essen-
tially precluded the Mets from even
Continued from page A15 bidding on him this winter.
free agent, rejected a more lucrative Granted, Cespedes almost cer-
offer from another team, eschewing tainly accepted the Mets’ overtures
more guaranteed years and dollars only because they gave him the
to come back to New York. chance to test free agency again next
The Mets acquired Cespedes from year. But by spurning longer offers,
the Detroit Tigers at last July’s trade Cespedes showed where the Mets
deadline, and he powered them to stand.
their first division title since 2006 “It really excites me when players
by slamming 17 home runs in 57 like Yoenis want to play here,”
DAVID J. PHILLIP/ASSOCIATED PRESS
and his dramatic game-winning
home run two nights later cemented
his status as a folk hero.
Away from the team while rehab-
bing an elbow injury, Wheeler dem-
onstrated his dedication to the Mets,
too. Concerned that the Mets might
try to trade him again, Wheeler took
the unconventional step of calling
general manager Sandy Alderson di-
rectly to express his desire to stay.
Alderson said later that their con-
versation “had quite an impact.”
Now add Cespedes to that list—

games. Wright said. another player who seemingly cared

“It was a compromise on Yo’s side
and a compromise on the Mets’
side,” Mets captain David Wright
said in a telephone interview. “I love
Yoenis even more for doing that,
knowing that he ultimately wanted
to play here.”
Even as the losses piled up and
the budget ranked among the bot-
tom-third in baseball, the Mets’
brass insisted they would open their
wallets at the appropriate moment,
when their window to contend
opened and fans filled the ballpark.
Buoyed by a 19.6% increase in regu-
lar-season attendance at Citi Field
and a surge in revenue from the
Mets’ postseason appearance, the
Wilpon family held up its side of the
bargain.
More important, the Mets did it
on their own terms, sticking to their
convictions about not handing Ces-
Last season, Yoenis Cespedes hit 17 home runs in 57 games with the Mets.
pedes the sort of lavish long-term
contract that frequently backfires.
With an incentive to hit the open
market again next offseason, when
he would be the prize of a weaker
free-agent class, the Mets expect to
see a slugger motivated to repeat his
35-homer, 105-RBI performance from
2015.
To be sure, landing Cespedes re-
quired some luck. But the Mets for-
mulated a plan and executed it per-
fectly. “They said all along for the
Over the summer, two other Mets
laid the groundwork for this phe-
nomenon, hinting at a burgeoning
change in the culture of a once-toxic
franchise.
Before they brought in Cespedes,
the Mets nearly completed a differ-
ent trade, agreeing to ship infielder
Wilmer Flores and starting pitcher
Zack Wheeler to the Milwaukee
right player, the right situation, that Brewers for outfielder Carlos Gomez.
they had the money and they are The Mets scuttled the deal at the
willing to spend it,” Wright said. last moment over concerns about
“Yoenis is that right situation.” the health of Gomez’s hip, but the
It seems Cespedes viewed the aborted trade’s aftermath will re-
Mets as the right situation as well, main etched in franchise lore.
crystallizing the new reality facing When news of the trade trickled
the team: After a half-decade of vir- out, Flores cried on the field, devas-
tual irrelevance, players now look at tated by the idea of leaving the or-
the Mets as a viable option. ganization that signed him as a 16-
Cespedes always maintained that year-old out of Venezuela in 2007.
he enjoyed his time with the Mets Flores’s tear-streaked face emerged
and would like to stay if the oppor- as the defining image of the season,
not only about his own situation, but
also about the Mets.
“We don’t have a lot of players on
this team that are those mercenary
types that make every last dollar,”
Wright said.
Wright would know: He inked an
eight-year, $138 million extension
with the Mets before the 2013 sea-
son, sacrificing an opportunity to
pursue an even bigger payday as a
free agent. Wright emphasized that
he doesn’t blame any player for
valuing money above all—but he ap-
preciates the fact that Cespedes
might not.
“When I take the field, I want the
guy next to me putting winning be-
fore anything else, before personal
accolades, paychecks,” Wright said.
“That’s the camaraderie you want.
Yoenis wants to be here to finish
what we started.”
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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WSJ.D B4 | MEDIA & MARKETING B6 | CROSSWORD B7 | SPORTS B8

BUSINESS & TECH.

Harley Is Searching Why Firms Keep
For a Smoother Ride Getting Disrupted
THE WEEK AHEAD | B2 KEYWORDS | B4
© 2016 Dow Jones & Company. All Rights Reserved. * * * * ** THE WALL STREET JOURNAL. Monday, January 25, 2016 | B1

Problems Found at Theranos Lab Twitter

Federal inspectors will
soon release details
on serious deficiencies
at blood-testing firm
U.S. health inspectors have
found serious deficiencies at
Theranos Inc.’s laboratory in
By John Carreyrou,
Christopher Weaver
and Michael Siconolfi
Northern California, according
to people familiar with the
matter.
The problems were found
during an inspection by the
Centers for Medicare and
Medicaid Services, the chief
federal regulator of clinical
labs, at the blood-testing com-
pany’s facility in Newark, Calif.
Failing to fix the problems
could put the Theranos lab at
risk of suspension from the
Medicare program.
The inspection results are
expected to be publicly re-
leased soon, these people said.
A spokesman for the agency
said it “can’t confirm any sur-
vey conclusions or results at
this time.”
Theranos spokeswoman
Brooke Buchanan said the
company “does not have the
report from last year’s regu-
larly scheduled CMS audit of
its California lab.” She added
that Theranos “has continued
its ongoing work to build best-
in-class systems and engage in The previous inspection cited
partnership with its regula-
tors.” Recent customer volume
and referrals from medical
infractions that Thera-
nos said it promptly resolved.
It isn’t clear exactly what
providers have been “record-
breaking,” she said.
regulators have faulted Thera-
nos for in their latest inspec-
tion, which took several
The results could
cause Walgreens to
months. Adverse findings
would be another regulatory
setback for one of Silicon Val-
ley’s highest-profile startups,
take a harder look at valued at about $9 billion in
its ties to Theranos. 2014.
Theranos already has
stopped collecting tiny sam-
The problems observed by ples of blood from patients’
regulators were far more se- fingers for all but one of its
vere than those cited by CMS tests while it waits for the
following its last inspection of Food and Drug Administration
the same lab in December to review the company’s appli-
2013, according to the peo- cations for wider use of the
ple familiar with the matter. proprietary vials called “nano-
tainers.” In October, the FDA
said it had determined that
the nanotainers were an “un-
cleared medical device.”
Since then, Theranos has
been performing just one
test—to detect herpes—using
its proprietary Edison device,
people familiar with the mat-
ter said. That test was ap-
proved by the FDA.
Theranos is using tradi-
tional machines for the rest of
the more than 200 tests it of-
fers to consumers, the people
said.
The company said it out-
sources some tests to outside
labs. Theranos is suffering
losses on some of those tests,
according to people familiar
Please see LAB page B2
Chief
Dorsey
Revamps
Top Ranks
BY YOREE KOH
Twitter Inc. Chief Executive
Jack Dorsey is revamping his
top ranks as he tries to find
ways to revive the social me-
dia company and earn the
trust of investors.
The company confirmed
late Sunday that four top exec-
utives are leaving the com-
pany, characterizing the de-
partures as voluntary. Among
them are engineering chief
Alex Roetter, product head

Broadcasters Bring Talk TV Closer to Home Kevin Weil, human-resources

vice president Skip Schipper
and media head Katie Stanton.
At the same time, Twitter
By producing their own daytime shows, station owners avoid big Hollywood fees, boosting odds of a profit plans to bring in two new
board members as soon as this
week, according to people fa-
miliar with the matter. At
ELLEN least one of the people is a
DEGENERES
DR. PHIL high-profile executive in the
media industry.
The two additions to the
board are expected to be the
first of many. Mr. Dorsey, who
was previously chairman of
Twitter, had told the company
that one condition of returning
as CEO was that the entire
board must eventually be re-
placed, according to one of the
people familiar with the matter.
The board includes Evan
Williams, who co-founded
Twitter along with Mr. Dorsey
and is one of the largest indi-
vidual owners of Twitter stock.
It is unclear if Mr. Williams
will be replaced, or if Twitter
will refill the departing execu-
tives’ positions.
Ms. Stanton had informed
the company of her intention
to quit weeks earlier, while
Mr. Roetter had told Mr.
KATIE Dorsey he considered resign-
MEREDITH ing several months ago, ac-
RAFAEL RICOY

COURIC
BY JOE FLINT
Television-station owners
have lost big bets in recent
years on daytime talk shows
hosted by familiar names in-
cluding Anderson Cooper,
Katie Couric, Queen Lati-
fah, Meredith Vieira and
Jane Pauley. Those shows
were canceled after failing to
deliver strong enough ratings
to justify the high cost of
making and airing them.
Now, some big broadcast-
ers, including Tegna Inc.,
Tribune Media Co. and E.W.
Scripps Co., are betting they
can do better themselves,
VIEIRA
producing their own shows
for less money and distribut-
ing them nationally. While
they have yet to find the next
“Dr. Phil” or “Ellen,” they say
that kind of star power isn’t
necessary to make a show a
financial winner.
Not only has the fragmen-
tation of the TV audience
lowered the bar for success,
but owning their own pro-
grams increases the potential
payoff for broadcasters. That
is partly because producing
in-house is cheaper than pay-
ing what can be tens of thou-
sands of dollars a week in li-
censing fees for shows from
cording to people familiar
with the matter.
Re/code earlier reported on
the departures.
Hollywood studios like Time dent of strategic program- tions around the country, ac- In a statement Sunday, Mr.
Warner Inc.’s Warner Bros., ming and acquisitions. cording to Nielsen. That’s Dorsey praised the four execu-
CBS Corp. or Comcast Corp.’s A few years ago, Mr. less than half what Messrs. tives and said they “are taking
NBCUniversal. Compton launched “The Bill Povich, Springer and Wilkos some well-deserved time off.”
What is more, if a station Cunningham Show,” because average. But Mr. Cunning- He said technology chief Adam
owns its shows, it doesn’t he felt too dependent on NB- ham’s show, which some in- Messinger will now be oversee-
have to worry about being CUniversal, whose talk shows dustry insiders describe as a ing engineering, consumer
outbid by a rival when the featuring Jerry Springer, knockoff of Mr. Povich’s tab- product, design, research, user
show’s contract expires, or Maury Povich and Steve loid talk show, can get by services and app development
paying more to keep a suc- Wilkos are mainstays of Trib- with lower ratings because in one group.
cessful program on its sched- une stations. “We wanted a Tribune doesn’t have the The executive upheaval
ule. It also keeps all the com- little diversity, and not be overhead costs associated comes as Mr. Dorsey tries to
mercial time. tied to our distributors,” he with big studio shows. get a handle on the company
“It’s not that the stations said. “I can’t spend $30 million that had fallen into disarray
want to go Hollywood. They “Bill Cunningham,” which producing ‘Maury.’ I spend under his predecessor, CEO
want more control over dis- stars a conservative radio half that or less, and the re- Dick Costolo.
tribution and protection for host, is averaging about sults are a very profitable Frequent management
themselves,” said Sean 864,000 viewers this season show for our company,” said changes, strategy shifts and a
Compton, Tribune’s presi- on Tribune and other sta- Please see TV page B6 Please see BOARD page B7

In Davos, Some Wonder Cloud Hangs Over Canada’s Oil Sands

If Tech Boom Is Cooling BY CHESTER DAWSON

BY SAM SCHECHNER firms. Artificial intelligence CALGARY—Canada’s efforts

DAVOS, Switzerland—The
chill in the air here last week
wasn’t just from the altitude.
A sharp slide in public and
private valuations for promi-
nent technology firms hung
like a snow cloud over the
World Economic Forum’s an-
nual event this year. As inves-
and new data-analytics tools
would help companies and
governments gain orders of
magnitude in efficiency.
Davos organizers themed
this year’s meeting around
harnessing the massive trans-
formation that technology can
offer, dubbing it the fourth in-
dustrial revolution.
to curb greenhouse-gas emis-
sions are calling into question
oil majors’ ability to tap the
world’s third-largest oil re-
serves.
The new left-leaning gov-
ernment of the Canadian prov-
ince of Alberta, which came to
power in May after 44 years of
conservative rule, has an-
BEN NELMS/BLOOMBERG NEWS

tors and entrepreneurs
crammed into meetings and
parties in this mountain town,
many wondered if the tech
boom was finally cooling off.
“Obviously there are a lot
of unicorns,” said Nathan
Blecharczyk, co-founder and
chief technology officer of
Airbnb Inc., referring to ven-
ture capital-backed startups
with a valuation of more than
$1 billion. “Some of those uni-
corns won’t survive.”
For years, the tech sector
was going nowhere but up.
Fast-spreading connectivity
promised a massive potential
market for large Internet
The chill blew in over the
summer. Investors had long
been suspicious of valuations
that were pushed as much by
public appearance as by fun-
damentals. Then the late Au-
gust shock over surprisingly
slow growth in China tanked
the public markets—and
spooked private ones, execu-
tives say.
“It was after the August
correction that we started to
get a dose of reality,” says
Devin Wenig, chief executive
of Silicon Valley stalwart eBay
Inc. “The private equity envi-
ronment has changed entirely
Please see TECH page B4
nounced it would cap carbon
emissions from its oil-sands
industry, a move that threat-
ens to strand billions of bar-
rels of crude from supplies so
vast that only Saudi Arabia
and Venezuela control more.
Nine of the world’s top oil
companies, including Exxon Alberta’s recently announced climate plan would cap its oil-sands industry’s carbon emissions.
Mobil Corp., BP PLC, Chevron
Corp., ConocoPhillips and ment bank Peters & Co.—up have taken a wait-and-see ap- voiced their concerns publicly.
Royal Dutch Shell PLC, have in- from only 5% in 2006. proach toward the cap, details “The cap is a long-term is-
vested tens of billions of dol- Marathon Oil Corp., China’s about which remain to be sue for province and the coun-
lars into megaprojects in the Cnooc Ltd., Total SA of France worked out. Privately, execu- try,” said Glen Schmidt, chief
province’s boreal forests. Com- and Norway’s Statoil ASA tives at some oil multination- executive of Laricina Energy
bined, those operations ac- round out the group of global als with oil-sands assets ex- Ltd., an oil-sands lease owner.
count for 23% of these compa- players exploiting Canada’s oil press dismay about the sudden “How will it be allocated to
nies’ proven crude reserves, sands. policy shift, and the heads of companies who in good faith
according to data from invest- Most of these producers some smaller companies have Please see CANADA page B2
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Monday, January 25, 2016
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
A-B-C
AdoreMe......................R6
Alphabet......................A2
American International
Group.........................C3
Anthem ....................... B4
AT&T............................A2
Audi.............................R5
AutonomouStuff.........R5
Bank of New York.......C3
BanyanGlobal Family
Business Advisors....R2
BlackRock....................C3
Box...............................R4
Buchanan Public
Relations...................R2
Buffalo Wings & Rings
.....................................R6
Buy Buy Baby.............R4
BYD..............................C6
Caterpillar ................... B4
CBS..............................B6
Chipotle Mexican Grill C1
Chubb...........................C3
Cigna............................B4
Citibank..................C3,C5
Closely.........................R4
Comcast.......................B6
Credit Suisse Group....C5
Cruise Automation.....R5
Cybernet Systems ...... R5
D-E-F
Delta Air Lines ........... B3
Denny's ....................... R6
Destination Maternity
.....................................R4
Deutsche Bank ...... A2,C3
Dropbox.......................R4
E.W. Scripps................B1
Facebook......................R4
Family Eye Care Center
& Optical Gallery......R2
Fidelity Investments .. C3
First Data....................R4
Fossil Group ................ C6
Four Square.................R4
Franklin Resources......C3
G-H-I
Gartner........................R5
Get Five Stars ............ R2
INDEX TO PEOPLE
B Havekotte, Todd ......... B2
Boltansky, Isaac..........C2
C Morgan......................R6
Christensen, Clayton..B4
Cohen, Tim..................C3
Compton, Sean ........... B1
Connick, Harry ............ B6
Cooper, Anderson ....... B1
Cordray, Richard..........C1
Couric, Katie ............... B1
Cunningham, Bill ........ B1
D Kordestani, Omid........B7
de Rivera, Luis Niño...C3
Dimon, James ............. C3
Dorogi, Carly...............R4
Dorsey, Jack................B1
E Mars, Charlie .............. R5
Easterbrook, Steve.....C1
F Miquelon, Wade..........B2
Fishman, Rocky .......... A2
G-H
Garcia, Patricia............C3
Gunster, Chris.............A2
Hancock, Peter............C3
Hardiman, James........B2
LAB
Continued from the prior page
with the matter and records
reviewed by The Wall Street
Journal.
The company declined to
comment on the volume or fi-
nancial terms of tests handled
by outside labs. Theranos, of
Palo Alto, Calif., said it “uses
reference labs from time to
time, which is common prac-
tice in the lab industry.”
The blood-testing com-
pany’s lab in Newark contains
its proprietary Edison ma-
chines and conventional de-
vices bought from companies
such as Siemens AG, accord-
ing to former Theranos em-
ployees.
During the CMS inspection
in 2013, the agency’s inspec-
tors never saw the Edison ma-
chines, the former employees
said.
David Boies, Theranos’s out-
side counsel and a company
director since October, told the
Journal last July that the in-
spectors didn’t ask to see the
part of the lab where the Edi-
CANADA
Continued from the prior page
have purchased rights to pro-
duce and invested in technol-
ogy as we have?” he said.
Canada’s federal govern-
ment defers to its provinces to
come up with policy prescrip-
tions to curb overall emissions.
Alberta’s new climate plan, an-
nounced in November, would
cap its oil-sands industry’s
greenhouse-gas emissions at
100 million metric tons a year.
The industry currently emits
70 million metric tons of
greenhouse gas a year—about
a quarter of the province’s
overall emissions.
Based on growth projec-
tions at the time, Canada’s en-
vironment ministry said in De-
cember of 2014—the latest
projection available—that the
oil-sands industry is likely to
cross that 100 million metric-
ton level as soon as 2020.
Shell, which welcomed the
policy along with three local
Canadian oil-sands producers,
said it didn’t expect the cap
would have a negative impact
on its existing operations or
* *** THE WALL STREET JOURNAL.
BUSINESS NEWS
Goldman Sachs......C2,C5
Google....................R4,R5
Greenlight Capital.......C1
Grupo Elektra..............C1
Polaris Industries.......B2
Potbelly ....................... C1
Promontory Financial . C3
Roadie ......................... R3
Harley Searches for Smoother Ride
Grupo Financiero Salesforce.com............R4 BY JAMES R. HAGERTY year totaled 400,000. That is
Banorte ..................... C1 Salveson Stetson ....... R2 about 2.3 times the esti-
W
GSR Ventures ............. B3 Siemens.................B2,B3
Guidant Financial........R6 Skadden Arps..............B3 hen Harley-David- mated number of new Har-
Harley-Davidson ......... B2 Slack............................R4 son Inc. reports leys sold by dealers in 2015.
Harris & Harris Wealth Southwest Airlines .... B3 quarterly earn- Sharon Zackfia, an analyst at
Management Group . R1 Standard Chartered .... C5
High Swartz................R2 ings Thursday, management William Blair & Co., said
Sticky Bellies..............R4
HSBC............................C3 Storm Ventures..........B4 will need to reassure its own sales of used bikes appear “a
Instagram....................R4 SunEdison....................C1 anxious dealers as well as in- little elevated” in relation to
International T-U-V vestors singed by the motor- those of new models.
Construction Products
.....................................B4 Takata..........................B4 cycle maker’s disappointing As older riders drop out of
Tegna...........................B1
International Paper.....C1 recent results. motorcycling, there aren’t
Intuit ........................... R4 TeleMapics..................R2
Tesla Motors...............R5 Harley’s U.S. dealer net- enough younger enthusiasts
Invoice2go...................R4
IronPlanet....................B4 Theranos......................B1 work is widely to replace them all. Global
J-K-L Thirty Tigers...............R5 THE WEEK regarded as shipments of Harley motorcy-
Travelers......................C3 AHEAD the best in the cles totaled an estimated
Jaybridge Robotics.....R5 Tribune Media.............B1
Johnson Controls........A1 T. Rowe Price Group...C3 business, but 268,000 in 2015, 23% less
J.P. Morgan ................. C3 Twitter...................B1,R4 tension has than the prerecession peak of
KFC...............................C1 21st Century Fox........B6
Komatsu......................B4
grown between some of 349,000 in 2006.
Tyco International......A1
L Brands......................C6 Uber Technologies ...... B4
those dealers and Harley Harley’s market share in
LinkedIn.......................R4 UBS Group...................C5 management, according to 2015 fell three-to-four per-
Lukoil PJSC ................. A1
Ulta Salon Cosmetics.C6 several dealers, as the com- centage points from a year
Lyft..............................B4 Union Pacific...............A2
pany’s market share erodes earlier to 50% of U.S. heavy-
M-N Unishippers Global ..... R2
MailChimp...................R4 United ContinentalA2,B3 amid competition from rivals weight motorcycle sales, Ms.
McDonald's............A2,C1 United Technologies ... C1 such as Yamaha Motor Co. Zackfia estimated.
Michael Kors...............C6 Vanguard Group..........C3 and Polaris Industries Inc. Dealers say Harley should
Monex Grupo Financiero Velodyne Acoustics....R5 One issue is a large supply
Volvo............................B4
focus on developing exciting
..................................... C1
Morgan Stanley .......... C5 W-Y-Z of used Harleys that has new models. Harley has
Morningstar ................ C3 Waddell & Reed
been putting downward promised increases in spend-
My Gung Ho................R4 pressure on prices for sec- ing on product development
Financial....................C3
National Football
League.......................B6
Walgreens Boots........B2 ondhand bikes, which deal- and marketing. Within days,
Wendy's.......................C1 ers sell in addition to new Harley is expected to intro-
News Corp...................B6 When I Work .............. R4
P-R-S White Ops...................B6 models. Many of Harley’s duce new high-powered ver-
new motorcycles sell in a sions of its LowRider and
Panera Bread...............C1 Wine & Design............R6
PHH..............................C1 Yamaha Motor............B2 range of $15,000 to $25,000. Breakout models aimed at
Philips..........................B3 Yellow Cab Co-Op.......B4 A lightly used model that younger riders, dealers said.
Pinterest ..................... R4 Yelp..............................R4
Pipelinersales..............R4 Yum Brands.................C1 doesn’t look much different Harley declined to comment.
Pizza Hut.....................C1 ZenPayroll...................R4 in some cases can cost The bigger question is
$6,000 to $7,000 less. whether Harley can increase
Attractive prices on used
models reduce the allure of
new ones, and that helped
sales to younger riders and
overseas markets fast
enough to make up for an
PIERRE-PAUL PARISEAU
Pogson, Keith..............C5 keep demand below Harley’s eventual decline in pur-
Hayduchok, Len...........C2 Povich, Maury.............B1 initial expectations for 2015. chases by baby boomers ag-
Hermand-Waiche, Profusek, Robert.........B3
Putin, Vladimir ........... A1 Sales have fallen short of ing out of the activity.
Holmes, Elizabeth ...... B2 R expectations in recent quar- One of Harley’s strengths
J ters, and Harley’s stock price has long been the fellowship
Ramsey, Doug.............A2
Jakes, T.D....................B6 Roetter, Alex...............B1 is off about 38% from a year among its customers, many
Jalgha, Bassam...........R3 Rosenberg, David ....... A2 ago. of whom join local Harley
K S In the same period, the The Milwaukee-based com- is a way to bring more people Owners Group. “When you
Kaeser, Joe..................B3 Schlager, Ivan ............. B3 S&P 500 index is down 8%. pany has urged some dealers into dealerships, they said. buy a Harley, you get 100
Kennedy, Mike ............ B2 Schutz, Anton.............C3 Wall Street expects Harley to put less emphasis on sell- Trade-in motorcycles have to friends,” Todd Havekotte, a
Sharma, Anshu...........B4 earnings of about 19 cents a ing used motorcycles in an ef- be sold, and the alternative to 64-year-old architect, said at
L Siegel, Simeon............C6
Slaibi, Hassane...........R3 share for the fourth quarter, fort to focus customers on displaying them at dealer- a recent gathering of the
Lo, Amy.......................C5 down from 35 cents a share new machines. Mike Kennedy, ships is to sell them to other HOG chapter in Pittsburgh.
Sook, Perry..................B6
M Springer, Jerry............B1 a year earlier, according to a Harley vice president re- parties, including auction “Everyone wanted to own
Marrs, Anna................C5 Stanton, Katie ............ B1 Thomson Reuters. Revenue sponsible for North American houses, which can result in a Harley,” he added. He
Stirling, Josh...............C3
Sullivan, Bob...............B6
is expected to total about sales, said it was a matter of lower resale prices. hasn’t been able to pass on
Martinez, Pamela ....... B4
$1.03 billion, little changed. getting the right balance be- Mr. Kennedy played down that passion to his two
V
N-O Before Harley can ramp up tween new and used. criticism from dealers. “We grown children. “They really
Vieira, Meredith..........B1
production of new 2016 mod- Several dealers in inter- believe our dealers are don’t have much of an inter-
Naren, Sankaran ......... C3 W-Z
Noto, Anthony............B1 els, “they still need to clean views said they knew more aligned to our direction and est in it,” he said.
Weil, Kevin..................B1
Olson, Theodore..........C2
Wilkos, Steve..............B1 out some used bike inventory,” about retailing than Harley plan,” he said.
P Williams, Evan............B1 said James Hardiman, an ana- executives do. Offering a big He estimated that U.S. The Week Ahead looks at
Pauley, Jane................B1 Zackfia, Sharon...........B2 lyst at Wedbush Securities. selection of used motorcycles sales of used Harleys last coming corporate events.
son devices were located.
Theranos has another lab in
Arizona. A CMS inspection
there early last year found in-
ness. He couldn’t be reached
for comment. Michael Polzin, a
Walgreens spokesman, de-
clined to comment on Mr. Mi-
labs, this person said.
Ms. Buchanan, the Theranos
spokeswoman, told the Jour-
nal last month that the com-
fractions that were less seri- quelon or his role in the Ther- pany has used both of those
ous than the ones about to be anos deal. labs “for years.”
made public. Theranos re- An earlier review of the Since mid-November, Ther-
solved the infractions found at contract led Walgreens offi- anos has sent more than 1,200
its Arizona lab. cials to conclude that it would test orders to UCSF, according
People close to talks be- be difficult to exit the agree- to lab records. Theranos
WALGREENS
tween Theranos and its main ment, but the inspection find- hadn’t outsourced any tests to
retail partner, Walgreens ings could alter that conclu- that lab since at least July, the
Boots Alliance Inc., expect the sion, according to people records show.
blood-testing company to re- Elizabeth Holmes, left, at a ribbon-cutting ceremony in 2013. familiar with the matter. Tests done on behalf of
ceive a critical inspection re- Mr. Polzin wouldn’t com- Theranos by UCSF include
port from CMS. ship with Theranos, these peo- ing top clinical-services execu- ment on the Theranos contract some of the most common
The drugstore operator has ple said. tives and directors, according or relationship beyond a previ- blood tests ordered during
41 blood-drawing “wellness Since October, Walgreens to people familiar with the ous statement that Walgreens routine doctor visits, such as
centers” in stores in Arizona representatives have met a matter. is “currently in discussions blood counts and screening for
and California, which are number of times with Thera- Those people said the con- about the next phase of our prostate-specific antigen, or
Theranos’s primary access to nos Chief Executive Elizabeth tract with Theranos hasn’t relationship.” Theranos de- PSA, the same lab records
consumers. Walgreens had Holmes and her executive generated revenue for Wal- clined to comment. show.
aimed to expand the sites na- team but were dissatisfied greens and doesn’t obligate Theranos has told Wal- UCSF charges Theranos
tionwide but has suspended with their responses, the peo- Theranos to share any finan- greens it is outsourcing only more than $300 for a compre-
those plans until Theranos an- ple added. cial information, even though “highly complex” tests col- hensive metabolic panel, said
swers questions about its The situation is especially Walgreens also has lent the lected at its stores to outside a person familiar with the
technology, said the people fa- delicate for Walgreens because startup at least $50 million in labs, including the University matter. Theranos’s website
miliar with the matter. of how its agreement with the form of debt convertible of California, San Francisco shows that patients who get
In recent weeks, Walgreens Theranos was reached. The into equity, according to peo- and ARUP Laboratories, which the same test at one of the
has debated whether to close Walgreens executive who ne- ple with knowledge of the ties. is affiliated with the Univer- company’s blood-draw sites
the wellness centers, and the gotiated and structured the Mr. Miquelon left his job in sity of Utah, a person familiar pay just $7.19. A comparison of
results of the latest inspection deal, Wade Miquelon, didn’t 2014 as finance chief at Wal- with the matter said. Wal- all the tests done by UCSF for
by CMS could lead the retailer initially apprise some senior greens amid a $1.1 billion fore- greens was told that Theranos Theranos shows that the com-
to take an even harder look at officials at the drugstore chain casting error in the drugstore tested “moderately complex” pany appears to be incurring
what remains of its partner- about the negotiations, includ- chain’s Medicare-related busi- patient samples at its own losses on many of those tests.
Looming Cap
Alberta's plan to curb the oil-sands industry's
emissions to 100 million metric tons a year may
sands, according to the Peters
report. Most other known un-
tapped crude reserves are
owned by state-owned firms in
came from oil sands assets in
Canada, it said.
However, the recent crude
slump—with oil prices hover-
duce greenhouse emissions
could keep companies from
fully exploiting their re-
sources, diminishing their
prevent oil majors from tapping growing reserves. top oil-producing countries ing around $30 a barrel—has value to shareholders.
and are largely off limits to hit producers’ bottom lines The debate has gained new
Canada’s greenhouse-gas Top oil companies' share of private companies. and forced many to abandon traction amid the run-up to
emissions, in metric tons of CO2 proven crude reserves coming Oil firms’ proven reserves or suspend development of the Paris climate change ac-
Oil-sands industry from Canada's oil sands* are an important indicator of new projects. Western Cana- cord last month, during which
800 25% their ability to grow. Canadian dian heavy crude costs more to 195 countries united around a
Estimate heavy crude may be expensive extract than other oil sources document that is effectively a
700 to extract, but companies because it must be separated blueprint for how the world
20 point out that other potential from deposits of sand and will tackle global warming.
600
sources such as Arctic or deep- trades at a discount to other Oil industry executives have
500 15 water offshore fields are also crudes, in part because of the dismissed the idea that they
high cost and, unlike Canada’s distance it must be trans- will be forced abandon unde-
400
oil sands, would require exten- ported from remote boreal for- veloped assets, noting fossil
300 10 sive exploration to find and ests in Alberta. It also is fuels will remain an important
substantiate crude oil deposits. among the most greenhouse energy source for decades to
200 Despite low prices, oil-sands gas-intensive to produce. It come.
5
100 production is expected to in- also trades at a discount: On Current volumes of proven
crease through 2020 as a re- Friday, Western Canada Select crude reserves aren’t likely to
0 0 sult of expansion projects ap- crude oil closed at 25.74 Cana- be affected by Alberta’s cap
1990 2000 ’10 2006 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 proved years ago. Oil-sands dian dollars (US$18.12) per since they reflect projects that
*Includes Exxon Mobil, BP, Chevron, ConocoPhillips, Shell, Total, Cnooc, Marathon Oil and Statoil developments cost billions of barrel. already have regulatory ap-
Sources: Environment Canada (emissions); Peters & Co. (share) dollars and take years to build, The prospect of Alberta’s proval, most of which are op-
THE WALL STREET JOURNAL. but produce at stable levels for carbon cap looms large be- erating or under construction.
a decade or more—unlike cause it could thwart develop- But companies may find it
force it to take impairments been turning to Alberta, help- short-lived shale-oil wells. ment even if oil prices re- harder to tap their vast quanti-
related to its undeveloped re- ing boost Canadian oil-sands Exxon said last year that bound. ties of contingent resources.
serves. The company said it is production by 38% over the 2014 marked the 21st consecu- The policy presents a real- “It’s more the future proj-
confident the advent of new past five years. Companies tive year it replaced more than world test case in a much ects that are affected,” said
technologies and other policy such as ConocoPhillips, Exxon 100% of its production. More broader debate now raging Keith Braaten, president of
initiatives would mitigate the and Shell have booked more than half of its newly booked among investors and resource Calgary-based reserve auditor
impact of a carbon cap. than one-third of their proven crude reserves—amounting to companies: Whether a more GLJ Petroleum Consultants
Oil majors have increasingly crude reserves from the oil some 700 million barrels— concerted global effort to re- Ltd.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. * * Monday, January 25, 2016 | B3

BUSINESS NEWS

Pressure Mounts on Siemens Chief U.S. Vets

Europe,
At annual meeting,
investors plan to push
CEO to show payoff
China
from restructuring Deals
BY CHRISTOPHER ALESSI BY SHAYNDI RAICE

FRANKFURT—After more LONDON—The U.S. govern-

than two years running Ger- ment body that screens corpo-
man industrial conglomerate rate takeovers for security
Siemens AG, Chief Executive concerns is scrutinizing an in-
Joe Kaeser faces pressure to creasing number of high-pro-
ensure his revamp of the com- file deals in which neither
pany starts paying off. party is American.
At Siemens’s annual share- The group, called the Com-
holders meeting Tuesday, in- mittee on Foreign Investment
vestors intend to remind Mr. in the U.S., or CFIUS, has long
Kaeser that following several examined deals in which for-
RODGER BOSCH/AGENCE FRANCE-PRESSE/GETTY IMAGES

years of stagnation and re- eign companies, especially

structuring, this year should Chinese ones, try to buy U.S.
be about delivering opera- assets. But a surge in Asian
tional improvements and takeovers of European compa-
boosting profitability. nies that own businesses in
The goal could be compli- the U.S. has put the panel in
cated, however, by economic the delicate position of trying
uncertainty, including low oil to police overseas deals.
prices and a slowdown in the On Friday, Philips NV said
Chinese economy. it was terminating its $2.8 bil-
“The pressure is on Kaeser lion deal to sell its lighting-
to now deliver after Siemens’s components and automotive-
shares have significantly un- lighting business to Go Scale
derperformed the German DAX Capital, an investment fund
index over the last five years,” Siemens has a diverse product range that includes gas and wind turbines. A Siemens engineer works on a wind turbine in South Africa. led by Chinese venture-capital
said Christoph Niesel, a fund firm GSR Ventures.
manager at Union Investment, and medical-imaging scanners. mens’s oil-and-gas sales to That deal—with neither of
a Siemens shareholder. Mr. Niesel said Union In- Power Down fall almost 20% this year, the principal actors being
Siemens’s share price vestment would be looking for Profit margin for Siemens's compared with last year, American—wouldn’t be con-
closed Friday up 2.1% at more detail from Mr. Kaeser power-and-gas unit contributing to overall sales sidered a likely target for
€83.24 ($89.89). about areas of growth outside declines at the power-and- CFIUS to inspect for potential
25%
Since becoming CEO in July of the oil-and-gas division and gas unit. impacts on U.S. national secu-
2013, Mr. Kaeser has simpli- potential streamlining ahead Siemens’s digital factory di- rity. But the Philips business
MATTHIAS BALK/EUROPEAN PRESSPHOTO AGENCY

fied the company’s organiza- for the group. “We want a 20 vision, which includes the that is on the block, called Lu-
tion, divested it of units and more focused company,” Mr. company’s industrial software, mileds, has a large portfolio of
cut Siemens’s workforce by Niesel said. “We investors dis- factory-automation, control U.S. patents for light-emitting
about 13,000 jobs, to around like conglomerates.” 15 1Q 2016* products and motion-control diodes, or LED, and a sizable
348,000 employees. Other investors say that de- 10.4% businesses, continues to be presence in the U.S. through
He also beefed up Siemens’s spite Mr. Kaeser’s divestitures, one of the company’s most manufacturing and research-
oil-and-gas operations through Siemens remains still too var- 10 profitable. and-development facilities in
two acquisitions and sepa- ied and lacks coherence. But it also faces sales pres- San Jose, Calif. That, appar-
rated its health-care division One institutional investor sure due to its strong exposure ently, was enough to attract
as a stand-alone legal entity. 5 the attention of CFIUS, which
said he would state at the an- to the Chinese market. The au-
Investors and analysts believe nual meeting that his firm tomation business, where con- blocked the deal.
the move presages an eventual would be “advising more re- 0
tracts tend to be fairly short CFIUS sometimes exerts its
spinoff of health-care opera- structuring.” duration, is most negatively power “in a way that observ-
2014 ’15 ’16
tions. There is still “a lot of meat Investors are looking to CEO affected, analysts say. ers kind of scratch their heads
Siemens declined to com- on the bone” to cut out, said Joe Kaeser for improvements Source: the company *Projection Mr. Kaeser’s guidance for and say, ‘Really?’ ” said Robert
ment for this article. the investor. and a boost in profitability. THE WALL STREET JOURNAL. 2016 is predicated on a macro- Profusek, global chair of merg-
As part of his Vision 2020 Unlike competitors General economic recovery in the second ers and acquisitions at the law
efficiency program, Mr. Electric Co., ABB Ltd. and Siemens’s most recent large month that the Egypt project half of the fiscal year, beginning firm Jones Day. By their logic,
Kaeser is targeting up to Schneider Electric SE, Siemens contract was an €8 billion was running ahead of schedule. in April. But many analysts and he added, “almost anything is
€500 million in cost savings is “not investing enough into power-generation deal with If successful, the deal could investors express doubts and a CFIUS deal.”
this year. He also has tried to optimizing cost structures,” Egypt, the largest single order boost power-generation equip- think Siemens may need to cut CFIUS doesn’t itself have
reward shareholders. In No- said Andreas Willi, an analyst in the company’s history. ment and service sales by as its outlook for this year. the power to reject transac-
vember he launched a pro- at J.P. Morgan. As part of the deal, Siemens much as 10%, according to an- In November, Siemens said tions. If it spots potential
gram to buy back up to €3 The company “seems to win plans to supply Egypt with alysts at RBC Capital Markets. it expects basic earnings per- problems, it can recommend
billion in outstanding shares a lot of large orders, but there three natural gas-fired power A bigger challenge for the share for fiscal 2016, through that the companies modify the
and proposed raising the is a suspicion in the market plants, which will start bring- power-and-gas unit is that Mr. September, in a range of €5.90 terms of their deal, for exam-
company’s dividend by 6%, to that Siemens is winning some ing power to Egypt’s grid be- Kaeser expanded it signifi- to €6.20, compared with €5.18 ple, by shedding U.S. assets, or
€3.50 for fiscal 2015, which of these orders to avoid hav- fore summer 2017, and deliver cantly just as petroleum prices last year. it can recommend that the U.S.
ended Sept. 30. ing to do more restructuring,” up to 12 wind farms. tanked. Siemens also will announce president nix the transaction.
Investors want specifics on Mr. Willi said. Investors have expressed The plunge accelerated last results for the first quarter of A presidential veto has only
both cuts and expansion at Siemens, “has had project concerns that Siemens could year as Siemens was closing fiscal 2016 on Jan. 26. Investors happened twice; more often,
Siemens, which has a diverse charges, some substantial, for have trouble executing such a its $7.6 billion acquisition of say they will be looking for signs as was the case with Philips,
product range including gas most years in the past 20 major project in part due to U.S. oil-equipment maker of improvement at the power- the companies abandon trans-
and wind turbines, factory-au- years, Mr. Willi said. Only “2015 political uncertainty in Egypt. Dresser-Rand. and-gas unit, while monitoring actions that CFIUS frowns
tomation equipment, trains was a remarkable exception.” Mr. Kaeser said earlier this RBC analysts expect Sie- profit growth at digital factory. upon.
Besides the scuttled Philips
deal, last year’s $16.6 billion

Germany’s Metro Revises Strategy

merger between the Finnish
United Pilots wireless-equipment company
Nokia Corp. and French firm
Approve BY ELLEN EMMERENTZE JERVELL
Alcatel-Lucent SA underwent
CFIUS scrutiny. Alcatel-Lucent

Contract DÜSSELDORF—German re-

tailer Metro AG’s global reach
had a joint-venture with
China’s Shanghai Bell. The
deal ultimately went forward,
Extension across 30 countries was sup-
posed to insulate it from mar-
though it is unclear if the par-
ties had to make concessions
BY DOUG CAMERON ket swings. Instead, turmoil to ensure CFIUS’s backing. The
AND CHELSEY DULANEY around the world has battered details around CFIUS’s scru-
the company, forcing the chain tiny remain secret.
Pilots at United Continen- to retrench and refocus on Eu- Experts on the government-
tal Holdings Inc. overwhelm- rope. review process believe a sale
ingly approved a two-year With a retail empire of of Swiss pesticides giant Syn-
contract extension, furthering more than 2,000 wholesale, genta AG could also get caught
the airline’s efforts to restore food retail, and consumer- in a CFIUS review if a deal
labor peace and complete the electronics stores in Europe, proceeds with China National
integration of staff following Asia and Africa, Metro has a Chemical Corp. or ChemChina,
its 2010 merger. big presence in emerging mar- because of Syngenta’s U.S.
The Air Line Pilots Associ- kets. But crises in many of holdings. Syngenta declined to
ANDREY RUDAKOV/BLOOMBERG NEWS

ation said Friday that 79% of these markets including Rus- comment.
those who voted approved a sia, Greece and Egypt over the The increased oversight
deal running through January past few years has hurt its re- comes as regulatory and na-
2019 that the union says pro- sults. The latest hit was a €1 tional-security scrutiny of
vides industry-leading pay billion ($1.08 billion) ex- deals globally has become
and benefits for 12,000 change-rate loss it had to take, more common, increasing
United aviators. largely because of the Russian what companies need to do to
Investors are monitoring the ruble’s slide. get deals across the finish line.
outcome of contract talks in- The company responded by After General Electric Co.
volving other United labor trimming its international went after France’s Alstom
groups and at other carriers, portfolio and seeking growth A Metro store in Moscow. Metro has an empire of more than 2,000 stores in Europe, Asia and Africa. Group in 2014, for example,
concerned about a repeat of at its core: Europe’s retail the French government ex-
previous cycles when rising market. Metro in June sold its said its holiday sales in- Metro planned to accelerate carry business on the London panded the scope of its na-
profits resulted in more gener- German Galeria Kaufhof de- creased compared with a year its expansion there. Stock Exchange. The company tional-security reviews of
ous deals that hobbled carriers’ partment-store chain to Can- earlier, helped by improved When the European Union had to postpone the listing in- foreign acquisitions to in-
finances when market condi- ada’s Hudson’s Bay Co. for sales in Western Europe, par- imposed sanctions on Russia definitely. At the time, people clude a broader range of in-
tions deteriorated. Pilots at €2.5 billion. It also shed its ticularly in Germany. The pos- in 2014, Mr. Koch realized he familiar with the matter sug- dustries. No deals have yet
Delta Air Lines Inc and South- Real hypermarket business itive numbers follow Metro’s needed to act quickly. First, he gested the unit could be val- been killed, but several have
west Airlines Co. both rejected and exited countries including announcement of its best an- refilled the empty shelves at ued at €1 billion. been scrutinized, said one
proposed deals last year. Vietnam, Denmark and Greece. nual results in years. For the more than 80 cash-and-carry In 2014, Metro sold 19 CFIUS lawyer.
United on Thursday reported Metro Chief Executive Olaf year through Sept. 30, it stores in Russia that had pre- wholesale stores and its re- “National-security reviews
record profit, buoyed by the Koch said he aims to make posted a net profit of €672 viously stocked imported Eu- lated real-estate holdings in are expanding around the
slide in fuel prices. Germany, which accounted for million on revenue of €59 bil- ropean goods including dairy Vietnam. Metro had entered world and the national-secu-
The United contract pro- 38% of Metro’s revenue last lion. The positive results show products, meat and fruit. the Vietnamese market in rity issues are broader as the
vides for higher pay, restores year, its priority market this Metro is on track to offset the Restocking required an en- 2002. Mr. Koch plans to use supply chain globalizes,” said
benefits for previously fur- year. The reorientation marks financial headwinds from tirely new procurement policy, cash from its recent selloffs, Ivan Schlager, a CFIUS attor-
loughed pilots and enhances a change for Metro. emerging markets. centered on local produce, including that of the Kaufhof ney with the law firm Skad-
scheduling rules for long-haul It comes after two years of The hardest blow for Metro that the company managed to department-store chain for in- den, Arps, Slate, Meagher &
flights, according to the pilots slumping profits and a realiza- was the crisis in Russia. The implement within two weeks, vestments in e-commerce and Flom LLP.
union. Both sides declined to tion that the company’s plan company had entered Russia it said. Soon the stores were startups. CFIUS’s mandate hasn’t
provide contract details, to spread risk and seek growth in 2001, when the country’s packed with Russian merchan- Metro recently took a stake changed. What has changed is
though a person familiar with in developing countries had growth rate was surging. More dise. Inventory was only part in Roomatic, an app for room- the nature of deals that are
the situation said the pact in- failed to insulate Metro from than a decade later, its Rus- of Metro’s Russian turmoil. service delivery that is aimed being struck, as globalization
cludes a 13% pay rise this year “circumstances outside of our sian cash-and-carry business The crisis hit as Metro was at guests in hotels without full means U.S. assets could end
followed by a 3% increase in control,” Mr. Koch said. accounted for about a quarter preparing to float a minority service, and Lunchio, a meal up in the hands of a wider ar-
2017 and 2% in 2018. Metro earlier this month of group operating profit, and stake in its Russian cash-and- preorder and payment app. ray of companies.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Monday, January 25, 2016 * *** THE WALL STREET JOURNAL.

TECHNOLOGY @wsjd | wsjd.com

Why Companies Are Being Disrupted

Falling Valuation
Median pre-money valuation for
U.S. venture capital-backed
companies.
Many firms that should $100 million
have the resources to 80
build the next big 60
thing often fail to do so
40

I
f you work in tech and 20
your company isn’t head-
quartered under a rock, 0
you’ve heard of Clayton
2012 ’13 ’14 ’15
Christensen’s book, “The In-
Source: Dow Jones VentureSource
novator’s Dilemma.” You may
THE WALL STREET JOURNAL.
have even thought a great
deal about how his concept

TECH
of “disruption” applies to
your own firm, as either the
disrupter
or, more
likely, the Continued from page B1
disruptee. in the last six months.”
What- Now investors are circling
ever its ex- the wagons.
planatory Giants can still raise money
KEYWORDS power, the at eye-popping valuations, as
CHRISTOPHER one thing Uber Technologies Inc. did in
HANNIBAL HANSCHKE/REUTERS

MIMS “The Inno- December.

vator’s Di- But others such as location-
lemma” sharing mobile app Four-
can’t explain is why, almost square are being forced to sell
20 years after the book was shares at sometimes half what
published, so many compa- they asked two years ago.
nies continue to fall prey to Large investors are writing
more nimble competitors. down the value of stakes they
Anshu Sharma, a ven- A photographer in Berlin took pictures of a wall featuring Samsung smartphones last year. Samsung faces smartphone challenges. own, such as when Fidelity
ture capitalist at Storm Ven- marked down the value of its
tures, thinks he knows why the layer cake of technology, that compute to selling the iPhone know exactly what the advantage of knowing Snapchat stake by 25%.
so many companies that one level of abstraction sit- services that computation they want in a mobile chip, exactly what it needs in a In the fourth quarter, the
should have all the resources ting atop the next, that ulti- enables, and the result is so Apple’s move to make its vehicle for such a service. median valuation before the
and brainpower required to mately delivers a product or that its revenue has shrunk own chips has yielded enor- It is also worth noting latest round of cash infusion
build the next big thing so service to the user. On the for the past 15 quarters. mous dividends in terms of that the stack fallacy is just or pre-money valuation for
often fail to. He calls his the- Internet, there is a stack of Google tried to move up the how the iPhone performs. In that: a fallacy and not a law tech firms raising venture cap-
sis the “stack fallacy,” and technologies stretching from stack from search to social the same way, Google’s move of nature. There are ways ital was $28.75 million, less
though he sketched its out- the server through the oper- networking and the result down its own stack—creating around it. The key is figuring than a third than that for the
line in a recent essay, I ating system running on it was Google+, about which its own servers, designing its out how to have true, first- previous quarter—and the
found it so compelling that I through a cloud abstraction the less I say, the better. own data centers, etc.—al- hand empathy for the needs lowest level since the begin-
thought it worth a more layer and then the apps run- The reason that compa- lowed it to become dominant of the customer for whatever ning of 2014, according to
thorough exploration of the ning atop that, until you nies fail when they try to in search. Similarly, Tesla’s product you’re trying to Dow Jones VentureSource.
implications of his theory. reach the user. move up the stack is simple, move to build its own batter- build next. Apple, for one, “VC’s are taking a vicious
What follows is the result of In tech, there are count- argues Mr. Sharma: They ies could—as long as it al- spends a great deal of time approach to capital deploy-
that conversation. less examples of how compa- don’t have firsthand empa- lows Tesla to differentiate its and effort testing the prod- ment,” said Jeff Schumacher,
“Stack fallacy is the mis- nies have violated the stack thy for what customers of products in terms of price ucts it rolls out, to the point founder and chief executive of
taken belief that it is trivial fallacy by attempting to the product one level above and/or performance—be a that it is rarely first to mar- venture firm BCG Digital Ven-
to build the layer above move up the stack and sub- theirs in the stack actually deciding factor in whether or ket in a category. That is one tures.
yours,” Mr. Sharma wrote. sequently failing; here are want. Database engineers at not it succeeds. reason its attempt to move
And as someone who worked just three. Oracle don’t know what sup- Of course, the real test of up the stack from cellphone
at both Oracle and Sales- Samsung, originally a ply-chain managers at For- a sweeping business hypoth- components, including chips,
Many investors say
force, his exhibit A is these maker of components for tune 500 companies want esis is whether or not it has software, batteries, and ad- the tech business is
two companies. To Oracle, Apple, tried to move up the out of an enterprise re- predictive power. So here’s a vanced lightweight materi-
which is primarily a data- stack by creating its own source-planning system like prediction based on the als, to the next object to use
still far from the
base company, Salesforce is cellphones. At first it suc- SAP, but that hasn’t stopped stack fallacy: We’re more them—electric cars—might dot-com bust.
just a “hosted database app,” ceeded, but lately it has Oracle from trying to com- likely to see Uber succeed at succeed.
he wrote. and yet despite foundered on its inability to pete in that space. making cars than to see Gen- In terms of who wins in a
spending millions on it, Ora- differentiate its products by To understand the stack eral Motors succeed at creat- given market, says Mr. “Preserving cash is the pri-
cle has been unable to beat creating its own software fallacy, it helps to recognize ing a ride-sharing service Sharma, the fundamental ority because the funding fau-
Salesforce in Salesforce’s and is now increasingly that companies move “down” like Uber. Both companies question is and has always cet has turned off.”
core competency, notably overrun by competitors tak- the stack all the time, and it appear eager to invade each been, “Who understands the Public markets are no less
customer-relations manage- ing advantage of the com- often strengthens their posi- other’s territory. But, assum- user better?” forgiving. Last year, just 31
ment software. modification of Android tion. It is the same thing as ing that ride sharing be- tech companies went public on
It helps to understand smartphones. IBM moved up vertical integration. For ex- comes the dominant model Write to Christopher Mims at the NYSE and Nasdaq ex-
that in tech, the “stack” is the stack from making things ample, engineers of Apple’s for transportation, Uber has christopher.mims@wsj.com. changes, down 46% from a
year earlier.
The amount raised per firm
YELLOW CAB COOPERATIVE U.S. District Judge Richard CIGNA Medicare plans. fell by more than half to just
Business Taxi Company Seeks Andrews wrote in a ruling
dated Thursday that ICP had
U.S. Halts Enrollment The timing of the penalty,
coming after the conclusion of
$400 million.
“We had the slowest quar-
Watch Bankruptcy Shield
Yellow Cab Cooperative Inc.,
provided “no facts that directly
show the existence of an
Into Some Plans
Cigna Corp. said Friday that
the annual Medicare open-enroll-
ment period, will limit its imme-
ter in a decade for tech IPOs
in the fourth quarter of 2015,”
San Francisco’s largest taxi com- agreement” among the manu- enrollment into its Medicare Ad- diate impact on Cigna. In addi- said Thomas Farley, president
pany, filed for bankruptcy protec- facturers. He also wrote that vantage and prescription-drug tion, the company’s business is of NYSE. He said that early
tion Friday, the latest in string of ICP hadn’t shown it lacked al- plans has been halted by the largely focused on managing 2016 could be worse: “Private
traditional taxi companies to turn ternative means of distributing government, posing a challenge coverage for big employers. and public funding is slowing.”
TAKATA to chapter 11 amid the rapid rise machinery. ICP’s suit stated to the insurer as it aims to Anthem’s proposed $48 billion Many investors and entre-
of ride-hailing rivals like Uber that Caterpillar had about a wind up its acquisition by An- acquisition of Cigna has been ap- preneurs argue that the tech
Auto Makers Issue Technologies Inc. and Lyft Inc. 40% share of the U.S. market them Inc. proved by shareholders of both business is still far from facing
More Air-Bag Recalls Pamela Martinez, the co-op’s for heavy construction equip- In a letter to Cigna, the Cen- companies. An Anthem spokes- the kind of crisis it saw in the
Auto makers will recall an ad- president, said in court papers ment, the judge wrote, but ters for Medicare and Medicaid woman said “we remain commit- dot-com bust.
ditional five million vehicles that her company faced a host that didn’t prove the company Services said it imposed the ted to the deal,” and analysts said Unlike a decade-and-a-half
equipped with Takata Corp. air of challenges, including a high had monopoly power. sanctions because of problems the sanctions likely don’t repre- ago, many of the most-promi-
bags after a driver died in a Ford number of accident-related Lawyers representing ICP with the insurer’s coverage-ap- sent the sort of “material adverse nent firms are generating rev-
Motor Co. pickup truck last claims and liabilities, a steep didn’t immediately respond to peals process, among other is- event” that would derail a merger. enue and growing—even if
month, U.S. regulators said. decline in ridership and compe- requests for comment. A Cater- sues, and the agency cited a Cigna said it was “working to they are overvalued. Some say
The latest action brings the tition from newer app-based pillar spokesman said the Peoria, “longstanding history of non- resolve these matters as quickly that what is happening is sim-
total recalled vehicles with po- ride-sharing services, namely Ill.-based company was pleased compliance” with requirements. as possible and is cooperating ply a realignment with reality
tentially rupture-prone Takata air Uber and Lyft, which have also with the decision. Connecticut-based Cigna was fully with CMS on its review.” after a period of stratospheric
bags to more than 24 million. increasingly poached Yellow —James R. Hagerty also blocked from marketing its —Anna Wilde Mathews valuations that had no basis in
The number of air-bag inflaters Cab drivers. reality.
being recalled jumped to 28 mil- “We are in the midst of serious The bigger impact could be
lion from 23 million, a spokes-
man for the National Highway
financial setbacks,” Ms. Martinez
said in a letter to the co-op’s
Sotheby’s Drops Dividend on employees and the race for
talent. Unlike later-stage in-
Traffic Safety Administration members last month. “Some are vestors who increasingly nego-
said.The NHTSA spokesman cau- due to business challenges beyond tiate themselves protections if
tioned that new data on the our control, and others are of our a firm raises money at a lower
Takata recalls were preliminary. own making.” valuation, or an initial public
The air bags can explode and The plight of yellow cab com- offering plunges, many tech
spray shrapnel in vehicle cabins. panies elsewhere in the U.S. employees are wooed by stock
A man driving a 2006 Ford shows newer ride-hailing ser- options that may now be far
Ranger pickup equipped with one vices are slowly displacing the underwater.
of the air bags died in South traditional taxi model. Taavet Hinrikus, chief exec-
Carolina in late December, the —Tom Corrigan utive officer of TransferWise,
NHTSA spokesman said, raising a startup that focuses on
to 10 the global death toll linked CATERPILLAR sending cash overseas, ac-
to the safety problem. Until now, knowledges a shift in the cli-
all deaths had occurred in Honda
Antitrust Suit mate but said he isn’t person-
Motor Co. vehicles. A Honda Is Dismissed ally that concerned. “It will
spokesman said the company A U.S. District Judge in Dela- weed out some of the busi-
would continue taking swift ac- ware dismissed an antitrust law- nesses that shouldn’t have
tion with any new recalls. suit accusing Caterpillar Inc. and been funded,” Mr. Hinrikus
A Ford spokesman said: “We other heavy-equipment makers said. “I think that the best
are saddened to hear about the of conspiring to thwart an online companies always have access
driver’s death and offer our sin- seller of Chinese construction to capital.”
cere condolences to the family equipment. But in Davos, as in Silicon
of the driver.” He added: “We are A year ago, International Valley, some executives did ex-
working with the agency to re- Construction Products LLC, press private concern about
view the available information, Asheville, N.C., or ICP, filed a suit how far the realignment would
JOHN PHILLIPS/GETTY IMAGES

but we have very limited infor- alleging that Caterpillar, Ko- reach—and what that will
mation at this point. If we find matsu Ltd of Japan and a North mean for themselves.
an issue with our vehicles, we American unit of Sweden’s AB “Clearly, there is some sort
take prompt action to address Volvo threatened to boycott of bubble that could be pop-
customer safety.” IronPlanet Inc. if that website ping,” said an executive at a
A Takata spokesman ex- operator helped ICP sell equip- large venture capital-backed
pressed condolences to the ment. As a result, the suit said, tech firm. “The question is
driver’s family and said the com- IronPlanet stopped working with how big it is.”
pany was cooperating with U.S. ICP, depriving it of “a feasible Sotheby’s eliminated its quarterly dividend and said it needs to repatriate overseas earnings at a —Rebecca Blumenstein
officials. means to efficiently bring its steep cost, though the auction house increased its stock-repurchase plans and predicted better- and Jason Anders
—Mike Spector products to market.” than-expected results for the latest quarter. Above, a work by Zoe Bradley at Sotheby’s in London. contributed to this article.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL. Monday, January 25, 2016 | B5

YOU CAN’T BUILD THE BUSINESS

OFTOMORROW ON THE NETWORK
OF YESTERDAY.
It’s no secret: business has changed — in every way, for every business. Modern
technologies have brought new opportunities and new challenges that old
solutions, Comcast Business is committed to designing, building, implementing
and managing solutions customized to the needs of today’s large, widely
networks just weren’t built for. distributed enterprise.

Many enterprise businesses are running on legacy technology— Every year, Our network is built to scale rapidly, from 10 Mbps In the next three
the average years, the average
networks that weren’t built for the likes of BYOD and a mobile to 10 Gbps and beyond. It’s built to connect multiple

5O%
enterprise uses enterprise workload
workforce. While demand on these networks has increased locations nationwide into a unified network, whether on the cloud will

200%.
exponentially, upgrades are increasingly time consuming it’s 50 locations or 5,000. And it’s built on the increase by over
and stop-gap solutions compromise performance. The result experience of thousands of dedicated engineering and
is that networking costs have skyrocketed and IT budgets more data on operations professionals working round the clock, all
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Source: IDC, “The Digital Universe of Opportunities,” April 2014; Cisco, “Cisco Global Cloud Index: Forecast and Methodology, 2014-2019,” 2015. Restrictions apply. © 2016 Comcast. All rights reserved.
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 | Monday, January 25, 2016
CMO Today
NFL Seeks a Shake-up
In Thursday Telecast
The National Football League
is flexing its muscles in talks
with television networks con-
cerning the renewal of Thursday
night telecasts, not only seeking
a sizable rights-fees increase but
also pushing multiple broadcast-
ers to split the package.
Unlike the previous two sea-
sons when CBS has shared a
package of Thursday games with
the league-owned NFL Network,
the league now wants to divide
the contests among two broad-
cast networks as well as the
league-owned NFL Network.
CBS and Comcast’s NBC are
in the lead to reach an agree-
ment with the NFL to share the
Thursday night package, people
familiar with the matter said.
Under the scenario being dis-
cussed, CBS and NBC would each
carry five Thursday games this
fall. The games would be simul-
cast on the NFL Network, which
would carry the remaining Thurs-
day night matchups exclusively.
The cost of the 10 games on the
broadcast networks might be as
much as $600 million, said a per-
son familiar with the matter.
The talks are continuing, a
person close to the NFL said.
Fox, a unit of 21st Century Fox,
is also interested in all or part of
the Thursday package, although
people close to the negotiations
said the network is trailing CBS
and NBC. 21st Century Fox and
Wall Street Journal owner News
Corp were part of the same
company until mid-2013.
Not only are the networks
Estimated Box-Office Figures, Through
Sunday
FILM DISTRIBUTOR
1. The Revenant 20th Century Fox $16
2. Star Wars: The Disney
Force Awakens
3. Ride Along 2 Universal
4. Dirty Grandpa Lionsgate
5. The Boy STX
*Friday, Saturday and Sunday Source: Rentrak
willing to pay higher sums, but
they also might be willing to dis-
rupt their schedules. Rather than
have one network carry five
straight games followed by the
other network, the NFL’s pro-
posal has been to alternate the
games among the networks and
the NFL Network, according to
people familiar with the matter.
—Joe Flint
Bogus Internet Traffic
Still Pains Ad Business
Despite warnings that the on-
line advertising business is rife
with fraud, marketers continue
to waste billions—an estimated
$7 billion this year—on buying
online ads that people don’t see,
according to the Association of
National Advertisers.
The trade group and ad-fraud-
detection firm White Ops con-
ducted a study last year that
tracked online ad buys of 49
brands from August through
September and found that fraud
levels are “relatively unchanged”
from a similar study the two
parties conducted in 2014.
The problem of fake Web
traffic generated by so-called
bots, computer programs that
mimic the clicks humans make
to give the impression that a
person is visiting a website, has
gotten significant attention.
But so far there has been lit-
tle change. The ANA said that in
the 2015 study advertisers found
that 3% to 37% of their ad im-
pressions were created by bots
compared with the prior study,
where the bot traffic ranged
from 2% to 22%.
—Suzanne Vranica
SALES, IN MILLIONS
WEEKEND* CUMULATIVE % CHANGE
$119.2 -50
$14.3 $879.3 -46
$13 $59.1 -63
$11.5 $11.5 --
$11.3 $11.3 --
NY
BUSINESS NEWS
TV
Continued from page B1
Mr. Compton.
Tegna, which owns 46 tele-
vision stations, is following
Tribune’s lead. The company
plans to launch a show in the
fall featuring T.D. Jakes, pastor
of a Dallas megachurch. Tegna
broadcast a test run of the
show on its own stations, and
the ratings were big enough to
merit taking a shot. Besides its
own channels, Tegna is selling
the program to other outlets
around the country.
The company was tired of
seeing “big names that cost a
lot of money that may not be
best suited to do daytime
talk,” said Bob Sullivan, senior
KYLE FROMAN
vice president of program-
ming. What’s more, studios
and production companies of-
ten restrict the time slots in
which their talk shows can air
or require a broadcaster to do
a set amount of promotion.
“Destiny and control,” Mr.
Sullivan said, were priorities
for Tegna.
The budget for a typical
daytime show from Hollywood
is more than $20 million a
year, and sometimes closer to
$40 million, depending on the
star’s popularity. When a show
is a hit, like Warner Bros.’ “El-
len,” its annual profit can hit
$50 million, say people famil-
iar with the matter.
Hollywood’s misses, how-
ever, far outnumber its hits,
and it continues to put its faith
in costly talent, such as Ms.
Couric and Ms. Vieira. Both
Ms. Couric and Ms. Vieira had
their shows canceled after two
seasons, as stations wanted
out and the studios behind the
shows cut their losses.
While Ms. Couric’s show av-
eraged a respectable 2.2 mil-
lion viewers, that wasn’t
enough to justify its budget,
say people familiar with the
matter. Ms. Vieira’s audience
in her show’s final season is
only about 1.1 million.
Representatives of Ms. Cou-
ric and Ms. Vieira declined to
comment.
The most recent daytime
talk successes are NBCUniver-
sal’s “The Steve Harvey Show”
THE WALL STREET JOURNAL.
Above, T.D. Jakes, the pastor
of a Dallas megachurch; right,
Harry Connick Jr.
and “Wendy Williams” from
Lions Gate Entertainment
Corp.’s Debmar-Mercury. Both
shows are several years old.
The only new daytime show
from a Hollywood studio
planned for this fall is a vari-
ety show from NBCUniversal
starring Harry Connick Jr.
Traditionally, a local TV sta-
GAVIN BOND
tion pays a weekly license fee
for a show and gives up a per-
centage of advertising time
during broadcast to the dis-
tributor, in what’s known as a
cash-plus-barter deal. Tough Time for Talk
Not all broadcasters think
As many daytime talk shows lose viewers, some broadcasters
making their own daytime
are trying to cut costs.
shows is a recipe for success.
Average audience per show
“I feel that’s like a catcher
playing shortstop,” said Perry 5 million viewers
Sook, Nexstar Broadcast-
ing Group Inc.’s chairman and 4 Dr. Phil
chief executive, at a National
Association of Television Pro-
3
Ellen
gram Executives conference DeGeneres
last week.
Studio executives say they 2 Wendy
understand broadcasters’ frus- Williams
trations, but would rather that 1 Meredith
Vieira
stations leave the business of
producing TV shows to Holly- Bill
0 Cunningham
wood. “These strategies seem
to me to be a distraction of 2011-’12 2012-’13 2013-’14 2014-’15 2015-’16*
capital resources and a sta- Season
tion’s focus,” said one senior *As of January 8
Source: Nielsen THE WALL STREET JOURNAL.
studio executive.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. * * * * * * Monday, January 25, 2016 | B7

BUSINESS NEWS

Iran Eyes Boeing’s Planes BOARD

Continued from page B1
Country looks to sinking stock price had para-
lyzed the company. Twitter
upgrade its aircraft failed to evolve its product in
and has said it agreed a way to appeal to the main-
stream mass, resulting in a
to buy Airbus jetliners stunt in growth.
Mr. Dorsey has made sev-
BY ROBERT WALL eral roster moves since offi-
cially taking over as CEO on
TEHRAN—Boeing Co. could Oct. 5, including cutting jobs
benefit from a potential bo- and naming Google’s former
BEHROUZ MEHRI/AGENCE FRANCE-PRESSE/GETTY IMAGES
suade to stay on.
Under Mr. Weil, who before
his latest role had no experi-
ence in consumer product, the
product team got hung up on
endless experiments and
reams of data, according to
people close to the company.
Mr. Weil’s exit comes a lit-
tle over a year after Mr. Cos-
tolo elevated him to lead prod-
uct at Twitter in what has
become a ill-fated role. When
Mr. Weil took over product in
October 2014 he became the
company’s fifth product head

nanza of plane orders from chief business officer, Omid in as many years.
Iran, the country’s transport Kordestani, as Twitter’s execu- Mr. Roetter joined Twitter in
minister said Sunday, as the Is- tive chairman. 2010 and is a former Google en-
lamic Republic seeks to up- Mr. Dorsey has repeatedly gineer. He recently faced scru-
grade its aging aircraft fleet said his focus will be to make tiny from former Twitter em-
with deals that could also in- Twitter easier to use. Under ployees who claimed he didn’t
clude Airbus Group SE A380 his watch, the company has do enough to increase diversity
superjumbos. so far released a news cura- among engineers. Mr. Roetter
Iran is eager to re-establish tion feature called Moments, has disputed some accusations
ties with Western companies which Ms. Stanton led, and but apologized and has said, “I
following the lifting of sanc- changed its “favorite” star realize that we have blind spots,
tions as part of a wider accord button to a “like” heart icon. myself included.”
to significantly constrain the The company is also report- Ms. Stanton, who is respon-
country’s nuclear activities. edly working to extend Twit- sible for Twitter’s media part-
It has already said it agreed ter’s identifying 140-charac- nerships with news, TV, sports
to buy Airbus jetliners, though Iran Air, the country’s flagship airline, has a fleet with an average age of more than 25 years. ter limit to 10,000. and music, joined Twitter in
the European plane maker But these changes and proc- 2010 and was elevated to run
hasn’t confirmed an order be- uty transport minister for fi- Paris this week, Mr. Akhoundi ing that new planes also would lamations have done little to global media in 2014.
yond saying it could enter into nance and international affairs, said. Mr. Kashan said Iran also boost safety. stem the stock slide. Since Twit- Twitter’s eight-person board
business with Iranian airlines in Asghar F. Kashan, said in an in- may buy 40 turboprop short- Western carriers are making ter named Mr. Dorsey CEO, its includes venture capitalist Pe-
compliance with international terview. It would include eight haul planes from ATR, the joint plans to boost service to and stock has fallen 37% to $17.84. ter Fenton, Hollywood executive
laws. A380 superjumbos, with deliv- venture between Airbus and It- from Iran to take advantage of Shares hit an all-time low of Peter Chernin and Silicon Valley
“We are open to buying from eries of the double-deckers aly’s Finmeccanica SpA. Deliv- growing business ties. $16.69 last Tuesday. business executive Peter Currie.
Boeing,” Iranian Transport starting around 2019. eries would unfold this year Dutch airline KLM is consid- The departures of Messrs. Mr. Kordestani, who joined
Minister Abbas Akhoundi said Such an order would be a and next, he said. ering restarting services to Weil and Roetter came after the board in October, is leading
in a brief interview little more big boost for Airbus, which has He said it was unclear how Tehran, though the carrier is months of interviews with em- the search for the new mem-
than a week after the U.S. and struggled to find buyers for its soon a deal with Boeing could still assessing whether all sanc- ployees, some of whom the bers along with Mr. Dorsey, a
Western countries agreed to lift flagship plane. Many airlines be completed. The plane maker tions have been removed, Chief chief executive tried to per- person familiar said.
an embargo on aircraft sales to have shied away from the jet, still was trying to sort out how Executive Pieter Elbers said.
Iran. Years of sanctions have which has a list price of $432.6 to deal with Iran and comply Air France last year announced
left Iran with one of the world’s million. with U.S. Department of the plans to resume services to and Executive Shuffle
oldest aircraft fleets, which it is Mr. Kashan said the Airbus Treasury’s Office of Foreign As- from Tehran. British Airways is Twitter's upper ranks change again.
eager to modernize. deal would be mostly for new sets Control rules, he said. actively considering starting
“We need short-, middle- A320 single-aisle planes, but Iran Air, the country’s flag- flights to the Iranian capital,
range and longer-range air- would also include A330 and ship airline, has a fleet with an Willie Walsh, chief executive of
planes,” Mr. Akhoundi said at used A340 long-haul planes. average age of more than 25 the airline’s parent, Interna-
the first Iran Aviation Summit Iran also plans to buy 16 A350 years, according to research tional Consolidated Airlines
organized by the CAPA Centre jets, Airbus’s newest long-range service AeroTransport Data Group SA, said last week.
for Aviation Consultancy. Avia- jet. Airbus and the plane Bank, though some of those air- Mr. Akhoundi said Iran also
tion would be key to reviving maker’s government-owned ex- craft aren’t actively flown. plans to spend $250 million to
the country’s tourism industry, port credit agencies will help The European Union has upgrade its air-traffic manage-
he said. finance the transaction, he said. placed restrictions on which ment systems. Iran’s airspace
Boeing has said: “There are Airbus Chief Executive Tom aircraft the carrier can operate has become busier even ahead
many steps that need to be Enders last week said Iran was in Europe because of safety of sanctions relief. Fighting in
taken should we decide to sell “a huge market” whose carriers concerns. Mahdi Hashemi, neighboring countries has
airplanes to Iran’s airlines. For could place 400 to 500 plane chairman of the Iranian parlia- driven airlines to fly routes
now, we are assessing the situ- orders in the coming years. ment’s civil-aviation commis- over Iran. Mr. Akhoundi said
ation.” Deals for all of the new sion, said there was urgency to the country had opened new Alex Roetter Katie Stanton Kevin Weil
The Airbus deal would be for planes could be formally an- rapidly expand the fleet of corridors for flights and would Head of engineering Head of media Product chief
127 planes and address fleet nounced when Iranian Presi- around 150 aircraft to 500 work to assure a high degree of
plans through 2022, Iran’s dep- dent Hassan Rouhani visits within three to five years, add- safety of its airspace. Photos: Getty Images (left and right), ZUMA Press (center)

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
0s <0 1 2 3 4 5 6 7 8 9 10 11 12 13 Down 34 Place to pump up
d t
Edmonton
10s 0s 1 Reproductive 35 Brief filer: Abbr.
V
Vancouver C llgary
Calgary
10s 14 15 16
10s
rights pioneer 36 Uttered
20s ip
Winnipeg 17 18 19 Margaret
ttl
Seattle 20s 37 Musk of SpaceX
30s 2 Split
P d
Portland 30s 20 21 22 and Tesla
Montreal
40s
Helena
l
Bismarckk Ottawa 3 Involving protons 38 Diner sandwich
40s 23 24 25 26 27
Billings Augusta
A g t and neutrons
Eugene
40s T t
Toronto 50s 39 Treasury Dept.
i
Boise pls / . Paul
Mpls./St. A bany
Albany
b t
Boston 4 Impressionist
20s 28 29 30 31 32 33 agency
30s rtford
Hartford 60s Claude
Pierre Sioux
P oux Falls k
Milwaukee Detroit Buffalo
l
New Yorkk
ew Y 70s 34 35 40 “My word!”
Ch
Chicago Cleveland
Cleve
Cl l d 5 Last year’s frosh
Reno Salt Lake
L Cit
Cityy Des
es Moines
Cheyenne Omaha
h Philadelphia
Ph
hil d lphi 80s 41 Where the Styx
Pittsburgh
Pitts b gh 36 37 38 39 40 41 6 Lake port of
Sacramento
Denver
d p
Indianapolis ashington
shington
h
Washington D.C.
DC
90s
flows
an Francisco
San Pennsylvania
Colorado
C d To p k
Topeka Spring
p i fi ld
Springfield Ch l t
Charles
Charleston
100+
42 43 45 Cleopatra’s love
40s Richmond
h d 7 Chow, informally
60s Las Springs
p g 40s Kansas St.. Louis
L
Lou LLouisville
Lou ill 46 ___ ’n’ cheese
50s Ve
Vegas Cityy gh
h
Raleigh 44 45 46 47 48 49 50
hit
Wichita Nashville
h ill 8 Competed
Los A
Ange
Angeles
Santaa FFe Charlotte
C h l tt 47 In
Memphis
Memphi
h
50s 51 52 53 54 against, as in
Ph
Phoenix Albuquerque
A b q q Oklahoma City Columbia
C b 48 Egyptian god
San Diego 70s LLittlee Rockk Atl t
Atlanta Warm Rain tennis
60s Tucson
T c 50s 55 56 57 58 59 who ruled the
Birmingham
i gh 9 Went over 21
Ft. Worth Jackson
Jack
El P
Paso
Cold T-storms underworld
D
Dallas
b
Mobile 60s Jacksonville 60 61 62 63 10 Bassoon cousin
49 Give a new
0s -0s Austin
A ti
Houston Stationary Snow 64 65 66 11 Aid for long shots version of, as a
70s ew Orleans
New l d
Orlando
10s 80s San
an Antonio
A t Tampa 12 Cheerios grain story
20s Anchorage
A h g Showers Flurries 67 68 69
Honolulu
l l Miami 13 Porker’s pad 50 Show relief, in
30s 70s
40s 70s 80s 21 Strictly off-limits a way
Ice
ORDER IN THE COURT | By Mark Danna 22 Bjorn Borg’s 54 Hindu master
U.S. Forecasts City
Today
Hi Lo W
Tomorrow
Hi Lo W City
Today
Hi Lo W
Tomorrow
Hi Lo W
Across 25 High hit on a 51 Crime lab country: Abbr. 56 Fighting
s...sunny; pc... partly cloudy; c...cloudy; sh...showers; 1 Con artist’s con tennis court evidence 26 No longer fooled 57 Zachary Taylor,
Omaha 32 24 i 29 16 pc Frankfurt 48 37 s 48 42 pc
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice
Orlando 68 50 s 74 59 s Geneva 50 36 s 53 39 pc 5 Ooze 28 TiVo remote 52 D.C. baseballer by politically
Today Tomorrow Philadelphia 34 28 pc 43 31 pc Havana 73 60 s 81 68 pc button 27 “___ there, done 58 Wild about
City Hi Lo W Hi Lo W 9 Knuckleheads 53 New Jersey
Phoenix 66 44 s 68 43 s Hong Kong 52 47 s 56 53 r 29 Like Lenin and that”
Anchorage 36 28 sn 35 29 c Pittsburgh 41 35 pc 44 26 sh Istanbul 36 30 pc 38 34 sn 14 Voice below county whose 59 Pedicure targets
Jakarta 85 77 t 87 76 sh soprano Lincoln seat is Newark 30 Water, in Paris
Atlanta 54 41 pc 59 41 sh Portland, Maine 32 23 pc 43 35 pc 60 Down
Austin 70 42 pc 55 34 pc Portland, Ore. 55 39 c 49 43 c Jerusalem 42 33 sh 39 31 sh
15 Administered 33 Direction 55 Intellectually 31 Busy mo. for
Baltimore 36 27 pc 42 33 pc Sacramento 60 38 pc 60 41 pc Johannesburg 79 56 pc 80 57 pc 61 Peyton
with a spoon, opposite WSW compete 39-Down
Boise 44 25 c 42 27 s St. Louis 49 31 sh 37 24 pc London 57 43 c 54 51 sh Manning’s
Boston 36 28 s 47 35 pc Salt Lake City 36 22 c 34 19 pc Madrid 60 42 pc 62 40 pc perhaps 34 Flip out against 32 Takes a breather brother
Burlington 32 26 pc 41 32 sh San Francisco 58 48 pc 59 47 pc Manila 82 77 pc 85 78 s 16 Vessel in the 35 Poker payment 60 Handle
Charlotte 52 32 pc 58 44 pc Santa Fe 42 19 pc 37 16 pc Melbourne 70 61 sh 83 64 pc Previous Puzzle’s Solution
Chicago 39 30 i 35 21 sf Seattle 52 41 c 52 47 r Mexico City 74 49 pc 71 39 pc Kriegsmarine 36 Strive for 62 “It can’t be!”
J E T T A E R I C A D I T
Cleveland 42 34 pc 42 27 c Sioux Falls 27 20 sn 27 13 c Milan 50 32 s 52 36 pc 17 Very bright, as 42 Class reunion 63 Geometry I Q U I T G A T O R E M O
Dallas 65 39 pc 51 31 pc Wash., D.C. 36 30 pc 45 34 pc Moscow 6 3 c 15 12 c a color attendee, for N U R S I N G H OM E A O L
Denver 36 18 sn 37 22 s Mumbai 86 68 pc 86 69 pc calculation D A B T O N S TA V E
18 Bread for falafel short
Detroit
Honolulu
39 34 pc 40 25 sf
82 68 pc 82 67 sh
International Paris
Rio de Janeiro
55 43 pc
91 76 pc
50 47 c
92 77 pc 19 Dirty like Santa’s 43 Buy everyone’s
64 Betting every A
L
T
E
O
T
P
O N
R O
G
B E R T
L U E
I
C
G
E
E
R
R
A
Today Tomorrow last chip L E D I R S KN I T
Houston 73 50 sh 55 41 sh Riyadh 73 49 s 63 48 c suit dinner M A R I E A N T O I N ET T E
Indianapolis 41 31 pc 35 24 sf City Hi Lo W Hi Lo W Rome 57 38 s 58 42 pc 65 Spider’s tiny A L E C F E Z N U T
Kansas City 42 25 r 32 20 pc Amsterdam 54 44 c 50 47 sh San Juan 84 73 sh 84 75 pc 20 Manipulate rules 44 Positive or cousin R E F I O W E S B E G A T
C H E E S E T R A Y D A L E
Las Vegas 59 39 pc 59 38 s Athens 47 35 pc 55 41 pc Seoul 25 16 s 38 18 pc for a desired negative
Little Rock 61 34 sh 48 28 pc Bangkok 80 62 pc 79 65 pc Shanghai 36 25 s 44 35 s outcome particle 66 Steelmaking H O R S E MA S M B A
O U R V A C U UM T U B E S
Los Angeles 69 47 s 72 48 s Beijing 36 14 s 32 6 s Singapore 89 77 pc 87 78 t site U S E E R A S E A F I R E
Miami 70 65 s 77 69 s Berlin 47 40 sh 48 41 sh Sydney 77 69 t 78 69 t 23 Tony-winning 45 Pulled together T E D N E P A L G O A T S
Milwaukee 36 31 i 35 20 sf Brussels 55 45 pc 51 47 sh Taipei 51 48 c 63 57 s musical based in 67 Simple song
48 Stuff that’s The contest answer is MIDDLE EAST. The initials
Minneapolis 32 23 sn 26 14 c Buenos Aires 85 63 pc 79 58 pc Tokyo 44 34 s 47 36 s Buenos Aires mined and 68 Swelled heads of the theme answers (NH, RI, MA, CT, VT) are
Nashville 50 45 pc 46 28 c Calgary 33 19 pc 44 31 pc Toronto 36 28 pc 41 26 sn the postal codes of the New England states
New Orleans 69 58 c 68 45 sh Dubai 82 66 s 78 67 s Vancouver 48 40 c 48 41 r 24 Female in a flock refined 69 Cruise stopover
New York City 34 29 s 43 35 c Dublin 55 41 sh 55 49 r Warsaw 37 33 sn 41 36 sh
except for Maine, whose postal code ME
Solve this puzzle online and discuss it at WSJ.com/Puzzles. matches the initials of the answer.
s

Oklahoma City 52 30 pc 45 25 pc Edinburgh 56 41 sh 54 48 r Zurich 49 32 s 50 35 pc

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B8 | Monday, January 25, 2016
Denver Broncos quarterback Peyton Manning is headed back to the Super Bowl, and will face Cam Newton, below, and the Carolina Panthers.
Carolina, Sure, But Hey It’s Peyton Manning!
Cam Newton and the thrilling
Carolina Panthers are off to the
Super Bowl, and it feels both inev-
itable and fun.
But yowza, look who’s also go-
ing: geezer Peyton Manning!
What a happy,
heart-fluttering and
somewhat improba-
ble story that Man-
ning—not long ago
injured, benched and
JASON left for retirement
GAY roadkill—will get an-
other crack at a ring
after Denver’s im-
pressive victory Sunday over New
England. Over the next two weeks,
there will be a sugar rush of senti-
mentality over how the 39-year-
old quarterback extricated himself
from the depths of his career to
vanquish a young replacement, re-
buke Father Time and again defeat
his nemeses, Tom Brady and
Grumbly Bill Belichick.
That’s right: Feb. 7 in Santa
Clara, just a short driverless car
ride (beep! vrrrooom!) from the
Silicon Valley Googleplex, Old Man
Peyton will line up against the
Panthers and the 26-year-old New-
ton, the presumed 2015 NFL MVP
who has built a case as the best
quarterback in the league.
It’s an irresistible match-up, as
Manning is a five-time MVP, a Su-
per Bowl champ, and one of the
most popular NFL players ever.
But let’s not get carried away with
the plot. The Broncos are going to
the Super Bowl on Feb. 7 in Santa
Clara, Calif. because of another as-
set: a ridiculous defense.
None of this is said to diminish
Manning, who played admirably
and beyond what was presumed he
had left. It’s just that the Bronco D
was clearly the story Sunday—ag-
For Stephen Curry, Even
Terrible Shots Are Great
A long 3-pointer with a lot of
time on the shot clock is a terrible
shot for almost every basketball
player on Earth—except Stephen
Curry.
There were 17 seconds left on
the shot clock in a Golden State
Warriors game this month when
Curry pulled up from 31 feet. His
heave from the Detroit Pistons’
halfcourt logo ended up looking like
a layup. But the most remarkable
thing about it was that Curry’s
swish wasn’t all that surprising.
It’s one reason the reigning
NBA champion and Most Valuable
Player has become even better this
season: Curry is taking—and mak-
ing—more ridiculously long shots
than ever.
His range has become so ab-
surd that there is no longer any-
where in the halfcourt where Curry
ASSOCIATED PRESS
gressive, relentless, suffocating.
Brady spent most of the afternoon
on the run, never clicking with his
receivers. The rest of the day he
seemed to spend on his back.
New England would manage to
take it down to the end—a Brady
touchdown pass to Rob
Gronkowski with 12 seconds left
gave the Patriots a chance to try a
2-point conversion to tie the game.
But once more a harried Brady
threw a shade-too-difficult pass,
and Denver intercepted. That was
that. The Denver D had done it.
Carolina, meanwhile, won in a
devastating laugher. It began its
NFC championship versus Arizona
the same way as its divisional
playoff against Seattle: by blazing
can go unguarded.
Curry’s shooting percentage on 3-
pointers more than three feet behind
the line is higher than almost every
other NBA player’s percentage on reg-
ular 3-pointers. Curry is shooting
44.9% so far this season on threes be-
tween 27 and 34 feet, according to
NBA Savant. Only five players have
higher percentages on threes up to 27
feet.
Curry’s newly extended range has
huge implications for the rest of the
league, including the San Antonio
Spurs, who face the Warriors on Mon-
day in the first of four games be-
tween the NBA’s top championship
threats.
Put simply, other teams must now
defend Curry even when he’s 30 feet
from the basket.
Two years ago Curry shot 30.7%
on such bombs. Last year he was up
to 38.6%. This year, with the rest of
the league shooting 23.9%, Curry is al-
most at 45%—and 53.3% when he’s
wide open.
Which may be why he’s attempt-
SPORTS
out of the garage at 85 MPH. At
the end of the second quarter, the
Panthers led 17-0. Arizona would
not mount an anxious-making
comeback as Seattle had done a
week before, preferring to turn the
ball over 85,000 times.
A diving flip touchdown run by
Newton in the third quarter made
it 34-7 and all but done. The final
score was 49-15. Yikes.
(A quick ask: heading into the
Super Bowl, can we please just
stop those ridiculous debates over
whether or not Cam Newton’s in-
game and post-game celebrations
are somehow detracting from the
staid, serious-minded game of
North American football? Newton
(335 yards passing Sunday, with
Going Long
How Stephen Curry fares on long 3-pointers
compared with the rest of the NBA
Curry Long
Season 3-pt Attempts*
2013-14 75
2014-15 96
2015-16 89
*3-pointers between 27 and 34 feet. Note: Data as of Jan 23
Sources: NBA; NBAsavant.com
ing more of them, too. In the last two
seasons, insanely long shots ac-
counted for 5.4% and 7.2% of Curry’s
total attempts. Now that number is
10.9%.
It’s only the latest example of how
* ***
two passing and two rushing
touchdowns) is nothing less than
the most exciting-to-watch player
in a sport with a lot of starting
quarterbacks who are as exciting
to watch as a bag of wet sand. If
you could play like Cam Newton,
you would never stop celebrating.)
On the unhappy side of the
field, it will be a long wait until
training camp for Arizona, which
enjoyed a great season under head
coach Bruce Arians until shrinking
in Charlotte. It will be similarly
long for New England, which
played under a withering spotlight
after last season’s Super Bowl vic-
tory and the continued “Deflate-
gate” drama involving Brady. New
England began the 2015 regular
44.9%
Stephen Curry
35% 23.9%
NBA 3-pt NBA
average long 3-pt
average
Foul line NBA 3-pt line 27 ft.–34 ft.
NBA avg. Curry
25.1% 30.7%
25.4% 38.6%
23.9% 44.9%
THE WALL STREET JOURNAL.
Curry is redefining basketball. He is in
the middle of the most efficient sea-
son in NBA history in part because he
has made seemingly impossible shots
a very real part of his game.
—Ben Cohen
THE WALL STREET JOURNAL.
(T-B) DOUG PENSINGER/GETTY IMAGES, GRANT HALVERSON/GETTY IMAGES
season as if in a revenge caper—
they started 10-0 before a loss to
Denver kicked off a 2-4 skid.
There will be no vengeance Su-
per Bowl repeat for the Patriots.
The two-week “Roger Goodell’s
Nightmare” storyline is kaput. The
Patriots will look with regret at
missed opportunities versus Den-
ver—Gronkowski appeared open in
the end zone on the failed two-
point conversion, and there was a
shocking missed extra point in the
first half by kicker Stephen Gost-
kowski, who had not missed one
since 2006.
Instead there will the unex-
pected return of Manning, who
struggled badly against Seattle in
a Super Bowl loss in 2014, lost his
job this season to shiny backup
Brock Osweiler this season after
an injury, and endured loud whis-
pers of his creaky demise, not to
mention published allegations of
an HGH shipment in 2011 to his
home, which Manning strongly de-
nied as untrue.
So here comes another Super
Bowl, the 50th overall, and there
will be so many shiny lists and his-
tories you may need a nap. Here
comes the usual hype and the ab-
surdity, the goofball press confer-
ences and breathless pregame con-
versations that start to run out of
adverbs with about four days to
go. (Here comes Coldplay—are you
pumped for halftime Coldplay?
Come on! Beyonce’s supposedly
showing up, too!) Here comes a
Carolina team that very much feels
like the best team in football. Here
comes Denver and that staggering
defense. And look here comes your
old pal, Peyton Manning—who
would have believed that, just a
month or so ago? Maybe not even
him.
 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

MOVING THE MARKET C2 | MARKETS DIGEST C4 | BANKING C5

JUSTIN SULLIVAN/GETTY IMAGES

Cracking the
Mortgage Offer Profit Code
BLOOMBERG NEWS

HEARD ON
AIG to issue shares of insurance unit FINANCE | C3 THE STREET | C6
© 2016 Dow Jones & Company. All Rights Reserved. THE WALL STREET JOURNAL. Monday, January 25, 2016 | C1
Last Week: DJIA 16093.51 À 105.43 0.66% S&P 1906.90 À 1.41% NASDAQ 4591.18 À 2.29% 10–YR. TREAS. g 5/32, yield 2.052% OIL $32.19 À $1.80 EURO $1.0799 YEN 118.77

U.S. Banks Cut Mexico Ties Asset Managers’ Latest Problem

Company
Earnings per share
4Q 2014 4Q 2015
actual consensus est.
Percentage
change
The prospect of large cross-border transactions and or the penalties if they step respondent accounts, people fa- Affiliated Managers Group $3.55 $3.60 1.5%
meet their clients’ needs for across the line. miliar with the advisories said.
compliance costs has dealing in dollars—in effect, U.S. financial regulators have Earlier, the Office of the Comp- Invesco 0.63 0.60 –4.4%

some firms getting giving them access to the U.S. long warned about the risks in troller of the Currency sent a T. Rowe Price Group 1.18 1.11 –6.2
financial system. The global Mexico of money laundering cautionary note to some big
out of the country firms that provide those ser- tied to the drug trade. The ur- U.S. banks about their Mexico AllianceBernstein 0.57 0.48 –16.1
vices are increasingly wary of banking activities. Franklin Resources* 0.91 0.75 –17.5
U.S. banks are cutting off a dealing with Mexican banks as But the pain Mexican firms
growing number of customers
in Mexico, deciding that busi-
well as their customers, accord-
ing to U.S. bankers and people $24.4 billion are experiencing is relatively
new. The fallout is affecting
Waddell & Reed Financial 0.97 0.75 –22.9

Note: Invesco and AllianceBernstein figures reflect adjusted earnings per share. AMG figures
ness south of the border might familiar with the matter. Total amount in U.S. dollars Mexican banks of various sizes reflect economic earnings per share. *Data are for fiscal first quarter
The moves are consistent Mexico got from people living such as Grupo Elektra’s Banco Sources: the companies (actual); Credit Suisse
By Rachel Louise Ensign, with a broader shift across the in the U.S. in 2014. Azteca, Grupo Financiero Ban- A decline in earnings expectations have hit the sector hard. C3
Emily Glazer industry, in which banks orte and Monex Grupo Finan-
and Amy Guthrie around the world are retreat- ciero, and their customers, the
ing from emerging markets as gency spiked more than a year people said.
not be worth the risks in the
wake of mounting regulatory
warnings.
At issue are correspondent-
regulators ramp up their scru-
tiny and punishment of possi-
ble money laundering. For
many banks, the money they
ago, when the Financial Crimes
Enforcement Network, a unit of
the Treasury Department, sent
notices warning banks of the
Regulators have consistently
said they don’t direct banks to
cut ties with specific countries
or a large swath of customers.
Case Fuels Fight on
banking relationships that al-
low Mexican banks to facilitate
can earn in such countries isn’t
worth the cost of compliance
risk that drug cartels were
laundering money through cor-
But the advisories, which
Please see MEXICO page C3 Consumer Watchdog
BY YUKA HAYASHI sponded seven months later, he
not only upheld the decision, he
WASHINGTON—In late 2014, ordered lender PHH Corp. to
an in-house judge for the gov- cough up $109 million in alleg-
ernment’s new consumer-fi- edly ill-gotten gains. That was
nance watchdog ruled that a $103 million—or 18 times—
New Jersey lender took illegal more than the judge sought. Mr.
“kickbacks” from mortgage in- Cordray has said that he applied
surers, boosting costs for bor- the law more strictly than had
rowers. The company said the been common since its 1974 en-
decision invoked a new, overly actment, a move he justified as
aggressive interpretation of an part of his bureau’s postcrisis
old law and appealed to the mission to toughen decades of
agency chief. lax consumer protection.
That gambit backfired in a The argument has moved to
big way and launched a legal a federal appeals court. Advo-
battle over the man who has be- cates from left and right have
come one of the country’s most jumped into PHH Corporation.
powerful financial regulators. et al v. CFPB, scheduled to re-
CHRISTOPHER BEAUCHAMP FOR THE WALL STREET JOURNAL

When Richard Cordray, di- ceive a District of Columbia Cir-

rector of the Consumer Finan- cuit Court of Appeals hearing
cial Protection Bureau, re- Please see CFPB page C2

SunEdison Gives Seat

To Einhorn’s Greenlight
BY LIZ HOFFMAN
David Einhorn’s Greenlight
Capital is poised to appoint a
Peter Merriman, pictured with his 1957 Dodge pickup truck, kept his money in his firm’s 401(k) plan when he retired. director at SunEdison Inc. fol-
lowing a collapse in the solar-
Last week, SunEdison an-
nounced the departure of its
chief operating officer and an-
other independent board mem-
ber. That followed the resigna-
tion of independent directors at

Latest 401(k) Pitch: Leave It Behind

power company’s stock price two of SunEdison’s subsidiaries
and the departure of some se- amid a management shake-up
nior officials, according to peo- in November.
ple familiar with the matter. Greenlight is likely to ap-
BY SARAH KROUSE corporate plans when they trillions of dollars of assets ees to do a better job of sav- The agreement, which could point a director from outside
AND TIMOTHY W. MARTIN change jobs or retire. The shift could be yanked out of their ing. The goal is ensuring that be announced this week, would the firm, one of the people said.
is turning companies and their 401(k) plans as that demo- older, relatively expensive give Greenlight a greater say in Greenlight owned about 6%
American employers have a plan managers into big—and graphic bubble moves on, workers can afford to retire one of its most problematic in- of SunEdison as of Sept. 30 and
new message for their work- unexpected—competitors for hurting their leverage to nego- and make room for younger vestments. SunEdison has increased its stake last month
ers: When you go, please leave the business of overseeing re- tiate lower fees with the out- hires. slashed jobs, sold assets and by participating in a fundrais-
your 401(k) behind. tirees’ money. side money managers that run “Why do employers care? raised new debt amid a sharp ing in which SunEdison offered
Companies from Interna- The change is being driven their retirement-savings plans. It’s a labor cost issue,” said decline in its share price since warrants to debt investors, ac-
tional Paper Co. to United by the shifting economics of The move also fits with a Marina Edwards, a senior con- July that fueled investor con- cording to securities filings.
Technologies Corp. are in- retirement as baby boomers broader effort by companies sultant at Willis Towers Wat- cerns about its liquidity and The firm owned about 26 mil-
creasingly urging employees wrap up their working lives. to improve the terms of their son, which works with large the durability of its business lion shares, or 8% of the com-
to keep their nest eggs in their Companies are worried that plans and cajole their employ- Please see SAVINGS page C2 model. Please see SUN page C6

McDonald’s Still Offers a Treat The world of investing is complex.

BY STEVEN RUSSOLILLO about one-third of customers
Happier Meal who purchased breakfast
McDonald’s Corp. chief McDonald’s same-store sales, items in the afternoon or
Steve Easterbrook has accom- change from a year earlier later hadn’t actually been to a
plished a lot nearly one year McDonald’s prior to the all-
into the job. There is reason 4% Projections
day breakfast launch.
to believe the positive mo- Furthermore, many com- The ultimate core holding for
mentum can 2 petitors are struggling at a
AHEAD OF continue. time when the Golden Arches institutional investors for over 20 years.
THE TAPE From all-day 0 are bouncing back. Chipotle
breakfast and Mexican Grill Inc.’s difficul-
other menu Estimate ties are well documented.
–2
changes to improved opera- Yum Brands Inc., which oper-
tions and better customer ates KFC and Pizza Hut, has
–4 Quarterly
service, a number of Mr. East- lost a quarter of its market
erbrook’s changes have been 2013 ’14 ’15 ’16 value since May as it embarks Visit SPDRs.com/spy
well received, while pleas- Source: FactSet on splitting off its China unit.
antly surprising Wall Street. Even relative upstarts such Assets for SPY as of 09/30/2015 were $168B. The second largest ETF had assets of $ 64B as of 09/30/2015. Average daily
For instance, analysts a McDonald’s in more than as Potbelly Corp. and Noo- trading volume over the past three months was over 147,924,961 shares as of 09/30/2015. Source: Bloomberg.
year ago sported an average three years. dles & Co., which were ex- ETFs trade like stocks, fluctuate in market value and may trade at prices above or below the ETFs net asset value.
12-month price target on More good news is ex- pected to eat many of the Brokerage commissions and ETF expenses will reduce returns.
McDonald’s of $95. Only one- pected for the quarter ended larger chains’ lunch, have
There can be no assurance that a liquid market will be maintained for ETF Shares.
fifth of them had buy ratings. in December. Analysts polled struggled recently.
Much has changed. The by FactSet forecast fourth- And while McDonald’s The SPDR ® S&P 500 ® ETF Trust is an exchange traded fund designed to generally correspond to the price and yield
performance of the S&P 500 Index.TM
stock now trades near $120 quarter earnings of $1.23 a shares aren’t cheap, they still
after surging 26% last year. share, up 9% from a year ago. trade at a discount relative to SPDR ®, S&P and S&P 500 are registered trademarks of Standard & Poor’s Financial Services LLC (S&P) and have been
And nearly half of analysts That has been raised from many of its competitors, in- licensed for use by State Street Corporation. State Street Corporation’s financial products are not sponsored, endorsed,
sold or promoted by S&P, S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their respective affiliates
rate it a buy. $1.17 in September. cluding Wendy’s Co., Panera
and third party licensors and none of such parties make any representation regarding the advisability of investing in
The rally caught fire in Oc- Global same-store sales are Bread Co. and Chipotle. such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of
tober as investors cheered a expected to rise 3.2%, thanks For McDonald’s investors, any index.
strong showing from U.S. res- in part to the early success of there’s still golden in them
ALPS Distributors, Inc. is distributor for SPDR S&P 500 ETF Trust, a unit investment trust. ALPS Distributors, Inc. is
taurants. That contributed to all-day breakfast. thar arches. not affiliated with State Street Global Markets, LLC.
a 4% gain in global same- In a study published last
Before investing, consider the funds’ investment objectives, risks, charges and expenses. To obtain a
store sales, the best for month, NPD Group Inc. found Email: tape@wsj.com
prospectus or summary prospectus, which contains this and other information, call 1.866.787.2257 or visit
www.spdrs.com. Read it carefully.
INDEX Credit Markets................................................ C4 Currencies........................................................... C2 Global Finance................................................. C3 IPO Scorecard........................................... C4 IBG-16247 Not FDIC Insured • No Bank Guarantee • May Lose Value
Commodities............................................ C4 Closed-End Funds........................................ C5 Financial Flashback..................................... C4 Heard on the Street.................................... C6 Money Rates............................................ C4
C2 | Monday, January 25, 2016 THE WALL STREET JOURNAL.

MOVING THE MARKET

THE TICKER | Market events coming this week

Monday Wednesday Earnings Expected Earnings Expected Chicago PMI

Fed 2-day meeting starts Estimate/Year Ago Estimate/Year Ago Dec., previous 42.9
Earnings Expected
Short-selling reports Biogen 4.06/4.09 Altria 0.68/0.66 Jan., expected 47
Estimate/Year Ago
Ratio, days of trading volume of Facebook 0.68/0.54 Amazon 1.58/0.45
D.R. Horton 0.42/0.39
current position, at Dec. 31 Qualcomm 0.90/1.34 Amgen 2.29/2.16
Haliburton 0.24/1.19 U. Mich. consumer index
NYSE 5.2 Tex. Instrum. 0.69/0.76 Bristol-Myers 0 28/0.46
Kimb.-Clark 1.43/1.35 Jan., prelim. 93.3
Nasdaq 5.3 United Tech 1.53/1.62 Microsoft 0.71/0.71
McDonald’s 1.23/1.13 Jan., final 93.1
Visa 0.68/0.63
Packag’g Corp. 1.03/1.16
Thursday
Mort. Bankers Indexes
Fed policy meeting ends Earnings Expected
Tuesday Friday Estimate/Year Ago
Purchase (prev.) down 2% Target rate 0.25-0.5%
Consumer Confidence Refin. (prev.) up 19% Gross domestic product Abvie 1.12/0.89
Dec., previous 96.5 Initial jobless claims Percentage change, annual rate Chevron 0.46/1.85
Jan., expected 96.5 EIA Status Report Previous 293,000 3d qtr. final up 2.0% Colgate-Palm. 0 72/0.76
Previous change in stocks in Expected 280,000 4th qtr. adv. est. up 0.8% Honeywell 1.58/1.20
Earnings Expected million of barrels MasterCard 0.70/0.69
Estimate/Year Ago
Crude-oil stocks up 4.0
3M 1.63/1.81 Gasoline stocks up 4.6 EIA report: natural gas GDP Deflator

HUY NGUYEN/BLOOMBERG NEWS

Apple 3.23/3.06 Distillates down 1.0 previous change in stocks in 3d qtr. final up 1.3%
billions of cubic feet 4th qtr. adv. est. up 0.8%
AT&T 0.63/0.55
down 178
J&J 1.42/1.27
New Home Sales
Lockheed Mart. 2.95/2.82 Durable goods orders
Nov., previous 490,000 Employment cost index
P&G 0.98/1.06 Dec., previous 0.0%
Dec., expected 505,000 3d qtr. previous 0.69%
Jan. expected up 0.5% 4th qtr., expected up 0.6%

* FACTSET ESTIMATES EARNINGS-PER-SHARE ESTIMATES DON’T INCLUDE EXTRAORDINARY ITEMS (LOSSES IN PARENTHESES)
ADJUSTED FOR STOCK SPLITNOTE: FORECASTS ARE FROM
DOW JONES WEEKLY SURVEY OF ECONOMISTS Kimberly-Clark reports earnings on Monday. Above, several of its products.

SAVINGS You’re
tiate better fees,” said Mr.
Hunkeler.
make those assets harder to
access, offer fewer investment
UTC Savings Plan doesn’t have
to!”
inside.

United Leaving The largest companies, with options and can be more The pitch is part of a

You’re IP.
Te more than $1 billion in their costly. broader effort by companies
more

Continued from the prior page But yo chnologies. 401(k) plan, pay 0.31% of as- “A 401(k) has virtually no to close a widening U.S. retire-
Learn

companies on their retirement

leaving t’s in the ur money sets in fees to outside manag- advantage over an IRA when ment gap. In recent years, em-
vings!

benefits.
But thahere Saving UTC ers. That compares with 1.1% you retire,” said Len Haydu- ployers have automatically en-
your sa
.
s Plan

A giant pool of money is at at firms with assets of $10 chok, president of Dedicated rolled workers into 401(k)
doesn s Plan
ol over

stake. Baby boomers, now

NOT w ry million or less, according to Financial Services, a financial plans and forced them to sock
Saving
d contr

largely in their 50s and 60s, ’t have BrightScope and ICI data. advisory firm in Hamilton, N.J. away more as a way of encour-
our stoend. to!
fees an

hold about $4 trillion in de- Companies for years urged One employee who has aging millions of Americans to
e UTC

has to
, lower

fined-contribution retirement workers to cash out their heard pitches from his com- put enough money aside to re-
y in th

plans, according to a Wall 401(k) assets and invest them pany as well as outside advis- tire. About 40% of households
choices
Mone

Street Journal analysis of data elsewhere in vehicles such as ers is Michael Sankner, a for- with people between 55 and
ment

from the Federal Reserve’s IRAs, since doing so limited mer United Technologies 64 have nothing saved for re-
invest
p Your

Survey of Consumer Finances costs or administrative hassles executive who retired in 2013. tirement.
great

and Investment Company In- for the companies. But over “I get these dinner invita- The widening gap has sad-
to Kee
enjoy

stitute, an asset-management the past decade companies tions every week for the free dled many companies with an
get to
It Pays

trade group. Withdrawals from have shifted some administra- steak dinner if you listen to aging workforce. The median
ill
You st

401(k) plans, which represent
the majority of assets in such
plans, exceeded new contribu-
tions in 2013 for the first time,
according to government data,
and 10,000 Americans are now
turning 65 every day.
Half a billion dollars flows
out of International Paper’s $5
billion plan each year because
of departing or retiring work-
ers, according to Robert Hun-
keler, vice president of invest-
ments at the firm. That is
largely offset by investment
returns and contributions into
workers’ 401(k) accounts, but
withdrawals are accelerating.
To stanch the outflow,
the Memphis-based paper-
products giant has started
sending “stay-over” letters to
tive and investment-related their pitch,” he said. “I ignore age of American workers rose
You h
You ca ave ch
n even oices! re
expenses to employees, and them all.” to 41.9 in 2014, up from 37.7 in
until yo leave
Star t he
u need your
it. Look money wh
inside
to lear
ere it
is
firms are deciding there are The 68-year-old Mr. 1994, and is expected to reach
n mor
e.
more benefits to keeping Sankner decided to keep his 42.4 by 2024.
Reserve
d
workers’ savings in place. money in United Technologies’ Some plans, like the one
Financial advisers who have 401(k) savings plan because of run by law firm Robinson &
A brochure being sent out to retirees from United Technologies. been eyeing an influx of baby the low fees and ease in keep- Cole LLP, are now allowing
boomer wealth stand to lose ing track of his investments by workers to draw down assets
workers close to retiring—a employees that it is easier and business if companies succeed having them all in one place. over time rather than requir-
play on the “rollover” letters cheaper to keep their money in persuading more employees United Technologies last ing them to either withdraw
companies used to send their in the company fund. Mr. Hun- to leave their retirement sav- year started sending auto- nothing or take it all out at
departing workers to explain keler said workers pay about ings in their 401(k) accounts. mated notes that outline once. One of the plan’s roughly
how to move their 401(k) 0.45% of assets in fees to out- Advisers typically don’t make choices for workers leaving 500 participants who agreed
plans into outside vehicles side money managers when money unless a retiree moves the company, including keep- to that offer was Peter Merri-
such as individual retirement they remain in the firm’s assets out of a company-spon- ing assets in the plan, rolling man, who had been the firm’s
accounts. 401(k) plan; by comparison, he sored plan. them into a new employer chief financial officer.
“You’re leaving IP,” says the estimated, they would pay fees Many outside financial ad- plan, transferring them into an “When I retired I figured,
company’s letter, referring to of more than 1.5% in IRAs. Re- visers urge retirees to move IRA or withdrawing the ‘Why go reinvent the wheel?’ ”
International Paper. “But tention also helps the firm their savings to IRAs or other money. said the 75-year-old Mr. Merri-
that’s NOT where our story keep fees low for all workers. products once their working “You’re Leaving United man. “I had been in the plan
has to end.” “Clearly, keeping members days are done. The advisers Technologies,“ a brochure 16 years, and I knew what it
International Paper tells in our plan enables us to nego- say company-sponsored plans says. ”But your money in the was like.”

Currencies
U.S.-dollar foreign-exchange rates in late New York trading
Fri
US$vs,
YTDchg Fri
US$vs,
YTDchg
CFPB Cordray—a veteran Ohio Demo-
cratic politician who served as
state attorney general—quoted
Winston Churchill: “You have
action costs.
The CFPB said PHH referred
borrowers to mortgage-insur-
ance companies and in return
called those payments “kick-
backs.”
PHH said Mr. Cordray de-
parted “drastically from prece-
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Continued from the prior page enemies? Good. That means pressured those insurers to buy dent” by declaring the company
Americas Vietnam dong .00004463 22405 1.1 on April 12. A “breathtaking as- you’ve stood up for something, its affiliate’s reinsurance. The not only violated the law when
Argentina peso .0730 13.7000 5.9 Europe sertion of raw administrative sometime in your life.” CFPB said that allowed PHH to it originated a reinsurance con-
Brazil real .2442 4.0949 3.4 Czech Rep. koruna .03997 25.021 0.5 power,” the U.S. Chamber of Mr. Cordray declined an in- collect up to 40% of the mort- tract but committed a “continu-
Canada dollar .7080 1.4124 2.1 Denmark krone .1447 6.9104 0.6 Commerce said in a brief sup- terview request. A CFPB spokes- gage insurance premiums— ing violation” with each
Chile peso .001398 715.50 1.0 Euro area euro 1.0799 .9261 0.6 porting the plaintiff. Underscor- man declined to comment for “hundreds of millions of dol- monthly payment. That was the
Colombia peso .0003021 3310.25 4.3 Hungary forint .003466 288.53 –0.7
Ecuador US dollar 1 1 unch Iceland krona .007642 130.86 0.5
ing the case’s broader implica- this article. lars” over a number of years— difference between the judge’s
Mexico peso .0542 18.4445 7.2 Norway krone .1145 8.7371 –1.2 tions for the industry’s long- The argument often turns on effectively raising consumer $6 million penalty and Mr.
Peru new sol .2901 3.447 0.9 Poland zloty .2422 4.1293 5.2 standing practices, mortgage the CFPB’s “single-director” costs. In his ruling, Mr. Cordray Cordray’s $109 million.
Uruguay peso .03224 31.0200 3.7 Russia ruble .01280 78.150 8.7 bankers, home builders and a structure—an unusual system
Venezuela b. fuerte .158603 6.3051 unch Sweden krona .1165 8.5829 1.6 dozen other groups also back designed to empower its leader

6%
Asia-Pacific Switzerland franc .9843 1.0160 1.4 PHH’s case, being argued by to make sweeping changes
Turkey lira .3333 3.0005 2.8
Australian dollar .7003 1.4280 4.1
Ukraine hryvnia .0404 24.7320 3.1
Theodore Olson, a leader of the swiftly.
China yuan .1520 6.5789 1.3 Washington conservative legal The director is appointed to
UK pound 1.4265 .7010 3.3
Hong Kong dollar .1282 7.7991 0.6
Middle East/Africa community who was solicitor a five-year term by the presi-
India rupee .01480 67.566 2.1
Indonesia rupiah .0000725 13797 –0.3 Bahrain dinar 2.6560 .3765 –0.2 general under President George dent, with wide discretion to
Japan yen .008420 118.77 –1.3 Egypt pound .1277 7.8303 unch W. Bush. implement and enforce rules, in
Kazakhstan tenge .002582 387.32 14.3 Israel shekel .2511 3.9828 2.3 The agency’s powers are jus- contrast with committee-based The percentage that the earnings of S&P
Macau pataca .1245 8.0290 0.3 Kuwait dinar 3.2822 .3047 0.4 tified “to protect consumers agencies—like the five-member
Malaysia ringgit .2341 4.2715 –0.7 Oman sul rial 2.5981 .3849 unch from widespread abuses in the Securities and Exchange Com- 500 companies are expected to decline in
New Zealand dollar .6490 1.5408 5.3 Qatar rial .2745 3.643 unch
Pakistan rupee .00953 104.890 unch Saudi Arabia riyal .2665 3.7521 unch
financial services market place,” mission— where commissioners the fourth quarter.
Philippines peso .0210 47.711 1.8 South Africa rand .0608 16.4583 6.3 countered a brief by AARP Inc., from both parties vote on major
.6993 1.4299 0.8 the seniors advocacy group. decisions.
Singapore dollar
South Korea won .0008344 1198.50
Sri Lanka rupee .0069032 144.86
1.9
0.4 WSJ Dollar Index 91.62
Close Net Chg % Chg YTD%Chg
0.09 0.09 1.60
“The PHH lawsuit is the first
serious test of the CFPB’s en-
For CFPB opponents, the
PHH case highlights problems
Forecasts Are Dropping
Taiwan dollar .02980 33.554 1.9 Sources: Tullett Prebon, WSJ Market Data Group forcement authority,” said Isaac with that structure, as the 56- Since companies began an- Goldman Sachs Group Inc.
Thailand baht .02776 36.020 unch
Boltansky, an analyst for Com- year-old Mr. Cordray, whose nouncing results two weeks ago, and Legg Mason Inc. were the
pass Point Research & Trading, term began in 2012, could sin- corporate earnings have moved biggest contributors to the fur-
an investment firm specializing gle-handedly overrule a judge in the wrong direction. ther contraction in Factset’s
ADVERTISEMENT in financial services. “If the and impose a penalty based on With 15% of the companies forecast. Due to a $5 billion reg-
court rules against the bureau, a new legal interpretation, with- in the S&P 500 having reported ulatory settlement, Goldman’s
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out advance notice. At the SEC,
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results, earnings for the index is reported earnings of $1.27 a
share, far below the $3.54 a
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sify.” a unanimous commission vote. MONEYBEAT share profit analysts forecasted.
The court case is just one The PHH case revolves Legg Mason, meanwhile, re-
DEA sign that, four years after the around the CFPB’s new hard- expected to contract 6% for the ported a loss of $1.31 a share,
agency’s creation, debate rages line interpretation of the four- fourth quarter, according to Fact- compared with the 70 cents a

LEGAL
over its authority to police a decade-old Real Estate Settle- Set’s blended earnings forecast. share profit analysts expected,


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picting the CFPB as a Soviet- about global economic growth. MoneyBeat
All Rights Reserved. style bureaucracy. In an email to
staff following its broadcast, Mr. Richard Cordray
 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.
Asset Managers Hard Hit
Shares of group have
fallen more sharply
than overall market as
industry shifts
BY SARAH KROUSE
The market’s glum start this
year is the latest problem to
beset the large, publicly traded
U.S. asset managers.
Firms like BlackRock Inc.,
T. Rowe Price Group Inc. and
Franklin Resources Inc.,
which manage funds for small
and large investors and finan-
cial advisers, have grown
larger and more prosperous
since the financial crisis.
But as a group, their shares
have fallen further than the
market in recent months as
they contend with industry
shifts and economic woes that
few analysts expect to disap-
pear soon.
The sector’s broad chal-
lenges start with low U.S. in-
SUSANA GONZÁLEZ/BLOOMBERG NEWS
A Banorte bank branch in Mexico City.
MEXICO
Continued from page C1
had nonpublic components that
haven’t been previously re-
ported, were interpreted by
several big banks as a fresh sig-
nal that they do business in
Mexico at their own peril, ac-
cording to people familiar with
the matter.
“All they know is that sanc-
tions are big and revenues are
small,” said Luis Niño de Ri-
vera, vice chairman of Banco
Azteca, based in Mexico City.
“It’s simple arithmetic: ‘I make
a million dollars and they’re
going to fine me a billion? I
won’t do that.’”
Multiple U.S. lenders have
cut ties with Banco Azteca,
which caters to low-income
customers with branches in
Mexican retailers, said Mr. Niño
de Rivera, adding that the bank
has taken steps to bolster its
compliance with U.S. regula-
tions.
The Mexican bank is down
to one remaining U.S. corre-
spondent account that will fa-
cilitate the movement of dollars
north of the border. The bank
had to temporarily halt money
transfers from the U.S. to Cen-
tral America, where the bank
has operations, he said.
Difficulties sending money
are especially problematic for
Mexican banks. The country re-
ceived $24.4 billion in U.S. dol-
lars in 2014 from people living
in the U.S., making it globally
the fourth-largest recipient of
remittances, according to the
World Bank. If the banks are
unable to send dollars back to
the U.S., the firms could be
stuck with large amounts of
cash that they are unable to
easily use in operations.
Several of the biggest banks
in Mexico are owned by foreign
banks, so they can use their
U.S. units to clear dollars and
are largely unaffected by the
recent moves. But smaller Mex-
ican banks depend on corre-
spondent relationships.
Some of those smaller banks
say the heightened scrutiny is
manageable.
“They’ve been putting more
requirements on us, but that’s
an issue of the market, not of
Monex,” said Patricia Garcia,
deputy director of corporate af-
fairs at Monex.
Many big U.S. banks are re-
viewing their correspondent re-
lationships in Mexico, including
scrutinizing the industries and
clients that Mexican banks are
working with and the kinds of
controls the firms have in
place, according to people fa-
miliar with the matter.
For example, J.P. Morgan
GLOBAL FINANCE
terest rates and rising compe-
tition, which together are
eroding profit margins. Many
of the actively managed mu-
tual funds in which many of
these firms have long special-
ized have lagged behind low-
cost index funds in recent
years, spurring outflows. And
continued market tumult or a
possible U.S. recession could
lead to withdrawals that could
further pressure profits.
Many asset-management
firms are “eating themselves,
their own margins,” said An-
ton Schutz, a portfolio man-
ager who oversees $750 mil-
lion in assets in financial funds
at Mendon Capital Advisors
Corp., referring to asset man-
agers undercutting one an-
other with low-cost index-re-
lated products, such as those
made popular by Vanguard
Group
Shares in publicly traded
U.S. asset-management firms
tracked by Morningstar Inc.
tumbled 18% on average in
Chase & Co. ramped up its
scrutiny of its correspondent
relationships among all high-
risk countries, including several
Mexican banks, within the last
year, according to people famil-
iar with the matter.
The review included Ban-
orte, one of Mexico’s biggest
and oldest commercial banks.
Senior J.P. Morgan executives
were involved in reviewing the
relationship, the people said.
J.P. Morgan eventually de-
cided to cut some Banorte ac-
counts the bank was inheriting
from a merger in Mexico be-
cause of money-laundering con-
cerns, the people said.
Banorte nearly tripled its
compliance team since 2010
and has new systems in place, a
person close to the bank said.
The bank is working with its
U.S. and European correspon-
dent banks to maintain those
relationships, this person said.
Deutsche Bank AG and
Bank of New York Mellon
Corp. cut their correspondent-
banking relationships with Ban-
Smaller Mexican
banks depend on
correspondent
relationships.
orte about two years ago, peo-
ple familiar with the matter
said.
Mexico last year made
changes in its bank-secrecy
laws allowing its banks to share
more client information with
U.S. banks.
The Asociación de Bancos de
México, a trade group, hired
Washington, D.C., consultancy
Promontory Financial Group
last year to help address the
conflict.
The risks for global banks in
Mexico aren’t hypothetical.
HSBC Holdings PLC and Citi-
group Inc. have faced probes
related to potential money
laundering involving Mexico;
HSBC paid a $1.9 billion fine.
In July, Citigroup said it
would close Banamex USA, a
small unit doing business
across the U.S.-Mexico border,
and agreed to pay $140 million
to regulators who said the unit
hadn’t done enough to protect
itself from money launderers.
At a December event co-
hosted by the Treasury Depart-
ment, J.P. Morgan Chief Execu-
tive James Dimon cited Mexico
as one of the countries where
the bank is ramping up compli-
ance due to tougher regulatory
expectations.
“We do move $6 trillion a
day and I am terrified if $100
goes to the wrong place,” Mr.
Dimon said.
2015, far behind the S&P 500
index, which closed little
changed. This year the selling
has intensified, taking the
group down an additional 14%
through Thursday, the most
recent period available, versus
a decline of about 8% for the
S&P through that day.
Adding to the stress are
withdrawals from some asset
classes in the early weeks of
the year. Investors have pulled
a net $26.2 billion from equity
funds since the start of the
year, according to data pro-
vider Lipper.
The recent performance of
shares in publicly traded asset
managers highlights one of the
risks that traders and portfolio
managers cite in assessing the
attractiveness of these shares.
They have a high “beta,” which
means they tend to rise more
than broad indexes when times
are good but are apt to fall
more sharply when the market
is in decline in part because
their flows and performance
AIG to Offer Stock in Mortgage Unit
BY LESLIE SCISM
American International
Group Inc. plans to offer
shares of its mortgage-insur-
ance unit to the public while
retaining a large majority po-
sition, according to people fa-
miliar with the matter, heed-
ing many investors’ calls for
more asset dispositions but
not following activists’ game
plan for an immediate breakup
of the insurance conglomerate.
Separately, AIG is finalizing
a deal to sell its network of
broker-dealers, people familiar
with the matter said.
The transactions are part of
a broader effort to slim down
that began when the in-
surer nearly collapsed into
bankruptcy proceedings in
2008 and received one of the
biggest bailouts of the finan-
cial crisis, since fully repaid.
Recently, AIG has come un-
der increasing pressure to take
more drastic steps to improve
results. Activist Carl Icahn and
fellow billionaire investor
John Paulson have called for
India’s benchmark S&P BSE Sensex index has fallen 17% since its most recent peak a year ago. Above, the Bombay Stock Exchange.
India’s Stocks Approach Bear Territory
BY SHEFALI ANAND
AND DEBIPRASAD NAYAK
MUMBAI—India’s fast-
growing economy may be a
ray of hope among struggling
emerging countries, but that
hasn’t helped stocks here es-
cape the global market selloff
this year.
The country’s bench-
mark S&P BSE Sensex index
could be the next to enter bear
territory following markets in
Shanghai and Tokyo, having
fallen 17% since its most re-
cent peak a year ago. That is
despite expectations India will
grow by around 7.4% in the
year to the end of March,
faster than other major devel-
oping countries like China and
Brazil. A bear market is de-
fined as a drop of at least 20%
from a recent peak.
The Sensex rose 2% on Fri-
day, in line with other Asian
markets, as investors hoped
for more stimulus efforts from
central banks of some major
developed economies.
For some, the sagging of In-
dian stocks marks the end of
the Modi wave—a nearly 30%
surge in shares in 2014, when
are linked to the health of fi-
nancial markets.
Perceived threats to the
sector are rooted in the falling
popularity of what has long
been its core and more profit-
able product, the actively man-
aged mutual fund, in which
portfolio managers work to
pick securities that will gener-
ate market-beating returns.
In general, it hasn’t been
working lately in traditional
stock and bond funds, and in-
vestors have noticed. In 2015,
the average actively managed
taxable bond fund lost 1.8%
compared with the average
passive bond fund, which lost
0.2% last year. Meanwhile the
average active stock fund lost
2.9% while the average passive
fund was down 2.3%.
Active managers say they
should be able to outperform if
interest rates rise and volatil-
ity picks up because, they ar-
gue, that is when stock pickers
can distinguish themselves. An
increase in performance could
the company to soon break
into three parts, as part of a
plan to get out from under
federal regulation as a “sys-
temically important financial
institution.”
AIG Chief Executive Peter
Hancock has said that while
he understands many inves-
tors’ desire for urgent action
to boost the company’s overall
financial results, an immediate
breakup isn’t in shareholders’
best interests.
Analysts expect the mort-
gage-insurance unit, one of
AIG’s most profitable busi-
nesses, to probably be valued
at or above $3.5 billion. The
broker-dealer sale would total
hundreds of millions of dol-
lars, analysts say. AIG has a
market value of about $70 bil-
lion.
While AIG has been aggres-
sively buying back its shares
with the cash it is generating
from operations and asset
sales, its profitability lags be-
hind big rivals like Travelers
Cos. and Chubb Ltd., the
newly merged ACE Ltd. and
Prime Minister Narendra Modi
was elected on a promise of
making it easier to do busi-
ness in India.
Mr. Modi’s reform efforts
have become bogged down
since, while Indian corporate
earnings have shown little im-
provement.
But India’s stock market
also is suffering from its sub-
stantial reliance on foreign in-
vestors, who own $285 billion
worth of the country’s listed
shares, according to ICICI Pru-
dential Asset Management Co.
Domestic institutional inves-
tors own only around $60 bil-
lion worth of shares, by con-
trast.
Up until October last year,
global investors had poured
$4.7 billion into Indian stocks
in 2015, according to regula-
tory data. Since November,
however, such investors have
withdrawn $3 billion, part of a
broader pullback from emerg-
ing markets since investors
became certain the U.S. Fed-
eral Reserve would start rais-
ing interest rates. Foreign in-
vestors have yanked $1 billion
out of Indian stocks this
month alone, according to the
Monday, January 25, 2016 | C3
Low interest rates are hurting big asset managers like BlackRock.
spur an uptick in new flows.
Investors pulled more than
$200 billion from actively
managed funds last year while
investing more than $400 bil-
lion in index-tracking funds,
according to Morningstar.
“As you’ve seen choppier
absolute performance, that
plays to some extent into sen-
timent around those stocks,”
Tim Cohen, chief investment
officer in Fidelity Invest-
ments’ equity division, said of
asset managers.
Adding to recent pressure
was the highly unusual move
Chubb Corp.
Mr. Hancock is set to up-
date investors on the com-
pany’s strategy in a session
Tuesday morning, and the two
transactions are expected to
be discussed. They are likely
to be part of a menu of
items—including potentially
steeper cost cuts—to show Mr.
Hancock is moving decisively
to improve the company’s
profit margins.
If these two transactions
are “a sign of more divesti-
tures to come, this could be an
important first step in the
right direction,” Josh Stirling,
a stock analyst at Sanford C.
Bernstein & Co., said Saturday.
By maintaining a majority
stake in the mortgage-insur-
ance unit, AIG could continue
to book a substantial portion
of its earnings and take advan-
tage of certain deferred tax as-
sets that Mr. Hancock main-
tains would be wasted if the
company were immediately
split into three parts, analysts
said.
AIG’s primary focus is prop-
data.
Much of the selling has
come from sovereign-wealth
funds based in the Middle East
and other regions that earn in-
come from oil, analysts say. As
crude-oil prices have fallen,
the spending power of these
governments has shrunk, and
they are dipping into the as-
sets of their wealth funds to
meet their budgetary needs,
analysts say.
“They are not selling be-
cause India is a bad market,
but they need money,” said
Sankaran Naren, chief invest-
ment officer at ICICI Pruden-
tial Asset Management, which
manages $25 billion in Indian
stocks and bonds.
The fall in global oil prices
has had a more direct effect
on some of India’s biggest
listed companies. Shares in
state-owned Oil and Natural
Gas Corp., one of India’s big-
gest oil explorers, have
fallen 37% over the past year.
Meanwhile, China’s slowing
growth is also harming Indian
stocks, albeit indirectly. As
China manufactures less, the
prices of metals such as steel
and copper are falling. That, in
EDUARDO MUNOZ/REUTERS
by Third Avenue Capital Man-
agement to halt redemptions
at a junk-bond fund in early
December. Investors re-
sponded by pulling $9.4 billion
from mutual funds that invest
in high-yield bonds, the sec-
ond-largest monthly outflows
from such funds, according to
Morningstar.
The redemptions added to a
steady stream of outflows dur-
ing the year from some of the
largest funds run by Franklin
and Ivy Investment Manage-
ment Co., a unit of Waddell &
Reed Financial Inc.
erty-casualty insurance sold to
businesses globally, and life
insurance and retirement ser-
vices sold mostly in the U.S.
Before the crisis, it was a lead-
ing seller of life insurance in
Asia, among many other far-
flung operations.
Private-equity firm Light-
year Capital is a buyer in the
broker-dealer sale, according
to the people familiar with the
matter. It wasn’t clear if other
buyers are involved.
A Lightyear Capital spokes-
man declined to comment.
AIG’s broker-dealer network
is known as AIG Advisor
Group, with more than 5,000
financial advisers. They work
through four different firms:
SagePoint Financial, FSC Secu-
rities Corp., Woodbury Finan-
cial and Royal Alliance.
An AIG spokesman said Fri-
day that the company “contin-
ues to take steps to narrow its
focus, improve its financial
performance and return capi-
tal to shareholders,” and that
it will disclose more on Tues-
day.
DHIRAJ SINGH/BLOOMBERG NEWS
turn, is lowering Indian min-
ing companies’ revenue.
Analysts fear that Indian
banks, which lent heavily to
these companies, may not get
their money back. Half of the
Sensex index comprises com-
modities and banking stocks.
“The world is on the verge
of the next recession, which is
made in China” and India isn’t
immune, said Pankaj Murarka,
head of equities at Axis Asset
Management Co., which man-
ages $2.5 billion in Indian
stocks.
For sure, some of India’s
problems are homemade. In-
vestors had hoped the Modi
government would quickly in-
crease investment in infra-
structure, which would create
jobs and raise incomes, boost-
ing consumption. Although the
government has made moves to
build more roads, the results
aren’t yet visible. Poor mon-
soon rains last year hurt crop
production and rural wages,
further tempering demand.
“This government underes-
timated the complexity of the
challenges that they inherited,
and overestimated their ability
to deliver,” said Mr. Murarka.
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
C4 | Monday, January 25, 2016 THE WALL STREET JOURNAL.

MARKETS DIGEST
Dow Jones Industrial Average S&P 500 Index New to the Market
Last Year ago Last Year ago
16093.51 s 105.43, or 0.66% last week Trailing P/E ratio * 15.73 16.64 1906.90 s 26.57, or 1.41% last week Trailing P/E ratio * 20.69 19.71 Public Offerings of Stock
High, low, open and close for each of P/E estimate * 14.65 15.58 High, low, open and close for each of P/E estimate * 15.38 17.01
the past 52 weeks Dividend yield 2.77 2.46 the past 52 weeks Dividend yield 2.36 1.97 IPOs in the U.S. Market
All-time high 18312.39, 05/19/15 All-time high: 2130.82, 05/21/15
Initial public offerings of stock expected this week; might include some
offerings, U.S. and foreign, open to institutional investors only via the
Current divisor 0.14602128057775 65-day moving average Rule 144a market; deal amounts are for the U.S. market only
18500 2150
Symbol/ Pricing
200-day moving average Expected primary Shares Range($)
pricing date Filed Issuer/business exchange (mil.) Low/High Bookrunner(s)
18000 2100
1/25 10/5 PLx Pharma PLXP 3.8 17.00/ Raymond James,
2015 Developer of non-steroidal Nq 19.00 Maxim Group
17500 2050 anti-inflammatory drug
products.
1/25 11/4 Shimmick Construction Co SCCI 6.3 11.00/ FBR Cptl Mrkts & Co
17000 2000 2015 Construction company Nq 13.00
offering general
Week's high construction, construction
200-day moving average management, and design-
DOWN UP 16500 1950 build services.
t

Monday's open Friday's close 1/26 11/9 AmeriQuest AMQ 6.2 11.00/ Raymond James,
2015 Provider of technology- Nq 13.00 Stephens
Friday's close Monday's open 16000 1900 enabled business-to-
t

business solutions.

Week's low 65-day moving average 1/26 10/7 Nordic Realty Trust NORT 5.0 15.00/ Wunderlich Secs,
15500 1850 2015 Real estate investment Nq 15.00 Compass Point,
trust focused on office and Janney
industrial properties in Montgomery
Bars measure the point change from Monday's open Norway, Sweden and Scott, JMP Secs,
15000 1800 Denmark. Nomura
J F M A M J J A S O N D J J F M A M J J A S O N D J
1/27 8/25 Advanced Inhalation Therapies AITPU 0.7 15.00/ Joseph Gunnar & Co
Primary 2015 Biopharmaceutical Nq 15.00
NYSE weekly volume, in billions of shares market Composite company developing
t
t

Financial Flashback products to treat various

30 respiratory infections.
20 The Wall Street Journal, January 25, 1988
10 The SEC notified Drexel Burnham Lambert that the SEC Lockup Expirations
0 would recommend civil charges against the firm and its
junk-bond chief Michael Milken. Below, companies whose officers and other insiders will become eligible
J F M A M J J A S O N D J
to sell shares in their newly public companies for the first time. Such
* P/E data based on as-reported earnings from Birinyi Associates Inc.
sales can move the stock’s price.
Major U.S. Stock-Market Indexes Nasdaq Composite Lockup
expiration Issue date Issuer
Offer Offer amt Through Lockup
Symbol price($) ($ mil.) Friday (%) provision
Latest Week 52-Week Range % chg s 102.76, or 2.29%
High Low Close Net chg % chg Low Close (l) High % chg YTD 3-yr. ann. Jan. 25 July 29, ’15 vTv Therapeutics Inc VTVT 15.00 117.2 –51.3 180 days
Dow Jones
last week
Jan. 27 July 31, ’15 TerraForm Global Inc GLBL 15.00 675.0 –76.3 180 days
Industrial Average 16171.96 15450.56 16093.51 105.43 0.66 15666.44 l 18312.39 -8.9 -7.6 5.5 Jan. 31 Aug. 4, ’15 Amplify Snack Brands Inc BETR 18.00 270.0 –41.3 180 days
Transportation Avg 6878.98 6403.31 6778.54 89.48 1.34 6625.53 l 9178.48 -24.5 -9.7 5.6 Aug. 4, ’15 SunRun Inc RUN 14.00 250.6 –37.2 180 days
4525
Utility Average 593.38 570.73 589.14 6.35 1.09 541.97 l 652.11 -9.1 2.0 8.1 Aug. 4, ’15 Zynerba Pharmaceuticals Inc ZYNE 14.00 48.3 –35.4 180 days
Total Stock Market 19570.73 18549.43 19556.80 260.51 1.35 19071.84 l 22287.78 -8.4 -7.3 7.9 Sources: Dealogic; WSJ Market Data Group
Barron's 400 472.06 444.35 470.50 6.48 1.40 460.46 l 586.75 -12.3 -8.9 6.7 4450

Nasdaq Stock Market

4375
IPO Scorecard
Nasdaq Composite 4591.18 4313.39 4591.18 102.76 2.29 4471.69 l 5218.86 -3.5 -8.3 13.5 Performance of IPOs, most-recent listed first
Nasdaq 100 4260.55 3992.91 4259.77 118.69 2.87 4016.32 l 4719.05 -0.4 -7.3 15.8
% Chg From % Chg From
4300 Company SYMBOL Friday3s Offer 1st-day Company SYMBOL Friday3s Offer 1st-day
Standard & Poor's 15 18 19 20 21 22 IPO date/Offer price close ($) price close IPO date/Offer price close ($) price close
500 Index 1908.85 1812.29 1906.90 26.57 1.41 1859.33 l 2130.82 -7.1 -6.7 8.5 January
Yirendai 7.07 –29.3 –22.3 Mimecast 7.95 –20.5 –21.3
MidCap 400 1288.87 1215.14 1287.77 17.94 1.41 1254.93 l 1549.44 -11.5 -7.9 6.0 DJ US TSM YRD Dec. 18/$10.00 MIME Nov. 19/$10.00
SmallCap 600 615.52 581.63 614.97 6.34 1.04 601.59 l 742.13 -10.1 -8.5 6.9 s 260.51, or 1.35% Atlassian 24.61 17.2 –11.4 Square 9.85 9.4 –24.6
TEAM Dec. 10/$21.00 SQ Nov. 19/$9.00
Other Indexes last week Axsome Thera 12.47 38.6 42.7 Instructure 17.17 7.3 –4.6
Russell 2000 1021.84 958.48 1020.66 12.94 1.28 994.87 l 1295.8 -14.2 -10.1 4.3 AXSM Nov. 19/$9.00 INST Nov. 13/$16.00
NYSE Composite 9437.79 8937.99 9426.91 127.29 1.37 9156.84 l 11239.66 -12.6 -7.1 2.2 Duluth Hldgs 15.56 29.7 14.0 Mesoblast 5.58 –30.3 –31.2
19350 DLTH Nov. 19/$12.00 MESO Nov. 13/$8.00
Value Line 406.98 378.06 405.07 6.84 1.72 392.58 l 522.42 -18.2 -9.1 1.3
Match Grp 12.22 1.8 –17.1 Xtera Comm 3.41 –31.8 –31.8
NYSE Arca Biotech 3255.02 2995.11 3204.79 0.27 0.01 3108.08 l 4431.87 -13.2 -16.0 24.3 MTCH Nov. 19/$12.00 XCOM Nov. 13/$5.00
NYSE Arca Pharma 515.46 493.68 513.89 7.79 1.54 502.66 l 605.94 -6.5 -5.1 9.9 19050
KBW Bank 64.59 60.57 62.26 -1.38 -2.17 61.26 l 80.41 -9.3 -14.8 4.9 Sources: WSJ Market Data Group; FactSet Research Systems

PHLX§ Gold/Silver 41.69 38.36 40.92 -0.49 -1.19 38.84 l 81.92 -47.8 -9.7 -37.1
PHLX§ Oil Service 2.15 l
18750 Other Stock Offerings
142.37 122.09 139.26 2.93 128.61 224.32 -28.0 -11.7 -16.8
PHLX§ Semiconductor 602.23 562.75 598.42 24.13 4.20 559.59 l 746.08 -12.1 -9.8 13.5 Secondaries and follow-ons expected this week in the U.S. market
CBOE Volatility 32.09 22.22 22.34 -4.68 -17.32 11.95 l 40.74 34.1 22.7 21.6 18450 None expected this week
15 18 19 20 21 22

Philadelphia Stock Exchange January
Sources: SIX Financial Information; WSJ Market Data Group Off the Shelf
“Shelf registrations” allow a company to prepare a stock or bond for
International Stock Indexes Commodities and sale, without selling the whole issue at once. Corporations sell as
conditions become favorable. Here are the shelf sales, or takedowns,
Latest Week 52-Week Range YTD Currencies over the last week:
Region/Country Index Close % chg Low Close High % chg Last Week YTD
Close Net chg %Chg % chg Takedown date/ Deal value Registration
World The Global Dow 2138.03 0.39 2078.15 • 2639.52 –8.5
DJ Commodity 436.15 10.66 2.51 -3.89
Issuer/Industry Registration date ($ mil.) (mil.) Bookrunner(s)
DJ Global Index 283.19 0.84 275.24 • 341.62 –8.0
Reuters-Jefferies CRB 163.80 3.87 2.42 -7.07 Agile Therapeutics Jan. 22 $35.0 $150.0 W. Blair LLC, RBC Cptl Mkts
DJ Global ex U.S. 191.32 0.31 185.27 • 246.68 –9.0
Healthcare June 19,315
Crude oil, $ per barrel 32.19 5.92 -13.09
Global Dow Euro 1859.83 1.57 1795.71 • 2305.98 –8.2 1.80
Natural gas, $/MMBtu 2.139 0.039 1.86 -8.47 Synergy Resources Jan. 21 $80.5 ... Credit Suisse, BofA ML, Citi
DJ TSM Global 2909.36 0.82 2828.40 • 3510.20 –8.1
Oil & Gas Sept. 11,315
1097.20 0.52
Global ex U.S. 1931.44 0.26 1870.90 • 2482.77 –9.0 Gold, $ per troy oz. 5.70 3.48
Developed ex U.S. 1927.06 0.34 1862.95 • 2403.18 –8.5 U.S. Dollar Index 99.53 0.59 0.60 0.85 TreeHouse Foods Jan. 20 $862.5 ... BofA ML, JPM, WFS,
Global Small-Cap 3805.05 0.26 3704.00 • 4716.91 –9.7 WSJ Dollar Index 91.62 0.30 0.33 1.60
Food & Beverage Nov. 20,313 BMO Cptl Mkts,
SunTrust
Global Large-Cap 2776.82 0.90 2698.16 • 3337.56 –7.9
Euro, per dollar 0.9261 0.0100 1.09 0.57
Americas DJ Americas 452.14 1.51 439.67 • 524.44 –7.2 Yen, per dollar 118.77 1.75 1.49 -1.27
Sovran Self Storage Jan. 20 $243.2 ... WFS, Jefferies, SunTrust
Brazil Sao Paulo Bovespa 38031.22 –1.39 37645.48 • 58051.61 –12.3
U.K. pound, in dollars 1.43 0.00 0.05 -3.20
Real Estate April 30,314
Canada S&P/TSX Comp 12389.58 2.62 11843.11 • 15450.87 –4.8 Physicians Realty Trust Jan. 19 $335.1 ... KeyBanc, BofA ML, BMO Cptl Mkts,
Mexico IPC All-Share 41621.31 1.89 40265.37 • 45773.31 –3.2
52-Week Range
Low Close(l) High % Chg Real Estate June 17,315 MS, Raymond James,
Chile Santiago IPSA 2820.32 1.29 2759.77 • 3359.04 –4.2 RBC Cptl Mkts, Stifel
DJ Commodity 420.23 l 584.70 -18.87
Europe Stoxx Europe 600 338.36 2.58 322.29 • 414.06 –7.5
231.77 -24.38
Stoxx Europe 50 2874.08 2.59 2738.91 • 3591.47 –7.3 Reuters-Jefferies CRB 156.32 l
Borrowing Benchmarks | WSJ.com/bonds
Eurozone Euro Stoxx 319.53 2.34 304.71 • 392.35 –7.4 Crude oil, $ per barrel 26.55 l 61.43 -29.39
Euro Stoxx 50 3023.21 2.40 2882.59 • 3828.78 –7.5 Natural gas, $/MMBtu 1.76 l 3.02 -28.37
Money Rates January 22, 2016
Belgium Bel-20 3450.99 1.97 3265.59 • 3905.71 –6.7 Gold, $ per troy oz. 1050.80 l 1292.60 -15.12
France CAC 40 4336.69 3.01 4124.95 • 5268.91 –6.5 Key annual interest rates paid to borrow or lend money in U.S. and
Germany DAX 9764.88 2.30 9391.64 • 12374.73 –9.1 U.S. Dollar Index 93.23 l 100.20 4.78 international markets. Rates below are a guide to general levels but
Israel Tel Aviv 1439.99 –0.99 1433.58 • 1723.56 –5.8 WSJ Dollar Index 84.11 l 91.62 7.28 don’t always represent actual transactions.
Italy FTSE MIB 19028.42 –0.87 17968 • 24031 –11.2 Euro, per dollar 0.86 l 0.95 3.77
Inflation Other short-term rates
Netherlands AEX 419.28 3.89 395.72 • 509.24 –5.1
Yen, per dollar 116.95 l 125.62 0.85
Spain IBEX 35 8722.90 2.10 8281.4 • 11866.4 –8.6
l 1.59 -4.85
Dec. index
level
Chg From (%)
Nov. '15 Dec. '14 Latest
Week
ago
52-Week
high low
Sweden SX All Share 469.16 3.48 446.99 • 564.90 –7.1 U.K. pound, in dollars 1.42
Switzerland Swiss Market 8271.11 2.02 7966.34 • 9526.79 –6.2
Real-time U.S. stock
U.S. consumer price index Call money
U.K. FTSE 100 5900.01 1.65 5673.58 • 7103.98 –5.5 All items 236.525 –0.34 0.7 2.25 2.25 2.25 2.00
Asia-Pacific
Australia
DJ Asia-Pacific TSM 1250.35
S&P/ASX 200 4916.00
–1.42
0.47
1210.15
4841.5 •
• 1619.39
5982.7
–10.0
–7.2
WSJ
.COM
quotes are available on
WSJ.com. Track most-
active stocks, new
Core

International rates
243.779 –0.12 2.1
Commercial paper
30 to 270 days n.q. ... ... ...
China Shanghai Composite 2916.56 0.54 2880.48 • 5166.35 –17.6
highs/lows, mutual Week 52-Week Commercial paper (AA financial)
Hong Kong Hang Seng 19080.51 –2.26 18542.15 • 28442.75 –12.9
funds and ETFs.
Latest ago High Low 90 days 0.57 0.57 0.64 0.06
India S&P BSE Sensex 24435.66 –0.08 23962.21 • 29681.77 –6.4
Prime rates
Japan Nikkei Stock Avg 16958.53 –1.10 16017.26 • 20868.03 –10.9 Plus, get deeper money-flows data and
3.50 3.50 3.50 3.25
Euro commercial paper
Singapore Straits Times 2577.09 –2.04 2532.70 • 3539.95 –10.6 email delivery of key stock-market U.S.
Canada 2.70 2.70 3.00 2.70
30 day
Two month
n.q.
n.q.
n.q. -0.02 -0.12
n.q. -0.01 -0.09
South Korea Kospi 1879.43 0.03 1829.81 • 2173.41 –4.2 data. Japan 1.475 1.475 1.475 1.475 Three month n.q. n.q. 0.01 -0.08
Taiwan Weighted 7756.18 –0.08 7410.34 • 9973.12 –7.0 All are available free at Four month n.q. n.q. 0.02 0.00
Policy Rates Five month n.q. n.q. 0.03 0.01
Source: SIX Financial Information;WSJ Market Data Group WSJMarkets.com
Euro zone 0.05 0.05 0.05 0.05 Six month n.q. n.q. 0.04 0.02
Switzerland 0.50 0.50 0.50 0.50
Libor
0.50 0.50 0.50 0.50
Consumer Rates and Returns to Investor Benchmark Yields and Rates Britain
Australia 2.00 2.00 2.50 2.00 One month 0.42550 0.42550 0.42950 0.16775
Three month 0.61910 0.62110 0.62430 0.25210
U.S. consumer rates Selected rates Treasury yield curve Forex Race Overnight repurchase Six month 0.86500 0.85730 0.86500 0.35390
A consumer rate against its New car loan Yield to maturity of current bills, Yen, euro vs. dollar; dollar vs. U.S. 0.50 0.44 0.50 0.07
One year 1.15595 1.15860 1.17800 0.61790
benchmark over the past year notes and bonds major U.S. trading partners Euro Libor
Bankrate.com avg†: 3.19% U.S. government rates One month -0.226 -0.223 -0.003 -0.226
Lake Elmo Bank 1.99% 5.00% 15%
Discount Three month -0.163 -0.146 0.034 -0.163
Prime rate 3.50% Lake Elmo, MN 651-777-8365 10 WSJ Dollar index Six month -0.084 -0.065 0.097 -0.084
t 4.00 s 1.00 1.00 1.00 0.75
PNC Bank 1.99% One year 0.024 0.046 0.239 0.024
5
t 3.00 Federal funds
Peoria, IL 888-622-4932 3.00 0 Euro interbank offered rate (Euribor)
New car loan Effective rate 0.4000 0.3800 0.4000 0.0600
2.50 South State Bank 1.99% –5 One month -0.231 -0.221 0.005 -0.231
2.00 High 0.5600 0.5625 0.5900 0.2500 Three month -0.152 -0.142 0.055 -0.152
Savannah, GA 912-629-6500 s Low 0.3400 0.3400 0.3500 0.0100
–10 s Six month -0.074 -0.054 0.138 -0.074
2.00 1.99% Friday 1.00 Yen 0.3800 0.3000 0.5500 0.0000
t

Think Mutual Bank Euro Bid One year 0.032 0.049 0.277 0.032
–15
t

Rochester, MN 800-288-3425 One year ago Offer 0.5000 0.3500 0.5600 0.0500
1.50 0.00 –20 Value 52-Week
FM AM J J A S ON D J TrustCo Bank 2.12% 1 3 6 1 2 3 5 710 30 Treasury bill auction Latest Traded High Low
Orlando, FL 2015
2015 407-422-7129 month(s) years 4 weeks 0.250 0.220 0.250 0.000 DTCC GCF Repo Index
13 weeks 0.255 0.215 0.280 0.000 Treasury 0.568 87.338 0.639 0.059
Yield/Rate (%) 52-Week Range (%) 3-yr chg maturity
26 weeks 0.370 0.470 0.585 0.065 MBS 0.622 118.314 0.705 0.075
Interest rate Last (l)Week ago Low 0 2 4 6 8 High (pct pts) Sources: Ryan ALM; Tullett Prebon; WSJ Market Data Group
Open Implied
Federal-funds rate target 0.25-0.5 0.25-0.5 0.00 l 0.50 0.25 Secondary market
Prime rate* 3.50 3.50 3.25 l 3.50 0.25
Corporate Borrowing Rates and Yields Fannie Mae
Settle Change Interest Rate

Spread +/- Treasurys,

DTCC GCF Repo Index Futures
Libor, 3-month 0.62 0.62 0.25 l 0.62 0.32 30-year mortgage yields Treasury Jan 99.505 -0.013 7482 0.495
Yield (%) in basis pts, 52-wk Range Total Return
Money market, annual yield 0.27 0.27 0.25 l 0.42 -0.24 Bond total return index Last Wk ago Last Low High 52-wk 3-yr 30 days 3.355 3.337 3.750 3.052 Treasury Feb 99.525 -0.005 6072 0.475
Five-year CD, annual yield 1.33 1.36 1.33 l 1.53 0.01 60 days 3.386 3.371 3.788 3.105 Treasury Mar 99.455 -0.025 4335 0.545
10-yr Treasury, Ryan ALM 2.052 2.035 -0.17 2.19
30-year mortgage, fixed† 3.75 3.82 3.72 l 4.22 0.11
DJ Corporate 3.414 3.354 -1.98 2.03 Notes on data:
15-year mortgage, fixed† 3.00 3.07 2.94 l 3.42 0.01
Aggregate, Barclays Capital 2.440 2.420 62 42 65 0.25 1.79 U.S. prime rate is effective December 17, 2015.
Jumbo mortgages, $417,000-plus† 4.36 4.44 4.00 l 4.97 0.21 Discount rate is effective December 17, 2015.
High Yield 100, Merrill Lynch 8.254 8.307 671 374 721 -6.910 0.173
Five-year adj mortgage (ARM)† 3.24 3.34 3.14 l 4.00 0.27 U.S. prime rate is the base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks;
Fixed-Rate MBS, Barclays 2.600 2.600 24 13 36 1.90 2.39 Other prime rates aren’t directly comparable; lending practices vary widely by location;
New-car loan, 48-month 3.19 3.23 2.71 l 3.33 0.45 DTCC GCF Repo Index is Depository Trust & Clearing Corp.'s weighted average for overnight trades in
Muni Master, Merrill 1.612 1.617 n.a. -10 7 2.572 2.770 applicable CUSIPs. Value traded is in billions of U.S. dollars.
HELOC, $30,000 4.98 4.98 4.24 l 4.98 0.37
EMBI Global, J.P. Morgan 6.972 7.062 497 359 519 -0.432 -0.472 Futures on the DTCC GCF Repo Index are traded on NYSE Liffe US.
Bankrate.com rates based on survey of over 4,800 online banks. *Base rate posted by 70% of the nation's largest
banks.† Excludes closing costs. Sources: Federal Reserve; Bureau of Labor Statistics; DTCC; SIX Financial Information;
Sources: SIX Financial Information; WSJ Market Data Group; Bankrate.com Sources: J.P. Morgan; Ryan ALM; S&P Dow Jones Indices; Barclays Capital; Merrill Lynch General Electric Capital Corp.; Tullett Prebon Information, Ltd.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
Wealth Management Is Hot Again in Asia
A slump in markets
and deals has Asian
bankers going back to
an old play book
BY JULIE STEINBERG
HONG KONG—Amid slump-
ing Asian markets and a dim-
mer outlook for deals this
year, bankers in Asia are going
back to basics: managing
money for wealthy clients.
Global banks from Goldman
Sachs Group Inc. to Standard
Chartered PLC are deploying
new tactics to gather more as-
sets from Asia’s wealthy fami-
lies. Firms are hiring more pri-
vate bankers and culling
clients from other parts of the
bank. Bankers want to show
clients their advice is needed
in turbulent times. They are
also pouring on perks, offering
clients access to ritzy cars and
events around the world.
The 18% decline in the
Shanghai stock market so far
this year and mounting doubts
about new share offerings
Closed-End Funds | WSJ.com/funds
Listed are the 300 largest closed-end funds as
measured by assets.
Closed-end funds sell a limited number of shares and
invest the proceeds in securities. Unlike open-end
funds, closed-ends generally do not buy their shares
back from investors who wish to cash in their holdings.
Instead, fund shares trade on a stock exchange.
a-The NAV and market price are ex dividend. b-The
NAV is fully diluted. c-NAV is as of Thursday’s close. d-
NAV is as of Wednesday’s close. e-NAV assumes rights
offering is fully subscribed. f-Rights offering in process.
g-Rights offering announced. h-Lipper data has been
adjusted for rights offering. j-Rights offering has
expired, but Lipper data not yet adjusted. l-NAV as of
previous day. o-Tender offer in process. v-NAV is
converted at the commercial Rand rate. w-Convertible
Note-NAV (not market) conversion value. y-NAV and
market price are in Canadian dollars. NA signifies that
the information is not available or not applicable. NS
signifies fund not in existence of entire period.
12 month yield is computed by dividing income
dividends paid (during the previous twelve months for
periods ending at month-end or during the previous
fifty-two weeks for periods ending at any time other
than month-end) by the latest month-end market price
adjusted for capital gains distributions.
Source: Lipper
Friday, January 22, 2016
52 wk
Prem Ttl
Fund (SYM) NAV Close /Disc Ret
General Equity Funds
Adams Divers Equity Fd ADX 13.99 11.77 -15.9 -8.1
Boulder Grwth & Inco BIF 9.03 6.90 -23.6 -20.0
Central Securities CET 21.82 17.42 -20.2 -8.8
CohSteer Opprtnty Fd FOF 11.47 9.95 -13.3 -17.1
Cornerstone Strategic CLM 13.58 12.85 -5.4 -18.5
EtnVnc TaxAdvDiv EVT 19.74 17.64 -10.6 -8.0
Gabelli Dividend & Incm GDV 18.98 16.22 -14.5 -18.4
Gabelli Equity Trust GAB 5.22 4.76 -8.8 -18.2
Genl American Investors GAM 34.48 28.24 -18.1 -15.2
HnckJohn TxAdv HTD 22.86 20.02 -12.4 -6.6
Liberty All-Star Equity USA 5.52 4.67 -15.4 -10.2
Royce Micro-Cap RMT 7.74 6.41 -17.2 -21.5
Royce Value Trust RVT 12.33 10.20 -17.3 -20.4
Source Capital SOR 70.86 64.02 -9.7 -0.2
Tri-Continental TY 21.86 18.39 -15.9 -9.7
Zweig Fund ZF 13.47 11.76 -12.7 -16.9
Specialized Equity Funds
Adams Natural Rscs Fd PEO 19.12 15.95 -16.6 -28.7
AllnzGI NFJ Div Interest NFJ 13.41 11.09 -17.3 -23.9
AlpnGlblPrProp AWP 6.11 4.98 -18.5 -18.9
BlkRk Enh Cap Inco CII 13.90 12.61 -9.3 -5.4
BlkRk Engy Res Tr BGR 12.77 11.33 -11.3 -42.7
BlackRock Enh Eq Div Tr BDJ 8.09 6.88 -15.0 -8.7
Blackrock Global Trust BOE 12.98 11.24 -13.4 -7.8
BlkRk Health Sci BME 33.42 36.33 +8.7 6.3
BlkRk Intl Grwth&Inco BGY 6.35 5.63 -11.3 -10.4
BlackRck Rscs Comm Str Tr BCX 7.43 6.11 -17.8 -31.6
BlackRock Science & Tech BST 18.11 15.63 -13.7 -6.9
BlackRock Utility & Infr BUI 18.73 15.78 -15.8 -17.1
CBREClarionGlblRlEstIncm IGR 8.44 6.96 -17.5 -20.4
Central Fund of Canada CEF 11.59 10.34 -10.8 -22.5
Central GoldTrust GTU NA NA NA
ClearBridge Amer Engy CBA 6.38 5.87 -8.0 -60.4
ClearBridge Engy MLP Fd CEM 12.78 12.05 -5.7 -50.1
Clearbridge Engy MLP Opp EMO 8.96 8.77 -2.1 -57.2
Clearbridge Engy MLP TR CTR 9.53 8.32 -12.7 -56.3
Cohen & Steers Infra UTF 21.08 17.06 -19.1 -19.8
C&S MLP Incm & Engy Opp MIE 7.78 7.02 -9.8 -60.0
Cohen & Steers Qual Inc RQI 12.92 11.09 -14.2 -6.6
CohnStrsPfdInco RNP 21.02 17.33 -17.6 -5.8
Cohen & Steers TR RFI 13.11 11.77 -10.2 -7.2
CLSeligmn Prem Tech Gr Fd STK 15.72 15.34 -2.4 -9.8
Divers Real Asset Incm Fd DRA 16.99 14.01 -17.5 -12.6
Duff & Phelps DNP 8.04 9.21 +14.5 -5.3
Duff&PhelpsGblUtilIncFd DPG 15.76 12.53 -20.5 -34.2
Eaton Vance Eqty Inco Fd EOI 13.05 11.91 -8.7 -5.4
Eaton Vance Eqty Inco II EOS 13.19 12.05 -8.6 -4.6
EtnVncRskMngd ETJ 10.58 9.49 -10.3 -2.8
Etn Vnc Tax Mgd Buy-Write ETB 14.49 14.55 +0.4 -0.7
Eaton Vance BuyWrite Opp ETV 13.60 13.89 +2.1 5.6
Eaton Vance Tax-Mng Div ETY 11.08 10.22 -7.8 -0.1
EatonVanceTax-MngdOpp ETW 10.77 10.02 -7.0 -2.9
New to the Market
Public and Private Borrowing
Treasurys
Monday, January 25
Auction of 13-week bills;
announced on Jan.21; settles on Jan.28
Auction of 26-week bills;
announced on Jan.21; settles on Jan.28
Tuesday, January 26
Auction of two-year note;
announced on Jan.21; settles on Feb.1
Auction of four-week bills;
announced on Jan.25; settles on Jan.28
Public and Municipal Finance
Deals of $ 150 million or more expected this week
Final
Sale maturity Issuer ($mil.)
Jan. 26 Oct. 1, 2035 Fairfax Co-
Virginia
Jan. 29 prelim. Connecticut
Hlth & Ed
Facs Auth
Jan. 29 prelim. Fort Bend
(Katy) ISD
Jan. 29 prelim. Kansas City
-Missouri
Jan. 29 prelim. San Francisco
City & Airport
Comm
Corporate Debt
None scheduled this week
have banks counting on wealth
managers to bring in a bigger
share of revenue across Asia.
“Particularly in Asia-Pacific,
wealth management is going
to grow,” said Keith Pogson,
senior partner in financial ser-
vices for Asia-Pacific at Ernst
& Young.
The potential is immense:
The Asia-Pacific region had 4.7
million high-net-worth indi-
viduals in 2014, more than any
other region in the world, ac-
cording to Capgemini and RBC
Wealth Management. Such in-
dividuals, defined as those
with investible liquid assets of
$1 million or more, controlled
$15.824 trillion in assets as of
that year.
Private banking, or wealth
management, is an attractive
business because it doesn’t tie
up much capital on a bank’s
balance sheet. It generates
steady returns, as banks earn
fees by charging clients a per-
centage of the assets they
manage and extra fees for cus-
tomized products.
Still, wealth management in
Asia isn’t a surefire strategy:
52 wk
Prem Ttl
Fund (SYM) NAV Close /Disc Ret
EtnVncTxMngGlDvEqInc EXG 9.01 7.98 -11.4 -6.1
Fiduciary/Clymr Opp Fd FMO 10.05 NA -56.3
FT Energy Inc & Growth Fd FEN 20.70 18.99 -8.3 -40.5
FstTrEnhEqtIncFd FFA 13.90 11.91 -14.3 -11.8
First Tr Engy Infr Fd FIF 15.23 12.84 -15.7 -38.6
First Tr MLP & Engy Incm FEI 12.33 10.60 -14.0 -44.0
Gabelli Hlthcr & Well GRX 11.00 9.21 -16.3 -9.0
Gabelli Utility Tr GUT 5.00 5.72 +14.4 -13.6
GAMCOGlblGoldNatRscs&Inc GGN 4.84 4.01 -17.1 -38.4
GoldmanSachsMLPIncOpp GMZ 6.38 NA -60.6
Goldman Sachs MLPEnergy GER 4.19 NA -68.6
John Hancock Finl Opps Fd BTO 23.05 22.23 -3.6 6.2
KayneAndersonEngyTRFd KYE 6.37 NA -71.8
Kayne Anderson MLP Invt KYN 12.72 NA -59.6
Kayne Andrsn Midstr Engy KMF 8.69 NA -67.5
Macquarie Glbl Infrstrctr MGU 21.34 16.84 -21.1 -29.1
NeubergerBermanMLPIncm NML 6.14 5.98 -2.6 -63.3
Neubrgr Brm Rl Est Sec Fd NRO 5.31 4.53 -14.7 -12.6
Nuveen Dow 30 Dynamic DIAX 14.68 12.88 -12.3 -10.5
NuvDivInco JDD 11.88 10.00 -15.8 -10.5
Nuveen Engy MLP Fd JMF 8.70 7.53 -13.4 -56.0
NuvNASDAQ100DynOver QQQX 18.57 NA NA NA
Nuveen Real Estate Fd JRS 11.23 9.85 -12.3 -11.5
NuveenS&P500Buy-Write BXMX 12.66 11.90 -6.0 -0.4
Reaves Utility Fund UTG 25.40 NA -18.8
Tekla Hlthcr Investors HQH 26.90 25.45 -5.4 -17.5
Tekla Healthcare Opps Fd THQ 17.58 15.06 -14.3 -18.4
Tekla Life Sciences HQL 20.63 19.55 -5.2 -20.2
Tekla World Hlthcr Fd THW 16.71 13.85 -17.1 NS
Tortoise Energy TYG 23.29 21.96 -5.7 -45.6
Tortoise MLP Fund NTG 15.41 13.86 -10.1 -42.8
Voya Gl Equity Div IGD 7.47 6.31 -15.5 -15.0
Income Preferred Stock Funds
Calamos Strat Fd CSQ 10.20 8.56 -16.1 -17.3
Cohen & Steers Dur Pfd LDP 24.67 22.68 -8.1 4.6
Cohen & Strs Sel Prf Inco PSF 26.30 24.71 -6.0 2.7
FT Interm Duration Pfd FPF 22.97 21.75 -5.3 6.1
Flaherty & Crumrine Dyn DFP 23.67 22.39 -5.4 4.8
Flaherty & Crumrine Pfd FFC 18.48 19.53 +5.7 1.6
John Hancock Pfd Income HPI 21.61 19.83 -8.2 3.3
John Hancock Pfd II HPF 21.32 19.39 -9.1 0.5
John Hancock Pfd Inc III HPS 18.87 17.56 -6.9 3.4
JHancock Pr Div PDT 14.96 13.37 -10.6 1.0
LMP Cap & Inco Fd SCD 13.24 10.87 -17.9 -30.6
Nuveen Preferred & Incm JPI 23.94 23.47 -2.0 11.2
Nuveen Preferred Inc Opp JPC 9.94 9.33 -6.1 6.2
Nuveen Quality pf JTP 8.86 8.18 -7.7 4.3
Nuveen Fd2 JPS 9.43 8.96 -5.0 3.4
TCW Strategic Income Fund TSI 5.81 5.20 -10.5 -0.2
Zweig Total Return ZTR 12.82 11.29 -11.9 -11.2
Convertible Sec's. Funds
AdvntClymrFd AVK 14.89 12.19 -18.1 -21.1
AllianzGI Conv & Incm NCV 5.70 4.80 -15.8 -39.0
AllianzGI Conv & Incm II NCZ 5.06 4.25 -16.0 -42.6
AllianzGI Equity & Conv NIE 19.67 16.58 -15.7 -12.5
Calamos Conv Hi Inco Fd CHY 10.67 9.38 -12.1 -27.3
Calamos CHI 10.09 8.79 -12.9 -25.8
World Equity Funds
Alpine Tot Dyn Div AOD 8.47 6.97 -17.7 -12.5
Calamos Glbl Dyn Inc CHW 7.64 6.33 -17.1 -20.5
Cdn Genl Inv CGI 22.55 16.85 -25.3 -8.9
China Fund CHN 15.03 13.32 -11.4 -24.0
Clough Glbl Eqty Fd GLQ 13.11 10.83 -17.4 -15.8
Clough Global Opp Fd GLO 11.42 9.25 -19.0 -14.9
EtnVncTxAdvGblDiv ETG 15.61 13.82 -11.5 -7.6
EatonVance TxAdv Opport ETO 21.26 19.37 -8.9 -11.9
First Trust Dynamic Eur FDEU 17.64 15.07 -14.6 NS
Gabelli Glbl Multimedia GGT 7.74 6.65 -14.1 -25.7
GDL Fund GDL 11.75 9.74 -17.1 1.6
India Fund IFN 23.88 20.61 -13.7 -25.1
Japan Sml Cap JOF 10.60 9.20 -13.2 11.5
Mexico Fund MXF 15.25 NA -21.4
MS China a Shr Fd CAF 20.13 15.99 -20.6 -17.3
MS India Invest IIF 26.69 22.61 -15.3 -21.1
New Germany Fund GF 14.76 12.96 -12.2 -0.6
Wednesday, January 27
Auction of two-year Frn;
announced on Jan.21; settles on Feb.1
Auction of five-year note;
announced on Jan.21; settles on Feb.1
Thursday, January 28
Auction of seven-year note;
announced on Jan.21; settles on Feb.1
Total Rating Bookrunner/
Fitch Moody’s S&P Bond Counsel(s)
371.5 AAA Aaa AAA Preliminary/
Sidley Austin
LLP
250.0 N.R. N.R. N.R. J P Morgan
Securities LLC
251.2 N.R. Aa1 AA Citi/—
187.6 N.R. N.R. N.R. Siebert
Brandford
Shank & Co
239.8 N.R. N.R. N.R. Wells Fargo & Co
Source:Thomson Reuters/Ipreo
Monday, January 25, 2016 | C5
MONEY & INVESTING
ment is also a chance for 15% of the global total. That is
banks to offset volatile invest- up from 10% for all of 2011.
ment-banking revenue, which Standard Chartered is
often hinges on the perfor- spending $250 million to build
mance of the region’s stock a single wealth-management
markets. platform. The Asia-focused
Investment-banking reve- lender plans to expand its pri-
nue in Asia has been uneven in vate-banking and wealth-man-
recent years. Initial public of- agement assets under manage-
ferings in Asia generate ment by $25 billion by 2018. It
AGENCE FRANCE-PRESSE/GETTY IMAGES
smaller fees than in the U.S. had $61 billion as of June
and local banks have been get- 2015.
ting a bigger slice of that fee To meet that goal, the bank
pool. wants to sell its corporate cli-
Trading revenues, hurt by ents on wealth-management
new regulatory capital re- offerings, said Anna Marrs,
quirements, have been lacklus- global CEO of commercial and
ter and aren’t expected to re- private banking at Standard
bound soon. Banks such as Chartered, while nearly dou-
Morgan Stanley have laid off bling its pool of about 300 re-
Citigroup has given some clients a Ferrari California T for a day. traders amid weakness across lationship managers in Asia by
their bonds, currencies and 2020.
Firms have consolidated in the are entrepreneurs, tend to fa- commodities businesses. To get new and existing cli-
past two years as smaller vor more complex investments Most banks don’t break out ents’ attention, some banks
players struggled to compete. than their U.S. counterparts. their earnings for Asian are offering perks. Citigroup
Clients globally are making That could be changing. wealth management, but it can Inc. gives some clients a Fer-
fewer transactions as a result “When we talk about diver- be a significant contributor to rari California T for a day,
of uncertainty in markets. sification, we have much more earnings. At Credit Suisse while others get invitations to
Younger, tech-savvy clients are attention than in the past,” Group AG, Asia-Pacific wealth- Singapore’s Formula One
less likely to rely on a bank’s said Amy Lo, head of greater management revenue totaled Grand Prix. UBS clients heard
wealth managers for investing China wealth management for 907 million Swiss francs ($893 renowned Chinese pianist Zhu
guidance. UBS Group AG. million) for the first nine Xiao-Mei play in Beijing in Oc-
Asia’s rich, many of whom Expanding wealth manage- months of 2015, accounting for tober.
Prem
52 wk
Ttl Fund (SYM)
Prem12 Mo
NAV Close /Disc Yld Fund (SYM)
Prem12 Mo
NAV Close /Disc Yld
52 wk
Prem Ttl
Fund (SYM) NAV Close /Disc Ret Nuveen Invest Qual Muni NQM 16.33 15.62 -4.3 6.2 Invesco Inv Grade NY Muni VTN 15.30 14.61 -4.5 5.6 Fund (SYM) NAV Close /Disc Ret
Swiss Helvetia Fund SWZ 11.46 9.66 -15.7 -9.6 NuveenMuniAdvantageFd NMA 15.68 13.87 -11.5 5.7 Nuveen California AMT NKX 16.17 15.47 -4.3 5.6 Income Preferred Stock Funds
NuveenMuniIncoOpp Fd NMZ 13.72 13.85 +0.9 6.5 Nuveen CA Div Fnd NAC 16.08 15.55 -3.3 6.0 CLA Strategic Alloc XSAFX NA NA NA NS
Templeton Dragon TDF 18.05 16.01 -11.3 -10.8 Convertible Sec's. Funds
Nuveen Muni Mkt Opp NMO 15.60 13.81 -11.5 5.6 NuveenCA 3 NZH 14.92 14.06 -5.8 5.7
Voya Infr Indls & Matls IDE 13.34 11.08 -16.9 -20.0 Nuveen Mun Opportunity Fd NIO 15.91 14.45 -9.2 6.1 Nuveen CA Muni Value NCA 10.58 10.81 +2.2 4.3 Calmos Dyn Conv and Inc CCD 18.85 15.95 -15.4 NS
Wells Fargo Gl Div Opp EOD 6.52 5.43 -16.7 -20.5 Nuveen Muni Value Fund NUV 10.36 10.20 -1.5 3.9 NuveenMDPremiumIncome NMY 14.91 12.71 -14.8 5.2 World Equity Funds
Nuveen MI Quality Income NUM 15.93 13.61 -14.6 5.7 BMO LGM Front ME 7.41 NA NA -16.6
Prem12 Mo Nuveen Performance Plus NPP 16.52 15.05 -8.9 5.9
Fund (SYM) NAV Close /Disc Yld Nuveen Premium Inco Muni NPI 15.71 14.10 -10.2 5.8 Nuveen NJ Div NXJ 15.89 13.64 -14.2 5.5 Prem12 Mo
Nuveen Prem Inco Muni 2 NPM 15.76 14.40 -8.6 5.9 NuvAMTFreeMuniIncm NRK 14.67 12.95 -11.7 5.4 Fund (SYM) NAV Close /Disc Yld
U.S. Mortgage Bond Funds
Nuveen Prem Inco Muni 4 NPT 14.65 13.52 -7.7 6.1 Nuveen NY Div Fnd NAN 15.54 14.00 -9.9 5.5 U.S. Mortgage Bond Funds
BlackRock Income Trust BKT 6.99 6.48 -7.3 5.8 Nuveen Ohio Qual Income NUO 17.18 15.23 -11.4 5.5
Nuveen Premier Muni Inc NPF 15.44 13.82 -10.5 6.0 Vertical Capital Income 12.09 NA NA 3.5
Brkfld Mortgage Opp Incm BOI 16.68 14.35 -14.0 10.3 Nuveen Pa Investment Qual NQP 15.88 13.95 -12.2 6.0
Nuveen Quality Income NQU 16.08 14.24 -11.4 5.8 Loan Participation Funds
Brookfield TR Fund HTR 24.50 20.98 -14.4 10.3 NuveenVAPremiumIncome NPV 14.76 13.98 -5.3 5.2
Nuveen Quality Muni Fund NQI 15.47 13.67 -11.6 4.9 504 Fund 10.08 NA NA 3.0
Nuveen Mtg Oppy Term Fd JLS 24.80 22.83 -7.9 6.6 PIMCO California Muni PCQ 14.71 15.86 +7.8 5.8
Nuveen Select Quality NQS 15.96 14.10 -11.7 5.5 Invesco Sr Loan A 5.94 NA NA 6.1
Investment Grade Bond Funds PIMCO California Mun II PCK 9.03 10.04 +11.2 6.4 Invesco Sr Loan B 5.94 NA NA 6.1
AllianceBrnstn IncoFd ACG 7.84 7.65 -2.4 6.0 Nuveen Sel TF NXQ 14.80 13.76 -7.0 3.9
PIMCO MuniFd PMF 13.37 15.45 +15.6 6.3 52 wk Invesco Sr Loan C 5.95 NA NA 5.3
Blackrock Core Bond Tr BHK 13.90 12.68 -8.8 7.0 Invesco Sr Loan IB 5.94 NA NA 6.4
Pimco Muni Inc II PML 12.50 12.72 +1.8 6.2 Prem Ttl
BlkRk Credit Alloc Incm BTZ 13.59 11.96 -12.0 7.8 Fund (SYM) NAV Close /Disc Ret Invesco Sr Loan IC 5.94 NA NA 6.2
John Hancock Income Secs JHS 14.52 13.30 -8.4 6.5 PIMCO Muni Inc III PMX 11.25 11.75 +4.4 6.4
Pioneer Mun Hi Inc Adv Tr MAV 12.50 13.60 +8.8 7.6 Invesco Sr Loan Y 5.94 NA NA 6.4
MFS Inc Tr MIN 4.93 4.51 -8.5 10.0 General Equity Funds
Voya Senior Income:A 12.05 NA NA 5.6
WstAstClymr InfLnkd Fd WIW 12.09 10.12 -16.3 3.5 Pioneer Mun Hi Incm Tr MHI 13.40 13.03 -2.8 6.8 Little Harbor MS Comp NA NA NA N
Voya Senior Income:B 12.00 NA NA 5.1
WstAssetClymr InflLnk Sec WIA 12.40 10.40 -16.1 3.3 Putnam Tr PMM 8.06 7.37 -8.6 5.9 Specialized Equity Funds
Voya Senior Income:C 12.03 NA NA 5.1
Loan Participation Funds PutnamMuniOpportunities PMO 13.54 12.47 -7.9 5.8 Corsair Opportunity:A 8.79 NA NA NS
Voya Senior Income:I 12.02 NA NA 5.9
Apollo Sr Fltg Rate Fd AFT 16.61 14.39 -13.4 7.7 Wstrn Asset Mngd Muni MMU 14.47 14.58 +0.8 5.5 Corsair Opportunity:I 8.79 NA NA -12.3 Voya Senior Income:W 12.06 NA NA 5.9
BlackRock FR Incm Strat FRA 14.14 12.30 -13.0 6.1 WesternAssetMunTrFund MTT 22.65 23.72 +4.7 4.1 Griffin Inst Access RE:A 26.21 NA NA 6.4
High Yield Bond Funds
Blkrk FltRt InTr BGT 13.65 11.92 -12.7 6.0 Single State Muni Bond Griffin Inst Access RE:C 26.14 NA NA NS WA Middle Mkt Inc WMF655.49 NA NA 13.1
BlackRock CA Municipal Tr BFZ 16.06 16.11 +0.3 5.4 Griffin Inst Access RE:I 26.25 NA NA NS
BlackstoneGSO Strat Cred BGB 14.58 12.64 -13.3 9.4 Other Domestic Taxable Bond Funds
Blackstone GSO Sr Float BSL NA 14.15 NA 7.2 BlkRk MuniHldgs CA Qlty MUC 16.09 14.89 -7.5 5.4 Resource RE Div Inc:A 9.34 NA NA -6.1 Capstone Church Capital 16.98 NA NA 1.7
Eaton Vance FR Incm Tr EFT 13.74 11.92 -13.2 7.1 Blkrck MunHl NJ Qlty MUJ 16.07 14.45 -10.1 6.2 Resource RE Div Inc:C 9.33 NA NA -6.8 GL Beyond Income 4.92 NA NA NE
EatonVnc SrFltRate EFR 13.34 11.74 -12.0 7.5 BlRk MuHldg NY Qlty MHN 15.20 14.36 -5.5 5.6 Resource RE Div Inc:D 9.48 NA NA NS Palmer Square Opp Income NA NA NA 5.4
1st Tr Sr Fltg Rt Fd II FCT 13.40 12.01 -10.4 7.1 BlkRk MuniYld CA Fd MYC 16.56 15.95 -3.7 5.5 Resource RE Div Inc:I 9.84 NA NA -6.5 Resource Credit Inc:A 9.31 NA NA NS
Invesco Credit Opps Fund VTA 11.78 9.98 -15.3 8.5 BlkRk MuniYld CA Quality MCA 16.36 15.69 -4.1 5.6 Resource RE Div Inc:T 9.32 NA NA NS Resource Credit Inc:C 9.29 NA NA NS
Invesco Senior Income Tr VVR 4.39 3.82 -13.0 7.9 BlkRk MuniYld MI Qlty MIY 15.85 13.91 -12.2 6.1 Resource RE Div Inc:U 9.34 NA NA NS Resource Credit Inc:D 9.30 NA NA NS
Nuveen Credit Strt Inc Fd JQC 8.73 7.39 -15.3 7.5 BlRk Muyld NY Qlty MYN 14.58 13.43 -7.9 5.6 Resource RE Div Inc:W 9.48 NA NA -6.5 Resource Credit Inc:I 9.31 NA NA NS
NuvFloatRteInco Fd JFR 10.60 9.46 -10.8 7.0 Eaton Vance CA Mun Bd EVM 12.99 12.40 -4.5 5.6 SharesPost 100 25.25 NA NA 0.0 Resource Credit Inc:T 9.29 NA NA NS
Nuv Float Rte Opp Fd JRO 10.55 9.18 -13.0 7.7 Invesco CA Value Mun Incm VCV 13.94 13.21 -5.2 5.9 Versus Cap MMgr RE Inc:F 26.59 NA NA 6.4 Resource Credit Inc:U 9.31 NA NA NS
Nuveen Senior Income Fund NSL 6.34 5.43 -14.4 7.2 Invesco PA Value Mun Incm VPV 14.55 12.95 -11.0 6.0 Versus Cap MMgr RE Inc:I 26.64 NA NA 6.8 Resource Credit Inc:W 9.30 NA NA NS
Pioneer Floating Rate Tr PHD 11.95 10.35 -13.4 6.5
Voya Prime Rate Trust PPR 5.44 4.77 -12.3 6.6
High Yield Bond Funds
AllianceBernstein Glbl AWF 12.02 10.51 -12.6 10.2
Babson Gl Sh Dur Hi Yd BGH 17.53 15.18 -13.4 12.0
BlackRock Corp Hi Yd Fd HYT 10.53 9.40 -10.7 10.1
BlkRk Debt Strat Fd DSU 3.78 3.18 -15.9 8.0
BlackRockDurInco Tr BLW 15.93 13.74 -13.7 8.2
Credit Suisse High Yld DHY 2.29 2.05 -10.5 12.6
DoubleLine Incm Solutions DSL NA 15.50 NA 11.6
Dreyfus Hi Yld Fd DHF 3.07 2.81 -8.5 11.3
Fst Tr Hi Inc Lg/Shrt Fd FSD 15.97 13.28 -16.8 8.8
Guggenheim Strat Opps Fd GOF 17.06 15.74 -7.7 12.9
Ivy High Income Opps Fund IVH 13.42 11.22 -16.4 12.9
NexPoint Credit Strat Fd NHF 21.64 18.06 -16.5 32.2 P DCASTS
Nuveen Gl Hi Incm Fd JGH 14.99 12.47 -16.8 11.4
Nuveen High Incm Dec18 JHA 9.35 10.00 +7.0 NS
Pioneer High Income Trust PHT 9.03 8.81 -2.4 14.5
Prud Gl Shrt Dur Hi Yd GHY 15.82 13.71 -13.3 10.0
Prudentl Sh Dur Hi Yd Fd ISD 16.15 14.57 -9.8 9.6
Wells Fargo Incm Opps Fd EAD 7.91 6.93 -12.4 10.9
Wstrn Asset Glbl Hi Inco EHI 9.71 7.96 -18.0 13.2
Wstrn Asset High Inco II HIX 6.54 5.82 -11.0 13.1
Wstrn Asset Opp Fd HIO 4.97 4.37 -12.1 9.0
West Asst HY Def Opp Fd HYI 14.80 13.20 -10.8 9.3
Other Domestic Taxable Bond Funds
Ares Dynamic Credit Alloc ARDC NA 12.44 NA 10.5
Babson Cap Corp Inv MCI NA 16.62 NA 6.9
BlackRock Multi-Sector IT BIT 17.87 15.34 -14.2 9.4
BlackRock Taxable Mun Bd BBN 22.72 22.18 -2.4 7.5
Doubleline Oppor Credit DBL NA 25.16 NA 10.0
Duff & Phelps Utl & Cp Bd DUC 10.05 9.15 -9.0 6.5
EtnVncLtdFd EVV 14.04 12.08 -14.0 9.5
Franklin Ltd Duration IT FTF NA 10.46 NA 6.9
GuggenhBondMnegDurTr GBAB 22.75 22.40 -1.5 8.2
KKR Income Opps Fund KIO 15.19 12.90 -15.1 10.8
MFS Charter MCR 8.72 7.54 -13.5 9.2
MFS Multimkt MMT 6.29 5.40 -14.1 9.0
Nuveen Build Am Bd Fd NBB 21.57 20.74 -3.8 6.7
PIMCO Corporate & Incm PTY NA 12.49 NA 11.9
PIMCO Corporate & Incm PCN NA 13.02 NA 10.2
PIMCO HiInco PHK NA 7.63 NA 16.9
PIMCO Inco Str Fd PFL NA 9.12 NA 11.0
PIMCO Incm Strategy Fd II PFN NA 8.24 NA 11.7
Putnam Mas Inco PIM 4.77 4.35 -8.8 6.8
Putnam Premier Income Tr PPT 5.24 4.71 -10.1 6.3
Wells Fargo Multi-Sector ERC 12.70 10.74 -15.4 10.2
World Income Funds
Abeerden Asia-Pacific FAX 5.37 4.40 -18.1 6.4
Etn Vnc Short Dur Fd EVG 14.78 13.04 -11.8 8.0
Legg Mason BW Glbl Incm BWG 12.84 10.45 -18.6 16.4
MS EmMktDomDebt EDD 7.88 6.30 -20.1 12.6
PIMCO Dynamic Credit Incm PCI NA 17.16 NA 11.8
SOUND IDEAS
PIMCODynamicIncomeFund PDI NA 26.44 NA 14.5
PIMCO Income Opportunity PKO NA 19.41 NA 10.5
PIMCO Strat Income Fund RCS NA 8.30 NA 11.1
Templeton Emerging TEI 11.12 9.16 -17.6 8.0
Templeton Global GIM 7.06 6.00 -15.0 4.7
Wstrn Asset Emerg Mkts ESD 15.88 12.88 -18.9 9.5
Wstrn Asset Emerg Mkt II EMD 11.39 9.23 -19.0 8.8
Wstrn Asset Gl Def Opp Fd GDO 17.44 15.39 -11.8 8.6
National Muni Bond Funds
AllianceBrnstn NtlMun AFB 15.36 13.90 -9.5 5.8
Blackrock Invest BKN 16.47 15.41 -6.4 5.9
BlackRock Municipal Trust BFK 15.00 14.72 -1.9 6.1
BlackRockMuni BLE 15.63 15.25 -2.4 6.1
BlackRockMuni Tr BYM 15.70 14.70 -6.4 5.7
Introducing WSJ Podcasts
Blackrock Mun Target Term BTT 24.14 21.78 -9.8 4.4
BlkRk MuniAssets Fd MUA 14.26 14.50 +1.7 5.2
BlkRk Munienhanced MEN 12.40 12.14 -2.1 6.1
BlkRk MuniHldgs Inv MFL 15.56 14.67 -5.7 5.9 Drive time, gym time, anytime. With award-winning WSJ
BlkRk MuniHldgs Qlty II MUE 14.78 13.60 -8.0 6.0
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BlkRk MuniVest II MVT 16.06 16.45 +2.4 6.0 to politics and world news to sports, arts and culture, WSJ
BlkRk MuniYield MYD 15.42 14.95 -3.0 6.2
BlkRk MuniYld Quality MQY 16.32 15.91 -2.5 6.0 Podcasts keep you connected.
BlkRk MuniYld Qlty II MQT 14.31 13.37 -6.6 6.2
BlRkMunyldQltyIII MYI 15.09 14.91 -1.2 6.0
Deutsche Mun Income Tr KTF 13.54 13.57 +0.2 6.2
Dreyfus Mun Bd Infr Fd DMB 14.04 12.54 -10.7 6.0
Listen now at WSJ.com/podcasts
Dreyfus Strat Muni Bond DSM 8.69 8.23 -5.3 6.1
Dreyfus Strategic Munis LEO 8.94 8.66 -3.1 6.0
Eaton Vance Mun Bd Fd EIM 14.22 12.99 -8.6 5.9
Eaton Vance Mun Income EVN 13.39 13.97 +4.3 6.4
EV National Municipal Opp EOT 22.87 21.53 -5.9 4.8
Invesco Adv Mun Incm II VKI 12.72 11.94 -6.1 6.6
Invesco Mun Incm Opps Tr OIA 7.65 7.39 -3.4 5.4
Invesco Mun Opportunity VMO 14.20 13.17 -7.3 6.3
Invesco Municipal Trust VKQ 14.14 12.93 -8.6 6.3
Invesco Qlty Mun Inco IQI 14.06 12.84 -8.7 6.0
Invesco Inv Grade Muni VGM 14.64 13.47 -8.0 6.6 Now on iTunes and Stitcher. Part of the Panoply Network.
Invesco Value Mun Incm Tr IIM 16.74 16.69 -0.3 5.2
MainStay DefinedTerm MMD 19.79 19.04 -3.8 6.2
MFS Munl Inco MFM 7.46 6.83 -8.4 5.7
NuvAMTFreeMuniIncm NEA 15.23 13.84 -9.1 5.6
NuvDivAdvMuniIncm NVG 16.46 14.54 -11.7 5.1
Nuveen Div Fnd NAD 15.85 14.52 -8.4 5.9
Nuveen Div Fnd 2 NXZ 16.18 14.27 -11.8 5.7
Nuveen Div Adv NZF 16.18 14.38 -11.1 5.4
Nuveen Enhncd Mun Val Fd NEV 15.69 15.70 +0.1 6.1
© 2016 Dow Jones & Co., Inc. All rights reserved. 3DJ3995
Nuveen Intermed Dur Mun NID 13.89 12.87 -7.3 5.3
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C6 | Monday, January 25, 2016
Email: heard@wsj.com
Cracking the Google Profit Code
This search may finally be
over. Google has wagered
billions on its moonshot bets
over the years. But investors
couldn’t really gauge their
cost, or tell how they might
mask the profitability of its
core advertising business.
That will change when
Google reports fourth-quar-
ter results next month. And
chances are, this additional
transparency could make the
advertising business look
more profitable, leading to a
bigger payoff for investors.
Google reorganized last
year under the umbrella of a
new parent company called
Alphabet. This was meant to
give more clarity to its oper-
ations, with the promise to
break out operating results
for units that include ven-
tures in areas such as life
sciences, home automation
and broadband cable service.
This could even include de-
tails of the incubation lab
that cooks up ideas for
things like driverless cars.
Alphabet’s stock is up
nearly 40% over the last 12
months, beating every other
large tech company save for
Amazon and Netflix. It’s also
Russia and Turkey Show Oil Prices Aren’t Everything
As goes oil, so goes the
ruble. Recent weeks have
seen steep declines for both.
But perhaps there is less
cause for concern over Rus-
sia than there is for the cur-
rency of a country that
should be benefiting from
cheaper oil: Turkey.
True, the ruble has per-
formed terribly this year. It
hit a record low of 86 to the
U.S. dollar Thursday and was
down 12% for the year before
Friday’s bounce in crude
prices brought it back to
78.3. The Turkish lira, by
contrast, is only down 3.2%
this year against the dollar.
But it, too, has flirted with
SUN
Continued from page C1
pany, as of Jan. 11.
SunEdison was once among
Greenlight’s best investments
but became one of its worst in
2015, contributing to a 20% loss
for the year, according to an in-
vestor letter. Mr. Einhorn told
investors in October that SunE-
dison was misunderstood and
blamed its “hard-to-decipher fi-
nancial statements” for the
stock’s decline.
At the root of SunEdison’s
trouble has been its reliance on
a pair of subsidiaries, known as
“yieldcos,” which are controlled
by SunEdison but trade pub-
licly. It launched one, Terra-
Form Power Inc., in 2014 and a
second, TerraForm Global Inc.,
this past summer. SunEdison
develops power projects and
then sells the finished ones to
its yieldcos, which manage the
projects under long-term con-
tracts with utilities.
The model gained popularity
among renewable-power com-
panies starting around 2013 be-
cause it freed up cash for new
investments. It was initially re-
warded by investors, who were
attracted by yieldcos’ high divi-
dends, before a sharp decline in
oil prices battered energy
stocks.
SunEdison shares closed Fri-
day at $2.65, down more than
90% since mid-July. TerraForm
Power’s shares lost about 76%
over the same period, and Ter-
raForm Global is down 75%
since its August initial public
offering.
ROBERT NICKELSBERG/GETTY IMAGES
A SunEdison solar-power project with Kohl’s in New Jersey
HEARD ON THE STREET
Froogle
Forward price/earnings
multiples, excluding net cash
Amazon
Facebook 34.9
Alibaba 23.7
Alphabet 19.7
Apple 7.8
Source: WSJ calculations based on FactSet data
Photo: Associated Press
THE WALL STREET JOURNAL.
brought the company’s mar-
ket value close to Apple’s. A
pair of strong earnings re-
ports has helped drive those
gains. A big factor has also
been the promise of greater
transparency. That should
shine a more flattering light
on the profitability of
Google’s advertising busi-
ness, which has borne the
costs for other ventures.
How much more flattering
is the question. To date, no
one really knows how much
Alphabet has put towards its
record lows. Moreover, its
depreciation has been relent-
less since the middle of 2013.
Russia’s economy is still
clearly in trouble: geopoliti-
cal risk is high, sanctions re-
main in force, its reliance on
oil and gas makes it vulnera-
ble, and potential growth
looks feeble. The economy is
estimated by the Interna-
tional Monetary Fund to
have contracted 3.7% in 2015
and is forecast to shrink a
further 1% in 2016. Yet Rus-
sia has managed to with-
stand a sudden stop in fi-
nancing due to sanctions, a
prospect that would cripple
many emerging economies.
The share rout has crimped
the ability of the yieldcos to
raise cash by selling stock, a
key part of their acquisition
strategy, and prompted inves-
tor concerns that SunEdison
may not be able to sell projects
at the same pace or prices.
SunEdison has since said it
will rely less on the yieldcos
and instead look for third-party
buyers.
Its falling share prices cre-
ated other headaches for
SunEdison. The company
amended the terms of its take-
over of Vivint Solar Inc., a deal
struck in July that was its first
major foray into residential
rooftop solar. In December,
SunEdison and Vivint’s major-
ity owner, Blackstone Group LP,
lowered the sale price and
Blackstone extended a loan to
help shore up the combined
company.
Lenders also called in a mar-
gin loan last fall, according to
regulatory filings.
Mr. Einhorn has had plenty
of hedge-fund company in
SunEdison. Many such inves-
tors piled in on the heels of an
activist hedge fund, Altai Capi-
tal, which took a stake in
SunEdison in 2012 and subse-
quently received a board seat.
Hedge fund Appaloosa Man-
agement LP, a large TerraForm
Power shareholder, sued earlier
this month to block the Vivint
deal, which would require Ter-
raForm to buy about $800 mil-
lion of Vivint’s projects in the
future. Appaloosa has accused
SunEdison of pressuring its
yieldcos to overpay for assets
and said the setup has “obvious
conflicts.”
FINANCIAL ANALYSIS & COMMENTARY
136.9
Google’s new self-driving
prototype car
more speculative efforts.
Capital expenditures hit
$11 billion last year -- up
50% from the year before --
and operating expenses are
now about 45% of net reve-
nue versus 39% five years
ago. The workforce has more
than doubled in that time, to
just under 60,000.
While exact spending on
“moonshots” is unknown,
one clue could be the com-
pany’s 70/20/10 rule. Under
that philosophy, about 70%
of internal efforts go toward
Russia’s central bank has
boosted credibility first by
allowing the ruble to float,
preserving foreign-exchange
reserves, and by slamming
interest rates higher. In De-
cember 2014, it raised its
key rate to 17%; it has since
fallen to 11%. But the central
bank has remained on hold
since August as it assesses
inflation, which was 12.9% in
December. The target for
2017 is 4%.
A further decline in oil,
and an associated slide in
the ruble, will present the
central bank with a new
challenge: with Russia’s
economy in recession, it will
MONEY & INVESTING
Axel Weber, chairman of UBS, was among many at Davos, Switzerland, who felt it was time for central bankers to step back.
The Only Winning Move Is Not Playing
The world’s central banks
can’t save us anymore.
That was the message
from some of the world’s
most prominent investors at
the World Economic Forum
in Davos, Switzerland, on
Friday.
Their mood
was irritated,
bordering on
affronted, with
what they say
has been cen-
THE GAME tral-bank in-
DENNIS K. tervention that
BERMAN has gone on
too long. From
this anecdotal
sampling, at least, that has
created growing distortions
in nearly all asset prices—
from stocks to bonds to real
estate.
Each was resistant to put-
ting on fresh positions and
expected asset prices to
head downward. In short,
they say, the only winning
move is not to play the
game.
“The trade now is to hold
as much cash as possible,”
said Nikhil Srinivasan, chief
the core business, 20% goes
towards related business and
10% goes to bets “farther
afield.” Those bets are cur-
rently presumed to be gener-
ating little revenue.
So if 10% of Alphabet’s
$19.7 billion in reported op-
erating expenses for the last
three quarters were credited
to those other segments, the
core Google business’s oper-
ating margin would rise
from to 29% from 26%--all
other things being equal.
Is a more profitable
Google core worth the extra
$57 billion in market value
since the Alphabet makeover
was announced in August?
That may look generous, but
transparency can be reward-
ing. Amazon has added
about $134 billion in market
value since last January,
when it first announced
plans to start disclosing de-
tails of its more profitable
cloud business. And Alpha-
bet still trades at less than a
quarter of Amazon’s valua-
tion, as a multiple of for-
ward earnings.
In this light, some bets
aren’t too much of a gamble.
—Dan Gallagher
face a hard decision over
whether to maintain the in-
flation-fighting credibility it
has won or let it slip. Yet it
is at least approaching the
situation from a position of
relative strength.
By contrast, Turkey’s
economy is still growing, and
the lower oil price has
helped shrink its current-ac-
count deficit. Domestically,
though, concerns loom. The
central bank has stepped
back from a promise to sim-
plify and normalize its com-
plex policies. This creates
further doubts about its abil-
ity to hit an inflation target
it has consistently missed.
investment officer for Gen-
erali, a European insurer
with $480 billion in assets.
“Equity markets could go
down 15% to 20%.”
From Mr. Srinivasan’s
view, there isn’t an existen-
tial worry about financial
assets. It’s just that they are
priced too high.
He said the central banks
in the U.S. and Europe have
done all that is possible,
bringing rates to historic
lows, and in Europe weaken-
ing the euro to help sustain
exports. Markets need to
“stop expecting miracles,”
he said, “now it’s time for
the fiscal side to do its job.”
The sentiment was the
same for Axel Weber, chair-
man of UBS Group AG.
“There may be no limit to
what the ECB is willing to
do, but there is a very clear
limit to what QE can and
will achieve,” he said in a
panel at Davos, referring to
the European Central Bank.
“The problem is that mone-
tary policy has largely run
its course.”
Elliott Management chief
* * THE WALL STREET JOURNAL.
OVERHEARD
Successfully running a
public company is all about
managing expectations. In re-
tail, some companies clearly
are better at this than others.
Nomura analyst Simeon
Siegel recently examined how
management at specialty re-
tailers tends to guide relative
to the Wall Street consensus
and how the retailers subse-
quently perform. He found
nonapparel retailers have
more reliably beaten manage-
ment earnings projections
than apparel retailers over
the past 22 quarters. That is
thanks perhaps to lower com-
petition among these compa-
nies and more predictable
sales. Among nonapparel
companies, Nomura also
found a divide. L Brands and
Fossil Group tended to guide
below the consensus analyst
estimate and then beat their
own guidance. Meanwhile,
Michael Kors Holdings and
Ulta Salon, Cosmetics & Fra-
grance more often beat both
consensus estimates and
their own guidance.
For retail-stock investors,
even guidance apparently
needs a guide.
Politics continues to pose
risks, with President Recep
Tayyip Erdogan continuing
to seek a new constitution
that would boost his grip on
power. Turkey is still ex-
posed to risks emanating
from tighter U.S. monetary
policy. A financing crunch
would be painful as Turkey
is clinging on to investment-
grade ratings.
The changing oil price is
reshaping the balance of
power between producers
and consumers, but policy
still counts. On that level,
perhaps the lira is more wor-
risome than the ruble.
—Richard Barley
Paul Singer, who runs a $26
billion hedge fund, said, “If
central banks double down
on their policies of QE, ZIRP
and NIRP, it could cause a
loss of confidence in central
bankers, paper money in
general, or one or more cur-
rencies, and lead to a col-
lapse in bonds and stock
prices.”
Added one other CEO of a
major global financial firm:
“The sickness is not infla-
tion, it’s the mispricing of
assets.”
The realization that
Western economies will be
growing slowly—and there
was little that the central
banks may do to aid them—
put financial executives here
in something of a stupor.
The Netherlands, for in-
stance, is experiencing nega-
tive interest rates.
“We have limited oppor-
tunities to lend on the other
side” of customer deposits
because of those negative
yields, said Ralph Hamers,
chairman of Dutch bank ING
NV. “The only thing we can
do is extend credit we
WSJ.com/Heard
China Risks
Electric-Car
Shakedown
Nearly every major Chi-
nese car maker is churning
out electric cars these days
in hopes of capitalizing on
regulatory largesse. One
problem: Regulators are
wary it is being misused.
One suspected strategy in-
volves manufacturers selling
faulty or incomplete cars to
related parties who pocket
the subsidies and then re-
turn the cars. That could ex-
plain why wholesale ship-
ments of electric cars
between January and No-
vember were 56% above re-
tail sales, according to LMC
Automotive data. By con-
trast, in the broader car
market, wholesale was 6%
higher than retail.
The Ministry of Finance
says misused funds could be
clawed back as officials step
up scrutiny. This would af-
fect one of China’s fastest-
growing auto segments. Sub-
sidies make up to 35% of
what consumers pay. In 2015,
wholesale shipments of elec-
tric and hybrid vehicles—in-
cluding buses—were more
than quadruple their 2014
level. The broader car mar-
ket limped ahead by 4.7%.
It isn’t clear who perpe-
trated the alleged frauds, but
tighter regulations could
curb the industry’s growth.
BYD, sometimes dubbed
China’s version of Tesla,
rode last year’s electric-car
boom, selling more than tri-
ple the number of electric
and hybrid vehicles than the
year before. If that pace can’t
be sustained, neither can its
Hong Kong shares, which
trade for 31 times forward
earnings. The second- most
expensive Hong Kong car
stock commands 10.4 times.
China’s electric-car indus-
try should prepare for some
short circuits.
—Abheek Bhattacharya
RUBEN SPRICH/REUTERS
would normally not do, and
that leads to an accident
waiting to happen.”
For Mr. Hamers and oth-
ers, a shift in sentiment
seemed to be taking hold.
Annual growth of the old or-
der—3% to 4% for the U.S.
and other Western econo-
mies, is far away. Absent
structural changes led by
governments, there was lit-
tle reason to be cheered.
“There may be a para-
digm shift we have to ac-
cept with demographics in
Europe: It’s not that bad to
have zero-percent inflation.
We were preoccupied with
2% inflation, but just be-
cause it’s been that way for
40 to 50 years doesn’t mean
it has to remain that way,”
Mr. Hamers said.
For him, “we call it the
new abnormal and we better
get used to it.”
The same thought came
from the financial-company
CEO who asked not to be
named. “We plan our future
with the Japanese environ-
ment in mind. That is our
base scenario.”
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

JOURNAL REPORT

Follo
The E w
THE WALL STREET JOURNAL. xper Monday, January 25, 2016 | R1
© 2016 Dow Jones & Company. All Rights Reserved.
A ts
Convn Online
e
DETA rsation

How
I LS , R2

To Keep a
Business Alive
After a Divorce
Spouses may split up. But
that doesn’t mean the
business they ran together
can’t survive.
BY ANDREW BLACKMAN

PHOTO ILLUSTRATION BY STEPHEN WEBSTER

W
HEN ENTREPRENEURIAL cou- as minimize their own emotional turmoil. In some cases, these what in a split. This can be incredibly tough, not just because
ples get divorced, there’s often at methods can even help spouses run the business together—and most people don’t want to think about it but also because most
least one child that gets torn apart: thrive—after the divorce. couples run a business informally, negotiating who does what
the business they raised together. Here’s a look at what marriage experts and entrepreneurs in the same way that they figure out who does the chores or
Spouses who spent years building say couples can do to keep a business together, even when the picks the children up from school.
a company suddenly find themselves owners no longer are. “Clear definition of roles within the business helps to avoid
having to divide it up, conflict when together,” says Matt Allen, a Babson
and the negotiations can College professor and director of the school’s Insti-
get nasty. One spouse tute for Family Entrepreneurship. “If a divorce does

1.4 1.7 0.6

may demand a bigger share of the company to occur, the clearly divided lines make it much easier
soothe bad feelings from the divorce. Another may for one of the two to step aside, and their role can
get defensive about the business’s finances and re- be more easily filled by an employee/manager be-
fuse to divulge details. And old resentments about
how the business has been managed can bubble to
the surface, making things even uglier.
million million million cause there is a job description already in place.”
Dividing up jobs is one thing. Figuring out how
to divide the company after the split is another. It
Both spouses can be left emotionally drained, Businesses jointly Businesses jointly Businesses jointly can be painful, but experts agree there should be a
and the business can end up neglected—or dis- owned/equally operated owned/primarily owned/primarily plan in place to avoid conflict later. Even if couples
solved entirely. by husband and wife operated by husband operated by wife think they'll be able to keep working together after
“The worst-case scenario is that you have to liq- a divorce, there’s no guarantee they’ll be able to
Source: Census Bureau’s Survey of Business Owners (2007 data, most recent available)
uidate the business and split the proceeds,” says pull it off—especially because “frequently the ten-
Catherine Stanton, an attorney and divorce media- sions inherent in working together are what caused
tor in Denver. “When we’re going through a divorce, the marriage to collapse in the first place,” says
we’re not always our best selves. If you’ve got a bad consultant and author Wendy Jaffe.
relationship with your spouse, they might not feel compelled Start off as strangers It is best for one spouse to plan to buy the other out, experts
to find another solution, and may go for the nuclear option.” Perhaps the most important step couples can take comes say. “The upside of the ‘cash-out’ is the finality,” says Dale E.
It doesn’t have to be this way. right at the creation of the company: “If you’re starting a busi- Johnson, a family-law attorney in Louisville, Colo. “I get the in-
Of course, it’s impossible to take bad feelings entirely out of ness with your spouse, treat it like you’re starting a business terest in the business, I go my way, and you get the cash.”
the picture. But there are strategies spouses can use to ensure with a stranger,” says Ms. Stanton. “Nobody wants to think, Zaneilia Harris, president of Harris & Harris Wealth Man-
their business has a fighting chance to survive a split, as well ‘We’re starting this business together, let’s plan for getting a agement Group in Bowie, Md., recommends having a buy-sell
divorce.’ But I’ll be honest: Starting a business together ups the agreement, which says that in case of divorce, one spouse will
Mr. Blackman is a writer in Crete. Barbara Haislip, a chances that you’re going to get divorced.” buy the other’s shares at an agreed price or at a price set later,
writer in Chatham, N.J., contributed to this article. Both Starting off as “strangers” means defining every aspect of after a valuation.
can be reached at reports@wsj.com. the business beforehand—from who does what jobs to who gets Please turn to the next page

INSIDE

UPFRONT it before a company’s third RUNNING THE SHOW

When GPS Can’t Find You year can be dangerous An Indie Success Story
How mistakes in online maps R3 Charlie Mars got dropped
can hurt small businesses from his record label. So
R2 MANAGING TECHNOLOGY he reinvented himself.
The Apps You Need R5
THE MONEY GAME To Run a Startup
IPOs With a Lot to Hide The best mobile software Entrepreneurs And
Companies often use complex for small businesses The Driverless Car
language to mask practices R4 Startups find a niche
that investors won’t like in a very hot industry
R3 Why Small Businesses R5
Get LinkedIn Wrong
The Perfect Time Strategies for leveraging FRANCHISING
To Offer Big Benefits the networking site Chains Target New Buyers
New research says doing R4 The latest incentives on offer
R6
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
R2 | Monday, January 25, 2016 THE WALL STREET JOURNAL.

JOURNAL REPORT | SMALL BUSINESS

What Happens When GPS Can’t Find You

Online maps are often wrong. And
that can be a major headache for a
small business.
BY CHANA R. SCHOENBERGER
IT’S AN EVERYDAY ritual: People
look up a local business they want to
visit, then click a link to get a map
and directions.
But what happens when the map
is wrong?
aren’t always distributed proportion-
ally. Businesses located in a shop-
ping center or subdivision can also
confound the mapping software.
The most sophisticated online
maps feature geocoding, which at-
taches an address to a building using
ing a firm specifically to fix a map satellite images. Even with this sys-
issue can run a few thousand dollars. tem, though, there can be screw-
ups—because, once again, most
Lost in the woods geocoding software divides a block
Map mistakes are a glitch that proportionally by the number range
happens all too often. Some 50% to of buildings.
70% of online business listings are “That’s why, when the GPS says,
wrong in some way, says Michael ‘You’ve arrived at your destination,’
Dobson, president of TeleMapics, a you look up and it is five stores

For a small business, it can be a
major headache. Customers who fol-
low incorrect directions can swamp
the store with angry or annoyed
calls and emails, or simply give up in
frustration. Solving the problem,
meanwhile, is a lengthy process that
can take weeks or months to com-
plete.
Small companies that handle it on
their own must file a request with
online map services, provide docu-
mentation to prove their actual ad-
dress and then wait—following up
with phone calls to make sure the
map services haven’t forgotten about
them. And while they’re using time
and energy they can’t afford to
spare, customers continue to go
astray.
There’s also the option of paying
somebody else to do it. Sometimes
small businesses turn to a company
they already work with, such as a
public-relations firm, to resolve the
problem. In other cases, they turn to
one of the small crop of startups
that help firms burnish their online
reputations. Depending on the setup,
that process can be expensive: Hir-
mapping and local-search consulting
firm in Laguna Hills, Calif.
For Family Eye Care Center &
Optical Gallery, the problems
started in the fall of 2012, after a
move to the new Cornerstone Square
shopping plaza in Westford, Mass.
The office moved just a few minutes’
drive away from its former location.
But the new street, built where
woods had recently stood, did not
yet appear on digital maps, says Kim
Shannon, an executive assistant for
the business, owned by ophthalmolo-
gist Dwayne Baharozian.
Patients’ GPS systems and phone
apps steered them wrong, as did in-
surance companies’ find-a-provider
websites, Ms. Shannon says. Some-
times the websites would show the
outdated address for the old office;
other times the maps would simply
not be able to locate the new street.
Ms. Shannon, a local, stayed on
the phone with patients calling to
say they were lost and walked them
through the correct directions turn
by turn as they drove, she recalls.
The experience was “a huge prob-
lem,” she says.
It took Salveson Stetson Group a month to get map sites to fix its address.
In April 2013, Family Eye Care
hired GetFiveStars, an online repu-
tation-development consulting firm
in Campbell, Calif., to fix the prob-
lem. Get Five Stars made sure the
business’s address was updated ev-
erywhere it appeared online and
prodded the map companies to in-
clude the new street in maps by call-
ing, emailing and sending proof of
the new address.
The fix cost $3,900, and it took
about a year—until the spring of
2014—for all the map companies to
make the change, Ms. Shannon says.
The errors pile up
How do things get so screwed up
in the first place?
For one thing, there’s no central-
ized or government-run database of
addresses, which means there are
lots of different address sources out
there with different levels of quality
control. Some map services may use
JEN TEDESCHI
down,” Mr. Dobson says. In rural ar-
eas, adjacent geocodes can be miles
apart.
Ultimately, many businesses never
find out what caused their map
a source that has a mistake, while problems. Two years ago, the ad-
others may use another that’s accu- dress of Salveson Stetson Group, an
rate. executive-search firm in Radnor, Pa.,
Mistakes can show up by simple started showing up wrong in map
human error when an address is systems, and clients, vendors and in-
typed into a database, says Mr. Dob- terviewees couldn’t find the com-
son of TeleMapics, who has worked pany’s offices.
on mapping for the Census Bureau Solving the problem took a month
and Rand McNally. Updates some- of making requests to a long list of
times lead to errors, or don’t get websites, search services and map
made at all: Sometimes streets that providers, says Nicole Lasorda, an
were renamed or added after the da- assistant vice president at Buchanan
tabase was put together show up in- Public Relations in Bryn Mawr, Pa.,
correctly. If a business moves, the which represents the firm and
new address sometimes doesn’t helped it handle the problem.
make it into the database. They never learned what the issue
Even if the map services do tap a was, Ms. Lasorda says. “Tech for us
database with the correct address, is a blessing and a curse,” she says.
there’s the problem of attaching that “When something goes wrong, a lot
address to a real-world building. The of times people don’t even know
mapping software uses something why.”
called a building-number range to
estimate what addresses correspond Ms. Schoenberger is a writer in
to what businesses. But that’s often New York. She can be reached at
wrong because numbers on a street reports@wsj.com.

How to Keep a Business Alive After a Divorce

Continued from the prior page fering. “Entrepreneurs are often jacks of all
Sometimes that doesn’t work at the time of trades,” she says. “They often see things other
the divorce, though, since the other spouse people do and say, ‘I can do it better.’ That’s
may not have money on hand to cover the buy- the nature of an entrepreneur, but it’s a very
out. To ensure the money is in place from the dangerous place to get into with a spouse, and
start, Ms. Harris recommends that couples even more dangerous with an ex-spouse.”
take out a permanent life insurance policy. Mr. and Ms. Roberts discovered that their
That way, the spouse who stays at the com- roles within the company started to change af-
pany can use the cash value of the insurance ter their divorce, with positive business re-
policy to pay for the departing spouse’s shares. sults. Before, Mr. Roberts had taken a lead role
in sales, while Ms. Roberts, as the primary
Plan to launch a new career care giver for their three young children, took
Of course, when most couples arrive at a a back seat. But after the divorce, they found
split, they don’t have any plan in place for di- a new way of working together that drew more
viding the company, which means a lot of ne- on their respective skills than their family dy-
gotiating at a time when tensions are already namic. Ms. Roberts says that she’s a “people
running high. In the easier-said-than-done de- person,” while Mr. Roberts says he is “more
UNISHIPPERS

partment, experts urge people to keep emo-
tions out of the negotiating process as much as
possible, and use third-party mediation to help
keep things civil. They also warn people to re-
member the bigger issues—such as providing
for their children’s future—and not let spite
lead them to push for more than they deserve,
or to deny a spouse’s reasonable requests.
“The more businesslike and nonemotional
the parties can be, the greater likelihood of
getting a settlement or a result that is cost-ef-
fective and fair to both,” says Mr. Johnson.
“Because people can get emotional when the
marriage breaks up and feel betrayed, they can
easily move toward having the case become all
about revenge, anger and punishment upon
that horrible person who had the audacity to
reject them. Wounded narcissism runs ram-
pant in the world of divorce.”
Along with emotional preparation, there’s
another big issue to think through: what
comes next for the spouse who leaves the com-
pany. If the spouse keeps working in the same
field, things get tricky quickly. Even if the cou-
ple tries to split customers fairly, there will of-
ten be some who feel more closely aligned
with one spouse and jump ship. Couples can
quickly end up competing with each other,
even if they start with the best of intentions.
So, some experts think it’s best for the
spouse who gets bought out to sign a noncom-
pete agreement and then go into a new field.
“Real entrepreneurs always have another
idea,” says Mary Cushing Doherty, a family-law
attorney at High Swartz LLP in Norristown,
Pa. “Often they’ll say, ‘This is my chance to go
my own path.’ ”
Find a new reason to stick together
All of that assumes, of course, that the
spouses split as business partners. It makes
sense: If spouses can’t live with each other as
a couple, they probably won’t be able to work
together, either.
Yet some choose to tough it out. Henry Fo-
ley, a senior partner at BanyanGlobal Family
Business Advisors, says he has seen couples
survive and thrive in business together post-
Jan and Stacey Roberts continued to work as business partners after their divorce.
divorce—but only if they follow certain rules.
First, people embarking on such a risky
strategy need a strong reason to do so—and
both partners need to see things the same way.
The “why” for married couples is often the de-
sire to build a business and a life together, or
achieve a certain standard of living.
When the marriage ends, “there needs to be
something that makes them more successful
together than they would be separately,” says
Mr. Foley.
For Stacey and Jan Roberts, there were two
reasons for staying together as business part-
ners: the amount of work they’d both put into
the venture, and their children.
The couple founded their business in 1995—
Roberts Freight Consultants, a franchise of
freight-services firm Unishippers Global Lo-
gistics LLC—while they were married. Their
nine-year marriage ended in 1999, but they
kept working together—and their firm is still
profitable 17 years later, with the ex-spouses at
the helm.
“Believe me, it wasn’t easy in the begin-
ning,” says Ms. Roberts. “There were times
when I didn’t want to be working with my ex-
husband, and I’m sure he felt the same way.”
But they had both worked hard to make the
Roseville, Calif., business a success, and nei-
ther of them wanted to be bought out. “At that
point, it became a question of how do we go
forward in the best way to keep our business
successful and create a wonderful childhood
for our children,” she says.
Mr. Roberts agrees. “We had a business and
we had children, and those were my focus:
How could they survive in a healthy way?” he
says. During the divorce, a counselor told him
that “the most important thing is that your
children see you as friendly [to each other],
whether you’re divorced or married. That’s the
most important thing for the emotional health
of your kids. That stuck with me.”
Reinvent the working relationship
A shared vision doesn’t help if the couple
can’t cooperate enough to achieve it. As a re-
sult, people who run a company together after
a divorce often find they need an entirely new
way of working. For example, even amicable
divorces often involve some breach of the trust
that was built during the marriage, so couples
need to admit that fact and change their work-
ing procedures to account for it.
Trisha Harp, founder of research and con-
sulting firm Harp Family Institute in Atlanta,
gives the example of handling company fi-
nances. For married couples, this is often
based on trust: The person who’s more com-
fortable with the numbers may be responsible
for the finances, leaving the other person to
concentrate on other areas.
After a divorce, however, that approach can
lead to resentment and suspicion. Money is
one of the main causes of a relationship break-
down, Ms. Harp says, and for divorced couples,
it’s a frequent cause of conflict. “There needs
to be a daily sharing of what’s going on in the
business from a financial perspective,” she
says. “If one partner isn’t being kept abreast,
that can cause a chasm in the relationship.”
This is linked to another of Mr. Foley’s rules
for successful divorced partners: Ex-spouses
need to define the new boundaries of their
business relationship much more sharply than
before. And they need to change how they be-
have with each other, creating a separation be-
tween their personal and business lives.
“The people who are successful are often
able to say, ‘I’m having this conversation as an
owner or an executive, not as an ex-husband or
ex-wife,’ ” he says. “That’s very difficult to do,
but it’s critically important.”
Ms. Harp says that when couples define
their new roles within the firm, they should
have clearly delineated jobs, and the other
partner needs to let them work without inter-
analytical.” Recognizing that, they began di-
viding their roles accordingly. Now Mr. Roberts
is more responsible for operations, while Ms.
Roberts is the primary salesperson.
Watch out for emotional triggers
Conflict, of course, is inevitable in any busi-
ness, and is even more likely when the part-
ners have been through a divorce. Mr. and Ms.
Roberts relied heavily on counselors and medi-
ators in the first year or so. Doing so, they say,
helped them keep their emotional issues sepa-
rate from the business, and avoid having dam-
aging arguments in the office. “If you have re-
spect for each other and believe that the other
person is fair and ethical, that makes things
much better,” says Ms. Roberts. “We both had
that belief, and we still do today.”
Ms. Harp says that “detriggering” tech-
niques can help reduce conflict. Couples can
identify a phrase to help them head off an ar-
gument before it develops. A couple she
worked with once had a petty argument at din-
ner, so they adopted the phrase “Please pass
the butter” as a secret code. It reminded them
of the ridiculous argument, made them laugh
and helped reduce the tension.
Conversely, Mr. Foley says that certain
phrases can be triggers for conflict in a broken
relationship. Starting a sentence with phrases
like “You always” or “You never” is particu-
larly likely to lead to fights, he says. The cou-
ples who have worked together successfully af-
ter divorce have been able to communicate in
a mature, respectful way, he says.
Despite all the potential pitfalls, Mr. Foley
says that divorced couples who can beat the
odds and stay in business together will often
form more healthy businesses than unhappy
couples who force themselves to stay married
for the sake of the business or their children.
“We’ve seen situations where there was a
toxic relationship, where the anger and hurt that
did not get resolved was bleeding out into the
business,” Mr. Foley says. “That, in fact, is a
much worse situation than saying, ‘OK, our part-
nership as a married couple is not working, but
we can make the business partnership work.’ ”

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THE WALL STREET JOURNAL. Monday, January 25, 2016 | R3

JOURNAL REPORT | SMALL BUSINESS

THE MONEY GAME
HOW I THOUGHT OF IT

IPOs With Something to Hide

Companies that have investor-unfriendly policies often
mask those policies with complex jargon. It often pays off.
By comparison, firms with less
BY LOUISE LEE
A Complex Message obfuscation held their IPOs
When companies on the verge of an IPO face little scrutiny, they’re along with just 3.3 others.
ENTREPRENEURS on the more likely to cover weak points by making their documents hard to
verge of an initial public offer- understand. And they often profit by doing so. The big payoff
ing often face a stark fact: The The researchers also found
company has policies that in- More Less that entrepreneurs using con-
confusing confusing
vestors won’t like. documents documents fusing language very often had
So, what do they do? In a successful IPO. The study
some cases, they try to hide Average number of found that companies that
analysts covering 2 4.43
those rough spots by making camouflaged raised more

their official documents hard
to understand.
That’s the conclusion of a
recent study that examined
IPO-related documents of 1,655
companies that went public
between 1995 and 2011 and an-
alyzed how the companies pre-
sented their corporate-gover-
nance provisions. The findings:
Firms with less investor-
friendly policies, such as limit-
ing shareholder amendments,
were more likely to camou-
flage those practices using
highly complex words and sen-
tences. They were also more
likely to do so if they knew
they weren’t under much scru-
tiny—if they had little analyst
coverage, for instance, or if
their IPO was part of a crowd
of offerings.
And the obfuscation often
paid off, the researchers dis-
covered. A firm that used such
camouflage was less likely to
see its shares underpriced, and
thus raised more capital than a
company that didn’t use cam-
ouflage.
Hiding the catch
The researchers, including
David F. Benson and James C.
Brau of Brigham Young Univer-
sity, James Cicon of the Uni-
versity of Central Missouri and
Stephen P. Ferris of the Uni-
versity of Missouri in Colum-
bia, used a computer program
to analyze individual sentences
and words in IPO documents.
Industry jargon, words with
multiple meanings or many
Average number of
other IPOs taking place 4.2 3.3
at same time
Amount raised in IPO $129 $113
million million
Source: study of IPO-related documents of 1,655
companies that went public between 1995 and 2011 THE WALL STREET JOURNAL.
syllables and lengthy sen- appeared to use camouflage
tences all raised the “camou- selectively.
flage measure,” as did burying
certain information. The right circumstances
“Paragraphs at the end of a For instance, companies
document may not even be were more likely to use cam-
read, especially by the casual ouflage when they had little
investor,” says Mr. Cicon, a analyst coverage. Companies
former engineer who wrote whose documents had an
the study’s computer algo- above-average camouflage
rithm. How a document is score had an average of just
written, he says, can “posture two analysts covering them.
your company eventually in But firms with a below-aver-
the IPO offering as something age score had 4.43 analysts
that it’s not.” covering them.
Overall, firms with policies “The more analysts you
unfriendly to investors had an have, the more scrutiny you
average camouflage score of have, and the more likely you
1.527, far above the mean of are to get caught trying to use
0.014. For an idea of what that some of these camouflage
means in practical terms, con- techniques,” says Mr. Brau.
sider one of the components Companies were also more
that went into the camouflage likely to camouflage if their
score: years of schooling. To IPO took place at the same
understand the average com- time as many other offerings.
pany document, a reader Investors and analysts may be
needed to have 19 years of for- more inclined to home in and
mal schooling, or the equiva- closely examine a lone IPO,
lent of a master’s degree. Doc- making the firm less likely to
uments that were full of try to hide information, the re-
obfuscating language required searchers figure.
even more. They found that companies
The research, published in with harder-to-understand
the Journal of Business Ven- documents had their IPO at the
turing, showed that companies same time as 4.2 other firms.
money and had higher share
prices than those that didn’t.
“If I have bad news and am
able to make the document
complex and camouflaged and
difficult to read, then that neg-
ative is not priced” into the
shares, says Mr. Brau.
On average, a company with
an above-average camouflage
score received $129 million in
proceeds from its IPO, or about
14% above the average $113
million raised by low-camou-
flage firms.
Is using unclear language in
this way illegal? Not as such,
but the Securities and Ex-
change Commission does have
“plain English” rules for com-
pany documents. The guide-
lines—published in “A Plain
English Handbook” in 1998—
include avoiding long sen-
tences, the passive voice, ab-
stract words and jargon.
“Our research suggests that
it’s not working or companies
are finding ways around it,”
says Mr. Benson.
The handbook, for instance,
says documents should be
“clear, concise, and under-
standable,” but a firm might
end up using a Wall Street
term anyway in an effort to be
“concise.” Companies “can in-
terpret the plain English law a
whole lot of different ways,”
Mr. Benson says.
Ms. Lee is a writer in Palo
Alto, Calif. She can be
reached at
reports@wsj.com.
ROADIE
If Band Mates Won’t Keep Quiet...
Bassam Jalgha was a musician long before he was an en-
gineering student. Then he put those two parts of his life to-
gether—and became an entrepreneur.
For years, Mr. Jalgha played the oud, a traditional Middle
Eastern stringed instrument, as a hobby. But “I used to
struggle tuning my oud during rehearsal, so I used to spend
half the time isolated or making sure my band mates were
quiet so I can tune my instrument,” he says. “I thought there
must be a better solution.”
In 2006, as a third-year mechanical-engineering student
at the American University of Beirut, the answer came to
him. He was taking a class on developing control systems for
machines, and he realized he could create a gadget that could
be attached to stringed instruments and tune them automat-
ically.
Although he didn’t pursue it at the time, he kept the idea
with him. In 2009, he took his pitch for the gadget onto a
reality-TV competition in Qatar, where it won first place and
a $300,000 prize.
Later, he began developing the device full-time with his
college friend and former band member, Hassane Slaibi, an
engineer and flute player. The original name was Dozan—Ara-
bic for tuning—but they eventually settled on Roadie as
catchier for a global audience.
The hand-held device, which sells for $99, attaches to a
tuning peg on a stringed instrument. After the user plucks
the string, Roadie analyzes the sound and automatically ad-
justs the tension to get the string tuned properly. An app
stores profiles for different instruments and custom tunings
and keeps track of the elasticity of the strings, telling the
musician when new ones are needed.
Roadie hit the market in November 2014. The company
won’t release revenue figures, but it says online and retail
sales have been “sustaining and growing” the firm.
“Our mission is to make perfection accessible to musi-
cians, and to reduce the barrier to entry for new musicians,”
says Mr. Slaibi. “It’s a new dimension that technology can
bring to music.”
Brooke Anderson

Why Startups Should Wait

To Hand Out Generous Benefits You’re only satisfied
when it’s perfect.

Awarding them too early in the company’s We’re only satisfied

life may put the business at risk
BY RACHEL EMMA
SILVERMAN
WHEN DOES IT make sense
for a startup to start offer-
ing big perks to employees,
Street Journal about the
ideal time for startups to
start offering a richer bene-
fits package.
Here’s an edited version
of the discussion.
don’t start handing out bo-
nuses. If you implement
them too early, you are in-
creasing the likelihood you
can fail as a new venture.
Don’t think that what
works for Google in 2015 will
when you’re protected.
As a small business owner, no detail about your company is too small. That’s
why we take the time to provide the right solution for the risks you may face.
At Liberty Mutual Insurance, we’re proud to work with businesses like yours
to help our customers flourish. You have a passion for your business. We
have a passion for protecting it. To learn more, talk to your independent
agent or broker today or visit libertymutualgroup.com/details.
BUSINESS OWNER’S POLICY | COMMERCIAL AUTO | PACKAGE | WORKERS COMPENSATION
@LibertyB2B

such as bonuses and stock
options?
That’s the question that
management researchers Da-
vid S. DeGeest and Ernest
O’Boyle, along with their co-
authors, set out to answer in
a study published in the
Journal of Management.
Dr. DeGeest, of the Univer-
sity of Groningen in the
Netherlands, and Dr. O’Boyle,
of the University of Iowa’s
Tippie College of Business,
A Question of Giving
Offering rich benefits too early can hurt a firm's chances early on
but help later. Below are the survival chances of small businesses
by age and whether they offer big benefits packages.
Succeeds
3 YEARS OLD OR LESS
20%
45%
80% 55%
Offers Doesn’t
generous benefits offer them
Source: study of a database that tracked 1,100 technology
startups over seven years beginning in 2004.
looked at a database that
tracked 1,100 technology
startups over a period of
seven years beginning in
2004.
The findings from their
research: Enhanced benefits
packages can be too expen-
sive for a young startup to
manage—so much so that
the extra cost can slow a
company’s growth or even
drive it under. But after a
business has gotten on its
feet, benefits can help the
company grow faster by al-
lowing it to recruit and re-
tain better talent.
Dr. DeGeest and Dr.
O’Boyle spoke with The Wall
A range of benefits
WSJ: What sort of enhanced
benefits did you measure in
your study?
DR. DEGEEST: We looked at
benefits designed to moti-
vate employees: flextime pol-
icies, bonus programs, stock-
option programs and group
health-care programs.
WSJ: What was the most im-
portant takeaway from your
study?
Fails
MORE THAN 3 YEARS OLD
30%
45%
70% 55%
Offers Doesn’t
generous benefits offer them
THE WALL STREET JOURNAL.
DR. DEGEEST: If firms tried to
implement these enhanced
benefits programs, such as
stock options or bonuses,
too early, in the first three
years of their lifetimes, they
lowered their chances of sur-
vival. If they started using
them later in their lifetime,
typically after three years,
using these benefits in-
creases the likelihood of sur-
vival and has a positive ef-
fect.
DR. O’BOYLE: These motiva-
tion-enhancing practices,
things like stock options, are
great when you are up and
running. But at the start,
when you are in the garage,
work for your [brand-new
startup]. They are at very
different stages.
WSJ: How did you determine
that roughly three years was
the optimal time to start of-
fering these benefits?
DR. O’BOYLE: When we talk
about new ventures, there is
a viability stage when they
have to secure financing and
focus on meeting payroll,
and then a growth stage
where they need to attract
and retain high-quality tal-
ent. After about the third
year, firms are switching
from getting all their ducks
in a row to how are we going
to get our business to grow.
Around year three, regard-
less of how big the firm was,
at that point many firms
started to go into growth
mode in our sample.
An enhanced rate
WSJ: What is the likelihood
that a firm will survive if it
offers these enhanced bene-
fits?
DR. DEGEEST: What we ob-
serve in the paper is that in
the growth stage, firms that
use these motivation-en-
hancing practices have an
approximately 70% chance of
survival, while firms that
don’t have roughly a 55%
chance of survival. In the
[earlier] viability stage,
firms that use more of these
motivation-enhancing prac-
tices have a survival chance
of about 20%. Firms that
don’t have a survival chance
of around 55%.
Ms. Silverman is a Wall
Street Journal staff reporter
in Austin, Texas. She can be © 2016 Liberty Mutual Insurance. Insurance underwritten by
reached at rachel.silver- Liberty Mutual Insurance Co., Boston, MA, or its affiliates or subsidiaries.
man@wsj.com.
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
R4 | Monday, January 25, 2016 THE WALL STREET JOURNAL.

JOURNAL REPORT | SMALL BUSINESS

MANAGING TECHNOLOGY
The Apps You Need to Fly Solo
A selection of the best mobile software to automate back-office jobs
BY AMY WESTERVELT
SMALL-BUSINESS owners can
carry the back office in their
front pocket.
There has been an explosion
in mobile applications aimed at
tackling everything from human
resources and payroll to schedul-
ing and finances. And that boom
is making it easier than ever for
small-business owners to keep
tabs on their operation from
anywhere they are.
Here’s a look at 10 options
available now to help run any
small enterprise on the go.
MANAGEMENT
SLACK
WHAT IT DOES: It lets
users set up instant
group or private chats
and direct messages, and drop in
files, videos or images. They can
also quickly search through ar-
chives, chats and files by term,
person, date or category. Data
from the Slack app can be
synced to users’ desktops, and
the software integrates with a
variety of other tools that many
businesses already use, including
all of the Google apps, Box,
MailChimp, Twitter, Dropbox
and many more.
COST: Free for limited use; up to
$15 per user a month for addi-
tional features, including inte-
gration with external email,
guest access and 24/7 support
YALDI
WHAT IT DOES: It en-
ables users to track
key performance indi-
cators for their business, such as
cash flow, revenue, inventory
and customer-acquisition costs.
Users select their industry and
can use the preset indicators the
app recommends, or select their
own. The app then prompts them
to add various actions they plan
to take toward improving perfor-
mance, and to enter any events
that might have an unusual ef-
fect on performance, such as a
holiday sale. As users enter data,
the app provides feedback, such
as “Your revenue is strong this
month, but sales are decreasing,
so you might want to concen-
trate efforts there.” The Yaldi
app, which is made by My Gung
Ho LLC, also integrates Quick-
Books accounting software.
(Note, though, that Yaldi isn’t
available for Android.)
COST: $9.99 a month; $99 a year
PERCH
WHAT IT DOES: It col-
lects a host of social-
media content onto
one screen for easy viewing: all
of your own posts and promo-
tions, and those of your competi-
tors, as well as check-ins, re-
views and comments from your
customers. The app, which is
made by Closely Inc., integrates
with Facebook, Twitter, Insta-
gram, Four Square, Yelp,
Google+ and various deal sites,
and provides analytics on where
your customers are engaging
with you most.
COST: free
SALES/CUSTOMER SERVICE
PIPELINER CRM
WHAT IT DOES: It tracks
every step of the
sales process, using
icons and color coding to indi-
cate what stage of the pipeline a
prospect is in and what actions
need to be taken. The idea: to
make it easy to onboard new
staff and quickly get a read on
how marketing activities are
contributing to sales. The app,
which is made by Pipelinersales
Inc., includes shared to-do lists
and task boards, and allows us-
ers to access the software via
their desktop as well as through
mobile.
COST: $35 per user a month, billed
annually
PERKA
WHAT IT DOES: It lets
small businesses set
up customer-loyalty
programs and track shoppers’
purchases automatically—a digi-
tal version of the traditional
punch card that buyers present
at checkout. Here’s how it all
works: A store’s point-of-sale
machine uses Bluetooth technol-
ogy to talk with customers’
smartphones to identify them
and log their purchases.
COST: Free for consumers to get
the app, made by First Data
Corp., on their phones; for busi-
nesses, Perka is included, along
with a choice of 100 other small-
business apps, with the purchase
of a point-of-sale terminal, which
is $300 and up
DESK.COM
WHAT IT DOES: It routes
customer-support re-
quests from a variety
of sources, including phone,
email and social media, into a
single queue in the app, enabling
users to quickly address requests
or assign them to others in the
team. Managers can get an in-
stant view of how many issues
are resolved and open, and
shared priority lists help keep
everyone on the same page. In
addition, the app, from Sales-
force.com, can integrate with
Salesforce’s customer-relation-
ship-management software.
COST: $35 to $135 a month, de-
pending on the level of customi-
zation and support needed
HR/ACCOUNTING
INVOICE2GO
WHAT IT DOES: It en-
ables users to prepare
electronic invoices on
the go, email them to customers
and save a copy instantly to the
company’s ledger. The app, from
Invoice2go, also lets users cap-
ture expenses and receipts—via
either manual or photo entry—
and save them to the company’s
books.
COST: $49 to $149 a year, depend-
ing on the number of invoices,
clients and additional features
GUSTO
WHAT IT DOES: It takes
payroll paperless,
tracking payments
and calculating taxes for employ-
ers, and enabling employees to
view their pay-stub archives at
any time, along with documents
such as state and federal tax
forms. The app is made by
ZenPayroll Inc.
COST: $29 monthly base fee, plus
$6 per employee a month
WHEN I WORK
WHAT IT DOES: It tracks
everyone’s schedule in
one place, enabling
employers to see who’s available
when, easily address scheduling
conflicts, approve time-off or
trade requests on the go and
keep tabs on their overall staff-
ing resources. Employees can
also use the app, from When I
Work Inc., to check their sched-
ule, or find another worker to
cover for them.
COST: From $29 to $99 per
month, depending on the
number of users
QUICKBOOKS
WHAT IT DOES: It en-
ables on-the-fly ex-
pense tracking, in-
voicing, payments and general
budget management. QuickBooks
integrates with the desktop and
cloud versions of the software,
so data is up to date across all
devices. The Intuit Inc. app also
lets users upload photos of re-
ceipts; create and send electronic
invoices; and add QuickBooks
Payments to get paid instantly.
COST: $10.36 a month for first 12
months; $12.95 and up after
Ms. Westervelt is a writer in
Truckee, Calif. She can be
reached at reports@wsj.com.
Small-Firm
Workers More
Likely to Face
Harassment
BY CAITLIN HUSTON
WORKING AT A small business can have a
lot of upsides. But it may also increase your
chances of being harassed or subjected to
emotional abuse.
According to a study published in the
Journal of Ethics and Entrepreneurship by
Dale Eesley and Patricia Meglich, workers
at firms with 50 or fewer employees re-
ported more abuse from their supervisors
than those at larger businesses. The abuse
included everything from forcing long
hours on workers to yelling and behaving
in a threatening way.
What’s behind the bad treatment? The
researchers argue a big part of it is educa-
tion. Many bosses at small firms have less
education than those at big ones, and edu-
cation plays an important role in how a su-
pervisor interacts with employees. “You’re
more comfortable thinking outside your
own interests,” Mr. Eesley says.
Another factor: The environment in
small firms can be influenced much more
strongly by one person’s behavior, so a bad
boss can make a much bigger difference.
What’s more, small firms often don’t have
performance reviews, which are an impor-
tant way to hold managers accountable for
bad behavior, as well as to make clueless
managers aware of how they’re acting.
To collect data, the researchers, both as-
sociate professors at the University of Ne-
braska Omaha, received survey responses
from 131 employees at small organizations
and 198 at large ones. The majority were
restaurants or retail stores; a third were in
a broad category that included everything
from manufacturers to nonprofits.
Seventy-nine percent of respondents in
small businesses reported abuse, versus
71% at big companies. And 15.3% of small-
business employees reported a high level of
abuse, almost double the percentage found
at large firms.
The consequences of abusive behavior
can affect the whole company, the re-
searchers note. Other studies have shown
that bad management can lead to poor em-
ployee performance and greater turnover,
according to Ms. Meglich.
Ms. Huston is a reporter for Market-
Watch in New York. She can be reached
at caitlin.huston@dowjones.com.

HOW I THOUGHT OF IT
Why Small Businesses Get LinkedIn Wrong
The social network can be a great place to promote a startup. Here’s how to do it right.
budget that big companies use to drive
LinkedIn traffic. Instead, a small firm
should polish and update its page only
often enough to attest to its credentials,
professionalism and experience.

SELL THE BUSINESS, NOT YOURSELF. On

LinkedIn, brand matters more than title.
People who work at big, recognized com-
panies have an advantage, because their
profile summaries can immediately con-
vey their role and industry. At a small
company, a C-level title doesn’t mean
much. Small-business executives should
STICKYBELLIES

include a descriptive summary of their

business, leveraging the brand of top cli-
ents, like “CFO of Acme Accounting, fi-
nancial advisers to The Gap and Target.”
Likewise, for founders, executives or
LLOYD MILLER

principals in a small business, a profile

BY ALEXANDRA SAMUEL
HOW CAN A small company make the
most of LinkedIn?
The social network is an inescapable
part of online life for working profession-
als. But much of the advice on how to le-
verage it is targeted at big names. Over
and over, I see small businesses making
mistakes on LinkedIn because they are
patterning their strategies after ap-
proaches that work for larger companies
with huge budgets, lots of brand aware-
ness and extensive social-media systems.
With that in mind, here are tips on
how small businesses can use LinkedIn.
DON’T USE IT FOR MARKETING. Smaller
companies need to be strategic about
where they invest their content-market-
ing budgets. Many businesses can get
more bang for the buck on Facebook,
Pinterest or Instagram, where consum-
ers spend a lot more time and attention,
or with Twitter or an independent blog,
where it’s easier to showcase expertise.
By all means, cross-post the occasional
article or update to LinkedIn, but focus
on it as a source of connections and ex-
pertise—not as a way of building an au-
dience or brand awareness.
TAP YOUR NETWORK FOR TRIPS. While
large companies may have sales teams in
multiple cities, small firms must squeeze
the most out of every business trip. Once
salespeople book the meetings and
events that constitute the primary pur-
pose of a trip, they should use LinkedIn
to fill the calendar with more meetings.
They can use the geographic-search op-
tion to search first- and second-degree
connections in the destination city and
filter results to people whose job titles,
company size and industry match a typi-
cal sales target. Then they can ask com-
mon connections for an intro.
DON’T HELP COMPETITORS. It’s great to
have collegial relationships with other
people in your field. But when connecting
on LinkedIn, it pays to be a little cut-
throat. If small-business people accept
collegial connection requests from people
who work for competitors, they are mak-
ing their entire network accessible to the
competition. In a small town or industry,
some exposure is inevitable, but there’s
no reason to make competitors’ work
easier for them by accepting their con-
nection requests.
KEEP CRITICAL ACTIVITY PRIVATE.
Because LinkedIn lets Premium members
see who has recently viewed their profile,
it’s easy to end up overexposed when in-
vestigating a prospect or competitor.
That’s a lot riskier for a small company
than it would be for a well-established
brand. So if small-business people don’t
want somebody to know they’re looking
at their profile, they should open a pri-
vate browsing window. Conversely, small-
business people should be sure to look
periodically at who has viewed their pro-
file, because it may provide useful in-
sights into their own business.
DON’T FOCUS ON LEAD GENERATION. A
sales team should use LinkedIn to iden-
tify prospects; a small company can make
that easier by encouraging everyone in
the company to connect with one another
on LinkedIn, so that they share networks.
But they shouldn’t expect their company
page to be a source of inbound leads if
they don’t have the kind of advertising
needs to tell a story that’s bigger than
their own career: It needs to tell the
story of the business or brand. An exec
can weave the two narratives together by
showing the value the company brings to
customers and noting the contributions
the exec has made to that effort.
GET FOCUSED WHEN HIRING. Big compa-
nies can afford to post openings on
LinkedIn, and then wait for applicants.
Lesser-known companies need to work
harder to attract the best applicants, and
may do better by searching for qualified
candidates (and then checking them out
by calling contacts in common). If a small
firm knows a couple of people who repre-
sent its dream hire, the firm should use
their LinkedIn profiles to reverse-engi-
neer a dream applicant: What are the
roles and experiences those dream candi-
dates had before they landed in their cur-
rent positions? The firm can then search
for people who hold similar positions,
and assemble a candidate pool.
ASK FOR HELP. Bidding on a government
contract for the first time? Instead of
hiring a consultant, ask the LinkedIn net-
work for its collective wisdom. Need a
new supply-chain management tool? Skip
the costs of commissioning an assess-
ment, and ask LinkedIn pals what they
are using. Joining LinkedIn groups can
help small-business people broaden the
range of expertise they can access. But
this approach only works for people who
are generous helpers in turn: Users
should make sure they check into each of
their key groups at least monthly, and try
to offer help on questions where they
have insight.
Dr. Samuel is an independent technol-
ogy researcher and the author of
“Work Smarter with Social Media.” She
can be reached at reports@wsj.com.
Baby Pictures to Mark Milestones
A childhood memory—and a husband’s nudge—got Carly
Dorogi to start a business.
When Ms. Dorogi was pregnant with her first child, she
noticed how her friends would take pictures of their new ba-
bies next to a scribbled piece of paper saying “one month
old” or “two months old” and post them on Facebook. She
reminisced about how her mother would sew special T-shirts
for birthdays and baby milestones.
She mentioned to her husband, Jim, that she wished she
knew how to sew, or that someone should make something
that looks like it’s sewn onto the shirt but can easily be re-
moved.
“Why don’t you?” her husband responded.
So the former first-grade teacher got colored pencils and
began making sketches for stickers that could be easily ap-
plied to clothes, marking milestone ages for babies. Sticky
Bellies was born.
In 2009 Ms. Dorogi of Novi, Mich., invested $7,000 to or-
der 24,000 stickers from a printer in Ohio and set up a web-
site. (She recalls that her husband helped reconcile her to the
spending by observing, “You can lose just as much in the
stock market.”)
The stickers are made of a thick, durable paper that is op-
timized for flash photography, and are reusable for a few
photo shoots if the baby is uncooperative.
When she and her friends posted pictures of their babies
wearing the stickers, the product went viral. To top it off, a
shopping website featured the product in an article at 8 a.m.
when Ms. Dorogi left for work; by 9 a.m. she had 1,000 or-
ders.
In 2013, Ms. Dorogi left her school position to run the
business, and her husband left his job in 2014 to manage
sales. Over 90% of sales are now through Buy Buy Baby,
Destination Maternity and over 3,500 independent bou-
tiques in the U.S. The products are also sold in Japan, Can-
ada, Australia, the United Arab Emirates, Singapore, Malay-
sia, Kuwait, and Indonesia.
The company carries 24 different styles of stickers, includ-
ing newborn to 12-month sets and sibling sets. It also offers
a variety of other milestone products including growth charts,
birthday posters and photo memory cards.
“I learn something new every day,” says Ms. Dorogi. “I
love the creative process.”
Barbara Haislip
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
RUNNING THE SHOW
The Successful Launch of an Off-Label Band
Singer Charlie Mars was on the verge
of stardom when the music industry
collapsed. So he reinvented himself.
BY KEVIN BRASS
AFTER SEVEN YEARS playing small
clubs and colleges, singer-songwriter
Charlie Mars hit it big.
With a sound that reminded some
of Tom Petty or U2, he was signed to
Richard Branson’s V2 North America
label in 2004, alongside such rising
stars as White Stripes and Josh Rit-
ter. It was a huge step up in lifestyle
and status for a little-known artist:
The deal included $250,000 upfront,
$5,000 a month for living expenses
for a year, major-label resources to
back his CDs and concerts—and the
potential to bring in a huge income if
he took off.
Then, all too quickly, it was over.
As the industry reeled from plum-
meting record scales, V2 changed
hands, and Mr. Mars’s contract was
dropped, just three years after he
was signed. His manager and agent
stopped returning his calls.
“It was like I had a scarlet letter
on me,” says Mr. Mars, now 41.
His first reactions were fear and
apprehension, as he wondered if he
could keep making a living doing
what he loved—writing and perform-
ing music. But those emotions soon
turned to anger and determination.
“I wanted to prove it shouldn’t have
happened to me,” Mr. Mars says. “I
felt like Rocky, the underdog. I
wanted to prove I could come back.”
He knew it would be tough to find
a new home among big labels, which
were increasingly unwilling to gam-
ble on artists without megastar po-
tential. So he decided to create a la-
bel for himself—an operation that
would let him record and promote
his music, and turn a profit doing so.
Today, Mr. Mars oversees a busi-
ness that grosses several hundred
thousand dollars in a good year, in-
cluding touring, record sales and li-
censing. He no longer receives a
monthly stipend from a record com-
pany or travels with an entourage.
But in an era dominated by label-
backed superstars like Taylor Swift
and One Direction, he is proving it is
possible for an independent musician
to create an international operation
without corporate support.
“As the industry crumbled, people
like me had to figure out how to
move forward,” he says.
Mr. Mars, a native of Oxford,
Miss., got started in songwriting
while attending Southern Methodist
University in Dallas. He formed a
band and spent years touring, but
the record industry didn’t come call-
Entrepreneurs and the Driverless Car
Startups are looking to get in on what could become a very hot industry
BY MIKE RAMSEY
YOU DON’T HAVE TO be a tech giant
to teach a vehicle to drive itself.
Big names like Tesla and Google
grab all the attention when it comes
to developing autonomous vehicles.
But, very quietly, startups have also
been getting into the field. These
small companies are taking advan-
tage of easily accessible software
and plummeting equipment prices to
carve out a niche in this emerging
industry—retrofitting existing vehi-
cles that do specialized jobs.
Thilo Koslowski, a senior automo-
tive analyst with Gartner Inc., says
there are dozens of startups adding
autonomous functions to military
and farm equipment. A smaller num-
ber of them, meanwhile, are tackling
the biggest challenge of all, automat-
ing passenger cars.
“It shows the innovation in this
field isn’t limited to big R&D bud-
gets,” Mr. Koslowski says.
Easy entry
One of the big advances driving
the startup boom is open-source
software. For the most part, the pro-
grams necessary to run autonomous
vehicles have already been devel-
oped by universities, which are giv-
ing them away free, says John Leon-
ard, a Massachusetts Institute of
Technology robotics researcher and
one of the leading minds in the au-
tonomy field. “That gives you the
ability to rapidly get up to the state
of the art. It’s not like an IBM con-
trols that,” Mr. Leonard says.
The cost of much of the equip-
ment needed for autonomy has also
fallen dramatically, such as for LI-
DAR. These laser-based systems,
which act like ultradetailed radar for
autonomous vehicles, originally cost
more than $80,000 each when they
were introduced in 2006. Now the
JOURNAL REPORT | SMALL BUSINESS
ing, so he decided to go for broke. He
took out a $50,000 loan, with his
parents as co-signers, to record an
album.
In 2004, the recordings caught the
attention of several top labels. Mr.
Mars settled on V2 North America,
which had a hip cachet and wanted
to expand in his genre, Americana
music. “It was incredible,” he says.
The cash from V2 let him pay off
his loan, and he was thrilled to min-
gle with some of the top names in
the music business. But by 2007,
things were falling apart. With more
people buying (or illegally download-
ing) digital music, CD sales plunged,
destroying the margins for the tradi-
tional music business.
And Mr. Mars didn’t look like a
DARIN BACK
good risk for a record label anymore:
He released only one album for V2 in
the three years it represented him,
and it only sold 15,000 copies, a dis-
appointment in the industry. When
the label was acquired, no others
called to pick him up.
His passion wouldn’t let him
abandon music. But he knew he’d
have to come up with a new way to
make a living in the industry.
“I knew, at that point, no one
would do it for me, there was no
shoulder to cry on,” Mr. Mars says.
‘I felt like Rocky, the
underdog. I wanted to
prove I could come
back,’ Mr. Mars says.
“Either I would have to do it myself
or be a tumbleweed on the music-in-
dustry highway.”
Still, giving up the backing and
prestige of a major label was a major
mental adjustment. “My mom always
says that once you get a raise, it’s
hard to go back to minimum wage,”
he says. “That’s what it felt like.”
Going solo
One of his first moves was to tap
his dwindling resources and put to-
gether a new CD. One of the songs,
“Listen to the Darkside,” started gen-
erating radio play in Austin, Texas,
where Mr. Mars was recording and
performing regularly. “It gave me a
lot of confidence,” he says.
To promote the song, he made an-
other huge investment, laying out
about $10,000 to create a video that
featured actress Mary-Louise Parker
(who later became his girlfriend for
three years). The video went viral in
Automation kits (right) let vehicles from Cybernet Systems drive themselves (left).
manufacturer, Velodyne Acoustics,
is offering a version that costs less
than $8,000.
In many cases, small companies
can even buy a kit that bundles to-
gether most of the software and
hardware they need, and then cus-
tomize it to the specific vehicle and
job involved. AutonomouStuff LLC,
Morton, Ill., sells kits starting as low
as $2,000 per vehicle for vehicles
with simple functions, ranging up to
around $150,000 per vehicle for ones
that can do things like plan routes
and interact with pedestrians and
other vehicles.
“What’s happening right now in
the automotive industry is a com-
plete transformation of mobility,”
says Bobby Hambrick, chief execu-
tive of AutonomouStuff, which he
says has more than 1,000 customers.
“For the first time in history for the
automotive industry, five guys in a
garage can make a huge impact on
the industry.”
Many of the projects that startups
are tackling are relatively simple, in-
volving vehicles that operate largely
in isolation. Jaybridge Robotics, a
Cambridge, Mass., company of 20
Charlie Mars realized he would have to tackle jobs his label used to handle.
2009, attracting more than 300,000
views on YouTube. That in turn
helped propel sales of his CD “Like a
Bird, Like a Plane,” which ultimately
sold 25,000 units at about $10
apiece, mostly through shows, stores
and digital downloads. The showing
wasn’t all that impressive for a major
label, which needs to cover a lot
more overhead, but for an indepen-
dent solo act, it meant real money.
The video “gave the radio people
something to talk about,” he says.
“That kind of made all the differ-
ence.”
He also realized that touring was
an even more substantial source of
revenue, and he would be on the
road constantly—both performing
shows and visiting radio stations to
try to boost airplay. That involved
some big adjustments. For one thing,
he couldn’t afford his usual touring
band of three or four musicians, so
he had to re-create himself as a solo
act, developing into more of an en-
tertainer on stage. “I had to learn
how to talk to the audience,” Mr.
Mars says. “There is an art to that.”
He also had to get involved with
the nuts and bolts of touring in a
way that he didn’t have to do when
he was attached to a label. He now
had to absorb all the costs, including
hotels and gas, and make reserva-
tions and other arrangements.
Another stretch was setting his
ego aside and playing gigs in tiny
venues, even private shows like par-
ties and corporate events. The ups
and downs of the business “certainly
humbled me,” he says.
At the same time, he realized he
people, launched in 2008 and has
carved out a specialty in automating
large industrial vehicles.
A common assignment: automat-
ing a tractor and grain cart to run
alongside a combine that is harvest-
ing wheat and collect its grain. The
job involves a central computer and
sensors placed in strategic spots
around the automated vehicle.
“We are primarily a software
company, and there is a relatively
low bar to making a kit that can
make a vehicle autonomy ready,”
says co-founder Jeremy Brown, who,
like his partner Josh Pieper, used to
design autonomous systems for un-
derwater vehicles.
Systems from Cybernet Systems
Corp. represent the next step up in
autonomous-vehicle complexity. The
company, which is based in Ann Ar-
bor, Mich., frequently works with
the Department of Defense to turn
military vehicles into semiautono-
mous or autonomous machines that
must work around people and other
vehicles. One such vehicle sits inside
the company’s work bays: a giant,
green forklift used to move shipping
containers.
couldn’t do everything himself—he
needed help with jobs that were
more complex than, say, booking
rooms. So he began to stitch to-
gether a network of independent
contractors and service companies to
do the jobs that the label had once
done for him.
A tour agent, for instance, books
his shows, getting 10% to 15% of the
proceeds. (Mr. Mars can take home
as much as $10,000 from concerts
and sometimes as much as $15,000
for private shows.) He also hires a
publicist for every record, paying
anywhere from $2,500 to $5,000 a
month for three to six months after
a CD release, as well as a promoter
to help get him radio airplay. To get
his discs into stores, he works with
Thirty Tigers, one of several compa-
nies that provide independent artists
access to distribution for, typically,
about 25% of sales.
‘Mailbox money’
Early on, he also hired a rep to
pitch his songs to TV and movie pro-
ducers. His songs have been used in
more than 40 programs, including
“How I Met Your Mother,” “Bones”
and “Smallville.” He earns anywhere
from $1,000 to $30,000 for each use
of a song, depending on the show
and how the song is used.
Mr. Mars calls it “mailbox
money”—the checks just show up—
but it is fickle. After selling 12 place-
ments worth almost $100,000 in
2013 and 2014, he had only one in
2015 (in the TV show “Nashville”).
“Over the last few years, it has be-
come an important part of my in-
CYBERNET SYSTEMS
The machines can autonomously
pick up shipping containers and then
move them around. Inside a factory,
the specially fitted forklifts can roam
around without following a buried
metal strip or requiring other sign
posts to navigate about, avoiding
people and other machines as they
go about their work.
Chief Executive Charles Jacobus
and his wife, Heidi, who is the chair-
man, were part of a Defense Ad-
vanced Research Projects Agency
challenge in 2007 to design cars that
were able to drive themselves
around a citylike course. The vehicle
they designed became the basis of
the company’s autonomy kit, which
includes a central processing unit, a
global positioning system and for-
ward, side and rear sensors.
APT, a startup based in Boston,
also aims to tackle complicated au-
tonomy tasks. Launched by the de-
veloper of one of the original self-
guided transportation shuttles at
airports, William Alden, APT is try-
ing to develop a prototype of an au-
tonomous low-speed vehicle that
would take a person from a parked
car all the way to the airport termi-
Monday, January 25, 2016 | R5
come,” he says. “But it’s not money
you can count on.”
Over the years, the business has
come to fill his everyday life. He usu-
ally begins his daily routine with an
hour spent updating his Facebook
and Twitter accounts and his mailing
list, which now has more than 15,000
people. Some of those fans also help
cover crucial expenses: For his last
two discs, which cost $25,000 to
$40,000 to produce, he partially
funded production through Kick-
starter campaigns. One fan donated
$10,000 for a chance to be men-
tioned in a song.
He often spends more time in a
day working on promotions and
booking hotels than music. But he is
enjoying running his own business,
which allows him to pursue his pas-
sion. “It’s fun,” he says. “It’s not a
burden. It’s not like I’m selling soap.”
After seven years of working the
road, driving overnight in storms
and dragging himself out of bed at 6
a.m. for radio-station interviews, he
is still ambitious. He would love to
tour with a tricked-out bus and stay
in five-star hotels, he says. “I’ve
never stopped being hungry, never
stopped chasing that metaphorical
dream,” he says.
But now he wants it on his own
terms. He enjoys his independence,
the creative freedom and ability to
control his music. “I get to call my
own shots,” he says. “I haven’t had to
make a lot of compromises.”
Mr. Brass is a writer in San Diego.
He can be reached at
reports@wsj.com.
nal or even the gate. “The autono-
mous technology is out there,” says
Mr. Alden, who is working with MIT
and the Olin College of Engineering,
as well as several other engineers.
“We are not trying to develop the
technology from scratch.”
APT—Airport Personal Trans-
port—launched a Kickstarter cam-
paign earlier this year to raise
money to build the prototype. The
campaign didn’t reach its goal, but
the company continues to operate
and seek funds.
Among the most ambitious
startup projects is one from Cruise
Automation Inc. The San Francisco-
based company sells a “pod” that
can be installed on the roof of cer-
tain Audi models to create an auto-
pilot system—allowing drivers to
take their hands off the wheel and
their feet off the pedals while on the
highway. Cruise Automation said it
would ship 50 of these $10,000 sys-
tems in 2015, which for now are be-
ing deployed only in California.
“Lower hardware costs have
tipped the scales so that formerly in-
feasible business models are now
very attractive,” says Cruise Autom-
aton CEO Kyle Vogt. “In those situa-
tions, it’s often startups that win.”
Moving ahead
Many researchers in the field are
watching the company with great in-
terest, in part because of Mr. Vogt’s
pedigree: He was the founder of
Twitch.tv, a popular website where
viewers can watch other people play
videogames, that was ultimately sold
to Google.
Ryan Eustice, a University of
Michigan autonomy researcher, has
seen firsthand how fast the technol-
ogy has evolved. But he is skeptical
about the safety of a system that is
an “appendage” to an existing vehi-
cle. “I don’t know how safe it is. It
has to go in and work with systems
that weren’t designed with these
functions in mind,” he says.
Mr. Ramsey is a writer in The
Wall Street Journal’s Detroit
bureau. He can be reached at
michael.ramsey@wsj.com.
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
R6 | Monday, January 25, 2016
FRANCHISING
Chains Look to Lure New Buyers
As the competition for franchisees heats up, so do incentives
BY ELIZABETH GARONE
THE FRANCHISE market is
getting crowded—and lots of
brands are trying to get the at-
tention of potential franchi-
sees by offering big incentives.
Over the past few years, a
host of franchises have sprung
up in all sorts of niches, from
restaurants to health care. The
result is a buyer’s market, and
chains are piling on incentives
to stand out. Many new or
Wine & Design CEO Harriet Mills (bottom center) with franchisees
small chains are offering such
inducements as discounted
franchise fees and reduced
royalties, to ease the way for
first-time buyers who have
trouble landing financing.
Larger chains with more name
recognition are mostly target-
ing incentive deals at existing
owners with multiple stores.
A growth opportunity
Experts don’t expect the in-
centives to go away anytime
soon. “As franchisers continue
to see more competition going
after a franchise buyer pool,
they’ll have to differentiate
more,” says David Nilssen,
chief executive and co-founder
of small-business financing
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JOURNAL REPORT | SMALL BUSINESS
company Guidant Financial.
Among the incentives he
has seen are franchisers not
charging royalties on the first
six months of revenue and
chains contributing $10,000 to
the grand-opening marketing
package if a buyer opens a sec-
ond store in under a year.
At small franchises, incen-
tives can make a huge differ-
ence in spurring growth. In
2013, Buffalo Wings & Rings
awarded one location. In 2014,
after slashing the franchise fee
to $5,000 from $35,000, the
Cincinnati-based sports-res-
taurant chain awarded 17.
Franchisees can pay up to
$2 million to buy and set up an
outlet, says Director of Fran-
chise Development Dan Dou-
len, “and in the grand scheme
of things, $30,000 doesn’t
seem like a huge amount—but
it is to those investors. They
think about every penny they
spend.”
Incentives are also a way
for small chains to get buyers
to try out secondary markets,
says Nick Powills, chief brand
strategist for No Limit Agency,
a Chicago marketing firm that
has worked with Buffalo Wings
& Rings and other franchises.
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The best returns aren’t just measured in dollars.
If the Chicago market is sold
out, for instance, a small chain
might offer buyers better deals
to target smaller Peoria, Ill.
At Wine & Design, of Ra-
leigh, N.C., founder and CEO
Harriet Mills offers franchisees
an interest-free loan of up to
one year to cover their initial
payment of $25,000. That al-
lows buyers who don’t have a
big lump sum on hand to defer
the payment until the business
gets up and running, she says.
“It has allowed a lot of our
WINE & DESIGN
franchisees to put the money
into building their companies,”
she says. “They no longer have
to eat cheese and crackers to
survive.”
For successful franchisees,
Ms. Mills offers second loca-
tions at half off the initial
franchise fee. “We know them,
and we want to give them the
opportunity to grow,” she says.
“They have shown their loyalty
to us. So, this is how we show
our loyalty to them.”
The company, which hosts
parties where guests create
paintings while sipping wine,
currently has 62 locations.
The incentive system takes
on a different shading at big
chains. “The big franchisers
IN ORDER.
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tend to grow with existing
franchisees, and by virtue of
their popularity and success,
are less likely to need to offer
incentives to new franchisees,”
says Burton Cohen, who
teaches strategic franchising
at the Kellogg School of Man-
agement at Northwestern Uni-
versity and is managing part-
ner of a franchise-consulting
firm. “That said, large fran-
chisers are offering incentives
to existing franchisees to up-
grade their facilities and un-
dertake other programs to
help competitiveness.”
The big get bigger
Big chains, he says, are also
seeking out well-financed mul-
tiunit operators—whether they
own stores in the same chain
or in others—to either buy out
existing franchisees, buy com-
pany-owned operations or ac-
quire rights to expand in un-
derdeveloped markets.
Denny’s, for one, gives new
franchisees a break of up to $1
million on initial fees and
other costs if they develop six
new restaurants “within a rea-
sonable time frame” in new
and emerging markets. “The
opportunity to grow market
share through more new devel-
opment in low-penetrated geo-
graphic areas is very attrac-
tive,” says Steve Dunn, senior
vice president and chief global
development officer. “Our cur-
rent incentive program is of-
fered to attract new growth
capital and experienced opera-
tors primarily in regions east
of the Mississippi River.”
Do these incentives make a
difference even for well-heeled
multiunit franchisees? “The
wealthiest people in the world
still want the best deal,” says
Mr. Powills.
Ms. Garone is a writer in
Alameda, Calif. She can
be reached at
reports@wsj.com.
THE WALL STREET JOURNAL.
HOW I THOUGHT OF IT
ADOREME
It All Began With Impressing a Girl
Like so many grad students, Morgan Hermand-Waiche
had champagne taste and a beer budget. Or rather, La Perla
taste and a Fruit of the Loom budget.
In 2009, Mr. Hermand-Waiche was attending Harvard
Business School and dating a fellow student. For their anni-
versary, he wanted to impress her with a gift of fine lingerie.
“I found there weren’t many brands that were as nice as
what I wanted for her but in the price range of my broke stu-
dent budget,” Mr. Hermand-Waiche says. “And then I
thought, God, if I see that problem and I don’t buy lingerie
every day, what must it be like for women who need to pur-
chase these things more often but can’t find anything that
looks nice, fits well and is a reasonable price?”
He knew it wouldn’t be an easy field to break into—a les-
son he had learned from his experience at his family’s fashion
business in France, and his own research into the industry.
“There is no one garment more complex to manufacture:
A bra is made of 60 different components, while a traditional
garment is usually made of five or up to 10 components,
max,” Mr. Hermand-Waiche says. “So then you have to order
way in advance and you have to order in large volumes be-
cause otherwise your manufacturer will say, sorry, that’s too
complex for me to just make a thousand.”
That means, he says, to start a new lingerie company, you
need to design at least 100 different bras in order to offer
enough options, and you have to order about 10,000 of each,
a year in advance. “So you’re buying a million bras, a year
before you can sell one,” he says.
Managing those logistics would take a lot of capital, so
Mr. Hermand-Waiche spent his first two years in business
raising $11.5 million. The effort paid off. Since he officially
opened shop in 2012, AdoreMe has sold over a million prod-
ucts, and will open branded stores in the U.S. in 2016.
The girlfriend who inspired the business, though, is no
longer part of the picture. “We’re not together anymore,” Mr.
Hermand-Waiche says. “I guess it’s just life.”
Amy Westervelt