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DJIA 17602.61 À 1.06%
Inside
What’s Third
News Avenue’s
Business & Finance
Meltdown
S
everal U.S. companies,
including HP and GE’s
oil-services unit, are explor-
ing an entry into Iran ahead
of the lifting of sanctions. B1
 OPEC predicted oil prices
will rebound in coming
years, and the cartel said it
expects to reduce its own
production by 2019. B5
 Amazon’s ties with UPS
have come under strain as
rising volume and costs
have the retailer seeking al-
ternate delivery routes. A1
 The Beatles’ full catalog
is scheduled for release on
major streaming services
on Christmas Day. B1
 China Cosco is so far the
sole bidder for a majority
stake in the privatization of
Greece’s port of Piraeus. B1
 Investors are bracing for
the arrival of La Niña, a
weather event that could
wreak havoc on the agricul-
tural commodity market. B5
 A New Zealand court said
Internet entrepreneur Dot-
com can be extradited to the
U.S. to face charges including
copyright infringement. B3
 China’s central bank said
it would extend yuan trad-
ing hours in the mainland
market starting Jan. 4. B8
World-Wide
 France’s government
proposed constitutional
amendments that would
strip some French-born ter-
rorists of their citizenship. A1
 An Iraqi offensive to re-
take the western city of Ra-
madi appeared to stall after
meeting resistance from Is-
lamic State fighters. A3
 A Chinese monitor de-
tailed safety lapses and
sloppy work practices at a
landfill before it collapsed
in a deadly landslide. A5
 The U.S. slapped new
sanctions on Ukrainian and
Russian businessmen and
politicians close to Putin. A4
 A Russian court ordered
the arrest in absentia of ex-
oil tycoon Khodorkovsky, a
prominent Putin critic. A4
 Thousands of migrants
risk being marooned in
Greece this winter as neigh-
boring northern countries
tighten their borders. A3
 Spain’s two big parties
held their first talks since
elections but came no closer
to forming a government. A4
 Brain-tumor researchers
said they found a mechanism
that causes normal cells to
become cancer cells. A7
Notice to Readers
WSJ.com will publish
throughout Christmas Day
and the holiday weekend.
The Wall Street Journal
print edition won’t be
published on Friday or
Monday in Europe.
CONTENTS
Arts............................... A9
Business News.. B1-3
Crossword.............. A12
Heard on Street.... B8
Markets Digest..... B6
Money & Inv..... B5-8
€3.20; CHF5.50; £2.00;
U.S. Military (Eur.) $2.20
s Copyright 2015 Dow Jones &
Company. All Rights Reserved
Freedom for
The Year in Film An Iranian
Pastor
ARTS & ENTERTAINMENT | A9
OPINION | A10
THURSDAY - MONDAY, DECEMBER 24 - 28, 2015 ~ VOL. XXXIII NO. 230 WSJ.com EUROPE EDITION
S&P 500 2064.29 À 1.24% NIKKEI 18886.70 Closed STOXX 600 366.39 À 2.67% OIL 37.50 À 3.76% GOLD 1069.40 g 0.50% EURO 1.0877 g 0.74% DLR ¥120.96 g 0.09%
In Germany, the Christmas Markets Are Aglow
Terror
Attacks
Prompt
French
BY GREGORY ZUCKERMAN
AND MATT WIRZ
Change
The end came quickly for Da-
vid Barse.
For 24 years, Mr. Barse
helped lead Third Avenue Man-
agement LLC, a mutual-fund Government proposes
company founded by legendary
investor Marty Whitman known to amend constitution
for profiting from beaten-down
investments. At its peak in BY NOEMIE BISSERBE
2006, Third Avenue managed AND STACY MEICHTRY
more than $26 billion.
But in the early afternoon of PARIS—A year bookended
Dec. 11, Mr. Barse was trying to by terror attacks is forcing
hold the firm together. Walking France to reconsider some of
into a conference room at its the principles that underpin its
midtown Manhattan offices, he national identity.
presented a rescue plan for the On Wednesday, the Socialist
company’s high-profile Focused government of President Fran-
Credit mutual fund. The fund, çois Hollande proposed
packed with risky debt, was in amending the constitution to
free fall and had halted cus- allow authorities to strip some
tomer withdrawals—a nearly natural-born citizens of their
unprecedented step for mutual nationality if they are con-
funds, which are required to victed of terrorism. Another
promptly return investor money. amendment would shield
Now, he wanted to sell the state-of-emergency police
fund’s assets to private-equity powers, such as to conduct
firm Fortress Investment Group warrantless searches and or-
LLC. der house arrests, from court
Mr. Barse’s partners deliv- challenges.
ered a shock response: no way. The changes, which parlia-
Mr. Barse, 53 years old, grew ment is expected to approve
agitated, said people familiar next year, are a measure of how
IMAGO/ZUMA PRESS
with the presentation. Meeting the French state—founded on
with the firm’s management the ideals of liberty, equality and
committee later that afternoon, fraternity—is adapting to the
Mr. Barse vowed to go ahead threat posed by Islamic State
with the Fortress deal anyway, and other extremist groups.
convinced it was the best move STANDING TALL: A view of the tree in the Christmas market in Dortmund, Germany, on Wednesday. “People wonder at times
for the fund’s investors. who we are, as French people,
Please see THIRD page A7 as a nation,” Prime Minister
Manuel Valls said in introduc-
ing the measure, which he said
Now Streaming: carried great symbolism. “I un-
The Beatles THE TROUBLE WITH derstand its implications and
the debates that may ensue.”
France fought a bloody rev-
SOVEREIGN FUNDS olution in pursuit of a secular
republic open to all who re-
spect its founding principles.
In recent decades, the country
Financial vehicles swell in size—and debt—raising global concerns threw its doors open to waves
of migrants from former colo-
nies in North Africa, becoming
Kazakhstan’s $55 billion sov- Funds like Samruk are at a host to Europe’s biggest Mus-
ereign-wealth fund helped pull By Simon Clark critical juncture. For years, lim population. France also
the country through the global in London, Mia Lamar sovereign-wealth funds—finan- was a driving force behind the
THOMAS MEYER/ASSOCIATED PRESS
financial crisis and offered in Hong Kong cial vehicles owned by govern- European Union and its com-
funding for the country’s bid to and Bradley Hope ments—swelled in size and mon currency with Germany,
host the 2022 Winter Olympics. in New York number, fueled by rising oil dissolving national borders.
But the collapse in oil prices prices and leaders’ aspirations Part of the problem now,
has hit Kazakhstan and its fund, Samruk-Ka- to increase economic growth, invest abroad lawmakers and officials say, is
zyna JSC, hard. In October, the fund bor- and boost political influence. A new wave of France went to war against Is-
rowed $1.5 billion in its first syndicated loan sovereign funds came from African coun- lamic State—joining U.S. air-
to help a cash-strapped subsidiary saddled tries like Ghana and Angola. Asian nations Please see FRANCE page A2
with a troubled oil-field investment. joined in with funds like 1Malaysia Develop-
FAB: The Beatles’ entire catalog is “Our oil company lost lots of its reve- ment Bhd., or 1MDB.  Iraq offensive to retake
being released for streaming. B1 nues,” says the fund’s chief executive, Um- The world’s sovereign-wealth funds together Ramadi stalls............................. A3
irzak Shukeyev. “Currently, we are trying to have assets of $7.2 trillion, according to the  Spy pullback emboldens
adjust to the situation.” Please see FUNDS page A6 Afghan militants...................... A5
You Can Lead Horse Fans to Beer, Amazon
Oracle #1
But Can You Make Them Drink?
i i i
Seeks to
Ease Ties
Struggling sales can’t stop brewer’s
famous Clydesdales; never tried a Bud With UPS Cloud ERP
BY TRIPP MICKLE neighborhood. He and 175 of BY LAURA STEVENS
his friends also star in com- AND GREG BENSINGER
ATLANTA—On a warm De- mercials, most recently clomp-
cember afternoon, Chuck’s 6- ing down a dusty street to a As the clock counts down to
foot frame had him towering military-style march of “Deck Christmas, workers at United
over the crowd outside a re- the Halls” in this year’s holi- Parcel Service Inc. are busy
cently opened Total day spot. They’re on a hustling packages along loading
Wine store. His eyes mission: Get more docks and conveyor belts at its
scanned the parking people drinking Bud- Louisville, Ky., hub—part of a
Opinion.............. A10-11 lot as he waited for weiser. costly, intricate system built in
Personal Journal.. A8
his friends. And therein lies the part to cater to Amazon.com 1,675 150
Sports........................ A12
Technology................ B3 But Chuck isn’t problem. What does a Inc., its biggest customer.
U.S. News.................. A7 your everyday booze big horse with broad But the symbiotic relation- Oracle Cloud Workday Cloud
Weather................... A12 hound. shoulders and white- ship between the two giants ERP Customers ERP Customers
World News........ A2-5
Chuck is a Clydes- fringed hoofs have to has come under increasing
dale. do with beer? strain, according to interviews “Oracle has their act together better than SAP”
A Budweiser To many fans, the with more than a dozen current Aneel Bhusri, Workday CEO
Clydesdale, in fact. His beer isn’t the point. “I and former UPS and Amazon
job is traveling 10 don’t even drink,” said executives.
months a year to Lisa Kidd, who started Rising package volumes and
places like South Da- A Bud a Clydesdale Facebook costs have Amazon seeking al-
kota’s Sturgis Motor- Clydesdale page. But “the horses ternative delivery routes—shift-
Midsize and large scale Enterprise Fusion ERP Cloud customers.
cycle Rally, Fort speak to me.” Please see AMAZON page A2
Worth’s black-tie Sky Ball That is what makes Jorn oracle.com/modern-finance or call 1.800.ORACLE.1
fundraiser or the Total Wine Socquet’s job as Anheuser-  For businesses, the holidays Copyright © 2015, Oracle and/or its affiliates. All rights reserved.
near this city’s tony Buckhead Please see HORSES page A6 mean stress................................ B2
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Thursday - Monday, December 24 - 28, 2015
The Narrow Path to a Carbon Tax in the U.S.
H
aving agreed to ambi-
tious new targets for
reducing emissions of
greenhouse gases in Paris,
the world’s nations now
need a way to hit those tar-
gets.
There’s no dispute among
economists on the most
cost-effective way to do that:
a carbon tax.
President Ba-
rack Obama
agrees. In Paris
he called such
a tax “the most
CAPITAL elegant way”
ACCOUNT to incentivize
GREG IP investment in,
and consumer
demand for,
cleaner energy technology.
But that sentiment is at
odds with Mr. Obama’s own
record. He has never for-
mally proposed a carbon tax
or even an increase in the
gasoline tax. The message
isn’t that a carbon tax is im-
possible, but that Mr. Obama
is not the person to deliver
it. Crafting a carbon tax ac-
ceptable to business and to
those Republicans who want
to address climate change
would probably require
trade-offs that Mr. Obama
couldn’t swallow, such as us-
ing the money to finance
corporate tax cuts instead of
new spending or deficit re-
ERIC FEFERBERG/POOL/EUROPEAN PRESSPHOTO AGENCY
Prime Minister Manuel Valls at the Élysée Palace on Wednesday.
FRANCE
Continued from Page One
strikes in Iraq in late 2014—
without battening down the
hatches at home.
“The French are just waking
up to the fact that we, more
than others, are a country at
war,” said Alain Marsaud, a
center-right lawmaker and for-
mer antiterrorism prosecutor.
The EU’s porous border sys-
tem allows terror operatives
and automatic weapons to en-
ter France unchecked from
neighboring countries. And
France’s failure to integrate
large pockets of its Muslim mi-
nority has fueled alienation
among younger people, some
of whom are flocking to Is-
lamic State.
More than 1,000 French citi-
zens have made the trip to
Iraq and Syria, Mr. Valls said,
of whom 250 have returned.
As recently as Monday, a se-
nior member of Mr. Hollande’s
cabinet played down sugges-
tions that the government
would expand its power to re-
voke citizenship.
“Stripping citizenship from
people born French—who have
belonged to the national com-
munity since their birth—
raises a substantial problem
on a fundamental principle:
the right of soil,” Justice Min-
ister Christiane Taubira told a
radio station in Algeria.
On Wednesday, the govern-
ment said its proposal to strip
convicted terrorists of their
French nationality would apply
only to people with dual citi-
zenship. Still, many French
Muslims are also citizens of
Algeria, Morocco and other
North African countries.
“We are creating two cate-
gories of citizens in our consti-
tution,” said Patrick Weil, a
prominent French historian
and political scientist, warning
the new amendment threat-
ened “social cohesion.”
When gunmen linked to al
Qaeda and Islamic State killed
17 people in a January assault
on the Charlie Hebdo satirical
weekly and a kosher market,
duction, and rolling back
regulations on greenhouse
gases.
The political radioactivity
of carbon taxes dates to 1993
when President Bill Clinton
proposed a “BTU” tax based
on the heat content of fuel.
That tax died as farmers,
manufacturers and others
pressed for exemptions and
legislators on both sides of
the aisle complained of the
hit to the middle class.
Mr. Obama campaigned
on a pledge to not raise
taxes on any family earning
less than $250,000 a year,
which made it difficult, po-
litically, to propose a carbon
tax or higher gas tax. In-
stead, he and Democrats in
Congress went with selling
tradable permits to emit
greenhouse gases—an ap-
proach, known as cap and
trade, that is economically
similar to a tax. Nonetheless,
it died in 2010 amid opposi-
tion by most Republicans,
who called it “cap and tax,”
and some Democrats in Con-
gress.
Since then, Mr. Obama
has instead turned to regula-
tions, such as boosting re-
quired fuel efficiency of cars
and a Clean Power Plan that
compels states to limit
power-plant emissions (they
can use cap and trade to do
more than three million people
took to the streets across
France in support of multicul-
turalism and freedom of ex-
pression.
In August, however, a gun-
man’s attack on a high-speed
train to Paris plunged France
into national soul-searching
over why it took foreign pas-
sengers—three Americans and
a Briton—to foil the attack
with an act of bravery.
Mr. Hollande decorated the
four men with France’s highest
honor in a ceremony where the
absence of French nationals
was glaring.
In the wake of the Nov. 13
attacks that killed 130 people,
France went into a defensive
crouch. Memorials formed
around the sites of the attacks,
but Mr. Hollande wasted no
time in imposing a state of
emergency, granting his gov-
ernment extrajudicial powers.
Among the more vivid signs
of change brought by the ter-
ror attacks is France’s new-
found willingness to negotiate
with Syrian President Bashar
al-Assad.
France severed diplomatic
ties with Mr. Assad at the out-
break of Syria’s civil war and
led the way in accusing him of
war crimes for allegedly
slaughtering his own people
with barrel bombs and chemi-
cal weapons.
The split, has also left
French intelligence in the dark
over who is entering and leav-
ing Syrian territory.
The fastest way to heal the
intelligence breach, French of-
ficials say, is for Mr. Hollande
and other world leaders to cut
a deal with Mr. Assad that ac-
celerates international talks
aimed at building a transi-
tional government in Syria.
Three days after the Nov. 13
attacks, Mr. Hollande assem-
bled the French legislature for
a martial address, in which he
first raised the possibility of
changing the constitution.
In that same speech, Mr.
Hollande identified Islamic
State—not Mr. Assad—as the
enemy of France.
—Sam Schechner
contributed to this article.
WORLD NEWS
President Barack Obama after the Paris climate talks.
that). At the same time Con-
gress continues to shower
billions of dollars of tax
credits on renewable energy.
These are expensive ways
to combat climate change.
Mandated energy efficiency
limits consumer choice and
makes cars and appliances
more expensive. Plunging
gasoline prices have sent
consumers flocking to less
efficient light trucks, and
auto makers are pressing to
relax the fuel-efficiency stan-
dards when they come up for
review in 2017. Subsidies
create industries addicted to
taxpayer support. Regula-
AMAZON
Continued from Page One
ing the online retailer’s role
from key ally to a potentially
disruptive competitor.
Amazon has held talks with
air-cargo companies to lease
airplanes and build its own
freight operation. The company
is already using its own trucks,
drivers and a fleet of couriers
for the final and most-expen-
sive leg of an order’s trip.
It has been making its own
deliveries in certain high-den-
sity regions and relying more
heavily on the U.S. Postal Ser-
vice. Eventually, it hopes to get
drones to drop packages into
backyards.
Such steps are part of a
much broader plan at Amazon,
which counts shipping costs as
one of its fastest-growing ex-
penses, totaling 11.7% of reve-
nue in the third quarter, up
from 10.4% a year ago. The goal
is to reduce its reliance on car-
riers like UPS, according to peo-
ple familiar with the matter.
“Amazon’s interest is not in
doing what may be good for
UPS,” said Satish Jindel, a par-
cel-industry analyst with SJ
Consulting Inc. “Their interest
is in getting control over logis-
tics.”
Amazon declined to com-
ment. A spokesman for UPS
said “we will continue to work
closely with Amazon and all our
customers to help them solve
their growth and customer ser-
vice challenges.”
There is more than loyalty at
stake for Atlanta-based UPS.
This year, its Amazon account
exceeds $1 billion, say former
Amazon and UPS executives.
That is roughly a fivefold in-
crease since 2005, according to
an estimate by a former execu-
tive with direct knowledge of
the company’s spending.
While UPS investors gener-
ally view growing volumes as a
sign of health, the company’s
cost-per-package has actually
risen since more than a decade
ago, putting margins under
pressure.
The average cost to handle a
parcel was about $8 last year,
up from roughly $6.50 in 2000,
according to the company.
Much of the increase was attri-
buted to a growth in e-com-
merce, as UPS has invested
more than $11 billion over the
past five years to upgrade and
expand its network.
It hasn’t helped relations
that Amazon was a factor in
UPS’s last two back-to-back
Christmas snafus—each of
which cost UPS an unexpected
$200 million. Two years ago,
Amazon overwhelmed UPS with
hundreds of trailers of last-min-
ute Christmas orders. It later
got UPS to help underwrite mil-
lions in customer refunds.
Last year, UPS increased
capital spending by 10% to be
ready for a prolonged holiday
surge that never came.
This year, the company is ex-
pecting record volumes and has
already seen parts of its net-
work strained from a surge of
online holiday spending over
the days before and after
THE WALL STREET JOURNAL.
voters are more concerned
than their candidates about
climate change. One poll
found a slim majority believe
there’s “solid evidence” of
global warming.
While Hillary Clinton, the
Democratic front-runner,
promises more action on cli-
mate change, she has not
embraced a carbon tax, while
Vermont Sen. Bernie Sanders
has and former Maryland
KEVIN LAMARQUE/REUTERS
governor Martin O’Malley is
open to the idea.
But any president who
wants to enact a carbon tax
will almost certainly have to
make it palatable to business
and some Republicans.
F
or example, Mr. Clinton
tions also provide less cer- wanted to use the BTU
tainty than legislation: two tax to reduce the deficit
dozen states are suing to while Mr. Obama originally
overturn the Clean Power earmarked the money from
Plan. selling trading permits for
What are the odds a car- worker tax credits and green-
bon tax will fare better un- energy subsidies. To win over
der the next president? Only conservatives, a carbon tax
a few Republican candidates would probably have to be
for president say climate “revenue neutral,” that is,
change needs to be ad- used to reduce other taxes, as
dressed, and none have with the Canadian province of
made it a priority. That British Columbia’s carbon tax.
could change if one actually George Frampton, an envi-
became president. Jerry Tay- ronmental adviser to Mr. Clin-
lor, president of the Nis- ton, and Walter Minnick, a for-
kanen Center, a libertarian mer Democratic congressman,
think tank that backs a car- are drumming up support for
bon tax, notes Republican a carbon tax, half of whose
A UPS worker with an Amazon
package in New York. Lately, Shipping News
the companies’ relationship has As sales have grown at Amazon, so too have package delivery costs.
been strained. Net sales
$100 billion
Thanksgiving.
On UPS’s earnings call in Oc- $89B
tober, an analyst pushed man- 80
agement to address possible
tension in the companies’ rela- 60
tionship.
“How do you make sure that 40
you’re guarding against the po-
tential outcome where your 20
customers might increasingly
become competitors?” asked 0 0
Alexander Vecchio with Morgan
Stanley. 2004 ’06 ’08 ’10 ’12 ’14
Alan Gershenhorn, UPS’s Source: the company
chief commercial officer, said it
would be “very difficult to with Amazon, according to an
match.” executive. When Amazon re-
The customer-as-competitor quested additional data, UPS—
dynamic is upending various by then wary of the retailer’s
business models. Pay-TV pro- intentions—refused, that execu-
viders like Comcast Corp. and tive added.
Dish Network Corp., for exam- Amazon has poached more
ple, could feel the pain as HBO than 40 UPS supervisors, man-
bypasses them to reach con- agers and executives in the last
sumers. Ditto for retailers like three years, according to an
Macy’s Inc. as Estée Lauder analysis of LinkedIn data. In
sells direct to online shoppers. September, Kniffen Kelly, a 16-
At Amazon, plans to handle year veteran working on engi-
more of its own parcels have neering UPS’s transportation
accelerated over the past two networks, left to become Ama-
years, according to current and zon’s director of sort center en-
former executives. Amazon also gineering.
fears that UPS’s hub-and-spoke UPS and Amazon have also
system—moving a package been engaged in a rare public
from shipper to sorting hub to debate over low postal rates. In
brown van to your home—is government filings, UPS has ar-
growing obsolete, according to gued that the U.S. Postal Ser-
the executives. So the retailer is vice calculates some pricing in-
building regional distribution correctly; Amazon defends the
and package sorting centers, model.
while adding thousands of For all its efforts, it is still
truck trailers. It is even trying unclear whether Amazon can
delivery by newspaper carriers. outrun its delivery partner—or
For a long time, UPS and if it might ever be able to break
Amazon were a harmonious away from UPS. Building a lo-
pair. The two had worked to-
gether for years, even as FedEx
CORRECTIONS 
Corp. also shipped for Amazon.
In 2013, FedEx refused to lower
prices enough to meet Ama-
zon’s demands on a big chunk
AMPLIFICATIONS
of its business with the retailer,
according to people familiar Shenzhen J-star Project
with the negotiations. Amazon Management Consultant Co.
asked UPS to take on much of it asked local officials on Dec. 16
instead. The company agreed, to temporarily shut down a
although some UPS executives landfill involved in a deadly
questioned whether to assume landslide in southern China
the low-margin business. four days later, according to a
When Amazon launched vice president at the firm. A
Prime unlimited two-day ship- Page One article Wednesday
ping in 2005, UPS went all in, about the landslide incorrectly
giving the retailer discounts of said it made the request on
as much as 70% for the new Dec. 17, three days before the
business. incident, based on incorrect in-
Lately, though, the compa- formation from the executive.
nies’ relationship has been
Readers can alert The Wall Street
strained. A few years ago, UPS Journal to any errors in news articles
shared some of its routing data by emailing wsjcontact@wsj.com.
revenue would be used to off-
set the effect on lower- and
middle-income taxpayers and
the other half to cut corporate
tax rates, a longstanding pri-
ority of both Republicans and
business. Mr. Frampton says
the most promising way to
create bipartisan support for
the tax is to tie it to tax re-
form. By boosting investment,
lower corporate tax rates
could make the package, on
net, neutral or even positive
for growth.
Their proposal would col-
lect the tax using existing fed-
eral infrastructure to collect
fees, taxes and data on coal,
refined oil and natural gas. A
tariff on carbon-intensive im-
ports would neutralize con-
cerns about competitiveness.
Mr. Obama’s regulations
weaken the incentive for Dem-
ocrats to compromise (since
they leave less for a carbon
tax to accomplish) but for Re-
publicans and business, the
opposite is true. For them, the
power plan “represents an
endless series of regulations
from an agency they hate,”
says Mr. Taylor.
Yet in the wake of the
Paris climate accord, further
action on climate change
looks inevitable. The ques-
tion, he says, is “whether we
address it using markets or
using regulators.”
EDUARDO MUNOZ/REUTERS
Shipping cost
$10 billion
$8.7B
8
6
4
2
2004 ’06 ’08 ’10 ’12 ’14
THE WALL STREET JOURNAL.
gistics network is costly, and
the retailer may never have the
necessary infrastructure, indus-
try analysts say.
Some customers have al-
ready complained about missed
or late deliveries from Ama-
zon’s in-house service, known
as Amazon Logistics.
David Konigsberg said a
camera he ordered this month
seemed to vanish. “Amazon
said the package I ordered had
left the carrier facility, but it
never came to me,” said Mr.
Konigsberg, a 27-year-old soft-
ware developer in Alexandria,
Va. “It’s a good thing I didn’t
need it right away.”
THE WALL STREET JOURNAL.
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THE WALL STREET JOURNAL.
Iraq Offensive to Retake Ramadi Stalls
BY GHASSAN ADNAN
AND MATT BRADLEY
BAGHDAD—A new push by
Iraqi forces to retake Ramadi
appeared to stall Wednesday
in the face of resistance from
Islamic State fighters, a day
after government troops made
quick progress toward the
center of the strategic city just
60 miles from the capital.
By Wednesday afternoon,
Iraqi forces had paused within
800 meters of a former gov-
ernment compound in the city
center that they are aiming to
recapture, said Gen. Talib
Sheghati, head of Iraq’s Joint
Operations Command which
coordinates with the U.S.-led
coalition battling Islamic
State.
Gen. Sheghati said the Iraqi
forces were working to defuse
bomb-rigged homes and build-
ings, land mines and impro-
vised explosive devices buried
under roadways.
”The area is full of bombs
and mined houses. Plus, there
are pockets of resistance by
Daesh,” said Naseer al-Nouri,
an adviser to the Iraqi Defense
Ministry, using another name
for Islamic State. He added
that it might take two or three
days to fully clear the area.
Even as fighting appeared to
stall, Iraqi Prime Minister
Haider al-Abadi praised the
progress of government security
forces. He lauded the govern-
ment’s military campaign and
looked ahead to the battle for
Mosul, Iraq’s second-largest city,
which has been under Islamic
State control since June 2014.
“We managed through our
security forces and volunteers
Turkey’s Kurdish-Majority Cities Become Like War Zones
BY AYLA ALBAYRAK
AND DION NISSENBAUM
I S TA N B U L — T u r k e y ’s
stepped-up military campaign
to crush Kurdish insurgents
has reduced some urban
neighborhoods in the south-
east of the country to battle
zones, raising fears the con-
flict could escalate and spread
elsewhere in the country un-
less peace talks resume.
Since the government last
week declared what it called a
“decisive” campaign to end
five months of limited violence
between Kurds and govern-
ment security forces, young
Kurdish militants in the cities
of Diyarbakir, Cizre, Silopi and
Nusaybin have been targeted
by Turkish tanks, helicopters,
artillery and snipers, according
to local residents and news re-
ports from the region.
Militants in the mainly Kurd-
ish cities have erected barri-
cades to seal off neighborhoods
they have declared outside the
authority of the Turkish state,
and are using AK-47s, rocket
launchers and homemade
bombs to defend the enclaves,
these residents say.
Turkish officials said
Wednesday that about 170
Kurdish militants and at least
11 members of Turkey’s secu-
rity services have been killed
since the government’s an-
nouncement last week.
Migrants Marooned in Greece by Tighter Balkan Borders
BY NEKTARIA STAMOULI
AND STELIOS BOURAS
ATHENS—Greece is steadily
shifting from being the main
gateway for migrants into Eu-
rope to becoming the conti-
nent’s bottleneck, as new ar-
rivals run up against tightened
borders to the north.
Already struggling with its
long debt crisis and economic
depression, Greece risks find-
ing itself unable to cope with
the tens of thousands of mi-
grants at risk of being ma-
rooned here this winter. Some
are staying in temporary gov-
ernment shelters, others are
sleeping rough.
“There is indeed a danger
that the country will turn into
a warehouse if these flows
continue,” Prime Minister
Alexis Tsipras told Parliament
on Dec. 11. He pledged to pre-
vent that from happening, al-
though Greece has few ways to
stop people from landing on
its shores.
More than one million mi-
grants have crossed the Medi-
Iraqi pro-government forces took positions south of Ramadi on Tuesday, as the military tried to retake the city center from militants.
to achieve victories,” the Iraqi
leader said in comments pub-
lished on his official website.
“The good news today is that
we are taking back and liber-
ating Ramadi. Plus, we are
now more determined to liber-
ate Mosul.”
Mr. Abadi, a Shiite Muslim,
has in recent months faced
criticism from Iran-backed mi-
litia leaders and Shiite politi-
cians who accuse him of rely-
ing too heavily on American
support in fighting the Sunni
Mourners on Wednesday carried the coffin of 38-year-old Mehmet Tekin, who was killed in Cizre.
The rising death toll has
raised concerns among human-
rights groups, the U.S. and the
European Union that the fight-
ing could expand beyond
southeastern Turkey and be-
come more indiscriminate if
both sides fail to heed appeals
by Washington and Brussels to
stop fighting and return to ne-
gotiations.
“Things are reaching a criti-
cal point, and it’s not clear
where things are heading,” a
Western official in Turkey said.
The government’s counter-
insurgency operation is its
most intensive effort to quash
terranean into Europe this
year, about half of them from
Syria, the International Organ-
ization for Migration said
Tuesday. Just over 800,000
entered the European Union
via Greece, risking a dangerous
sea crossing that has led to al-
most-daily drownings, includ-
ing 13 early Wednesday off the
Greek island of Farmakonisi.
Greece has so far largely
been a conveyor belt in the mi-
gration crisis: Syrian refugees
and other migrants set off
from Turkey and landed on
Greece’s Aegean islands.
They quickly made their
way to the mainland, then
headed north into the Balkans
en route to Germany and other
wealthier countries in North-
ern Europe.
That is changing as a result
of a growing political backlash
against uncontrolled migration
around Europe. Germany and
European Union authorities
are trying to cajole countries
along the migration route,
from Turkey to the Balkans, to
significantly slow the largest
WORLD NEWS
extremists of Islamic State.
Iraqi forces, backed by U.S.-
led airstrikes, launched an of-
fensive Tuesday to seize full
control of the capital of Anbar
province, which Islamic State
militants captured in May.
U.S. intelligence assess-
ments estimate that up to 350
Islamic State fighters remain
in central Ramadi where they
are squaring off against a gov-
ernment-aligned force num-
bering nearly 10,000, coalition
spokesman Col. Steve Warren
young Kurdish militants since
the outlawed Kurdistan Work-
ers’ Party, known as the PKK,
declared an end to a two-year
cease-fire in July and restarted
attacks against Turkey’s secu-
rity forces.
The PKK is seeking self-rule
areas in Turkish territory for
the country’s minority ethnic
Kurds and has threatened to
escalate violence—even launch
an all-out civil war—unless the
government ends its efforts to
eradicate it.
“If they push the military
too far and it carries out a
massacre, this will fan the
movement of people Europe
has witnessed since the after-
math of World War II.
Several Balkan countries in-
cluding Macedonia, Greece’s
northern neighbor, have built
border fences and are no lon-
ger letting all migrants pass
through their territory.
People from war-torn Syria,
Iraq and Afghanistan are still
allowed through, but people
from countries such as Paki-
stan, Morocco or Iran, who are
considered less likely to win
asylum claims, are being
turned back.
Thousands of migrants have
been denied entry to Macedo-
nia in recent weeks. Many have
retreated back to Athens. So
far, neither Greece nor the EU
has laid out a plan for dealing
with them. Meanwhile thou-
sands more migrants are land-
ing every week on Greek is-
lands such as Lesbos.
The mantra in Brussels, the
EU’s headquarters, is that
Greece must police its sea bor-
der better, with help from
other EU nations if needed.
Thursday - Monday, December 24 - 28, 2015 | A3
rorism forces and 8th Army Divi-
sion pushed into the city center.
The offensive is a test for
Iraq’s air force, recently re-
trained and supplied by the
United States. Strikes from
Iraqi air force F-16s, which the
U.S. delivered to Iraq for the
first time this summer, had
killed up to eight Islamic State
leaders in Ramadi and the
northern city of Hawija since
Tuesday, state television said.
The U.S.-led coalition said
that it had launched four air-
strikes against Islamic State
targets around Ramadi on
Tuesday, destroying sniper po-
sitions, anti-aircraft artillery,
bunkers, machine-gun nests and
nearly 20 fighting positions.
Success in Ramadi is seen
as a bellwether for Iraq’s secu-
AGENCE FRANCE-PRESSE/GETTY IMAGES
rity forces and the Obama ad-
ministration’s controversial
strategy of confronting Islamic
State with only airstrikes,
without putting soldiers on
the ground. The quick loss of
Ramadi to Islamic State in
May was an embarrassment
for Iraq’s army, which watched
its soldiers melt away as mili-
tants advanced on the city.
Reclaiming the city would
said Tuesday. Islamic State Iraq’s army dropped leaflets give the army momentum for
fighters have been outnum- on Ramadi on Sunday to warn what is expected to be a major
bered in recent battles against civilians of the impending as- battle to retake the much
Iraqi and Kurdish forces, and sault, but thousands are larger Mosul, Islamic State’s
are using more sophisticated thought to remain there as Is- Iraqi stronghold.
networks of improvised explo- lamic State hostages. Tuesday’s ground offensive
sive devices, booby-trapped Provincial officials said Is- started at dawn, when Iraqi
buildings and suicide vehicle lamic State was holding sev- forces crossed an improvised
bombings to supplement their eral families hostage on pontoon bridge over the Eu-
dwindling numbers. Wednesday inside Ramadi’s phrates River into a southern
As they have in prior bat- main hospital, about 2 miles neighborhood and surprised
tles, Islamic State is also using from the city center, to ward militant fighters, said Sabah
civilians as human shields to off coalition airstrikes. al-Numani, spokesman of the
prevent Iraqi security forces Tuesday’s assault saw rapid government’s counterterror-
from advancing into the city. initial gains as Iraqi counterter- ism forces.
with the region’s people.” ment security forces resumed
In a move by that has in July, about 700 people have
stirred controversy here, lead- been killed in the violence, in-
ers of Turkey’s legal and cluding at least 150 civilians,
avowedly nonviolent Kurdish according to the International
political parties are seeking Crisis Group.
support from Russia, which is Turkish security forces have
embroiled in a feud with An- imposed curfews of varying
BULENT KILIC/AGENCE FRANCE-PRESSE/GETTY IMAGES
kara over the shootdown of a lengths in seven cities in
Russian jet last month along southeastern Turkey. More
the Turkey-Syria border. than 200,000 residents have
Selahattin Demirtas, head of fled their homes, Turkish
the pro-Kurdish Peoples’ Dem- rights groups say, and scores
ocratic Party, or HDP, held of schools have been closed
talks Wednesday in Moscow because of the fighting.
with Russian Foreign Minister “While we understand Tur-
Sergei Lavrov. key’s needs to take security
In comments to the Firat measures, it should also take all
news agency, Mr. Demirtas feasible precautions to protect
lashed out at Turkey’s ruling civilians and to act consistently
Justice and Development with its legal obligations,” U.S.
Party, known as the AKP, and State Department spokesman
urged world leaders to back John Kirby said Monday.
Kurdish calls for self-rule ar- The European Union echoed
flames,” senior PKK com- eas in the country. U.S. concerns, calling for “all
mander Murat Karayilan said “While the Kurdish people parties to act proportionately
in an interview this week with have put forth their legitimate and demonstrate restraint” in
Kurdish media. “In that case, demand for self-rule, the AKP the fighting.
we will take new decisions.” is running a policy of massa- More than 40,000 people
President Recep Tayyip Er- cres and suppression by using have died in fighting between
dogan on Wednesday said the military ground forces and the PKK and government
government was proceeding tanks. We want the whole forces since 1984, when the
methodically to wipe out the world to see that the Kurds PKK took up arms.
PKK, which Ankara, the U.S. want autonomy,” he said. Most of the group’s attacks
and the EU have designated it The Kurdish political occurred in rural Turkey, but a
a terrorist group. leader’s visit to the Russian new generation of militants—
“Our security forces are an- capital drew sharp criticism mostly local youth, some as
nihilating members of the ter- from allies of the government, young as 15—has brought the
rorist organization meticu- who accused Mr. Demirtas of conflict into the heart of
lously, one-by-one,” he said. insensitive timing. southeastern Turkey’s cities
“After that, we will wrap the Since the fighting between and towns, increasing the risk
wounds and start a new phase Kurdish militants and govern- to civilians.
France, on Dec. 16. problem will only grow.
Tide Turns In practice, however, On some of the tourism-de-
Number of migrants arriving Greece’s sea border is difficult pendent islands, opposition is
into Greece, monthly data to police. “It’s hard to build a mounting against the con-
fence on the sea,” says a senior struction of large, potentially
2014 2015
German official. Islands such long-lived camps for migrants.
200,000 as Lesbos are so close to Tur- German officials have become
key that small boats can evade increasingly impatient with
the coast guard. what they see as foot-dragging
150,000 Greece is under growing EU by Athens.
pressure to act as Europe’s fil- This month EU officials, en-
ter for migrants: Processing couraged by Germany, threat-
100,000 centers on Greek islands, known ened to suspend Greece from
as “hot spots,” are supposed to Europe’s easy-travel Schengen
sort out refugees who have a zone unless it steps up efforts to
reasonable claim to asylum in build hot spots and accepts EU
50,000 Europe from economic migrants help in patrolling its borders.
who don’t. The latter are to be Greek officials have accused
prevented from continuing their the EU of being slow to deliver
0 trek into Europe. But no de- on promised financial aid,
J F M A M J J A S O N D* tailed plan exists for what to do equipment and manpower to
*2015 figure through Dec. 21
with them. Often, their coun- help police its borders. Athens
Source: UNHCR tries of origin won’t cooperate also says other EU countries
THE WALL STREET JOURNAL. in taking people back. have been slow to accept even
So far, relatively small num- Syrian and Iraqi refugees from
“We Europeans no longer have bers of migrants have found Greece under the EU’s new re-
many borders. We have one themselves stuck in Greece. location program.
and we have a shared respon- But even providing housing for Out of a total of 66,000 ref-
sibility to protect it,” European a few thousand is stretching ugees in Greece whom the EU
Commission President Jean- the resources and capability of wants to offer new homes
Claude Juncker told the Euro- Greece’s cash-strapped govern- around Europe, fewer than 100
pean Parliament in Strasbourg, ment, and officials fear the have been moved.
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 - Monday, December 24 - 28, 2015 HK JP KO ML SI IN UK FR MN PR THE WALL STREET JOURNAL.

WORLD NEWS

U.S. Targets Putin Allies Russian Court

Additional sanctions
underscoring support
Orders Arrest
for Ukraine could hurt
cooperation on Syria Of Khodorkovsky
BY JAY SOLOMON BY OLGA RAZUMOVSKAYA prison for alleged financial
AND PHILIP SHISHKIN crimes.
MOSCOW—A Russian court In exile, he has remained a
WASHINGTON—The Obama issued a ruling ordering the prominent critic of the gov-
administration slapped fresh arrest of former oil tycoon ernment of Mr. Putin; he main-
SHALGIN ALEXANDER/TASS/ZUMA PRESS

sanctions on Ukrainian and Mikhail Khodorkovsky in ab- tains the Russian govern-
Russian businessmen and poli- sentia amid an investigation ment’s recent legal actions
ticians close to President into a 1998 murder of a Sibe- against him are a political
Vladimir Putin, a move that rian mayor, a court spokes- vendetta.
was designed to show support woman told Russian news Senior Russian officials say
for Kiev but that could under- agencies on Wednesday. the investigation into the kill-
cut U.S. efforts to cooperate The ruling calls for Mr. ing of the mayor isn’t politi-
with Moscow on ending the Khodorkovsky to be arrested cally motivated.
Syrian war. in the event that he is de- Earlier this month, Mr.
The Treasury Department tained, the spokeswoman said. Khodorkovsky received a sum-
said Tuesday that the penal- Russia’s President Putin, with Prime Minister Dmitry Medvedev at the Kremlin on Wednesday. Mr. Khodorkovsky now lives mons from a senior Russian
ties were aimed at forcing Rus- in Switzerland. Olga Pisanen, investigative body in connec-
sia to comply with diplomatic the line having a devastating takes the steps necessary to ests, a senior administration his representative, said he tion with the murder case. Mr.
agreements designed to stabi- effect for bilateral relations.” comply with its obligations un- official said. plans to return to Russia even- Khodorkovsky, once Russia’s
lize Ukraine and force Russian U.S. officials said they ex- der the Minsk agreements and “Syria and Ukraine are to- tually, but doesn’t have the richest man and head of the
troops out of Crimea, which pected Russia might try to re- to ensure a peaceful settle- tally different, and we’ve been ability to at the moment. “He now-defunct Yukos oil com-
the Kremlin formally annexed taliate for the sanctions, possi- ment of the conflict in crystal clear,” a White House has the reaction of a sensible pany, has denied any involve-
last year. bly by further undercutting Ukraine,” said John Smith, act- official said. person,” she said. “He isn’t ment in the killing and previ-
The timing of the sanctions American efforts on Ukraine ing director of Treasury’s Of- President Barack Obama has planning to respond.” ously said through his
highlights the complicated ties and Syria. But they added that fice of Foreign Assets Control. emphasized the distinction to Mr. Khodorkovsky was par- intermediaries that he has no
between the two powers. Russia’s oil-dominated econ- Administration officials said Mr. Putin during their recent doned by Russian President plans to appear before Rus-
While opposing Russia’s ag- omy is continuing to deterio- they have stressed to the interactions, a senior adminis- Vladimir Putin two years ago sia’s Investigative Committee,
gression in Ukraine, the admin- rate as global crude prices Kremlin that U.S. policy to- tration official said. The two after serving 10 years in the body that summoned him.
istration has worked to secure plunge. ward Ukraine was separate leaders most recently huddled
Moscow’s cooperation in the “They have to decide from Syria and that Mr. Putin last month on the sidelines of
fight against the Islamic State whether an escalatory cycle is wouldn’t be allowed to trade the international climate talks.

PETER SCHNEIDER/EUROPEAN PRESSPHOTO AGENCY

extremist group and in efforts what they want,” said a senior cooperation on Syria for the The U.S. and Russia also
to end the Syrian conflict. U.S. official working on the U.S.’s and Europe’s acceptance pressed through a new United
The Kremlin, responding to sanctions. “There’s a lot of un- of Russia’s moves into Ukraine. Nations Security Council reso-
the new penalties against doz- happiness there.” “The Russians can’t buy a lution last week that seeks to
ens of individuals, said that Among those blacklisted pass on Ukraine by talking to forge a cease-fire in Syria
the sanctions could undermine were top Russian businessmen us on Syria, which they haven’t within the next six months.
U.S.-Russia relations and that the U.S. accused of helping the been that helpful on anyway,” The Obama administration
Moscow could retaliate. Kremlin evade Western sanc- said the senior U.S. official. has courted Russia in recent
“This is a continuation of tions imposed last year after “We meant what we said. The weeks in a bid to jointly end
the unfriendly line against the Crimea land grab. The in- Russians might not believe us.” the war in Syria and to fight
Russia that runs counter to dividuals named Tuesday in The U.S. will continue to Islamic State.
logic,” Kremlin spokesman the U.S. sanctions couldn’t be work constructively with Rus- —Colleen McCain Nelson
Dmitry Peskov told state me- reached to comment. sia in areas where the two in Kailua, Hawaii,
dia. “This is a continuation of “It is critical that Russia countries have shared inter- contributed to this article. Mikhail Khodorkovsky, shown in June in Switzerland, where he lives.

Spain Parties Struggle to Form Government Amid Discord

BY MATT MOFFETT cause of seemingly intractable For its part, Podemos Rafael Leonisio, an investiga-
policy differences with poten- seems unlikely to waver on the tor in the political-science de-
MADRID—Leaders of tial partners. referendum issue, partly be- partment at the University of
Spain’s two establishment par- The Popular Party couldn’t cause the regional affiliates the Basque Country. “It’s seen
ties held their first talks since reach a majority even if it under the Podemos banner badly if a party enters a coali-
elections Sunday that frac- were to win the backing of the won’t allow it. “There’s a very tion.” He said all potential
tured the country’s traditional upstart centrist party Ciuda- strong current of support for combinations seemed unwork-
political structure, but came danos and its 40 seats. the right to self-determina- able and it was probable that
no closer to piecing together a The Socialists seem to have tion,” said Xavier Domenech, Spain would ultimately face no
stable government. more options; Mr. Sánchez who heads the Podemos choice but to call new elec-
Prime Minister Mariano Ra- could team up with the up- branch that was the leading tions in a few months.
joy of the conservative Popu- start far-left party Podemos, vote-getter in Catalonia. Coming up with alternative
lar Party and Socialist leader which won 69 seats, and some Mr. Domenech said tacti- scenarios to break the impasse
SERGIO PEREZ/REUTERS

Pedro Sánchez met for about regional parties to obtain a cians of the dominant parties has become a parlor game in
45 minutes Wednesday, after majority. But the only way of who are trying to cobble to- Spain these days for both poli-
their parties’ worst perfor- bringing Podemos on board is gether majorities haven’t yet ticians and analysts. Podemos
mances in an election in de- ceding to the party’s insis- grasped the significance leader Pablo Iglesias said in a
cades. tence on permitting a referen- of Sunday’s vote. “A political post on his blog Wednes-
Spain has been rocked by dum on independence for the cycle has ended and we want day that if neither Mr. Rajoy
uncertainty since the election. Messrs. Rajoy, left, and Sánchez before their meeting Wednesday. wealthy Catalonia region as to create a new one,” he said. nor Mr. Sánchez was electable,
With the two big parties hurt part of a broader rewrite of Compounding the difficulty Spain may need to opt for “an
by economic austerity policies photographers shaking hands Mr. Sánchez came to the meet- the Spanish constitution. is the rigid political culture of independent figure of pres-
and corruption scandals, up- though scarcely making eye ing with his mind made up, The referendum is a deal a country, where the two par- tige.” He didn’t name names.
start or fringe parties won 137 contact after a bitter cam- adding it was important to re- breaker in the Socialists’ ties have held sway, almost Others were predicting an
of the 350 seats in parliament, paign. In a news conference member that Mr. Rajoy won ranks. “The party would be since the end of the long dic- eventual agreement between
making it hard for anyone to after the meeting, Mr. Sánchez the election. “It’s not the best torn apart over Catalonia,” if tatorship of Francisco Franco the Popular Party and the So-
forge a governing coalition. said that voters had expressed start, but we’re at the begin- they allow a referendum, said in the 1975. Earlier this year, cialists. There are obstacles,
Mr. Rajoy, whose party won their desire for “progressive ning of the process, not the César Molinas, an economist former Socialist Prime Minis- however. Not only are the par-
123 seats, has called on the change” and that the pros- end,” he said, adding Mr. Ra- and political writer. Susana ter Felipe González said pro- ties historical rivals, but it has
Socialists to back him with pects for an agreement on a joy would hold conversations Díaz, leader of the populous phetically that Spain was mov- been only nine days since Mr.
their 90 seats when the body second term for Mr. Rajoy with other political leaders. Andalusia region and Mr. Sán- ing toward a multiparty Sánchez, in a nasty televised
convenes to elect a govern- were “null.” Both establishment parties chez’s top rival within the system “a la italiana but with- debate, said Mr. Rajoy lacked
ment—or at least allow him to Speaking for the Popular have limited options in forging party, said her party out Italians,” who know how the decency required to be
stay in office by abstaining. Party, Fernando Martínez alliances with third parties, ei- “isn’t going to allow the unity to manage it. prime minister and Mr. Rajoy
Before the meeting, the po- Maillo, a deputy secretary, ther because the math doesn’t of Spain to be put in play” just “There’s not a culture here lambasted his remarks as
litical adversaries posed for said it was regrettable that add up to a majority, or be- to win “a handful of votes.” of pacts or coalitions,” said “contemptible.”

FRANCE
World Beheading Suspect
Watch Kills Self in Prison
The suspect held for behead-
ing his boss in an attack on an
industrial gas plant in France has
committed suicide in prison,
prosecutors said.
UNITED KINGDOM Yassin Salhi, who was being
held in solitary confinement at a
Economic Growth prison on the outskirts of Paris,
Trails Estimates was found hanged Tuesday eve-
The U.K. economy grew more ning, a spokesman for the prose-
slowly than previously thought cutor’s office in the Paris suburb
during the second and third of Evry said.
quarters, according to revised of- In June, Mr. Salhi, who
ficial figures, data that could re- worked for a transport company,
inforce the case for the Bank of tried to blow up a gas-process-
England to leave interest rates ing plant in Saint-Quentin Falla-
at record lows even after last vier, a suburb of Lyon, by steer-
week’s U.S. rate increase. ing a delivery van toward gas
Government statisticians said canisters.
the economy expanded 0.4% be- His boss was found decapi-
tween July and September, com- tated, his head affixed to a
pared with an earlier estimate of fence and framed by flags em-
0.5%. Annualized growth was blazoned with the shahada, an
also reduced to 1.8% from 1.9%. Islamic creed declaring “There is
The financial sector was weaker no god but God, and Muham-
BRAZIL economic growth for this year
Political Turmoil and next.
A corruption scandal has en-
Imperils Economy
A chaotic political situation is
snared dozens of congressmen,
while efforts are afoot to im-
aggravating the ailing economy, peach President Dilma Rousseff
pushing the country’s central for allegedly manipulating bud-
bank to worsen its view of key get figures, along with a bid to
indicators for this year and next. remove the speaker of the lower
The bank said in its quarterly house for alleged corruption.
inflation report that consumer Ms. Rousseff and the
prices rose more quickly than speaker, Eduardo Cunha, have
expected in 2015 and will climb denied any wrongdoing.
faster in 2016 as well. —Jeffrey T. Lewis
The bank also cut its view of and Rogerio Jelmayer
CANADA 0.2% increase in October from
Decline in Output September.
The Bank of Canada has said
Offsets Energy Gains
Canada’s economy posted no
it expects growth in the fourth
quarter to slow after a 2.3% an-
growth in October as a decline nualized expansion in the third
in manufacturing offset gains in quarter. Canada’s resource-reliant
oil and gas extraction, marking economy shrank in each of the
an inauspicious start to the first two quarters of 2015 as
fourth quarter. business spending plummeted
Canada’s gross domestic on sharply lower energy and
product was flat at 1.64 trillion metals prices. —Kim Mackrael
Canadian dollars (US$1.18 tril-
lion), Statistics Canada said. THE PHILIPPINES
Market expectations were for a
Leading Candidate
For President Barred
The election commission for-
mally disqualified the front-run-
ner in the 2016 presidential race.
Grace Poe, a senator and the
popular daughter of two movie
stars, vowed to stay in the race
by seeking a Supreme Court rul-
ing, but the verdict is unlikely to
come much before polling day
on May 9.
The Commission on Elections
said it had rejected her candi-
WANG SHUANGZHENG/XINHUA/ZUMA PRESS

than earlier data suggested, offi- mad is the messenger of God.”
cials at the Office for National Mr. Salhi told investigators he
Statistics said. killed his boss in a parking lot
Still, Wednesday’s revised fig- but said he was driven by a per-
ures show the expansion of sonal clash, said prosecutors and
gross domestic product was less his lawyer at the time. But pros-
robust than it appeared through- ecutors placed him under inves-
out the past year and half, espe- tigation on terror charges after
cially in the second quarter this they recovered data from his
year when quarterly growth was cellphone showing the suspect
downgraded to 0.4% from a pre- sent images of the body to a
vious reading of 0.7%. 30-year-old French national liv-
—Jon Sindreu ing in Syria. —Nick Kostov
dacy on two counts: that she
isn’t a “natural-born Filipino,”
having been found abandoned as
a baby and then adopted, and
that she failed to satisfy a 10-
year residency requirement after
she returned from living in the
U.S. In doing so, it upheld two
earlier decisions by a commis-
sion panel.
Ms. Poe says she meets both
HAZY SHADE OF WINTER: People on Wednesday rode through Pingdingshan, in central China’s criteria and should be allowed to
Henan province, as authorities issued another smog alert in the north and east of the country. run. —Trefor Moss
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.
Spy Pullback Emboldens Afghan Militants
As surveillance assets
dwindle in remote
areas, militants find
more room to operate
BY JESSICA DONATI
AND MARGHERITA STANCATI
KABUL—Fourteen years af-
ter the U.S. and its allies routed
most al Qaeda militants from
Afghanistan, the country is
again becoming a haven for ex-
tremist groups, the result, in
part, of inadequate surveillance
of its far-flung territory, Af-
ghan and Western officials say.
At the height of their pres-
ence five years ago, the U.S.
military and its allies operated
852 bases and outposts across
Afghanistan, many with their
own informants, drones and
surveillance balloons to moni-
tor even remote areas of the
vast and rugged country.
Today, these spy assets are
largely gone. As of September,
all but about 20 of the installa-
tions that anchored the exten-
sive intelligence-gathering net-
work have been closed,
bulldozed or handed off to the
Afghan government. With
large stretches of Afghanistan
now regularly unmonitored,
Afghan and Western officials
fear that more extremists from
Islamic State, al Qaeda and
other militant groups could
find sanctuary inside the coun-
try’s borders.
“We lost a lot of eyes and
ears,” said an official with
U.S.-led forces in Afghanistan.
“Reporting from the provinces
dried up.”
In a sign that militants are
able to grow and operate un-
detected outside Afghanistan’s
Chinese Landfill Monitor Detailed Lapses
BY EVA DOU
AND CHUN HAN WONG
SHENZHEN, China—A gov-
ernment-appointed moni-
tor detailed what it said were
safety lapses and sloppy work
practices at a landfill in south-
ern China in the months before
it collapsed in a deadly land-
slide, according to inspection
reports reviewed by The Wall
Street Journal.
The reports said the landfill
operator hadn’t sufficiently
compressed the soil onsite
and cited “severe” erosion on
some slopes, among other
findings, from September to
November. These findings
eventually prompted the moni-
tor to recommend suspending
operations at the landfill—just
four days before construction
debris broke loose and swept
into an industrial zone in the
city of Shenzhen.
Government officials have
pinpointed the Hong’ao landfill
as a focus of their investiga-
tion into Sunday’s landslide,
which killed at least four peo-
ple and has left more than 70
missing. Rescuers found just
one survivor, state media said.
The landslide in one of
China’s fastest-growing and
most affluent cities has raised
fears over lax safety enforce-
ment across the country,
where rapid development and
urbanization have of-
ten come at the expense of in-
dustrial safety, labor rights
and environmental protec-
tions.
Virus Linked to Infant Deaths Adds to Brazil’s Woes
SÃO PAULO—Brazil is in the
grips of yet another crisis: a
fast-spreading virus some
health officials are linking to
thousands of cases of infant
brain damage and 40 related
deaths this year.
By Reed Johnson,
Rogerio Jelmayer
and Betsy McKay
Health authorities have de-
clared a national emergency as
they battle the Zika virus, a
mosquito-borne pathogen that
has been detected across much
of South America’s largest
country.
Symptoms include fever,
rashes, headaches, joint aches
and vomiting, lasting from a
few days to about a week. The
virus is rarely lethal.
Health officials believe the
virus this year alone is respon-
sible in Brazil for an explosion
of cases of microcephaly, an
An Afghanistan military operation in Ghazni province earlier this month. Extremists have set up in remote areas of the country.
main urban centers, the U.S.
military in October discovered
a 30-square-mile al Qaeda
training camp in a remote and
sparsely populated area of the
southern province of Kanda-
har.
U.S. special-operations
forces razed the encampment,
which officials described as
probably the largest al Qaeda
installation in Afghanistan
since the U.S. invasion of the
country in 2001.
The mere existence of such
a large facility showed that Is-
lamist militants are still will-
ing—and able—to establish
bases in areas of Afghanistan
where the government has no
reach, the commander of U.S.
Rescuers found a buried survivor on Wednesday, days after the landslide in Shenzhen, China.
The inspection reports were
compiled by Shenzhen J-star
Project Management Consul-
tant Co., an environmental-
monitoring firm, hired in July
by urban administrators in
Guangming New District—
where the landslide occurred—
to monitor Hong’ao and an-
other landfill.
The Guangming New Dis-
trict’s urban-administration
bureau didn’t respond to a re-
quest to comment.
In September, Guangming
New District officials said they
started monthly inspections of
the Hong’ao landfill, and re-
quested remedies for unspeci-
fied problems. J-star started
extremely rare condition in
which babies are born with
shrunken skulls because their
brains aren’t growing properly.
But they say microcephaly
hasn’t been linked to Zika vi-
rus outbreaks before.
On Tuesday, Brazil’s Health
Ministry released figures
showing that as of Saturday,
the number of suspected Zika-
related microcephaly cases had
climbed to 2,782, up nearly
16% from the previous week.
The number of confirmed
deaths shot up to 40 from 29
over the period. By compari-
son, Brazil had 147 cases of
microcephaly for all of 2014.
“This is probably the largest
outbreak of Zika ever re-
corded,” said Ann Powers, act-
ing chief of the arboviral dis-
eases branch at the Atlanta-
based Centers for Disease
Control and Prevention.
“There’s a lot of concern about
what it means, what the impli-
WORLD NEWS
and coalition forces in Afghan-
istan said.
“I think they want to con-
tinue to grow,” U.S. Army Gen.
John Campbell said in a recent
interview.
The intelligence gap has
also helped the Taliban mount
large-scale surprise attacks,
overrunning districts and kill-
ing large numbers of Afghan
troops. “It’s costing more lives
than it should,” a former Af-
ghan intelligence official said.
The growing influence of
militant groups like al Qaeda
was a factor in President Ba-
rack Obama’s decision in Octo-
ber to maintain the number of
U.S. troops in the country at
9,800 instead of continuing a
monitoring the landfill that
month, an executive said.
J-star noted erosion prob-
lems at the landfill in a report
dated Sept. 21 to Oct. 21 that
also said workers didn’t wear
reflective vests and safety haz-
ards weren’t clearly marked.
On Oct. 20, J-star issued a
notice to a subcontractor run-
ning the landfill, requesting
remedies for problems at the
landfill, including insufficient
monitoring of work quality
and a poor safety culture. It
wasn’t clear if the subcontrac-
tor or the landfill operator saw
the notice.
A second report, dated Oct.
21 to Nov. 21, said J-star found
Alarming
Increase
Brazilian cases
of microcephaly,
a birth defect
that may be
linked to Zika-
virus infection,
in thousands
2010 ’11 ’12 ’13 ’14
*Suspected cases as of Dec. 19
Source: Brazilian Health Ministry
THE WALL STREET JOURNAL.
cations are, and what we can
potentially do for containment
and control.”
There are multiple poten-
Thursday - Monday, December 24 - 28, 2015 | A5
XINHUA/ZUMA PRESS
planned withdrawal of all but a “As groups like [Islamic
handful of U.S. forces. State] emerge on the battle-
Mr. Obama’s plan now sees field, or al-Qaeda seeks to re-
leaving at least 5,500 in place establish a safe haven, we
when he leaves the White must be prepared to deter
House. Those levels will allow their growth and counter the
the U.S. to maintain drone mis- threats they pose,” Mr. Carter
sions and counterterrorism op- said.
erations, military officials have Building the intelligence ca-
said, despite the loss of many pabilities of Afghan forces, he
outposts. said, is among the priorities of
During a visit to Afghani- the enduring U.S. military
stan earlier this month, De- presence in the country.
fense Secretary Ash Carter in- The lack of intelligence
dicated he believes the U.S. about militant activities in re-
military should remain in Af- mote areas of Afghanistan
ghanistan for five to 10 years stems from the drawdown of
or more, hinting at the need to U.S. forces and the shutting of
stay committed to helping Af- U.S. and NATO bases that be-
ghan forces thwart militant ac- gan in 2012.
tivity. “There was a dramatic
handle day-to-day operations
at the landfill, according to a
copy of the subcontracting
agreement reviewed by the
Journal.
Efforts to reach officials at
Luwei and Yixianglong weren’t
successful.
On Nov. 21, municipal offi-
cials urged the landfill opera-
tor to address unspecified
problems identified in a recent
report, according to an online
government notice. Bian Yuxi-
ang, a vice president at J-star,
told the Journal the notice was
LIANG XU/XINHUA/ZUMA PRESS
driven in part by his firm’s
findings.
A month later, on Dec. 16, J-
star issued a “work suspension
order” to Yixianglong, the sub-
contractor, with immediate ef-
fect.
It wasn’t clear if the docu-
ments were seen by Luwei,
Yixianglong and the district
“slight natural sinking” in part government. Work at the land-
of the landfill, “subpar” safety fill continued.
measures, damaged drains and A copy of the subcontract-
a shortage of machinery. J- ing agreement reviewed by the
star requested the operator to Journal showed that Luwei
compress the soil across the agreed to allow Yixianglong to
landfill, among other mea- operate the landfill, but would
sures, though it wasn’t clear supervise the subcontractor’s
whether these steps were safety management.
taken. Such an agreement appears
The reports named Shen- to contradict Chinese law on
zhen Luwei Property Man- tenders, which bar main sup-
agement Co. as the landfill op- pliers from subcontracting the
erator, while a company called core components of projects to
Shenzhen Yixianglong Invest- other parties, legal experts say.
ment Development Co. was It wasn’t clear if the Guang-
named as the unit responsible ming New District government
for building work at the facil- gave consent for Yixianglong
ity. Luwei had engaged Yixian- to handle the bulk of the oper-
glong as a subcontractor to ations at Hong’ao landfill.
tial causes of microcephaly in health authorities are finding
3.0 gestating babies. Dr. Powers unusual neurological symp-
said there is a “suggestive” toms and disorders for the
link between microcephaly first time, she said. Another
2.5
and Zika, but said the connec- reason may be a mutation in
tion couldn’t be confirmed un- the virus, she said.
2.0
til additional studies have With the Southern Hemi-
been performed. sphere’s summer vacation sea-
No vaccine exists to combat son now under way and the
1.5 the Zika virus. Alarmed health nation gearing up for an influx
and government officials are of tourists for the 2016 Olym-
mobilizing communities na- pic Games in Rio de Janeiro,
1.0 tionwide to battle mosquitoes some Brazilian officials say
and have enlisted the help of they fear the infection rate
international health agencies, could surge in coming months.
0.5 including the World Health Or- The Zika virus first surfaced
ganization and the CDC. in Africa in the late 1940s. Ex-
The virus is carried by the actly how it reached Brazil,
0 Aedes aegypti and Aedes al- why it is spreading so fast and
’15* bopictus species, the same how it became such a threat to
mosquitoes that transmit den- developing fetuses isn’t yet
gue and a similar disease, chi- understood.
kungunya. Those mosquitoes Brazil’s mosquito popula-
populate the southern U.S., Ca- tion has surged over the past
ribbean, Central and South few years, paradoxically, as a
America, Dr. Powers said. result of a record drought. As
The size of the Brazilian water supplies dried up, anx-
outbreak may be the reason ious residents began storing
weakening of intel capabili-
ties,” said Franz-Michael Mell-
bin, the European Union’s en-
voy to Afghanistan. “It was
like a watershed—it should not
have been. And we still feel the
consequences.”
Informants run by the Cen-
tral Intelligence Agency and
other coalition forces from
bases around Afghanistan
weren’t transferred to the su-
pervision of Afghan authori-
ties, since under long-standing
policies observed by most spy
agencies, their identities
couldn’t be disclosed, even to
the host government.
“It’s the stupid culture of
intelligence—countries don’t
share their assets with each
other,” the former Afghan in-
telligence official said.
U.S. intelligence support for
the Afghan military today is
limited to information for spe-
cific military operations by Af-
ghanistan’s elite special-opera-
tions forces.
Coalition officials are work-
ing to help build Afghanistan’s
intelligence assets.
Afghan forces are currently
being taught how to operate
and maintain tethered surveil-
lance balloons, and next year
they are expected to receive
the first shipment of seven un-
armed drones, according to
U.S. Army Maj. Gen. Gordon
Davis, whose command over-
sees the development of Af-
ghan forces.
Afghan officials are also
compiling the names of sus-
pected militants to be cap-
tured or killed, Gen. Davis said.
About 150 names are on the
list so far.
—Gordon Lubold
in Washington
contributed to this article.
India Plan to
Simplify Tax
System Stalls
BY NIHARIKA MANDHANA
NEW DELHI—Partisan bick-
ering in India’s Parliament
stalled an important piece of
Prime Minister Narendra
Modi’s economic agenda: a
constitutional amendment that
would create a simplified na-
tionwide tax system to replace
a commerce-stifling patchwork
of state levies.
The winter session of In-
dia’s legislature ended on
Wednesday without a vote on
the measure in the upper
house, where Mr. Modi’s
Bharatiya Janata Party is in
the minority, after lawmakers
spent weeks trading jabs over
graft allegations involving top
politicians.
Fixing the tax system is “in
the big-bang reforms category,
so had it passed, it would have
been a great sentiment
booster—and a necessary
one,” said D.K. Joshi, chief
economist at ratings company
Crisil. Instead, he said: “The
economy suffers while politics
overrides everything.”
Mr. Modi’s landslide victory
in the 2014 national elections,
which gave his party a com-
manding majority in Parlia-
ment’s lower house, raised ex-
pectations among investors for
swift and sweeping economic
change in India. The prime
minister instead adopted a
more incremental approach.
emergency water supplies, cre-
ating a huge stock of mos-
quito-breeding areas.
Microcephaly cases with
suspected links to the Zika vi-
rus have been reported in 19 of
Brazil’s 26 states as well as the
federal district of Brasília, the
nation’s capital. But its effects
are being felt most keenly in
poor, northeastern states in-
cluding Pernambuco, Paraíba,
Ceará and Bahia.
Jussara Araujo, health sec-
retary of Itapetim, in Pernam-
buco, said the town had re-
corded 11 suspected cases of
Zika-related microcephaly
since October. But because the
municipality of 13,800 lacks
adequate medical infrastruc-
ture, pregnant mothers sus-
pected of being infected had to
be taken to the state capital of
Recife, about 220 miles away.
“We are very saddened,”
Ms. Araujo said. “We have no
experts to handle it.”
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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A6 | Thursday - Monday, December 24 - 28, 2015
HORSES
Continued from Page One
Busch InBev’s U.S. marketing
vice president so challenging.
Not only is the Belgian native
responsible for boosting mar-
ket share when beer-drinking
is flagging, but also for how
to best use a herd of fancy
horses and all their accouter-
ments.
When he started his job
last year, he discovered his
advertising and marketing re-
sponsibilities would include
some 175 horses, their 41 han-
dlers, 16 wagon drivers, sev-
eral stables, a travel coordina-
tor and a breeding operation
geared to produce 25 foals a
year. Mr. Socquet visited the
St. Louis stables in an attempt
to meet everyone on his
Clydesdale crew, including
some of the horses like Roger,
Donnie and Sparky.
He was impressed. “They
exude an enormous amount of
power, resilience, confidence,”
he said.
The Clydesdales and Bud-
weiser go way back—to
1933—when the Busch family
sent a six-horse hitch (a horse
and wagon team) across the
East Coast delivering Buds in
FUNDS
Continued from Page One
Sovereign Wealth Fund Insti-
tute, which studies them. That
is twice their size in 2007, and
more than is managed by all the
world’s hedge funds and pri-
vate-equity funds combined, ac-
cording to J.P. Morgan Asset
Management. The number of
funds tracked by the Institute of
International Finance is up 44%
to 79 since the end of 2007.
Nearly 60% of sovereign-wealth-
fund assets are in funds depen-
dent on energy exports.
Now, some funds are
shrinking or are being tapped
by governments as oil reve-
nues fall. That is forcing them
to borrow or sell investments,
potentially pressuring global
markets just as other investors
are pulling back from risk.
Saudi Arabia’s central bank,
which functions in some ways
like a sovereign-wealth fund as
it holds significant reserves
that are invested widely, has
sold billions in assets this
year. Norway says it plans to
tap its fund, the world’s larg-
est, for the first time in 2016.
The stress from low energy
prices comes at a sensitive
time. At least two funds are em-
broiled in controversy. 1MDB,
which amassed $11 billion in
debt, is the subject of at least
nine investigations at home and
abroad. One of its main finan-
cial backers was an Abu Dhabi
fund. The head of South Korea’s
fund stepped down in the wake
of a public outcry over his plan
to invest in the Los Angeles
Dodgers baseball team.
Officials at 1MDB declined
to comment. Previously, they
said they would cooperate
with all investigations.
Uncertainty
Adnan Mazarei, deputy di-
rector of the International
Monetary Fund’s Middle East
and Central Asia Department,
says the worry is sovereign-
wealth funds will be forced to
sell during a period of already
turbulent markets. “A with-
drawal of assets by sovereign-
wealth funds against the back-
ground of liquidity concerns
could lead to large price move-
ments,” he says. “Nobody
knows how much or when but
the concern is there.”
Uncertainty is stoked by the
fact that many of the funds
don’t disclose their size, hold-
ings or investment strategies,
making it hard to gauge what
risk, if any, they pose to the
global financial system. While
others provide clear disclosure
and have good governance,
sovereign-wealth funds consti-
tute a large blind spot in the
markets, analysts say.
Global financial regulators
are investigating “potential
vulnerabilities” of sovereign-
wealth funds that could affect
world markets, the Basel-
based Financial Stability Board
said in September. An FSB
spokesman says it is too soon
to comment on the analysis.
Sovereign-wealth funds are
largely funded by commodity
revenue and foreign-exchange
reserves. Their ranks can in-
clude government pension plans
and economic development
funds like Malaysia’s 1MDB and
Samruk, which was established
in 2008 to hold Kazakhstan’s
Members of the St. Louis Clydesdale team get their feathery-white
feet washed by handler Kat Metzger and hitch driver John Clark.
celebration of the end of pro-
hibition.
Since then, the draft horses
have become beloved corpo-
rate icons like the Wells Fargo
stagecoach and the Coca-Cola
polar bears—except that they
live and breathe. When they
show up, people turn out. In
Ambler, Pa., earlier this
month, an estimated 20,000
people turned out to see them
in a holiday parade. In Texar-
kana, Texas, people recently
lined up for four hours to get
photos with a Clydesdale. And
about 500,000 visit Grant’s
state companies with an eye to
selling them off and investing
the proceeds.
As emerging markets grew
wealthier, many countries
started sovereign-wealth
funds. More than three-quar-
ters of assets are in funds
from emerging markets, with
many of the biggest based in
the Middle East and Asia. The
latest wave comes from Africa.
“In the old days you built
armies,” says Jayne Bok, head
of sovereign advisory in Asia
for consulting firm Towers
Watson. “Now you build a sov-
ereign-wealth fund.”
Many have kept funds in
low-risk, highly liquid invest-
ments. But as assets grew and
global yields tumbled, some
invested more in less-liquid
assets. They bought real es-
tate, took big stakes in compa-
nies and made other hard-to-
trade investments.
Government investment
funds have borrowed roughly
$100 billion since 2007, accord-
ing to figures reported to Dea-
logic and analyzed by The Wall
Street Journal. About two-thirds
of that borrowing has come
from net oil exporters such as
Bahrain and Kazakhstan.
Selling is picking up. Sover-
eign-wealth funds yanked
roughly $100 billion from asset
managers in the six months to
Sept. 30, according to Morgan
Stanley. “The countries that
have accumulated these vast
reserves over the last 20 years
will be dipping into those re-
serves,” Martin Gilbert, chief
executive of $430 billion Aber-
deen Asset Management, told
reporters in November. “It
could be a difficult 2016.”
The Saudi Arabian Monetary
Agency sold close to $2 billion
of European shares this year
through November, according to
Nasdaq. Its reserves have fallen
13% to $647 billion in the 12
months through the end of Oc-
tober. The agency didn’t re-
spond to inquiries.
In South Korea, where the
government tracks foreign own-
ership of stocks, Saudi state-
owned investment funds have
sold local stocks for six months
straight totaling roughly 3.6 tril-
lion won ($3.1 billion), according
to people familiar with the mat-
ter and official regulatory data.
The International Monetary
Fund, examining the fallout of
low oil prices, said in October
that a large-scale liquidation
of government funds’ exten-
Sovereign-wealth
funds, analysts say,
constitute a large
black box in markets.
sive bondholdings could drive
up interest rates. “A substan-
tial change in the path of asset
accumulation by sovereign
wealth funds,” it said, “will
likely have a direct effect on
financial markets.”
U.S. Federal Reserve econo-
mists have estimated that five-
year Treasury rates would rise
by about 0.40 to 0.60 percent-
age point if foreign official in-
flows into U.S. Treasurys were
to decrease by $100 billion in
any given month. That would
push rates to their highest
level since 2011.
Predicting a sovereign-fund
selloff’s impact is difficult be-
cause many funds disclose al-
FROM PAGE ONE
Farm in St. Louis each year to
see the 50-plus draft horses
stabled there.
Some of the most avid fans
have been jittery since 2008,
when the Busch family sold
Anheuser-Busch to the no-
nonsense Brazilian manage-
ment team at InBev. What
would the new owners, fa-
mous for their cost-cutting,
do with a herd of Clydesdales?
Feeding a Clydesdale costs
about $500 a month, accord-
ing to Jim Poole, the retired
manager of the Budweiser
Clydesdales, who owns 25
Vladimir Putin spoke with the emir of Kuwait upon a November agreement between Russian and Kuwaiti sovereign-wealth funds.
Government Riches
Estimated assets in sovereign-
wealth funds
$8 trillion
Total Oil- and
assets gas-related
6 GeoEconomica, a Swiss political-
4
2 competitive edge,” says a GIC
0
’05 ’07 ’09 ’11 ’13
Source: Sovereign Wealth Fund Institute
THE WALL STREET JOURNAL.
most nothing. “The problem
with sovereign wealth funds is
that too often they prove to be
‘black boxes’ into which funds
are deposited in a nontranspar-
ent fashion,” says Sarah Chayes,
a former special adviser to the
chairman of the U.S. Joint Chiefs
of Staff and a senior associate at
the Carnegie Endowment for In-
ternational Peace, where she re-
searches corruption.
There is a push to get funds
to adhere to a voluntary code of
conduct known as the Santiago
Principles, which calls for an-
nual reporting, clear gover-
nance rules and effective risk
management, among other
things. The chairman of the In-
ternational Forum of Sovereign
Wealth Funds, Adrian Orr, has
said he wants members to
adopt the highest standards of
transparency and governance.
“Not doing so bankrupts the
principles, leaving them worth-
less for all,” Mr. Orr said in
September. He also runs New
Zealand’s Super Fund, which in-
vests government money to
fund future pension payments.
But Mr. Orr has little power
to get funds to comply, as mem-
bership in the forum doesn’t re-
quire funds to implement the
high standards he is urging. At
least five of the 29 forum mem-
bers don’t publish public annual
reports. At least four don’t dis-
close their asset size.
Clydesdales. It takes nine
semi-trucks and three vans to
transport them. The brewery
runs a wagon-driving program
to teach hitch drivers, and it
maintains dozens of handlers
like Kat Metzger, who on a re-
cent afternoon tended to
TRIPP MICKLE/THE WALL STREET JOURNAL
horses Levy and Rock as they
played tag in a nearby pad-
dock and frolicked in the mud.
She and the other handlers
ensure the horses get daily
massages, weekly haircuts and
new shoes every six weeks.
Training a Clydesdale takes
years. Colts go off to “prep
school” at Grant’s Farm every
year to learn how to interact
with adoring fans. Top horses
then go to Merrimack, N.H., to
try out for the traveling team.
Others become “hero horses”
who star in commercials after
learning special tricks like
rearing on command or jump-
ing fences.
And then there are the Dal-
matians. The Clydesdales are
so big that the mascots for
Budweiser have their own
mascots—three Dalmatians
named Clyde, Barley and
April, who travel with the
team.
Mr. Socquet won’t say how
much the whole thing costs.
“Funding is not an issue,” said
Jeff Knapper, general manager
Singapore’s GIC and the Qa-
tar Investment Authority were
named to the forum’s board in
September. While both have
signed up to the Santiago Prin-
ciples, GIC is only partially com-
pliant and Qatar is noncompli-
ant, according to analysis by
risk advisory firm. Neither dis-
closes how much money it man-
ages. Qatar doesn’t publish an
annual report.
“We do not report on invest-
ment specifics, to safeguard our
spokeswoman. The GIC takes
the Santiago Principles seri-
ously, she says. The Qatar fund
said last year it would publish
’15 an annual report, which its web-
site says is “coming soon.” A
fund spokesman declined to
comment. “It is not part of IF-
SWF’s mandate to comment on
member practices,” Mr. Orr says
in an interview.
The case of 1MDB
The situations at Malaysia’s
1MDB and Abu Dhabi’s Interna-
tional Petroleum Investment
Co., or IPIC, are examples of ex-
ploitation of weak oversight at
government investment funds,
says Ms. Chayes, the former U.S.
special adviser.
Executives at 1MDB are sell-
ing assets to repay debt. The
new management at IPIC is
now trying to determine how
the fund guaranteed bonds and
investments by 1MDB valued at
more than $7 billion, say peo-
ple familiar with the matter.
IPIC and U.A.E. spokesmen
declined to comment for this
article.
The deals between IPIC and
1MDB began in 2009 with a pub-
lic promise by Abu Dhabi to in-
vest $1 billion in projects along-
side the newly formed 1MDB. It
is unclear how the commitment
transformed into guarantees for
1MDB. Those include $3.5 billion
of bonds, about $1.5 billion of
interest on those loans over
their lifetime and $2.3 billion of
investments with a Cayman Is-
lands-registered fund, according
to company documents and peo-
ple familiar with the deals.
The transactions occurred
THE WALL STREET JOURNAL.
of the Clydesdale operation.
Even if the most hard-
hearted company bean coun-
ters wanted to cut back, they
would be hard pressed to do
so given the fan reaction to
last year’s decision to discon-
tinue Bud’s traditional holiday
ad showing the 2,000-pound
steeds trotting through rural,
snowy landscapes decked out
in jingle bells and pulling a
red wagon.
When that news broke,
Clydesdale lovers stampeded
the company’s phone lines
with hundreds of calls. Ms.
Kidd of Jerome, Idaho, started
her “Keep the Budweiser
Clydesdales” Facebook page
and was amazed when more
than 13,000 liked it.
“The American people be-
lieve the Clydesdales belong
as much to them as to us,” Mr.
Socquet says.
The company is committed
to the horses, Mr. Socquet
says, but is working on chang-
ing their image to make them
less, well, picturesque, and
more macho.
Budweiser has been losing
volume in the U.S. in part be-
cause around 40% of young,
legal-age drinkers have never
even tried the King of Beers.
Sales of the beer have im-
proved this year behind a
under IPIC’s managing direc-
tor, Khadem Al Qubaisi, who
took over in 2007. Under Mr.
Al Qubaisi, the fund’s net debt
grew almost tenfold to $24.6
billion.
Executives now digging into
IPIC’s operations also found a
subsidiary of the fund bought
shares of a publicly listed con-
struction company from an as-
sociate of Mr. Al Qubaisi’s and
bought large amounts of land
from the private investment
vehicle of the fund’s chairman,
Sheik Mansour Bin Zayed Al
Nahyan, say people familiar
with the matter. Sheikh Man-
sour didn’t respond to inqui-
ries.
In a rare presidential decree
in April, Mr. Al Qubaisi was re-
placed at IPIC. A London-
based representative of Mr. Al
Qubaisi says he declined to
comment. The new managing
director, Suhail Al Mazrouei—
he is also the country’s energy
minister—ordered a review of
the company with a view to re-
turning to its original mandate
of investing in oil and gas
projects. Mr. Al Mazrouei
didn’t respond to inquiries.
Long-running concerns about
sovereign-wealth funds have
centered on the idea that they
don’t behave like traditional in-
stitutional investors, which typi-
cally invest only to produce re-
turns. Sovereign funds often
answer to top government offi-
cials and may invest not only to
produce returns but also to fur-
ther government initiatives,
usually focused on economic de-
velopment or diplomacy.
Those concerns peaked be-
fore the financial crisis when
the funds were seen as “agents
of the state executing ‘check-
book’ foreign policy strategies,”
said the sovereign-wealth fo-
rum’s Mr. Orr in September.
But after the financial crisis
hit, political concerns faded,
says Jukka Pihlman, head of
central banks and sovereign-
wealth funds at Standard Char-
tered PLC. “Many countries just
wanted the capital,” Mr. Pihlman
says. “The tables turned quite
significantly.”
Other countries’ sovereign-
wealth funds quickly came to
new, hard-hitting campaign—
“Brewed the Hard Way”—
which portrays Bud as a
“Macro Beer,” not one of
those pretentious, hipster, mi-
crobrewed craft beers.
So AB InBev has put the
Clydesdales to work. It is
scrapping portrayals of the
horses as regal show stoppers
and Norman Rockwellesque
creatures in Christmas
scenes—the reason it took
them off the stage last Decem-
ber. The company instead is
emphasizing their power,
strength and masculinity. (To
ensure a similar size and
build, every Budweiser
Clydesdale is a male.)
The company’s new holiday
spot shows a short flash of
Clydesdales hitched up to
their red wagon, tromping to-
ward a Budweiser tree-light-
ing party at the St. Louis
brewery.
“We’re proud to be big and
the Clydesdales are the big-
gest horses out there,” Mr.
Socquet said. “We’re using
them to represent how macro
we are.”
But die-hard fans like Ms.
Kidd are unimpressed. “I like
it because the horses are in it,
but I like the ones that feature
only the horses better,” she
said.
RUSSIAN DIRECT INVESTMENT FUND VIA FLICKR
the aid of the Russian Direct In-
vestment Fund, or RDIF, when
U.S. and European sanctions re-
stricted business between the
fund and Western companies.
The fund is on the U.S. sanctions
list drawn up to punish Moscow
for annexing Crimea last year.
In June, Russian President
Vladimir Putin hosted his an-
nual dinner for foreign investors
in a seaside palace built for Pe-
ter the Great. Around the table
were officials of sovereign-
wealth funds who together man-
age trillions in assets, according
to RDIF, which organized the
gathering. Representatives of
funds from China, Abu Dhabi,
Qatar, Bahrain, South Korea,
Iran, France and Italy attended
the conference during which the
meeting was held, according to
a Russian-language statement
on the Kremlin’s website.
Korea Investment Corp., the
Abu Dhabi Investment Authority
and Bahrain’s Mumtalakat fund
confirmed their officials at-
tended the conference. The Qa-
tari and Kuwaiti funds declined
to comment. The Chinese, Ital-
ian and French funds didn’t re-
spond to inquiries.
One important new guest:
Prince Mohammed bin Salman,
the 30-year-old Saudi Arabian
defense minister and second in
line to the throne. He agreed the
next month to invest $10 billion
in Russia. A few months later, a
Kuwaiti sovereign fund pledged
$500 million, raising its total
commitment to $1 billion.
“The headline may seem po-
litical, but, in fact, it is not a
blank check,” a Saudi official
says, adding that Russian in-
vestments offer among the
highest yields in the world. Ku-
wait Investment Authority exec-
utive director Ahmad Bastaki
declined to comment.
“For us, it’s about finding ad-
ditional money to invest in Rus-
sia,” says Kirill Dmitriev, the
Russian fund’s chief executive.
The fund is “nonpolitical” and
focused on returns, he says.
“Those sanctions really do not
affect our work much.”
—Ahmed Al Omran in Riyadh,
Juliet Samuel in London
and Kwanwoo Jun in Seoul
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.
U.S.
Watch
HEALTH
Cancer-Causing
Mechanism Found
Researchers studying brain
tumors said they have discov-
ered a biological mechanism that
causes normal cells to become
cancer cells, a finding that chal-
lenges current treatment strate-
gies and could lead to new ap-
proaches.
In a study published online
Wednesday in the journal Na-
ture, researchers reported that a
mutation in what are called IDH
genes causes changes in how
DNA is folded into the nucleus
of cells. This enables abnormal
interactions between other
genes, turning on a process that
promotes the development of
tumors.
“This shows us there is a
whole other side of how cancer
can form and progress,” said
Jeremy Rich, chairman of stem-
cell biology and regenerative
medicine at the Cleveland Clinic,
who wasn’t involved with the
study.
While the study focused on
the brain tumor called glioma, re-
searchers said mutant IDH genes
are present in many other can-
cers, including leukemia and colon
and bladder cancers.
“The implications are likely to
be much broader than just brain
tumors,” said Bradley Bernstein,
a member at the Broad Institute,
Cambridge, Mass., and senior au-
thor of the study. He said the
finding “changes our fundamen-
tal basic science view” of how
disruption of the genome can
cause cancer.
It also underscores cancer’s
complexity. The process appears
to operate independently of the
mutations in genes that directly
drive tumor growth. The finding
may help explain why treating
tumors with drugs targeted at
such mutations—a strategy
known as precision medicine—is
having limited success. While
such targeted treatment often
dramatically shrinks tumors ini-
tially, patients eventually relapse
in most cases.
“This puts a further dent in
our ability to think that silver bul-
lets are ready-in-the-making for
many cancer types,” Dr. Rich said.
—Ron Winslow
MARIA NEMCHUK/BROAD COMMUNICATIONS
Bradley Bernstein, senior
author of the cancer study.
ECONOMY
Consumer Spending
Rose 0.3% Last Month
Americans boosted spending in
November as their incomes con-
tinued to tick up, a sign the eco-
nomic expansion remains on track
despite sluggishness overseas.
Personal spending, measuring
what households paid for every-
thing from dental care to cars,
rose 0.3% in November from a
month earlier, the Commerce
Department said Wednesday.
Spending was flat in October af-
ter rising 0.2% in September.
Personal incomes, representing
Americans’ pretax earnings from
salaries and investments, in-
creased 0.3% last month after
climbing 0.4% in October.
Some of the figures on con-
sumer spending became public
Tuesday evening in what the
Commerce Department de-
scribed as an “inadvertent re-
lease” on its website. The de-
partment’s Bureau of Economic
Analysis said in a statement it
“will take steps to ensure that
this does not happen again and
will take all appropriate action to
safeguard economic data.”
Consumer spending is the
U.S. economy’s linchpin, repre-
senting more than two-thirds of
economic output. Solid house-
hold spending in recent months
has enabled the economy to
grow steadily despite numerous
obstacles, including a strong dol-
lar and weak overseas demand,
that have pinched American fac-
tories.
—Josh Mitchell
and Ben Leubsdorf
Dynamics Shift in New Hampshire
In a state that values
retail politics, Trump
is maintaining his lead
despite few visits
BY BETH REINHARD
BERLIN, N.H.—New Hamp-
shire voters take their first-
in-the-nation primary very se-
riously, ribbing their early-
voting compatriots in the
Midwest with the expression,
“In Iowa, they pick corn. Here,
we pick presidents.”
But now, the success of
Donald Trump, who has
topped polls of Republicans
here for nearly five months, is
unnerving those who cherish
the state’s tradition of shoe-
leather campaigns.
The New York businessman
has held only 23 events in the
state this year, according to
the New England Cable News
candidate tracker—even fewer
than former rivals Scott
Walker and Rick Perry, who
dropped out of the race dur-
ing September.
“The entire justification for
New Hampshire being the
first in the nation is that you
can meet people one on one,”
said Drew Cline, former edito-
rial-page editor of the New
Hampshire Union Leader
newspaper. “If New Hamp-
shire goes for Trump, who is
THIRD
Continued from Page One
Tensions grew, and Mr. Barse
was told the group had come to
a different decision. They were
firing him, and he needed to va-
cate the building immediately,
without stopping to collect his
personal belongings.
Mr. Barse was escorted into
an elevator, through the high-
ceiling lobby and out the door.
Guards in the lobby stared in
surprise. “It was a fiasco,” a se-
curity guard said.
Back upstairs, some seemed
stunned by the rapid-fire events.
Investors around the world
took the Third Avenue melt-
down as an ominous signal.
Junk-bond markets tumbled,
sparking worries about other
mutual funds. Markets remain
on edge and investors continue
to ask how a mutual fund could
unravel so rapidly and how a
pedigreed firm could run into
such deep problems.
“It’s the unforgiving reality of
the market, they really had to
do what they did,” said John
Bogle, founder of mutual-fund
giant Vanguard Group. “But it’s
very surprising they would al-
low themselves to be in this po-
sition.”
An examination of the credit
fund’s collapse based on conver-
sations with nearly 20 employ-
ees, former employees and oth-
ers close to the situation points
to a firm hobbled by prolonged
dissension, with Mr. Barse often
at the center, criticizing Mr.
Whitman and prodding manag-
ers to improve disappointing
performance. The discord
sapped morale and prompted
the departure of some senior
talent at the firm, whose assets
under management this year fell
to $7.2 billion.
Mr. Barse is “a very tough-
minded person and he wasn’t
running a kindergarten,” said
Jim Millstein, chairman and
founder of restructuring firm
Millstein & Co., in which Third
Avenue invested a few years
ago.
Attempts to reach Mr. Barse
by telephone, text message and
email were unsuccessful. A
Third Avenue representative re-
ferred to an early statement by
Mr. Whitman thanking Mr.
Barse for his “years of devotion
to the firm and contributions.”
A spokesman for Affiliated Man-
agers Group, a public Boston
company that owns 60% of
Third Avenue, said, “We are
confident in the firm’s future
path.”
Attempts to speak with Mr.
Whitman weren’t successful.
Fortress wouldn’t comment.
Under Mr. Whitman’s leader-
ship, Third Avenue—which
started in 1974 and scored early
gains investing in mortgage
bonds of the then-bankrupt
Penn Central Railroad—became
among the most respected mu-
tual-fund firms, emphasizing
“vulture” investments in the
debt of struggling companies.
Senior corporate executives
regularly made their way to the
U.S. NEWS
Republican presidential candidate Jeb Bush, the former Florida governor and a frequent visitor to
New Hampshire, speaking at a town-hall meeting in Exeter, N.H., on Saturday.
connecting with voters via de-
bates and celebrity status, it
is potentially fatal,” he said.
Mr. Trump’s popularity in
New Hampshire reflects the
decades-long trend away from
state-by-state ground games
and toward a national, media-
driven presidential campaign.
This year, the daily grind of
the campaign trail has been
overshadowed by record-set-
ting debate audiences and the
couch in Mr. Whitman’s office
for an audience with the famed
investor.
“Marty was an academic at
heart who approached every
day as if the workplace were a
laboratory to test his theory of
deep-value investing,” said Peter
Lupoff, a former partner.
In 1991, Mr. Whitman hired
Mr. Barse, then a 28-year-old
corporate attorney who had
been involved in the early devel-
opment of the secondary mar-
ket for distressed debt. Mr.
Barse quickly gained favor with
Mr. Whitman, handling the busi-
ness operations of the growing
company. That enabled Mr.
Whitman to focus on investing,
said people who worked there
at the time.
After becoming CEO in 2002,
Mr. Barse drove growth by help-
ing to launch new funds. That
year, Messrs. Whitman and
Barse sold 60% of the company
to AMG. Executives vowed to in-
crease assets, then $4 billion, to
$25 billion, a former employee
recalls. They met their promise
in 2006, when assets hit $26
billion, partly as investors piled
into the flagship Third Avenue
Value Fund run by Mr. Whit-
man, which focused on stocks.
But Third Avenue lost about
half its assets during the 2008
credit crisis. The firm’s highly
concentrated style, inspired by
Mr. Whitman’s approach to
value investing, backfired and
his stock fund lost 45% in that
year, exceeding the 37% decline
in the S&P 500.
Mr. Barse became concerned
about competition from low-
cost index-tracking mutual
funds, according to a former
employee. Third Avenue at-
tempted to launch “alternative”
funds, or vehicles that resem-
bled hedge funds, but most
never clicked.
One winner: the credit fund,
which was launched in 2009
and quickly raced past $1 billion
in assets. The fund, which was
Mr. Barse’s brainchild, bought
hard-to-trade distressed debt
and other investments likely to
rise as the economy rebounded.
Most distressed-debt inves-
tors operate private funds that
can delay repaying investors if
their holdings become hard to
trade. By opting instead for a
mutual fund, Third Avenue was
able to sell to individual inves-
tors but increased its risk by
promising them an easy exit.
As the performance of Mr.
Whitman’s own stock fund
lagged after 2008, his relation-
ship with Mr. Barse turned
tense, adding to strain within
the firm. Mr. Barse criticized
Mr. Whitman’s concentration in
Hong Kong real estate shares,
which the CEO argued was mak-
ing it harder to market the fund,
people familiar with the situa-
tion said.
Mr. Barse also harangued
other fund managers who grew
disgruntled. Mr. Whitman took
no public steps to rein in the
CEO, the people said, preferring
to focus on investing.
“All Marty wanted to do was
sit in his office and read 10-Ks
and 10-Qs,” one former execu-
sheer size of the field, making
it harder for voters to check
out all the candidates before
the Feb. 9 primary.
Corey Lewandowski, Mr.
Trump’s campaign manager,
said the candidate has “seen
tens of thousands of New
Hampshire residents on his
numerous trips” and will re-
turn next week.
Mr. Trump’s critics dismiss
his enduring lead in the polls,
Reversal
The Third Avenue Focused Credit Fund was hit hard this year by losses and investor withdrawals that
fueled a sharp decline in assets.
Investor flows to fund, monthly
$300 million
150
0 2
–150
–300
2010 ’11 ’12 ’13
Source: Morningstar
tive said.
The dispute boiled over in
the fall of 2011, when about 50
employees gathered in the
firm’s largest conference room
after an annual meeting with in-
vestors. Mr. Barse screamed at
Mr. Whitman, inches from his
face, demanding better perfor-
mance, according to people who
were in the room.
“You can’t tell me what to
do,” Mr. Whitman responded,
one of the people said. “We ana-
lyze companies, that’s what we
do, we don’t change that.”
Mr. Whitman “was pounding
the table so hard with his fist it
was shaking,” said another per-
son at the meeting.
Mr. Whitman eventually
withdrew money from the Value
Fund and quit running it to fo-
cus on investing for himself,
while remaining chairman of the
firm.
As most of Third Avenue’s
funds underperformed relevant
benchmarks—only its real-es-
tate fund beat a comparable in-
dex over the past five years—
Mr. Barse seemed to become
more irritated, the people said.
Staff stopped using the con-
ference room adjoining Mr.
Barse’s office because some-
times he could be heard shout-
ing through the walls.
Over 2012 and 2013, a num-
ber of Third Avenue’s senior
fund managers, including inter-
national investor Amit Wadh-
waney, complained to AMG
about Mr. Barse’s style and un-
willingness to share profits,
people familiar with the matter
said.
Most employees received
part of their pay on a deferred
basis. After 2008, Mr. Barse be-
gan personally determining
compensation for most person-
nel, often without explaining his
decision, one of the people said.
Someone close to Mr. Barse says
“lead portfolio managers” could
pay underlings from a pool of
money determined by perfor-
mance, among other things.
AMG told the executives it
would encourage Mr. Barse to
change, but it had a hands-off
approach to its affiliates, a per-
son familiar with the matter
said. Eventually, senior employ-
ees, including Mr. Wadhwaney
and Curtis Jensen, a former pro-
tégé of Mr. Whitman, left. Mr.
Wadhwaney wasn’t available for
Thursday - Monday, December 24 - 28, 2015 | A7
candidates who hunker down
in the frigid weeks leading up
to its primary. Most recently,
that was 2012 nominee Mitt
Romney and 2008 nominee
John McCain.
This year, three candidates
who have invested consider-
able time in New Hampshire—
New Jersey Gov. Chris Chris-
tie, former Florida Gov. Jeb
Bush and Ohio Gov. John Ka-
sich—are running in fourth,
fifth and sixth place, respec-
tively, according to the Real
Clear Politics polling average.
The three candidates are fo-
cusing on the state as a mat-
ter of necessity, because they
are unlikely to fare well in the
GRETCHEN ERTL/REUTERS
more conservative early-vot-
ing states of Iowa and South
Carolina.
Florida Sen. Marco Rubio,
currently tied with Texas Sen.
Ted Cruz for second place in
New Hampshire, recently
drew the ire of the Union
Leader, which demanded
pointing to a history of late “Where’s Rubio?” The edito-
decision making in a state rial ripped him for delivering
that lets residents register to his stump speech and taking
vote on Election Day. Forty- questions for only 10 minutes.
six percent of the voters in At Tuesday’s town hall here
the 2012 New Hampshire GOP in Berlin, Mr. Rubio made it
primary—held early on Jan. clear that he wasn’t in a rush.
10—said they made their deci- “I’ll be brief. I want to get to
sion that day or in the past your questions,” he told about
few days, according to exit 125 people in the audience. To
polling. a voter raising a hand, he said,
New Hampshire has tradi- “We’ll get to you in a second.
tionally rewarded Republican We’ve got plenty of time.”
Fund’s net assets, monthly
$4 billion
3
1
0
’14 ’15 2010 ’11 ’12 ’13 ’14 ’15
THE WALL STREET JOURNAL.
comment, while Mr. Jensen de- Mr. Lapointe returned, he be-
clined to comment. came furious, they said.
While Third Avenue’s stock The credit fund scored gains
funds were shrinking, the credit of nearly 17% in 2013, putting it
fund kept growing, led by port- in the top 1% of all high-yield
folio manager Thomas Lapointe, funds. But in the spring of 2014,
who had formerly run a tradi- as the fund approached a peak
tional high-yield bond fund at of $3.5 billion, Bradley Alford,
Columbia Management. Mr. who runs Atlanta’s Alpha Capi-
Lapointe admired Mr. Whit- tal Management and had clients
man’s strategy of making large, in the fund, became nervous it
concentrated bets, a tack that was getting too big.
can reap big returns but also Mr. Lapointe told Mr. Alford
amplifies risk. that Third Avenue “was dealing”
Diversification “is a damn with the growth, Mr. Alford
poor surrogate for knowledge, says. The credit fund never
control and price conscious- closed to investors and Mr. Al-
ness,” Mr. Whitman said in an ford’s clients yanked their
interview with Barron’s earlier money, concerned about junk
this year. bonds.
The credit fund became the Mr. Barse voiced some con-
single-largest holder of certain cern about the risk of holding
hard-to-exit bonds. For example, hard-to-sell assets while allow-
it owned a fifth of a $250 mil- ing investors to sell out in a day,
lion issue of low-rated bonds according to someone who
sold by New Enterprise Stone & worked with him. “David was
Lime Co., a private construc- worried about the mismatch,”
tion-materials supplier. said the ex-employee.
When the junk-bond rout be-
gan in July and the firm’s assets
slipped to $10 billion, Mr. Barse
didn’t seem especially nervous.
But by early December the
credit fund was down about 27%
on the year and assets fell to
around $800 million. It had re-
ceived so many withdrawal re-
CHRIS GOODNEY/BLOOMBERG NEWS
quests that Third Avenue infor-
mally reached out to the
Securities and Exchange Com-
mission to give regulators a
sense of the mounting troubles,
executives said. Third Avenue
decided to freeze the fund’s re-
demptions—a move approved
by its board of trustees.
David Barse in August. “It’s extremely painful,” Mr.
Barse told The Wall Street Jour-
As the fund grew, Mr. Barse nal at the time.
and Mr. Lapointe sometimes ar- A day later, his colleagues
gued over investments, former shot down his Fortress deal,
colleagues said. Sometimes the concerned the SEC hadn’t
differences spilled into the open. agreed to the idea, according to
In spring 2012, after Mr. people close to the matter.
Lapointe defended an employee Today, a group of five execu-
Mr. Barse had publicly repri- tives runs Third Avenue. Mr.
manded, Mr. Barse threw a cell- Whitman, 91, remains chairman.
phone at Mr. Lapointe’s chest, a On the morning of Dec. 11, af-
stunned Mr. Lapointe told a col- ter Mr. Barse addressed inves-
league. Mr. Lapointe declined to tors on a conference call, a
comment. Someone close to Mr. friend called Mr. Barse to check
Barse denies the incident. in. Mr. Barse sounded calm, the
About four years ago, while executive recalls. “He seemed
Mr. Lapointe was on vacation, normal, like it was business as
Mr. Barse sold a position in the usual,” the person said.
fund, according to three former Hours later, Mr. Barse was
employees, a move that is typi- out the door.
cally the domain of a portfolio —Serena Ng
manager, not the CEO. When 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
A8 | Thursday - Monday, December 24 - 28, 2015 THE WALL STREET JOURNAL.

PERSONAL JOURNAL.

Room Service Is Great, but How About the Elevator?

Hotels add art and other
features to a small space
everyone spends time in
BY ANDREA PETERSEN

Are the hotel’s elevators Insta-

gram-worthy?
Hotels are trying to convince
travelers that they are. Properties
FROM LEFT: FAENA ART; COSMOPOLITAN HOTEL; IVAN BELAUSTEGUI/FAENA ART

are busy transforming their eleva-

tors from boring boxes into forums
for art, music—and, hopefully, so-
cial media fame. Many hotel
brands have already plowed plenty
of money into reinvigorating their
lobbies, restaurants and fitness
centers. They are now shifting
their attention to these most utili-
tarian of public spaces.
Marriott is planning to turn the
elevators at its new Moxy brand
hotels into photo booths. Elevators
will feature red velvet curtains and
mirrors. Pouches will hang from
pegs on the wall: Location-specific
props will be tucked inside. Mus-
taches and cactuses for Tempe,
Ariz., for example. Masks and
Mardi Gras beads for New Orleans.
The hope is that guests will be in-
spired to pose for selfies with
their phones—and then post them Art Inside
with the hashtag #atthemoxy. Consuelo Castaneda’s ‘Wall on Walls’ in Miami’s Casa Claridge’s elevator
“We are creating these ener- repurposes photographs from a church in Mexico, above. Inside the elevator at the
getic spaces in our lobbies, in our Cosmopolitan in Las Vegas, top right, the art is called ‘Little Winter.’ The artist
public spaces. Why not create a Typoe, right, inside Casa Claridge’s elevator which he covered with small magnets.
moment in the elevator?” says
Vicki Poulos, Marriott’s global on the travel site Trip Advisor spent” in the elevator. Elevators can be tricky spaces. When the artist Michael Gran,
brand director for Moxy. “You’re mention the hotel’s funky eleva- Entertainment in elevators isn’t They are usually small and are who goes by Typoe, first saw the
sitting there for five to seven to 10 tors. The hotel has other quirky new. Elevator music has been subject to strict safety regulations elevator at Casa Claridge’s in Mi-
seconds waiting. We want to en- features as well: Greeters wear around since at least 1948, when and fire codes. When the Rose- ami that was to house his work, “I
tertain you and give our guests an bright red wigs. the Otis Elevator Co. introduced wood Beijing charged Emily de was like, dear God, what am I go-
opportunity to gain some social At the Cosmopolitan of Las Ve- soothing background music on ele- Wolfe Pettit with finding artwork ing to do in this space?” he says.
currency.” gas, 6-foot-tall high-definition vators at the Palmolive building, a for its snug elevators, she steered “You can’t have things poking
The elevators at the QT Sydney screens in the elevators display 37-story tower in Chicago. As sky- clear of landscapes and portraits, out.”
in Australia, a boutique hotel that elaborate video art pieces created scrapers rose higher, elevator rid- pieces where the viewer would Starting in late 2014, Casa Clar-
opened in 2012, are equipped with specifically for the hotel. Now, the ers could sometimes feel the sway need some distance to appreciate. idge’s began featuring site-specific
sensors that detect the number of property, which has 3,005 rooms of the buildings. (Rides then took She also nixed art with any optical installations by Miami-based art-
people in the space. on 52 floors, is featuring “Little two to three times longer and illusions. “I didn’t want anything ists in its elevator, which it calls
The soundtrack is adjusted ac- Winter,” a four-minute video that were much less smooth than they that would disorient the guest or an “ascending gallery for artistic
cordingly. For a solo rider, Elvis depicts whimsical animated char- are today.) Otis heard that some make them feel queasy,” says Ms. invention.” Each piece in the Ele-
Presley’s “Are You Lonesome To- acters ice fishing, skiing and ice riders were anxious and uncom- De Wolfe Pettit, founder of Peking vate series lasts about three
night” or Frank Sinatra’s “All skating—and playing catch in a fortable. So the company con- Art Associates, an art consultancy months.
Alone” might play. For two people, field of snow while wearing biki- sulted with psychologists. firm. Typoe installed iron panels on
there’s Bill Withers’s “Just the Two nis. “They thought that installing She chose artworks by Huang the walls and floor of the elevator,
of Us” or Marvin Gaye’s “Let’s Get “It breaks up what can be an music in the cab would take your Ke: large ink displays on rice pa- covered the space with black vinyl
It On.” And for a crowd, travelers awkward space to be in,” says mind off the sway,” said Stephen per with abstract versions of Chi- and attached thousands of small
might hear MC Hammer’s “U Can’t Krista Chmielewski, director of art Showers, the company’s archivist. nese characters. Rosewood Beijing, magnets—in the shape of every-
Touch This” or Deee-Lite’s “Groove and digital content at the Cosmo- “Apparently it worked.” Otis which opened in 2014, is the first thing from letters to sandals to
Is In the Heart.” politan. “It definitely cuts down teamed with Muzak to create a Rosewood property to include art pink flamingos. The elevator trav-
Several of the hotel’s reviews the perceived amount of time continuous loop of music. in the elevators. els just four floors.

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 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
Blessings, Great and Small
BY JOE MORGENSTERN
When “Spotlight” opened early
last month, I called it “the year’s
best movie so far.” The reason for
the “so far” was obvious. The com-
plete returns weren’t in and a bet-
ter movie might have come along,
especially given the movie indus-
try’s idiotic, self-destructive and
by now probably irreversible pol-
icy of jamming its most promising
productions into the last two
months of every year. (The ratio-
THE YEAR nale for the idi-
ocy remains Hol-
lywood’s crass
fixation on Os-
cars, Golden
Globes and other
such adjuncts to
marketing. What we think of as
the holiday season is, for movie
executives, the awards season.)
Until recently, though, I figured
the “so far” was just a pro forma
precaution; that’s how good “Spot-
light” is. But then “The Big
Short” opened last week, and I
had to pry my mind open to the
possibility of a tie.
In one sense these films are a
mismatched pair. “The Big Short”
is as reckless in its satirical take
on events leading up to the finan-
cial debacle of 2008 as “Spotlight”
is meticulous in its account of the
Boston Globe’s 2002 revelations of
widespread child abuse in the
Catholic archdiocese of Boston. Yet
satire in the right hands is no less
revelatory than investigative re-
porting, and Michael Lewis’s book
could not have fallen into righter
hands than the ones responsible
for making “The Big Short.” How,
then, to solve this happy dilemma?
With guidance from a term I never
thought I’d find myself typing for
one of these annual wrap-ups—
gravitas. “Spotlight” is deeply seri-
ous, as well as exceptionally dra-
matic, a rare conjunction of
qualities that makes it the best
movie of 2015. “The Big Short” is
runner-up, and we’re doubly
blessed to have them on screen in
the same year.
Here are my other picks, in al-
phabetical order:
‘Brooklyn’
On first sight it endears itself to
you, then keeps growing on you,
this fable about a small-town Irish
girl’s pursuit of happiness as an
immigrant arriving in America in
the 1950s. The girl, Eilis Lacey, is
played by Saoirse Ronan, the pu-
rity of whose performance seems
to be causing a lump in my throat
as I recall it. But artistic success
has many parents, and some of
them surrounding Ms. Ronan’s ra-
diance are the director, John
Crowley; the writer, Nick Hornby,
who adapted a novel by Colm
Tóibín; and a supporting cast led
by Emory Cohen, Domhnall
Gleeson, Jim Broadbent and Julie
Walters.
‘The Martian’
(right); ‘Spotlight’
(below).
FROM TOP: 20TH CENTURY FOX; OPEN ROAD FILMS
Thursday - Monday, December 24 - 28, 2015 | A9
ARTS & ENTERTAINMENT
Clockwise from above: ‘The Big
Short’; ‘Brooklyn’; ‘Ex Machina’;
‘Room’; ‘Mad Max: Fury Road’; ‘Star
Wars: The Force Awakens’; and
‘Inside Out.’
‘Ex Machina’
Alex Garland made his directorial
debut with this elegant sci-fi fan-
tasy about artificial intelligence.
Oscar Isaac is Nathan, a hipster
mogul and prickly narcissist.
Domhnall Gleeson—who will have
been seen in four films this year—
is Caleb, a bright young program-
mer in Nathan’s company who
pays a visit to his boss. Alicia Vi-
kander is Ava, Nathan’s creation, a
mysteriously beautiful robot. What
Ava is up to may have profound
implications for humanity. Ms. Vi-
kander’s performance has already
had a profound effect on her ca-
reer. For this gifted young actress
from Sweden, 2015 has been a sen-
sational year.
‘Inside Out’
We’re awash in media-generated
emotion. “How did you feel?” has
replaced “What happened?” as the
obligatory question that reporters
ask on TV. Pixar’s glorious ani-
mated feature about the life of the
mind, and the heart, takes a differ-
ent approach. The feelings them-
selves are characters in this tale of
11-year-old Riley, who’s going
through the emotional upheaval of
moving, with her parents, from the
sweet security of her childhood
home. The film made millions of
people, including me, feel abso-
lutely wonderful.
‘Mad Max: Fury Road’ berant adaptation of the Andy Weir
Marketing campaigns try to make novel wasn’t meant to make a case
you believe new movies are big for Mars as humanity’s next happy
deals. This movie truly is. The home. The film makes a strong
director was George Miller, re- case, though, for the continuing ap-
turning to the post-apocalyptic peal of big-screen spectaculars,
franchise he started in 1979. A provided they’re as smart and sur-
gleefully violent—and improba- prising as this one. Matt Damon’s
bly feminist—phantasmagoria, astronaut, Mark Watney, is the vital
“Fury Road” turns epic road center of an impressive production.
rage and long stretches of vehicu- He’s a problem-solver whose main
lar megacide into an eye-boggling problem is surviving after his crew-
joy ride. Tom Hardy, picking up mates blast off during an epic
the torch from Mel Gibson, plays storm, leaving him behind.
CLOCKWISE FROM TOP: PARAMOUNT PICTURES; SUNDANCE INSTITUTE; A24 (2); WARNER BROS.; LUCASFILM LTD.; DISNEY•PIXAR
Max, the cop/avenger. Charlize
Theron is Furiosa, a one-armed ‘Room’
woman warrior with a rococo By now you may know that much
prosthesis. Regardless of the title, of this superb movie takes place in
it’s Furiosa who drives the story, a single room, and that the pro-
as well as an 18-wheeler hot rod duction is graced by two transcen-
called the War Rig. dent performances: Brie Larson as
a young mother, Ma, and Jacob
‘The Martian’ Tremblay as her 5-year-old son,
The allure of other planets Jack, both living as prisoners. But
may be enhanced by the “Room” has yet to find the large
devastation we’re inflict- audience it deserves, so what you
ing on our own, but may not know if you haven’t yet
Ridley Scott’s exu- seen it is that the film is full of
life, and that the drama doesn’t
flag once the mother and child
leave their prison.
‘Son of Saul’
Here again, whatever you think you
know about Holocaust films will
only begin to prepare you for the
beauty—the horror, of course, but
also the beauty—of this phenome-
nal debut feature by László Nemes.
Géza Röhrig is Saul, the grim-faced,
gimlet-eyed Auschwitz prisoner
who finds a way to perform a
meaningful moral act in the midst
of unceasing madness. Seldom has
an artist found such startling new
perspective on a solemn subject,
and rarely has sound been such a
potent tool in telling a story. Ideally this huge, fearfully expen- Would Be as Good as It Is. The di-
sive, fatefully ambitious and rector, J.J. Abrams, knows how to
‘Star Wars: The Force steadfastly enjoyable production make a movie move, and how to
Awakens’ would be at the top of a one-film slow it down for magical mo-
A last-minute entry, so you may list in a category of its own: ments. His stars, Daisy Ridley and
not have heard about it, but a maybe Best Global Commercial John Boyega, know how to make
worthy little winner all the same. Venture That Nobody Thought those moments live and breathe.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A10 | Thursday - Monday, December 24 - 28, 2015 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
The Good, the Bad
Brushing Back a Lawless EPA And the Shkreli
P
resident Obama continued to use execu- to turbocharge his extralegal climate rule on
tive agencies to exceed his constitutional power plants. That request included $8.3 million “He stayed there two
weeks, dismayed at its
power in 2015, none more so than the En- for the EPA’s science and technology groups, ferocious indifference
vironmental Protection Agency. The courts have which do the phony modeling to justify regula- to the drums of his
pushed back on occasion, and now Congress is tions. It also included $68.3 million for the destiny, to destiny it-
beginning to use its powers to do the same. agency’s environmental programs and manage- self, and despising the
Congress used the ment department, janitor’s work with
BUSINESS
Congressional Review The Declining EPA Workforce which is where the which he was to pay
WORLD
Act to put two bills minions draft and im- By Holman W.
his way through.” —F.
Full-time equivalent employees by federal fiscal year, Scott Fitzgerald, on
blocking EPA rules on 1999-2016 plement the Presi- Jenkins, Jr.
Mr. Obama’s desk the dent’s climate initia- the brief college ca-
past two months. One 18.5 thousand tives. Congress denied reer of his title char-
acter in “The Great Gatsby.”
would have nullified 18.0 every penny.
the EPA’s draconian It also denied the “My parents were immigrants and
17.5
new Clean Power Plan nearly $30 million ex- janitors. [Trump] inherited wealth! [Ex-
that will force lower 17.0 tra that Mr. Obama pletive] him. And I thought we could be
emissions from exist- 16.5 wanted for the legal friends.” —Martin Shkreli, disgraced
ing power plants. A department that de- pharmaceutical CEO, quoted in Vanity
second measure is de- 16.0 fends the agency in Fair.
signed to block new 15.5 court. The President’s
coal-fired plants. budget request com- Martin Shkreli, the wunderkind and
15.0 bad boy of pharmaceuticals who was
The Congressional plained that “over the
Review Act allows a ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 last five years, the arrested last week, takes exception to
the term Ponzi scheme, and no wonder.
bill to pass without 60 Sources: EPA, House Appropriations Committee number of lawsuits
If the government charges are correct,
votes in the Senate, EPA counseling attor- his story goes like this: In his 20s, he
and the GOP put together a bipartisan majority neys have handled during a year has more than raised a few million dollars from ac-
in both houses. Mr. Obama rejected both mea- doubled, increasing from approximately 240 in quaintances and tried to become a
sures with rare pocket vetoes that let a Presi- 2009 to well over 500 in 2013.” Well, yes, that hedge-fund impresario but almost in-
dent refuse to sign a bill when Congress is out happens when you keep breaking the law. The stantly lost their money and then lied
of session, as it has been since Friday. GOP budget doesn’t provide EPA the funds to to his investors about it.
The bills were still useful in showing Mr. hire additional attorneys. Thereupon he created what appears
Obama’s hand to voters in energy states and The budget also zeroed out the nearly $44 to have been a successful pharmaceutical
showing the courts that the legislative branch million increase Mr. Obama sought for his “wa- company from which he allegedly ille-
rejects Mr. Obama’s regulatory interpretation of ter quality protection” initiatives. At least some gally transferred cash and shares to pla-
cate his previous investors. When the
Congressional statutes. This could help in par- of that money would have gone to ramping up company understandably fired him and
ticular the 27-state legal challenge to the Clean the EPA’s new Waters of the United States Rule sued, he created a second apparently
Power Plan. that empowers the feds to regulate just about successful drug company.
Meanwhile, Congress is also using its power of every creek and pond in the country. The first company, Retrophin, even af-
the purse to complicate the EPA’s legal evasions. Republicans were able to insert a few modest ter the controversy and bad headlines of
Conservatives are understandably frustrated that policy riders in the budget. Congress barred the the past week, is still worth $730 million
last week’s budget bill didn’t include policy riders EPA from attempting to regulate greenhouse- in the market, a large multiple of his al-
to halt new climate and water regulations—though gas emissions from livestock, and it added a re- leged hedge-fund losses.
GOP disunity didn’t help. But Republicans did at quirement that the Administration inform Con- The second company, Turing Pharma-
least pinch the EPA’s budget. gress how much it is spending on climate ceuticals, is not publicly traded but owns
lucrative drug rights and apparently con-
The EPA received $8.1 billion, or $451 million initiatives across the federal bureaucracy.
tinues to realize profitable sales.
less than Mr. Obama had demanded, and no in- More might have been possible if Democrats Awkward questions naturally come up.
crease from the year before. Congress has cut hadn’t blocked individual spending bills in the Going by Retrophin’s private lawsuit
the EPA’s allowance by $2.1 billion, or 21%, since Senate to force a giant omnibus that gave Mr. against Mr. Shkreli, its former CEO, which
fiscal 2010. This has forced the EPA to cut more Obama more leverage by threatening to shut gives names and dates, he wasn’t exactly
than 2,000 full-time employees over the same down the government. But the budget pressure operating behind a veil. Some of his
period, and its manpower is now at the lowest on the EPA and the use of the Congressional Re- investors are fairly prominent names
level since 1989 (see nearby chart). view Act show that GOP control of Congress has whose make-good for their hedge-fund
Mr. Obama sought an additional $72.1 million made a difference. losses allegedly came in the form of
“sham consulting agreements” that Mr.
Shkreli provided through his company
Freedom for an Iranian Pastor Retrophin. Will these investors soon be
hearing a federal knock on the door?
near-household name (not in a good
way) months before any federal indict-
ment surfaced.
Unknowable at this point is whether
any of Mr. Shkreli’s apparently creditable
designs on new-drug development will
ever pay off. Multiple industry execu-
tives, investors and drug scientists have
spoken of what one called the untrained
32-year-old’s “humbling” insights into
biopharmacology.
We’ll have to see. Meanwhile, un-
doubtedly due to his urgent need for
money to silence his irate hedge-fund in-
vestors, his immediate strategy at both
Retrophin and Turing was to acquire the
rights to old drugs and jack up the
prices. Voilà, in an election year, a pass-
port to infamy. Off-patent drugs that
treat rare conditions are evidently extor-
tionate price hikes waiting to happen.
Any generic copycat would have to pass
through the U.S. Food and Drug Adminis-
tration’s complicated, expensive ap-
proval rigmarole, which isn’t worthwhile
for a drug that treats a small population.
Even as he committed his
alleged frauds, some called
his drug expertise ‘humbling.’
Let’s not deceive anyone. Established
companies like Merck, Pfizer Questcor,
Rodelis, Valeant and others also hike
prices. Indeed, every seller of a medical
good or service charges what the market
will bear in a system where market disci-
pline is attenuated and distorted by
third-party payership.
Mr. Shkreli’s story, furthermore,
wouldn’t be possible without a drug-
approval system that vastly inflates the
cost and undermines the incentive to cre-
ate new drugs. At the same time, it also
wouldn’t be possible without the not-un-
attractive fact that, in what remains a
fairly free society, anybody can hang out
a shingle as an investment manager for
“accredited investors,” i.e., people with
enough money that they’re assumed to
know what they’re doing.
Finally, his story wouldn’t be possi-
ble without the enormous excitement
and promise of genetic medicine, about
which Mr. Shkreli seems to have ac-
quired genuine expertise even while al-
legedly committing the remarkable lit-
any of frauds detailed in the

I
Even as Retrophin was firing him for government’s complaint.
ran’s ayatollahs are fond of timing and Saeed Abedini, former U.S. Marine Amir Hek- alleged fraud, it struck a deal to let him For instance, Mr. Shkreli may well
symbolism. So it’s no accident that the re- mati, Washington Post correspondent Jason take some of its drugs under develop- have been onto something with respect
gime freed jailed Christian Pastor Farshid Rezaian and Iranian-American businessman ment. Hmm. And despite the swirling to new treatments for certain genetically
Fathi on Tuesday in time for Siamak Namazi. complaints that followed him from his based neurodegenerative diseases.
Christmas. The news is wel- Farshid Fathi is free, but President Obama has is- hedge funds and Retrophin, Mr. Shkreli It all brings to mind the Chinese Com-
come, but it doesn’t mean the sued tepid statements of con- claimed he raised $90 million for his new munist Party’s labored verdict in the
mullahs are calling time-out
thousands of innocents cern about such cases. Re- company, Turing. At least $55 million of 1980s that Mao was 70% good and 30%
on their war on dissidents. are still imprisoned. publican and Democratic this money apparently was real: He bad. Maybe the CCP can lend us exper-
Security forces arrested presidential contenders could bought the U.S. rights to Daraprim, the tise to differentiate the good Mr. Shkreli
aging, off-patent drug that made him a from the bad.
Pastor Fathi five years ago help the cause of the Ameri-
and held him for months in solitary confine- cans by making it clear that they will do more
ment before convicting him on charges that in- to punish this kind of hostage taking.
cluded “evangelism” and possession of Persian- Now that he’s free, Pastor Fathi will face
language Bibles, considered contraband in the pressure to leave the country. Yet forced ex-
Beyond the Bromance
Islamic Republic. Evangelical Christianity is ex- ile won’t diminish the power of his spiritual
ploding in Iran today, with conversion esti- example. “Although the beauty of Christmas
mates ranging from 300,000 to half a million. . . . cannot be found in this prison,” he wrote
Between Trump and Putin
Braving intense repression, new believers flock in a letter to followers last December, “with Donald Trump’s budding leading establishment candidate.
to online ministries and house churches such the ears of faith I can hear the everlasting bromance with Vladimir In New Hampshire, Mr. Trump holds a
Putin is shocking but not solid lead with 28% while Mr. Cruz is tied
as the one founded by Pastor Fathi. and beautiful truth that ‘the Virgin will con-
surprising. Each is an for second with 12%. Support for the four
Meantime, thousands of innocent prisoners ceive and give birth to a Son, and they will ardent, unabashed na- establishment candidates—Mr. Rubio, New
still languish in Iran’s jails. These include at call him Immanuel.’” Merry Christmas, Pas- tionalist. Each believes Jersey Gov. Chris Christie, Ohio Gov. John
least four American citizens: Christian Pastor tor Fathi.
POLITICS that his country has de- Kasich and former Florida Gov. Jeb Bush—
clined from its former totals 39%, what Mr. Romney received four
& IDEAS
greatness, to which it years ago and more than enough to pre-
A Chipotle Education By William
A. Galston
must be restored. Both vail. But that share of the vote is divided

T
worship strength and almost evenly among the four, preventing
he executives at Chipotle Mexican Grill Chipotle derides “factory farming,”—last year despise weakness. Both any one of them from emerging as the
have been, well, dining out for years on the company put out a comedy series about the believe that the end justifies the means. establishment champion.
their self-styled reputation for “food “utterly unsustainable world of industrial agri- And each is a case study in the patholo- That could change. A survey released
gies of narcissism. two weeks ago by CNN/WMUR found that
with integrity.” So their com- culture”— such economies of
It is easy to understand how a man like fully 56% of voters likely to participate in
petitors who by implication The all-natural scale exist to deliver safer Mr. Putin could rise to power in the rubble the New Hampshire Republican primary
lack integrity can be forgiven evangelists get an food at a lower price. of the former Soviet Union. The 1990s left were still trying to decide which candi-
if they indulge in a little As it happens, Chipotle’s Russia freer but poorer and weaker. Mr. date to support. But there are no signs as
Schadenfreude about the com- E. coli reality check. locavore movement is a re- Putin felt a deep sense of national humili- yet that these voters are in the process of
pany’s recent trouble with sult of the wealth and pros- ation and was shrewd enough to coalescing around a single representative
food-borne disease. perity unleashed by efficient understand that many Russians shared his of the establishment. Complicating their
On Monday the U.S. Centers for Disease Con- agriculture. In 1950 food gobbled up more feeling. He saw the vulnerability of the choice, most of the candidates have been
trol and Prevention said it is investigating an- than a quarter of household spending. That new rich created by a program of pell-mell campaigning flat-out in the Granite State.
other E. coli outbreak linked to the American figure has plummeted to single digits—leaving privatization: Reining them in would be a By contrast, Mr. Rubio has devoted only
restaurant chain. Since July the burrito seller the economy with enough excess capital to fi- crowd-pleaser, even if it replaced the “oli- 12 days to the state. Unless he finishes
garchs” with his own cronies. Above all, better than a distant third in Iowa, Mr.
has been connected to five outbreaks spanning nance people like Mr. Ells who want to create he understood that the urban elites who Rubio seems unlikely to arrive in New
several states. At least 50 customers have a company with a marketing model deriding led the push for democracy lacked a mass Hampshire on Feb. 2 with enough mo-
munched on something laced with E. coli, and efficient agriculture. The romantic longing for base and that the traditional resentments mentum to break the logjam.
more than 120 in Boston came down with the colonial-era farming has grown precisely as of small-town and rural Russians could be This matters because New Hampshire
gastrointestinal norovirus. the share of people who actually plow fields used to marginalize them. occupies a pivotal position in the race.
The company has closed and scrubbed scores has dwindled to 2% of society. It is harder to understand—at first Since the creation of the modern nomi-
of restaurants but says it still has no idea what’s Also ironic is Chipotle’s campaign against glance, anyway—Mr. Trump’s staying nating process in 1972, no candidate of
poisoning people, and here’s a possible reason: genetically modified organisms, known as power at the top of the U.S. Republican either party who finished worse than
About 10% of Chipotle’s produce—the most GMOs. Earlier this year the company celebrated Party. To be sure, he has mobilized and second in New Hampshire has gone on
common disease culprit—is grown locally. Chi- “a farewell to GMOs,” not that anyone has ever championed the white working class, an to win his party’s nomination.
important but long-neglected cornerstone Unless an establishment candidate
potle calls this local-sourcing part of its com- fallen violently ill from eating a GMO. The com-
of the Republican base. And he has ex- breaks away from the pack in New
mitment to “the very best ingredients,” but pany thus plays into public fears that crops with ploited the mistrust much of the grass Hampshire, party leaders may well face
working with so many suppliers makes it diffi- tweaked DNA are Frankenfood, but E. coli is all roots harbors toward candidates who have a prospect they dread—a head-to-head
cult to catch the offending tomato. natural. Genetic modification makes agriculture promised much more than they delivered. contest between Messrs. Trump and
Founder Steve Ells vowed on a global grovel- more sustainable: Shoring up a crop’s defenses But Mr. Trump’s strength reflects Cruz. No matter who wins, they lose.
ing tour that Chipotle will ramp up safety mea- against insects or drought helps farmers cut mainly the weakness of the moderate- And even if one of the four establish-
sures at the company’s nearly 2,000 locations. back on pesticides and tillage. conservative establishment wing of the ment candidates does better than ex-
The company will likely rely less on local suppli- Chipotle’s anti-GMO and locavore advertis- Republican Party during this campaign. In pected, the likely result would be a pro-
ers, many of whom can’t comply with sophisti- ing has been part of a commercial strategy to previous cycles, evangelical conservatives tracted triangular battle.
cated testing. The company will also chop, differentiate from competitors and make a often prevailed in the Iowa caucuses, only One thing is clear: Unless the estab-
prepare and hermetically seal ingredients such buck. Perhaps no longer: On Tuesday the stock to hit a wall in New Hampshire. lishment field narrows quickly, the
There isn’t much evidence that any- champions of the party’s populist and
as cilantro and lettuce in a central kitchen be- tumbled below $500 for the first time since
thing similar is unfolding this time. The hard-right factions will enjoy an enor-
fore shipping it to local restaurants. May 2014, with the price down about 25% for Real Clear Politics average of recent sur- mous advantage as the contest shifts
In other words, Mr. Ells promises to bring the year. Sales are expected to drop precipi- veys shows the evangelical favorite, south. Will the establishment’s elected
his restaurants into the 20th century. One rea- tously this quarter. The market is a brutal Texas Sen. Ted Cruz, leading with 30% in leaders and major donors be able to
son large chains dice foodstuffs in a central teacher when customers and investors realize Iowa compared with 26% for Mr. Trump rally around a single candidate in time
kitchen is to avoid contamination. And while a company isn’t practicing what it preaches. and 13% for Florida Sen. Marco Rubio, the to avert a defeat of historic proportions?
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THE WALL STREET JOURNAL. Thursday - Monday, December 24 - 28, 2015 | A11

OPINION

Hillary Has Her Running Mate: Obama

By Juan Williams young people and minorities: “Presi- Yet Mrs. Clinton keeps asserting

T
dent Obama has both the unique her independence. “I’m not running
he 2016 presidential race ability and unique credibility to for my husband’s third term. I’m not
will be defined by the re- frame the stakes in the race that running for President Obama’s third
lationship between two will be motivating to Democrats,” term,” she told late-night talk-show
titans of American poli- Geoffrey Garin, a pollster advising host Stephen Colbert on Oct. 27.
tics: Barack Obama and Mrs. Clinton’s super PAC, told “I’m running for my first term.”
Hillary Clinton. For the first time in Bloomberg in October. Even so, when a Democratic de-
more than two decades—since Pres- Watching their current embrace it bate moderator asked her in October
ident Reagan campaigned with is easy to forget that in the 2008 to “name the one way that your
then-Vice President George H.W. race for the Democratic nomination, administration would not be a third
Bush—an incumbent two-term pres- the two were rivals. Mr. Obama took term of President Obama,” Mrs.

GETTY IMAGES/ASSOCIATED PRESS

ident will be an active player in the
campaign and possibly even an ac-
tive presence at events.
Right now, President Obama is
free to be the designated partisan at-
tack dog for Mrs. Clinton, allowing
her to remain above the nastiness
likely to arise in a race with a sharply
divided electorate. Bill Clinton has
played that role for her in past races.
The president is free to
be Clinton’s designated
partisan attack dog.
This time Mr. Obama’s presence
allows Mr. Clinton, with his high poll
numbers, to lead a chorus of nostal-
gia-stirring reminders of good feel-
ings about the last time a Clinton
was in the White House.
The Obama team is already
backing her. John Podesta, Mr.
Obama’s former adviser, runs her
campaign. President Obama’s 2008
campaign manager, David Plouffe,
once a Hillary Clinton critic, is now
supporting her, writing Oct. 24 on
Medium.com that, “She’s the right
person to protect President
Obama’s legacy.”
The Clinton team needs Mr.
Obama to turn out the vote among
swipes at Mrs. Clinton, for instance Clinton avoided policy detail: “Well,
by calling her “likable enough” in a I think that’s pretty obvious,” she
debate, and chiding her for being on responded. “I think being the first
the Wal-Mart board of directors. woman president would be quite a
Mrs. Clinton famously mocked him change from the presidents we’ve
as naive for promising transforma- had up until this point, including
tive change, characterizing the idea President Obama.”
as “the skies will open, the light will That evasive answer demon-
come down . . . and the world will strates the conflicting desire of the
be perfect!” Clinton campaign to keep some dis-
Meanwhile, Republicans are nationwide sought to distance them- the president’s refusal to send tance from the president even as she
already stirring their base voters by selves from incumbent two-term thousands of troops into the Mid- signals to his supporters that she
attacking Mrs. Clinton’s candidacy as President Bill Clinton. Despite his dle East, she is also taking more- remains close to him.
essentially seeking an Obama third impeachment over the Monica hawkish positions by advocating a For both politicians, the relation-
term. “As the chief architect of Presi- Lewinsky sex scandal, Mr. Clinton no-fly zone over Syria and the de- ship is transactional. Mr. Obama
dent Obama’s foreign policy,” the remained personally popular, with a ployment of more U.S. special-oper- gets a successor who will defend his
Republican National Committee’s 65% approval rating, according to ations forces. already much-debated legacy and
Allison Moore said in a Dec. 15 state- the last Gallup poll of his adminis- The strategy appears to be work- fight to protect his signature accom-
ment, “Hillary Clinton has seen her tration. Yet Mr. Gore regarded him ing. A November ABC/Washington plishments on health care, Wall
tenure as Secretary of State go from as radioactive for moderate and con- Post poll found that Mrs. Clinton is Street and student-loan reform.
being a chief qualification for the servative voters, particularly in the more trusted than any Republican to In exchange, Mrs. Clinton gets the
presidency to a huge political liability, South and Midwest. handle terrorism. That poll indicates best advocate to fire up the Demo-
particularly when it comes to the is- Fifteen years later, Mrs. Clinton is that voters are willing to judge Presi- cratic base and pull it to the polls in
sue of counterterrorism.” trying to strike a delicate balance. dent Obama’s first secretary of state November in the numbers she needs
Candidate Clinton’s strategic re- She needs President Obama’s sup- as capable of developing her own to become the first female president
lationship with the incumbent porters at the polls on election day. policies on dealing with terror. of the United States.
president of her own party stands But she is taking great care to assert In reality, the differences between The downside to this strategy is
in contrast to recent elections. In her independence from him, particu- the current president and the aspir- that today’s polarizing president
2008 the Republican ticket of Sen. larly on foreign affairs, where Presi- ing one aren’t large. Generally, Mrs. could turn out more Republicans
John McCain and Gov. Sarah Palin dent Obama has weak poll numbers. Clinton stands with Mr. Obama on than Democrats next year.
chose to distance itself from two- Thus her implied distance from the concept of “smart power” and
term incumbent Republican Presi- the president when she said at Sat- the idea that the U.S. should act Mr. Williams, a political analyst
dent George W. Bush. urday night’s Democratic debate: “I chiefly in coalition with other na- for Fox News and a columnist for
In 2000 the Democratic presiden- have a plan that I’ve put forward to tions. She, like him, also backs ac- the Hill, is the author of “Muzzled:
tial nominee, Vice President Al Gore, go after ISIS, not to contain them cepting refugees from Syria, overall The Assault on Honest Debate”
and Democrats running down-ballot but to defeat them.” While echoing immigration reform and gun control. (Crown, 2011).

Here’s What Genuine Tax Reform Looks Like

By John H. Cochrane ing populist outrage across the po- allocating capital toward their most smaller houses, save up more for But when bundling leads to paraly-

L
eft and right agree that the
U.S. tax code is a mess. The
candidates running for U.S.
president in 2016 are offering re-
form plans, and proposals to fix the
code regularly surface in Congress.
But these plans are, and should be,
political documents, designed to at-
tract votes. To prevent today’s ugly
bargains from becoming tomorrow’s
conventional wisdom, we should
more frequently discuss the ideal
tax structure.
The first goal of taxation is to
raise needed government revenue
with minimum economic damage.
That means lower marginal rates—
the additional tax people pay for
each extra dollar earned—and a
broader base of income subject to
tax. It also means a massively sim-
pler tax code.
In my view, simplification is
more important than rates. A sim-
ple code would allow people and
businesses to spend more time and
resources on productive activities
and less on attorneys and accoun-
tants, or on lobbyists seeking spe-
cial deals and subsidies. And a
simple code is much more clearly
fair. Americans now suspect that
people with clever lawyers are
avoiding much taxation, which is
corrosive to compliance and driv-
litical spectrum. productive uses. down payments or pay down their sis, progress comes by separating
What would a minimally damag- Recognizing the distortion, the mortgages. There would be rioting the issues. Thus, we should agree to
ing, simple, fair tax code look like? federal government provides a com- in the streets. Yet that is exactly first reform the structure of the tax
First, the corporate tax should be plex web of shelters that wealthy what the mortgage-interest deduc- code, leaving the rates blank. We
eliminated. Every dollar of taxes individuals use to shelter their tion accomplishes. will then separately debate rates,
that a corporation seems to pay wealth and escape the estate tax. If Similarly, suppose Congress pro- and the consequent overall revenue
comes from higher prices to its cus- investment isn’t taxed, these costly posed to match private charitable and progressivity.
tomers, lower wages to its workers complexities can disappear. donations. But rich people would Consumption-based taxes can be
or lower dividends to its sharehold- get a 40% match, middle class peo- progressive. A simplified income
ers. Of these groups, wealthy indi- ple only 10% and poor people noth- tax, excluding investment income
vidual shareholders are the least The goal is to be simple and ing. This is exactly what the chari- and allowing a full deduction for
likely to suffer. If taxes eat into table deduction accomplishes. savings, could tax high-income
profits, investors pay lower prices fair, with minimal damage. Zeroing out deductions, credits, earners’ consumption at a higher
for less valuable shares, and so Step one would eliminate and corporate and investment taxes rate. Low-income people can re-
earn the same return as before. To matters—for permanence, for pre- ceive transfers and credits. I think
the extent that taxes do reduce re- the corporate tax. dictability and for simplicity. If the smaller government and less pro-
turns, they also financially hurt corporate rate is drastically reduced, gressivity are wiser. But we can
nonprofits and your and my pen- or if deductions are capped, it agree on an efficient, simple and
sion funds. All the various deductions, cred- seems that the economic distortions fair tax, and debate revenues and
With no corporate tax, argu- its and exclusions should be elimi- go away. But the thousands of pages progressivity separately.
ments disappear over investment nated—even the holy trinity of tax of tax code are still in place, the We should also agree to separate
expensing versus depreciation, re- breaks for mortgage interest, chari- army of lawyers and accountants the tax code from the subsidy code.
patriation of profits, too much tax- table donations and employer-pro- and lobbyists is still in place, and We agree to debate subsidies for
deductible debt, R&D deductions vided health insurance. The extra the next administration will itch to mortgage-interest payments, elec-
and the vast array of energy deduc- revenue, more than a trillion dol- raise the caps, and the rate. tric cars and the like—transparent
tions and credits. lars annually, could finance a large Why is tax reform paralyzed? Be- and on-budget—but separately from
Second, the government should reduction in marginal rates. This cause political debate mixes the tax reform.
tax consumption, not wages, in- step would also simplify the code goal of efficiently raising revenue Negotiating such an agreement
come or wealth. When the govern- and make it fairer. with so many other objectives. will be hard. But the ability to
ment taxes savings, investment in- Imagine that Congress proposed Some want more progressivity or achieve grand bargains is the most
come, wealth or inheritance, it to send an annual check to each more revenue. Others defend subsi- important characteristic of great
reduces the incentive to save, in- homeowner. People with high in- dies and transfers for specific activ- political leaders.
vest and build companies rather comes, who buy expensive houses, ities, groups or businesses. They
than enjoy consumption immedi- borrow lots of money or refinance hold reform hostage. Mr. Cochrane is a senior fellow
ately. Taxes on capital gains dis- often, would get bigger checks than Wise politicians often bundle dis- at Stanford University’s Hoover
courage people from moving or re- people with low incomes, who buy similar goals to attract a majority. Institution.

An Irresponsible Civil Society Harms Israel

By Gerald M. Steinberg may not be the country’s largest, but reliable or are later proved false. But Compared to competing propos- video portraying the leaders of BTS

T
o the long list of hot-button
topics embroiling the Jewish
state, from Iran to terrorism,
the spillover from Syria and the
prospects for peace, we can now
add one more: irresponsible non-
governmental organizations that
use underhanded tactics in the
name of human rights.
NGOs that claim to promote peace
and human rights are big business in
Israel, with dozens of groups com-
peting for money and headlines. One
group, Breaking the Silence, or BTS,
with a 2014 income of $1 million,
PUBLISHED SINCE 1889 BY DOW JONES & COMPANY
Rupert Murdoch
Executive Chairman, News Corp
Gerard Baker
Editor in Chief
Rebecca Blumenstein; Matthew J. Murray, Deputy
Editors in Chief; Almar Latour, Executive Editor
DEPUTY MANAGING EDITORS:
Michael W. Miller, Senior Deputy; Thorold Barker,
Europe; Paul Beckett, Asia; Christine Glancey,
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EDITORIAL AND CORPORATE HEADQUARTERS:
1211 Avenue of the Americas, New York, N.Y., 10036
Telephone 1-800-DOWJONES
it’s been making the biggest waves. the accusations go unquestioned, and
With about 10 activists on staff, the political damage is significant.
BTS publishes anonymous and unveri- This has helped fuel the boycotts
fiable testimonies from Israeli sol- targeting Israel, as well as the pub-
diers who claim to have witnessed Is- lication of the 2009 Goldstone Re-
raeli forces committing war crimes. port on the fighting in Gaza, which
Representatives of BTS travel the has since been discredited even by
world repeating these stories, appear- its own author, the South African
ing in parliaments and before United jurist Richard Goldstone. Efforts in
Nations bodies, university campuses the United Kingdom and elsewhere
and in the media. to “arrest” Israeli leaders such as
To audiences with no experience Tzipi Livni, the former foreign min-
in combat with terror groups, the ister, based on allegations of war
emotional claims of these soldiers crimes, become international head-
can easily appear authentic. Many of lines and push Israel further toward
the details in these accounts are un- pariah status.
The bigger problem is that groups
like BTS get most of their money, up
to tens of millions of dollars, from
European governments, including
Sweden and Switzerland, either di-
Robert Thomson
Chief Executive Officer, News Corp rectly or indirectly. The European
William Lewis Union, for instance, is reported as
Chief Executive Officer and Publisher BTS’s largest single donor of 2015.
DOW JONES MANAGEMENT:
BTS is also one of about 20 similar
Anna Sedgley, Chief Financial Officer; groups that were built by the power-
Mark H. Jackson, General Counsel; ful U.S.-based New Israel Fund.
Ashley Huston, Chief Communications Officer;
Paul Meller, Chief Technology Officer;
These well-financed organizations
Mark Musgrave, Chief Human Resources Officer; have enraged Israelis and have trig-
Katie Vanneck-Smith, Chief Customer Officer gered counterattacks and legislative
OPERATING EXECUTIVES: proposals to outlaw, tax or limit
Edwin A. Finn, Jr., Barron’s; Edward Roussel,
NGOs involved in impugning Israel.
Innovation; Ingrid Verschuren, Data Strategy;
Suzi Watford, Marketing; Following the recent election, Jus-
Professional Information Business, Sales: tice Minister Ayelet Shaked submit-
Nancy McNeill, Global; William Ashworth, ted a bill which, if passed, would la-
Americas; Florence Lefevre, Europe; Tomasz
Rustowski, Asia bel NGOs funded by foreign
governments as “foreign agents” in
publications and other activities. In
meetings with public and elected of-
ficials, or in Knesset hearings, their
tags would designate them as lobby-
ists for their funders.
als, which would, for instance, limit
the activities of and impose financial
penalties on these NGOs, Ms.
Shaked’s bill highlights some sym-
bolic aspects of these NGOs and tar-
gets their legitimacy. Foreign-state
funding for BTS and other NGOs is
seen as an attack on Israel’s national
Foreign influences push
the Jewish state further
toward pariah status.
sovereignty, a very sensitive matter
for Israelis. This has drawn centrist
politicians in joining the condemna-
tion of BTS and its European-state
funders, adding to the support for
Ms. Shaked’s bill or others which call
for even more stringent limits.
Opponents on the left have de-
nounced Ms. Shaked’s proposal as
“McCarthyite.” NGO officials and their
allies, both in and outside of Israel,
compare her proposed restrictions to
those used to curb free speech in
Vladimir Putin’s Russia and Recep
Tayyip Erdogan’s Turkey.
But the proposal doesn’t seek to
limit the internal debate and criti-
cism of the Israel Defense Forces,
no matter how painful these discus-
sions may be. It only seeks to ad-
dress the threat from the outside,
via NGO campaigns of demonization
and boycotts.
A far more extreme counterattack
has come from Im Tirtzu (annual
budget: $500,000), which launched a
and three other NGOs as “moles”
and “foreign agents” responsible for
betraying IDF soldiers. European
funders are presented as supporters
of terrorism.
The video was ugly, over the top
and counterproductive, shifting the
focus from BTS to Im Tirtzu. It was
denounced by members of the Knes-
set, ex-military officers and various
commentators as “disgusting” and a
form of “incitement.” But it has also
fanned anger on the right, stoking
the belief that Prime Minister Benja-
min Netanyahu and other political
leaders have done little to protect Is-
raelis from BTS and demonization
around the world.
For the majority of Israelis, the
role of NGOs in Israel is an impor-
tant debate to have. These organiza-
tions’ invective, their propaganda
campaigns and their attacks on Is-
rael, with the assistance of foreign
governments, will escalate further.
Legislation on “foreign agent” re-
strictions may soon come to pass.
European-funded campaigns attack-
ing the country’s moral standing and
exploiting the language of human
rights is taking the country across
too many red lines. The dangers of
being turned into a pariah state
through these international cam-
paigns outweigh the costs of stigma-
tizing NGOs and limiting their travel.
Mr. Steinberg is professor of in-
ternational politics at Bar Ilan Uni-
versity and president of NGO Moni-
tor, a Jerusalem-based research
institute.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A12 | Thursday - Monday, December 24 - 28, 2015 THE WALL STREET JOURNAL.

WEATHER & PUZZLE

You Can Stop Doing Sit-Ups; Try a Plank Pose Instead

A push for other exercises
required only for certain posi-
to prevent back injuries; tions.)
A Canadian overhaul The Army in recent years put
10,000 soldiers through a pilot of a
BY RACHEL BACHMAN revamped physical-fitness test that
excluded sit-ups. While the Army
For anyone who has struggled is studying the best methods to
on a gym mat, hands behind head, measure baseline soldier readi-
straining to touch elbows to knees, ness, it’s sticking with its long-
there’s good news: The sit-up’s standing three-event test: timed
reign as a workout standard may push-ups, sit-ups and a two-mile
be ending. run, a spokesman says.
People from high-profile exer- The Marines and Navy also are
cise gurus to military experts are reviewing the elements of their
arguing that the sit-up, that staple tests. The Marines will collect rec-
of fitness tests, presents too great ommendations through July 1. The
a risk of back injury. Navy has no deadline for possible
A recent editorial in Navy changes to its test, says Lt. Joe
Times, an independent publication Keiley, public affairs officer for the
that covers the U.S. Navy, called Chief of Naval Personnel.
for banishing the sit-up from the “We’re certainly looking at
physical-readiness test sailors ways we can improve it,” Lt. Keiley
must pass twice each year. The ed- says.
FROM TOP: DOMINIQUE PINEIRO/U.S. NAVY; BRENT LEWIS/GETTY IMAGES

itorial called it “an outdated exer- The FitnessGram, the health-re-

cise today viewed as a key cause lated fitness assessment tool now
of lower back injuries.” The Cana- most commonly used in school fit-
dian Armed Forces recently cut the ness programs, in 1992 replaced
sit-up from its fitness test, citing the sit-up with a lower-rising curl-
concern over potential injury and The sit-up has been an exercise up.
its lack of connection to actual staple. Colorado personal trainer “Experts believe it puts less
military work. Jessica Crandall, left, demonstrates stress on the lower spine and the
Tony Horton, creator of the the plank pose. hip flexors than sit-ups do,” says
popular P90X video workout se- Laura Fink DeFina, president and
ries, says he no longer does sit-ups CEO of the Dallas-based Cooper In-
or crunches, their truncated cous- really don’t prepare us for what stitute, which developed and
ins. “I really believe that the tradi- we typically use our core for in launched the FitnessGram in 1982.
tional, antiquated crunch has seen daily life, or operationally on the Another argument against the
better days, and it’s time to make battlefield.” He stressed that he sit-up: Research suggests it is not
a change,” Mr. Horton says. was voicing his opinion, not that the best exercise for strengthening
Sit-ups can put hundreds of of the entire Navy. abdominal muscles. A 2010 study
pounds of compressive force on The Canadian Armed Forces’ in the Journal of Orthopaedic and
the spine, says Stuart McGill, a overhaul of their longtime fitness Sports Physical Therapy found that
professor of spine biomechanics at ways, including crunches and sit- quires just a few muscles, experts test, phased in through last year, exercises using an inflatable Swiss
Canada’s University of Waterloo. ups on stability or Swiss exercise say. emphasizes functional tasks such exercise ball activated more mus-
In dozens of published studies, Dr. balls. The injury risk with modi- Cmdr. David Peterson, executive as lifting a 44-pound sandbag 30 cles than did bent-knee sit-ups or
McGill has found that the forces, fied sit-ups depends on the exact officer for the physical education times within 3 1/2 minutes. crunches.
combined with the repeated flex- motion and on an individual’s department at the U.S. Naval Acad- “We went away from just mea- John Childs is CEO of Evidence
ing motion, in sit-ups can squeeze physical limitations. But some fit- emy, advocates replacing the curl- suring core strength by doing sit- in Motion, a company that trains
the discs in the spine. That combi- ness instructors have ditched even up in the Navy’s physical-readiness ups or push-ups,” says Patrick Ga- physical therapists. He says gener-
nation eventually can cause discs modified sit-ups. test with plank if the Navy keeps a gnon, senior manager of human ally available research shows that
to bulge, pressing on nerves and One move, called plank pose, core-readiness exercise in the test. performance for the Canadian traditional sit-ups do increase
causing back pain, potentially has expanded beyond yoga classes In a 2013 paper in Strength and Armed Forces. He says the new forces and loading on the back but
leading to disc herniation. and is used widely in physical Conditioning Journal, he argued test more accurately predicts how that “from our data, we can’t say
For people who want to do ab- training in place of sit-ups. Plank that plank was less likely to injure well soldiers will perform their that sit-ups cause back pain.”
dominal exercises from the tradi- resembles the upper position of a people and more relevant to Navy jobs. The most important thing is for
tional sit-up start position, Dr. push-up, with the body held operations. Versions of the sit-up remain in people to perform exercises they
McGill advocates a modified curl- straight from heel to shoulder. It is When performing real-world the regularly required physical fit- enjoy so they’ll continue doing
up he developed, with the hands also often performed with fore- tasks, Cmdr. Peterson says, “we ness tests for the U.S. Air Force, them, Dr. Childs says. “Staying ac-
placed underneath the low back arms on the ground. typically stabilize the abs so that Army, Marines and Navy, though tive and doing regular exercise the
and the shoulders barely leaving Plank uses muscles on the we’re able to generate more power three of those tests are under re- old-fashioned way is far more ad-
the floor. front, side and back of your mid- from the core so we can lift, pull, view. (The Coast Guard’s fitness vantageous than doing nothing,”
Sit-ups can be done in many section or core, while a sit-up re- push, carry. In that sense, sit-ups test, which also includes sit-ups, is he says.

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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14 15 16
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Glasgow 0
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10 20 21 22
in 1997
15 5 Coach’s
D bli
Dublin
A d
Amsterdam
li
Berlin arsaw
Warsaw 20
23 24 25 command 32 Bacon bit
25 26 27 28 29 30 31 32 6 Fellow who 34 “Really? There’s
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Frankfurt 30 made his fortune no more?”
Brussels Pra
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Kiev
35 33 34 35 36 in stages? 39 Icy feeling
Paris i h
Munich 37 38 39 40 7 Run-D.M.C.’s 40 “The Virgin of
Vienna Warm “Christmas in the Rocks”
Budapest 41 42 43 44 painter
Geneva Cold Hollis,” e.g.
Milan 45 46 47 48 8 Madre’s siblings 42 Start of “The
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62 63 64 11 Dishwashers
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(War Is ___)” days
Global Forecasts City
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Athens 18 9 s 17 8 s Jakarta 33 25 c 33 24 pc Rio de Janeiro 33 25 pc 34 25 c worth ___...?”: free of smelly 55 Grand style Woody, Rhea 57 “___ comes
Atlanta 24 19 c 24 20 sh Johannesburg 33 15 s 31 15 t Riyadh 23 13 sh 14 7 r “As You Like It” perfume ads 59 Mother’s sibling and Kelsey Santa Claus...”
Baghdad 14 7 c 16 4 pc Kansas City 8 -2 pc 9 7 pc Rome 15 4 s 15 4 pc
Baltimore 24 15 t 21 13 sh Las Vegas 13 5 pc 10 3 pc Salt Lake City 1 -7 c 0 -9 sn 15 Partridge’s 35 Crowd response 60 Train with icy 26 Lab work 58 Organization
Bangkok 33 25 s 34 25 pc Lima 27 21 pc 27 20 pc San Diego 18 12 pc 16 7 c cousin 36 Anatomical floors? 27 Celebrant of a that has an
Beijing 5 -8 s 6 -5 s London 12 5 r 13 11 sh San Francisco 11 6 r 11 4 s 16 High- duct 62 Number of December Antlers youth
Berlin 10 6 pc 9 6 pc Los Angeles 17 8 c 15 6 pc San Juan 30 24 pc 30 24 pc 37 Antlered animal
Bogota 21 8 pc 21 7 pc Madrid 13 1 pc 14 0 pc Santiago 32 14 s 33 14 s maintenance stripes on the festival called affiliate
Boise 2 -8 sn -1 -12 c Manila 30 24 s 31 24 s Santo Domingo 30 22 s 30 22 s performer 38 Advent flag of Atemoztli 61 No little angel
Boston 20 12 c 16 5 pc Melbourne 33 22 s 32 16 s Sao Paulo 31 22 pc 30 22 t 17 Friend who 40 Fragrant Deutschland
Brussels 12 5 c 11 9 r Mexico City 22 7 pc 23 8 pc Seattle 7 1 c 5 -2 sn supplies you with wreaths 63 Glass marble Previous Puzzle’s Solution
Buenos Aires 28 18 s 30 18 s Miami 29 24 pc 28 24 pc Seoul 5 -5 pc 3 -2 s
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Dubai 27 20 pc 27 20 c New Orleans 25 19 t 26 20 pc Toronto 15 3 pc 7 1 c P O S T A G E D U E L I S T
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Edinburgh 8 3 r 6 4 r Omaha 5 -2 sn 5 3 c Washington, D.C. 24 17 t 22 16 sh D I O R T O L E T E R G O
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s

Frankfurt 12 7 pc 10 7 r Orlando 30 20 pc 30 20 pc Zurich 8 2 pc 10 1 pc S OWS O P E R A L I S T

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BUSINESS & TECH.

INSIDE:

MONEY &
INVESTING
DeNA CEO Urges Patience OPEC Expects
Supply Cuts
Nintendo’s partner says game has just begun TECHNOLOGY | B3 OIL MARKETS | B5
© 2015 Dow Jones & Company. All Rights Reserved. THE WALL STREET JOURNAL. Thursday - Monday, December 24 - 28, 2015 | B1

Iran Market Beckons to U.S. Firms

BY BENOÎT FAUCON On the nuclear agreement’s of confidence in the end of the handsets is set to rise to $13 icine and aircraft spare parts.
Sound Off
U.S. music industry revenue,
in billions*
$12
“implementation day,” the U.S. embargo,” said Denis Florin, billion within four years, from U.S. companies have been
Ahead of an expected lifting Treasury’s Office of Foreign As- head of Paris-based energy $9.5 billion in 2014, according consulting with the State De- 10
of sanctions, several U.S. corpo- sets Control will issue a general consultancy Lavoisier Conseil, to U.K.-based consultancy BMI partment and Treasury to en-
rate giants including personal- license authorizing foreign- who advises foreign companies Research. sure conversations held by 8
computer seller HP Inc. and based arms of U.S. corporations seeking to enter the Islamic Re- Foreign companies, however, their non-American subsidiar-
General Electric Inc.’s oil-ser- to engage in activities involving public. But with sanctions still have to tread carefully. ies remain compliant, accord-
6 Physical
vices unit actively are exploring Iran, a U.S. official said. An official at the U.S. Trea- ing to a U.S. State Department
$2.3B
a market entry. Concerned that they could sury said only “non-U. S. com- official and other people famil-
U.S. companies other than be left behind their European
U.S. companies are panies and individuals will not iar with the matter. “People are 4 Streaming
food, aircraft-parts and medi- and Asian peers in the race to consulting with the be subject to U.S. sanctions if exchanging draft contracts but $1.9B
cine suppliers are still banned do business with a country of they engage in initial discus- nothing has been signed,” the 2
from conducting direct transac- over 77 million people, some
State Department sions about potential business U.S. official said. Digital
downloads
tions with Iran. But last week American companies have pre- and Treasury. opportunities or travel to Iran As a result, U.S. companies
0 $2.6B
Maryland Sen. Ben Cardin, the pared to go as soon as the to examine the possibilities of are sending non-American sub-
top Democrat on the Senate sanctions lift, drafting con- business relationships after sidiaries to test the waters. 2004 ’10 ’14
Foreign Relations Committee, tracts and sending envoys to slated to end soon, looking at sanctions are lifted.” In one recent example, Hewl- *Excludes licensing revenue
said at a hearing that sanctions Iran as the country prepares to Iranian opportunities is no lon- “Entering into contracts in- ett-Packard (Suisse) Sarl, the Source: Recording Industry Association
relief on Tehran could start in break decades of isolation. ger as politically charged as it volving Iran before Implementa- Swiss subsidiary of Palo Alto, of America
January, when an agreement “Major U.S. companies do used to be, he said. tion Day may be sanctionable,” Calif.-based HP, last month circu- THE WALL STREET JOURNAL.
with world powers over Iran’s not seem worried anymore The opportunity could be the Treasury says on its web- lated draft agreements with Ira-
controversial nuclear program
is implemented.
with covering their tracks in
Iran, suggesting a high degree
massive. Iran’s market for com-
puters, gaming devices and
site, except for specifically al-
lowed trades such as food, med-
nian distributors to resell its
Please see IRAN page B2 Beatles’
Catalog
Smirnoff Vodka Aims to Regain Its Rhythm Ready for
Diageo tries to revive
brand’s U.S. sales after
missteps; electronic
Streaming
BY HANNAH KARP
dance music anyone? AND AMIR MIZROCH

BY SAABIRA CHAUDHURI LONDON—Fans of the Beat-

les around the world are get-
After two years of fizzling ting a big Christmas present
U.S. sales, Diageo PLC is on a this year, as the iconic band’s
mission to stir up its once- full catalog is scheduled for re-
blockbuster vodka brand, lease on major streaming ser-
Smirnoff. vices Thursday morning.
Vodka’s overall appeal has London-based Apple Corps
declined in recent years, with Ltd./UMG, which holds the
(TOP TO BOTTOM) GABRIEL OLSEN/GETTY IMAGES; DANIEL ACKER/BLOOMBERG NEWS

consumers abandoning the rights to the music, posted the

spirit in favor of whiskey and news on the Beatles’ website
tequila. But Diageo hastened and released a video teaser on
Smirnoff’s decline with a se- YouTube. The Beatles’ 13 re-
ries of missteps that hurt mastered studio albums and
sales. four collections will be avail-
The world’s largest spirits able at 12:01 a.m. Thursday in
maker consistently raised the each country’s time zone, the
price of its main vodka brand band’s label said.
over the past few years to Participating streaming ser-
widen profit margins, hoping vices include Spotify AB, Apple
rivals would follow suit. They Inc’s Apple Music, Jay Z’s
didn’t, and Smirnoff’s U.S. Tidal, Deezer, Alphabet Inc.’s
sales fell 4% in the company’s Google Play and Amazon.com
fiscal year ended June 30. Inc.’s Amazon Prime.
Smirnoff also unleashed a The Beatles’ long-awaited
bewildering range of flavors in streaming debut is a boon for
an attempt to attract younger the music industry. It could
drinkers. Some of these fla- boost the subscriber numbers
vors, like Kissed Caramel, Iced of music streaming services,
Cake and Root Beer Float, left which record labels see as key
people unimpressed. to their future as CD sales and
“Adding 42 flavors, all of Diageo hopes the vodka brand can earn a name in the electronic dance music community. Above, a festival in Pomona, Calif., in August downloads decline. In particu-
which are almost the same, lar, the Beatles’ songbook could
was a bad decision,” Smirnoff Diageo is also working to Group shows that on 12% of help hook older, less tech-savvy
global brand director Matt earn its main vodka brand a occasions, alcohol drinks in consumers on music streaming,
Bruhn said at a conference last name in the electronic-dance- North America are consumed which hasn’t yet become a
month. “We and vodka got music community, in an at- as shots. mainstream practice in the U.S.
lazy—we made mistakes.” tempt to earn the loyalty of While Smirnoff remains the Spotify, the largest service,
Turning Smirnoff around is the fickle millennials who are U.S.’s largest vodka brand, counts more than 20 million
a priority for Diageo’s chief the brand’s core customers. selling more than nine million paying subscribers and about
executive, Ivan Menezes, who The company in March cases a year, the brand has 80 million free users world-
has presided over a period of reached a deal with Live Na- been battling for market share wide; Apple Music had 6.5 mil-
declining sales in the U.S., Dia- tion Entertainment Inc. to with smaller rivals seen as lion subscribers and 8.5 mil-
geo’s biggest market. Vodka have Smirnoff sponsor 26 having more authentic stories lion in free trial as of October.
made up 12% of Diageo’s net electronic-music festivals to tell. A fast-growing one is Though the Beatles catalog
sales last fiscal year—amount- around the world. Tito’s Handmade Vodka, which will be available to both Spo-
ing to about $1.96 billion— Part of that effort involves is produced in Austin, Texas, tify’s paying and free users,
with Smirnoff commanding people like Justin Medcraft, a by Fifth Generation Inc., a paying subscriber numbers
the biggest chunk, at 56%. 29-year-old Diageo employee, small private company. could still see growth due to
The company is now plan- who spends his days helping Tito’s sales rose by 82% last the sheer publicity the re-
ning to ratchet down the num- make electronic dance music music producer Djemba nate with younger customers, year, while brands like New leases bring to Spotify’s brand.
ber of Smirnoff flavors it sells, for the Smirnoff sound collec- Djemba together with Cana- Smirnoff has launched a line Amsterdam, Svedka, Alberta The Beatles’ rights holders
particularly in the U.S., where tive, an initiative that aims to dian pop singer Kiesza to cre- of neon-colored, glow-in-the- and Diageo’s own Cîroc have had long been interested in
roughly 25% of Smirnoff is fla- help up-and-coming artists. ate a dance track found on dark, sour-flavored vodkas also gained share, according to making the catalog available
vored compared with about Mr. Medcraft recently brought Spotify, iTunes and elsewhere. meant to be drunk as shots. Exane BNP Paribas. on streaming services to main-
10% in other markets. Los Angeles electronic-dance- In another attempt to reso- Data from Boston Consulting Please see VODKA page B2 Please see BEATLES page B2

China Cosco Is Lone Piraeus Port Bidder Altice’s Cable Strategy

BY COSTAS PARIS Republic Asset Development
Fund, which handles state as-
has not officially said who put
forward binding bids, it’s not
cession it acquired in 2009.
Piraeus, just a few kilome-
In U.S. Hits Turbulence
Chinese shipping and port set sales, said it would dis- unprecedented that a late en- ters south of the Greek capital BY SHALINI RAMACHANDRAN nor the state will find that the
giant China Cosco Holdings close the bids for the port on try comes into the fold,” one of Athens, is the de facto AND NICK KOSTOV transaction is in the public in-
Co. is so far the sole bidder Jan. 12. APM Terminals and of the people said. home of Greece’s shipping in- terest, or alternatively, they’ll
for a majority stake in the de- ICTS declined to comment. Cosco is considered the fa- dustry and one of the largest Altice NV’s $10 billion deal demand so much in terms of
layed privatization of Greece’s “It will be complicated for vorite to win the bid as it al- ports in the Mediterranean. to buy cable operator Cablevi- givebacks that ultimately the
main port of Piraeus, two peo- offers to be accepted after the ready operates two container Greece’s leftist government sion Systems Corp. is running deal won’t be palatable to Al-
ple with direct knowledge of deadline, but since the seller terminals under a 35-year con- had pushed the privatization into unexpected turbulence in tice,” said Craig Moffett, ana-
the deal said Wednesday. back for a year, upsetting po- New York City. lyst at MoffettNathanson LLC.
Two other shortlisted in- tential investors and the coun- Since the European telecom New York City has said it
vestors—APM Terminals, try’s international creditors. operator unveiled the U.S. ca- has “a number of important
owned by Danish shipping The creditors had made the ble acquisition in September, concerns” about the merger
conglomerate A.P. Møller- selling of state assets a condi- Cablevision’s shares have sunk and believes it has the power
SIMON DAWSON/BLOOMBERG NEWS

Maersk A/S, and Philippines- tion for a multibillion-euro below Altice’s all-cash offer of to deny the deal if it finds it
based port operator Interna- bailout package to keep Greece $34.90 a share. The stock is isn’t in the public interest. Ca-
tional Container Terminal from defaulting on its debts. trading more than 9% below blevision’s 3.1 million custom-
Services Inc.—didn’t submit The deal involves bids for a the agreed takeover price, re- ers are concentrated in the
binding bids by Monday’s 67.7% stake in Piraeus Port Au- flecting investors’ concerns greater New York market.
deadline, the people said. thority SA. A 51% slice would about the deal closing. In an interview, Mayor Bill
The privatization is ex- be transferred to the winning “The spread has widened in de Blasio’s top legal counsel
pected to generate hundreds bidder at once and the re- large part because people have Maya Wiley said the city is
of millions of euros for cash- maining 16.7% over the next become increasingly con- concerned about whether Al-
strapped Athens. The Hellenic Piraeus is the de facto home of Greece’s shipping industry. five years. cerned that neither the city Please see CABLE page B3
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Thursday - Monday, December 24 - 28, 2015
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 F
Affiliated Managers
Group ........................ A7
Airbus..........................B3
Alphabet......................B8
Altice...........................B1
Amazon.com...............A1
A. P. Moller-Maersk ... B1
APM Terminals...........B1
Apple...........................B2
Aquila Resources........B3
Aurizon Holdings........B3
B Investment
Boeing ......................... B3
Boparan Holdings ....... B2
C Machines...................B2
Cablevision..................B1
Camden Town
Brewery.....................B5
Canadian Pacific..........B3
Chilango.......................B7
China Cosco
Holdings....................B1
China Southern
Airlines......................B3
Coca-Cola ............... B2,B8
Crowdcube...................B7
D N
Delta Air Lines ........... B3
DeNA...........................B3
Deutsche Invest Equity
Partners....................B1
Diageo ......................... B1
INDEX TO PEOPLE
A
Adetunji, Adeola.........B8
B
Barse, David ............... A1
Batato, Finn................B3
Bogle, John.................A7
Boparan, Baljinder......B2
Brown, Rob Murray....B7
Bruhn, Matt................B1
C
Campos, Gualberto Lima
.....................................B8
Cardin, Ben..................B1
Carlier, Emmanuel......B3
D Lupoff, Peter...............A7
Dotcom, Kim...............B3
F W
Florin, Denis................B1
G Whitman, Marty.........A1
Garvey, Kieran ............ B5
Goei, Dexter................B3
Fox’s Biscuits Is Set
For Potential Sale
BY SHAYNDI RAICE
Bankers for Fox’s Biscuits
owner Boparan Holdings Ltd.
are reaching out to potential
buyers on behalf of the maker
of Golden Crunch, Crunch
Creams and Party Rings cook-
ies, according to people famil-
iar with the matter.
Birmingham, U.K.-based
Boparan Holdings, which is
owned by Ranjit Singh and his
wife Baljinder Boparan, is the
holding company for 2 Sisters
Food Group, whose brands in-
clude Fox’s Biscuits. Invest-
ment bank Rothschild has ap-
proached possible buyers on
behalf of 2 Sisters, according
to the people familiar with the
matter.
Fox’s Biscuits could be val-
ued at as much as £250 mil-
lion, or up to $371 million,
some of the people said. No
formal process has been
started and the considerations
are at an early stage, some of
the people said.
Fox’s Biscuits is the fourth-
largest cookie maker in the
U.K., with a 3.8% market share,
MICHAEL OCHS ARCHIVES/GETTY IMAGES
The Beatles’ streaming debut is a boon for the music industry.
BEATLES
Continued from the prior page
tain the relevancy of the Beatles
brand, according to a person fa-
miliar with the matter. Though
Spotify, Apple and Google likely
would have paid handsomely
for the exclusive streaming
rights, the Beatles camp elected
to release the material on all
services and tiers to reach the
broadest possible swath of fans.
While the move could
dampen already declining CD
and download sales in the long
term, strengthening the brand
could bolster other revenue
streams such as merchandise
sales and Beatles-themed shows.
The Beatles have sold about
900,000 albums and two mil-
lion digital songs this year,
O
Facebook......................B7 Ontario Teachers
Ford Motor..................B8 Pension Plan.............B2
Fortress Investment S
Group ........................ A1
Seedrs ......................... B7
G
Shenzhen J-star Project
General Electric .... B1,2,8 Management
H Consultant...........A2,A5
Hilton Worldwide Shenzhen Luwei
Holdings....................B5 Property
Management ............ A5
HP................................B1
Hyatt Hotels...............B5 Shenzhen Yixianglong
I Development ............ A5
International Business Simon Property GroupB2
Starbucks....................B2
International Container T
Terminal Services.....B1
Tesla Motors...............B8
K
Third Avenue
Kinopto........................B5 Management ............ A1
L Transcorp Hotels ........ B8
2 Sisters Food Group . B2
Lavoisier Conseil.........B1
Lenovo Group..............B2 U
M Uber Technologies.B7,B8
Megaupload.................B3 United Parcel Service.A1
Microsoft.....................B2 V
Vanguard Group..........A7
New Enterprise Stone & Y
Lime..........................A7
Yukos...........................A4
Nintendo......................B3
Noble Group................B8 Z
Norfolk Southern........B3 ZTE..............................B3
H
Huffman, Beth............B2
I
Moriyasu, Isao............B3
Murray, Phil ................ B7
N
Ireland, Jay ................. B8 Norland, Erik...............B5
O for Santas at several shopping
J
Jeremiah, Danny.........B5 Ortmann, Mathias......B3
K Ozigbo, Valentine ....... B8
Khodorkovsky, P way. With businesses like
Mikhail......................A4 Partaker, Eric..............B7
Kolk, Bram van der.....B3 Pisanen, Olga..............A4
L Pitsiorlas, Stergios.....B1
Lang, Luke...................B7 S ror over coffee cups and
Lapointe, Thomas.......A7 Shaw, Peter ................ B7
Singh, Ranjit...............B2
Lynn, Jeff....................B7
Socquet, Jorn..............A1
M rate reputation experts say.
Manning, James ......... B5
Wadhwaney, Amit......A7
Mansfield, Ron............B3
Menezes, Ivan.............B1
Millstein, Jim..............A7 X holiday symbols illustrate how
Moffett, Craig.............B1 Xiradakis, George ....... B1
according to industry tracker
Euromonitor.
One possible buyer for Fox’s
Biscuits could be Burton’s Bis-
cuit Co., the third-largest
cookie maker in the U.K. In
2014, Burton’s Biscuits owner
Ontario Teachers’ Pension
Plan lost out to Turkish cookie
owner Yildiz Holding in an
auction to buy United Biscuits
Ltd., the maker of Jaffa Cakes.
A combination of Burton’s
and Fox’s would unite well-
known cookie brands in the
U.K. and create a more formi-
dable competitor to the lead-
ing cookie company, United
Biscuits. Mondelez Interna-
tional Inc. ranks as the No. 2
cookier maker in the U.K. Fox’s
is perhaps most recognized in
the U.K. for its cookie boxes.
Boparan Holdings has been
working to boost sales at Fox’s
Biscuits, which has struggled
in the face of growing compe-
tition. Boparan Holdings owns
other brands such as frozen-
fish supplier Donegal Catch
and says it produces one-third
of all poultry products con-
sumed in the U.K.
down from 1.2 million albums
and 2.7 million songs last year,
according to Nielsen Music.
Nielsen analyst Dave Bakula
said that the Beatles’ streaming
arrival possibly could even help
sales by turning people onto
the band for the first time.
“It’s hard to believe that any-
body hasn’t discovered the Beat-
les yet, but there are still people
out there,” Mr. Bakula said, who
still want to own all of its music.
The Beatles’ music has long
been available on Internet ra-
dio services and on satellite
radio, but never before via on-
demand services. The Beatles
have been the most prominent
streaming holdout, preferring
instead to remaster existing
albums and improve their
quality. In 2010, the band al-
lowed its catalog to appear on
Apple Inc.’s iTunes store.
Shoppers complained when U.S. mall developer Simon Property unveiled a new setting for its Santas earlier this year.
HolidayStressforBusinesses
BY RACHEL FEINTZEIG
Can companies win Christ-
mas?
It sure doesn’t feel that
Starbucks Corp. and Coca-
Cola Co. facing customer com-
plaints and social-media fu-
commercials, the holiday sea-
son has become increasingly
treacherous territory, corpo-
Controversies like the one
over Starbucks’ decision to use
plain red coffee cups free of
consumers view brands as
friends, and expect companies
to share their values, says
Deborah Small, a professor of
marketing and psychology at
the University of Pennsylva-
nia’s Wharton School.
“When it comes to the holi-
days, that’s very touchy,” she
says.
The dynamic leaves compa-
nies struggling to appear in-
clusive without riling those
who feel political correctness
has quashed their traditions.
They risk being too Christ-
massy for some, and not
Christmassy enough for oth-
ers.
When Simon Property
Group Inc., which owns, man-
ages and develops shopping
IRAN
Continued from the prior page
consumer products, such as
tablets and laptops, in Tehran,
according to people familiar
with the prospective contracts.
Non-U.S. HP staffers met the
potential distributors in Dubai
and Tehran, and last month held
an internal meeting to discuss
the opportunity, the people said.
To keep confidentiality tight,
HP exchanged only hard copies
of the documents with its pro-
spective partners and asked
them to sign the documents
and return them by post, ac-
cording to one person familiar
with the matter.
The U.S. computer giant also
has told its prospective part-
ners in Tehran that no deals
would be signed by HP or an-
nounced until the nuclear
agreement with Iran is com-
pleted, said the people familiar
with the draft contracts.
An HP spokeswoman said
“business activities, including
VODKA
Continued from the prior page
Diageo has no plans to
slash Smirnoff’s list prices, in-
stead opting for promotions
and discounts to draw custom-
ers back in. The company fa-
vors using mail-in rebates, ac-
cording to a person familiar
with its U.S. pricing strategies,
noting that redemption is low
and that rebates allow Diageo
to protect its revenue while si-
multaneously offering custom-
ers a discount.
Rather than highlighting
Smirnoff’s 151-year-old his-
tory—a tactic Diageo has re-
cently employed on a number
of brands facing competition
from craft spirits—the com-
pany is hoping to win over
customers aged 21 to 34 by
plunging into the electronic-
music scene and taking a
stand for sexual rights
BUSINESS NEWS
centers, unveiled a new setting
centers earlier this year, blow-
back was swift.
Shoppers complained on so-
cial media that Santa’s glacier,
an all-white, modern backdrop
violated the spirit of the sea-
son.
Simon quickly removed the
glaciers, which cost tens of
thousands of dollars to design
and build, and hauled out the
traditional settings with
Christmas trees.
A Starbucks executive said the plain-cup
design was about purity, and not politics.
“It was a mistake, and we
had to correct,” David Contis,
president of Simon’s regional
mall division, told the Char-
lotte Observer newspaper in
North Carolina in November.
“If we lose money, so be it.”
A spokesman for the com-
pany declined to comment fur-
ther.
Last week, Barclays Bank
PLC sparked Yuletide fury in
the U.K. after posting signs at
bank branches stating that
branches would be closed
from Dec. 25-28 for “bank hol-
idays,” rather than Christmas,
which social-media users lam-
basted as “cowardly” and “po-
those undertaken in the Middle
East, are conducted in full com-
pliance with U.S. and other ap-
plicable global trade require-
ments,” but declined to
comment further.
HP has been particularly un-
settled by early forays by some
of its competitors into Iran’s
technology sector, according to
people familiar with its internal
discussions.
Earlier this year, Lenovo
Group Ltd., the world’s largest
PC maker by volume, said it
was exploring Iranian opportu-
nities and invited dozens of Ira-
nian retailers to an event at a
plush Tehran hotel to drum up
interest for its latest laptops.
The Hong Kong-based com-
pany, which bought Interna-
tional Business Machines
Corp.’s PC business in 2004, re-
tains strong American connec-
tions; it has a second headquar-
ters in Raleigh, N.C. But its
Chinese ownership made the
Iranian entry easier, people fa-
miliar with the matter say.
Last year, Apple Inc. started
contacts with Iranian distribu-
through its sponsorship of
pride parades and “voguing,” a
stylized dance form that has
roots in Harlem’s LGBT com-
munity.
“Brands must contribute to
culture, not advertise to peo-
ple,” said Mr. Bruhn, the
Smirnoff brand director. His
target is for 40% of customers
between the ages of 21 and 34
globally to regularly drink
Smirnoff. In the U.S., he said,
there are 62 million customers
in this age group, with just 11%
of these having drunk
Smirnoff over the four weeks
prior to being surveyed, leav-
ing room for growth.
“If the goal is to create that
association with [electronic
dance music], then they’ve
definitely done that,” said
Sooraj Gera, a 32-year-old
Manhattan media professional
who said he has noticed
Smirnoff’s branding at several
electronic-dance music festi-
vals he attended this year.
THE WALL STREET JOURNAL.
litically correct.”
In a statement, a Barclays
spokeswoman said the bank
calls all closures bank holidays
and will continue to refer to
Christmas online and in post-
ers at some branches.
Advertisements can stir an-
ger, too. Microsoft Corp.
sparked the ire of some con-
sumers who noticed that one
version of an ad depicting em-
ployees caroling outside an
Apple Inc. store in New York
omitted a reference to God in
the song lyrics. A spokesman
for Microsoft declined to com-
ment.
And Coke, well known for
its Christmas marketing cam-
paigns, pulled a holiday ad in
Mexico earlier this month, al-
though the Christmas message
wasn’t the problem—viewers
took issue with the ad’s depic-
tion of light-skinned youth
bringing Cokes and Christmas
décor to indigenous people.
The company ultimately re-
moved the ad from YouTube
and apologized.
Companies may feel they
have no choice but to be bor-
ing, says Paul Argenti, a pro-
People shop at a store selling Apple products in Iran.
tors about possibly entering
the country with the full gamut
of its business activities, in-
cluding selling its iPhones, and
even opening Apple stores,
should Western sanctions ease
sufficiently. Talks have contin-
ued with local distributors,
though they have been slowed
by issues such as Iran’s lax in-
tellectual-property protection,
according to people familiar
with the matter.
Whether the moves will
translate into a sustainable
sales bump for Smirnoff re-
mains to be seen. “I don’t
think the audience they’re go-
Out-Spirited
Diageo's Smirnoff is still the biggest vodka brand in the U.S.,
but it has been losing market share to craft rivals.
2014 U.S. market share
Smirnoff 13.0%
Absolut 5.8
Svedka 5.8
Skyy 4.0
Grey Goose 3.9
New Amsterdam 3.5
Pinnacle 3.5
Burnett’s 3.4
Tito’s 3.3
Cîroc 3.1
Source: IWSR
EDMUND J COPPA
fessor of corporate communi-
cation at Dartmouth College’s
Tuck School of Business.
“The pressure is so great
among companies to avoid of-
fending individual groups that
they end up offending every-
one,” he adds.
Following the red-cup out-
cry, a Starbucks executive said
the plain-cup design was
about purity, and not politics.
The company stuck with the
cups, which will remain in cir-
culation through the season.
“A brand can’t be every-
thing to everybody,” Ms. Small
says, adding that people gen-
erally have short attention
spans for such kerfuffles.
“Things go viral really fast and
then they die out really fast.”
Don’t tell that to the people
tasked with creating corporate
holiday greetings.
In this realm, land mines
are more plentiful than snow-
men. Seasonal scenes could be
read as insensitive to the
Southern Hemisphere, where
December is a summer month.
The colors red or green have
questionable connotations in
some regions.
“It’s the project no one
wants to do,” says one senior
leader at a global marketing-
services firm, who didn’t want
to speak publicly about holi-
day-card efforts.
ATTA KENARE/AGENCE FRANCE-PRESSE/GETTY IMAGES
Apple declined to comment
on Tuesday.
Representatives from Nuovo
Pignone, an Italian oil and gas
subsidiary of GE, visited Iran
last month as part of an Italian
government delegation, said a
spokeswoman for the U.S. in-
dustrial-equipment maker. “GE
and its subsidiaries operate in
full compliance with all appli-
cable sanctions laws,” the
spokeswoman said.
ing after is sophisticated
enough to really care about
what vodka they’re drinking,”
said Mr. Gera, who prefers
bourbon to vodka.
Change from a year
ago, in pct. pts.
–0.39
–0.45
0.20
–0.07
–0.06
Tito's has had 0.69
unusually strong –0.42
growth among
top-selling brands 0.12
1.47
0.11
THE WALL STREET JOURNAL.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Dotcom
Is Ruled
Eligible for
Extradition
BY KATE GEENTY
WELLINGTON, New Zea-
land—Internet entrepreneur
Kim Dotcom and three co-de-
fendants are eligible to be ex-
tradited to the U.S. to face
charges including criminal
copyright infringement, money
laundering and conspiracy to
commit racketeering, a New
Zealand court ruled on Wednes-
day.
Speaking to media outside
court Mr. Dotcom said Wednes-
day’s decision wasn’t the last
word on the matter. “We will go
through the whole process until
the very end.”
Mr. Dotcom and fellow de-
fendants Finn Batato, Mathias
Ortmann and Bram van der
Kolk have already lodged ap-
peals, which will be heard in the
High Court.
Mr. Dotcom’s New Zealand-
based lawyer, Ron Mansfield,
said that Mr. Dotcom is positive
he can succeed in the higher
courts in New Zealand.
Mr. Mansfield said the next
step would be an appeal to the
Court of Appeal, followed by
New Zealand’s highest court,
the Supreme Court—which is
where he believes the case will
end up.
Kim Dotcom
and three fellow
defendants have
lodged appeals.
Under New Zealand’s Extra-
dition Act, once all court action
has been exhausted the final
decision on whether the men
will be extradited lies with Jus-
tice Minister Amy Adams.
The four men face the
charges in the U.S. because of
their involvement in file-shar-
ing site Megaupload. The four
men have maintained their in-
nocence, and have carried out a
protracted legal fight to prevent
extradition.
The U.S. Justice Depart-
ment’s case alleges that the four
men knew Megaupload was re-
producing and distributing
copyrighted works and failed to
delete the infringing files or
terminate access to them.
CABLE
Continued from page B1
tice has the financial where-
withal to digest Cablevision
without skimping on customer
service and infrastructure up-
grades for faster Internet
speeds. Ms. Wiley said the city
is also concerned about the
impact on jobs. Altice has a
reputation for instituting dras-
tic cost cuts.
“Altice is talking about $900
million in synergies. Well,
what’s getting cut? How’s that
going to impact the economy of
New York and quality of ser-
vices?” Ms. Wiley asked. “We
Business
Watch
NORFOLK SOUTHERN
Board Rejects
Canadian Pacific Bid
Norfolk Southern Corp. said
its board unanimously rejected
the latest offer from Canadian
Pacific Railway Ltd., saying it
didn’t address regulatory issues
and calling it “grossly inade-
quate.”
On Dec. 16, Canadian Pacific
added a new financial incentive
to its $30 billion cash-and-stock
offer after being spurned twice
by Norfolk Southern. The Cal-
gary, Alberta, railroad had of-
fered a contingent-value right for
each Norfolk Southern share,
which it said would be paid if
the value of the shares declined
during a prolonged regulatory re-
view. It said the contingent
rights could be worth as much
as $3.4 billion.
In a letter to Canadian Pa-
cific’s Chief Executive E. Hunter
A Quest to Master Mobile Games
Investors wonder
if DeNA partnership
provides Nintendo
with the edge it needs
BY ALEXANDER MARTIN
AND ERIC PFANNER
TOKYO—When Nintendo
Co. earlier this year announced
its choice of a partner to help
with a long-resisted move into
smartphone games, many fans
were puzzled.
DeNA Co., a Japanese mo-
bile-game provider that is little
known outside its home mar-
ket, had been a powerhouse of
the feature-phone era but has
struggled to adapt to the rise
of the smartphone, just like
Nintendo.
Now the companies are
struggling to assure investors
that their partnership will
work, while they push to meet
a March deadline for rolling
out their first joint smartphone
app, Miitomo.
In an interview, DeNA Chief
Executive Isao Moriyasu urged
investors to be patient, adding
that the goal of the partner-
ship is to “produce several big
hits so we can build a sustain-
able business structure, not
just rely on one hit.”
DeNA has some of the skills
needed to help Nintendo
bridge the gap to smartphones,
Mr. Moriyasu said, including
its ability to crunch vast
amounts of data on how gam-
ers play—vital information for
building business models
around games.
But the pair’s initial an-
nouncements have disap-
pointed gamers and investors
who hoped for a smartphone
adaptation of a legendary Nin-
tendo franchise, such as Mario
the plumber.
Many investors and analysts
are growing impatient and
questioning whether DeNA
gives Nintendo the edge it
needs to break through in the
competitive, hit-driven busi-
ness of smartphone games.
The lack of details sur-
rounding their partnership has
also fanned concerns that the
two might not be working well
together. Some analysts were
surprised when Nintendo this
year struck a separate agree-
ment with a partner company,
Pokémon Co., and San Fran-
cisco-based Niantic Inc. to de-
velop a game for mobile
phones.
Mr. Moriyasu said the part-
certainly are not afraid to dis-
approve a transaction.”
The scope of the city’s au-
thority is a point of contention.
The companies are seeking ap-
proval from the Federal Com-
munications Commission and
New York’s Public Service Com-
mission, but told the city in a
letter that their deal doesn’t
need its approval because Ca-
blevision’s “franchise” contract
with the city exempts its cable
services from review. They
have filed for approval with the
city, but only regarding Cable-
vision’s business-telecom arm.
New York City believes it has
solid legal standing to review
the deal, based on its interpre-
tation of the franchise contract.
Harrison and Chairman Andrew
F. Reardon on Wednesday, Nor-
folk Southern said the only
change in the latest proposal
was the contingent-value right
and that its financial advisers
believe the contingent-value right
would trade at a significant dis-
count to Canadian Pacific’s esti-
mate.
—Tess Stynes
CHINA SOUTHERN
Chinese Airline to
Buy 10 Airbus Jets
China Southern Airlines Co.
plans to buy 10 aircraft from
Airbus Group for a combined list
price of $2.27 billion.
The latest deal comes shortly
after China’s biggest airline by
fleet size said it and 51%-owned
unit Xiamen Airlines Co. agreed
to buy 110 aircraft from Boeing
Co. for $10.1 billion, as they look
to increase capacity.
Guangzhou-based China
Southern said in a Wednesday
filing that the planes have list
prices of US$227.36 million each.
The medium-haul aircraft, which
will be delivered between 2017
and 2019, are expected to in-
crease capacity by about 4%.
—Joanne Chiu
TECHNOLOGY
DeNA Chief Executive Isao
Moriyasu is asking for patience
regarding the Nintendo alliance.
nership is “going smoothly”
even after Nintendo’s longtime
president, Satoru Iwata, died in
July of cancer.
Nintendo declined to com-
ment on its partnership with
DeNA.
Under a deal unveiled in
March, Nintendo took a 10%
stake in DeNA, while DeNA ac-
quired 1.24% of its partner,
giving Kyoto-based Nintendo
the upper hand.
“At this point, it’s unclear
whether they will succeed,’’
said Hitoshi Sato, a senior ana-
lyst at InfoCom Research.
“There are countless smart-
phone applications and games
being produced globally, and
DeNA is still relatively un-
known outside Japan.”
DeNA was founded in 1999
by one of Japan’s highest-pro-
file female entrepreneurs, To-
moko Namba, a Harvard Busi-
ness School graduate and a
former McKinsey & Co. part-
ner. It began as an Internet
auction site and morphed into
a browser-based mobile video-
game platform. DeNA pio-
neered a new business model
in Japan of games that were
free to play on feature phones,
earning tens of millions of dol-
The city is taking on a more ex-
pansive role than it did during
Comcast’s ill-fated attempt to
buy Time Warner Cable. City
officials say Cablevision’s and
Time Warner Cable’s franchise
agreements give the city ap-
proval power over deals with a
cash component, whereas Com-
cast’s offer had been all-stock.
The Public Service Commis-
sion is scheduled to complete
its review by April 29. Under
the state regulatory body’s
newly expanded powers over
cable—thanks to a law passed
last year—Altice has to prove
Cablevision customers will re-
ceive better services after the
deal.
Altice and Cablevision said
Boeing’s 166 commercial jet orders were all for the 737 family.
BOEING
Jet Maker Nears
Goal for Deliveries
Boeing Co. on Wednesday
said it booked orders for 166
commercial jets in the past
week, taking the plane maker
within a whisker of matching
deals for new aircraft with
planned deliveries this year.
The orders were all for the
company’s best-selling 737 fam-
ily of jets, and included 20 from
Delta Air Lines Inc., three from
U.K.-based Jet 2.com Ltd. and
The Right DeNA?
Sales of Nintendo's mobile game partner DeNA have fallen
considerably from their peak.
Revenue
In billions
¥250
200
150
100
50
0 Sports and other
FY2010 ’11 ’12 ’13
Note: ¥1 billion = $8.21 million. Fiscal year begins April 1 and ends March 31.
Source: the company
lars a year through sales of vir-
tual items in games.
DeNa’s platform, called
Mobage (pronounced mo-ba-
geh), generates revenue by let-
ting users purchase virtual
items and services once they
are immersed in a game.
But when smartphones ar-
rived, gamers turned to stand-
alone apps available at stores
run by Google Inc. and Apple
Inc. Mobile-phone game reve-
nue is expected to rise to $45
billion in 2018 from $29 billion
this year, according to Digi-
Capital, a consulting firm. That
in separate statements that
the transaction will deliver
significant customer benefits
and they look forward to a
“fair and open” regulatory
process. “Altice has a strong
track record of investment, in-
novation and customer service
in all the communities we
serve,” said Altice, which ex-
pects the deal to close in the
first half of 2016.
In filings, Altice has argued
that the deal will benefit the
public by bolstering invest-
ment in innovative products,
improved network speeds and
reliability, and better customer
service. Altice has tended to
slash costs dramatically fol-
lowing acquisitions such as
143 for unidentified customers,
many of which are likely Chinese
carriers, said analysts.
Boeing booked deals for 743
jets through Dec. 22 after ex-
cluding 100 cancellations, many
of them airlines and leasing com-
panies swapping the new, up-
graded 737 Max aircraft for the
company’s existing single-aisle
flagship.
The company had targeted
matching net new orders and
deliveries this year, and previ-
ously forecast that 750 to 755
jets would be delivered, though
Thursday - Monday, December 24 - 28, 2015 | B3
BLOOMBERG NEWS
Revenue by segment
For fiscal year ended March 2015
E-commerce Games
14.1% 78.4%
Total
¥142.4
billion
’14 7.5%
THE WALL STREET JOURNAL.
will be about 40% of spending
on game software, up from
about 30% now.
DeNA’s shares, which once
traded higher than ¥4,000
(US$33), have fallen to less
than ¥1,900. In the fiscal year
ended March 31, its net profit
fell to ¥14.9 billion, one-third
the amount reported two years
earlier, even though it gets
nearly 80% of its revenue from
mobile games.
Nintendo, too, was strug-
gling, as sales of its 3DS and
Wii U consoles slumped over
the past few years. It swung to
France’s SFR, resulting in sav-
ings that it can reinvest in in-
frastructure.
In October, Altice Chief Ex-
ecutive Dexter Goei met with
City Hall officials including
Ms. Wiley and Deputy Mayor
Alicia Glen. At that meeting,
Altice suggested running high-
capacity fiber lines closer to
homes to increase Internet
speeds and improve network
reliability.
Local authorities have a
history of playing hardball
with cable companies during
deal reviews as a way to ex-
tract concessions for their
constituents.
There are other, broader
concerns about the deal. Al-
analysts expect it could exceed
this level by around 20 planes.
—Doug Cameron
ZTE
China Handset Maker
To Spin Off Unit
The board of Chinese handset
TED S. WARREN/ASSOCIATED PRESS
maker ZTE Corp. has approved a
plan to spin off and separately
list its 90%-owned unit Shen-
zhen ZTE We Link Technology
Co. on China’s over-the-counter
equity exchange.
Shenzhen ZTE We Link pro-
duces wireless communication
modules. China’s National Equi-
ties Exchange & Quotations Co.
is an equity-trading platform for
the sale of existing shares or
private placing of new shares
by small- and midsize enter-
prises.
The planned listing would give
Shenzhen ZTE We Link a fund-
raising platform for growing its
businesses, the company added.
—Joanne Chiu
AURIZON
Company to Book
Impairment Charge
Aurizon Holdings Ltd. plans
to book an impairment charge to
@wsjd | wsjd.com
a profit in the fiscal year ended
March 31, but its net profit is
down 85% from a 2009 peak.
Nintendo shares, which
surged after the company’s
March announcement that it
was moving into mobile games
through its DeNA partnership,
have slumped about 30% since
Miitomo was unveiled in Octo-
ber, though they are still up
nearly 30% year to date.
Mr. Moriyasu said he ap-
proached Mr. Iwata, the former
Nintendo president, in 2010 to
ask him about the possibility of
developing Nintendo games for
DeNA’s platform.
In 2013, Mr. Iwata sounded
out DeNA on whether it could
take a background role in
building a service to develop
Nintendo games for smart-
phones, he said.
While Nintendo is in charge
of game development, DeNA’s
focus is on post-release, back-
end operations that Mr. Mori-
yasu said are crucial to extend
play time and pump out profits
for years after the initial re-
lease.
For example, DeNA has
teams of engineers who track
how long users are battling a
monster before quitting and
what motivates them to buy
extra weapons. DeNA then ad-
justs the games to encourage
users to play longer or spend
more money on in-game pur-
chases. Those skills could be
crucial in helping Nintendo
move into an online environ-
ment where games need to
constantly evolve.
But what DeNA hasn’t
shown is the ability to produce
a string of hit games, which is
where Nintendo’s expertise
comes in.
Mr. Moriyasu said that the
pair are still on track to release
five titles together by March
2017. All of the games cur-
rently in development with
Nintendo are free to play,
meaning that in-app purchases
will be needed to generate rev-
enue. For Miitomo, he said us-
ers will be able to buy clothing
for their avatars.
Mr. Moriyasu said he has
been testing Miitomo on a spe-
cially installed iPhone kept un-
der tight security in its head-
quarters.
But investors and analysts
are growing restless.
“I’m sure DeNA has a lot of
ideas about mobile games they
could create for Nintendo,” said
Serkan Toto, a Tokyo-based
game consultant. “The question
is, is Nintendo listening?”
tice’s stock has declined 50%
since September, precipitated
by widespread investor skepti-
cism about whether it can de-
liver the $900 million in syn-
ergies promised in the
Cablevision deal. Plus, the to-
tal company will have $45 bil-
lion in debt by the end of 2016
if the Cablevision acquisition
closes, according to ING ana-
lyst Emmanuel Carlier.
“There’s a lot of skepticism
from a lot of longtime media
investors” about Altice’s debt-
fueled cable roll-up strategy,
one longtime Cablevision in-
vestor said. The spread on the
Altice-Cablevision deal had
been as wide as 16% earlier
this month.
reflect the rail-freight operator’s
investment in iron-ore miner Aq-
uila Resources Ltd., surplus roll-
ing stock and uncertainty on the
timing of an expansion of a coal
network in eastern Australia.
Aurizon also said the partners
in Aquila’s proposed 7.4 billion
Australian dollars (US$5.4 billion)
West Pilbara iron-ore project in
Western Australia have halted
work on a feasibility study in
light of the slump in iron prices,
which could lead to a further im-
pairment charge.
The company said on
Wednesday that it would recog-
nize a charge of between A$215
million and A$240 million for the
six months through Dec. 31. It
said it would take a charge of as
much as A$65 million against
the value of Aquila’s South Afri-
can iron-ore and manganese as-
sets and its coal assets in Aus-
tralia’s eastern Queensland state.
Aurizon was part of a consor-
tium led by China’s Baosteel
Group Corp. that last year
bought Aquila, which was seek-
ing to unlock new iron-ore sup-
plies as part of a wide develop-
ment that in its first phase
aimed to build a new deep-water
port and a 282-kilometer railway.
—Robb M. Stewart
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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B4 | Thursday - Monday, December 24 - 28, 2015 THE WALL STREET JOURNAL.

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Scarcity of Dollars Hits
Commerce in Africa
CURRENCIES | B8
© 2015 Dow Jones & Company. All Rights Reserved.
As of 4 p.m. ET EUR/GBP 0.7317 g 0.97%
OPEC Expects Rebound in Crude
Cartel sees oil price
doubling by 2020, but
also predicts a drop
in its own production
BY BENOÎT FAUCON
OPEC on Wednesday pre-
dicted oil prices will rebound
in coming years, and said it
expects to reduce its own pro-
duction by 2019.
The report comes after
global oil prices this week fell
to levels not seen since 2004
amid an increasing glut.
Package Deals: Invest
To Get Citizenship
KITTITIAN HILL
A developer in St. Kitts said he has made about 200 sales at his Kittitian Hill development to citizenship-by-investment owners.
BY CRAIG KARMIN
Tiny island nations like St.
Kitts and Nevis, Dominica and
Grenada have struggled since
the financial crisis to attract
money for new construction
projects to boost tourism.
One way they have found to
sweeten the deal: selling citi-
zenship as part of the package.
A collection of Caribbean
nations have enticed wealthy
Chinese, Russians and Middle
Easterners, and even some
from the U.S., to invest
$200,000 or more in real-es-
tate developments in the Ca-
ribbean. The investors have
helped pay for new resort
projects anchored by hotels
from big companies including
Hilton Worldwide Holdings
Inc., Hyatt Hotels Corp. and
Jobless Claims Could Test Fed Long-Shot Bets in U.K.
BY STEVEN RUSSOLILLO
The number of Americans
filing for unemployment
benefits doesn’t exactly keep
traders on pins and needles
these days. Unlike the gov-
ernment’s monthly jobs re-
port, it doesn’t inspire Twit-
ter hashtags,
AHEAD media live
OF THE blogs or prompt
TAPE sharp, short-term
market moves.
But the less-
heralded weekly jobless
claims, due Thursday morn-
ing, still matter a great deal,
perhaps now more than ever.
They are useful for gauging
the state of the labor market
in a relatively real-time man-
ner. Based on the past year’s
trend, historically low levels
of claims and budding signs
of wage pressure suggest the
Federal Reserve may feel
compelled to accelerate the
tightening pace in 2016.
Jobless claims have fallen
steadily since peaking in
mid-2009, hitting a four-de-
cade low in mid-July and re-
maining around that level
MARKET DIGEST B6 | WEDNESDAY’S MARKETS B7 | FINANCE WATCH B8
YEN/DLR ¥120.96 g 0.09% GOLD 1069.40 g 0.50%
In its closely watched an-
nual World Oil Outlook pub-
lished Wednesday, the Organi-
zation of the Petroleum
Exporting Countries said it ex-
pects the price of its basket of
crudes to rise to $70 a barrel
in 2020 and $95 a barrel in
2040, compared with $30.74 a
barrel on Monday.
Brent crude futures, the
global benchmark, fell to
$36.11 a barrel on Tuesday, the
lowest settlement price since
July 2, 2004. On Wednesday,
Brent gained $1.25 a barrel,
or 3.5%, to $37.36.
The “need to develop oil
the Four Seasons.
In exchange for buying a
residential unit or taking an
equity stake in a project, the
property owners gain citizen-
ship in these countries. Since
many investors come from na-
tions that face travel restric-
tions, their new passports
make it easier for them
to visit more than 100 coun-
tries, including much of Eu-
rope, without visa require-
ments. Americans, meanwhile,
are attracted in part to the
possibility of cutting their U.S.
tax bills.
The programs aren’t a new
concept. They have existed for
years in the region, though
they have attracted only spo-
radic attention, as well as in
places like Cyprus and Malta.
Even the U.S. has the EB-5 visa
Heigh-Ho, Heigh-Ho
Initial unemployment claims as
a percentage of the U.S.
population age 16 and above.
0.4%
0.3
0.2
0.1
0 the other half—the Ameri-
1970 ’80 ’90 2000 ’10
Source: Labor Department
THE WALL STREET JOURNAL.
since.
Fewer layoffs and fewer
people filing for unemploy-
ment benefits typically
translate into rampant hir-
ing. Fed Chairwoman Janet
Yellen indicated as much
when she raised the bench-
mark rate earlier this month,
saying she has seen “sub-
stantial improvement” in the
labor market.
But exactly how strong is
it? Deutsche Bank economist
Torsten Slok posits much of
THE WALL STREET JOURNAL.
production in more expensive
areas will drive long-term oil
prices higher,” OPEC said
in its report. Much of the re-
cent oversupply has been
caused by the extraction of
costly reserves in the U.S. and
Canada, which started to slow
after oil prices fell by more
than half in the past year.
On top of North American
competition, OPEC is facing
the return of Iranian produc-
tion after sanctions on Tehran
are lifted next year. Neverthe-
less, OPEC members earlier
this month said they would
keep pumping full-tilt and re-
The Price of Citizenship
Antigua & Barbuda
program, which grants resi-
dency to foreigners who invest
at least $500,000 in certain
business ventures that create
jobs.
But the Caribbean is emerg-
ing as the new hot spot for so-
called citizenship-by-invest-
ment programs, in part
because the citizenship pro-
cess is more streamlined than
others parts of the world.
Some governments fear they
can’t measure up businesswise
without them.
“We realized we were be-
coming less competitive with
developers without a citizen-
ship-by-investment program,”
said Ernest Hilaire, chairman
of the board for St. Lucia’s cit-
izenship by investment pro-
gram. His country begins ac-
cepting applications on Jan. 1,
the drop in claims is due to
the participation rate—the
share of working-age Ameri-
cans working or actively
looking for work—hovering
near its lowest since the
1970s. Since 2007, about half
of the participation rate’s
decline has been due to
structural reasons, such as
baby boomers retiring and
leaving the workforce for
good, according to the Coun-
cil of Economic Advisers. But
cans on the fringe of the la-
bor force—is what Mr. Slok
calls “the real joker in the
forecast.”
True, the Fed’s other half
of its dual mandate—infla-
tion—remains well below its
target. And growth and man-
ufacturing have been weak
recently. But the labor mar-
ket is stronger than ever
based on weekly claims and
robust on more headline-
grabbing measures, too.
With wage pressures mount-
ing, the Fed’s patience will
be put to the test in 2016.
Email: tape@wsj.com
The BG Fire Sale
Coming at Shell
HEARD ON THE STREET | B8
OIL 37.50 À 3.76%
jected any limit on output.
The organization’s report
suggests the group might have
to change tack. It said it ex-
pects to cut its own supply to
30.6 million barrels a day in
2019. That is more than one
million barrels a day lower
than its production of 31.7 mil-
lion barrels a day in Novem-
ber, its highest in three years.
Though OPEC has fre-
quently revised its numbers in
recent months, the output cut
is expected because rival pro-
ducers are forecast to show
resilience and the global rise
in oil demand is seen being
St. Kitts & Nevis
$400,000
$400,000
Grenada
$350,000
Dominica
$200,000
Note: All amounts are minimum investments
Source: Apex Capital Partners
joining St. Kitts and Nevis,
Dominica, Grenada and Anti-
gua and Barbuda among the
Caribbean nations offering the
programs.
The programs represent
one of the few ways for the
smaller island nations to at-
tract investment when banks
and many developers see them
as risky bets. But they have
their skeptics.
The U.S. government, for
one, has alleged some people
have used their new citizen-
ship in at least one Caribbean
country to provide cover for
financial crimes.
The countries usually don’t
share figures related to citi-
zenship-by-investment. But St.
Kitts and Nevis Prime Minister
Timothy Harris said in an in-
Please see EXPAT page B7
BY MAX COLCHESTER
LONDON—A few years ago
James Manning, a Brit who
runs a cleaning company, de-
cided to get into the movie
business.
The 50-year-old went online
and bought a stake in cinema-
technology startup Kinopto
Ltd., which was selling shares
via a website. But Kinopto
soon folded and Mr. Manning
lost his money. “It was always
going to be a high-risk invest-
ment,” says Mr. Manning, who
put several thousand dollars
into the venture.
For Kinopto’s co-founder
Danny Jeremiah, however,
raising money online was a
no-brainer. It “was embar-
rassingly easy,” he says. “We
went down the path of least
resistance.”
The U.K. has led the way
opening up a new ultra-risky
market in which fledgling
companies pitch shares to am-
ateur investors online. The
country “is now the best place
for equity crowdfunding in the
world,” says Kieran Garvey,
the policy program manager at
Thursday - Monday, December 24 - 28, 2015 | B5
3-MONTH LIBOR 0.60310% 10-YR TREAS g 7/32 yield 2.262%
undermined by new govern-
ment policies to cut energy
consumption, according to
data in the report.
The current decline in
prices is driving up demand
for oil, the report said, fore-
casting a rise to 97.4 million
barrels a day by 2020, com-
pared with an estimated 92.8
million barrels a day this year.
But OPEC added that the im-
pact of lower crude prices on
demand will be mitigated by
high taxes on motor fuel,
along with measures to in-
crease fuel efficiency, notably
in China.
Bracing for La Niña
As El Niño Crests
BY LUCY CRAYMER
HONG KONG—As El Niño
reaches its peak this winter,
investors are already bracing
for its sister climate phenome-
non, La Niña, to be next to up-
end weather patterns and po-
tentially wreak havoc on the
agricultural commodity mar-
ket.
Government forecasters in
Australia and Japan have in
recent weeks said the current
El Niño may already have
peaked and will ease through
the first half of 2016 as tem-
peratures cool on the subsur-
face of the eastern Pacific
Ocean.
By the start of December,
this year’s El Niño—the stron-
gest since 1997-1998—had
caused sea surface tempera-
tures to rise by more than 3.6
degrees Fahrenheit in places,
and driven a rally in agricul-
tural commodities such as
palm oil, sugar and dairy.
The end of an El Niño event
is often followed by the rever-
sal of the phenomenon, known
as La Niña, although that isn’t
a given. While El Niño and its
impact might be better known,
prices for crops such as soy,
corn and wheat can move
around 50% more during a La
Niña event, based on a mea-
sure of the volatility of prices,
said Erik Norland, senior econ-
omist at CME Group from New
York.
“The likelihood that the
current El Niño peaks soon
and turns into a potentially
strong La Niña by late 2016 or
early 2017 is something that
participants in agricultural
markets should track closely,”
Mr. Norland said.
La Niña occurs when east-
Chilango is among companies that raised cash via crowdfunding.
the Cambridge Centre for Al-
ternative Finance, which
benchmarks such projects
across the globe.
Buying shares in unlisted
companies is a long-shot bet:
Few if any of these companies
will ever have a public offering
that will allow investors to
cash out at a hefty profit. The
main hope for many investors
is that the company is eventu-
ally sold. Financial reporting
is thin, and the U.K.’s regulator
has expressed concern that
On the Ropes
Brent crude-oil futures price
$120 a barrel Wednesday:
$37.36
3.5%
100
80
60
40
20
0
’14 ’15
Source: SIX Financial
THE WALL STREET JOURNAL.
erly trade winds strengthen.
That cools water across the
central and eastern Pacific
Ocean, which in turn can up-
end weather around the world.
The severity of the phenome-
non is measured by ocean
temperatures and changes in
wind patterns. It typically
brings drier-than-usual
weather to some states in the
U.S. and South America and
causes wetter-than-normal
conditions for much of Austra-
lia, Papua New Guinea, Indo-
nesia and Central America. It
also increases the likelihood of
tropical cyclones in the Pa-
cific.
“El Niño gets all the buzz,
but La Niña does not get
enough credit,” said David
Ubilava, a lecturer at the Uni-
versity of Sydney’s School of
Economics, who has written
on the correlation between cli-
mate anomalies and commod-
ity prices. For example, Can-
ada and the U.S. are more
likely to get more droughts in
La Niña years than during an
El Niño year, which can
tighten food supplies and push
up prices, Mr. Ubilava said.
“A strong La Niña phenom-
enon could potentially have a
greater impact on agricultural
markets than El Niño, as it af-
fects weather in several key
producers and exporters of a
large number of commodities,
namely the U.S. and Brazil,”
said Aurelia Britsch, senior
commodities analyst at BMI
Research. BMI Research sees
La Niña as posing its biggest
risks to corn, soybeans, wheat,
sugar, cotton and coffee.
Over the 12 months follow-
ing the confirmation of a La
Niña in July 2010, wheat on
Please see NIÑA page B7
ALAMY
amateurs aren’t suited to do
the kind of financial sleuthing
a venture capitalist can.
So far, out of 367 U.K. com-
panies that have raised equity
between 2011 and the first half
of 2015 via equity crowdfund-
ing, only one has made a
profit for investors, according
to Altfi Data, which tracks the
alternative finance sector.
Since then, Camden Town
Brewery became the second
company set to make money
Please see FUND page B7
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 - Monday, December 24 - 28, 2015 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
18886.70 Market Closed Year-to-date s 8.23% 366.39 s 9.52, or 2.67% Year-to-date s 6.96% 2064.29 s 25.32, or 1.24% Trailing P/E ratio * 22.65 19.48
High, low, open and close for each 52-wk high/low 20868.03 16795.96 High, low, open and close for each 52-wk high/low 414.06 331.61 High, low, open and close for each P/E estimate * 17.19 17.15
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 2.15 1.92
All-time high: 2130.82, 05/21/15

20800 390 2150

65-day moving average

20000 380 2100

19200 370 2050

18400 360 2000

Session high
DOWN UP 17600 350 1950
t

Session open Close

65-day moving average
65-day moving average
Close Open
t

16800 340 1900

Session low
Bars measure the point change from session's open
16000 330 1850
Sept. Oct. Nov. Dec. Sept. Oct. Nov. Dec. Sept. Oct. Nov. Dec.

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 2348.15 29.10 1.25 2203.10 • 2643.78 –6.1 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1710.20 20.95 1.24 1611.53 • 1956.39 –3.6 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 802.97 8.36 1.05 769.36 • 1067.74 –16.0 4.250 Australia 2 2.043 105.7 104.4 116.5 152.3 2.021 2.078 2.277
3.250 10 2.785 52.2 50.4 70.5 58.0 2.741 2.944 2.843
Americas DJ Americas 490.83 4.90 1.01 454.29 • 525.25 –3.2
3.500 Belgium 2 -129.0 -129.3 -121.6 -78.3 -0.316 -0.302 -0.029
-0.305
Brazil Sao Paulo Bovespa 44123.02 653.50 1.50 42749.23 • 58574.79 –11.8
0.800 10 0.962 -130.2 -131.0 -140.3 -138.4 0.928 0.836 0.879
Canada S&P/TSX Comp 13265.74 182.88 1.40 12617.66 • 15524.75 –9.3
4.250 France 2 -0.283 -126.9 -126.6 -121.7 -78.0 -0.289 -0.303 -0.026
Mexico IPC All-Share 43363.56 34.84 0.08 39256.58 • 46078.07 0.5
1.000 10 0.990 -127.4 -128.5 -136.8 -139.5 0.953 0.871 0.868
Chile Santiago IPSA 2914.72 28.61 0.99 2792.11 • 3361.36 –7.9
0.500 Germany 2 -0.328 -131.4 -132.1 -130.1 -84.1 -0.344 -0.388 -0.087
U.S. DJIA 17550.53 133.26 0.77 15370.33 • 18351.36 –1.5
1.000 10 0.631 -163.2 -163.5 -171.1 -166.7 0.602 0.528 0.595
Nasdaq Composite 5035.10 33.99 0.68 4292.14 • 5231.94 6.3
4.500 Italy 2 0.109 -87.6 -84.1 -85.2 -23.3 0.136 0.061 0.521
S&P 500 2057.34 18.37 0.90 1867.01 • 2134.72 –0.1
2.000 10 1.668 -59.5 -58.9 -80.4 -34.5 1.648 1.434 1.918
CBOE Volatility 15.88 –0.72 –4.34 10.88 • 53.29 –17.3
0.100 Japan 2 -0.048 -103.4 -102.5 -93.9 -78.8 -0.048 -0.026 -0.034
EMEA Stoxx Europe 600 366.39 9.52 2.67 331.61 • 414.06 7.0 0.300 10 0.276 -198.8 -196.2 -192.3 -192.3 0.276 0.315 0.339
Stoxx Europe 50 3109.23 89.97 2.98 2832.47 • 3602.76 3.5 0.500 Netherlands 2 -0.358 -134.3 -134.3 -128.9 -77.2 -0.366 -0.376 -0.018
Austria ATX 2401.19 36.15 1.53 2083.22 • 2695.57 11.2 0.250 10 0.797 -146.7 -147.7 -154.1 -153.1 0.761 0.697 0.732
Belgium Bel-20 3689.51 74.79 2.07 3175.25 • 3910.33 12.3 4.350 Portugal 2 0.133 -85.2 -84.3 -75.0 -35.1 0.134 0.164 0.403
France CAC 40 4674.53 106.93 2.34 4076.16 • 5283.71 9.4 2.875 10 2.535 27.2 27.8 29.8 42.9 2.516 2.536 2.691
Germany DAX 10727.64 238.89 2.28 9325.05 • 12390.75 9.4 0.500 Spain 2 0.123 -86.3 -85.2 -86.8 -31.7 0.126 0.046 0.437
Greece ATG 619.96 0.92 0.15 557.63 • 945.81 –25.0 2.150 10 1.849 -41.5 -43.6 -57.7 -59.9 1.802 1.662 1.663
Hungary BUX 23547.40 91.49 0.39 15596.56 • 24055.22 41.6 3.750 Sweden 2 -0.447 -143.2 -142.1 -135.7 -65.2 -0.444 -0.443 0.102
Israel Tel Aviv 1498.00 9.52 0.64 1443.69 • 1728.89 2.3 2.500 10 1.036 -122.7 -121.4 -137.5 -128.4 1.023 0.863 0.978
Italy FTSE MIB 21456.36 396.23 1.88 17991.76 • 24157.39 12.9 1.000 U.K. 2 0.638 -34.8 -34.7 -29.6 -30.5 0.630 0.618 0.449
Netherlands AEX 443.72 12.75 2.96 401.87 • 510.55 4.5 2.000 10 1.947 -31.7 -35.9 -36.2 -41.1 1.879 1.877 1.852
Poland WIG 46564.08 142.80 0.31 43724.52 • 57460.44 –9.4 0.875 U.S. 2 0.985 ... ... ... ... 0.977 0.913 0.754
Russia RTS Index 785.51 23.11 3.03 708.25 • 1092.52 –0.7 2.250 10 2.263 ... ... ... ... 2.238 2.239 2.263
Spain IBEX 35 9641.00 225.40 2.39 9231.30 • 11884.60 –6.2
Sweden SX All Share 502.81 10.00 2.03 459.28 • 564.90 6.1 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 8705.74 189.92 2.23 7852.83 • 9537.90 –3.1 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 50839.81 1059.48 2.13 46530.87 • 55355.12 2.1 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of December 22, 2015
Turkey BIST 100 74044.89 942.79 1.29 69190.95 • 91805.74 –13.6
One-Day Change Year Year
U.K. FTSE 100 6240.98 157.88 2.60 5768.22 • 7122.74 –5.0 Commodity Exchange Last price Net Percentage high low
365.00 -1.25 -0.34% 464.00 362.50
Asia-Pacific DJ Asia-Pacific TSM 1378.33 4.68 0.34 1269.24 • 1621.10 –3.3 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 881.00 -4.50 -0.51 1,044.25 847.00
Australia S&P/ASX 200 5141.80 25.10 0.49 4909.60 • 5982.70 –5.0
Wheat (cents/bu.)
CBOT
CBOT 468.50 -3.25 -0.69 629.50 465.50
China Shanghai Composite 3636.09 –15.68 –0.43 2927.29 • 5166.35 12.4
Live cattle (cents/lb.) CME 134.450 2.650 2.01% 157.000 121.975
Hong Kong Hang Seng 22040.59 210.57 0.96 20556.60 • 28442.75 –6.6
Cocoa ($/ton) ICE-US 3,244 47 1.47 3,429 2,650
India S&P BSE Sensex 25850.30 259.65 1.01 24893.81 • 29681.77 –6.0
Coffee (cents/lb.) ICE-US 120.60 1.45 1.22 194.60 115.30
Japan Nikkei Stock Avg 18886.70 … Closed 16795.96 • 20868.03 8.2
Sugar (cents/lb.) ICE-US 15.10 0.06 0.40 17.40 11.28
Singapore Straits Times 2863.65 10.68 0.37 2787.94 • 3539.95 –14.9
Cotton (cents/lb.) ICE-US 62.81 -0.35 -0.55 67.90 59.45
South Korea Kospi 1999.22 6.66 0.33 1829.81 • 2173.41 4.4 Robusta coffee ($/ton) ICE-EU 1531.00 4.00 0.26 2,076.00 1,496.00
Taiwan Weighted 8315.70 22.96 0.28 7410.34 • 9973.12 –10.7
Copper ($/lb.) COMEX 2.1295 0.0205 0.97 2.9555 2.0020
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1068.90 -5.20 -0.48 1,295.90 1,045.40
Silver ($/troy oz.) COMEX 14.295 -0.019 -0.13 18.090 13.620
Currencies London close on Dec. 23 Aluminum ($/ton)* LME 1515.00 9.00 0.60 1,937.50 1,435.00
Tin ($/ton)* LME 14580.00 -20.00 -0.14 19,750.00 13,850.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Wed YTDchg Copper ($/ton)* LME 4690.50 -11.50 -0.24 6,445.00 4,500.00
20% Country/currency in US$ per US$ (%) Lead ($/ton)* LME 1709.00 -1.00 -0.06 2,137.00 1,562.00
15
WSJ Dollar index Europe Zinc ($/ton)* LME 1525.50 0.50 0.03 2,377.00 1,483.00
10 s Bulgaria lev 0.5567 1.7962 11.1 Nickel ($/ton)* LME 8760.00 -60.00 -0.68 15,540.00 8,200.00
5
Croatia kuna 0.1422 7.030 11.1 Rubber (Y.01/ton) TCE 166.50 -0.60 -0.36 174.80 155.70
0
Euro zone euro 1.0877 0.9194 11.2
–5 s Yen Palm oil ($/bbl.) MDEX 2486.00 18.00 0.73 2519.00 2030.00
Czech Rep. koruna-b 0.0402 24.846 8.7
–10 Denmark krone 0.1457 6.8617 11.5 Crude oil ($/bbl.) NYMEX 37.80 1.66 4.59 65.70 35.35
–15 s Euro
Hungary forint 0.003458 289.21 10.5 NY Harbor ULSD ($/gal.) NYMEX 1.1612 0.0411 3.67 2.1280 1.1107
–20 Iceland krona 0.007678 130.25 2.1
–25 RBOB gasoline ($/gal.) NYMEX 1.2674 0.0815 6.87 1.8458 1.1813
Norway krone 0.1145 8.7373 17.3
Poland zloty 0.2565 3.8989 10.1
Natural gas ($/mmBtu) NYMEX 2.048 0.093 4.76 3.6210 1.8020
2015
Russia ruble-d 0.01434 69.730 15.2 Brent crude ($/bbl.) ICE-EU 38.27 1.70 4.65 73.21 36.45
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1181 8.4681 8.5 Gas oil ($/ton) ICE-EU 350.00 7.75 2.26 643.50 335.50
Wed Wed
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0056 0.9944 0.01
Turkey lira 0.3422 2.9226 25.2 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1290 7.7500 –0.1
Ukraine hryvnia 0.0436 22.9555 45.1
Argentina peso-a 0.0767 13.0325 54.0
India rupee
Indonesia rupiah
0.0152
0.0000732
65.9565
13661
4.6
9.9
U.K. pound 1.4869 0.6725 4.8 Cross rates London close on Dec 23
Brazil real 0.2524 3.9616 49.1 Middle East/Africa
Japan yen 0.008267 120.96 1.0
Canada dollar 0.7224 1.3843 19.1 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002974 336.29 83.9 Bahrain dinar 2.6514 0.3772 0.04
Chile peso 0.001429 699.60 15.3 Australia 1.3843 2.0586 1.3920 0.0114 0.1786 1.5058 1.0003 ...
Macau pataca 0.1252 7.9847 –0.1 Egypt pound-a 0.1277 7.8320 9.5
Colombia peso 0.0003057 3271.63 37.7 Canada 1.3843 2.0581 1.3918 0.0114 0.1786 1.5053 ... 0.9997
Malaysia ringgit-c 0.2331 4.2909 22.4 Israel shekel 0.2572 3.8875 –0.2
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.6786 1.4736 14.9 Kuwait dinar 3.2949 0.3035 3.6 Euro 0.9194 1.3672 0.9245 0.0076 0.1187 ... 0.6643 0.6642
Mexico peso-a 0.0582 17.1871 16.6
Pakistan rupee 0.0095 104.800 4.0 Oman sul rial 2.5978 0.3849 –0.03 Hong Kong 7.7500 11.5234 7.7936 0.0641 ... 8.4280 5.5987 5.5978
Peru sol 0.2943 3.3975 13.8
Philippines peso 0.0212 47.214 5.6 Qatar rial 0.2747 3.641 –0.01 Japan 120.9630 179.8600 121.6900 ... 15.6080 131.5400 87.3955 87.3800
Uruguay peso-e 0.0336 29.740 23.9
Singapore dollar 0.7113 1.4058 6.1 Saudi Arabia riyal 0.2666 3.7504 –0.1 0.9944 1.4786 ... 0.0082 0.1283 1.0817 0.7185 0.7183
Venezuela bolivar 0.158603 6.31 0.2 Switzerland
South Korea won 0.0008524 1173.12 7.2 South Africa rand 0.0658 15.1865 31.4
U.K. 0.6725 ... 0.6763 0.0056 0.0868 0.7317 0.4859 0.4858
Asia-Pacific Sri Lanka rupee 0.0069589 143.70 9.5 Close Net Chg % Chg YTD % Chg
0.7224 1.3843 13.1 Taiwan dollar 0.03047 32.824 U.S. ... 1.4869 1.0056 0.0083 0.1290 1.0877 0.7224 0.7224
Australia dollar 3.7 WSJ Dollar Index 90.09 0.13 0.15 8.51
China yuan 0.1544 6.4775 4.4 Thailand baht 0.02772 36.080 9.6 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

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

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Close Chg Chg Cur Stock Sym Close Chg Chg Cur Stock Sym Close Chg Chg Asia Titans 50
One month 0.42160% 0.16875% ¥ TakedaPharm 4502 5955.00 0.03 19.18 £ RioTinto RIO 2014.50 6.11 -32.85 Last: 135.04 s 0.46, or 0.34% YTD t 5.0%
Three month 0.60310 0.25660 Asia Titans HK$ TencentHoldings 0700 152.20 0.93 35.29 CHF RocheHldgctf ROG 272.50 1.98 0.96
150
Six month 0.82750 0.35740 HK$ AIAGroup 1299 46.80 -0.43 8.84 0.89 15.67 1551.00 4.37 -27.98
¥ TokioMarineHldg 8766 4550.00 £ RoyDtchShell A RDSA
One year 1.14400 0.62880 ¥ AstellasPharma 4503 1683.00 0.09 -0.21 0.74 1.02 73.00 1.74 25.30 140
¥ ToyotaMtr 7203 7635.00 € SAP SAP
Euro Libor AU$ AustNZBk ANZ 26.88 0.75 -16.24 AU$ Wesfarmers WES 40.31 0.07 -3.38 € Sanofi SAN 79.96 2.76 5.68
One month -0.20571% 0.01214%
t 130
AU$ BHP BHP 17.41 3.45 -36.56 AU$ WestpacBanking WBC 32.06 0.19 -3.32 € SchneiderElectric SU 53.84 3.62 -11.17
Three month -0.12714 0.05643 HK$ BankofChina 3988 3.51 1.15 -19.68 89.64 2.43 -4.38 High 120
AU$ Woolworths WOW 23.69 0.51 -22.78 € Siemens SIE 50–day
Six month -0.03786 0.14143 HK$ CKHutchison 0001 104.40 0.97 38.89 € Telefonica TEF 10.47 3.51 -11.29 Close moving average 110
One year 0.05929 0.29571 HK$ CNOOC 0883 8.16 3.95 -21.84 Stoxx 50 € Total FP 42.12 3.19 2.05 Low
100
Euribor ¥ Canon 7751 3747.00 1.13 -2.43 CHF ABB ABBN 17.84 2.41 -15.61 CHF UBSGroup UBSG 19.31 1.74 12.99
One month -0.20100% 0.02500% ¥ CentralJapanRwy 9022 21320 1.57 17.53 € AXA CS 25.10 1.39 30.70 € Unilever UNA 39.95 3.20 22.38 25 2 9 16 23 30 6 13 20 27 4 11 18
Three month -0.13100 0.08000 HK$ ChinaConstructnBk 0939 5.39 1.13 -15.12 € Allianz ALV 163.00 1.68 18.67 £ Unilever ULVR 2883.00 2.36 9.70 Oct. Nov. Dec.
Six month -0.04100 0.17300 HK$ ChinaLifeInsurance 2628 25.65 1.58 -15.35 € Anheuser Busch ABI 114.95 2.18 22.47 £ VodafoneGroup VOD 215.60 2.33 -3.17
One year 0.06100 0.32800 HK$ ChinaMobile 0941 88.30 -0.06 -2.65 £ AstraZeneca AZN 4513.00 2.60 -0.93 CHF ZurichInsurance ZURN 255.70 2.16 -17.97
Yen Libor AU$ CmwlthBkAust CBA 82.05 0.47 -4.20 € BASF BAS 70.95 2.84 1.53
DJIA Stoxx 50
One month 0.22464% 0.23357% ¥ EastJapanRailway 9020 11530 2.04 26.38 £ BGGroup BG. 988.10 6.28 14.23
$ AmericanExpress AXP 69.97 1.63 -24.80 Last: 3109.23 s 89.97, or 2.98% YTD s 3.5%
Three month 0.39040 0.39143 ¥ Fanuc 6954 20945 ... 5.01 € BNP Paribas BNP 53.71 1.92 9.03
Six month 0.55114 0.54429 ¥ Hitachi 6501 690.10 0.66 -23.38 £ BT Group BT.A 472.90 2.92 17.78 $ Apple AAPL 108.62 1.30 -1.59 3600
One year 0.85150 0.84714 TW$ Hon Hai Precisn 2317 81.30 0.74 -2.88 € BancoBilVizAr BBVA 6.93 2.64 -10.02 $ Boeing BA 144.02 1.15 10.80
-0.33 10.04 $ Caterpillar CAT 69.89 2.16 -23.64 3400
Offer ¥ HondaMotor 7267 3880.00 € BancoSantander SAN 4.65 2.86 -31.56
KRW HyundaiMtr 005380 151500 -0.98 -10.36 £ Barclays BARC 222.30 1.51 -8.71 $ Chevron CVX 93.81 3.92 -16.38 3200
Eurodollars
4.79 1.27 -15.37 2.38 2.74 $ CiscoSys CSCO 27.40 1.90 -1.49
One month 0.5000% 0.4000% HK$ Ind&Comml 1398 € Bayer BAYN 116.10 3000
-0.04 34.56 4.48 -12.31
$ CocaCola KO 43.67 0.88 3.43
Three month 0.7000 0.6000 ¥ JapanTobacco 2914 4478.00 £ BP BP. 360.40
¥ KDDI 9433 3132.00 1.10 23.03 £ BritishAmTob BATS 3745.50 2.07 7.01
$ Disney DIS 105.53 -1.13 12.04 2800
Six month 0.9000 0.8000
$ DuPont DD 66.02 2.15 -6.01 2600
One year 1.2000 1.1000 ¥ Mitsubishi 8058 1953.00 -2.25 -11.91 CHF FinRichemont CFR 71.95 1.70 -18.98
$ ExxonMobil XOM 80.19 3.27 -13.26
Latest 52 wks ago ¥ MitsuUFJFin 8306 756.40 1.01 13.83 CHF CreditSuisse CSGN 21.73 3.38 -12.49 25 2 9 16 23 30 6 13 20 27 4 11 18
$ GenElec GE 30.95 1.51 22.48
¥ Mitsui 8031 1415.00 -0.39 -12.74 € Daimler DAI 77.84 1.92 12.86 Oct. Nov. Dec.
Prime rates $ GoldmanSachs GS 183.00 1.64 -5.59
U.S. 3.25%
¥ Mizuho Fin 8411 241.50 0.04 19.26 € Deutsche Bank DBK 22.32 3.53 -10.69
3.50% $ HomeDepot HD 133.11 0.93 26.81
¥ NTTDoCoMo 9437 2494.00 0.10 41.06 € DeutscheTelekom DTE 16.61 2.47 26.65
Canada 2.70 3.00 $ Intel INTC 35.00 0.78 -3.55
AU$ NatAustBnk NAB 29.00 0.76 -13.69 1853.00 2.66 0.24
Japan
Hong Kong
1.475
5.00
1.475
5.00 ¥ NipponStl&SmtmoMtl 5401 2409.50 0.96 -19.92
£
€
Diageo
ENI
DGE
ENI 13.96 3.41 -3.79
$
$
IBM
JPMorganChase
IBM
JPM
138.48
66.73
0.40
1.60
-13.69
6.63
Dow Jones Industrial Average P/E: 17
¥ NipponTeleg 9432 4785.00 -0.02 54.08 £ GlaxoSmithKline GSK 1370.00 2.09 -0.44 0.77 -1.02 Last: 17602.61 s 185.34, or 1.06% YTD t 1.2%
Policy rates $ JohnsJohns JNJ 103.50
¥ NissanMotor 7201 1261.50 0.92 19.35 £ HSBC Hldgs HSBA 540.90 2.13 -11.12 0.92 26.79
ECB 0.05% 0.05% $ McDonalds MCD 118.80
Britain 0.50 0.50
¥ NomuraHldgs 8604 683.80 -0.28 -0.93 € INGGroep INGA 12.55 2.49 15.88 $ Merck MRK 52.98 1.69 -6.71 19500
¥ Panasonic 6752 1206.50 -0.66 -15.45 £ ImpTobaccoGrp IMT 3543.50 2.00 24.95 $ Microsoft MSFT 55.82 0.85 20.17 18500
Switzerland 0.50 0.50
HK$ PetroChina 0857 5.26 3.34 -38.69 € IntesaSanpaolo ISP 3.09 -0.32 27.58 $ NikeClB NKE 128.81 -2.31 33.97
Australia 2.00 2.50 17500
HK$ PingAnInsofChina 2318 44.00 1.15 11.39 € L'AirLiquide AI 104.30 2.25 1.41 $ Pfizer PFE 32.56 0.12 4.53
U.S. discount 1.00 0.75
$ RelianceIndsGDR RIGD 30.10 1.52 6.74 € LVMHMoetHennessy MC 146.45 1.84 10.74 $ Procter&Gamble PG 79.92 0.40 -12.26 16500
Fed-funds target 0.25 0.00
AU$ RioTinto RIO 44.00 4.19 -24.14 £ LloydsBankingGroup LLOY 73.65 3.28 -2.86 $ 3M MMM 151.17 1.48 -8.00
Call money 2.25 2.00 15500
KRW SamsungElectronics 005930 1295000 0.23 -2.41 £ NationalGrid NG. 933.40 2.29 1.67 $ TravelersCos TRV 113.19 0.63 6.93
Overnight repurchase rates 14500
¥ Seven&I Hldgs 3382 5429.00 -0.33 24.56 CHF Nestle NESN 73.35 2.66 0.55 $ UnitedTech UTX 96.26 1.47 -16.30
U.S. 0.34% 0.12%
¥ SoftBankGroup 9984 6094.00 -0.49 -15.48 CHF Novartis NOVN 85.05 2.10 -7.90 $ UnitedHealthGroup UNH 118.67 1.05 17.39 25 2 9 16 23 30 6 13 20 27 4 11 18
Euro zone n.a. n.a.
¥ Sumitomo Mitsui 8316 4533.00 -0.20 3.61 DKK NovoNordiskB NOVO-B 393.80 2.13 51.29 $ VISAClA V 78.58 1.55 19.88 Oct. Nov. Dec.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 95.85 0.95 -18.98 £ Prudential PRU 1540.50 2.50 3.25 $ Verizon VZ 46.96 1.33 0.38 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 141.50 -0.35 0.35 £ ReckittBenckiser RB. 6205.00 2.29 19.10 $ WalMart WMT 61.08 0.89 -28.88 Sources: WSJ Market Data Group; Birinyi Associates
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THE WALL STREET JOURNAL.
U.S., Europe Shares Leap
BY SAUMYA VAISHAMPAYAN
AND CARLA MOZEE
Investors snapped up bat-
tered stocks linked to com-
modities on Wednesday, pro-
pelling major indexes higher
in Europe and the U.S.
The Dow Jones Industrial
Average climbed 185.34 points,
or 1.1%, to
WEDNESDAY’S 1 7 6 0 2 . 6 1 .
MARKETS The S&P
500 gained
1.2%, and
the Nasdaq Composite rose
0.9%. Wednesday’s gains came
on the last full trading day be-
fore the Christmas holiday.
The U.S. stock market will
close early on Thursday and
remain closed on Friday for
Christmas Day.
The Stoxx Europe 600
surged 2.7% to 366.39. Spain’s
IBEX 35 index continued to
stage a recovery from a selloff
earlier in the week after in-
conclusive elections over the
weekend. Spanish stocks rose
2.4%. European trading will be
closed Friday for Christmas
Day, and U.K. markets will re-
main closed the following
Monday for Boxing Day.
U.S. oil prices rose $1.36, or
3.8%, to $37.50 a barrel
Wednesday after government
data showed an unexpectedly
large decline in U.S. stockpiles.
A global glut of crude oil has
contributed to the steep pull-
back in oil prices over the past
year.
“The commodity bust has
really been weighing on senti-
ment for a number of market
segments,” said David Lefko-
witz, senior equity strategist
at UBS Wealth Management
Americas. “A little bit of relief
there is sparking a bit more
broad-based strength.”
NIÑA
Continued from page B5
the Chicago Board of Trade
rallied around 21% and soy-
beans rose around 39%, while
the benchmark sugar contract
in New York was up 67%.
There remains no way to
anticipate whether a La Niña
event will occur or how severe
the impact will be. However,
La Niña events have followed
11 of the last 15 El Niño events,
according to the Japan Meteo-
rological Agency.
The impact of La Niña may
not be limited to agriculture.
The La Niña that lasted from
1998 through to 2000 caused
colder-than-normal winters in
the U.S. and Canada, sending
prices of natural gas higher,
according to CME Group.
Adrian Redlich, chief in-
vestment officer at Merricks
Capital, a Melbourne-based
firm that runs a US$350 mil-
lion soft-commodities fund,
said investors could be under-
estimating the impact of the
current El Niño and the possi-
ble La Niña. “The option mar-
ket is pricing very low price
volatility for oil seeds versus
wheat or sugar. What the mar-
FUND
Continued from page B5
for investors, after agreeing to
sell to a rival brewer.
Still, U.K.-based investors
have snapped up stakes in
companies making everything
from flying cars to burritos
and musicals.
The U.S. is following the
U.K.’s lead, with the Securities
and Exchange Commission set
to allow armchair investors to
get in on an act long reserved
for “accredited investors”—
broadly those with a net
worth of more than $1 million,
or who earn at least $200,000
a year. Other countries remain
wary. Germany eased disclo-
sure rules for small businesses
looking for funding, but caps
the total investment at
€10,000 ($10,900) a person. In
Italy, individuals can invest
only €500 at a time and
€1,000 over a year.
In the U.K., the rules are
more relaxed. Retail investors
must certify they won’t invest
more than 10% of their portfo-
lios, excluding housing, pen-
sions and life assurance, on
crowdfunded companies. Web-
sites make investors pass a
multiple-choice test to show a
basic understanding of the
risks involved.
The U.K. equity crowdfund-
ing market is small but grow-
Steel firm ArcelorMittal rose 11% on a potential tariff move.
Some of the biggest gainers
Wednesday were sectors that
have been hit in recent weeks.
Energy stocks in the S&P 500
were up 3.7% in late trade, but
they were still down 7.6% this
month as oil prices have
dropped.
The S&P 500’s materials
sector, which includes shares
of mining companies, was up
2.3% in late trade, but was still
down 2.6% for the month.
“Hopes that Chinese stimu-
lus measures could buoy the
fortunes of natural-resources
stocks, combined with some
elements of a short squeeze,
have driven miners to the top
of the board,” on Wednesday,
said Tony Cross, market ana-
lyst at Trustnet Direct, in a
note.
This week, Chinese leaders
approved an economic blue-
print for next year. Worries
that China will experience a
so-called hard landing still lin-
ger in global markets.
In Europe’s mining group,
Anglo American PLC leapt
9.1%, Glencore PLC gained
8.5%, and Sweden’s Boliden AB
jumped by 7.7%.
The Cool Sister
If El Niño reverses and becomes a La Niña there could be further commodity disruptions.
Expected conditions: Wet
Dry
Cold
Higher rainfall in
Australia could
see restocking of
cattle, sheep farms
*June to August, all other conditions expected December to February
Sources: National Oceanic and Atmospheric Administration; commodities analysts
ket is saying is there is not a
huge fear that the price is go-
ing to go up dramatically. This
complacency represents the
opportunity,” Mr. Redlich said.
Palm-oil production in In-
donesia and Malaysia and
rapeseed production in India
are expected to be poor in the
first half of 2016. If that is
backed up with a La Niña that
ing rapidly, roughly tripling
between 2013 and 2014, ac-
cording to the Cambridge Cen-
tre for Alternative Finance,
helped by generous tax breaks
for investors. Proponents see
it as an important way for
small companies—many of
them starved for credit as Eu-
ropean banks pare lending—to
access funds. It also allows in-
vestors to access investments
they wouldn’t have been able
to before.
Tax breaks are a major in-
centive. The U.K. offers 30%
tax relief on investments up to
£1 million ($1.48 million) and
allows investors to offset
losses against their income.
Critics say it opens the path
for companies with inflated
valuations to hawk equity to
uninformed investors. One in
five companies that raised
money via crowdfunding be-
tween 2011 and 2013 is no lon-
ger in business, according to
Altfi.
Many of the companies that
raised money are still growing.
“It’s going to take another
year or two or three to get a
feel of how well it is working,”
says Luke Lang, co-founder
Crowdcube, the U.K.’s largest
equity crowdfunding platform.
Mr. Lang says the current fail-
ure rate is better than ex-
pected. Several companies
that obtained cash online via
Crowdcube have gone on to
raise funds at higher valua-
Thursday - Monday, December 24 - 28, 2015 | B7
MONEY & INVESTING
which could exaggerate moves
in the market. “People are do-
ing less and less as we come
into Christmas Eve,” said Ste-
phen Carl, head equity trader
at the Williams Capital Group.
The Organization of the Pe-
troleum Exporting Countries
VIVEK PRAKASH/BLOOMBERG NEWS
on Wednesday predicted oil
prices would rebound in com-
ing years, but the cartel said it
KITTITIAN HILL
expects to reduce its produc-
tion by 2019.
“If oil and commodities can
find a bottom, perhaps mar-
kets, which are sluggish, could Valmiki Kempadoo, whose Kittitian Hill project has a golf course,
also find a bottom,” said An- says the foreign investment program “was very useful.”
dreas Nigg, head of equity and
Steel producer ArcelorMit-
tal SA surged 11% in Paris.
That extended Tuesday’s 6.1%
commodity strategy at Vonto-
bel Asset Management, which
manages 91 billion Swiss
francs ($92 billion) in assets.
EXPAT West Indies with a population
of about 55,000 is known for
its rain forests and black-sand
beaches.
rise after the U.S. Commerce Low oil prices and a weak- Continued from page B5 Mr. Kempadoo said he
Department made a prelimi- ening energy industry “have terview that 2015 revenue has made about 200 sales at
nary recommendation to tax ripple effects across the whole from his country’s program his Kittitian Hill hillside devel-
corrosion-resistant steel im- industrial economy,” Mr. Nigg exceeded expectations by 42%, opment to citizenship-by-in-
ports from China at a rate of said. though he declined to offer a vestment owners. The project
256%. But shares of some U.S.- While falling commodities dollar amount. includes an 84-room high-end
listed steel producers fell after prices have left consumers Apex Capital Partners, a hotel and 18-hole golf course.
Bank of America Merrill Lynch with more money to spend in Montreal wealth-management “It was very useful,” he said
said preliminary antidumping recent months, the sharp drop firm that specializes in these of the foreign investment pro-
tariffs levied on corrosion-re- has also hit business confi- programs, estimates Caribbean gram. “Especially in the early
sistant steel imports from dence and sparked fears about countries granted new citizen- stages when we couldn’t sell
China, India, Korea and Italy the health of the global econ- ship to as many as 2,000 in- anything.”
were “largely disappointing.” omy, said Simon Laing, head vestors this year, at least dou- Christophe Harbour, a mas-
Stock swings have picked of U.S. equities at Invesco Per- bling from five years ago. ter-planned community in St.
up in recent sessions as oil petual. “When you see the Scores of U.S. citizens Kitts that includes a marina,
prices tumbled to multiyear most major commodity falling are helping boost those num- private residences and a 125-
lows and a rout in the junk- at the rate it has been, it bers. At least some might be room luxury Park Hyatt hotel
bond market intensified, makes you question every- worried about recent govern- slated to open next year with
sparking worries about the thing else you see,” he said. ment efforts to enforce tax average room rates expected
health of the U.S. economy. Elsewhere, Australia’s re- laws on American citizens liv- at more than $700 a night, ac-
The Dow has moved by at source-heavy S&P/ASX 200 ing abroad. Apex estimates cording to its developer Buddy
least 100 points for nine added 0.5% and Hong Kong’s that in recent months more Darby.
straight sessions. The blue- Hang Seng Index rose 1%, than 100 Americans have re- His group has spent about
chip index’s biggest move in while the Shanghai Composite ceived new citizenship in the $350 million on the project so
that period came two days af- Index lost 0.4%. Markets in Caribbean through these pro- far, and he has raised more
ter the Federal Reserve de- Japan were closed for a holi- grams. than $42 million from wealthy
cided to raise interest rates day. “America is beginning to be investors who got involved to
for the first time in nearly a Gold fell 0.5% to $1,069.40 a great source market for per- gain St. Kitts citizenship, Mr.
decade. an ounce on the Comex divi- sons wanting second citizen- Darby said. He sold them resi-
Traders said volumes were sion of the New York Mercan- ship, and I think you’ll see dences for $400,000 or private
light ahead of the holiday, tile Exchange. more and more Americans lots within his 2,500-acre
participating,” Mr. Hilaire said. complex for $700,000.
This comes as a record Last year, the U.S. Treasury
3,415 Americans gave up their
citizenship in 2014, up about
14% from 2013 and more than
triple the amount in 2012, ac-
issued an advisory letter to fi-
nancial institutions warning
that “certain foreign individu-
als” were using the St. Kitts
cording to an analysis of Trea- program to obtain passports
Lower rain in parts sury Department data by tax “for the purpose of engaging
Colder winters in
parts of Canada, of the U.S. could lawyer Andrew Mitchel. in illicit financial activity.”
U.S. could increase hit crop production That reflects in part Wash- The letter added that the
gas demand ington’s stricter enforcement U.S. government believed that
of its tax collection for citi- “several Iranian nationals” ob-
zens living abroad with the tained St. Kitts passports to
Foreign Account Tax Compli- elude international sanctions
ance Act, enacted in 2010. The that stood last year before the
act compels foreign banks to global nuclear agreement with
report U.S. individual accounts Tehran.
or risk losing access to the Mr. Harris, the prime minis-
U.S. market. ter, said that after the Trea-
That has motivated a num- sury report his country
Drier weather*
in Argentina
ber of U.S. expats to give up worked with the U.S. and
could reduce their citizenship, said Apex other foreign governments to
soybean yields President Nuri Katz. “You can “make sure our due diligence
save 45% a year in taxes for process meets the highest in-
the rest of your life,” he said. ternational standards.”
Still, even though most of Despite the Treasury’s
the Caribbean nations impose warning, citizenship-by-invest-
THE WALL STREET JOURNAL. little to no tax on their citi- ment programs should con-
zens, Americans giving up tinue to bloom in the West In-
could impact oil-seed produc- of assets under management. their citizenship must pay a dies, said Rick Newton, a
tion in the U.S. Midwest, then With prices of a number of hefty one-time exit tax on founding partner at Resort
supply of oil seeds could U.S.-grown commodities likely their assets. Capital Partners, a real-estate
tighten significantly, pushing to rise during a La Niña, farm- Developer Valmiki Kempa- investment-advisory firm that
prices higher, he added. ers may have more money to doo said he has seen a sprin- focuses on the Caribbean.
The opportunities aren’t spend on the likes of tractors, kling of U.S. citizens among With foreign banks still re-
limited to commodities, said boosting the bottom lines of the many Asians and Middle luctant to lend for projects
Michael Underhill, chief in- companies such as Deere & Easterners investing for citi- there, new citizens of St. Kitts
vestment officer at Wisconsin- Co., which manufactures John zenship in his $500 million and its neighbors “are becom-
based Capital Innovations, Deere products, and AGCO project in St. Kitts and Nevis. ing the lenders of last resort,”
which has nearly US$1 billion Corp., he said. The two-island nation in the he said.
tions, he says.
Investors in Britain aren’t
just hunting for the next Uber
Technologies Inc. or Face-
So far around 90% of U.K.
companies that raised funds
via Crowdcube have missed
their projected financial tar-
online platforms, also saw an-
other bet go sour. “I don’t
think you can ever predict
what the outcome will be,” he
Kinopto. The company pro-
vided technology that allowed
schools, town halls and other
public spaces to turn into “pop
book Inc. Hungry customers at gets, estimates Rob Murray says. Most people investing up” cinemas. Kinopto raised
Chilango, a U.K. chain of Mex- Brown, who tracks crowdfund- via these websites “have no £35,000 from 23 investors in a
ican restaurants, were recently ing investments on a blog idea what they are doing,” he week, selling a 15% stake in
handed leaflets promoting a called “The Truth About Eq- adds. the business via Crowdcube.
share sale along with their uity Crowdfunding.” Earlier this year, the Finan- Mr. Manning, an entrepreneur
burritos. Chilango raised £3.4 cial Conduct Authority, the who has invested in seven
million this month selling eq- U.K.’s regulator, said it was crowdfunded businesses on-
uity to investors on Crowd-
Rules in the U.K. concerned that the majority of line, became the company’s
cube. The equity raising came are more relaxed the people placing funds on biggest external shareholder.
after Chilango loaded up on the sites had no venture-capi- The business was well re-
more than £2 million of debt
than in Italy and tal investment experience. ceived but struggled to make
last year via a “burrito bond” Germany. In the U.K., investors tend money, says Mr. Jeremiah,
also pitched to customers. to be men who have dispos- Kinopto’s co-founder. “We re-
“What better people to own able income, says Jeff Lynn, alized that the market was
your company than those that Phil Murray, a teacher, chief executive of Seedrs, an there, but paying for it was
support it?” says Chilango co- made money from a sale of an equity crowdfunding platform not,” he says. Kinopto was dis-
founder Eric Partaker. equity crowdfunded company based in London. The peak in- solved this summer.
A lack of transparency has earlier this year. He invested vestment time on Seedrs is at Despite the setback, Mr.
made judging success of such in electric-car rental company, 11 a.m. on Monday mornings, Manning says he was im-
capital raisings hard. Most of E-Car Club, that was sold to a he says, suggesting that inves- pressed by Mr. Jeremiah. Mr.
the crowdfunding websites competitor. tors are looking for an exciting Manning is hopeful his other
don’t provide regular informa- Mr. Murray, who has in- distraction at work. crowdfunded investments will
tion on how companies that vested around £80,000 in Mr. Manning was at work come good. “I will be happy if
raised money are holding up. about 25 small companies via when he decided to invest in I get my money back,” he says.
It can also be unclear how
much traction a pitch actually
has. For instance, Crowdcube
says that a theater musical,
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please contact: Freda Fung tel: +852 2831
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B8 | Thursday - Monday, December 24 - 28, 2015
Email: heard@wsj.com
Pound’s Soft
Performance
May Persist
The festive season is
looming, but the pound is
showing a lack of sparkle.
This year, sterling has fallen
4.5% against the dollar, and
December has brought a
fresh slide to under $1.49.
The currency may struggle
to shine next year too.
The immediate cause of
sterling’s weakness is the
shifting sands at the Bank of
England, where the prospect
of a rate increase has been
easing even as the U.S. Fed-
eral Reserve lifted off from
zero rates. U.S. and U.K. two-
year bond yields have di-
verged, making U.S. dollar
assets look more attractive.
With inflation bumping
along around zero in 2015,
BOE officials have been pay-
ing more attention to near-
term prospects for prices. A
slowdown in wage increases
and Wednesday’s news
that third-quarter growth
has been revised down to
0.4% add to concerns. Over
the next few years, too, the
U.K. faces another extended
period of fiscal tightening
that could weigh on growth.
Meanwhile, the debate in
the U.K. will increasingly fo-
cus on the planned referen-
dum on membership in the
European Union. The run-up
to 2014’s Scottish referen-
dum saw volatility in ster-
ling; the Brexit debate is
likely to have a bigger im-
pact given the potential eco-
nomic consequences and the
uncertainty it will generate.
Barclays forecasts a fur-
ther decline for the pound to
$1.40 by the end of the third
quarter of 2016. Were the
BOE to rediscover its appe-
tite for rate increases, ster-
ling could shrug off its mal-
aise. But, right now, the
currency doesn’t appear to
have a great deal going for
it. — Richard Barley
Scarcity of Dollars Slows Business in Africa
BY NEANDA SALVATERRA
Valentine Ozigbo is strug-
gling to obtain a key construc-
tion ingredient as he refur-
bishes and builds hotels
in Nigeria: the U.S. dollar.
Some of Africa’s largest
economies, including Nigeria,
Angola, Ethiopia and Mozam-
bique, are restricting access to
the greenback to protect dwin-
dling reserves. That is causing
problems for businesses from
Mr. Ozigbo’s Transcorp Ho-
tels to international giants like
General Electric Co. and Coca-
Cola Co., all of which are strug-
gling to get the dollars they
need for imports or to send
profits back home.
The shortage comes as the
inflow of dollars from resource
exports, from oil to cotton, has
plummeted with the prices of
these commodities. The com-
modity rout also is putting
pressure on local currencies,
which some central banks are
trying to support with their
dwindling supply of dollars.
This dollar squeeze is frus-
trating investors, increasing
China to Extend Yuan Trading Hours
BY LINGLING WEI
BEIJING—China’s central
bank said it would extend
the yuan’s trading hours in
the mainland market starting
next month, in a much-antic-
ipated move aimed at in-
creasing the Chinese cur-
rency’s global appeal.
The People’s Bank of
China announced Wednesday
that beginning Jan. 4 the
hours for buying and selling
the yuan on the mainland
will be extended to 11:30 p.m.
local time, from the current
4:30 p.m. The longer trading
hours are in keeping with the
government’s efforts to make
the yuan’s exchange rate
more market-oriented and to
further open China’s markets
to foreign investors, accord-
ing to the statement.
Most of the world’s major
HEARD ON THE STREET
The BG Fire Sale Coming at Shell
Misery loves company.
Royal Dutch Shell will proba-
bly get a bit of both.
The Anglo-Dutch oil and
gas major is pushing ahead
with its purchase of BG,
sending documents to share-
holders ahead of January’s
votes. Despite some griping,
Shell can’t spontaneously re-
negotiate the deal, the value
of which has fallen to $53
billion from $70 billion in
April as the value of Shell’s
stock has dropped.
Shell argues that it is bet-
ter off with BG than without
it, a rather poor reflection
on its stand-alone cash-flow
prospects. By its latest fig-
ures, the deal’s break-even
price has dropped to just
over $60 a barrel. Shell reck-
ons BG adds to its operating
cash flow per share from
next year, at prices as low as
$50 a barrel.
This isn’t terribly reassur-
ing with oil hovering around
$37. But Shell’s figures aren’t
out of line with a sector that
is battling to function at a
$60 oil price. Without signs
of recovery, the entire sector
At Noble, a Cheerier Christmas and a Hard ’16
Just in time for Christ-
mas, Noble Group has rung
in something new—cash to
help it survive. But it hasn’t
rung out all its old problems.
Early Wednesday in Asia,
the beleaguered commodities
trader said it agreed to sell
its 49% stake in agricultural
unit Noble Agri to Chinese
grain-trading giant Cofco.
Noble gets $750 million in
cash immediately. A maxi-
mum of another $200 mil-
lion may come if Cofco,
which already controls Noble
Agri, sells the asset or lists
it, but it is unclear when
that may happen.
That provides the liquidity
Noble would need to pay
back all short-term debt, as-
A trader exchanges dollars for naira in Lagos, Nigeria.
costs and delaying projects. It
may hamper future investment
in countries reeling from the
fall in commodity prices.
“It’s been a rough ride for a
lot of companies in Nigeria, if
not all the companies,” said Mr.
Ozigbo, chief executive of
Transcorp Hotels.
Nigeria gets more than 90%
of its foreign-currency re-
serves from oil exports. Since
June 20, 2014, when the U.S. oil
currencies trade 24 hours a
day and move up and down
based on demand. By com-
parison, Beijing keeps the
yuan on a tight leash, with
its value largely guided by
the central bank and its trad-
ing restricted within a band.
In recent years, China has
gradually allowed greater
flexibility in the yuan’s trad-
ing. Earlier this month, the
Chinese central bank also re-
newed its pledge to ease the
yuan’s de facto peg to the
dollar and instead measure
the yuan’s value against a
basket of currencies includ-
ing the dollar, euro, yen and
10 others.
The move to extend the
trading hours came after the
International Monetary Fund
decided in late November to
add the yuan to its highly se-
lective basket of reserve cur-
FINANCIAL ANALYSIS & COMMENTARY
Deal Drag
Share-price performance
20%
10
0 sheet, with net debt to total
AGENCE FRANCE-PRESSE/GETTY IMAGES
Total
–10
BP
–20
–30
Shell
(B)
–40
2015
Source: FactSet
THE WALL STREET JOURNAL.
will require Armageddon- ture guidance, reduced this
worthy restructuring en- week to $33 billion from $35
deavors next year. billion for 2016, still looks
Shareholders, many of more aspiration than expec-
whom also own BG stock, are tation. Unless prices start to
probably better off holding recover, that will come down
their noses and voting for a and more operational sav-
deal rather than forcing ings must be found.
Shell to walk (and poten- Meanwhile, Shell is ex-
tially management heads to pected to find more than the
roll). promised $3.5 billion in pre-
More cost and investment tax deal synergies, particu-
cutbacks are inevitable. larly by channeling BG’s pro-
Shell’s latest capital-expendi- duction through Shell’s
suming it also sold 14% of its needs more asset sales or
inventories. Noble will use capital raises to keep ratings
the proceeds to repay some companies at bay. But to get
debt and then probably try them off its back, Noble has
to use this to persuade lend- to show it can convert the
ers to roll over other loans. accounting gains on its com-
Most important, $750 mil- modities and derivatives
lion reduces the likelihood contracts into sustainable
that ratings companies will cash flow. This is one main
downgrade Noble’s credit to concern critics have raised.
junk status. The company Noble Agri’s sale itself
calculates that it now is raises an old concern—the
above the threshold level on value of assets on its books.
key credit metrics that Stan- Assuming Noble Agri is only
dard & Poor’s and Moody’s valued at $750 million, Noble
employ to gauge risk. will report a $546 million
Yet Noble’s long-term noncash loss on the transac-
credit profile hasn’t im- tion because it carried the
proved much. S&P says No- asset at roughly $1.3 billion.
ble’s liquidity, for a commod- Noble Agri’s valuation has
ities trader, remains weak halved from the $1.5 billion
after the deal. Noble then Noble got when it sold 51%
MONEY & INVESTING
18% to $29.5 billion from the
same month last year.
In the summer, the central
bank introduced a list of 41
items, from meat to concrete,
that it won’t release dollars for.
But no matter what a buyer
wants their dollars for, their re-
quest has to be vetted against
this list, slowing down any at-
tempt to buy the currency.
Angola now lists indus-
tries—including the oil and
JOE PENNEY/REUTERS
food sectors—that have prior-
ity for the country’s dollar re-
serves, In Mozambique,
the government requires com-
panies to convert half of any
dollar revenues into the local
currency, as it looks to shore
price was at $107.26, the U.S. up its reserves.
oil price has declined 65% “It’s obviously not like it
through Wednesday’s close of used to be, where you would go
$37.50, amid oversupply and to the bank and get your dol-
weak growth in demand. lars,” said Jay Ireland, the Af-
Oil’s decline sent the value rica chief executive officer for
of the naira, Nigeria’s currency, GE. “Now it’s a process that
sharply lower at the start of they require and it takes lon-
the year. In March, the Central ger,” he said, talking about Ni-
Bank of Nigeria fixed its ex- geria and Angola.
change rate at around 199 naira Mr. Ireland said GE remains
to the dollar. By this month, its committed to long-term proj-
currency reserves were down ects in Africa, but the dollar
rencies, which also includes that is traded in Hong Kong,
the dollar, euro, yen and the where it isn’t subject to any
British pound. restrictions, has consistently
Officials at China’s central traded below its mainland
bank have said the reserve- counterpart as foreign inves-
currency status could lead to tors expect the currency to
greater foreign demand for depreciate further amid
the yuan. Extending the trad- China’s slowing economy.
ing hours could help bring The discrepancy could
more participants into yuan lead to speculative trading
markets, the central bank activities and capital flows,
said Wednesday. involving investors taking
It also said it would per- advantage of the yuan’s dif-
mit more foreign investors to ferent exchange rates on-
trade in the mainland yuan shore and offshore, accord-
market currently dominated ing to officials at the central
by Chinese banks. bank.
Longer trading hours also Even after the yuan’s trad-
could help narrow the gap ing hours are extended, the
between the onshore yuan— central bank will base the
the version traded within the yuan’s closing level on its
mainland—and the yuan rate against the dollar at
traded in what is known as 4:30 p.m. local time. The
Hong Kong’s offshore mar- bank uses the closing level to
ket, the central bank said. help determine the official
In recent weeks, the yuan rate it sets for the next day.
THE WALL STREET JOURNAL.
trading operation. Each $1
billion of after-tax benefits
reduces the deal’s break-even
price by about $1.
But top priority will be to
repair the damage the deal
has done to Shell’s balance
capital rising toward 25%
from 13%. The mining sector
has demonstrated how
higher-leveraged companies
are punished in this com-
modity-price environment.
Shell’s leverage won’t be
vastly higher than that of
European peers. But comfort
in its dividend—and its
share-price performance—
rests on rapid debt reduction
next year. It is taking on
about $30 billion in net debt
as part of the deal and—no
coincidence—plans $30 bil-
lion in asset sales by 2018.
Getting a big chunk of that
through the door quickly is
the best way to calm nerves.
Shell, which has underper-
formed European peers
markedly this year, will have
to follow its investors’ exam-
ple: If in doubt, sell.
—Helen Thomas
of the unit last year. Perhaps
Cofco negotiated hard this
time, though the asset also
has lost part of its intrinsic
value as it continued to re-
port losses because of weak
agricultural prices.
Noble’s other interests
may not fetch much either if
they were sold amid this
commodities downturn.
Noble’s shares jumped
4.6% Wednesday, and its
bonds may follow. It remains
hard, however, to get enthu-
siastic when questions about
liquidity and asset values
aren’t resolved, not to men-
tion when commodities
prices keep falling. Noble has
a difficult new year ahead.
—Abheek Bhattacharya
shortage means that it now
takes local clients longer to buy
GE products priced in dollars.
Coca-Cola has been in Africa
for almost a century and can
obtain dollars from across its
businesses. Still, the beverage
giant is concerned
that its suppliers will start to
feel the pinch as they struggle
to fund imports that they need.
“If there are no changes in
monetary policy it might be-
come a bigger challenge and
that is a space we are watching
very closely,” said Adeola Ade-
tunji, Coca-Cola’s managing di-
rector in Nigeria.
Mr. Ozigbo’s Transcorp
needs dollars to pay contrac-
tors and to import building
materials to upgrade one hotel
and build another, among other
construction projects.
Last year, getting a “siz-
able amount” of dollars would
have taken 48 hours to a week,
Mr. Ozigbo said. Now,
Transcorp is lucky if it can ob-
tain the money within
three weeks, he said.
Amid delays, the cost of up-
grading the Hilton in Abuja has
Finance
Watch
CHINA
Shanghai Will Have
Own Startup Board
China’s State Council said it
would launch a stock-trading
board in Shanghai for small and
innovative companies in an effort
to lower their financing costs as
economic growth slows.
The council didn’t provide de-
tails about the new board, which
will likely face competition from
the ChiNext market, a Nasdaq-
style startup board in Shenzhen.
The council, China’s cabinet,
said it would gradually expand in-
surers’ investments in capital
markets and launch a trial of se-
curitizing infrastructure assets.
—Grace Zhu
WSJ.com/Heard
OVERHEARD
In the case of Ford Motor,
maybe old dogs really can
learn new tricks.
Ford shares jumped Tues-
day morning after a report
from Yahoo Autos that the
vehicle maker will announce a
partnership next month with
Alphabet, the parent of
Google, to develop self-driving
autos. Neither company has
confirmed the reports. But
whether or not a partnership
eventually comes to fruition,
it is clear that Ford is aggres-
sively investing in cutting-
edge technology.
Last week, Ford an-
nounced that it had secured a
permit to commence testing
of autonomous cars on public
roads in California. Any part-
nership with Google would
certainly give this project
some added heft. Separately,
Ford also announced earlier
this month that it will be in-
vesting up to $4.5 billion in
electric cars over the next
five years.
Of course, these are long-
dated, costly projects with an
uncertain chance of payoff.
But embracing higher-risk
projects may be what Ford
needs to get its stock price
moving in the right direction.
After Tuesday’s rally, Ford
shares are down nearly 9%
this year, despite a run of tor-
rid sales in the U.S.
Ford’s third-quarter tally of
earnings before interest,
taxes, depreciation and amor-
tization—$4.3 billion—was its
strongest quarterly result
since 2007. Fears that the
auto bull market won’t last
forever, wobbly overseas mar-
kets, and the perceived threat
from upstarts all have re-
strained the stock price.
Companies such as Uber
Technologies and Tesla Mo-
tors have commanded the
bulk of the investing public’s
attention in recent years. But
as Ford’s recent maneuvering
demonstrates, the incum-
bents are pushing back.
ballooned from an estimated 16
billion naira ($79 million) to
about 26 billion naira since last
year.
Mr. Ozigbo now has serious
doubts about whether his proj-
ect will remain economically
feasible.
Companies are looking for
ways to get around the short-
age, particularly by buying
more local products, which typ-
ically don’t need dollar pay-
ments.
An official at the central
bank of Nigeria said complaints
about dollar scarcity aren’t sur-
prising, but the blame should
be placed on the falling oil
price rather than the bank.
Angola has also been using
its dollars to prop up its cur-
rency, the kwanza. Its central
bank says it plans to stay on
that course.
“If we devalue, it will have a
huge impact on inflation be-
cause most of our food is im-
ported,” said Gualberto Lima
Campos, deputy governor for
the Central Bank of Angola.
The country has a 14% an-
nual rate of inflation.
DYAL CAPITAL
Firm Takes a Stake
In Energy Investor
Neuberger Berman’s private-
equity unit, Dyal Capital Partners,
has purchased a roughly 20%
stake in a Houston-based oil and
gas investor, according to people
familiar with the deal, a new bet
that energy bargains can be
found following the worst com-
modity slump in years.
Dyal paid between $700 mil-
lion and $800 million for the
stake in EnCap Investments LP,
said one person familiar with the
situation.
EnCap, a private-equity firm
founded in 1988, has $27.5 billion
in assets under management. It
provides capital to oil and gas
companies and has billions in
cash available to make new in-
vestments. Earlier this month,
Devon Energy Corp. and an affili-
ated company said that they
would buy $4.05 billion in oil as-
sets from EnCap.
—Juliet Chung