For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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DJIA 21892.43 À 0.12%
What’s
News
Business & Finance
U ber’s new CEO said he
would aim for an IPO
as soon as 2019, setting the
stage for what would be one
of the most highly anticipated
debuts in recent memory. A1
 The U.S. economy ex-
panded at its most robust
pace in more than two years
in the spring and appears to
have momentum going into
the second half. A7
 The FDA approved No-
vartis’s first-of-its kind
cancer therapy aimed at
bolstering a patient’s own
immune cells, while the
drugmaker attempted to al-
lay worry over the cost. B1
 Amazon introduced this
week hundreds of Whole
Foods products to its web-
site, a new impetus for on-
line grocery shopping. B1
 GOP plans to scale back tax
deductions on firms’ interest
payments risk pushing more
borrowing outside the U.S. B1
 One of the U.S.’s largest
securities clearinghouses
said it would no longer settle
Venezuela bond trades. B1
 Hyundai was forced into
a weeklong production halt
in China amid a dispute be-
tween Beijing and Seoul. B3
 Toyota plans to dive
deeper into the ride-hailing
business by teaming up with
Singapore startup Grab. B3
 1MDB said it paid the
second part of a missed in-
stallment to an Abu Dhabi
state investment fund. B7
 Apple is allowing Chinese
customers to use local mobile-
payment system WeChat Pay
for App Store purchases. B4
World-Wide
 The U.S. carried out two
airstrikes aimed at stopping
Islamic State militants evac-
uated from the Lebanese-
Syrian border from going to
a stronghold in Syria. A1
 Harvey came ashore
again, bringing heavy rains
and whipping winds—but
far less destruction—to
southwestern Louisiana. A1
 The storm is upending
petroleum flows world-
wide, a consequence of the
U.S.’s growing influence in
the global energy sector. A6
 The U.N. Security Council
condemned North Korea in
the aftermath of its mis-
sile launch over Japan. A3
 Trump and his national se-
curity team gave mixed mes-
sages about the U.S. approach
to North Korea, with the
president suggesting the win-
dow for talks has closed. A3
 NATO said it would send
three observers to Russia’s
Zapad military exercise but
said Moscow’s invitation
fell short of obligations. A5
 Trump called on Congress
to approve a steep cut in
corporate tax rates and sim-
plify the U.S. tax system. A7
 U.S. officials are worried
that politics could threaten
funding for a children’s
health-insurance program. A7
 American and Iraqi of-
ficials are concerned next
month’s referendum on Kurd-
istan’s independence will lead
to the breakup of Iraq. A4
 At least 18,000 Rohingya
Muslims have fled violence in
Myanmar and crossed into
Bangladesh in recent days. A5
CONTENTS
Business News...... B3
Crossword.............. A12
Heard on Street.... B8
Life & Arts......... A9,12
Markets...................... B8
Markets Digest..... B6
€3.20; CHF5.50; £2.00;
U.S. Military (Eur.) $2.20
s Copyright 2017 Dow Jones &
Company. All Rights Reserved
THURSDAY, AUGUST 31, 2017 ~ VOL. XXXV NO. 149
NASDAQ 6368.31 À 1.05% NIKKEI 19506.54 À 0.74%
DAVID J. PHILLIP/ASSOCIATED PRESS
Household items damaged by Houston’s flooding sit outside a home, above. Below, a volunteer sorts donated clothing.
Harvey Douses Louisiana
Storm comes ashore
again as Texas officials
scramble to deal with
the extensive flooding
HOUSTON—Tropical storm
Harvey came ashore again
early Wednesday, bringing
heavy rains and whipping
winds to southwestern Louisi-
By Cameron
McWhirter,
Jon Kamp
and Russell Gold
ana, but far less destruction
than it brought to Texas.
Harvey, which weakened as
it turned inland, has been
linked to 22 deaths, though
an accurate death toll is un-
certain because Texas offi-
cials aren’t releasing state-
wide figures.
There were 230 shelters
taking care of 30,000 people,
Federal Emergency Manage-
INSIDE
KICKING THE
TIRES ON A
NEW PLANE
THE MIDDLE SEAT, A9
How Big
Mergers
Can Have
Downsides
BY GREG IP
Corporate America is get-
ting more concentrated. The
country’s largest internet re-
tailer just acquired its largest
standalone or-
ANALYSIS ganic grocer,
and two of its
largest aviation-
Middle Seat............ A9 parts makers plan to
Opinion.............. A10-11
merge. From health insurance
Review........................ A8
to internet search, fewer com-
Technology............... B4
U.S. News............. A6-7 panies control more of their
Weather................... A12 markets.
World News........ A2-5
That can be good: size and
scale can enable companies to
reduce costs, invest in bet-
ter products and compete
globally. But a provocative
new study concludes the op-
posite. It found that in recent
decades a lack of competi-
tion has driven up prices,
hurting U.S. growth, wages
and labor-force participation.
Please see IP page A2
WSJ.com EUROPE EDITION
STOXX 600 371.01 À 0.70% BRENT 50.86 g 2.19% GOLD 1308.10 g 0.38% EURO 1.1922 g 0.43%
U.S. Hits
Escape
Route for
ISIS in
Lebanon
The U.S. military on
Wednesday carried out two air-
strikes aimed at stopping hun-
dreds of Islamic State militants
evacuated from the Lebanese-
Syrian border from relocating
to an extremist stronghold in
Syria near the border with Iraq.
By Nancy A. Youssef in
Washington and
Margherita Stancati in
Beirut
The first of the strikes came
shortly after the U.S. criticized
a deal brokered by the Lebanese
militia Hezbollah that allowed
hundreds of Islamic State mili-
tants and their families free
passage out of an area strad-
dling Syria’s southwestern bor-
der with Lebanon. Their convoy
left Monday and was headed to
a part of eastern Syria’s Deir
Ezzour province very close to
While waiting in the rain to the border with U.S. ally Iraq.
get into the George R. Brown “We created a crater. It was
Convention Center downtown, to block them so they could not
Ms. Brown burst into tears, continue on the road,” a U.S. de-
realizing she had likely lost fense official said on Wednes-
her home in Dickinson, a day, adding the coalition didn’t
badly flooded area southeast strike the buses because family
of the city. members were present.
Mr. Long said the best indi- That airstrike, which also
cator of the number of people destroyed a bridge, took place
who have been affected by after the convoy entered Deir
Harvey is that nearly 200,000 Ezzour province, one of Islamic
individuals have asked FEMA State’s last strongholds in
MICHAEL CIAGLO/ASSOCIATED PRESS
for financial assistance. Syria, from territory controlled
“That number is going to by the government of Syrian
climb,” he said. President Bashar al-Assad.
For five days the storm The U.S. Central Command
moved along the coast, dump- said that within two hours of
ing more than 50 inches of rain the first strike, it conducted a
on parts of the state—a record strike west of Deir Ezzour on a
for the contiguous U.S.—and handful of logistical vehicles
leaving damage and death in that were known to be affiliated
its wake. with Islamic State. That strike
ment Agency Administrator this the end of the world?’” Police in Beaumont, near may have killed Islamic State
Brock Long said Wednesday. said 74-year-old Norma Please see HARVEY page A6 fighters, the U.S. military said.
Texas officials have said Brown, cradling two of her “Irreconcilable #ISIS terror-
more than 725,000 people dogs in a Houston evacua-  Economic heft gives Houston ists should be killed on the bat-
were under a mandatory tion center on Tuesday after an edge in recovery............... A6 tlefield, not bused across
evacuation order. fleeing the flood on a neigh-  Insurers’ drones win after- #Syria to the Iraqi border with-
“I asked my daughter: ‘Is bor’s boat. storm role.................................... B5 Please see ISIS page A4
Uber’s New CEO Is Aiming
For IPO as Early as 2019
BY GREG BENSINGER and 36 months, though he in- resigned in late June under in-
dicated that wasn’t a firm vestor pressure. Mr. Kalanick
MIKE BLAKE/REUTERS
Uber Technologies Inc.’s deadline, according to a per- appeared emotional as he
new chief executive, Dara son who attended the meeting. praised Mr. Khosrowshahi and
Khosrowshahi, said he would The wide range gives Mr. said he would support the new
start on Tuesday and aim for Khosrowshahi some leeway to CEO however he could, accord-
an initial public offering as restore order to a company ing to the person who at-
soon as 2019, setting the stage beset by months of scandals tended the meeting.
for what would be one of the and legal issues, as well as to “This company has to
AMAZON’S most highly anticipated mar-
ket debuts in memory.
shore up losses that totaled
more than $3 billion last year.
change,” said Mr. Khosrow-
shahi, according to Uber. “What
GROCERY At his first appearance in Mr. Khosrowshahi was in- got us here is not what’s going
GAMBIT front of employees for the
ride-hailing firm Wednesday,
troduced to employees at the
San Francisco headquarters by
to get us to the next level.”
The 48-year-old CEO told
Mr. Khosrowshahi set a time- the man he is succeeding, Tra- employees he wants to bring in
BUSINESS & FINANCE, B1 line for an IPO of between 18 vis Kalanick, who reluctantly Please see UBER page A2
Tiger, an Orange Tabby, Is One
Of the Last Cats at Sing Sing
Oracle #1
i i i
New York prison once had hundreds of
resident felines; fewer than a dozen remain SaaS Enterprise
BY CORINNE RAMEY cell block at Sing Sing Correc- Applications Revenue
tional Facility. The tabby is
OSSINING, N.Y.—Tiger, a among the last cats of Sing
pudgy orange tabby, broke Sing, which once had hundreds
into a maximum-security of resident felines freely roam-
#1
prison in ing its buildings and
Westchester County grounds. While other
about a decade ago. prisons have strug-
Now, he turns his
nose up at tuna from
gled with feline in-
vaders, the position
#2
the mess hall, but of cats at Sing Sing,
will gladly chow where the creatures
down on tinned tuna once had remarkable
Oracle Salesforce
inmates buy for him privileges, was un- Cloud Cloud
at the commissary. usual. 14.5% 12.4%
While men lift Today, fewer than
weights outside, he a dozen remain.
meanders through This is a tale of 1,000+ Employees Segment, 2015
the yard, supervising men and cats. A tale
from the picnic table or rub- of how hardened convicts can
bing up against their legs. be softened by furry tails
“I think this is the best among them. And of how, in a
thing that ever happened to suburb 30 miles north of New oracle.com/applications
him,” said one inmate, of the York City, unsanctioned felines Source: IDC “Worldwide SaaS Enterprise Applications Market Shares, 2015: The Top 15 by Buyer Size,”
cat’s living situation. “He has a once thrived behind the aging doc #US41913816, Dec. 2016; Table 4. For the purposes of this report, SaaS enterprise applications include
the following application markets: CRM, engineering, ERP, operations and manufacturing, and SCM.
family.” walls of a formerly notorious Copyright © 2017, Oracle and/or its affiliates. All rights reserved.
Tiger’s family is an 80-man Please see CAT page A2
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Thursday, August 31, 2017
Uber Faces Probe Under Bribery Law
Justice looks at
whether managers
breached Foreign
Corrupt Practices Act
BY DOUGLAS MACMILLAN
AND ARUNA VISWANATHA
The Justice Department has
taken preliminary steps to in-
vestigate whether managers at
Uber Technologies Inc. vio-
lated a U.S. law against foreign
bribery, according to people
familiar with the matter.
The agency has begun to re-
view allegations that Uber
may have violated the Foreign
Corrupt Practices Act, which
bans the use of bribes to for-
eign officials to get or keep
business, these people said.
Based on what it finds, the
Justice Department may or
may not decide to open a full-
fledged FCPA investigation
into Uber.
It is unclear whether U.S.
authorities are focused on one
country or examining activi-
ties in multiple countries
where the company operates.
An Uber spokesman con-
firmed the company is cooper-
ating with the Justice Depart-
IP
Continued from Page One
The study is causing a stir
among economists, some of
whom are skeptical of its con-
clusions. Yet its basic finding
is eye-opening.
In the study, Jan
De Loecker of Belgium’s Uni-
versity of Leuven and
Jan Eeckhout of University
College London
CAPITAL start from the
ACCOUNT economic as-
sumption that in
a competitive
market, a company can’t
charge much more for a prod-
uct than the cost of making
one more (what economists
call the “marginal cost”). If it
did, another company would
swoop in and undercut it.
The authors analyze data
on every publicly traded com-
pany in the U.S. back to 1950
to determine how much its
revenue exceeded its variable
costs, such as labor and com-
modities. That excess, what
they call the markup of price
over marginal cost, fluctuated
between 16 % and 32% until
1982 and has since climbed
steadily, to 67%.The trend
holds across industries, and is
more pronounced in smaller
rather than the biggest com-
panies.
CAT
Continued from Page One
prison.
“You’re in a place where ev-
erything is stripped from you,
and you can’t go to the bath-
room without permission,”
said former inmate Sean Pica,
who left Sing Sing in 2002,
“and you find this animal who
doesn’t look at you differently.”
Rikers Island, which holds
New York City’s jail complex,
once had about 1,000 outdoor
cats, said retired Capt. Gloria
Murli.
In the early 2000s, volun-
teers neutered about 400,
neatly clipping the tips of one
ear to keep track. Once a jail
kitty, always a jail kitty, Capt.
Murli said. “You can’t just take
the cat and throw it into some
other neighborhood.”
She hopes to neuter at least
100 more.
At New Jersey’s Bayside
State Prison, inmates used to
catch and raise cats, stashing
them in lockers during counts
and inspections. In 2014, after
prison officials and the non-
profit Alley Cat Allies clashed
over a cat-feeding ban, the
nonprofit helped neuter and
return nearly 150 cats to the
grounds the next year, said
Becky Robinson, its president.
As for Sing Sing, no one
knows how the cats got there.
Rumor has it tomcats were
brought in to control ubiqui-
tous rats at the aging prison,
said Mr. Pica. The problem
was they weren’t all toms.
Others say feral cats, lured
by mess hall scraps, simply
showed up. In the 1970s, cats
lived out in the open among
officers and “really rough
guys,” said filmmaker David
Hoffman, who taught a drama
class at the prison. “The
ment on the preliminary
investigation.
“As a matter of policy, the
department generally neither
confirms nor denies the exis-
tence of an investigation,” a
Justice Department spokes-
woman said.
Under former Chief Execu-
tive Travis Kalanick, the eight-
year-old company spread rap-
idly to more than 70 countries
in part by giving regional
teams authority to adapt to lo-
cal markets and expand as
quickly as possible, sometimes
flouting local laws.
In South Korea and France,
for example, it was found to
violate transportation laws. In
Singapore, local managers
bought more than 1,000 defec-
tive cars last year and rented
them out to drivers, fixing the
safety defect only after one of
the cars caught on fire, a
probe by The Wall Street Jour-
nal found this month. Uber
said it has since added safety
measures and fixed all of the
defective cars in Singapore.
News of the preliminary
bribery investigation comes as
Uber plans to usher in a new
chief executive, Expedia Inc.
CEO Dara Khosrowshahi, to
succeed Mr. Kalanick, who re-
This, they say, is proof that
companies are increasingly
able to exert “market power,”
that is, charge higher prices
so as to boost profits at the
expense of consumers.
Other studies have come to
similar conclusions. One by
former President Barack
Obama’s Council of Economic
Advisers found return on cap-
ital had become astronomical
for the most profitable pub-
licly traded companies, which
shouldn’t be possible if com-
petitors could freely enter
their market.
The latest study goes even
further, arguing the preva-
lence of market power helps
explain deeper economic mal-
adies. A company with such
power often restricts produc-
tion to prop up prices
and profits. Messrs.
De Loecker and Eeckhout ar-
gue this reduces demand for
labor and thus explains why
wages for low-skilled workers
have stagnated in recent de-
cades. Lower wages also dis-
courage people from working,
which depresses labor-force
participation.
They add that markups
may be evidence of barriers
to entry by new competitors,
which is corroborated by
slumping business startup
rates. The especially sharp
rise in markups since 2009,
they say, may explain why
An inmate tries to coax Tiger outside at Sing Sing Correctional Facility in Ossining, N.Y.
sweetness of the way inmates
treated the animals was beau-
tiful to me.”
When inmate Todd Young,
who was at Sing Sing from
1996 to 2011, talked on the
phone in the yard, a black cat
named Stinky and a gray one,
Mita, would climb all over him.
“Stinky would be on my left
and Mita on my right,” said
Mr. Young, adding he’s “like
Dr. Dolittle with animals.”
Kitty-human relations
purred along peacefully until
one fateful day. On March 11,
2001, correction officer Ronald
Hunlock searched under an in-
mate’s bunk, where he discov-
ered a box with five kittens,
court documents say. Mr. Hun-
lock ordered the inmate, John
Williams, to crush the kittens
and their mother in a trash
compactor, and when he re-
WORLD NEWS
signed in June after months of
scandals, legal issues and an
internal investigation into al-
legations of sexism.
Mr. Khosrowshahi said
Tuesday he plans to accept the
job once his employment con-
tract is ironed out.
As Mr. Khosrowshahi steps
in, Uber faces growing pres-
sure from U.S. authorities. The
Justice Department is sepa-
UBER
Continued from Page One
a chairman “to be my partner
at the board level.”
Uber’s current chairman is
co-founder Garrett Camp, who
is expected to be replaced in
that role but remain a director
after the board mandated it
hire an independent chairman.
One of Mr. Khosrowshahi’s
first duties is to fix the com-
pany’s employee culture, which
under Mr. Kalanick was guided
by a list of 14 corporate values
including “toe-stepping” and
“principled confrontation.” An
internal investigation earlier
this year into allegations the
company ignored complaints of
economic growth has been so
tepid since.
The paper’s novel approach
and audacious claims have at-
tracted widespread atten-
tion in the blogosphere.
Dietrich Vollrath, an econo-
mist at the University of
Houston, calls it “an intrigu-
ing (and very large) step for-
wards.”
But some of its claims in-
vite skepticism. Ample evi-
dence already links depressed
wages to globalization,
weaker unions and the de-
mand for skills. Growth has
been weak globally since
2009 and seems due mostly
to aging and repairing the
damage of the financial cri-
sis. The link to market power
thus far appears mostly cir-
cumstantial.
By focusing on variable
costs the authors may under-
state how companies’ fixed
costs have risen, to pay for
things such as software, com-
puters, research and develop-
ment and marketing. One ma-
jor fixed cost, depreciation,
has risen from 12% of GDP in
the 1960s to around 16% as
companies spend more on
tech equipment that quickly
becomes obsolete.
Tyler Cowen, a blogger and
economist at George Mason
University, writes
that this might lead to more
“monopolistic competition,”
fused, the guard did it himself.
Midnight, the mother cat,
jumped out of the compactor
and came back to Mr. Wil-
liams’s cell, meowing, pacing
and looking for her kittens,
“black furry little things and
very cute,” he wrote in a letter
this month.
That “horrific” day remains
fresh in his memory, he added.
“I’m a 3x offender for armed
robbery’s [sic], but God is my
witness; I’ve never physically
hurt anyone, nor have I ever
harmed any animals!” wrote
Mr. Williams, who is now incar-
cerated at Attica Correctional
Facility in upstate New York.
Mr. Hunlock was convicted
of one felony per kitten and
sentenced to a year in the
slammer—as an inmate. The
former guard and his lawyer
didn’t respond to requests to
THE WALL STREET JOURNAL.
rately pursuing a criminal in- protections for its users. The
vestigation into “Greyball,” a company didn’t admit nor
software tool employees used deny the allegations as part of
to evade law-enforcement offi- the settlement.
cials, people familiar with the The FCPA, a 1977 law, has
matter said in May. seen an increase in enforce-
Uber hasn’t commented on ment over the past decade. It
the probe. bars companies from paying
And this month, Uber set- bribes to officials of foreign
tled Federal Trade Commis- governments and requires
sion charges that it didn’t of- firms to keep accurate books
fer sufficient privacy and records, including on for-
sexism and sexual harassment
led to the dismantling of those
corporate values.
“If culture is pushed top
the work and character,” of Mr.
Khosrowshahi, “and are thrilled
to have him leading @Uber
2.0.” Media magnate and Uber
down, then people don’t believe director Arianna Huffington
in it,” Mr. Khosrowshahi said, tweeted a “special selfie” photo
according to Uber. “Culture is of her, Mr. Kalanick and Mr.
written bottoms up.” Khosrowshahi beaming arm-in-
Uber directors who have arm in front of employees.
been battling for months over And yet behind the scenes,
the future of the $68 billion the legal battle dividing the
company took pains to demon- board and shareholders contin-
strate broad support for Mr. ued. A Delaware Chancery
Khosrowshahi. Court judge sent to arbitration
In an email to employees on a suit from Benchmark against
Tuesday announcing his hire, Mr. Kalanick seeking the return
the board emphasized the vote to board control of three board
was unanimous. Benchmark seats he oversees, which would
Capital, which sued Mr. Kalan- effectively push him out as a di-
ick to try to oust him from the rector. That marks a victory for
board, said in a message on its Mr. Kalanick who had contested
Twitter account late Tuesday a public trial.
that “We’ve been admirers of Benchmark, which owns
i.e., a handful of companies, time, increasingly contain
each of which exercises some software that is costly to de-
market power, without gener- velop but almost costless to
ating excessive profits be- reproduce, such as Tesla Inc.’s
cause these companies have self-driving software, an en-
to invest so much. The study’s hanced version of which the
authors say profits have company sells as a $5,000 op-
risen, but Mr. Cowen disputes tion.
their data. The question for trust
One example of this is busters is whether this move
banks that now spend more toward companies with higher
on information technology to fixed costs and more market
manage risks and to design power is benign or malign.
and market products rather The policy implications are
than on branches. This favors either “‘We’re being too le-
large banks that can spread nient,’ which is what we
those costs over many more heard in the corridors of Eu-
customers. Cars, mean- rope, or it could be, ‘Here’s
ple, but you would see them
caring for these cats, and nur-
turing and protecting them,”
Mr. Jimenez said.
Among inmates’ favorites:
A different Midnight, who took
up residence in the school
building and was later adopted
by the librarian. “She finally
got parole,” the inmates joked
of the cat, who died last year.
Among guards’: Mama, the
tortoiseshell kitty who lives
outside the prison entrance.
“She’s my second officer,” said
one guard, referring to her
MARK KAUZLARICH FOR THE WALL STREET JOURNAL
pawed partner. “From the mo-
ment I come in she’s by my
side.”
As for Tiger, Mr. Jimenez,
47 years old, was among the
early inmates adopted by the
orange tabby. Then, Tiger
would catch mice, proudly sit-
ting by his trophies at the cell
block’s entrance. The cat, trot-
ting with his tail in the air,
pounced on joggers in the yard.
The tabby slept in Mr.
Jimenez’s cell. At 6 a.m., Tiger
would jump on his bed to get
comment. Court papers say he his attention, then leap to the
contended the kittens were window and wait for him to
sick, dangerous and violated get up.
facility rules. Tiger, Mr. Jimenez noted
Outrage generated by his with disapproval, could once
trial led to animal-welfare
groups neutering Sing Sing’s
cats and returning many to
prison. Cat life at Sing Sing CORRECTIONS 
took on a semblance of order,
with inmates building wooden
AMPLIFICATIONS
feline houses outside the
buildings and officials install-
ing outdoor feeding stations. Labor Department data
Joel Jimenez, who spent were the source for a chart
from 2005 to 2011 at Sing showing unadjusted U.S. job-
Sing, said cats were still “ev- less claims that accompanied a
erywhere” when he arrived. Heard on the Street column
Inmates who worked as custo- Wednesday about wage
dians cared for cats around growth. The chart incorrectly
their housing areas. Friendly said that the source was the
ones sat on prisoners’ laps. Bureau for Labor Statistics.
“Some of the most hard-
Readers can alert The Wall Street
ened inmates were totally an- Journal to any errors in news articles
tisocial and hated other peo- by emailing wsjcontact@wsj.com.
eign transactions.
Companies sometimes self-
report infractions of the FCPA
to the Justice Department and
the Securities and Exchange
Commission, which jointly en-
force the law. Other times, the
agencies pursue their own in-
vestigations.
—Newley Purnell
and Greg Bensinger
contributed to this article.
about 13% of Uber, has argued
Mr. Kalanick has reneged on a
contractual agreement to turn
the board seats over and de-
frauded the company by not
disclosing questionable busi-
ness practices, including a pro-
gram to evade authorities
through use of a phony app.
Mr. Kalanick in filings has
called the lawsuit a personal at-
tack and pledged to fight it.
Before the all-hands meeting,
another investor who has
aligned himself with Mr. Kalan-
ick, Shervin Pishevar, released a
letter in his defense that he said
was meant to “defend what is
right and to protect the interest
of not only shareholders but
most importantly the far more
important stakeholders of em-
ployees, drivers and customers.”
the way business models are
evolving,’”
De Loecker.
says
Last week, the Federal
Mr.
Trade Commission
blessed Amazon.com Inc.’s
purchase of Whole Foods
Market Inc., no surprise
since the combined company
would control only a small
slice of the grocery market.
And Amazon, whose profit
margins are infamously thin
anyway, immediately cut
prices on dozens of items—a
move sure to depress rather
than raise markups.
Critics worry that once
Amazon has eliminated its
competitors, it will be free to
jack up prices or squeeze sup-
pliers. Yet the very thing
that in theory makes
that possible, Amazon’s
size, also justifies the invest-
ments in technology and real
estate that make its offerings
so irresistible to custom-
ers and difficult for competi-
tors to match. For instance,
Whole Foods doesn’t just give
Amazon a big footprint in
groceries, but a network of
physical pickup locations
close to its most affluent cus-
tomers.
The latest study doesn’t re-
solve these tensions. But the
questions it raises about how
corporate size is reshaping
the economy beg for further
investigation.
enter the prison through barred
windows but has since gotten
too fat to squeeze through.
Current inmates extolled Ti-
ger’s virtues: He obeys the of-
ficers. He scared off a ground-
hog that menaced lettuce in
the garden. He beat up a pos-
sum. He lets a favorite inmate,
Ace, play with his back paws.
“Only Ace,” an inmate said.
On a recent morning, the
tabby sat on a prison stair-
case, cautiously eyeing a visi-
tor. “Tiger’s scared of women,”
another inmate explained, not-
ing a previous female caller
carted him off to the vet.
“It’s kind of ironic you have
violent criminals ready to de-
fend him,” said inmate Jer-
maine Archer, 44. The cat, Mr.
Archer said, was getting old, fat
and slow. “But we love him.”
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THE WALL STREET JOURNAL. Thursday, August 31, 2017 | A3

WORLD NEWS
South Koreans Feel Sidelined in Crisis
‘Korea passing’ enters
the lexicon to describe
the view that the U.S. is
bypassing Seoul
BY JOHN LYONS

SEOUL—Like many in this

gleaming South Korean capital,
Kim Hyun-soo says he feels like
a helpless bystander in the nu-
clear standoff between the U.S.
and North Korea, even though
his fate hangs in the balance.
South Koreans are watching
from the sidelines as U.S. Presi-
dent Donald Trump threatens
North Korea with “fire and
fury” and North Korea’s leader
Kim Jong Un vows to reduce
the U.S. to “huge heaps of
ashes.” It’s an unnerving posi-
tion, locals say, since this city of
10 million could be leveled in
the first minutes of any conflict.
The South Korean feeling of
being bypassed in a debate af-
fecting their future even has a
name: “Korea passing.” The
phrase, which gets increasing
use these days, is pronounced
in English with a South Korean
inflection—and often with a
healthy mix of frustration, res-
ignation and irony.
“It doesn’t feel good to be

AHN YOUNG-JOON/ASSOCIATED PRESS

excluded. South Korea is the
party with the most at stake,”
says Mr. Kim, a 38-year-old ac-
countant from Seoul.
Many North Korea watchers
in Seoul say the U.S. looks
first to China and even puts
Japan ahead of South Korea
when it comes to dealing with
the North. The Trump admin-
istration has yet to name an People prayed for peace on the Korean Peninsula during a religious service near the U.S. Embassy in Seoul on Tuesday, the day the North fired a missile over Japan.
ambassador to Seoul, for ex-
ample, while it has sent en- tweet, or North Korea’s Mr. Kim North Korea, but he rarely
voys to Beijing and Tokyo. issues a threatening statement. mentions South Korea. On U.S. Missile Defense
Following North Korea’s South Korea’s defense minister, Wednesday, he tweeted that
launch Tuesday of a missile Song Young-moo, met with U.S. talking with North Korea isn’t Gaining Acceptance
over Japan, Mr. Trump spent Defense Secretary Mattis on the solution, taking a different
40 minutes on the phone with Wednesday in Washington. approach from President

STAFF SGT. JENNIFER CHANCE/U.S. FORCES KOREA

Japanese Prime Minister Shinzo Mr. Moon is seeking to as- Moon’s emphasis on dialogue SOSEONG-RI, South Korea—
Abe. No such call happened sert a stronger role for South with Pyongyang. Climbing to a high outcropping in
with South Korean President Korea. In a recent speech, he Meantime, South Korea is this rural corner of South Korea, a
Moon Jae-in, a left-leaning for- said any military strikes against ignored by North Korea, add- hiker can spot a pair of U.S.-made
mer human-rights lawyer. North Korea would require ing to the local perception of antimissile launchers parked on a
Still, U.S. officials have re- South Korea’s approval, even “Korea passing.” After North golf course in a forested valley,
peatedly reiterated the U.S.’s though many analysts say the Korea tested an intercontinen- aimed high over jagged moun-
commitment to protect South U.S. is unlikely to seek permis- tal ballistic missile July 4, tains toward North Korea.
Korea. Mr. Moon met with Mr. sion if its security is threatened. South Korean President Moon The bucolic scene is at odds
Trump in June in Washington, On Monday, Mr. Moon proposed a round of North- with the controversy around the
while U.S. Vice President Mike vowed to upgrade South Ko- South talks at a border village. launchers, part of a Terminal
Pence, Defense Secretary Jim rea’s military capabilities, in- North Korea never responded. High-Altitude Area Defense, or
Mattis and Secretary of State cluding developing greater of- Critics say Mr. Moon’s cam- Thaad, battery installed here in
Rex Tillerson have each made fensive capabilities that would paign-trail opposition to the April amid mass protests and a U.S. military officers visit the Thaad site in South Korea.
visits to Seoul, in part to reas- allow the country to forcefully installation of a U.S.-made an- presidential race in which the
sure South Korea that the respond to attacks from the timissile system risked pushing winning candidate, President go-ahead for the completion of such as the Lotte Group, a con-
Trump administration stands by North. Adding military muscle the U.S. away. The system, Moon Jae-in, questioned the de- the Thaad battery after the glomerate that provided the golf
its security alliance. The U.S. could give South Korean diplo- known as Terminal High-Alti- ployment. launch on July 28 of a second course for the Thaad battery.
State Department didn’t re- macy more weight. tude Area Defense, or Thaad, For months, a mix of antiwar North Korean ICBM. Anti-Thaad activists question
spond to a request to comment. South Koreans’ sense of be- was partly installed before Mr. Buddhists, university activists These days, only a handful of whether Thaad, which doesn’t
The administration of South ing left out grew in April, Moon took office in May. and local villagers protesting the protesters remain camped in even cover Seoul, is meant to
Korea’s Mr. Moon says it when Mr. Trump met with Mr. Moon has warmed to Thaad system from a roadside blue tents draped with “No protect South Korea. They sus-
doesn’t recognize the term Chinese President Xi Jinping the missile-defense system encampment seemed to be gain- Thaad, No War” along the coun- pect the system’s true purpose is
“Korea passing.” The phrase, as part of an effort to enlist since taking office. But now ing the upper hand. After taking try road leading to the now- to pick off missiles aimed at U.S.
initially used by experts in China to pressure North Korea members of his more-progres- office in May, Mr. Moon halted closed golf course where the bases in Korea, Japan and Guam,
Asian policy-making circles to economically. sive voter base, including Bud- the deployment of four addi- Thaad battery sits. They have or even the U.S. mainland.
describe the state of U.S.- After the summit, Mr. Trump dhist monks, attack him for tional launchers needed to com- vowed to block delivery of the Protesters from the village of
South Korean relations, has said Mr. Xi had explained to being a lackey of Washington. plete the battery, pending envi- remaining launchers. Soseong-ri, close by the Thaad
become more commonplace in him that Korea was part of “Thaad is now one of the ronmental review. South Korea is paying a price site, complain about the installa-
recent months to describe how China dating back to antiquity. main examples of ‘Korea pass- Then, North Korea tested an for Thaad, however. Rankled by tion. “Thaad means everyone in
Seoul is seemingly ignored by Mr. Trump’s statement—dis- ing,’ where the U.S. gets what it intercontinental ballistic missile Thaad’s ability to peer into Chi- this valley will die in a war,” said
other regional players as well, puted by many historians—was wants,” said Kang Hyun-wook, a July 4. Public approval for deploy- nese airspace with powerful X- Do Geum-nyeon, an 81-year-old
including North Korea. interpreted in Seoul as another Moon supporter and Buddhist ing the system has surged to band radar, the Chinese are mak- resident. “If President Moon likes
South Korean officials say sign of dwindling relevance. monk who is helping to orga- 72% from around 50% earlier in ing fewer tourist trips to South Thaad so much, he should bring
their government is being heard Since then, Mr. Trump has nize protests against Thaad. the year, a recent Gallup Korea Korea and boycotting its car it to his house.”
and they don’t need to respond issued Twitter messages call- —Min Sun Lee poll showed. Mr. Moon gave the makers and other businesses, —John Lyons
every time Mr. Trump fires off a ing on China to do more about contributed to this article.

U.S. Signals Mixed on Pyongyang U.N. Condemns

BY FELICIA SCHWARTZ

WASHINGTON—President
Missile Launch
Donald Trump and his na-
tional security team issued BY FARNAZ FASSIHI fusal to comply and didn’t
mixed messages about the U.S. specify whether the council
approach to North Korea on UNITED NATIONS—The was considering further ac-
Wednesday, with Mr. Trump United Nations Security Coun- tion, such as tightening eco-
suggesting that the window cil adopted a statement con- nomic sanctions.
for talks has closed. demning North Korea “for its The U.S. has maintained
“The U.S. has been talking to outrageous actions and threats that all options, including a
North Korea, and paying them against another U.N. member military one, are on the table.
extortion money, for 25 years. state” in the aftermath of its But Russia and China, two
HONG GI-WON/YONHAP/ASSOCIATED PRESS

Talking is not the answer!” Mr. latest launch of a missile that countries that hold veto power
Trump said in an early morn- flew over Japan. on the Security Council, have
ing Twitter message. The “presidential state- made it clear that they would
Defense Secretary Jim Mat- ment,” which counts as the block the council from handing
tis, appearing later at the Pen- council’s fastest form of reac- the U.S. endorsement or per-
tagon with his South Korean tion to events, reiterated that mission for military escalation.
counterpart, said the U.S. is North Korea is in violation of Earlier Tuesday, U.S. Am-
“never out of diplomatic op- multiple Security Council res- bassador Nikki Haley said the
tions.” olutions banning ballistic-mis- council must get serious in re-
Last week, Secretary of sile and nuclear tests. acting to North Korea’s re-
State Rex Tillerson praised “The Security Council ex- peated provocations. In a
Pyongyang for exercising “re- South Korean soldiers took part in annual joint military exercises in Yongin Tuesday. presses its grave concern that statement after the Security
straint” by not conducting the DPRK is, by conducting Council meeting, she said:
missile tests during joint an- Moon Jae-in, also has said it The Trump administration coast of Hawaii, the Missile De- such a launch over Japan as “The world is united against
nual exercises between the wants to pursue a peaceful has been ratcheting up sanc- fense Agency said Wednesday. well as its recent actions and North Korea. The United
U.S. and South Korean militar- resolution to expanding hostil- tions and has sought the help In the test, the U.S. guided- public statements, deliberately States will not allow their law-
ies, which began on Aug. 21. ities. of China and other countries missile destroyer John Paul undermining regional peace lessness to continue. And the
However, Pyongyang then It wasn’t clear what Mr. to pressure Pyongyang, which Jones successfully intercepted and stability and has caused rest of the world is with us.”
launched a battery of missiles Trump meant by “extortion has continued missile tests a medium-range missile target grave security concerns U.K. and French ambassa-
last Friday, following them money.” Previous U.S. adminis- and other provocative ac- off the coast of Hawaii using around the world,” the state- dors, close allies of the U.S. on
with an intermediate-range trations have employed both tions. Standard missile-6 guided mis- ment said, referring to North North Korea policy, told re-
ballistic missile launch on carrots, such as humanitarian The U.S. Navy and the Mis- siles, the Missile Defense Korea by its acronym. porters that the international
Tuesday. aid, and sticks, including sanc- sile Defense Agency also con- Agency said. The statement stopped community must stand united
The government of South tions, to try to confront North ducted a previously scheduled —Nancy A. Youssef short of spelling out conse- in sending a strong message of
Korea, led by new President Korea’s nuclear program. missile defense test off the contributed to this article. quences for North Korea’s re- condemnation to North Korea.
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 | Thursday, August 31, 2017
Kurdish people gathering this month in northern Iraqi city of Kirkuk in support of a controversial plan to hold a referendum on Iraqi Kurdistan’s independence, to be held on Sept. 25.
Kurdish Statehood Plan Alarms Iraq, U.S.
Independence vote is
to be held in an
ethnically mixed
region in September
Ibrahim Mahmood has been
waiting to return to his home-
town of Zummar in Iraq’s
Kurdistan region since Kurdish
militias kicked him out three
years ago, early in the battle
against Islamic State.
By Maria Abi-Habib
in Beirut and Ghassan
Adnan in Baghdad
But a referendum on Kurd-
istan’s independence—planned
for next month and certain to
pass—will likely dash the
hopes for return Mr. Mahmood
shares with thousands of
other Arabs displaced from
the semiautonomous northern
region during the latest war.
American and Iraqi officials
say they are worried the vote,
hailed by Kurds as an exercise
in democracy, will lead to the
violent breakup of Iraq just as
it is on the verge of expelling
Islamic State.
“We will lose everything in
this referendum,” said Mr.
Mahmood from a refugee
camp in Baghdad, where he
lives in a cramped tent with
his wife, three children and his
brother’s family.
“We thought the end of Is-
lamic State in Mosul would be
an end to this violence,” the 32-
year-old said. “But the Kurds
are now making their demands.
We need to take the defense of
our people into our hands.”
The referendum, set for
Sept. 25, is an initiative of the
Kurdistan Regional Govern-
ment, which administers a
ISIS
Continued from Page One
out #Iraq’s consent,” Brett
McGurk, U.S. President Donald
Trump’s special envoy for com-
bating Islamic State, tweeted
ahead of the airstrike. “Our
@coalition will help ensure
that these terrorists can never
enter #Iraq or escape from
what remains of their dwin-
dling ‘caliphate.’”
Iraqi Prime Minister Haider
al-Abadi criticized the deal.
“We consider it an insult to
the Iraqi people. Moving this
number of terrorists for such a
long distance through Syria is
unacceptable,” Mr. Abadi told
reporters on Tuesday night. “We
are fighting terrorism in Iraq
and we are killing them in Iraq.
We don’t send them to Syria.”
U.S.-backed Iraqi forces are
battling Islamic State, recently
ousting the group from Mosul,
Iraq’s second-largest city, and
the strategic town of Tal Afar
Peshmerga forces clashing with Islamic State militants in November 2016 in Bashiqa, east of Mosul.
semiautomous region roughly
the size of Ireland and home
to some 5.2 million people.
Since 1991 Kurdistan has en-
joyed broad self-rule under the
Iraqi constitution, with its
own security forces and immi-
gration controls.
While Washington and Bagh-
dad oppose the independence
vote even within that region,
they have expressed particular
alarm that it is to be held
across the far broader, ethni-
cally mixed swath of northern
Iraq where Kurdish Peshmerga
fighters played a key role in ex-
pelling the Sunni Arab extrem-
ists of Islamic State.
In three years of chaotic
fighting, Peshmerga fighters
have grabbed disputed terri-
tory from their Arab neigh-
bors, human-rights groups and
Iraqi officials say. The referen-
near the Syrian border. Syrian
government officials in the past
have accused the U.S.-led coali-
tion battling Islamic State of al-
lowing some of the group’s
fighters to flee Mosul into Syria.
The Lebanese army earlier
this month launched a ground
operation in the country’s
mountainous northeast to clear
it of Islamic State militants who
controlled the territory for
about three years. Syrian gov-
ernment forces and Hezbollah
pressed a simultaneous but
separate offensive from the
Syrian side of the border.
The fighting stopped on Sun-
day after Hezbollah negotiated
the cease-fire and evacuation
agreement with Islamic State in
return for information on the
fate of nine Lebanese soldiers
who were kidnapped by the
group in 2014. Eight bodies be-
lieved to belong to the soldiers
have since been retrieved by
Lebanese authorities.
Hezbollah leader Hassan
Nasrallah on Wednesday de-
fended the agreement, saying
HK JP KO ML SI
WORLD NEWS
dum, they say, would solidify
demographic changes wrought
by the conflict, feed long-
standing grievances of the
Sunni Arab community, and
possibly set off clashes be-
tween Kurds and Arabs over
contested areas across four
provinces.
Mr. Mahmood’s hometown
of Zummar has a recent history
typical of many such disputed
territories. Islamic State briefly
controlled the town until U.S.-
backed Peshmerga fighters ex-
pelled the group in August
2014. But then the Kurdish mi-
litia kicked out the town’s Arab
residents and laid claim to their
homes, according to residents
and human-rights groups.
“The Peshmerga treated us
like Islamic State did,” Mr.
Mahmood said.
The Kurdistan Regional Gov-
it was necessary to establish
what had happened to the
missing soldiers.
The Lebanese military says
it doesn’t cooperate with Hez-
bollah, Lebanon’s most power-
ful group and a close ally of Mr.
Assad’s government. Many in
Lebanon, including people close
to the military, criticized the
deal, saying it undermined the
regular armed forces and gave
militants a free pass.
But many others said they
were relieved that Islamic State
no longer had a foothold in
Lebanon, even if removing
them was partly the result of a
negotiated settlement.
“It was a nightmare that has
been lifted,” said Rev. Ibrahim
Nehmo, the senior pastor at the
Roman Catholic church in Ras
Baalbek, a Lebanese village lo-
cated on the foothills of the
mountains that Islamic State
controlled. “Not only has secu-
rity returned to us, but there is
also hope for a better future.”
—Nour Alakraa in Berlin
contributed to this article.
IN UK FR MN PR
Contentious Vote
Iraqi Kurdistan's Sept. 25 independence referendum, which Baghdad
opposes, will also be held in areas Kurdish fighters helped free from
Islamic State.
TURKEY
Sinjar
Shaddadi
Makhmour
Deir Ezzour
IRAQ
SYRIA
AZAD LASHKARI/REUTERS
Disputed territories
Source: United States Institute of Peace
ernment, or KRG, denies that Kurdistan.
Kurdish forces forcefully dis- “We oppose the referendum
placed Arabs, and Majid Shigali for a number of reasons,” a se-
a senior Kurdish member of nior U.S. official said. “The key
Iraq’s parliament, defended the one is the potential for vio-
referendum and the ambition lence, particularly if it is held in
to make Kurdistan independent. disputed territories like Kirkuk
“We don’t expect there to be with its ethnic mix and various
any problems as all sides want forces.”
to live in peace,” Mr. Shigali Arab Iraqis accuse the KRG
said. “The only problem may of taking advantage of Bagh-
surface is that of the disputed dad’s preoccupation with fight-
territories and in this case, we ing Islamic State to seize Kir-
will craft a constitution to ad- kuk, where the regional
dress it.” authorities voted on Tuesday to
But U.S. and Iraqi officials take part in the referendum,
say disputes won’t be easily re- over the protests of representa-
solved, particularly in the oil- tives from the Arab and Turk-
rich province of Kirkuk, claimed men communities.
by Kurds and Arabs alike. The While optimism over the ref-
Peshmerga seized the ethnically erendum runs high among
mixed city in northern Iraq in many Kurds, an independent
June 2014, after Iraq’s army Kurdistan would face consider-
fled south as Islamic State able financial challenges. Like
blitzed across lands bordering the government in Baghdad,
A convoy of Islamic State fighters and their families leaving the Lebanon-Syria border.
THE WALL STREET JOURNAL.
AKO RASHEED/REUTERS
50 miles
50 km
IR
AQ
Mosul I IRAN
K
Erbil
U
RD
IS
TA
Kirkuk
N
Tikrit
Ramadi Baghdad
THE WALL STREET JOURNAL.
Kurdistan’s government has a
cash-strapped economy heavily
dependent on oil revenues,
which fell to historic lows this
year. A regional real-estate
boom ended in 2014 and con-
struction cranes dotting the
skyline of its capital, Erbril,
now stand idle.
The U.S. is concerned the
referendum will break down
the close cooperation between
Kurdistan’s government and
Baghdad, an alliance that has
been crucial to defeating Is-
lamic State. The Iraqi military,
backed by the U.S. and working
with the Peshmerga and Iran-
backed Shiite militias, has
pushed the radical group out of
the main northern city Mosul,
and the same partnership-
scored a key victory on Sunday
in the strategic town of Tal
Afar, near the Syrian border.
OMAR SANADIKI/REUTERS
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. Thursday, August 31, 2017 | A5

WORLD NEWS

Alliance
To Monitor
Russia Drills

PETRAS MALUKAS/AGENCE FRANCE-PRESSE/GETTY IMAGES

Moscow says 12,700 Thursday, replacing four Pol-
ish F-16s.
troops will take part in NATO officials have warned
the exercises. Western the Zapad maneuvers, planned
amid a military buildup in the
officials expect 70,000. region by the alliance and Rus-
sia, could serve as a screen for
BY JULIAN E. BARNES Russia to deploy more military
equipment and heighten the
BRUSSELS—The North At- risk of an accident or miscal-
lantic Treaty Organization an- culation that could touch off a
nounced it would send three crisis.
observers to Russia’s Zapad NATO will send two ex-
military exercise but said Mos- perts to Belarus and one to The U.S. began flying seven F-15C jet fighters out of Lithuania on Wednesday as it took over the Baltic air-policing mission.
cow’s invitation fell short of Russia. The experts will be al-
Russia’s international obliga- lowed to attend the official in Europe. ance of mandatory transpar- NATO and U.S. officials have won’t hold any of its own ex-
tions. “Visitor Day” of the exercise, The Vienna Document, ency only raises questions disputed that saying that they ercises during Zapad.
The statement from NATO NATO said. which has no enforcement about the nature and purpose expect 70,000 or more troops While the alliance has in-
came as the U.S. took over the Oana Lungescu, chief mechanism, requires briefings of the exercise.” to take part in Zapad and in- creased the number of planes
Baltic air-policing mission in NATO spokeswoman, said on the exercise scenario and Russian officials said terconnected exercises. conducting the Baltic air-po-
Lithuania. that although the alliance events, access to individual Wednesday that the Zapad ex- NATO ambassadors met for licing mission, it intends to
The U.S. began flying seven welcomes the invitation “they soldiers and overflights of the ercise would be under the an update on the Zapad exer- keep the size of its ground
F-15C jet fighters from the are not a substitute” for the drill area. threshold set by Vienna for in- cise on Tuesday, according to force, roughly 4,000 person-
U.K. out of Lithuania on kind of observation required “Russia and Belarus are in- viting formal observation allied diplomats. While Poland nel, steady in September, to
Wednesday. The U.S. fighters under the Vienna Document, stead choosing a selective ap- teams. and Sweden, a NATO partner, avoid any moves that look like
will begin standing alert to in- an international agreement proach that falls short,” Ms. Russia plans to have 12,700 are conducting drills in Sep- provocation, allied officials
tercept unknown aircraft governing military exercises Lungescu said. “Such avoid- troops participate in Zapad. tember, the alliance as a whole said.

More Rohingya Flee Myanmar Europe Economic

BY ASSOCIATED PRESS

COX’S BAZAR, Bangla-

Confidence Soars
desh—At least 18,000 Roh-
ingya Muslims have fled fresh BY NINA ADAM 2018, economists said.
violence in Myanmar and “Robust survey indicators
crossed into Bangladesh in FRANKFURT—Economic in euro area countries suggest
less than a week, with hun- sentiment in the eurozone that growth should accelerate
dreds stranded in no-man’s- reached its “highest level in through the rest of the year,”
land at the countries’ border, more than 10 years” in August, while the consumer confidence
YE AUNG THU/AGENCE FRANCE-PRESSE/GETTY IMAGES

the International Organiza- led by rising confidence indicator close to a 16-year

tion for Migration said. among industrial companies high bodes well for the con-
Sanjukta Sahany, a spokes- and in the services sector, the sumer-driven recovery, said
woman for the organization European Commission said Madhavi Bokil, a vice presi-
in Cox’s Bazar, on the Bangla- Wednesday. dent at Moody’s Investors Ser-
desh border with Myanmar, Its Economic Sentiment In- vice.
released the figures as hu- dicator, which aggregates An improving economic
man-rights advocates for the business and consumer confi- outlook also prompted
Rohingya said the Myanmar dence, jumped to 111.9 from Moody’s to raise its forecasts
army was retaliating for at- 111.3 in July. That marked the for growth in the eurozone to
tacks last week by Rohingya highest level since July 2007. 2.1% in 2017 and 1.9% in 2018.
militants by burning down Economists surveyed by The The European Commission
villages and shooting civil- Wall Street Journal had ex- said industrial companies in the
ians. pected a stable outcome. 19-country euro currency bloc
The Myanmar government Displaced people arrived at the boat jetty in Sittwe, in Myanmar’s Rakhine state, on Wednesday. Italy recorded the sharpest raised their employment plans
blames Rohingya insurgents rise in economic sentiment in August and their selling-
for the violence, including the hundreds of civilians may neighborhoods in the town- estimated one million Roh- among the region’s largest price-expectations increased,
arson. Government figures have been killed in army ship of Maungdaw burned ingya live in northern Rakh- economies, followed by France too. However, consumers’ price
put the death toll since last raids. down on Sunday and Monday. ine, where they have faced and Spain—a sign the recovery expectations remained “virtu-
week at a minimum of 103, A report issued Wednesday Maungdaw, in the northern persecution in the Buddhist- is spreading. The mood, how- ally unchanged,” the commis-
including 12 members of the by Myanmar’s Information part of Rakhine state, is a majority country that refuses ever, eased slightly in Ger- sion said.
security forces, 77 persons Ministry said that 45 impro- center for the violence, to recognize them as a legiti- many and the Netherlands, the But some economists cau-
described as insurgents and vised explosive devices were though villages over a much mate native ethnic minority, region’s traditional power- tion that a rising euro and
14 civilians. detonated and seven villages, wider area were also hit. leaving them without citizen- houses. geopolitical tensions pose
Rohingya advocates fear one security post and two A majority of Myanmar’s ship and basic rights. The pickup in confidence risks to the upswing.
underpins expectations that While it remains to be seen
the eurozone will remain on if the euro’s appreciation since

India’s Financial Hub Hit by Floods

Associated Press and thousands of commuters
were stranded in their offices
MUMBAI—Torrential mon- overnight. Commuter trains
soon rains paralyzed India’s fi- shut down, buses were half-
nancial capital for a second day submerged in water and the
Wednesday as the streets turned deluged airport had to divert
into rivers and people waded flights to other cities.
through waist-deep waters. By Wednesday morning,
On Tuesday, about 5 inches most trains were running but
of rain fell on the city and its traffic remained chaotic.
already hamstrung infrastruc- According to the Meteoro-
ture collapsed. logical Department, more heavy
Public transport stopped rain was expected and the
city's local government asked
all schools and colleges to shut
down for a day.
Every year the city strug-
gles to cope with the annual
monsoon deluge, drawing crit-
icism about its poor planning.
Heavy rain warnings have
also been issued for other
parts of the state of Maha-
rashtra, where Mumbai is lo-
cated.
A heavy rainfall alert has
also been issued for parts of
Maharashtra’s neighboring
states of Goa and Gujarat.
India’s monsoon season runs
from June through September.
Since the start of the sea-
son this year, devastating
floods across South Asia have
killed more than 950 people
and affected close to 40 mil-
lion across northern India,
southern Nepal and northern
Bangladesh.
its solid growth path in the the start of the year will put a
second half of this year de- damper on exports, it is be-
spite a stronger euro, and will coming “an increasingly im-
be assisted by domestic de- portant part of the debate
mand. around the next policy move
It also fuels economists’ ex- for the ECB,” Angel Talavera,
pectations that the European an economist at Oxford Eco-
Central Bank will soon begin nomics, wrote in a recent note
to wind down its massive to clients.
stimulus program, following in A rising euro threatens to
the footsteps of the Federal hurt the international compet-
Reserve in the U.S. itiveness of goods produced in
ECB President Mario Draghi the eurozone. A rising euro
could signal as soon as the could also weigh on the out-
bank’s next policy meeting on look for inflation as it reduces
Sept. 7 that stimulus will be the prices of many imported
gradually reduced from early goods.

WORLD WATCH
GAZA STRIP pay tribute to their mother’s
charity work on the eve of the
Guterres Urges Israel 20th anniversary of her death.
To Ease Blockade The princes, accompanied by
William’s wife, the duchess of
The U.N. secretary-general on Cambridge, huddled under um-
Wednesday urged Israel to ease brellas in the pouring rain as
its blockade of the Hamas-ruled they strolled through the Sunken
Gaza Strip and called for large- Garden, which is planted with
scale foreign aid, saying the situ- white flowers and dedicated to
ation in the isolated territory is the princess at her former home,
“one of the most dramatic hu- where she once strolled and
ANDREW MEDICHINI/ASSOCIATED PRESS

manitarian crises” he has seen. where she used to talk with the
Speaking at a U.N.-backed ele- gardeners about their ever-
mentary school in the northern changing displays.
Gaza Strip, António Guterres also William and Harry, who have
called for unity among the Pales- both promised to carry on their
tinians’ warring factions—Hamas, mother’s charity work, also chat-
which rules Gaza, and Fatah, the ted with representatives from
party of Palestinian Authority groups that Diana supported.
President Mahmoud Abbas. The princes then left the pal-
“The division only undermines ace grounds to meet with mem-
the cause of the Palestinian peo- SHELTER FROM THE SUN: Bishops at Pope Francis’ weekly general audience in St. Peter’s Square at the Vatican on Wednesday. bers of the public, who had braved
ple,” he said. In an apparent the rain for a chance to share
message to Hamas, he said “mil- VENEZUELA to repress political dissent and in- “I think we would argue that some documented cases amount- memories of Diana with her sons.
itantism” was causing damage still fear,” the U.N. human-rights over the course of time we have ing to torture, the report said. The weeks before the anniver-
to the region, adding that he U.N. Accuses Caracas office said, in a report that called seen an erosion of democratic life —Reuters sary of Diana’s death have been
had a dream to “come back to Of Rights Abuses for investigation and accountabil- in Venezuela,” the official said at met with reflection in Britain as
Gaza one day and to see Gaza ity. It called on President Nicolás a news conference. “It must be UNITED KINGDOM the public remembers “the peo-
as part of a Palestine state in The United Nations said Ven- Maduro’s government to release barely alive, if still alive, is the ple’s princess” and considers her
peace and prosperity.” ezuela’s security forces had com- arbitrarily detained demonstrators way I would look at it.” Princes Pay Tribute contributions to the country and
Mr. Guterres is on his first mitted extensive and apparently and to halt the unlawful use of Some 882 people are believed To Princess Diana the monarchy.
visit since taking office in Janu- deliberate human-rights viola- military courts to try civilians. to be in custody, among 5,341 de- Many brought flowers, which
ary. During his visit, he met with tions in crushing antigovernment U.N. High Commissioner for tained in street protests since Princes William and Harry the princes gathered and laid in
Israeli and Palestinian leaders to protests and that democracy Human Rights Zeid Ra’ad al-Hus- April, U.N. human-rights official visited a memorial garden at front of the black and gold gates
encourage peace talks. was “barely alive.” sein was asked whether the Hernan Vales said. Detainees are Kensington Palace in London of Kensington Palace.
—Associated Press The actions indicated “a policy country was now a dictatorship. often subjected to ill treatment, in dedicated to Princess Diana to —Associated Press
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A6 | Thursday, August 31, 2017
Economic Heft Gives Houston an Edge
City is equipped with
means to recover faster
than New Orleans did
from Hurricane Katrina
BY CHRISTOPHER M. MATTHEWS
Houston’s economy will suf-
fer a significant and perhaps
unprecedented blow from
Tropical Storm Harvey. But
economists project that unlike
New Orleans following Hurri-
cane Katrina, Houston’s res-
urrection is nearly certain.
By some estimates, Harvey
could be the most expensive
U.S. storm ever. Kevin M. Sim-
mons, a disaster economist at
Austin College, estimated that
$145 billion in property is at
risk of being damaged.
Adam Kamins, an economist
for Moody’s Analytics, esti-
mates the price tag could be
as much as $75 billion
for southeast Texas. He pre-
dicts that the city could lose
as much as $10 billion in eco-
nomic output, and that busi-
nesses might suffer some $10
billion to $15 billion in prop-
erty damage from flooding.
Economic output could be flat
for two months following the
storm but would likely grow
thereafter, he said.
Hurricane Katrina is esti-
mated to have cost about $100
billion in property damage in
2005, the most costly storm in
U.S. history to date.
But unlike New Orleans, the
greater Houston area economy
is better equipped to absorb
the blow because of its size,
diversity and prominence as
the nation’s energy hub.
Houston is the country’s
fourth-largest city by popula-
tion and economic output, with
2.3 million people and a gross
domestic product of more than
HARVEY
Continued from Page One
where the storm made landfall
again Wednesday morning,
have confirmed a woman died
there after getting washed
away into a canal with her
young daughter clinging to
her. The girl survived after a
dramatic rescue, police said.
Five people have been con-
firmed dead by the medical
examiner in Harris County, in-
cluding a veteran Houston po-
lice officer. Officials in nearby
Pasadena also said that a fam-
ily—four students and two of
their great-grandparents—
were swept away by the flood-
waters.
There are three confirmed
deaths in Galveston County,
Chief Medical Examiner Erin
Barnhart said. Floodwaters
have made it hard to coordi-
nate with outlying funeral
homes, she said.
Jeff Lindner, a meteorolo-
gist with the Harris County
Flood Control District, said the
city’s watersheds have crested
and up to 30% of the county
has been flooded.
He added that officials were
concerned about a levee near
a subdivision in northeast
Houston that “has sloughed a
little bit.”
The likelihood of a breach
remains low, he said, but he
Storm Jumbles Global Oil Trade as Key Link Severed
BY ALISON SIDER
AND STEPHANIE YANG
Tropical Storm Harvey is
upending the flow of oil and
petroleum all around the
world—a consequence of the
growing influence of the U.S.
in the global energy industry.
Since the last time a major
storm passed through the Gulf
Coast, vast quantities of oil
and natural gas have been un-
locked from shale formations
in the U.S.
While production from
these fields accounts for just a
fraction of the global oil mar-
ket, that output now feeds a
huge volume of gasoline,
chemicals, plastics and crude
exports, which means Harvey
will have repercussions of
global proportions.
And the U.S. Gulf Coast has
been at the center of this shift.
The area has become a critical
link in the global energy chain.
Shipments from the region
now satisfy 6% of global de-
mand for oil and other liquid
petroleum fuels—twice as
much as in 2012, according to
The greater Houston area is better equipped to absorb the blow from Harvey because of its size and prominence as the nation’s energy hub.
$503 billion in 2015, according
to the most recent data from
the Department of Commerce,
making it roughly the size of
Sweden’s economy.
At the time of Katrina, New
Orleans had a population of
roughly 450,000 and an econ-
omy largely dependent on
tourism. Following the storm,
tens of thousands fled the city
and never returned. Its popu-
lation today is less than
400,000. “New Orleans was
hurt because people didn’t
come back,” said James Rich-
ardson, an economics profes-
sor at Louisiana State Univer-
sity. “We’re still not back to
the pre-Katrina population.”
Mr. Richardson studied Ka-
Nuns join a line of people Wednesday waiting to volunteer at an evacuation center in Houston.
urged residents who are still
in homes near the levee to
leave.
If there is a breach, the wa-
ter can rise “very fast” and “it
is going to be very deep,” he
said. In some areas, the water
could rise to the rooftops, he
said.
Mr. Lindner said officials
plan to continue to release wa-
ter from the Barker and Ad-
dicks reservoirs near the city,
a move intended to relieve
pressure on dams and prevent
more widespread flooding.
The Buffalo Bayou, which runs
High Output
Gulf Coast exports of crude oil
and other liquid fuels as a share
of global demand
6%
5 Port Arthur, Texas, said
4 Wednesday that it has initiated
3 a full shutdown because of
2
1 dumping a foot of rain on the
0 region overnight.
2010 ’11 ’12 ’13 ’14 ’15 ’16 ’17*
*Through May
Source: Barclays analysis of U.S. Energy
Information Administration data
THE WALL STREET JOURNAL.
Barclays PLC.
That means Harvey, which
was the most powerful storm
to hit Texas in half a century,
is likely to cause shortages
that affect consumers from
Houston to Beijing. Countries
such as Mexico, which relies
on the U.S. for as much as half
of the gasoline it consumes,
according to the U.S. Energy
Information Administration,
are the most likely to feel the
HARVEY’S DESTRUCTION
trina’s effect on New Orleans
and found it lost 190,000 jobs
and employment fell by more
than 30% from August 2005 to
December 2005. “I would be
surprised if there’s a compara-
ble net loss in Houston,” he
said. Mr. Richardson said part
of Houston’s resilience lies in
its diversified economy.
While the city has long been
tied to the boom-bust cycle of
the oil industry, it has diversi-
fied in recent years. Some 84%
of Houston’s economy was de-
pendent on the oil-and-gas in-
dustry during the 1980s, ac-
cording to data from the Dallas
Federal Reserve. But that had
dropped to about 44% by 2016.
Houston boasts one of the
through the middle of Hous-
ton, is expected to rise slightly
throughout the day and then
hold steady.
Ed Russo with the U.S.
Army Corps of Engineers said
officials plan to release a com-
bined total of 16,000 cubic feet
per second of water from the
two reservoirs.
“The decision to make the
increased controlled releases
was difficult but necessary,”
he said.
In the west Houston suburb
of Memorial, residents on wa-
terlogged streets weren’t sure
Nation’s Largest
Refinery Shutters
The U.S.’s largest refinery, in
flooding, as Tropical Storm Har-
vey pushed east of Houston,
In an emailed statement,
Motiva, owned by Saudi Arabia
state oil giant Saudi Aramco,
said the controlled shutdown of
effects, analysts said.
“The consequences of a ma-
jor disruption on the U.S. Gulf
Coast will be felt in the pric-
ing of oil product markets in
Latin America and Europe and
crude markets as far away as
Asia,” J.P. Morgan Chase & Co.
analysts wrote.
The U.S. became a net ex-
porter of refined products in
2011. Gasoline exports surged
33% to a record last year and
THE WALL STREET JOURNAL.
need weeks before traffic re-
sumes normal levels, accord-
ing to analysts.
Regina Mayor, Houston-
based head of energy at
KPMG, said any damage at re-
fineries had been relatively
contained so far. While compa-
nies are losing millions of dol-
lars a day while their facilities
are idled, “they’ve been
through this before and
planned accordingly,” she said.
Longer term, Ms. Mayor
said, oil-and-gas companies
may need to think about where
and how they build offices.
Houston’s energy corri-
dor, where many of the world’s
largest oil-and-gas companies
have offices, sits in between
two decades-old reservoirs
built to contain floodwaters.
DAVID J. PHILLIP/ASSOCIATED PRESS
Those reservoirs are expected
to flood for the first time ever
after water levels reached his-
toric highs, according to the
Army Corps of Engineers.
Richard Fisher, the former
president of the Federal Re-
serve Bank of Dallas, said that
construction would provide a
short-term boost to the econ-
omy, but that there could be
largest medical centers in the residential and is unlikely to constraints on the available la-
world. Its health-care and edu- be covered by insurance. That bor force if people leave and
cation industries were the could prevent a full-scale re- don’t return and President Don-
city’s largest employers as of construction effort and even ald Trump pursues tighter im-
2014, according to a 2017 potentially slow the region’s migration policies. “All these
study by the Greater Houston rapid population growth, he business will have to be recon-
Partnership, the region’s said, but it wouldn’t spark a structed,” Mr. Fisher said.
chamber of commerce. Katrina-like exodus. “That’s an enormous opportu-
Houston and the surround- The storm had disrupted nity, but you can’t rebuild Hous-
ing region are also in the midst more than 15% of U.S. refinery ton without Mexican labor.”
of a petrochemical boom, with capacity located on the Texas Mr. Fisher also said the doz-
more than $50 billion of capi- Gulf Coast by Tuesday, and ens of Fortune 500 companies in
tal investment projected to that figure is climbing. Em- Houston are unlikely to relocate
create thousands of jobs. ployees in all industries could but that the city’s small-business
Mr. Kamins of Moody’s pre- be prevented from reaching community could face chal-
dicts the real “economic trag- their offices for days to come lenges. Nearly 40% of small busi-
edy” will be for homeowners. as roads remain impassable. nesses never reopen their doors
He predicts that most of the Trade in the Houston Ship following a flood disaster, in
property damage—$30 billion Channel, the second busiest in part because many are unin-
to $40 billion in damage to the country by tonnage, has sured, according to the Federal
homes and vehicles—will be also come to a halt and could Emergency Management Agency.
ing, but the water keeps com-
ing.”
Meanwhile, Harvey is losing
strength as it moves inland,
the coastal areas, and several
tornadoes blazed through
fields and forested areas. But
no fatalities or injuries have
said Phil Grigsby, a meteorolo- been reported in Louisiana,
gist with the National Weather where the storm is losing
Service office in Slidell, La. force.
As the storm moves off the “It has been weakening,”
Gulf Coast, tornadoes are pos- said Andy Tingler, a National
sible in neighboring states as Weather Service meteorologist
the weather system moves up based out of Lake Charles, La.
toward western Tennessee and “It is expected to drop below
Kentucky, according to the Na- tropical storm force winds
tional Weather Service. later this afternoon.”
In much of Louisiana, in- Back in Texas, Gov. Greg
MICHAEL CIAGLO/ASSOCIATED PRESS
cluding New Orleans and Ba- Abbott said federal funding
ton Rouge, “rain totals are sig- for recovery efforts will need
nificantly lower than what we to be greater than the
expected” in part because of roughly $120 billion provided
drier air from Mexico that to New Orleans after Hurri-
wrapped around the storm and cane Katrina.
weakened its bands of heavy The damage caused by Har-
rain, Mr. Lindner said. vey is “far larger than Katrina
“Obviously, things are not and far larger than [super-
as bad as has been forecasted. storm] Sandy,” Mr. Abbott, a
We’re very thankful for that,” Republican, said.
Wednesday morning whether said Louisiana Gov. John Bel He said he expects “ongoing
to believe assurances that Edwards, a Democrat. “We’ve challenges” with flooding for
their homes would remain dry. fared much better than we up to a week even though
Jake Emery, 42, who lives feared might be the case.” floodwaters are receding in
in a multistory brick home, Harvey touched down at the Houston area and the
surveyed the water at the edge roughly 4 a.m. in the south- storm is moving eastward.
of his front yard. He said it western corner of Louisiana “The worst is not yet over
came within an inch of the near the town of Cameron, for Southeast Texas as far as
house Sunday night, then re- which is about 50 miles from the rain is concerned,” he
ceded—though it looked to the Texas border. said, referring to a region that
have risen about 5 inches The far western reaches of includes Beaumont and Port
since midnight as water the state already experienced Arthur.
pushed up through storm up to 30 inches of rainfall over —Tawnell D. Hobbs,
drains. several days, and Wednesday’s Dan Frosch, Ben Kesling,
“You think you have it landfall accelerated flooding. Christopher M. Matthews
beat,” he said. “You look up Harvey also packed a sev- and Erin Ailworth
and it’s a beautiful cool morn- eral foot storm surge across contributed to this article.
climbing as Harvey has started
its 603,000-barrel-a-day Port would have to do a full closure. to track eastward.
Arthur refinery began at 5 a.m. Otherwise, the refinery might “While everyone is watch-
Central Time “in response to in- have been forced to do a risk- ing the impact from a U.S.-
creasing local flood conditions.” ier, emergency shutdown. centric perspective…disruption
It said the refinery would stay The nation’s second-largest to U.S. product exports to
shut until flood water recede in refinery, Exxon Mobil Corp.’s places like Latin America
the area. “Our priority remains 560,000-barrel-a-day Baytown could actually end up being a
the safety our employees and plant in the Houston area, shut bigger story,” said Michael
community.” down Sunday, while more than Tran, director of energy strat-
The Motiva Port Arthur re- a half dozen smaller refineries egy at RBC Capital Markets.
finery, located 90 miles east of along the Texas coast have Market participants are al-
Houston, had already begun re- also shut. ready starting to respond.
ducing production rates on In all, some three million Trade flows should start to
Tuesday as Harvey’s rains barrels a day of refining capac- shift to bring more fuel from
poured down, and analysts ity has been taken offline, about Europe to Latin America,
warned then it was only a mat- 20% of total U.S. capacity. which would typically get fuel
ter of time before the plant —Dan Molinski from the U.S., analysts said.
It isn’t clear how disruptive
Harvey will prove to be. If re-
have continued to rise this Netherlands and Peru. fineries sustain significant
year. Some 17% of gasoline Harvey has shut off much of damage, they could be down
made at the Gulf Coast and that flow. Vessels that planned for months. But even if pro-
39% of the diesel produced to come in to be loaded with ducers, pipelines and fuel-
there this year has been ex- crude destined for foreign making plants can ramp up
ported, according to consul- markets changed course be- relatively quickly, analysts
tancy Turner, Mason & Co. fore entering Corpus Christi said its effects may linger.
Exports of crude oil itself, last week. “Back to normal is months,
which were largely banned be- And fuel production has not weeks, for exports and for
fore 2015, have grown from a been curtailed. About 20% of the industry and the region.
trickle to surpass one million U.S. oil-refining capacity has We have to acknowledge that,”
barrels a day at times this been shut because of the said Barclays analyst Michael
year, winding up in China, the storm, and that number is Cohen.
 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.
KEVIN LAMARQUE/REUTERS
President Trump, on a visit to a Missouri factory, called for lower corporate taxes but offered few other specifics for the tax plan.
Trump Stumps for Tax Cut
BY MICHAEL C. BENDER
AND RICHARD RUBIN
SPRINGFIELD, Mo.—Presi-
dent Donald Trump called on
Congress to approve a steep
cut in corporate tax rates and
simplify the U.S. tax system,
saying the moves will boost
the middle class, as he urged
bipartisan support for a tax
plan that is still being written.
Mr. Trump’s remarks were
a broad-brush opening pitch
for the major tax bill that Re-
publicans aim to pass ahead of
the 2018 midterm elections.
They have deep support from
corporate America and strong
GOP desire to rack up a major
legislative victory, but they
have to grapple with the com-
peting factions and interest
groups that have bedeviled
previous tax proposals.
The president said he wants
to lower business rates to 15%
and make it easier for compa-
nies to repatriate foreign prof-
its, but he offered few other
specifics. Instead, he repeated
broad goals to make tax filing
easier and lower tax rates on
corporations and individuals.
He also said he wants to elimi-
nates “loopholes” that benefit
the wealthiest Americans.
Pressure Grows to Fund Health Program
BY STEPHANIE ARMOUR
WASHINGTON—State offi-
cials increasingly worry that
this year’s turbulent health-
care politics could threaten
funding for the Children’s
Health Insurance Program, a
popular initiative that usually
wins broad bipartisan support.
Federal funding for CHIP is
set to end Sept. 30. The fed-
eral-state program provides
health coverage to more than
eight million low-income, un-
insured children whose family
incomes are too high to qual-
ify for Medicaid.
Republicans are looking to
possibly attach a repeal of Af-
fordable Care Act taxes—in-
cluding levies on certain
health-insurance plans and
medical devices—to a CHIP re-
authorization bill, people fa-
miliar with the thinking said.
Members of both parties
have also discussed using the
CHIP bill to extend payments
to insurers under the ACA.
The risk, lobbyists and state
health officials say, is that
such brinkmanship could en-
danger quick passage of a
funding reauthorization.
When Congress returns to
Wisconsin Suit Aims to Cut Through Butter Laws
BY QUINT FORGEY
A new lawsuit is churning
up trouble in America’s Dairy-
land. Attorneys with the Wis-
consin Institute for Law and
Liberty are taking the state to
court over a 1953 law that
mandates all butter sold in
Wisconsin be graded and la-
beled on factors such as flavor,
texture and color by state-li-
censed tasters.
Those convicted of selling
unlabeled butter in the state
more than once could pay up
to $5,000 in fines and spend a
year in county jail.
The statute has enraged
“If we want to renew our
prosperity and to restore op-
portunity then we must reduce
the tax burden on our compa-
nies and our workers,” Mr.
Trump said.
But while he called on Con-
gress to put aside partisan
politics and unite behind a
goal of “letting Americans
keep more of what they earn,”
he also took aim at U.S. Sen.
Claire McCaskill, a Missouri
Democrat seeking re-election
next year. The president said
the state should vote her out
of office if she doesn’t commit
to supporting his plan.
“If she doesn’t do it for you,
you have to vote her out of of-
fice,” he said. “She’s got to
make that commitment.”
Ms. McCaskill said in state-
ment last weekend that she
supports lowering the current
35% corporate tax rate and
that she was optimistic about
finding common ground with
Mr. Trump.
The president also nodded
to Congress’s central role in
getting tax changes passed, af-
ter Republican lawmakers’
failure to get a health-care
overhaul passed.
“I don’t want to be disap-
pointed by Congress, do you
CHIP at a Glance
Sen. Orrin Hatch was a chief sponsor of the 1997 CHIP legislation.
 Serves more than eight million uninsured children
 About $16 billion allotted to states in fiscal 2017
 Federal funding set to end Sept. 30 if not extended
Washington next week after its
August recess, it isn’t clear
how hard lawmakers will push
to attach measures to the CHIP
bill. But some state officials are
worried enough that they al-
ready are looking at whether
they may have to wind down
their programs if Congress fails
to reauthorize the funding.
CHIP has earned bipartisan
support from the outset. Sen.
Orrin Hatch (R., Utah), now
devotees of the popular Kerry-
gold brand of butter, which is
produced in Ireland and hasn’t
been tested by the state. Local
retailers say their inability to
sell the grass-fed, gold-pack-
aged spread has affected their
bottom line. WILL is repre-
senting four consumers in
counties across Southeast Wis-
consin in the suit, as well as a
health-food store in Grafton.
“I think the issue is impor-
tant because it’s a specific in-
stance of a larger problem,”
Rick Esenberg, WILL president
and lead counsel, said of the
obscure, 64-year-old ordi-
nance. “The government
U.S. NEWS
understand?” Mr. Trump said wealthiest 1% of Americans,
to loud applause from workers period. Not one penny of tax
at Loren Cook Co., a business cuts,” for the top 1%, Senate
that makes industrial fans and Minority Leader Chuck
blowers. Schumer (D., N.Y.) said
Mr. Trump called for the Wednesday. “It’s middle class
tax plan to be bipartisan and Americans, not those in the
the core principles he laid out 1%, that deserve tax relief.”
appeal to Democrats, including Independent analyses of
simplification, assistance for prior tax plans from Republi-
middle-class families and eco- cans and Mr. Trump show the
nomic growth. biggest benefits going to high-
But the policies that Mr. income households. The Trea-
Trump has proposed as a can- sury Department and the con-
gressional Joint Committee on
Taxation estimate that work-
ers do pay some corporate
The president said he taxes in the form of depressed
wants to lower wages, but that the bulk of the
cost is borne by owners of
business rates to 15% capital.
from the current 35%. Faced with the political ur-
gency of needing something to
show to voters in 2018, Repub-
licans hope to push a major
didate and as president have tax bill through Congress by
turned many Democrats away. the end of the year.
His plans to dramatically They are still working on
lower business taxes, lower in- the legislation and they have
dividual tax rates for high-in- obstacles to overcome. They
come households and repeal haven’t settled on which tax
the estate tax have found little breaks would go away, or
support among Democrats. whether they want a net tax
“Tax reform should not in- cut, or how much revenue the
crease the tax burden on the new tax code would raise.
middle class and there should —Peter Nicholas
not be any tax cut for the contributed to this article.
within the Finance Committee
to ensure funding for CHIP is
continued and services for vul-
nerable children are main-
TOM WILLIAMS/CONGRESSIONAL QUARTERLY/NEWSCOM/ZUMA PRESS
tained,” the spokeswoman said.
The uncertainty reflects the
political dynamic after the
failure of the hard-fought Re-
publican effort to topple most
of the ACA.
CHIP supporters face other
obstacles. Congress must pass
a broad spending bill by the
end of September to avoid a
partial government shutdown,
and lawmakers also face pres-
sure to raise the government’s
debt limit in coming weeks.
CHIP is authorized through
2019, but federal money for the
state portion of the program
isn’t. Congress last reautho-
rized that funding in 2015 for a
chairman of the Senate Fi- two-year period that ends Sept.
nance Committee, was a chief 30. In fiscal 2017, federal CHIP
sponsor of the 1997 CHIP leg- allotments to the states came
islation along with the late to roughly $16 billion.
Democratic Sen. Edward Ken- States have some cushion if
nedy of Massachusetts. the federal funding is delayed,
Mr. Hatch is working with with unspent federal funds re-
fellow lawmakers and the distributed to states that have
Trump administration to find a used up their allotment cover-
way to ensure funding is pro- ing some of the shortfall.
vided, a committee spokes- Arizona, Minnesota, North
woman said. Carolina and Washington, D.C.,
“There is a bipartisan desire would run out of their federal
should not restrict our liber- their state fairs, Wisconsin,
ties—particularly our ability home of a $43.4 billion dairy
to engage in a legitimate busi- industry, plays it straight.
ness and make a living.” The Wisconsin State Fair’s
An Ozaukee County Circuit only butter competition is a
Court judge this month denied mostly corporate auction
the state’s motion to dismiss where networking bidders from
the suit. “The Attorney Gen- a who’s-who list of the state’s
eral will defend Wisconsin dairy world vie to purchase the
laws against challenges and first-place winners from a
we plan to represent the State cheese and butter contest held
of Wisconsin as this lawsuit two months prior. “The people
proceeds,” a spokesman for that enter the contest are pas-
the Wisconsin Department of sionate,” said Katy Katzman
Justice said in a statement. with the Wisconsin State Fair
Butter is serious business in Dairy Promotion Board.
Wisconsin. While other states WILL is alleging Wiscon-
elect butter queens and honor sin’s butter law violates the
massive butter sculptures at state constitution’s due pro-
Thursday, August 31, 2017 | A7
Economy Grew 3%
In Second Quarter
BY BEN LEUBSDORF
WASHINGTON—The U.S.
economy expanded at its most
robust pace in more than two
years in the spring and ap-
pears to have momentum go-
ing into the second half of the
year, supported by solid con-
sumer spending and a pickup
in business investment.
Gross domestic product, a
measure of the goods and ser-
vices produced across the U.S.,
rose at a seasonally and infla-
tion-adjusted annual rate of
3% in the second quarter, the
Commerce Department said
Wednesday. That was the
strongest quarter in more than
two years and some forecast-
ers expect growth will remain
near that pace this quarter.
Since the recession ended
in mid-2009, economic growth
has fluctuated from quarter to
quarter while averaging a lit-
tle more than 2% a year. It is
far from clear that a sustained
breakout from that modest
pace was building as the ex-
pansion entered its ninth year;
similar past accelerations have
proven fleeting. But some
promising trends are under
way, including a global pickup
in growth supporting exports,
rising employment supporting
household income and spend-
ing, and robust corporate
profits and confidence, sup-
porting investment.
For now, at least, there is
little sign of an imminent
downturn. “Typically in a
business expansion, you would
see growth start to arc down-
ward as we get later into the
cycle,” said Ellen Zentner,
The GDP reading partly reflected stronger business investment.
CHIP funding by December, ac-
cording the Medicaid and CHIP
Payment and Access Commis-
sion, or MACPAC, a nonpartisan
legislative agency that provides
analysis and recommendations
to Congress. An additional 27
states would exhaust their fed-
eral funds by March.
Some Republicans say the
reserves mean there isn’t an
urgent need to reauthorize
funding. But some state offi-
cials say they would run out of
money sooner than projected.
Virginia is estimated to ex-
haust its federal funds in
March, but due to its payment
procedures the state’s CHIP
program would actually wind
down in January, said Linda
Nablo, chief deputy director
for the Virginia Department of
Medical Assistance Services.
Families would get a 60-day
notice that their coverage was
ending, she said.
More than 121,000 children
are covered in Virginia, includ-
ing 1,100 with cancer. About
70,000 would be at risk of los-
ing coverage at January’s end,
she said. “We have kids in the
middle of lifesaving treatment.
What do we say to those fami-
lies?” said Ms. Nablo.
cess, equal protection and
commercial speech clauses.
Wisconsin laws have
shielded the dairy industry
from out-of-state competition
for decades, but have often
crumbled under judicial scru-
tiny. The Wisconsin Supreme
Court in 1927 ruled unconsti-
tutional a law prohibiting the
sale of oleomargarine and
other butter substitutes in the
state, and in 1952 turned back
an attempt to ban the sale of
Dairy Queen soft-serve.
In 1895, Wisconsin forbade
the sale of artificially colored
margarine. That law wasn’t re-
pealed until 1967.
chief U.S. economist at Mor-
gan Stanley. But so far, she
said, the pace of growth has
remained steady: “It’s incredi-
ble to sustain this kind of mo-
mentum this far into a busi-
ness expansion.”
Wednesday’s report was an
upgrade from the 2.6% GDP
growth pace the government
had reported last month.
Hitting 3% growth was no-
table because President Don-
ald Trump has said he wants
to lift annual economic growth
above 3% in a sustained fash-
ion by rolling back regulations,
overhauling the tax code and
enacting other policy changes.
“We just announced that we
hit 3% in GDP, it just came
out,” Mr. Trump said Wednes-
day during an event in Spring-
field, Mo. “And on a yearly ba-
sis, as you know, the last
administration during an eight-
year period never hit 3%. So
we’re really on our way.”
The quarterly GDP growth
rate was above 3% eight times
during President Barack
Obama’s eight years in office,
and GDP growth exceeded 3%
in four quarters on a year-
over-year basis. The U.S. econ-
omy didn’t have a full calendar
year of 3% growth during the
Obama administration.
Many forecasters expect
growth will remain modest in
the coming years, shaped by
long-term demographic and
other forces including slow
worker productivity growth.
Federal Reserve policy makers’
median projection in June was
for 2.2% growth this year fol-
lowed by 2.1% growth in 2018
and 1.9% growth in 2019.
TRAVIS DOVE/BLOOMBERG NEWS
Expanded
Pay-Data
Disclosure
Is Halted
BY TED MANN
The White House said it
would halt a planned Obama-
era rule that would have re-
quired businesses to begin col-
lecting data about how much
they pay workers of different
genders, races and ethnic
groups, saying that it posed a
burden to employers.
The data-collection require-
ment was proposed by the
Obama administration in 2016
as part of its efforts to ad-
dress pay disparities among
workers of different groups.
The Trump administration
will stay implementation of
the rule, which would have re-
quired employers to report the
pay data for the first time in
the spring. “It’s enormously
burdensome,” said Neomi Rao,
administrator of the Office of
Information and Regulatory
Affairs, which analyzes the
cost of federal rules and regu-
lations. “We don’t believe it
would actually help us gather
information about wage and
employment discrimination."
The Obama administration
proposal directed the Equal
Employment Opportunity Com-
mission to begin collecting
wage and pay data from private
employers with 100 or more
employees and federal contrac-
tors with 50 or more employ-
ees. The proposal effectively
expanded the range of data em-
ployers were required to report
beginning this year on a form
called the EEO-1. That form has
been used to collect informa-
tion on the racial and gender
makeup of the workforce.
In a memo, dated Tuesday,
to Victoria Lipnic, the acting
chairwoman of the EEOC, Ms.
Rao said the White House Of-
fice of Management and Bud-
get would stay the rule and
conduct a review.
 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 | Thursday, August 31, 2017
CARMEN SEGOVIA
Summer Books
For All Seasons
Aimless, whimsical reading
shouldn’t just be for the
beach and summer cottage
BY WILL SCHWALBE
This summer, a friend told me that he was
surprised to find himself sharing a cottage
with Tom Brokaw, Tina Fey, John Irving, Mary
Higgins Clark, Amy Tan, Al Gore and Condo-
leezza Rice. Not with any of those people
themselves, of course. He had rented the cot-
tage for a week with his family, and those were
the authors of books left behind—by the own-
ers or by previous renters and guests.
He had brought with him George Eliot’s
“Daniel Deronda,” a book he’d always intended
to read; this he left unread while he devoured
John Irving’s “The Water-Method Man,” Amy
Tan’s “The Kitchen God’s Wife” and several
Mary Higgins Clark mysteries. The other books
he didn’t read cover-to-cover but sampled in
REPEALING THE DEATH SENTENCE OF A SNAKEBITE
BY BETSY MCKAY
John Heenan stepped over a fence while
volunteering at an organic farm in Novato,
Calif. earlier this month and felt a sharp burn-
ing pain. “I’ve been bitten by a rattlesnake!”
the 68-year-old yelled to fellow volunteers
nearby, after looking down to see that he had
stepped on one about 5 feet long.
Mr. Heenan staggered a few steps and col-
lapsed. He foamed at the mouth and felt like
he was suffocating, and his muscles rippled
uncontrollably. By the time he arrived at the
hospital minutes later, his airway was so
swollen and clogged that doctors struggled to
put a breathing tube down his throat, and his
blood pressure had plummeted. He was given
antivenom and put on life support, and re-
mained unconscious for two days.
Now recovering at home, Mr. Heenan faces
extensive physical therapy and follow-up
care. But he considers himself lucky to have
gotten medical attention so quickly. “I’m
alive,” he says. “I can’t ask for much more
than that.”
Many others aren’t so fortunate. Every
year, more than 100,000 people world-wide
are killed by snakebites, and about 400,000
undergo limb amputations or are otherwise
disabled, according to the World Health Or-
ganization. Experts say the real toll is likely
much higher because so many poisonous
snakebites go unreported.
Yet the problem attracts little investment.
Snakebite “envenoming,” or poisoning, is
largely ignored by public-health authorities
and drug developers, though experts hope
that it will attract more attention and funding
after being added to the WHO’s official list of
neglected tropical diseases in June.
Antivenom can be hard to find in Africa
and Asia, where snakebites pose the largest
threat. It can also be of poor quality. It usu-
ally has to be kept cool and administered in-
REVIEW
the early morning hours, lying in bed and
waiting until he heard some other family mem-
ber putting away the previous night’s dishes
and making the morning coffee.
My friend didn’t take any
of the summer-house books
home with him—that would
be more than bad manners. He The
left them all, and even added serendipity
to the pile. Next year’s visitors
will find George Eliot waiting of a random
to greet them.
The rest of the year, we
book is
tend to be purposeful about thrilling.
what we read. Most of us
carefully choose the books we
buy or borrow, gaining inspi-
ration from friends, reviewers, podcasts, li-
brarians and booksellers—or we simply follow
the choices of our book club. But summer days
spent in someone else’s home or at a B&B
make possible a different kind of reading:
more aimless, whimsical, promiscuous.
As I savor the remaining days of summer, it
occurs to me that I could incorporate into my
ISTOCK
SNAKEBITES kill more than 100,000 people a year world-wide. Above, a cobra.
travenously in hospitals or clinics, far from
where many victims are bitten. And it is still
manufactured using the same basic method
created in the 1890s, which involves milking
snakes through their fangs, injecting the
venom into horses or other large animals and
collecting their antibodies.
Scientists, including some from outside the
field, are working on ways to modernize
snakebite medicine, but it isn’t easy: Venom
is a complex mixture of enzymes and proteins
and varies by species of snake.
Matthew Lewin, an emergency-medicine
doctor in Corte Madera, Calif., is developing
an antidote that could be administered to a
snakebite victim on the spot, blocking many
immediately life-threatening effects until the
life some of this elusive summer spirit. In fact,
I think we all might benefit from doing so.
Summer is a time when we remember to put
our smartphones down, even if only for a few
hours a day, and pay attention to things that
last: the sea, mountains, friendships, a fool-
proof recipe for blueberry pie, great ideas and
books—books of all sorts, whether published
last week or centuries ago.
When you are in a rented home or staying
with a friend for a weekend, you can be the
kind of person you aren’t for the rest of the
year: someone who canoes, plays Parcheesi
and reads detective novels from decades past
and political memoirs from
both sides of the aisle by poli-
ticians long dead. The seren-
dipity is thrilling. What’s best
about books left behind in
summer houses and country
inns is that they so often offer
random and unexpected
choices.
There is some predictabil-
ity, however. It is fairly likely
that if you’re staying at a sea-
side cottage, you’ll find Anne
Morrow Lindbergh’s “Gift From the Sea,” the
1955 classic that sought to teach everyone, but
especially women, how to bring balance back
into their lives. In a cabin in the woods, you’ll
probably encounter Henry David Thoreau’s
“Walden.” Geography is destiny, as well.
Guides to local flora and fauna, books of maps
and trails, cookbooks from the neighboring
victim can get antivenom and medical care.
“We’re just trying to fill the gap between the
bite and the hospital,” says Dr. Lewin, who
helped to treat Mr. Heenan.
Lab tests show that the drug, known as an
sPLA2 inhibitor, blocks one of the deadliest
toxins in venoms from an array of snakes, Dr.
Lewin says. The drug was originally devel-
oped by Eli Lilly and Shionogi for other pur-
poses but was shelved. Eli Lilly recently pro-
vided documents to help Dr. Lewin further his
research and development.
Snakebite science needs groundbreaking
solutions, says Jerry Harrison, a member of
the bands Talking Heads and the Modern Lov-
ers, who co-founded a biotech company called
Ophirex with Dr. Lewin to advance the drug.
THE WALL STREET JOURNAL.
schools and junior leagues, mysteries set in the
surrounding towns and villages—all find their
way to a permanent place on summer-house
bookshelves and bedside tables.
If there are mysteries and thrillers, and
there almost always are, you’ll probably find a
selection of books by James Patterson, Sue
Grafton, Walter Mosley, Louise Penny and John
Grisham, alongside dozens of Agatha Christie,
Ngaio Marsh and Erle Stanley Gardner novels.
And if there are children’s books, you are
pretty sure to come across Louisa May Alcott’s
“Little Women” and an assortment of Nancy
Drew and Hardy Boys books.
Then there are the books of summer—the
ones whose covers feature a baseball diamond
or Adirondack chairs on a sun-dappled dock.
No summer-house library is complete without
a few of these.
Some houses are frozen in a particular time,
with every book a best seller from the same
era. In those, “Love Story” by Erich Segal,
“The Love-Machine” by Jacqueline Susann,
“Rich Man, Poor Man” by Irwin Shaw, “The
Lord Won’t Mind” by Gordon Merrick and “A
White House Diary” by Lady Bird Johnson, all
best sellers in 1970, might sit together, waiting
patiently for today’s summer readers to dis-
cover them. Some cottages feature yards of
Reader’s Digest condensed books, allowing vis-
itors to whip their way through every decade’s
most popular works, year-by-year.
One friend reports that she and her friends
stay every year at a turn-of-the-century hotel
in Maine that has a library overflowing with
books from decades past. They start each din-
ner by taking turns reading aloud from books
chosen at random. These run the gamut from
essays on archery to novels about zoology.
Summer is also a time for rereading. Re-
cently, I came across Ken Follett’s “The Key to
Rebecca” while spending a weekend with a
friend. I’ll never forget racing through it and
other Follett thrillers the summer I turned
20. It’s still every bit as thrilling as it was
then. As are “The Day of the Jackal” by Fred-
erick Forsyth and Octavia E. Butler’s “Parable
of the Sower,” a masterpiece set in a dysto-
pian future.
But there is a different thrill that comes
from the glorious oddities and unknowns.
What makes summer house books so delightful
is that they are often books I never knew ex-
isted and wouldn’t have chosen to read if other
options had been available. And yet it’s aston-
ishing how often my friends and I find our-
selves engrossed in random books. My most
recent was “Thatched With Gold: The Memoirs
of Mabell, Countess of Airlie”; another was
“Fillets of Plaice,” a 1971 book of “vignettes”
by the memoirist and naturalist Gerald Durrell.
Often these are diaries, collected letters, or
books of poetry by writers and public figures
who were previously complete strangers to me.
Sometimes these are books I had heard
about but thought would be of no interest. I’ll
find myself transfixed by the memoirs of a
teen idol or happily exploring a topic in sci-
ence or natural history that I had assumed
would be as dry as the dust that covered the
book itself. We could all spend more time read-
ing books other than ones that simply confirm
beliefs we already hold, or cater to interests
we know we have.
There’s a simple way of re-creating the ser-
endipity of summer reading. It involves a su-
perstition. I believe that if I knock over a book
in a bookstore, I have to buy it. So in the dark-
est days of the fall or winter, when I need a
break from everything, I’ll take my clumsy self
to my favorite local bookseller and buy the
first volume I topple. Or if that fails, I’ll let a
random stranger choose a book for me. I’ll
then cancel any plans and stay home and read
it. Instant summer, year round.
Mr. Schwalbe is an executive vice president at
Macmillan Publishers and the author, most
recently, of “Books for Living,” out in
paperback from Vintage on Tuesday.
“The name ‘antivenom’ is so perfect that peo-
ple think the problem is solved,” says Mr. Har-
rison, who is now a music producer and works
with technology and startup companies.
Other scientists are seeking more modern
approaches. Andreas Laustsen, a bioengineer
at the Technical University of Denmark, is de-
veloping a new type of antivenom that would
be made with mixtures of human, rather than
animal, antibodies. These so-called “recombi-
nant antivenoms,” produced in a fermentation
tank, would be safer, more effective and less
expensive than current antivenoms, says Dr.
Laustsen. The idea is to develop an antivenom
that would neutralize a range of toxins from
different types of snakes, he says. He is using
techniques, he adds, that were developed in
the course of research on cancer and autoim-
mune disease.
Still others are working on ways to im-
prove existing antivenoms. Some veterans of
snakebite research say that should be the pri-
ority, given limited funding. “At the moment,
we need to fix the current system because
people are dying literally over 100,000 a year,
and they can’t wait 15 to 20 years for a won-
der drug,” says David Williams, a toxinologist
and herpetologist at the University of Mel-
bourne in Australia and CEO of the nonprofit
Global Snakebite Initiative.
Dr. Williams sees an urgent need to im-
prove the prevention and treatment of snake-
bites, to tighten regulations to keep poor-
quality antivenoms off the market, and to
make antivenom production more efficient.
He supports both immediate and long-term
approaches. “I think we need to innovate
across the board,” he says.
As for the farm where Mr. Heenan was bit-
ten, it has put up signs warning about rattle-
snakes. Once he recovers, Mr. Heenan is de-
termined to get back to work there. “I
guarantee you I will religiously watch every
step from now on,” he says.
 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. Thursday, August 31, 2017 | A9

LIFE&ARTS
tray tables, turn all lights on and
off. Then they recline each seat
with knee-knocking force.
One squeaks like a mouse on an
exercise wheel. “Write it up,” says
THE MIDDLE SEAT | By Scott McCartney Joyce Adkins, a veteran flight at-
tendant from Los Angeles who’s

How to Inspect
been part of the new-plane inspec-
tion team for 17 years. “No one
wants to hear that in the middle of
the night.”

Every Piece of a
The team leaves the seats re-
clined during a lunch break to see
if any creep back up, which would
indicate a mechanical defect.

Widebody Plane
In galleys, flight attendants ver-
ify temperature readings on ovens
and chillers. (On one plane, Ms.
Adkins says she discovered a
chiller wired backward, so off was
on and on was off.) They flush all
American Airlines pilots, mechanics and flight the toilets, blow fake smoke into
attendants kick the tires on a new Boeing 787-9 smoke alarms, make sure all prere-
corded emergency messages sound
when required. They check to
make sure carpet seams line up.
They look for scuffs and scratches.
“We basically touch everything
on the airplane that the crew and
customers contact,” says Steve
Young, a Los Angeles based flight
attendant. “We’re all airplane
geeks, very detail-oriented.”
In the cockpit, Gary Beam, an
American pilot whose main job is
TRAVIS DOVE FOR THE WALL STREET JOURNAL

to test new and overhauled air-

North Charleston, S.C.
IMAGINE YOU’RE BUYING a
$270 million car. You’d want to
kick the tires pretty hard. That’s
what airlines do with new air-
planes.
Some carriers station their own
engineers at Boeing and Airbus
factories to watch their flying ma-
chines get built and check parts as
they arrive. Finicky buyers send
flight attendants, mechanics and
pilots for what are called shake-
down inspections. They get to be
the worst passengers and pilots
ever—yanking seat backs, punch-
ing all the call buttons and flying
the plane aggressively right up to
its limits before the deal is done.
“The rubber meets the road
here,” says Timothy Jackson, an
American Airlines aircraft acquisi-
tions manager, as he begins check-
ing a brand new Boeing 787-9
Dreamliner. “It’s inspected and it’s
inspected and it’s inspected. And
yet we still find things.”
Delivering one widebody air-
plane is a big deal—each plane has
a list price roughly the cost of a
high-rise hotel.
American is taking delivery of
57 new Airbus and Boeing planes
this year, or more than one a
week. Like other carriers, Ameri-
can has been using profits to up-
grade to jets that have more seats,
longer range and better fuel effi-
ciency. Five years ago, American’s
fleet averaged 15 years old. Now
the average age is 10 years.
But getting that new airplane
smell into service isn’t like order-
ing pants on Amazon Prime. Boe-
ing does its own testing, but most
airline buyers repeat the same
tests and do their own extra in-
spection. Some carriers are more
persnickety than others, Boeing
executives say, but the airline is
always right. Unhappy customers
could lead to lost future orders.
“If I was buying the airplane, I’d
probably want to fly it, too,” says
David Carbon, Boeing’s vice presi-
dent of 787 operations in South
Carolina.
Tagging along with a team of
experienced American tire-kickers
at Boeing’s factory here over two
steamy days last week shows just
how carefully airlines check out
their purchases before passengers
ever board.
Armed with rolls of red tape
used to mark problems, five flight
attendants, a couple of mechanical
experts and a test pilot attack the
285-passenger plane. All the doors
and panels are opened for inspec-
tion. In the cabin, everyone wears
booties over shoes to keep dirt
out. Like an operating room nurse
counting sponges, Boeing counts
flashlights and mirrors to make
sure nothing gets left behind in an
American Airlines employees check the rudder and inspect the paint on a new
787-9, above. A technician tracks problems found in the cabin, below.
engine or mechanical compart-
ment.
Joseph Maloy, American’s direc-
tor of aircraft acquisition, disposi-
tions and records, heads straight
to the tail of the airplane to in-
spect the auxiliary power unit—a
small engine that provides power
on the ground and in emergencies.
He checks the oil level and insula-
tion and looks for any leaks. He
makes sure safety wiring is correct
and fire-detection tubes are prop-
erly positioned and haven’t been
bumped or bent. It all looks OK.
But not everything is perfect.
Another mechanic shows him a
cooling tube inside the General
Electric engine that appears bent.
Mr. Maloy thinks it’s probably
within limits, but the tube gets
written up for GE inspection.
Inside the cabin, flight atten-
dants shake each seat violently,
grab the headrest and pull it up as
if curling weights and jerk the
cord on each entertainment con-
troller. They test power ports, USB
ports, audio jacks and the enter-
tainment system. They open all
planes, checks systems on the
ground with a Boeing analyst sit-
ting beside him. He shuts off sys-
tems to see if backups kick in and
warning lights come on, tests he’ll
repeat the following day in the air.
Capt. Beam cuts all the power—
emergency lights illuminate the
cockpit, as expected. He tests
evacuation alarms and fire alarms.
With no air conditioning in the
cockpit because normal electrical
power has been cut, sweat runs
down his face.
The next day, Capt. Beam and a
Boeing test pilot fly the plane
south from Charleston to the Flor-
ida panhandle, taking it up to
38,000 feet. Capt. Beam flies the
jet to its limits, making sure
alarms sound when he increases
air speed or slows the plane down
to stall speed. Even at 690 mph,
the ride is smooth, he says later.
After three hours of flight test-
ing, Capt. Beam is pleased with
the product. “It’s really kind of an
amazing flight. You learn so much
about the airplane doing this,” he
says back on the ground.
Flight attendant Tom Baldwin
says about 20 cabin items needed to
be checked after the test flight. One
major squawk: The crew couldn’t
connect to the Wi-Fi system.
The day before, 120 issues were
recorded, most of them cosmetic
and minor, like seat squeaks. “It
was pretty routine,” he says, ex-
cept for the Wi-Fi failure.
Those 140 punch list items,
about average for a widebody, Mr.
Baldwin says, will be addressed
this week by Boeing and its suppli-
ers.
The airplane will be officially
delivered to American on Friday,
74 days after assembly began, with
tail number N830AN and Ameri-
can’s fleet number 8LL.

PHOTO ILLUSTRATION BY THE WALL STREET JOURNAL; PHOTOS: GASOLINE GLAMOUR; KATE SPADE NEW YORK (3); CHASER BRAND; THREEPOTATOFOURCO; CUFFLINKS, INC; LETTERCLOTHINGCO; WILDFOX; UNCOMMONGOODS; ISTOCK (2)

FASHION

HOW TACOS BECAME A FASHION TREND

BY ANNE MARIE CHAKER
DON’T LOOK, but there’s a taco on your T-
shirt.
Tacos have gone from one of America’s
most popular restaurant foods to a serious
fashion statement. A $59 tank top from Los
Angeles-based clothing brand Chaser reads
“tacos are my life.” New York-based Nylon
Media’s online store sells taco-themed jew-
elry and sunglasses while Kate Spade offers a
$358 purse in the shape of a taco truck.
Online retailer Etsy says taco searches
were up more than 65% in the first half
of this year.
Kevin Palarz, a 36-year old structural en-
gineer in Barrington, Ill., has a thing for ta-
cos. He and his friend Mark Lanctot track
their taco consumption—including restau-
rants and ratings—on a shared spreadsheet.
Mr. Palarz, who has consumed, 881 tacos
since January, owns several taco-themed T-
shirts and socks. “When I wear my taco T-
shirt, people on the street talk to me,” he
says. “It’s a social thing.”
The public taco obsession has been stoked
in recent years by teens and 20-somethings,
experts say, who are exposed to celebrity-
magazine images of a chilled-out, West
Coast lifestyle. “There is something funda-
mentally California about tacos,” says Megan
Baca, vice president of design for Chaser,
whose beachy T-shirts and dresses are sold
in department stores such as Bloomingdale’s
and Nordstrom. Celebrities such as singer
Katy Perry and model Chrissy Teigen have
recently been photographed waiting in line
for tacos or eating them. Tacos got a major
break in 2015: After much lobbying by Taco
Bell and others, the nonprofit Unicode Con-
sortium, which regulates coding standards
for written computer text, approved the taco
as an emoji. Graphics of tacos began trick-
ling in after that, says Sarah Owen, senior
editor of digital media and marketing at
fashion forecasting firm WGSN. Everything
from rugs, towels and baby booties followed,
as well as shirts that say “It’s Taco Time” or
“There is no We in Tacos.”
Clothing with symbols and statements are
like wearable tweets, says Ms. Baca at
Chaser. “It’s little soundbites of ourselves,”
she says. “I’m trying to capture the emotion
of a mini-mental vacation in a T-shirt.”
Ms. Baca designed her first taco shirt two
years ago after department store buyers
balked at designs touting champagne and
beer. “It was, ‘How do you capture the fun. .
.without alcohol?’ ” Ms. Baca says.
More broadly, food seems to be having a
fashion moment. While many trends start
on the runway and trickle down to the
masses, the food-symbol trend is going the
reverse, says Mark-Evan Blackman, assistant
professor in the fashion design department
at the Fashion Institute of Technology. High-
end Italian brands such as Milan-based
Etro are incorporating foods such as
spaghetti into designs, he says. Ta-
cos, Mr. Blackman says, remain
planted in U.S. fashion. “They are
cool and they are sexy.”
Tacos are among the top five foods
ordered at U.S. restaurants, according
to NPD Group. Their influence has
crossed into other restaurant cuisines.
Part of the fun is that some taco de-
signs make people laugh and some leave
others scratching their heads. Ms. Owen
authors an annual report titled Slanguage
which deconstructs popular new catch
phrases and symbols for marketers. The re-
port explains that teens and 20-somethings
have created their own vernacular, “with an
injection of humor and irony that transcends
parents and anyone over the age of, say, 35.”
Tacos, which have attained street credibility
among 20-somethings, she says, are part of
that. “The microtrend of food,” Ms. Owen
says—designs containing symbols and ex-
pressions of love for certain foods—“is a
backlash to this huge wellness and clean-eat-
ing movement. Now, it’s that girl who says
‘I’m going to treat myself to a doughnut and
talk about how much I love tacos,’” she says.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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A10 | Thursday, August 31, 2017 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
First Resilience,
The Hurricane Learning Curve Then Boondoggle
H
urricane Harvey is still pouring torren- preparing to deploy overseas. By Monday more
tial rain on Texas and Louisiana, which than 12,000 Guardsman were assisting with An arrow straight up cars found their way blocked by a mas-
in recent decades has sive cattle drive down U.S. 90, as ranch-
means more damage to come. But it search and rescue, and preparing to help with
been the rising sever- ers moved their herds to higher
isn’t too soon to point out recovery. ity of hurricane dam- ground.
some compensating news: The lessons of failure The state ramped up more age. The culprit is the Disrupted drivers didn’t mind; they
Storm responders are putting in Katrina are saving than 200 buses to transport ever larger number of stopped to take pictures, according to
into practice the lessons of people out of coastal areas, people and their stuff the Houston Chronicle, eyewitnesses to
past extreme weather and sav- lives in South Texas. and more than 40,000 shelter BUSINESS
in the path of these a phenomenon seen only in John
WORLD
ing lives as a result. beds in safe zones. Houston By Holman W.
storms. Wayne movies. Another expression of
By late Tuesday the storm Mayor Sylvester Turner gave It has nothing to do resilience.
Jenkins, Jr.
had dropped 50 inches of rain on parts of Texas— clear instructions to residents to stock up and with climate change. At the time of Sandy, New York’s
breaking continental records. Harvey appears to avoid roads, and he quickly deployed police and During the past de- Mayor Mike Bloomberg and Gov. An-
have claimed at least 15 lives, including a family firefighters. Dallas opened a megashelter at its cade that we keep being told was the drew Cuomo blamed the damage, non-
hottest on record (the record being sensically, on global warming. They had
of six swept away in a vehicle that remains miss- convention center and put hundreds of buses on
skimpy), the U.S. also saw a dearth of an eye on the administration in Wash-
ing. The Houston police by Tuesday morning had standby for flood victims. Officials in smaller, hurricane landfalls. A major storm ington. They knew its hobbyhorses and
rescued at least 3,400 people from rising floodwa- coastal towns worked with state authorities on hadn’t hit the U.S. since 2005. talking points. Their blather was aimed
ter, and the Coast Guard rescued 3,000 on Mon- mandatory evacuations. Sandy, as many in the press played at creating an atmosphere conducive to
day. Officials are predicting the storm will force One theme is communication and clear lines down at the time, had actually been the billions in federal rebuilding grants
30,000 people into shelters and the economic of authority. Every analysis of Katrina has pointed downgraded to a tropical storm when it that soon would be flowing.
damage will be at least $30 billion. to confusion between Louisiana and Washington reached the New York and New Jersey
Yet as terrible as the toll is, it’s impossible to about who should be in charge. In this case, Gov- shore in 2012. The impact was worse
ignore the improved response compared to ernor Abbott and local officials appear to be tak- than it might have been for a simple Maybe we should start
storms past. Hurricane Katrina in 2005 left New ing the lead but are working closely with the feds reason: The storm followed an unusual budgeting for the kind of
westward track, and a garden-variety
Orleans a chaotic scene of failed evacuation, to marshal resources. These agencies are also us- bailout Houston will need.
storm surge happened to coincide with
stranding 100,000 people in the low-lying city. ing social media to provide instructions to vic- a full-moon high tide.
It killed 1,833, left three million without power tims, cut through rumors, and work with Housto- Harvey has been an energetic storm
and cost an estimated $100 billon to $130 billion. nians rushing to help neighbors. but also an uncharacteristically station- Two-thirds of Katrina’s damage in
A few weeks later more than 100 people died at- Corporate America also learned from Katrina. ary one. The deluge that fell and con- New Orleans wasn’t covered by insur-
tempting to leave Houston, part of a panicked Telecom companies have upgraded their networks tinues to fall on Houston is created by ance. Less than half of Houston com-
evacuation before Hurricane Rita. against natural disasters after Katrina knocked a storm hovering in place, sucking up mercial buildings and homes in the wa-
The federal government, local officials and out more than 1,000 cell sites and put 911 calls and moisture from the Gulf of Mexico and terlogged zone are covered by flood
private and charitable interests are now apply- other networks in gridlock. As Harvey neared, dumping it on land. insurance.
ing the lessons of these past failures. Katrina ex- AT&T and Verizon dispatched fuel for emergency Even press accounts that noted a It wouldn’t be politically realistic to
posed the Federal Emergency Management generators and deployed mobile cell sites. lack of discernible connection to cli- expect the Trump administration to
mate change somehow, by paragraph resist opening the spigots as every
Agency’s dysfunction, and Congress responded The Federal Communications Commission re-
three, were quoting climate-change other administration has. The back-
with reforms that altered how the agency ported Sunday that just 4% of 7,804 cell sites in campaigners. ground chant may not be “climate
works—particularly on prestorm preparation. Harvey’s path were knocked out. While Texans are This is a counsel of despair. Daily change”—perhaps the political sound
Prior to Katrina, FEMA waited until governors certainly getting busy signals, many emergency tides rise and fall along the East Coast effects will dwell instead on Houston’s
requested assistance, often arriving late as it did calls are getting through. By Friday Wal-Mart had anywhere from 2 feet to 11 feet. Storm role in protecting America’s “energy
in New Orleans. already dispatched more than 1,000 trucks of surges associated with hurricanes range independence.”
FEMA was on the ground in Texas nearly 48 goods to Houston, and Bass Pro Shops is handing from 7 feet to 23 feet. These dwarf the Only 10% of California residents have
hours before Harvey made landfall, working with over 80 of its Tracker boats for rescues. effect of any global-warming-caused in- earthquake insurance; 85% of the public
local partners and unifying a larger federal ef- The Texas stretch of the Gulf Coast is home crease in the steadily rising sea levels assets in San Francisco are “self-in-
fort. In addition to thousands of FEMA employ- to nearly five million barrels a day of oil and gas of the past century. sured”—i.e., uninsured. What will be
ees and the Coast Guard, the Energy Department refining capacity. Post-Katrina, refineries hard- The U.S. economy consists of mil- the accompanying music then?
lions of Americans who aren’t waiting If Gov. Jerry Brown is still in office,
was on hand to monitor oil and gas facilities, and ened their facilities against the flooding threat
around for someone to tell them what maybe he will find some way to con-
Health and Human Services sent 650 staffers to by investing in systems that guard electric to do. This makes it resilient. Private nect an earthquake to global warming.
provide medical assistance. The Department of equipment. They stacked up on emergency gen- boat owners in Houston leapt into ac- Otherwise taxpayers in the Midwest
Homeland Security on Saturday activated a erators and fortified against wind and storm tion to rescue the stranded, many can expect to hear how vital Silicon
post-Katrina program that stands up a “surge” damage. So while refineries are closed as they whose pleas were transmitted via social Valley is to America’s global leadership.
force of non-FEMA federal employees trained to ride out the storm, they should be back online media, bouncing server to server until If the U.S. were a private business,
assist in natural disasters. quickly when weather and roads clear. they reached the guy with a skiff down such “contingent” liabilities would
Former Louisiana Gov. Kathleen Blanco daw- The storm isn’t over, and no doubt some will the block. show up in measures of the federal
dled about getting her National Guard on the find reasons to point fingers. But at a time when Gasoline prices ticked up on reports debt and deficit. In Washington, they
streets to help with rescues and maintain order. Americans have so little trust in government, it’s of damage to the Gulf’s massive refin- do things differently.
ing industry, encouraging some to forgo One of the most interesting quotes
Texas Governor Greg Abbott quickly activated worth noting when it shows it can learn from
filling up and leaving more fuel avail- collected by Journal reporters this
the entire Texas National Guard, including those previous failures. able for those who value it most. For- week comes from Michael Williams, a
eign refiners are eyeing the higher mar- ballpark maintenance worker for the

Nixing the $520,000 ‘Footlong’ gins available in the U.S. and

dispatching cargoes our way.
Houston Astros, whose position atop
the American League West will be a

A
Thousands in Houston have been solace to the hard-hit city. He noted
merica’s Seventh Circuit Court of Ap- attorneys were to collect $520,000 in fees. flooded out, and thousands more are succinctly: “Houston floods fast.
peals has given the plaintiffs bar some- Enter Theodore Frank, who directs the Center without power and likely to be so for They’re doing all this construction but
thing to chew on. Writing for a three- for Class Action Fairness at the Competitive En- days. The outages Americans experi- we still got no [storm] outlets.”
member panel, Judge Diane terprise Institute. He objected ence nowadays aren’t more frequent, Between the immediate displays of
Sykes on Friday threw out a A U.S. appeals court to the settlement on grounds but tolerance for them is lower, hence self-help and resilience, and the pre-
a growing number of householders dictable federal spendathon that’s com-
class-action lawsuit settle- tosses the Subway that while the lawyers were
who outfit themselves with emergency ing, let Mr. Williams be heard too. A
ment involving the Subway “handsomely compensated” generators. few such lessons and better planning
food chain’s “Footlong” sand- sandwich settlement. the class received “negligible Even those Houston-area residents might help lighten the burden of those
wich on grounds that the only to no relief.” who were free to move around in their facing future emergencies.
beneficiaries were the lawyers. During litigation it emerged
The case started in 2013 after an Australian that though the baked length of a roll may vary,
teenager posted a photo on Facebook of a Subway the amount of dough is uniform. Judge Sykes also
Footlong next to a tape-measure showing it to be noted that “after the settlement—despite the new
11 inches. The post went viral—and so did the law- measuring tools, protocols, and inspections—
Those Who Commute
yers. Nine class-action suits were launched there’s still the same small chance that Subway
around the U.S., later consolidated into one. will sell a class member a sandwich that is slightly
Subway soon announced steps to ensure its shorter than advertised,” owing to the inherent
Deserve a Salute
By James Bruce flourish, and too many unmarried fa-
baked rolls would be at least 12 inches. In 2016 vagaries of food production. It’s safe to assume,

C
a lower court approved a settlement under wrote Judge Sykes, that Subway customers ramped almost to the point of
which Subway promised to maintain practices “know this as a matter of common sense.” These suffocation, surrounded by hard
to ensure more uniformity in its bread. The suing days we’ll take any victory for common sense. plastic and metal, you glide
through the darkness, wondering
whether you will survive. You’re not pi-
Nuclear Missiles Over Tokyo loting a submarine or a spacecraft
headed toward Mars. You’re just a New
thers don’t, as Charles Murray ex-
plains in “Coming Apart.”
• For the schools. If you can afford a
private education for your little angels,
then good for you. But for many par-
ents, choosing a school means chang-
ing districts. So get into that car, dad.
Take that train, mom.

R
esidents of northern Japan awoke Tues- their own nuclear arsenal, but that could change York commuter trying to get home, as • For the opportunity. What do New
day to sirens and cellphone warnings to if they conclude America isn’t reliable in a cri- the “Summer of Hell” for public transit York, Washington and San Francisco
nears its end. Or perhaps you’re leav- have in common, apart from terrible
take cover as a North Korean rocket flew sis. Or Japanese may simply decide they can’t ing Los Angeles on Tuesday to beat the
overhead. The intermediate- have their survival depend on Friday traffic.
range missile test will further Accepting a nuclear even a faithful ally’s judgment. Nearly 40% of American workers— Your daily grind
roil the politics of security in North Korea probably Some Japanese politicians are more than 50 million people—travel 30
Northeast Asia and is another already talking about their minutes or more to work, according to
brings prosperity
prod toward Japan acquiring means a nuclear Japan. own nuclear deterrent. And the Census Bureau. It’s a grind: the de- to me—and the world.
its own nuclear deterrent. while public opinion currently layed trains, the stink of sweaty dress
Pyongyang tested long- opposes nuclear weapons, fear shirts, the motionless traffic on the
range missiles over Japan in 1998 and 2009, could change minds. Japan has enough pluto- “freeways.” traffic? The answer is good white-
claiming they were satellite launches. The first nium from its civilian nuclear reactors for more But the worst part is the incessant collar jobs and a chance for a better
reminder that you are the world’s life. Cities are America’s economic en-
shocked Japanese and led to cooperation with than 1,000 nuclear warheads, and it has the
problem. Walking doesn’t pollute. gines, and they can take you to success
the U.S. on theater missile defense. After the know-how to build them in months. Cars and trains do. Today’s cultural only if you hop on board.
second, Tokyo curtailed the North’s funding This prospect should alarm China, which trends protest your lifestyle. Think • For America. According to Mark J.
sources within Japan’s ethnic Korean commu- would suddenly face a nuclear-armed regional about it the next time you drink your Perry, in terms of economic output,
nity. Tuesday’s launch is even more threatening rival. The U.S. also has a strong interest in pre- fair-trade coffee on a train built be- New York state rivals South Korea, but
because U.S. and allied intelligence agencies as- venting a nuclear Japan, not least because fore the Hogwarts Express. Your trip with 17 million fewer workers. Califor-
sess that North Korea now has the ability to hit South Korea might soon follow. East Asia would isn’t recyclable. nia beats France, but with six million
Japan with a miniaturized nuclear warhead join the Middle East in a new era of nuclear pro- As you face the day ahead—and the fewer workers. This kind of perfor-
mounted on a missile. liferation, with grave risks to world order. This straphanger next to you, who really mance wouldn’t be possible without
Much of Japan is protected by its own missile is one reason that acquiescing to a North Korea needs a shower—you may begin to for- millions of American commuters. Your
defenses as well as systems operated by U.S. with nuclear missiles is so dangerous. get why you commute. Here’s a fresh disagreeable journey helps support the
reminder: productivity that delivers prosperity to
forces in the region. Japan also recently de- Yet this is the line now peddled by former
• For your family. How you used to the country, indeed the world.
ployed four Patriot PAC-3 missile-defense bat- Obama National Security Adviser Susan Rice love the city when you were single and That includes the small town in Ar-
teries to the west of the country, but these and former Director of National Intelligence carefree! But that cute neighbor be- kansas where I live. I walk to work,
didn’t cover the northern island of Hokkaido James Clapper, who says the U.S. must begin came your spouse, and then came mar- which isn’t without hazards. One time
overflown by Tuesday’s missile. “accepting it and trying to cap it or control it.” riage and maybe children. A kitchen I was bitten by a duck overeager (in my
Japan’s ultimate security is the U.S. defense Having said for eight years that a nuclear North the size of a waffle iron felt hip when estimation) to protect its nest.
and nuclear umbrella, with its treaty guarantee is unacceptable, they now say that President you were eating out all the time, but But, overall, it’s wonderful. Yet I
that the U.S. will respond if Japan is attacked. Trump and Japanese Prime Minister Shinzo Abe then you learned to cook. know how much I depend on you, the
But the logic of deterrence depends on having had better get used to it. • For the community. If you drive big-city commuters: You set up my re-
a rational actor as an adversary, and rationality But “control it” how? North Korea has made from suburbia to an office downtown, tirement account, approved my mort-
can’t be guaranteed in North Korea. Its recent clear it won’t negotiate away its nuclear pro- you’re leaving a place where first gage application and routed my new
comes love, then comes marriage, shirt from a distribution center to my
development of an ICBM capable of hitting the gram. The U.S. can threaten mutual-assured de- then comes a baby in a carriage. In doorstep. So thank you—and have a
U.S. mainland also changes the equation. If struction, but Tuesday’s missile test over Japan cities the baby often comes first, safe trip home.
North Korea attacked Tokyo and the U.S. re- shows how North Korea will use its nuclear sometimes with no marriage at all.
sponded with an attack on Pyongyang, U.S. cit- threat to coerce and divide the U.S. and its al- That’s a crucial difference. Married fa- Mr. Bruce is an associate professor
ies might then be endangered. lies. Accepting a nuclear North Korea means ac- thers work to make their neighbor- of philosophy at John Brown University
Japanese leaders have long resisted building cepting a far more dangerous world. hoods places where children can in Siloam Springs, Ark.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
Trump’s Reassuring Hurricane Response
By Tevi Troy
P
resident Trump visited
Texas Tuesday to assess
the damage from Hurri-
cane Harvey and show
concern for its victims.
So far, his administration is
largely getting praise for effective
handling of the crisis. Washing-
ton’s disaster authorities appear
to be in sync with the state on
roles and responsibilities; the Fed-
eral Emergency Management
Agency and its leader, Brock Long,
deployed resources as Harvey ap-
proached; and the government re-
sponse as a whole appears well
coordinated.
The White House has
shown a focus on Harvey
that extends even to the
president’s Twitter feed.
“I give FEMA a grade of A-plus,
all the way from the president
down,” Texas Gov. Greg Abbott
told “Fox News Sunday.” Yes, Mr.
Abbott is a fellow Republican, but
he is also interested in protecting
Texas and would not have said “A-
plus” if the state weren’t getting
what it needed.
That assessment is backed up
by Rear Adm. W. Craig Vanderwa-
gen, a former career emergency
manager who is plugged into the
Harvey effort. “Early read,” he told
me in an email, “is that Executive
Branch is performing well under
this President.”
Modern Liberalism’s False Obsession With Civil War Monuments
Visit the American
Museum of Natural
History in New
York City, and be-
tween exhibits of
dinosaur skeletons,
Asian elephants
UPWARD
MOBILITY and Alaskan moose
you might notice a
By Jason L.
Riley
bust of Henry Fair-
field Osborn and a
plaque honoring
Madison Grant. Osborn and Grant
were two of the country’s leading
conservationists in the early
1900s. They also were dedicated
white supremacists.
Osborn, a former president of
the museum, founded the Eugenics
Education Society—now known as
the Galton Institute—which sought
the improvement of humanity
through selective breeding.
Grant, a co-founder of the Bronx
Zoo, is known today for his influ-
ential 1916 best seller, “The Pass-
ing of the Great Race,” a pseudo-
scientific polemic arguing that
nonwhite immigrants—which in-
cluded Eastern and Southern Euro-
peans by his definition—were
tainting America’s superior Nordic
stock.
Osborn, who was a zoologist by
training, wrote the introduction to
Grant’s book, which Hitler called
Misusing U.S. Sanctions Will Sap Their Power
By Jarrett Blanc
S
ince taking office, President
Trump hasn’t hesitated to
threaten or implement sanc-
tions against countries such as
Venezuela and North Korea. Sanc-
tions are useful tools, but Mr.
Trump and bipartisan majorities in
U.S. Congress run the risk of mak-
ing them less effective.
The U.S. economy’s size isn’t
the primary reason its sanctions
are so powerful: Countries without
a significant trade relationship
with the U.S. can still be severely
damaged by bilateral sanctions.
Though the European Union’s
gross domestic product almost
matches America’s, EU sanctions
are much less devastating. This in-
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Two reasons suggest themselves
for the apparent success: person-
nel and preparation. Mr. Trump
has surrounded himself with lead-
ers experienced in this area. John
Kelly, the president’s chief of staff,
is fresh off his stint as the secre-
tary of homeland security. He
brought to the White House his
own deputy, Kirstjen Nielsen, a
veteran of George W. Bush’s Home-
land Security Council.
Tom Bossert, another Bush
alumnus now advising Mr. Trump
on homeland security, has acquit-
ted himself well on television, pro-
jecting calm and expertise as he
discusses the hurricane response.
It may be premature to conclude
that Mr. Kelly has succeeded in
bringing order to the Oval Office,
but Harvey has demonstrated a re-
assuring ability to focus on a di-
saster when needed.
Beyond the White House, Mr.
Trump still lags behind his prede-
cessors in filling political appoint-
ments, but he appears to have pri-
oritized the right ones.
The president has made nomi-
nations for about half the slots at
the Department of Homeland Secu-
rity, more than at most depart-
ments. Some nominees, such as
Mr. Long’s two deputies at FEMA,
await Senate confirmation hear-
ings. Mr. Long is an experienced
hand, having previously served as
Alabama’s head of emergency man-
agement. He has been a reassuring
and take-charge presence through-
out the Harvey response.
Mr. Long began preparing for
the next disaster the day he was
sworn in, when he presided over a
cabinet-wide tabletop exercise on
“my Bible.” The New Yorker maga-
zine once described Grant as
someone who “extended a passion
for preserving bison and caribou
into a mania for preserving the
‘Nordic race.’ ”
Given their options, why are
liberals so focused on monuments
to Civil War figures? Politically, it
makes some tactical sense. The
GOP has spent decades warding
off claims of racism, and forcing
Republican politicians to defend
prominent displays of Confeder-
ate statuary keeps them on the
defensive.
On another level, however, liber-
als make a fetish of Civil War
monuments because it feeds their
hallowed slavery narrative, which
posits that racial inequality today
is mainly a legacy of the country’s
slave past.
One problem with these assump-
tions about slavery’s effects on
black outcomes today is that they
are undermined by what blacks
were able to accomplish in the first
hundred years after their emancipa-
tion, when white racism was ram-
pant and legal and blacks had big-
ger concerns than Robert E. Lee’s
likeness in a public park.
Today, slavery is still being
blamed for everything from black
broken families to high crime
fluence derives from America’s
central position in international fi-
nance—particularly its control
over the invisible plumbing that
allows money to move around the
world.
Recognizing how much of their
work touches the U.S., major for-
eign banks will often go so far as
to treat themselves as “U.S. per-
sons” for legal and regulatory pur-
poses. Countries or entities subject
to U.S. sanctions thus have a very
difficult time with even simple
banking transactions, which is cat-
astrophic for trade.
Yet America’s dominant place in
international banking, like its posi-
tion in the broader international
system, can be lost. The interna-
tional financial plumbing can be
Robert Thomson
Chief Executive Officer, News Corp
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OPINION
Texas Gov. Greg Abbott and President Trump in Corpus Christi, Texas, Aug. 29.
emergency management. Frank
Cilluffo, a homeland security aide
in the Bush administration, says
this showed the White House was
taking disaster readiness seri-
ously. “Training is everything
here,” he told me. “You want to
make mistakes on the practice
field, not in the actual event.”
Then in early August, weeks be-
fore Harvey showed up on the ra-
dar, Mr. Long hosted the president
and other cabinet officials at
FEMA for a briefing on the com-
ing hurricane season.
Thus far, the most controversial
part of the president’s hurricane
response has been communications.
On the positive side of the ledger,
Mr. Trump has used his vast Twit-
ter following both to provide use-
ful information and to convey that
rates in black neighborhoods to
racial gaps in education, employ-
ment and income. Yet outcomes in
all of those areas improved mark-
edly in the immediate aftermath of
slavery and continued to improve
for decades.
Black accomplishments in
1940s and ’50s America
prove today’s setbacks
aren’t due to slavery.
Between 1890 and 1940, for ex-
ample, black marriage rates in the
U.S. where higher than white mar-
riage rates. In the 1940s and ’50s,
black labor-participation rates ex-
ceeded those of whites; black in-
comes grew much faster than
white incomes; and the black pov-
erty rate fell by 40 percentage
points.
Between 1940 and 1970—that is,
during Jim Crow and prior to the
era of affirmative action—the
number of blacks in middle-class
professions quadrupled.
In other words, racial gaps were
narrowing. Steady progress was
being made. Blacks today hear
plenty about what they can’t
changed with the investment of
time and resources by banks, gov-
ernments and regulators. So far
there haven’t been sufficient in-
centives to make those changes,
but governments and banks will
reconsider if the U.S. abuses its
position.
Policy makers and regulators in
the U.S. have long been sensitive to
this risk. They have taken it into
account in the application of new
sanctions and have worked closely
with foreign banks to ensure
they’re doing permissible busi-
ness—even business barred to their
American competitors.
For example, outreach surround-
ing the Iran deal was designed to
assure foreign businesses and reg-
ulators that remaining U.S. sanc-
tions were tailored and not a back
door to enforcing the sanctions
lifted by the deal. Thanks to these
efforts, major foreign banks work-
ing with Iran have largely chosen
to work with U.S. officials and stay
in careful compliance.
Washington’s caution seems to
have been lost with the latest
sanctions against Iran, Russia and
North Korea—legislation that
passed with overwhelming sup-
port from both parties and was
signed into law by a hesitant Mr.
Trump. The new sanctions will do
little to change the kinds of com-
merce allowed with the target
countries. The law’s main function
is to shift influence over lifting
sanctions from the White House
to Capitol Hill.
Congress has historically found
it more attractive to levy sanctions
than to lift them. Sanctions gener-
ally target adversaries, so that
even if a country changes the pol-
Thursday, August 31, 2017 | A11
REUTERS
the White House is actively moni-
toring events. On Tuesday he
retweeted an urgent alert from
Brazoria County saying that a levee
at Columbia Lakes had been
breached and residents needed to
get out immediately.
Mr. Trump’s tweets about the
storm have been informative and
responsible, with a tone appropri-
ate to the human tragedy. To the
extent he has been criticized, it has
been mostly for tweeting on unre-
lated topics, such as his pardoning
of former Sheriff Joe Arpaio and
the “great” new book by Sheriff Da-
vid Clarke. Although it isn’t realis-
tic to expect the White House to
eschew all other subjects during a
crisis, perhaps the president could
avoid tweeting about unessential
matters until the storm passes.
achieve due to the legacy of slav-
ery and not enough about what
they did in fact achieve notwith-
standing hundreds of years in
bondage followed by decades of le-
gal segregation.
In the post-’60s era, these posi-
tive trends would slow, stall or in
some cases even reverse course.
The homicide rate for black men
fell by 18% in the 1940s and by an-
other 22% in the 1950s. But in the
1960s all of those gains would van-
ish as the homicide rate for black
males rose by nearly 90%.
Are today’s black violent-crime
rates a legacy of slavery and Jim
Crow or of something else? Unfor-
tunately, that’s a question few peo-
ple on the left will even entertain.
Just ask Amy Wax and Law-
rence Alexander, law professors at
the University of Pennsylvania
and University of San Diego, re-
spectively, who were taken to task
for co-authoring an op-ed this
month in the Philadelphia Inquirer
that lamented the breakdown of
“bourgeois” cultural values that
prevailed in mid-20th-century
America.
“That culture laid out the script
we all were supposed to follow,”
they wrote. “Get married before
you have children and strive to
stay married for their sake. Get
icy that prompted sanctions, it
likely will have other problems
with the U.S.
Some members of Congress will
be tempted to promote these re-
maining issues as new reason to
keep sanctions in place. That’s why
the 1974 Jackson-Vanik restrictions
on most-favored-nation status for
America’s central role in
finance gives it unique
clout, but this could erode
if Congress isn’t careful.
Russia stayed in place for a gener-
ation after Russia opened up emi-
gration restrictions, the legisla-
tion’s original aim.
Mr. Trump is right to say the
shift in power toward Congress
will make it harder to use sanc-
tions as a chit in international
negotiations.
For those who are deeply con-
cerned by Russian meddling in
other countries’ elections—and by
Mr. Trump’s apparent noncha-
lance—congressional authority
over sanctions may feel like prog-
ress. For banks, governments and
regulators abroad, it looks as if
the U.S. is turning sanctions from
a means of achieving particular
ends into permanent stigmas. That
makes it more attractive to find
ways to leave the U.S. banking
system.
Mr. Trump also is threatening
loudly to trash the Joint Compre-
hensive Plan of Action, better
known as the Iran deal. Never
mind that America’s international
Outside Twitter, the administra-
tion has relied on experts like
Messrs. Long and Bossert to reas-
sure the public, which seems an
appropriate strategy. Message dis-
cipline matters. When responding
to a disaster, Mr. Cilluffo says, you
“can’t have one message here, an-
other message there, and a tweet
saying a third thing.”
It’s reassuring that the White
House understands the importance
of relying on trusted messengers
during a crisis—especially given
the backlash to Mr. Trump’s com-
ments this month after the violence
in Charlottesville, Va. During an
emergency, the government needs
wide cooperation from the public,
which may not be possible under
any president with credibility prob-
lems. Messrs. Long and Bossert
have the standing to appeal to
Americans across the partisan di-
vide during Harvey and whatever
disaster may come next.
Mr. Trump’s handling of the
hurricane response thus far is to
be commended, but this is no
time for complacency. The recov-
ery in Texas will take a long time,
and new disasters are always in
the offing. The Trump administra-
tion would serve Americans well
by following its successful ap-
proach to this first crisis with a
continuing focus on disaster man-
agement. Today it’s Harvey. To-
morrow, who knows?
Mr. Troy, a former deputy sec-
retary of health and human ser-
vices, is author of “Shall We Wake
the President? Two Centuries of Di-
saster Management From the Oval
Office” (Lyons Press, 2016).
the education you need for gainful
employment, work hard, and avoid
idleness. . . . Be respectful of au-
thority. Eschew substance abuse
and crime.”
The professors noted that disad-
vantaged groups have been hit
hardest by the disintegration of
these middle-class mores and that
the expansion of the welfare state,
which reduced the financial need
for two-parent families, hastened
social retrogression.
“A strong pro-marriage norm
might have blunted this effect,”
they wrote. “Instead, the number of
single parents grew astronomically,
producing children more prone to
academic failure, addiction, idle-
ness, crime, and poverty.”
For the suggestion that some-
thing other than continuing racial
bigotry and the legacy of slavery
has contributed to racial inequality,
a coalition of faculty and students
at the University of Pennsylvania
promptly accused the professors of
advancing a “racist and white su-
premacist discourse.”
The reality is that there was a
time when blacks and whites alike
shared conventional attitudes to-
ward marriage, parenting, school
and work, and those attitudes
abetted unprecedented social and
economic black advancement.
partners and the intelligence com-
munity agree that Iran is fulfilling
its commitments.
The U.S. built an international
consensus that Iran’s nuclear pro-
gram was a problem. European
and Asian partners took appropri-
ate action, suffering real economic
harm by ratcheting back oil pur-
chases and other commerce with
Iran and then working to negoti-
ate the deal.
If the U.S. cannot take “yes” for
an answer, those same partners
likely will be at least as concerned
about the threat posed by Amer-
ica’s financial power as the threat
of Iran’s nuclear program.
In a time when U.S. consistency
and reliability is openly questioned
by some of America’s closest allies,
threats of permanent sanctions
will draw more attention to the
risks of being dependent on the
U.S. financial system. America’s
importance as an international fi-
nancial hub won’t disappear over-
night, and neither will the reach of
U.S. sanctions.
If the U.S. comes to be seen as
an untrustworthy custodian,
there will be a slow and inexora-
ble erosion of America’s role and
influence.
Sanctions compare favorably
with any other tool the U.S. has—
and certainly very favorably to
military action. They can help ad-
dress real problems in the world,
which is why the U.S. shouldn’t
fritter them away.
Mr. Blanc, a senior fellow at the
Carnegie Endowment for Interna-
tional Peace, was the U.S. State
Department coordinator for Iran
nuclear implementation (2015-17).
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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A12 | Thursday, August 31, 2017 THE WALL STREET JOURNAL.

LIFE & ARTS

ART REVIEW

‘Truth-to-Materials’ Sculpture
Tom Joyce’s monumental works are a love letter to abstract shape, paying homage to forebears dating back to Brancusi
thought possible from forged steel.
BY ANN LANDI
And the same is true of several of
the outdoor sculptures, like “Stack
Santa Fe, N.M. VI” and the “Surge” series
THESE ARE strange times for (2015-17), five discrete plump
monumental sculpture, whether sculptures, whose gentle folds
outdoors or indoors, sited in public have an almost erotic charge. In
spaces or ensconced in the capa- the same gallery, a couple of huge
cious lobbies of high-rise buildings. charred drawings, made up of exu-
Yet for ambitious artists, big works berant circular shapes burned into
in durable materials can prove irre- wood fiber through “pyroengrav-
sistible. And while contemporary ing,” are impressive in size but
art may not carry the controversial oddly inert, like giant doodles with
charge of Confederate statues, it’s a protractor and compass.
still a cultural landscape dotted And what to make of the last in-
with extremes: Jeff Koons’s giant terior gallery, an installation called
balloon dogs and Damien Hirst’s “Tenet” (2017), which is literally
flayed vision of the Virgin Mary on the sculptor’s studio turned upside
the one hand, and on the other, down? A desk (with gloves, a note-
works by younger artists like Carol book and other implements of the
Bove and Roxy Paine, who riff on a artist’s trade attached), bookcases
Modernist tradition that the unini- and tools are all affixed to the ceil-
tiated may find hard to understand. ing. Mr. Joyce told me it was a
But another strain of sculpture kind of farewell, a notion I had
is still adventurously at work, and trouble grasping. To the average
this one stems from the venerable visitor, the dimly lighted installa-
“truth-to-materials” aesthetic and tion will seem spooky, threatening
DANIEL BARSOTTI/CCA

love of abstract shape that runs and surreal.

from Constantin Brancusi through Mr. Joyce is an artist of huge
David Smith right up to Richard gifts with perhaps too many ideas
Serra. Tom Joyce—who is the sub- percolating at once. I’m generally
ject of a mini-survey here at the not one to complain about the ab-
Center for Contemporary Arts sence of lengthy labels (and I’m
called “Everything at Hand,” com- Installation view of ‘Everything at Hand’ at the Center for Contemporary Arts with ‘Bloom V’ (2016) in the foreground told a catalog will be available
prising 45 works made in the past soon), but visitors to this show will
12 years—falls squarely into this whether his sources are weapon also provided the schematic geom- look like crusty canvases cooked need more hand holding to grasp
tradition, with noble monuments parts or the soil from battlefields etries for a series of three seven- up by, say, Larry Poons 40 years the most promising direction sug-
weighing up to 21 tons made from around the world. A little wall text color lithographs. This is a kind of ago, these are in reality photos of gested by this survey: the interface
cast iron and forged steel. might have lent more resonance to high-tech recycling that could be the ends of the massive ingots that between technology (CT scans, 3-D
The show, however, runs into visually pleasing sculptures that tied together better through wall provide Mr. Joyce with his raw computer imaging, video, high-tech
trouble almost from the start. Out- otherwise haven’t much new to text. material. Again, some explanation photography) and traditional large-
side the main gallery doors are gi- say. Another gallery presents ghostly would be helpful. scale abstract sculpture.
ant clusters of stainless-steel A couple of silent videos near 3-D printed tools used by the art- This reviewer felt on firmer There is much here to delight,
spikes, like frozen sparklers, with the reception desk show the artist ist, primitive shapes that look like ground in the largest interior gal- and many works that puzzle. A
cast-iron modeled hammerheads at work in the studio and the they’re made from quartz, sus- lery, where big steel sculptures better edited exhibition, one that
providing a central core. Those in- foundry, where clumps of red-hot pended from the ceiling (they are give full rein to Mr. Joyce’s dexter- connected the disparate strains of
ner elements are a reference to metal emit showers of sparks as a “stereolithography printed clear ity with shape and surface, talents the artist’s fertile imagination
Mr. Joyce’s history as a black- layer of steel is sheared off. Not polycarbonate-like plastic [with] that tie him to the grand Brancusi- through text and placement, would
smith, a trade he learned almost much explanation needed here, but LED lights,” according to the exhi- to-Serra tradition. “Bloom IV” and leave visitors with more of a sense
50 years ago as a teenager in El “Core Value” (2015), a high-defini- bition checklist). In the same gal- “Bloom V” (both 2016) have a of “Aha” and less of “Huh?”
Rito, N.M., and an important leit- tion video projected on an interior lery is a series called “Well” quirky organic life, blocky shapes
motif that runs throughout a dis- wall is truly baffling. In conversa- (2017), described as “dye sublima- rounded at the top and clustered Tom Joyce: Everything at Hand
tinguished career that includes a tion with the sculptor later, I tion photographs on aluminum.” together, rising from a bed of peb- Center for Contemporary Arts,
MacArthur award. The spikes are learned that this was an animation They are painterly, with a nubbly bles and suggesting Brancusi’s through Dec. 31
made from steel filings retrieved of a CT scan of the compact sculp- texture that’s illusory because the “The Kiss.” “Lignifact I” (2017),
from earlier projects, and recycling ture “Core IX” (2013/2015) near prints are flat and affixed to alu- tucked in a corner, has a pillowy Ms. Landi writes on the arts and
is another concern of the artist’s, the entrance. Those test results minum boxes. Though they might aspect one never would have culture from Taos, N.M.

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
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BUSINESS & FINANCE
© 2017 Dow Jones & Company. All Rights Reserved.
Euro vs. Dollar 1.1922 g 0.43%
Novartis Cancer Therapy Wins Approval
Drugmaker defends
$475,000 price tag
for treatment, which
breaks new ground
BY DENISE ROLAND
AND PETER LOFTUS
The U.S. Food and Drug Ad-
ministration approved a first-
of-its kind cancer therapy
aimed at bolstering a patient’s
own immune cells, while the
drugmaker behind the treat-
ment attempted to allay
worry over the high cost of
the procedure.
High Returns Wither for Marijuana Growers Red Flag
JOHN LOCHER/ASSOCIATED PRESS
Since peaking in September 2015 at about $2,133 a pound, average U.S. wholesale cannabis prices dropped to $1,614 in July, according to an industry research firm.
Cheaper High
Cannabis’ U.S. wholesale price
$2,200 a pound
2,000
1,800
$1,614
1,600
1,400
1,200
2016 ’17
Source: New Leaf Data Services LLC
THE WALL STREET JOURNAL.
Clearinghouse Is the Latest
To Crimp Venezuelan Debt
BY JULIE WERNAU
The Depository Trust &
Clearing Corp., one of the
largest securities clearing-
houses in the U.S., said it
would no longer settle Vene-
zuela bond trades, the latest
blow for investors in the
South American nation in the
wake of U.S. sanctions.
The New York-based clear-
inghouse said in a notice on
its website that, based on a
recent executive order, it has
suspended settlement ser-
vices that allow Venezuelan
bonds to change hands, in-
cluding those of state-owned
oil company Petróleos de
Venezuela SA. A clearing-
house acts as an intermediary
between buyers and sellers to
exchange payments, and is
crucial to bond trading.
The move is the latest com-
TECHNOLOGY: MICROSOFT’S CORTANA AND AMAZON’S ALEXA TO WORK TOGETHER B4
FTSE 100 7365.26 À 0.38%
Swiss pharmaceuticals giant
Novartis AG said it would
charge $475,000 for the treat-
ment, which involves extract-
ing a patient’s disease-fighting
blood cells, modifying them to
attack cancer cells more vigor-
ously and then reinjecting
them in the patient. The
$475,000 price tag was signifi-
cantly lower than many ana-
lysts had expected.
The procedure can only be
undertaken at a limited num-
ber of facilities in the U.S. It is
highly tailored to individual
patients and can take the bet-
ter part of a month to com-
plete. Those logistical hurdles
BY JACOB BUNGE
After decades of dodging
law enforcement and fighting
for legalization, U.S. marijuana
growers face a new challenge:
low prices.
From Washington to Colo-
rado, wholesale cannabis
prices are tumbling as dozens
July of states have legalized the
drug for recreational and me-
dicinal uses, seeding a boom
in marijuana production.
The market is still tiny
compared with the U.S. to-
bacco industry’s $119 billion in
annual retail sales, but the na-
scent cannabis business has
grown to more than $6 billion
a year at retail, according to
data from Euromonitor Inter-
national Ltd. and Cowen & Co.
plication for traders of Vene-
zuelan bonds and shows a ris-
ing awareness of the risk of
dealing in these securities.
Fears of falling on the wrong
side of U.S. or Venezuelan pol-
icy have pushed some major
institutional players out of the
DTCC says it won’t
settle the country’s
bond trades following
U.S. sanctions.
market and driven down li-
quidity. That is causing con-
cerns that bondholders will
find it difficult to find buyers
when and if they decide to sell
those securities.
On Tuesday, Cantor
THE WALL STREET JOURNAL.
Gold 1308.10 g 0.38%
and its expected high price
had cast a shadow over what
has otherwise been seen as a
groundbreaking treatment.
The treatment, called
CLT019 but re-christened by
Novartis after the FDA ap-
proval as Kymriah, has been
shown to dramatically raise
the chances of survival for
children and young people
with an aggressive form of leu-
kemia who don’t respond to
standard treatment.
In a bid to blunt criticism
over the price, Novartis said it
would take payment for pa-
tients covered by Medicaid
only if they respond to Kymriah
For marijuana smokers, the
price drop is sweet news. Rec-
reational users and those pre-
scribed cannabis for health rea-
sons have seen prices decline
as wholesale prices have fallen,
though some retailers have
pocketed part of the difference,
according to New Leaf Data
Services LLC, which researches
the U.S. cannabis market.
At Hashtag Cannabis, a Se-
attle-based retailer running
two dispensaries, co-owner
Jerina Pillert said wholesale
price declines show up on the
plastic vials holding green-
and-tan nuggets of “Super Sil-
ver Lemon Haze” marijuana
produced by Longview, Wash.-
based Bondi Farms. A gram
sells for about $10 currently,
down by a third from the $15
Fitzgerald LP stopped trading
Venezuelan debt. The move
was the first blanket restric-
tion on Venezuelan bonds by a
large U.S. financial institution.
This month, Credit Suisse
Group AG said that it prohib-
ited its traders from buying
and selling two existing Vene-
zuelan bonds because of the
risk the trades would finance
human-rights abuses.
An executive order from
President Donald Trump on
Friday prohibited U.S. institu-
tions from trading new bonds
with the government of Presi-
dent Nicolás Maduro. Offi-
cials said the move aims to
punish Mr. Maduro and his
administration for a move to-
ward authoritarianism and
that more financial sanctions
would come if the repression
continues.
Please see BONDS page B2
WTI crude 45.96 g 1.03% German Bund yield 0.362%
within a month of treatment.
The company also said it would
offer financial assistance—such
as help with copay, travel and
accommodation costs—to pri-
vately insured patients.
“We have taken a very re-
sponsible approach” to pricing,
said Bill Hinshaw, Novartis’s
U.S. oncology head. He cited
independent cost-effectiveness
estimates that showed Kym-
riah could command a price
of $600,000 to $750,000. He
said that because patients will
be children or young adults—
who typically fall under their
parents’ or caregivers’ private
Please see GENES page B2
a gram it fetched in Septem-
ber 2015, she said.
But for growers—ranging
from high-tech warehouse op-
erations to backcountry pot
farmers gone legit—the price
drop has been painful.
Since peaking in Septem-
ber 2015 at about $2,133 a
pound, average U.S. wholesale
cannabis prices fell to $1,614
in July, according to New
Leaf. That is the sort of mar-
ket decline that hit Midwest-
ern corn and soybean growers
in recent years after a string
of record-breaking crops.
“There is an increasing rec-
ognition, on the part of the in-
dustry and those that grow and
dispense, that this market is a
commodity,” said Jonathan Ru-
bin, New Leaf’s chief executive.
Amazon
Lures
Grocery
Shoppers
BY LAURA STEVENS
AND HEATHER HADDON
Amazon.com Inc. this week
introduced hundreds of Whole
Foods products to its website to
encourage consumers to buy
their groceries online.
Online grocery shopping
accounts for less than 5% of
the nearly $800 billion in food
and beverage sales in the U.S.,
despite Amazon and others
rolling out deliveries in major
U.S. metro areas. Buying gro-
ceries online has been slow to
take hold because of shop-
pers’ desire to touch and
smell fresh produce, as well as
price concerns and limits to
where it is available.
“I don’t want some guy
Thursday, August 31, 2017 | B1
10-Year Treasury yield 2.145%
U.S. health regulators approved Novartis’s Kymriah treatment,
which uses a patient’s own immune cells to fight cancer.
In response, some produc-
ers are taking a page from the
food industry, where farmers
and food companies increas-
ingly appeal to health- and en-
vironment-conscious consum-
ers. Growth in organic food
products for years has out-
paced conventional grocery
sales, and products made
without genetically modified
crops, gluten and artificial fla-
vorings can command pre-
mium pricing and shelf space.
Stephen Jensen, who se-
cured a state license to grow
cannabis in Washington in 2015,
has yet to turn a profit. He is
promoting what he described
as natural growing methods.
“We needed to give people a
reason to select us,” said Mr.
Please see FARMS page B2
The online retailer is adding Whole Foods products to its site,
and it is likely to introduce grocery pickup in the chain’s stores.
picking out my tomatoes or
my zucchini. I’m just going to
get shoveled whatever is on
top of the bin,” said Skip
Olinger, a 64-year-old retired
shipping-container executive
from Sonoma, Calif., who
spends upward of $100 a week
at a local Whole Foods.
Amazon’s $13.5 billion acqui-
sition of grocery chain Whole
Foods Market Inc., which closed
this week, is providing a new
impetus for online grocery
NOVARTIS/ASSOCIATED PRESS
Is Waved
On Bonds
Over GOP
Tax Plan
BY VIPAL MONGA
Republican plans to scale
back tax deductions on compa-
nies’ interest payments risk
pushing more borrowing over-
seas, say analysts and market
participants, eroding the com-
petitive advantage of the
$6.053 trillion U.S. corporate-
bond market.
Rep. Kevin Brady (R.,
Texas), chairman of the House
Ways and Means Committee,
said this month that he
wanted to curtail companies’
capacity to deduct net interest
payments from taxable income
to pay for tax cuts. The com-
ments virtually ensure the
topic will feature prominently
in the coming tax debate,
which is expected to begin in
earnest after Labor Day.
White House officials and
top House Republicans say
they are optimistic about fin-
ishing a major tax bill this
year, but they have a long way
to go. President Donald Trump
was set to cite the importance
of a tax-code revamp in a
speech Wednesday in Missouri.
Any U.S. limits on interest
write-offs would diverge from
the policies in many other rich
countries and likely prompt
companies to shift some bor-
rowing to places where de-
ductibility would still be in ef-
fect, many analysts say. Large
U.S.-based companies such as
Apple Inc. and Microsoft Corp.
routinely borrow billions of
dollars in the U.S., knowing
that interest payments will
lower their tax bills.
Ironically, a tax revamp
meant to boost U.S. competi-
tiveness and bring overseas
earnings home may weaken a
central pillar of the U.S. capi-
Please see PLAN page B2
RICHARD B. LEVINE/LEVINE ROBERTS/NEWSCOM/ZUMA PRESS
shopping. Amazon has expanded
its catalog with Whole Foods
groceries at the same prices as
in stores, and could use Whole
Foods’ 470 stores as hubs for
online pickups and deliveries.
Food retailers that have both
physical stores and e-commerce
offerings have done better in
capturing the online grocery
Please see AMAZON page B2

Heard: Worries over Amazon
leave Costco at a discount..B8
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 | Thursday, August 31, 2017
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
A
Abbott Laboratories...B2
Alibaba Group.............B4
Allstate ....................... B5
Alphabet......................B4
Amazon.com.....B1,B4,B8
Apple...........................B4
B I
Bank of America.........B5
Bank of New York
Mellon.......................B7
Berkshire Hathaway...B5
Boeing.........................A9
C
Cantor Fitzgerald........B1
China Guodian.............B8
Citigroup......................B2
Clearstream.................B2
Costco Wholesale.......B8
Credit Suisse...............B1
F N
Facebook......................B3
INDEX TO PEOPLE
A F-K
Ardid, Inigo.................B3
B Kong, David.................B3
Ball, LaVar...................B3
Bezos, Jeff..................B4
Bokil, Madhavi............A5
Bouzid, Ahmed............B4
Buffett, Warren..........B5
C R
Cook, Tim....................B4
AMAZON
Continued from the prior page
market. Twenty-two percent of
consumers surveyed in April by
Morgan Stanley had shopped
for food from a nearby super-
market’s website, while only
13% had done so from an on-
line-only grocery service.
While shares of traditional
grocers have tanked in the past
week as Amazon implements
price cuts in Whole Foods
stores, the greater menace to
their business could be Ama-
zon’s grocery ambitions online,
especially if Amazon drives
down prices further, analysts
said.
Amazon’s strategy for
selling Whole Foods
online is likely twofold,
analysts say.
“The biggest threat is what
Amazon can do online. There’s
only so much reach the stores
can achieve,” said William Kirk,
an analyst for RBC Capital Mar-
kets LLC.
Amazon declined to com-
ment beyond its statement is-
sued last week that several
Whole Foods private labels, in-
cluding 365 Everyday Value,
would be available on Ama-
zon.com and via some of its
grocery-delivery options.
Whole Foods also declined to
comment.
The new Whole Foods cate-
gory on Amazon.com for cus-
tomers of AmazonFresh, its on-
line grocery-delivery service,
displays nearly 900 results for
everything from $4.99 organic
vanilla ice cream to $6.99
creamy almond butter. On Ama-
zon’s Prime Now app, which of-
fers faster delivery, about 90
products are available to start.
Amazon said previously it
would add other private label
brands to its selection.
GENES
Continued from the prior page
insurance plans, Medicaid or
other federal plans aimed spe-
cifically at children—few pa-
tients would likely end up pay-
ing near the full price out of
pocket. That cost will fall to
the employers, insurers and
taxpayer-funded government
programs that fund health-
care costs.
Novartis Chief Executive
Joe Jimenez said the company
may charge a lower price in
cancer types where the benefit
is less dramatic. Novartis is
testing Kymriah in adults with
diffuse large B cell lymphoma,
another form of blood cancer,
but its remission rates are
lower than in childhood leuke-
mia.
Still, the company has al-
ready faced backlash over the
announced price. “While No-
vartis’s decision to set a price
at $475,000 per treatment may
be seen by some as restraint,
we believe it is excessive,” said
David Mitchell, president of
Patients for Affordable Drugs,
a campaign group backed by
the Laura and John Arnold
Foundation, which supports ef-
forts to make prescription
Fresh Direct ................ B2
G
Grab.............................B3
H
1Malaysia
O
Development...........B7
P
Honda Motor...............B3
Peapod.........................B2
Hyundai Motor............B3
Petróleos de
Venezuela................B1
Portfolio Resources
Group.........................B2
International Petroleum
Investment ............... B7 S
J regular heartbeat in patients
Shenhua Group...........B8
Johnson Controls Shipt............................B2
International.............B2 T
J.P. Morgan Chase......B7
Tencent Holdings........B4
K Toyota Motor..............B3
Key International........B3 Toyota Tsusho.............B3
Kik Interactive............B3 Travelers ....................B5
M U
Microsoft.....................B4 Uber Technologies ...... B3
W cardiac device linked to two pa-
New York Times.........B3 Wells Fargo.................B5
S ing Abbott’s handling of the
Fields, Bruce...............B7 Skyrm, Scott...............B7
Sosa, Juan I................B2
L-M W with its $23.6 billion purchase
Livingston, Ted ........... B3 William Dudley...........B7
Murrieta, Jarrod ......... B5 Y and said the issues cited in the
P Ydreos, Mel.................B8
Patel, Amit..................B3 Z the deal closed.
Zaretskaya, Victoria...B8
Robinson, Mark...........B7 Zentner, Ellen.............A7
Amazon’s strategy for selling
Whole Foods online is likely
twofold, analysts say. Private-
label products are typically
higher-margin because of lower
production and marketing
costs, so the grocery chain’s ad-
dition brings a new profitable
line to Amazon’s site. And
Whole Foods’ cachet as a
healthy lifestyle brand could en-
tice more shoppers to add food
to their online shopping cart.
Amazon’s push into food
started in earnest in 2007, when
it launched AmazonFresh in Se-
attle. Fresh costs $15 extra a
month on top of Amazon’s $99
annual Prime membership fee.
But it is tricky to handle perish-
able items, such as ice cream in
the summer heat, and the busi-
ness is costly, requiring refrig-
erated storage that thins profit
margins. After testing the deliv-
ery service for about six years
in its hometown, Amazon rolled
it out to more than 20 U.S. mar-
kets, as well as London, Berlin
and Tokyo.
But online grocery has be-
come increasingly crowded. De-
livery services such as Instacart
Inc., Peapod LLC, Shipt Inc.
and FreshDirect LLC have ex-
panded nationally. Instacart has
handled Whole Foods online or-
ders since 2014. (Instacart exec-
utives have declined to say
what Amazon’s merger with
Whole Foods will mean for its
business.)
Wal-Mart Stores Inc. and
Kroger Co. have rolled out in-
store pickup for online orders.
While Amazon hasn’t de-
scribed exactly how it might
use Whole Foods to bolster its
online delivery options, people
familiar with the matter have
said that it is likely to introduce
online grocery pickup in stores.
In an announcement last week,
Amazon said it would be adding
lockers for package pickups in
Whole Foods stores. It is un-
clear if the lockers will be used
for food orders. Still, the higher
prices charged by Whole Foods
for its organic store goods
could limit sales on a mass-
market platform such as Ama-
zon, analysts say.
drugs more affordable in the
U.S. “Novartis should not get
credit for bringing a $475,000
drug to market and claiming
they could have charged peo-
ple a lot more.”
Steve Pearson, head of the
Institute for Clinical and Eco-
nomic Review, which studies
the cost of drugs, said that
while the price is lower than
analysts expected, it should be
judged on whether it reflects
the benefit to patients.
“It will leave patients and
others wondering” why
$475,000 is the right price “in-
stead of 175 [thousand], 600,
750 or any other number,” Dr.
Pearson said. “And questions
will remain about how this
price will affect patients’ abil-
ity to access the drug, and how
it will be used to set a bench-
mark for other uses of this
drug and perhaps other cancer
drugs in the future.”
On Wednesday, the FDA ap-
proved Kymriah for children
and young adults up to 25
years old who suffer from
acute lymphoblastic leukemia
and who have not responded
to standard therapy. The deci-
sion was expected, following
the backing of an FDA advisory
committee of experts, who
voted unanimously in favor of
approval in July.
Cardiac Software Updated
Abbott releases
patches to protect
pacemakers against
threat of hacking
BY PETER LOFTUS
Abbott Laboratories re-
leased new software updates
designed to protect hundreds of
thousands of implanted pace-
makers from external hacking
that could harm heart patients
and to guard against dangerous
battery depletions in a different
tient deaths.
U.S. health regulators flagged
the safety risks of the devices
and issued a blistering warning
letter earlier this year criticiz-
problems.
Abbott acquired the products
of St. Jude Medical in January
warning letter occurred before
The software patches under-
score the growing concern
about cybersecurity of medical
devices that are increasingly
connected via the internet or
other networks.
Abbott said in a letter to
doctors Monday that the new
FARMS
Continued from the prior page
Jensen. He said his Green Barn
Farms eschews synthetic pesti-
cides and relies on natural
light over high-powered lamps,
which he said helps his canna-
bis stand out among more than
1,100 other Washington farms.
Because cannabis remains
illegal under federal law, grow-
ers can’t get their crops certi-
fied as organic, a label that can
only be bestowed by the U.S.
Department of Agriculture.
Cannabis farmers instead
have turned to alternative la-
bels such as SunGrown Certi-
fied, which requires that grow-
ers use sunlight and water-
conservation practices. They
hope such labels will entice
A shopper considered medicinal cannabis at a dispensary in Santa Ana, Calif., this month.
PLAN
Continued from the prior page
tal markets. “If you remove in-
terest deductibility in one lo-
cation and retain it in others,
then of course companies will
want to move their borrow-
ing,” said Matt King, a credit
analyst at Citigroup Inc.
A spokesman for the House
Ways and Means Committee
said the tax cuts will help revi-
talize the economy, which in
turn will stimulate capital
markets.
A debt boom after the fi-
nancial crisis has only bur-
nished the U.S.’s status as the
world’s largest bond market.
Companies routinely borrow
billions to build new factories,
finance acquisitions and fund
share buybacks. Nonfinancial,
investment-grade companies
in the U.S. have borrowed
roughly $575 billion this year,
on pace to break the record of
close to $800 billion set in
2015, according to data pro-
vider Dealogic.
The U.S. corporate-bond
market is almost triple the
size of the euro corporate-debt
market, the world’s second
largest, according to Dealogic.
The U.S.’s sophisticated
market infrastructure and am-
ple liquidity give corporations
better access to debt financing
than anywhere else. While
those advantages make a
wholesale shift to other bor-
rowing markets unlikely,
BUSINESS & FINANCE
The move comes amid growing concern about cybersecurity.
firmware—a type of software
embedded in the device’s hard-
ware—is intended to reduce the
risk of unauthorized access to
pacemakers that use radio-fre-
quency communications.
“This firmware update pro-
vides an additional layer of se-
curity against unauthorized ac-
cess to these devices that
further reduces the potential for
a successful cybersecurity at-
tack,” Abbott said in the letter.
Abbott said it doesn’t recom-
mend that patients have their
pacemakers replaced. Rather,
the company advises doctors to
discuss the matter with patients
at their next visits and to ad-
minister the software update if
it is deemed appropriate.
smokers and secure shelf space
in the 29 states where mari-
juana is legal in some form.
Another label, Clean Green
Certified, is modeled on U.S.
organic standards. It bars syn-
thetic pesticides and empha-
sizes what the program deems
fair labor practices. In May,
Washington state passed a law
that would set up a state-level
organic-certification program,
though it may need to have a
label that doesn’t use that
word.
That push to differentiate is
splitting pot farmers into rival
camps.
Indoor-grown cannabis,
where climate controls and
high-powered lights allow sev-
eral crops a year, typically is
of a more consistent quality,
industry officials say. Its
dense, often bright-green buds
changing the tax code could
push some borrowing into for-
eign markets, Mr. King said.
Debt is popular because it
is cheaper than selling equity.
Its low cost is enhanced by de-
ductibility, which began in the
early 1900s when railroad and
real-estate executives per-
suaded the federal govern-
ment that their businesses
wouldn’t survive if they paid
interest with after-tax profits,
said Steve Bank, a professor at
the UCLA School of Law.
Towering
Corporate bonds outstanding
as of Aug. 22, by region
U.S.
$6.1 trillion
Europe
$2.2 trillion
China
$2.0 trillion
Source: Dealogic
THE WALL STREET JOURNAL.
Ending or limiting that de-
duction is key to funding the
House tax plan. Repeal would
raise $1.5 trillion over a decade
to replace some of the revenue
lost from a corporate rate cut
and immediate deductions of
capital expenses, according to
the Tax Foundation, a conser-
vative-leaning think tank.
Multinational corporations
have shown they can deftly
manage any difference be-
tween countries’ tax policies
THE WALL STREET JOURNAL.
Abbott’s software update “to re-
duce the risk of patient harm
due to potential exploitation of
cybersecurity vulnerabilities”
for the pacemakers, which use
electrical jolts to maintain a
with abnormal heart rhythm.
NAM Y. HUH/ASSOCIATED PRESS
The FDA said the Abbott
pacemakers had vulnerabilities
that, if exploited, could allow
an unauthorized user to access
a patient’s device using com-
mercially available equipment.
Hackers could modify pro-
gramming commands to the
pacemaker, which could result
in patient harm from rapid
The doctor administers the battery depletion or adminis-
update through a wand held tration of inappropriate heart
over the site of the implanted
pacemaker. The update itself
carries small risks of causing a
pacing, the FDA said.
Abbott also released a new
software update for more than
device malfunction, Abbott said. 398,000 implanted cardioverter
About 465,000 implanted defibrillators, which are de-
pacemakers are eligible for the signed to prevent cardiac arrest
update, and Abbott said the up- in patients with rapid heart-
date will be built into all newly beats.
implanted devices. The pace- The software update pro-
makers are sold under brand vides doctors with earlier warn-
names including Accent, An- ings of the potential for prema-
them and Assurity. ture battery depletion.
The Food and Drug Adminis- In its warning letter this
tration said Tuesday there are year, the FDA said Abbott
no known reports of patient hadn’t properly investigated
harm related to cybersecurity
vulnerabilities in the implanted
pacemaker devices.
The agency said it approved
and resolved the cybersecurity
risks of its pacemakers or the
risk of premature battery deple-
tion in the defibrillators.
catch consumers’ eyes, often
sell at a higher price and can
be costlier to produce.
Proponents of marijuana
“The socially conscious,
premium customer is going to
want us because we’re sus-
tainable,” he said. “It only
grown outdoors and in green- takes me 30 seconds to con-
houses say indoor facilities vert somebody wearing Pata-
rely on synthetic fertilizers gonia and driving a Prius that
and heavily consume electric- they should never smoke in-
ity. They point to a 2012 paper door weed again.”
by University of California se- At Hashtag Cannabis in Se-
nior scientist Evan Mills, who attle, Ms. Pillert said custom-
estimated that indoor canna- ers occasionally ask for pesti-
bis production accounted for cide-free or sun-grown
1% of national electricity use, varieties. Smokers’ main fixa-
though some growers have tion, she said, is the potency
been adopting LED lights, rating for the key active ingre-
which consume less electricity. dient, tetrahydrocannabinol,
Jeremy Moberg, owner of or THC: “They want to make
Riverside, Wash.-based Canna- sure they are getting the big-
Sol Farms and head of the gest bang for their buck.”
Washington Sungrowers In- Many in the emergent in-
dustry Association, says mar- dustry expect marijuana to
ijuana smokers will come to eventually resemble the beer
care about the environmental business, where pricier craft
cost of their high. brews have built followings in
the shadow of cheaper mass-
market beers like Budweiser
and Busch.
While high-quality strains
and specialty brands may se-
cure premium prices, more
low-quality marijuana will be
processed into oil used in va-
porizer cartridges or adult-
oriented baked goods like
NICK AGRO/THE ORANGE COUNTY REGISTER/ZUMA PRESS
brownies and cookies, growers
and retailers said.
Mr. Jensen, the Washington
cannabis producer, said he
hopes that his sun-grown, nat-
urally produced plants over
time will yield a 20% to 30%
premium over the average
market price.
“I always buy organic prod-
ucts at the store and think
there is a future for that in the
[cannabis] industry,” said Mr.
Jensen. But, he said, “it’s a bat-
tle getting that awareness out.”
to their benefit, said Brian Kit-
tle, a tax lawyer at Mayer
Brown LLP. Companies includ-
ing Mylan NV, Medtronic PLC
BONDS
and Johnson Controls Interna- Continued from the prior page
tional PLC have in recent Bond traders said that the
years moved abroad in part to majority of Venezuela bond
lower their U.S. tax bills.
Removing interest deduct-
ibility would create a “strange
and ironic” echo of such “cor-
trades are cleared through Eu-
rope-based settlement houses,
including Euroclear in Brussels
and Clearstream in Luxem-
porate inversion” strategies in bourg, but that DTCC’s move
which firms move their head- raised concerns that other
quarters overseas but keep clearinghouses would follow
their main operations in the suit. Euroclear and Clear-
U.S., said Citigroup’s Mr. King. stream didn’t respond to re-
In this case, companies could quests for comment.
keep their funds in the U.S. Europe doesn’t have the
and borrow elsewhere. same restrictions on Venezu-
U.S. companies have also ela as the U.S. But the Trea-
stockpiled more than $2.6 tril- sury Department has warned
lion in earnings offshore, be- that even indirect bond trans-
cause they don’t pay U.S. tax on actions involving Caracas,
any reinvested foreign earnings. such as through European
Apple, Microsoft and Pfizer markets, would violate its
Inc. have collectively bor- sanctions.
rowed almost $200 billion in DTCC is co-owned by in-
the U.S. investment-grade vestment banks and brokers
bond market since 2008, ac- on Wall Street, and says it
cording to Dealogic, even as processes trillions of dollars in
their earnings overseas rose. securities transactions each
Foreign companies already day.
borrow in the U.S. to lower Venezuela’s Information
their tax bills. German indus- Ministry didn’t respond to a
trial conglomerate Siemens AG request for comment. In the
has borrowed $21.25 billion in past, Mr. Maduro has accused
the U.S. investment-grade Wall Street of being part of
market since 2015. Others are the “economic war” against
spreading their bets. Apple is- his government.
sued a 2.5 billion Canadian- “This is only adding fear
dollar (US$2 billion) bond in and uncertainty,” Juan I. Sosa,
August, the largest corporate co-chairman of Portfolio Re-
borrowing by a foreign issuer sources Group Inc. in Miami,
on record there. said Wednesday.
—Richard Rubin —Anatoly Kurmanaev
contributed to this article. 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.
Hotel Building Boom Stalls in U.S. Toyota,
Startup
Tighter lending,
surging supply of
rooms are cooling
plans for new projects
Hotel developers are slow-
ing down new U.S. construc-
tion projects after years of
rapid growth, a result of
tighter lending conditions and
a ballooning supply of rooms
in large markets.
By Sharon Nunn,
Chris Kirkham
and Sarah Chaney
Though consumer demand
remains healthy, hotel con-
struction spending was down
2% to $27.5 billion in June at a
seasonally adjusted annual
rate from December, according
to Census Bureau data, after
more than tripling since bot-
toming in 2011. A combination
of increased travel spending,
growing consumer confidence
and cheap credit prompted de-
velopers to pour money into
hotel-construction projects in
the aftermath of the 2007-09
recession. Now, growth in new
hotel rooms is outpacing the
number of consumers able to
stay in them in cities like New
York, Houston and Miami,
prompting banks and develop-
ers to take a breather.
“As soon as they started
seeing a lot of cranes in the air,
people started getting cautious
again,” said Inigo Ardid, co-
president of Key International,
a Miami real-estate investment
and development company for
hotels throughout Florida.
Overall growth in the sup-
ply of U.S. hotel rooms has
been slower in recent years
than it was going into the last
downturn, but there has been
rapid growth in the nation’s
Hyundai Hits Political Roadblock in China
BY TREFOR MOSS
SHANGHAI—Hyundai Mo-
tor Co. was forced into a
weeklong suspension of pro-
duction in China, as a political
dispute between Beijing and
Seoul wreaks havoc at the
South Korean auto maker in
its biggest overseas market.
Hyundai said Wednesday
that its Chinese joint venture,
Beijing Hyundai Motor Co.,
halted production last week
because it was unable to pay a
supplier of essential fuel-tank
parts, causing the supplier to
halt deliveries.
“The slowdown in China
has put a strain on their fi-
nancial situation. That’s why
they haven’t been able to pay
their supplier,” said a Hyundai
spokesman.
Production resumed at
midday Wednesday after talks
with the supplier, he said.
Hyundai Motor’s shares fell
Messaging App Plans Initial Coin Offer
BY PAUL VIGNA
Messaging-app operator
Kik Interactive said Tuesday
that it was aiming to raise
$125 million through an initial
coin offering in September,
one of the first established
companies to step into the
mushrooming, highly specula-
tive market for these digital
tokens.
In doing so, Kik, which has
encountered growth issues, is
trying to tap into the surging
interest in cryptocurrencies
and digital tokens associated
with them.
‘We went on record two years ago and said growth is a problem for us,’ said Kik CEO Ted Livingston.
A hotel project in New York City this year. Hotel construction spending in the U.S. fell in June.
largest markets, leading to
pockets of oversupply. Hotel-
room supply has grown 2.5%
in the nation’s top 25 markets
so far this year, according to
STR Inc., a data company that
tracks the hotel industry, com-
pared with 1.5% in all other
markets.
Adding to the challenge:
Construction labor shortages
have pushed up the cost of
building new hotels at a time
when revenue growth for hotel
rooms across the U.S. is also
beginning to slow.
“That kind of one-two
punch doesn’t make it exciting
to build another hotel,” said
Mark Laport, president and
chief executive of Concord
Hospitality Enterprises Co.,
which develops, owns and
manages properties across the
U.S. for most of the major U.S.
hotel chains.
roughly 4% after news reports
of the shutdown early
Wednesday, before recovering
to close off less than 1%. The
company’s stock has lost 16%
of its value since May. Hyun-
dai posted its worst quarterly
results in five years in July,
citing the China situation as a
primary cause.
The production halt com-
pounds what has already been
a disastrous year for Hyundai
in China. Sales slumped after
Seoul’s deployment of a U.S.-
built missile-defense system
in February amid North Ko-
rea’s growing nuclear threat.
Beijing condemned the
move, claiming it threatened
China’s national security. That
sparked an unofficial cam-
paign against South Korean
consumer goods in China,
with retailers and auto mak-
ers among the hardest hit.
Hyundai’s sales in China
fell 55% from March to July,
It also is experimenting with
a potential way for its inves-
tors to essentially cash out of
the company without actually
selling their equity.
The market for digital coins
has exploded in 2017, with
more than 100 firms raising
more than $1.7 billion, up from
64 firms raising about $103
million in 2016, according to
research firm Smith & Crown.
Most of these firms,
though, are startups and in
many cases don’t have a work-
ing product. In that, Kik is dif-
ferent: Its messaging app is
popular among teens in Can-
Thursday, August 31, 2017 | B3
BUSINESS NEWS
10 lenders that were inter-
ested in the project,” said
Amit Patel, president of Win-
wood Hospitality Group, which
Grab Set
owns and develops hotels in
North Carolina and has an ex-
isting hotel investment in
Alliance
Nashville. “That number today BY SEAN MCLAIN
is probably closer to three.”
Miami’s growing supply and TOKYO—Toyota Motor
recently declining lodging mar- Corp. said Wednesday it plans
RICHARD B. LEVINE/LEVINE ROBERTS/NEWSCOM/ZUMA PRESS
ket is a microcosm of the trend to dive deeper into the ride-
and a warning; almost 3,500 hailing business by teaming up
rooms were under construction with Singapore-based startup
as of March, which is 6% of Mi- Grab Inc.
ami’s existing supply, and the Separately, Toyota Group
city’s occupancy rates and rev- company Toyota Tsusho Corp.
enue per room have ticked said it would invest an undis-
down by almost 7% since 2015. closed amount in Grab as part
Houston was experiencing of a $2.5 billion fundraising
similar perils before flooding round announced in July.
hit the city this week. The oil- Toyota says it will install
rich city had almost 5,000 tracking devices on 100 Grab
rooms under construction as vehicles to gather data on
of March, which is 6% of Hous- driver behavior to help de-
ton’s existing supply. Almost velop aspects of its mobility
half of Houston-area hotel services, such as usage-based
loans are distressed because insurance and financing pro-
of declines in hotel-room oc- grams.
Banks tightened commercial nomic recovery have seen huge cupancy and dwindling income Japanese auto makers have
real-estate lending standards growth in the number of new to pay back mortgages, ac- been sampling the ride-hailing
in the second quarter across rooms, dragging down revenue cording to Kroll Bond Rating and car-sharing business. In
categories including construc- from each available room. New Agency. December, Honda Motor Co.
tion, nonresidential and multi- York, Miami, Austin and Dallas Still, some fundamentals point invested an undisclosed
family development, according all saw declines in revenue per in the sector’s favor. The average amount in Grab to explore mo-
to a July survey of 76 U.S. available room for the first annual U.S. occupancy rate at the torcycle ride-hailing.
banks and 22 U.S. branches of seven months of this year peak of hotel construction last Toyota’s deal with Grab is
foreign banks conducted by compared with a year earlier. cycle was 62.8%, and was rap- the auto maker’s second foray
the Federal Reserve. Given the pipeline of projects, idly declining. By comparison, into the competitive ride-hail-
David Kong, president and growth in new hotel rooms is occupancy was at 65.5% over ing market.
CEO of Best Western Hotels & projected to accelerate over the last year, which is a slight Last year, Toyota said it
Resorts, said his company cre- the next two years in these uptick from a year earlier. would work with Uber Tech-
ated a dedicated team last four major markets, according Unlike in past cycles, when nologies Inc. to lease vehicles
year to work with owners and to a forecast from CBRE Hotels developers overbuilt across to Uber drivers.
developers who were having Americas Research. the board, this last growth pe- In October, Toyota said it
difficulty getting construction Developers said the con- riod has been more moderate. was running a pilot program
financing. He said the com- struction-lending environment Average room-supply growth in the U.S. with car-sharing
pany has been much more fo- has tightened as the cycle has was less than 2% across the startup Getaround, making use
cused on acquiring existing gotten longer, with wounds U.S. in June, according to STR. of a Toyota technology that al-
hotels under its brands be- from the financial crisis and That is in line with long-term lows cars to be started with a
cause “we recognize there are the recession still weighing on averages and lower than sup- smartphone.
going to be less and less new many investors’ minds. ply growth of about 3% going The deals are part of Toy-
construction projects.” “If we were going to market into the 2007-09 recession and ota’s long-term plan to build
Some large cities that with a new project three years 4% growth before the 2001 re- its own platform for mobility
bounced back early in the eco- ago, we would maybe have had cession. services.
In a Jam
China sales at South Korea’s
Hyundai and its Kia subsidiary
while sales at the company’s start production this month, nese consumers to steer clear tumbled after Seoul deployed a
Kia Motors Corp. subsidiary and in its 2017 business plan of Korean goods and switch U.S.-made missile-defense system.
dropped 63%. Both operate in the auto maker said it ex- off once-popular Korean pop
China with state-run joint pected China sales to increase music and television shows. 150,000 HYUNDAI KIA
venture partners Beijing Auto 9.5% this year to 1.25 million When Mr. Moon took office Feb. 27
Industry Corp. and Dongfeng vehicles. in May, he put additional de- 125,000
Seoul confirms
Motor Corp., respectively. But Hyundai only managed ployments of the new missile- deployment of
The dispute has led Kia to about 350,000 sales in the defense system on hold, in an 100,000 missile-defense
cut production at its three first seven months of the year. apparent effort to mollify Bei- system
factories in Yancheng, about Hyundai sold 1.14 million jing, though he has since 75,000
965 kilometers south of Bei- vehicles in China last year, not come under political pressure
jing. Those plants employ far behind its domestic tally not to cave into China’s per- 50,000
about 30,000 people, who of 1.67 million. China ac- ceived bullying tactics by dis-
have been getting by on re- counted for roughly one-quar- continuing the missile system 25,000
duced hours and lower pay as ter of its global sales. altogether.
Kia tries to avoid full-scale South Korean President The missile-defense spat
0
layoffs. Moon Jae-in urged Chinese came at the worst possible
The production suspension President Xi Jinping to re- time for Hyundai, which was 2016 ’17 2016 ’17
at Beijing Hyundai didn’t af- move the “constraints” being already facing a “fundamental Source: Car Sales Base
fect the separate Kia joint placed on Korean businesses issue with product positioning THE WALL STREET JOURNAL.
venture, the Hyundai spokes- in China at a July meeting, and brand equity” in China,
man said. but the pressure on Korean according to Janet Lewis, ers, Ms. Lewis said, while
Hyundai, previously the No. companies hasn’t eased. managing director of equity hoping that an end to the po-
3 foreign auto maker in China Chinese officials have de- research at Macquarie Capital litical backlash against Korean
by sales, had been planning to nied there is any official boy- Securities. products enables a quick re-
accelerate its China output in cott against South Korean The company needs to re- bound.
2017. A fifth Hyundai plant in products, though state-con- fresh its “aging product —Min Sun Lee in Seoul
Chongqing had been due to trolled media have urged Chi- lineup” to win back custom- contributed to this article.
BUSINESS WATCH
NEW YORK TIMES in the Family,” which was created
ada and the U.S. can match any new service Kik specifically for the social-media
Kik also allows developers offers and sell it to a larger Court Dismisses Suit website’s recently redesigned
to publish games and services user base. Now, Kik is trying Brought by Palin Watch video tab.
within the platform. to recast its platform around Mr. Ball’s spirited and even
The Ontario-based company an in-house currency and refo- A federal court on Tuesday theatrical promotion of Lonzo,
has said it has 300 million cus its shareholders on the dismissed a defamation lawsuit who was selected second in the
registered users. But Kik re- digital tokens it plans to issue. brought by Sarah Palin against National Basketball Association
vealed in the token offering’s Kik had previously disclosed New York Times Co., saying the draft this summer, has been the
marketing materials that it plans for a coin offering, but it former Alaska governor failed to subject of much media attention.
only has 15 million monthly hadn’t set a date until Tues- show that the newspaper acted Mr. Ball made headlines after
active users, a key metric. day. maliciously when it made an error claiming Lonzo, who has yet to
“We went on record two The new tokens, or coins, in an editorial about gun violence. play in an NBA game, is a better
years ago and said growth is a will have multiple purposes. The 2008 Republican vice- player than two-time MVP Steph
problem for us,” Chief Execu- They will allow Kik users to presidential nominee filed the Curry and that, in his prime, he
tive Ted Livingston said in a purchase services within the suit after the Times ran an edi- himself could have taken on bas-
recent interview. Kik has been app as well as enable pay- torial in June that suggested her ketball legend Michael Jordan in
boxed out by larger rivals like ments between users. political-action committee helped a one-on-one contest.
Facebook Inc., he added, which The company said it hopes incite the 2011 assassination at- Trailers for the show indicate
that the tokens will entice tempt against former Demo- it will offer an inside look at the
more developers to build apps cratic Rep. Gabrielle Giffords. family, including LaVar’s efforts
for the platform. If they re- After publication, the Times to groom his three sons into
ceive the tokens as payment, corrected the article, noting that basketball legends, the building
and those coins then appreci- there was no evidence of a link of the Big Baller Brand business
ate in value, developers would between Ms. Palin’s activities and his wife’s rehabilitation after
gain even more from working and the shooting. a stroke.
on Kik. Representatives for Ms. Palin “We wanted to give our fans
At the same time, Kik is us- didn’t respond to a request for an unfiltered look into our lives
ing the initial sale of the to- comment. and show them a side of us that
kens to raise money for the —Imani Moise isn’t typically seen,” LaVar Ball
company and its investors. said in a statement.
Kik is creating 10 trillion FACEBOOK The video series is being pro-
NOAM GALAI/GETTY IMAGES FOR TECHCRUNCH
tokens, called “kin,” and plans duced by Bunim/Murray Produc-
to sell 1 trillion in a Sept. 12 Site Scores Show tions, the company behind
offering. Its goal is to raise About Ball Family “Keeping up with the Kar-
$125 million. Kik said it al- dashians,” “The Real World” and
ready has raised $50 million of Facebook Inc. is betting a “The Simple Life.”
that through a private sale of family of media-savvy basketball The social-media site is hop-
tokens to venture-capital personalities can draw a dedi- ing the show will attract a signif-
firms, including Blockchain cated audience to its revamped icant weekly audience for ap-
Capital, Pantera Capital and original programming effort. pointment viewing similar to
Polychain Capital. The remain- LaVar Ball and his family—in- traditional TV programming and
ing $75 million worth will be cluding his son, Los Angeles Lak- also compete with the likes of
available publicly through the ers rookie Lonzo Ball—will star in Google’s YouTube.
coin sale. a new reality series called “Ball —Imani Moise
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 | Thursday, August 31, 2017
Microsoft, Amazon on Speaking Terms
BY JAY GREENE
AND LAURA STEVENS
Microsoft Corp. and Ama-
zon.com Inc., fierce rivals in
cloud computing, are collabo-
rating in another emerging
field: voice computing.
The companies on Wednes-
day announced plans to allow
their voice-enabled digital as-
sistants—Microsoft’s Cortana
and Amazon’s Alexa—to work
together beginning later this
year. The agreement provides
each assistant with capabilities
they lacked, and poses new
challenges to Apple Inc. and
Alphabet Inc.’s Google, which
have their own voice-enabled
assistants.
Amazon customers who use
the company’s voice-activated
Echo speakers will be able to
tap into Microsoft’s artificial-
intelligence capabilities by say-
ing, “Alexa, open Cortana.”
They can check their Outlook
calendar for coming appoint-
ments, for example. At the
same time, customers using
computers running Windows
10 will be able to say, “Hey
Cortana, open Alexa,” to turn
on the lights in their homes or
Apple Reaches Out to WeChat Users
BY ALYSSA ABKOWITZ
BEIJING—Apple Inc. is now
allowing Chinese customers to
use local mobile-payment sys-
tem WeChat Pay for purchases
in its App Store, underscoring
the expanding reach of the ser-
vice owned by technology firm
Tencent Holdings Ltd.
Apple’s decision to accept
payments from the service
came despite recent tensions
with Tencent, including over
the Chinese company’s rollout
this year of a so-called minipro-
gram system that has been
seen as a competitor to the App
Store.
“We are committed to offer-
ing customers across our eco-
system a variety of payment
options that are simple and
Book a
Bespoke
Marrakech
Experience
Amazon’s digital assistant Alexa surfaced in 2014 when the company introduced the Echo, above.
add items to shopping lists.
By joining with Microsoft,
Amazon expands Alexa’s reach.
Morgan Stanley estimates Am-
azon has sold more than 11 mil-
lion Echo devices through last
year, while Cortana is available
convenient,” Apple said in a
written statement.
In the second quarter of this
year, Apple’s App Store pulled
in more revenue in China—an
estimated $2.2 billion—than in
any other market, according to
mobile-analytics firm App An-
nie.
Tencent’s latest victory
comes as it challenges the more
established Alipay mobile-pay-
ment system backed by local ri-
val Alibaba Group Holding Ltd.
As WeChat Pay, which controls
40% of the Chinese market, has
gained wider acceptance, Ali-
pay’s market share has fallen
from 80% in 2014 to about 50%
currently, according to data
from iResearch Consulting
Group. Apple began accepting
App Store payments from Ali-
WSJ TALK / E XPERIENCE / OFFE R / GE TAWAY
TECHNOLOGY
on the 500 million computers
running Windows 10—though
Microsoft said in May Cortana
has 141 million monthly users.
Both services also run on apps
available on the mobile operat-
ing systems from Apple and
pay in November 2016 and
from state-backed network
UnionPay two years earlier.
WeChat has become an all-
purpose smartphone utility in
China, with nearly one billion
monthly active users who rely
on it for mobile payments, so-
cial messaging and entertain-
ment, among other functions.
Chinese smartphone users
spend so much time on WeChat
that some analysts say they be-
lieve it could hurt sales of Ap-
ple’s 10th-anniversary iPhone
expected in September, because
consumers here won’t see the
need to upgrade their handsets
as long as they can access the
platform.
Apple has said it views Ten-
cent, one of the world’s biggest
competitors in mobile games,
THE WALL STREET JOURNAL.
some aspects such as email and
calendar options, which it
gains through the partnership,
he said.
One thing the companies
won’t share is data. An Amazon
spokeswoman said the compa-
nies will only exchange neces-
sary information to process re-
quests that is consistent with
both companies’ privacy poli-
cies. “Once you open Cortana,
all voice data goes to Microsoft
and not Amazon,” she said.
Alexa, which surfaced in
2014 when Amazon introduced
ELAINE THOMPSON/ASSOCIATED PRESS
the Echo, has focused on con-
sumer and home-automation
needs. Cortana, which made its
debut in 2014, works in per-
sonal computers as well as Mi-
crosoft’s Xbox One game con-
soles. Cortana’s strength is in
its integration with Microsoft’s
productivity software, said Pat-
rick Moorhead, an analyst with
research firm Moor Insights &
Strategy.
Google. The digital-assistant market
“This is a great move for Al- is still emerging, with no clear
exa, but also a necessary leader. Apple’s Siri is on as
move,” said Gene Munster, many as a billion devices, Mr.
head of research at venture- Moorhead estimates. The com-
capital firm Loup Ventures. pany will start selling its
Right now, Alexa is lacking in HomePod speaker later this
as a partner. On an earnings
call with analysts earlier this
month, Chief Executive Tim
Cook said Tencent is “one of
our biggest and best develop-
ers” and that Apple looked for-
ward to working with the com-
pany “even more.”
However, the decision to ac-
cept WeChat Pay comes as Ap-
ple struggles to gain traction
with its own mobile-payment
system, Apple Pay, which made
its debut in China in May 2016.
The system’s footprint in the A sign indicates acceptance of WeChat Pay, at a restaurant in
country’s market is negligible, Guangzhou, China. Apple’s App Store now accepts the service.
iResearch says.
Also, Apple has sparred with function to comply with App
Tencent recently over pur- Store rules. The function al-
chases in the App Store. Earlier lowed WeChat users to give
this year, Apple forced the Chi- small amounts of money to au-
nese company’s WeChat mes- thors and other content cre-
saging app to disable its “tip” ators as gratuities via transfers
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year, a device that likely will
tie into millions of iPhones and
iPads and their calendar and
email information.
Google Assistant is on about
150 million devices that run the
latest versions of its Android
operating system, Mr. Moorhead
said. The company is racing to
catch up to Alexa with Google
Home, a voice-activated speaker
similar to Amazon’s Echo.
“There are going to be mul-
tiple successful intelligent
agents, each with access to dif-
ferent sets of data and with
different specialized skill ar-
eas,” Amazon Chief Executive
Jeff Bezos said in a statement.
The tie-up is a signal the
companies realize the future of
voice assistants may be more
about the content rather than
how it is delivered, said Ahmed
Bouzid, a former member of
the Alexa team and founder
and CEO of Witlingo, which
builds voice products for Alexa,
Google and Cortana.
“This development is mov-
ing towards that world where
it really doesn’t matter if you
access the content through
Google or Alexa or Cortana or
Siri or Bixby,” Mr. Bouzid said.
BOBBY YIP/REUTERS
from mobile-wallet accounts.
Apple considered these pay-
ments to be in-app purchases,
of which it takes a 30% cut.
—Xiao Xiao
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. Thursday, August 31, 2017 | B5

FINANCE & MARKETS

Insurers’ Drones Win After-Storm Role

BY NICOLE FRIEDMAN spokesman said.
AND LESLIE SCISM There are potential compli-
cations to the use of so many
Property insurers are pre- drones at one time after a
paring to fly dozens of drones storm. The FAA has temporar-
over homes and businesses to ily restricted flights of all
Other insurers want to eval-
uate the situation further.
United Services Automobile
Association, or USAA, had
10,000 claims as of Tuesday
from various places hit by Har-

WILLIAM LUTHER/SAN ANTONIO EXPRESS-NEWS/ZUMA PRESS

assess damage in the wake of
Tropical Storm Harvey, the
first widespread use of un-
manned aircraft to size up ca-
tastrophe claims.
Insurers have been testing
drones and using them on a
small scale since getting Fed-
eral Aviation Administration
approval in 2015 to use the
technology for U.S. inspec-
tions. Drones provide aerial
images that can help insurance
adjusters inspect buildings
faster and more safely, execu-
tives say, part of a larger in-
dustry effort to speed up time-
consuming claims.
The storm presents the first
opportunity for some insurers
to test their new fleets on a
large scale. Harvey, which
made landfall in Texas last
week and moved to Louisiana
on Wednesday, is estimated to
have caused up to $20 billion
in insurable damage.
Travelers Cos., a large com-
mercial and personal-property
insurer, has about 24 drones
Harvey is the first opportunity for some insurers to test their drone fleets on a large scale.
ready to be used in Texas and
about 200 Travelers employ-
ees certified by the FAA as
drone pilots, according to a
spokesman.
Allstate Corp. expects to
make hundreds of flights a day
and thousands a week with
drones that it uses on a con-
tract basis, according to a
spokesman. It already rou-
tinely uses drones to settle
claims in Texas and three
other states.
Farmers Insurance, one of
the top homeowners’ insurers
in Texas, has seven drones
available for use in Texas and
14 adjusters who are trained to
use them. Adjusters using
drones can inspect three
homes an hour, while an in-
spector without a drone could
take more than an hour to
types, with exceptions, over
most of Houston, meaning op-
erators have to get federal ap-
provals to fly.
Federal regulations also
prohibit drones from being
flown too close to airports,
and insurers can fly over a
home only with permission,
preventing the companies
from filming over a wide area.
To be sure, insurance ad-
justers will still be climbing on
thousands of roofs to inspect
damage in person. State Farm,
the largest homeowners’ and
personal car insurer in Texas,
isn’t currently using drones in
climb onto a badly damaged its Harvey claims handling, a
roof and inspect it, according spokeswoman said.
to Jarrod Murrieta, head of “Our claims adjusters will
claims catastrophe response at likely need to inspect both the
Farmers. interior and exterior of the
“We are pretty confident” home to assess coverage and
that the adjusters can make damages,” she said. “For this
accurate estimates based on situation, we find that the best
photos, Mr. Murrieta said. The way to service our customers
company has received more and evaluate coverage and
than 14,000 claims reports as damages is through on-the-
of midday Wednesday, a ground claims handling.”
vey, but it hasn’t yet made the
decision to use 12 of its own
drones and additional ones un-
der contract.
It had adjusters in Corpus
Christi, Texas, on Tuesday as-
sessing the situation. “We’re
trying to survey what type of
damage is there to know
whether or not we need to de-
ploy the drones,” spokes-
woman Rebekah Nelson said.
Chubb Ltd., a big business
insurer that also specializes in
insuring expensive homes and
other property of wealthy peo-
ple, will mostly use drones for
commercial property or to
reach areas that are inaccessi-
ble, like barrier islands, said
Fran O’Brien, who heads the
company’s high-net-worth
business.
“If technology is the way to
give good service, we will do
that,” she said. “If it can be
done through human adjusters
with lots and lots of experi-
ence with these kinds of
claims, we will” go that route.

NYSE Seeks a Delay ADVERTISEMENT

The Mart
On End-of-Day News BUSINESS OPPORTUNITY BUSINESS OPPORTUNITY

BY ALEXANDER OSIPOVICH sion associated with the oc-

The New York Stock Ex-
change wants to impose a
brief delay on the late-after-
noon release of important
company news, saying that
when firms publish such an-
nouncements too soon after 4
p.m., it causes confusion and
undermines the NYSE’s closing
auctions.
Under a proposed change to
its rule book, the NYSE would
make listed companies delay
news releases until 4:05 p.m.
or whenever the exchange
published their stock’s closing
price for the day, whichever
comes first.
The Securities and Ex-
change Commission disclosed
that the NYSE, owned by In-
tercontinental Exchange Inc.,
was seeking the rule change in
a notice posted on its website
Tuesday. SEC approval is
needed for the change to take
effect.
“This prohibition would
mitigate the risk of market
disruption and investor confu-
SPENCER PLATT/GETTY IMAGES
currence of significant news-
related price volatility on
other markets during the brief
period between the NYSE’s of-
ficial closing time and the
completion of the closing auc-
tion,” the notice said.
Companies typically wait
until after major markets close
at 4 p.m. to issue announce-
ments that could affect their
stock price, such as earnings
releases.
But 4 p.m. is also when the
NYSE holds its closing auction,
a process that determines the
final end-of-day prices for
thousands of NYSE-listed se-
curities. In turn, the NYSE’s
closing prices determine the
value of exchange-traded
funds and index-tracking mu-
tual funds that hold those se-
curities in their baskets.
All-electronic exchanges
such as Nasdaq Inc. can hold
the closing auction nearly in-
stantly, but the NYSE’s auction
can experience short delays
because of the role played by
its human traders.

Bank of America hailed Berkshire Hathaway’s ‘continued support.’

Buffett’s Paper Profit

On BofA: $13 Billion
BY RACHEL LOUISE ENSIGN
Warren Buffett’s Berkshire
Hathaway Inc. officially be-
came the biggest shareholder
of Bank of America Corp.,
notching billions in gains on
the bank’s recovery from the
financial crisis.
Bank of America said Tues-
day that Berkshire exercised
warrants to buy 700 million of
its shares at below-market
prices, a deal that ties back to
a crisis-era investment. The
move makes the famous stock
picker’s firm the largest share-
holder of the second- and
third-largest U.S. banks—the
third being Wells Fargo &
when the lender needed to
shore up investor sentiment.
Bank of America’s share price
was slumping as investors be-
came worried about poten-
tially billions of dollars in le-
gal claims and fines related to
the crisis.
Mr. Buffett helped change
the market’s perception with
the investment and by calling
the bank “well led.”
The $5 billion deal also in-
cluded warrants for Berkshire
to buy 700 million shares of
Bank of America common
stock for $7.14 apiece. ANNOUNCEMENTS CAPITAL WANTED
At the time, the strike price
was slightly above where Bank
of America’s shares were trad-  

  
Co.—while also providing a ing. Now, it is far below the
  
 


 Capital Needed


 
 
 



vote of confidence for Bank of current price of about $23.90 



 





Bridge loan of $3.5 mil or

 
 

 


$5.5 mil term loan. Real estate
America stock. a share. 


    

“Berkshire is going to keep “In 2011, we welcomed  


 

 
 for collateral. Principals only,

 


     !
no brokers. 918-804-8030
every share for a very long Berkshire Hathaway as a 
 ""#$$   
time,” Mr. Buffett said in an shareholder, and we appreci-
email to the Journal. ate their continued support
BUSINESS OPPORTUNITY TRAVEL
Berkshire’s exercise of the now as our largest common
warrants, along with dividends shareholder,” Bank of America
the company has received on Chief Executive Officer Brian Save Up To 60%
Bank of America preferred Moynihan said. à As with all investments,
appropriate advice should First & Business
stock, brings its paper gain on The terms of the initial in- INTERNATIONAL
its investment in the bank to vestment were expensive for be obtained prior to Major Airlines, Corporate Travel
about $13 billion. the bank. The preferred stock entering into any Never Fly Coach Again!
www.cooktravel.net
Berkshire bought preferred paid a 6% annual dividend, or binding contract. à (800) 435-8776
shares in the bank in 2011 $300 million a year.
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 | Thursday, August 31, 2017 THE WALL STREET JOURNAL.

MARKETS DIGEST
Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
19506.54 s 143.99, or 0.74% Year-to-date s 2.05% 371.01 s 2.59, or 0.70% Year-to-date s 2.65% 2457.59 s 11.29, or 0.46% Trailing P/E ratio 23.53 24.71
High, low, open and close for each 52-wk high/low 20230.41 16251.54 High, low, open and close for each 52-wk high/low 396.45 328.80 High, low, open and close for each P/E estimate * 18.73 18.59
trading day of the past three months. All-time high 38915.87 12/29/89 trading day of the past three months. All-time high 414.06 4/15/15 trading day of the past three months. Dividend yield 2.01 2.11
All-time high: 2480.91, 08/07/17

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

20500 395 2500

65-day moving average

20000 390 2475

19500 385 2450

19000 380 2425

Session high
65-day moving average
DOWN UP
t

Session open Close 18500 375 2400

Close Open
t

65-day moving average

18000 370 2375
Session low
Bars measure the point change from session's open
17500 365 2350
May June July Aug. May June July Aug. May June July Aug.

International Stock Indexes Data as of 4 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 3 p.m. ET
World The Global Dow 2830.87 0.40 0.01 2386.93 • 2881.15 12.0 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1915.56 –10.01 –0.52 1614.17 • 1955.39 11.6 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 1087.96 6.73 0.62 838.96 • 1088.07 37.0 2.750 Australia 2 1.885 55.5 53.1 46.3 65.9 1.848 1.818 1.457
2.750 10 2.688 54.6 50.5 40.0 27.8 2.635 2.693 1.846
Americas DJ Americas 591.73 2.41 0.41 503.44 • 599.20 9.5
3.000 Belgium 2 -189.8 -188.9 -187.2 -141.2 -0.572 -0.517 -0.615
-0.569
Brazil Sao Paulo Bovespa 70844.26 –485.60 –0.68 56459.11 • 71505.69 17.6
0.800 10 0.683 -145.9 -146.5 -147.4 -142.2 0.665 0.819 0.146
Canada S&P/TSX Comp 15138.15 55.45 0.37 14319.11 • 15943.09 –1.0
0.000 France 2 -0.515 -184.5 -182.9 -181.8 -137.6 -0.512 -0.463 -0.578
Mexico IPC All-Share 51195.44 –118.22 –0.23 43998.98 • 51772.37 12.2
1.000 10 0.674 -146.8 -146.8 -148.8 -141.9 0.661 0.805 0.149
Chile Santiago IPSA 3917.15 –5.05 –0.13 3120.87 • 3945.90 21.5
0.000 Germany 2 -0.756 -208.6 -206.6 -203.8 -141.0 -0.749 -0.683 -0.613
U.S. DJIA 21892.43 27.06 0.12 17883.56 • 22179.11 10.8
0.500 10 0.362 -177.9 -178.6 -174.9 -165.9 0.343 0.544 -0.091
Nasdaq Composite 6368.31 66.42 1.05 5034.41 • 6460.84 18.3
0.050 Italy 2 -0.026 -135.5 -134.0 -137.4 -88.1 -0.023 -0.019 -0.084
S&P 500 2457.59 11.29 0.46 2083.79 • 2490.87 9.8
2.200 10 2.082 -6.0 -6.4 -16.6 -46.0 2.066 2.127 1.108
CBOE Volatility 11.19 –0.51 –4.36 8.84 • 23.01 –20.3
0.100 Japan 2 -0.151 -148.1 -147.3 -146.8 -100.2 -0.155 -0.112 -0.204
EMEA Stoxx Europe 600 371.01 2.59 0.70 328.80 • 396.45 2.7 0.100 10 0.008 -213.3 -212.5 -221.5 -164.4 0.004 0.078 -0.076
Stoxx Europe 50 3016.84 15.89 0.53 2720.66 • 3279.71 0.2 4.000 Netherlands 2 -0.712 -204.2 -201.1 -203.1 -141.3 -0.694 -0.676 -0.616
Austria ATX 3201.43 32.61 1.03 2311.88 • 3285.00 22.3 0.750 10 0.497 -164.5 -165.2 -163.9 -154.9 0.478 0.654 0.019
Belgium Bel-20 3873.58 26.98 0.70 3384.68 • 4055.96 7.4 4.750 Portugal 2 -0.053 -138.2 -133.6 -131.2 -30.1 -0.019 0.043 0.496
France CAC 40 5056.34 24.42 0.49 4310.88 • 5442.10 4.0 4.125 10 2.841 70.0 71.0 58.5 143.9 2.839 2.878 3.007
Germany DAX 12002.47 56.59 0.47 10174.92 • 12951.54 4.5 2.750 Spain 2 -0.352 -168.1 -165.9 -168.9 -99.1 -0.342 -0.334 -0.194
Greece ATG 823.65 0.98 0.12 548.72 • 859.78 28.0 1.450 10 1.578 -56.4 -56.2 -76.3 -62.4 1.567 1.530 0.944
Hungary BUX 37903.88 264.26 0.70 27466.59 • 38147.22 18.4 4.250 Sweden 2 -0.673 -200.2 -200.9 -205.8 -143.8 -0.692 -0.702 -0.641
Israel Tel Aviv 1390.99 9.38 0.68 1346.71 • 1490.23 –5.4 1.000 10 0.590 -155.1 -155.7 -158.9 -147.3 0.573 0.703 0.095
Italy FTSE MIB 21503.46 94.84 0.44 15923.11 • 22065.42 11.8 1.750 U.K. 2 0.188 -114.2 -115.6 -110.0 -64.8 0.162 0.255 0.150
Netherlands AEX 513.01 2.98 0.58 436.28 • 537.84 6.2 4.250 10 1.032 -111.0 -113.0 -107.5 -102.9 1.000 1.218 0.539
Poland WIG 64957.87 569.44 0.88 46321.24 • 65191.96 25.5 1.250 U.S. 2 1.329 ... ... ... ... 1.317 1.355 0.797
Russia RTS Index 1084.41 16.83 1.58 944.88 • 1196.99 –5.9 2.250 10 2.141 ... ... ... ... 2.129 2.293 1.568
Spain IBEX 35 10245.80 53.20 0.52 8512.40 • 11184.40 9.6
Sweden SX All Share 550.46 4.63 0.85 489.12 • 598.42 3.0 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 8851.26 36.72 0.42 7585.56 • 9198.45 7.7 EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
South Africa Johannesburg All Share 56168.00 –241.62 –0.43 48935.90 • 56896.89 10.9 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 8/29/2017
Turkey BIST 100 110423.11 … Closed 71792.96 •110530.75 41.3
One-Day Change Year Year
U.K. FTSE 100 7365.26 27.83 0.38 6654.48 • 7598.99 3.1 Commodity Exchange Last price Net Percentage high low

Asia-Pacific Corn (cents/bu.) CBOT 345.00 -3.75 -1.08% 417.25 345.00

Soybeans (cents/bu.) 932.50 -4.75 -0.51 1,047.00 907.00
Australia S&P/ASX 200 5669.70 0.70 0.01 5156.60 • 5956.50 0.1
Wheat (cents/bu.)
CBOT
CBOT 429.25 -0.50 -0.12 592.25 422.50
China Shanghai Composite 3363.63 –1.60 –0.05 2980.43 • 3365.23 8.4
Live cattle (cents/lb.) CME 106.225 0.125 0.12% 122.850 99.125
Hong Kong Hang Seng 28094.61 329.60 1.19 21574.76 • 28094.61 27.7
Cocoa ($/ton) ICE-US 1,940 -19 -0.97 2,301 1,794
India S&P BSE Sensex 31646.46 258.07 0.82 25765.14 • 32575.17 18.9
Coffee (cents/lb.) ICE-US 128.60 -0.05 -0.04 166.75 119.10
Japan Nikkei Stock Avg 19506.54 143.99 0.74 16251.54 • 20230.41 2.1
Sugar (cents/lb.) ICE-US 13.91 0.09 0.65 20.50 12.74
Singapore Straits Times 3265.26 15.92 0.49 2787.27 • 3354.71 13.3
Cotton (cents/lb.) ICE-US 70.84 0.86 1.23 75.72 66.15
South Korea Kospi 2372.29 7.55 0.32 1958.38 • 2451.53 17.1 Robusta coffee ($/ton) ICE-EU 2075.00 -30.00 -1.43 2,272.00 1,892.00
Taiwan Weighted 10569.40 72.83 0.69 8902.30 • 10579.38 14.2
Copper ($/lb.) COMEX 3.0880 -0.0165 -0.53 3.1215 2.5025
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1313.40 -5.50 -0.42 1,331.90 1,160.80
Silver ($/troy oz.) COMEX 17.470 -0.046 -0.26 18.875 14.440
Currencies London close on Aug. 30 Aluminum ($/mt)* LME 2,104.00 5.00 0.24 2,104.00 1,688.50
Tin ($/mt)* LME 20,380.00 -100.00 -0.49 21,225.00 18,760.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Wed YTDchg Copper ($/mt)* LME 6,813.00 87.00 1.29 6,813.00 5,491.00
Country/currency in US$ per US$ (%) Lead ($/mt)* LME 2,390.00 24.00 1.01 2,481.00 2,022.00
10% Europe Zinc ($/mt)* LME 3,115.00 -8.00 -0.26 3,144.00 2,450.50
Bulgaria lev 0.6096 1.6403 –11.7 Nickel ($/mt)* LME 11,790.00 110.00 0.94 11,790.00 8,780.00
sWSJ Dollar index Croatia kuna 0.1609 6.217 –13.3 Rubber (Y.01/ton) TCE 216.10 0.60 0.28 n.a. n.a.
0
Euro zone euro 1.1922 0.8388 –11.8
s s Euro
Czech Rep. koruna-b 0.0458 21.856 –14.9 Palm oil (MYR/mt) MDEX 2706.00 -7.00 -0.26 2950.00 2380.00
–10 Yen Denmark krone 0.1602 6.2403 –11.7 Crude oil ($/bbl.) NYMEX 46.00 -0.44 -0.95 58.34 42.52
Hungary forint 0.003898 256.51 –12.8 NY Harbor ULSD ($/gal.) NYMEX 1.6515 -0.0025 -0.15 1.8138 1.3814
Iceland krona 0.009486 105.42 –6.7 RBOB gasoline ($/gal.) NYMEX 1.6381 0.0362 2.26 1.6860 1.2902
–20 Norway krone 0.1284 7.7885 –9.9
0.2801 3.5700 –14.7
Natural gas ($/mmBtu) NYMEX 2.939 -0.044 -1.48 3.5660 2.7990
2016 2017 Poland zloty
Russia ruble-d 0.01713 58.366 –4.7 Brent crude ($/bbl.) ICE-EU 50.66 -1.00 -1.94 60.08 45.19
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1255 7.9684 –12.5 Gas oil ($/ton) ICE-EU 486.25 2.50 0.52 534.00 408.25
Wed Wed
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0431 0.9587 –5.9
Turkey lira 0.2902 3.4461 –2.2 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1278 7.8255 0.9
Ukraine hryvnia 0.0391 25.5850 –5.5
Argentina peso-a 0.0573 17.4449 9.9
India rupee
Indonesia rupiah
0.0156
0.0000750
63.9901
13342
–5.8
–1.4
U.K. pound 1.2933 0.7732 –4.5 Cross rates London close on Aug 30
Brazil real 0.3165 3.1591 –2.9 Middle East/Africa
Japan yen 0.009071 110.24 –5.8
Canada dollar 0.7930 1.2611 –6.2 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002964 337.42 1.1 Bahrain dinar 2.6517 0.3771 –0.02
Chile peso 0.001588 629.70 –6.0 Australia 1.2658 1.6368 1.3201 0.0115 0.1617 1.5087 1.0036 ...
Macau pataca 0.1234 8.1034 2.4 Egypt pound-a 0.0567 17.6427 –2.7
Colombia peso 0.0003408 2934.65 –2.2 Canada 1.2611 1.6308 1.3153 0.0114 0.1611 1.5034 ... 0.9963
Malaysia ringgit-c 0.2342 4.2705 –4.8 Israel shekel 0.2788 3.5866 –6.8
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.7207 1.3875 –3.9 Kuwait dinar 3.3171 0.3015 –1.4 Euro 0.8388 1.0849 0.8748 0.0076 0.1072 ... 0.6652 0.6627
Mexico peso-a 0.0563 17.7664 –14.3
Pakistan rupee 0.0095 105.175 0.8 Oman sul rial 2.5974 0.3850 0.01 Hong Kong 7.8255 10.1199 8.1626 0.0710 ... 9.3283 6.2055 6.1830
Peru sol 0.3086 3.2406 –3.3
Philippines peso 0.0195 51.214 3.2 Qatar rial 0.2717 3.681 1.12 Japan 110.2400 142.5700 114.9800 ... 14.0870 131.4200 87.4200 87.1100
Uruguay peso-e 0.0347 28.800 –1.9
Singapore dollar 0.7371 1.3566 –6.3 Saudi Arabia riyal 0.2666 3.7503 –0.01 0.9587 1.2398 ... 0.0087 0.1225 1.1432 0.7603 0.7574
Venezuela bolivar 0.099691 10.03 0.4 Switzerland
South Korea won 0.0008901 1123.43 –7.0 South Africa rand 0.0770 12.9896 –5.1
U.K. 0.7732 ... 0.8066 0.0070 0.0988 0.9219 0.6131 0.6109
Asia-Pacific Sri Lanka rupee 0.0065428 152.84 3.0 Close Net Chg % Chg YTD % Chg
0.7900 1.2658 –8.8 Taiwan dollar 0.03317 30.144 U.S. ... 1.2933 1.0431 0.0091 0.1278 1.1922 0.7930 0.7900
Australia dollar –7.1 WSJ Dollar Index 85.82 0.25 0.30 –7.66
China yuan 0.1517 6.5911 –5.1 Thailand baht 0.03011 33.210 –7.3 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

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

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Asia Titans 50
One month 1.23722% 0.52489% ¥ TakedaPharm 4502 6019.00 0.75 24.49 CHF RocheHldgctf ROG 241.20 0.04 3.70 Last: 164.57 s 0.11, or 0.07% YTD s 16.7%
Three month 1.31611 0.83933 Asia Titans HK$ TencentHoldings 0700 326.60 2.13 72.17 £ RoyDtchShell A RDSA 2126.00 -0.07 -5.20
Six month 1.45333 1.24450 HK$ AIAGroup 1299 60.00 1.27 37.14 ¥ TokioMarineHldg 8766 4370.00 0.53 -8.88 € SAP SAP 87.53 0.45 5.70 High 170
One year 1.71178 1.55711 80.75 -0.82 5.01
¥ AstellasPharma 4503 1388.50 -0.14 -14.47 ¥ ToyotaMtr 7203 6151.00 1.00 -10.57 € Sanofi SAN Close 165
Euro Libor AU$ AustNZBk ANZ 29.06 -0.21 -4.47 AU$ Wesfarmers WES 42.05 1.35 -0.21 € SchneiderElectric SU 66.52 0.53 0.62 Low 160
One month -0.40143% -0.37357% AU$ BHP BHP 26.95 0.30 7.54 AU$ WestpacBanking WBC 31.16 0.06 -4.42 € Siemens SIE 109.30 0.55 -6.42 t
Three month -0.37257 -0.32257 HK$ BankofChina 3988 4.13 0.73 20.06 AU$ Woolworths WOW 25.62 0.23 6.31 € Telefonica TEF 9.00 0.32 2.09 155
Six month -0.30757 -0.20486 43.23 0.65 -9.47
50–day
HK$ CKHutchison 0001 101.50 1.30 15.47 € Total FP
moving average 150
One year -0.20786 -0.07529 HK$ CNOOC 0883 9.44 1.29 -2.68 Stoxx 50 CHF UBSGroup UBSG 15.83 0.76 -0.75
145
Euribor AU$ CSL CSL 126.84 -0.01 26.32 € Unilever UNA 49.59 -0.05 26.78
CHF ABB ABBN 21.90 0.88 1.96
One month -0.37200% -0.37200% ¥ Canon 7751 3823.00 0.61 16.02 £ Unilever ULVR 4461.50 -0.83 35.50 2 9 16 23 30 7 14 21 28 4 11 18 25
€ ASMLHolding ASML 129.00 0.16 20.96
Three month -0.33000 -0.29900 ¥ CentralJapanRwy 9022 18440 0.85 -4.11 € Vinci DG 76.32 1.11 17.96 June July Aug.
€ AXA CS 24.25 ... 1.13
Six month -0.27300 -0.19200 HK$ ChinaConstructnBk 0939 7.02 0.57 17.59 £ VodafoneGroup VOD 218.55 0.88 9.36
€ AirLiquide AI 102.45 0.54 -3.03
One year -0.16100 -0.05200 HK$ ChinaLifeInsurance 2628 25.20 1.20 24.75 CHF ZurichInsurance ZURN 286.30 0.35 2.10
178.50
Yen Libor HK$ ChinaMobile 0941 88.35 0.28 7.48
€
€
Allianz
AB InBev
ALV
ABI 99.03
0.25 13.69
1.98 -1.51 DJIA Stoxx 50
One month -0.04350% -0.07214% HK$ ChinaPetro&Chem 0386 5.97 2.93 8.55 £ AstraZeneca AZN 4453.00 -0.86 0.35 Last: 3016.84 s 15.89, or 0.53% YTD s 0.2%
Three month -0.02800 -0.02829 AU$ CmwlthBkAust CBA 75.37 -0.48 -8.54 € BASF BAS 81.48 1.00 -7.73
$ AmericanExpress AXP 85.68 0.30 15.66
Six month -0.00743 -0.00036 ¥ EastJapanRailway 9020 10045 ... -0.54 € BNP Paribas BNP 63.16 -0.11 4.31
$ Apple AAPL 163.35 0.27 41.04 3275
One year 0.11086 0.09314 ¥ Fanuc 6954 21100 0.24 6.48 £ BT Group BT.A 290.70 1.03 -20.77
$ Boeing BA 240.39 -0.04 54.41
$ Caterpillar CAT 117.55 1.33 26.75 3200
Offer Bid ¥ Hitachi 6501 744.40 2.82 17.78 € BancoBilVizAr BBVA 7.34 0.25 15.57
TW$ Hon Hai Precisn 2317 117.50 1.73 39.55 $ Chevron CVX 107.69 -0.16 -8.50 3125
Eurodollars € BancoSantander SAN 5.41 0.69 9.03
¥ HondaMotor 7267 3040.00 ... -10.98 $ CiscoSystems CSCO 31.99 1.62 5.86
One month 1.3100% 1.2100% £ Barclays BARC 190.70 0.18 -14.66 3050
KRW HyundaiMtr 005380 143000 -0.69 -2.05 $ Coca-Cola KO 45.37 -0.18 9.43
Three month 1.3500 1.2500 € Bayer BAYN 107.05 -0.09 7.99
2975
HK$ Ind&Comml 1398 6.02 1.52 29.46 $ Disney DIS 102.87 0.29 -1.30
Six month 1.5600 1.4600 £ BP BP. 441.90 0.34 -13.28
$ DuPont DD 83.19 1.16 13.34
One year 1.7800 1.6800 ¥ JapanTobacco 2914 3736.00 0.62 -2.81 £ BritishAmTob BATS 4754.00 0.03 2.87 2900
¥ KDDI 2973.50 0.69 0.47
$ ExxonMobil XOM 76.09 -0.48 -15.70
Latest 52 wks ago 9433 € Daimler DAI 61.59 0.11 -12.91 $ GeneralElec GE 24.28 -0.65 -23.16 2 9 16 23 30 7 14 21 28 4 11 18 25
¥ Mitsubishi 8058 2532.00 0.22 1.69 € DeutscheTelekom DTE 15.12 0.10 -6.63 $ June July Aug.
Prime rates GoldmanSachs GS 222.41 1.11 -7.12
¥ MitsubishiElectric 6503 1642.00 1.33 0.77 £ Diageo DGE 2557.50 0.43 21.21 $
U.S. 4.25% 3.50% HomeDepot HD 150.03 0.13 11.90
¥ MitsubishiUFJFin 8306 660.50 0.64 -8.29 € ENI ENI 13.14 0.23 -15.06 $
Canada 2.95 2.70 Intel INTC 34.89 0.46 -3.80
1616.00 0.53 0.56 1517.00
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥
¥
Mitsui
Mizuho Fin
8031
8411 187.50 ... -10.63
£
£
GlaxoSmithKline
Glencore
GSK
GLEN 356.70
1.23 -2.88 $
1.06 28.61 $
IBM
JPMorganChase
IBM
JPM
142.57
91.31
-0.40 -14.11
0.23 5.82
Dow Jones Industrial Average P/E: 20
¥ NTTDoCoMo 9437 2539.50 0.34 -4.64 £ HSBC Hldgs HSBA 749.10 0.88 14.04 $ J&J JNJ 131.03 -0.89 13.73 Last: 21892.43 s 27.06, or 0.12% YTD s 10.8%
Policy rates
ECB 0.00% 0.00%
AU$ NatAustBnk NAB 30.06 -0.07 -1.99 € INGGroep INGA 14.78 0.44 10.55 $ McDonalds MCD 159.48 0.66 31.02
Britain 0.25 0.25
¥ NipponTeleg 9432 5431.00 1.36 10.57 £ ImperialBrands IMB 3188.50 -0.11 -9.99 $ Merck MRK 63.12 ... 7.22 22000
Switzerland 0.50 0.50
¥ NissanMotor 7201 1087.50 0.18 -7.49 € IntesaSanpaolo ISP 2.82 0.14 16.08 $ Microsoft MSFT 74.01 1.31 19.10
¥ Panasonic 6752 1458.50 0.79 22.61 € LVMHMoetHennessy MC 218.85 1.23 20.64 $ Nike NKE 52.53 -0.38 3.34
21500
Australia 1.50 1.50
HK$ PingAnInsofChina 2318 62.55 -0.56 61.21 £ LloydsBankingGroup LLOY 63.60 -0.39 1.74 $ Pfizer PFE 33.45 -0.15 2.99
U.S. discount 1.75 1.00 21000
Fed-funds target 1.00-1.25 0.25-0.50
$ RelianceIndsGDR RIGD 48.60 1.99 54.04 € LOreal OR 176.25 -0.14 1.64 $ Procter&Gamble PG 91.87 -0.49 9.26
Call money 3.00 2.25
KRW SamsungElectronics 005930 2310000 0.26 28.19 £ NationalGrid NG. 965.70 0.41 -6.98 $ 3M MMM 203.64 0.35 14.04 20500
¥ Seven&I Hldgs 3382 4359.00 0.23 -2.11 CHF Nestle NESN 80.95 0.43 10.81 $ Travelers TRV 121.79 -0.99 -0.51
Overnight repurchase rates 20000
U.S. 1.12% 0.55%
¥ SoftBankGroup 9984 8843.00 1.25 13.88 CHF Novartis NOVN 79.25 0.06 6.95 $ UnitedTech UTX 119.60 0.76 9.10
Euro zone n.a. n.a.
¥ Sony 6758 4321.00 2.88 31.94 DKK NovoNordiskB NOVO-B 291.20 1.01 14.33 $ UnitedHealth UNH 195.83 -0.46 22.36 2 9 16 23 30 7 14 21 28 4 11 18 25
¥ Sumitomo Mitsui 8316 4032.00 0.05 -9.60 £ Prudential PRU 1789.50 0.11 9.95 $ Visa V 103.81 0.04 33.06 June July Aug.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 127.30 1.52 29.90 £ ReckittBenckiser RB. 7299.00 0.03 6.00 $ Verizon VZ 48.12 -0.80 -9.85 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 217.50 0.69 19.83 £ RioTinto RIO 3679.00 0.48 16.48 $ Wal-Mart WMT 78.55 -0.28 13.64 Sources: WSJ Market Data Group; Birinyi Associates
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
Worries Build on ‘Repo’ Market Safety
With one bank left to
handle a $3.5 trillion
sector, investors fret
segment is too risky
BY KATY BURNE
When ED&F Man Capital
Markets in June opened a set-
tlement account for govern-
ment bonds at Bank of New
York Mellon Corp., it was a
watershed moment in an ob-
scure but vital corner of the
global financial system.
That was when London-
based ED&F became the first
bond broker to change “repo”
clearing banks in nearly a de-
cade.
ED&F’s move, and other
brokers doing the same, shift
more of the market onto Bank
of New York, which already
dominated that sector with an
85% share. That exacerbates
concerns many traders have
about the safety of repos, or
repurchase agreements, in
which lenders such as money-
market funds make short-term
loans, often using government
bonds as collateral.
Bank of New York’s onetime
sole rival in the business of
clearing U.S. Treasurys and re-
pos backed by them, J.P. Mor-
gan Chase & Co., in 2016 de-
cided to exit from the
business, prompting more
than two dozen brokers in-
cluding ED&F to move to Bank
of New York.
With J.P. Morgan’s retreat,
Delay for
Fiduciary
Deadline
BY LISA BEILFUSS
The U.S. Labor Department
said it would delay the fidu-
ciary rule’s final compliance
deadline by 18 months while
signaling it may eliminate a
provision that would allow in-
vestors to bring class-action
suits against brokers they say
breached their fiduciary duty.
The latest notices shed light
on how the government’s re-
evaluation of the fiduciary
rule, aimed at easing firms’
regulatory burden, is taking
shape. President Donald
Trump earlier this year or-
dered the department to reas-
sess the economic costs of reg-
ulation, with an eye toward
revision or repeal. The first
phase of the regulation went
into effect June 9, requiring
stewards of tax-advantaged re-
tirement accounts to act in cli-
ents’ best interest.
In a notice set to publish
Thursday, the department says
it will delay the rule’s final
compliance deadline to July 1,
2019, as it conducts its eco-
nomic review through the end
of the year. On Tuesday, the
Labor Department won ap-
proval for its latest delay, a
move that experts have said
suggests the retirement-sav-
ings rule will emerge from a
re-evaluation with significant
revisions.
Labor is considering a con-
ditions-based system for com-
pliance, by which firms might
have different transition peri-
ods based on the steps they
have taken or where the tran-
sition period is tied to the re-
view’s progress. The depart-
ment will reopen the comment
period starting Thursday for 15
days, soliciting feedback from
consumers and the industry on
the latest delay and how it
should structure it.
The Labor Department also
is working on a change that
would make it easier for firms
to operate in exemption of the
rule while encouraging the de-
velopment of investor-friendly
products. The department said
it “anticipates it will propose
in the near future a new and
more streamlined class exemp-
tion built in large part on re-
cent innovations in the finan-
cial services industry” and
that any such changes couldn’t
be realistically implemented
by the end of the year.
“This is a carrot,” said
George Gerstein of a new po-
tential exemption, an attorney
at Stradley Ronon who repre-
sents financial-services firms.
Mr. Gerstein said Labor is
signaling that it will propose a
new, more flexible exemption
track for products that pose
few conflicts of interest.
Federal Reserve Bank of New York President William Dudley has cited risks in repo markets.
concerns about the market’s
stability began falling squarely
on Bank of New York. The
company this past May formed
a new unit with a separate
governance team to oversee
the repo business, acknowl-
edging its unique role and re-
sponsibility.
Individual brokers’ transi-
tions have by all accounts been
smooth. But many traders fret
over the risks of having a sin-
gle bank handle all clearing
and settlement—the process of
completing trades and distrib-
uting funds according to con-
tract—in a short-term-lending
Europe Stocks Rebound;
Chip Makers Rally in U.S.
BY AMRITH RAMKUMAR
AND RIVA GOLD
The Nasdaq Composite rose
for a third day in a row,
boosted by shares of chip
makers, as stocks in Europe
and Asia rebounded from
losses triggered by North Ko-
rea’s mis-
WEDNESDAY’S sile launch
MARKETS over Japan.
Tues-
day’s mis-
sile was the first that Pyong-
yang has fired over Japan’s
main islands since 2009, and
the latest in a string of moves
that have briefly weighed on
financial markets in recent
weeks. Still, many investors
said the economic and earn-
ings backdrop for stocks re-
mained favorable, keeping the
market within striking dis-
tance of records.
Asian and European mar-
kets had fallen Tuesday in re-
1MDB Pays Abu Dhabi Fund After Two Delays
BY YANTOULTRA NGUI
KUALA LUMPUR—Malay-
sia’s troubled state-investment
fund 1Malaysia Development
Bhd., or 1MDB, said Wednes-
day that it had paid the sec-
ond part of a missed install-
ment to Abu Dhabi’s
International Petroleum In-
vestment Co.
While 1MDB is under pres-
sure and being wound up, the
payment could alleviate some
concerns about Malaysian
state securities for foreign in-
vestors, who own a significant
share of government bonds in
Malaysia. Allegations of fraud
involving 1MDB, which is un-
der investigation in half a
dozen countries, have already
spooked investors by weighing
on the country’s currency, the
ringgit.
The payment announced on
Wednesday is a balance pay-
ment by 1MDB to compensate
the Abu Dhabi sovereign
fund—a former business part-
ner known as IPIC—for an
emergency loan and other fi-
nancial support extended after
1MDB was unable to service its
debt obligations.
The precise amount of the
payment wasn’t disclosed ei-
ther by 1MDB or IPIC, which
stated earlier in a filing to the
London Stock Exchange that it
had been made.
IPIC said the payment ful-
filled the obligations that were
initially due July 31. 1MDB
missed an original deadline of
July 31 and an initial five-day
extension granted by IPIC to
pay $628.75 million. The Abu
Dhabi fund again extended the
FINANCE & MARKETS
market estimated by the Trea-
sury’s Office of Financial Re-
search at $3.5 trillion.
Many worry that having all
those transactions handled by
just one clearing bank poten-
tially exposes the world’s saf-
est bond market to threats
ranging from mundane power
outages to cyberattacks and
terrorism.
“This clearing function is
only in one bank now and is so
systemically important,” said
Scott Skyrm, head of repo at
Wedbush Securities, a Los An-
geles broker dealer.
The Federal Reserve has
sponse to the launch, but the
Dow Jones Industrial Average
added 57 points that day after
trading down as much as 135
points, its biggest intraday re-
covery in nine months.
“I think the market has
learned the wrong lesson,
which is to buy any dip indis-
criminately, and there are
risks out there that should be
factored into stock prices,”
said Eddie Perkin, chief equity
investment officer at Eaton
Vance.
On Wednesday, Japan’s Nik-
kei Stock Average rose 0.7%,
helped by a nearly 1% gain in
the dollar against the yen from
the end of Tuesday’s trading, a
shift that supported shares of
exporters. Auto maker Mitsub-
ishi Motors gained 1% while
Sony climbed 2.9%. Hong
Kong’s Hang Seng Index rose
1.2% while South Korea’s Kospi
index nudged up 0.3%.
U.S. economic data showing
IPIC had extended an emergency loan and other financial help to Malaysia’s state-investment fund.
deadline and 1MDB made a
payment of $350 million on
Aug. 11, with the understand-
ing that the balance would be
paid by Aug. 31.
1MDB, which is wholly
owned by the Malaysian fi-
nance ministry, said that all
funds were “paid from pro-
ceeds of the ongoing rational-
ization program,” referring to
an effort to reduce debt by
selling assets.
The market has been
watching closely to see if
1MDB would be able to meet
its payment deadline.
A default would likely erode
investor confidence toward
Malaysian government securi-
ties and raise the risk of capi-
tal outflows from the country,
been trying to reform the mar-
ket for nearly a decade. Those
efforts picked up as shortcom-
ings in repos were exposed in
2008, when lenders’ retreat
from Bear Stearns Cos. and
Lehman Brothers Holdings Inc.
played a role in accelerating
the financial crisis.
Troubles at those firms and
others, driven in part by their
exposure to subprime-lending
losses and reliance on short-
term loans to fund longer-term
investments, helped pave the
way for an updated repo mar-
ket.
A decade ago, many finan-
that growth remains steady
and consumer sentiment is up-
beat helped stocks to rise, said
Masashi Murata, currency
strategist at Brown Brothers
Harriman.
“The fundamentals remain
unchanged, so the bounce back
has been easier,” he said.
A measure of U.S. consumer
confidence rose in August to
its second-highest reading
since late 2000 on Tuesday,
while on Wednesday, eurozone
economic sentiment in August
reached its highest level in
more than 10 years, according
to the European Commission.
The Stoxx Europe 600 index
closed up 2.59 points, or 0.7%.
BioMerieux, a French biotech-
nology company, rallied 8% af-
ter lifting its guidance for
sales. The Swiss insurer Ba-
loise Holding rose 1.3%; its
first-half profit soared 34%.
In the U.S., the Nasdaq rose
1.1%, while gains in semicon-
Kuala Lumpur-based Kenanga
Research said.
1MDB is due to make an-
other payment, of around
$600 million, to IPIC by the
end of the year.
In July, total foreign owner-
Advertisement
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Data as shown is for information purposes only. No offer is being made by
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Thursday, August 31, 2017 | B7
cial firms funded themselves
“wholesale” by borrowing in
the market overnight. Today,
repo borrowings tend to be
longer-term and backed by
stronger collateral, such as
Treasury securities rather
than privately issued mortgage
bonds.
“When bad things happened
in 2008, we saw that there
were virtually no bids in the
market for anything other
than the risk-off sovereign
market,” said Mark Robinson,
a former managing director at
Bank of New York and most re-
cently a business-development
KHOLOOD EID/BLOOMBERG NEWS
executive at financial-technol-
ogy company Broadridge Fi-
nancial Solutions.
Regulators have been trying
on and off for years to resolve
concerns about problems in
repos spilling over to broader
financial markets.
In April, Federal Reserve
Bank of New York President
William Dudley wrote that
repo markets pose risks to
market functioning and “are
not settled yet,” in part be-
cause participants can still
choose to raise cash in a hurry
by selling assets in a so-called
fire sale.
Bank of New York this sum-
mer began transitioning some
clients of J.P. Morgan. Besides
ED&F, it has also added as new
clearing clients INTL FCStone
and Landesbank Baden-Würt-
temberg. In all, about 30 are
expected to move.
“We were nervous at first,”
said Bruce Fields, group trea-
A technician checks on wafers at an Applied Materials facility.
ductor stocks helped the S&P
500 edge up 0.5%. The Dow in-
dustrials were up 27.06 points,
or 0.1%, to 21892.43 in late
trading.
The gains in semiconductor
stocks came as Analog Devices
beat earnings expectations. Its
shares rose 5.2% by late after-
noon in New York. Microchip
Technology, Advanced Micro
Devices and Applied Materials
were also among the S&P
500’s biggest gainers.
Shares of chip makers have
soared in the past year, often
leading larger tech companies
CHRIS JUNG/NURPHOTO/ZUMA PRESS
ship of Malaysian government
debt securities fell for the sec-
ond consecutive month, by 2.3
billion ringgit ($539.1 million),
compared with a net outflow
of 300 million ringgit in
June, according to data from
INTERNATIONAL INVESTMENT FUNDS
FUND NAME
n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866
Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg
CAM-GTF Limited
For information about listing your funds,
please contact: Freda Fung tel: +852 2831
2504; email: freda.fung@wsj.com
surer at INTL FCStone. But he
said his fears have been al-
layed since his firm’s conver-
sion on July 10, which he said
has provided access to a wider
array of repo lenders than at
J.P. Morgan.
Beyond Bank of New York,
efforts to make the repo mar-
ket safer continue. In May, a
unit of Depository Trust &
Clearing Corp., a financial-in-
frastructure firm controlled by
large banks, got permission
from the Securities and Ex-
change Commission to expand
a repo safety net already in
use for bond broker to cover
institutional investors, too.
Some view this as potentially
mitigating fire sales. Hedge-
fund firm Citadel LLC joined
the safety net in June.
Trading volumes have
shrunk, owing to new rules
that have levied extra capital
charges on banks. Other rules
have meant more repos are
locked in for longer terms, re-
ducing the incentives for firms
to borrow in the short term
while lending in the long term
and creating an unsound con-
dition known as an asset-lia-
bility mismatch.
Perhaps most important,
the hundreds of billions of dol-
lars in intraday loans that J.P.
Morgan and Bank of New York
once made every morning to
bond brokers have been re-
duced by 97%, according to
Fed estimates, virtually elimi-
nating the exposure the two
clearing banks had precrisis to
a broker default.
DAVID PAUL MORRIS/BLOOMBERG NEWS
on the way up and the way
down because chips are used
in so many consumer prod-
ucts. Analog Devices is one of
several semiconductor and
technology stocks up more
than 30% in the past 12
months.
“They’re the ones that can
deliver the top-line growth,
which makes them kind of
unique in this marketplace,”
said Crit Thomas, global mar-
ket strategist at Touchstone
Investments.
—Sara Sjolin
contributed to this article.
Malaysia’s central bank.
IPIC and 1MDB signed a set-
tlement agreement in April.
The July 31 payment was the
first to come due since the
U.S. Justice Department in
June and Singapore’s public
prosecutor in July alleged in
court filings that units owned
by 1MDB in an offshore invest-
ment fund were almost worth-
less. 1MDB had maintained
they were worth about $940
million. The fund hasn’t com-
mented on the allegations.
The fund was launched by
Prime Minister Najib Razak in
2009 to spur economic devel-
opment but accumulated $13
billion in debt. It began strug-
gling in 2015 to make pay-
ments on its debts and later
was found to be missing bil-
lions of dollars. Investigations
are under way in the U.S.,
Singapore and elsewhere. U.S.
investigators allege that at
least $4.5 billion was stolen.
1MDB has denied wrongdo-
ing and promised to cooperate
with investigators. Mr. Najib
denied wrongdoing and was
cleared of any wrongdoing by
Malaysia’s attorney general.
NAV —%RETURN—
GF AT LB DATE CR NAV YTD 12-MO 2-YR
OT OT MUS 08/25 USD 308853.70 2.2 -2.3 6.7
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B8 | Thursday, August 31, 2017
Emerging Markets Pick Up LNG Slack
Gas demand is rising
in developing Asian
nations as it weakens
in richer neighbors
BY DEMI GUO
Emerging-market nations in
Asia are turning to imports of
liquefied natural gas to offset
dwindling domestic supplies,
bolstering LNG trade in the re-
gion as demand from bigger
markets eases.
Nearly 90% of global LNG
demand growth will come
from emerging and frontier
economies by 2022, the Inter-
national Energy Agency esti-
mates. Natural-gas prices fell
to their lowest in a decade in
2016, according to the IEA,
making it a more affordable
source of energy for develop-
ing countries. LNG is a form of
gas that is converted into liq-
uid form so that it can be
transported from producing to
consuming countries, where it
is converted back into gaseous
form.
While most of the demand
growth will come from eco-
nomic behemoth China, as it
competes with Singapore and
Japan to establish itself as an
LNG hub, the rest will come
from smaller economies, the
IEA says.
Domestic LNG reserves are
running low in countries such
as Bangladesh, Pakistan and
the Philippines, forcing them
to seek outside sources. Ban-
gladesh has only 12 years’
worth of domestic natural gas
left, said Lance Crist, global
head of oil, gas and mining at
International Finance Corp., a
private branch of the World
Bank.
As demand growth slows in
traditional consumers such as
Japan and South Korea, those
smaller players will make up
20% of the global LNG trade
by 2022, the IEA says.
“What really drives the de-
mand is the shortages of elec-
tricity,” said Victoria Zarets-
Email: heard@wsj.com
Megamerger
Shows Off
China’sPower
China is trimming the
number of its state-owned
enterprises, the huge gov-
ernment-backed companies
whose inefficiencies are of-
ten blamed for holding back
the economy. But it is doing
so only by making even big-
ger state-backed entities.
Witness this week’s
whopping merger of Shen-
hua Group, China’s top
miner and a major power
producer, and electricity
firm China Guodian. The
combined company will
have assets of $270 billion.
Chinese power producers
have suffered from intensi-
fying competition in the
past two years as the gov-
ernment has started to lib-
eralize part of the market.
Return on equity in the sec-
tor is expected to plunge to
3.6% this year from 14.4%
two years ago, according to
Credit Suisse Group.
Part of the predicament
stems from China’s central
planning. Power producers
have suffered from surging
coal prices since last year
thanks in large part to un-
timely Beijing-mandated ca-
pacity cuts. As both the
largest producer and con-
sumer of coal, China has a
big interest in stable coal
prices, yet its all-too-visible
hand has added more vola-
tility to prices recently.
Sure, less competition in
the power sector, as rivals
bow to the new giant com-
pany, could help to reduce
China’s electricity glut in
the short term. Yet in the
long run, letting market sig-
nals dictate capital alloca-
tion rather than creating
larger state-owned behe-
moths is a better way for
China to reform. Unfortu-
nately, Beijing looks un-
likely to give up its med-
dling in the market just yet.
—Jacky Wong
An LNG tanker near Tokyo. Asia relies on liquefied natural gas because it is hard to build pipelines to isolated markets such as Japan.
kaya, lead operations research
analyst at the U.S. Energy In-
formation Administration.
Metropolitan areas such as Ka-
rachi, a major city in Pakistan,
experience rolling blackouts to
conserve energy.
“They do load shedding.
That means you don’t provide
electricity 24 hours a day,” she
said.
Historically, Asia has de-
pended on natural gas shipped
in LNG form because transna-
tional pipelines are hard to
build in geographically iso-
lated areas such as top con-
sumers Japan and South Ko-
rea.
But the construction costs
for onshore import facilities
are prohibitive for some devel-
oping nations, which struggle
HEARD ON THE STREET
Stars Line Up in Emerging Bonds
Low inflation has gone
global. But while it is prov-
ing a test for central banks
like the U.S. Federal Reserve
and European Central Bank,
it is a different story in
emerging markets. Investors
in local-currency government
bonds are the winners—and
could have more to come.
The gains so far in 2017
are pretty remarkable. The
J.P. Morgan GBI-EM index of
emerging-market local-cur-
rency bonds has returned
14.6% in dollar terms this
year. That performance has
been powered by the combi-
nation of falling bond yields
and rising emerging-market
exchange rates.
A key factor is easing in-
flation. An aggregate mea-
sure calculated by Capital
Economics that covers 52
emerging-market economies
held at an eight-year low of
just 3% in July, down from
3.8% in January. In part, that
is because the influence of
food and energy prices that
pushed inflation higher pre-
Worries Over Amazon Leave Costco Shares at a Discount
One of the few ways for
retailers to compete against
the growing might of Ama-
zon.com is to offer some-
thing different. Costco
Wholesale does that, but the
market has been unwilling of
late to give it credit for its
uniqueness.
The discounter, like other
grocers, was punished twice
by investors fearful that Am-
azon’s acquisition of Whole
Foods Market would mean
aggressive price competition
in grocery. Costco shares fell
13% in the week following
Amazon’s June 16 announce-
ment of the deal, shaving
roughly $10 billion off its
market capitalization. Its
shares then fell another 5%,
representing an additional
$3.5 billion of value, on
Thursday last week, when
MARKETS
Gas Demand
Non-OECD Asia* countries are increasingly turning to liquefied
natural gas.
200 billion cubic meters
Residential/
150 commercial
100
50
0 tional Gas Union.
2000 ’10 ’16 ’18 ’20
Estimates
*Excludes China
Source: International Energy Agency
to find lenders to fund large
infrastructure projects.
“A typical plant takes at
FINANCIAL ANALYSIS & COMMENTARY
Low Pressure
Aggregate emerging-market inflation
10%
8 returns may be more risky. A
6 haps because markets start
4 terest-rate rises, could be a
2
0 brighter growth prospects
2007 ’08 ’09 ’10
Note: Covers 52 emerging economies, excluding Venezuela and Argentina
Source: Capital Economics
viously has waned. But it
also reflects contained un-
derlying price pressures.
Crucially, that may allow
central banks in emerging
markets to cut rates. Interest
rates in many emerging-mar-
ket countries remain high,
after central banks had to re-
act in recent years to rising
inflation and weakening cur-
rencies by tightening policy.
Amazon said it would be cut-
ting prices on certain Whole
Foods items when the deal
closed on Monday.
Investors typically buy the
rumor and sell the news. In
this case, they sold the ru-
mor as well as the news. For
a company that isn’t just a
typical grocery store,
though, that degree of pessi-
mism seems unwarranted.
The primary way in which
Costco differentiates itself is
by offering the lowest prices
on bulk food, dry goods, ap-
pliances, electronics and ap-
parel. The company is able to
undercut competitors in part
because of its annual mem-
bership fees of either $60 or
$120 a year. The fees are
similar to Amazon’s Prime
membership fee, except that
in Costco’s case they don’t
Industrial Power generation
2000 ’10 ’16 ’18 ’20 2000 ’10 ’16 ’18 ’20
Estimates Estimates
THE WALL STREET JOURNAL.
least $4 billion to build,” Ms.
Zaretskaya said. Infrastructure
cost, often funded by investors
’11 ’12 ’13 ’14 ’15 ’16 ’17
THE WALL STREET JOURNAL.
The Central Bank of Russia’s
policy rate is 9%, Brazil’s is
9.25% and Mexico’s is 7%.
But that gives emerging-
market policy makers more
room to maneuver. India,
South Africa and Indonesia
are among those to have cut
rates in recent weeks. Fur-
ther easing might not be
priced into debt markets,
meaning bond prices could
need to subsidize the cost of
Prime benefits, such as free
shipping or the e-commerce
giant’s online video-stream-
ing service. The fee essen-
tially flows directly to the
bottom line. Its membership-
renewal rate exceeded 90% in
the U.S. and Canada during
its most recent quarter and
was 88% world-wide.
Costco’s low pricing also
is enabled by the higher
margins it gets on products
made under its private-label
Kirkland Signature brand,
which accounts for 25% of
sales, according to Cowen. It
has a meat-processing plant
and is building a poultry
farm. In contrast to “the ev-
erything store,” Costco limits
the number of items it sells,
giving it greater purchasing
power on the items it
THE WALL STREET JOURNAL.
$400 million annually selling
imports to the domestic mar-
ket, but that isn’t enough to
cover the annual $1.8 billion in
estimated costs to import the
LNG.
Petrobangla is seeking $1.4
billion in financing from the
government to offset the im-
port costs.
Even so, the first pipeline to
transport gas from the termi-
nal was completed this month
and Petrobangla expects the
project to be finished in 2018.
The World Bank’s IFC also
helped finance Pakistan’s first
floating LNG terminal in Port
Qasim, which became opera-
tional in early 2015, to facili-
tate imports from Qatar.
Pakistan’s gas demand in
2015 was 6 billion cubic feet a
day, while its domestic sup-
plies covered 4 billion cubic
feet a day, according to num-
bers provided by Engro Elengy
TOMOHIRO OHSUMI/BLOOMBERG NEWS
Terminal Ltd., which runs the
Port Qasim terminal.
As of the beginning of 2017,
the terminal covers roughly
30% of that deficit, according
to Engro Elengy Terminal
data.
Emerging markets’ surging
demand for LNG stands in con-
trast with slowing growth in
developed markets in the re-
gion.
such as banks, is why nations Natural-gas demand from
such as Bangladesh, which has Australia, Japan, South Korea
a low international credit rat- and New Zealand is expected
ing, have struggled to find to decline to 206 billion cubic
lenders. meters in 2022 from 218 bil-
A cheaper alternative is to lion cubic meters in 2016, ac-
put the import terminals off- cording to the IEA. Emerging-
shore. A floating LNG terminal market demand, meanwhile, is
costs significantly less than an expected to jump to 375 bil-
onshore one. The leasing pe- lion cubic meters in 2022
riod is also shorter, said Mel from 312 billion cubic meters
Ydreos, executive director of last year.
public affairs at the Interna- While LNG prices will likely
stay low for the foreseeable
Bangladesh’s state-owned future, the real question is
national energy company, what happens when natural-
Petrobangla, is building the gas prices rise, Mr. Ydreos
country’s first floating LNG said.
terminal off Moheshkhali Is- “It depends on how demand
land in the Bay of Bengal, par- will increase and how all these
tially financed by International projects on schedule are com-
Finance Corp. pleted and can actually deliver
Petrobangla expects to earn to the market,” he said.
WSJ.com/Heard
OVERHEARD
yet rise. J.P. Morgan Asset According to The Urban
Management points to Mex-
ico, Indonesia and Turkey as
offering potential.
Dictionary, “Kanoa” is slang
for having your girlfriend sto-
len by someone good-looking.
The foreign-exchange part “I went to the gym with my
of the trade that has boosted girl and I got Kanoa’d” is the
sample sentence.
sharp rise in the dollar, per- Kanoa may soon become
slang in Silicon Valley for los-
to worry more about U.S. in- ing money given to a startup.
A company with the name
big problem for many emerg- Kanoa had raised funds by
ing-market assets, and could offering a set of its planned
reverse investment flows high-tech Bluetooth ear-
into these countries. But phones for upward of $150, a
50% discount for paying up
for emerging countries are a front for a nonexistent prod-
countervailing force. uct. The earphones were sup-
The yield on the GBI-EM posed to arrive about a year
index is still north of 6%, far ago, but now the company
above the yield on devel- says it is going out of busi-
oped-market government ness and they never will.
bonds. Even without the tail- “Over the past 2 years you
wind of foreign-exchange have joined Kanoa on this
gains, that is a tempting journey to create something
prospect in a world where special,” reads a message on
low yields are depressing its website, explaining that
prospective bond returns. they were “emotionally over-
The stars may still be whelmed” with the turn of
aligned for emerging-market events and that they “genu-
bond investors. inely tried.”
—Richard Barley
was 64% in the second quar-
Food Fight ter of 2017, up from 28% in
Costco’s stock price the first quarter of 2013, Co-
wen estimates. But that
$190 Amazon announces overlap hasn’t put a dent in
Whole Foods deal...
180
Costco’s sales growth. The
...and price company reported 5% same-
cuts at
170 the grocer. store sales growth in its fis-
cal third quarter ended in
160 May. Late Wednesday, Costco
was set to report same-store
150
sales for August, the final
M A M J J A month of its fiscal year.
Source: FactSet The market hasn’t been
THE WALL STREET JOURNAL. cheered by Costco’s recent
top-line strength amid fears of
chooses to stock. Costco what Amazon might do. That
members also can buy gas edginess should ease now that
for about 20 cents less a gal- the Whole Foods tie-up is
lon, on average, than na- complete. At 24 times forward
tional prices—a perk that earnings estimates, Costco
Amazon can’t match. shares trade below their five-
Granted, the portion of year average multiple. Inves-
Costco members who were tors should buy them in bulk.
also Amazon Prime members —Miriam Gottfried