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THE FASHION SHOW Transatlantic Trade Talks

AS PERFORMANCE ART Lack European Leadership
PERSONAL JOURNAL | A8 OPINION | A11

WEDNESDAY, SEPTEMBER 21, 2016 ~ VOL. XXXIV NO. 164 WSJ.com EUROPE EDITION
DJIA 18129.96 À 0.05% NASDAQ 5241.35 À 0.12% NIKKEI 16492.15 g 0.16% STOXX 600 341.00 g 0.08% BRENT 45.95 À 0.39% GOLD 1313.70 À 0.02% EURO 1.1169 g 0.06%

What’s
Finger-Pointing Over Syria Aid-Convoy Bombing
Stimulus
News Is Profitable
For Nations
Business & Finance
entral banks have
C been swelling govern-
ment coffers in their ef-
forts to lower borrowing
BY JON SINDREU lions of dollars, yen, pounds
costs, boost inflation and
and euros in buying bonds
spark economic growth. A1
In their efforts to stimulate and lending to commercial
 SABMiller’s deal to be economies, central banks banks, in a bid to lower bor-
acquired by AB InBev could have been swelling govern- rowing costs, boost inflation
be jeopardized by a group ment coffers. and spark economic growth.
of hedge funds, some inves- Last year, the central banks It turns out rescuing
tors and bankers warn. A1 of eight large developed econ- economies can be quite lu-
omies remitted about $149 crative, as central banks col-
 Wells Fargo’s CEO apol-
billion to their respective gov- Please see PROFIT page A2
ogized to a Senate panel
ernments, more than triple
for allegedly illegal sales
the $40 billion they sent  Streetwise: The crazy world
practices at the bank but
along in 2005, according to a of the Bank of Japan............. B1
was met with rancor. B1
Wall Street Journal analysis  U.S. stocks, bonds tighten
 Glaxo named its con- of central-banking data. ahead of the Fed..................... B6
sumer-health-care chief as Since the financial crisis,  Heard: China can’t put brakes
CEO, underscoring a shift central banks have used tril- on outflows............................... B12
away from the prescrip-
tion-drug business. B1,B2
 Freddie and two lenders
Bomb Suspect
OMAR HAJ KADOUR/AGENCE FRANCE-PRESSE/GETTY IMAGES

are loosening income and

documentation rules for
mortgage applicants in a
new pilot program. B10
 Pokémon said it plans
to create games for Nin-
Probed in 2014
tendo’s next system. B1
BY PERVAIZ SHALLWANI jured 29 people.
 Sutter’s CEO defeated
AND DEVLIN BARRETT Meanwhile, the United Arab
three candidates to win a
Emirates’ embassy in the U.S.
seat on the board of stock-
Federal terrorism investiga- said Mr. Rahami’s wife, Asia
broker regulator Finra. B7
tors looked into claims made Bibi Rahami, was being ques-
 Intel tapped veteran fi- two years ago by the father of tioned by authorities in that
nance executive Bob Swain the New York bomb suspect country after she was stopped
to be its next CFO. B3 that he was a terrorist, but while traveling through it. The
AFTERMATH: The U.S. believes Russian aircraft conducted the strike on an aid convoy in northern Syria dropped the matter when the U.A.E. is a major Middle East-
World-Wide on Monday that killed at least 12. Russia has said it wasn’t behind it. Above, the scene on Tuesday. A3 father recanted, according to a ern travel hub.
law-enforcement official famil- The day after Mr. Rahami
iar with the investigation. was captured, investigators
 U.S. investigators are Ahmad Khan Rahami, who are trying to piece together
looking into claims made two was captured on Monday, is Please see PROBE page A7
years ago by the father of the
New York bomb suspect that
he was a terrorist, but
A U.S. GROCERY BARON suspected of setting off
homemade bombs in New
York and New Jersey that in-
 ‘Lone-wolf’ attacks: no single
explanation, experts say..... A7
dropped the matter when
the father recanted. A1, A7
 Russia and Syria denied
AND HIS ROBOTS May’s Maiden Speech at the U.N.
they were behind the air-
strike on an aid convoy that
killed at least 12 people. A3 Rick Cohen pitches autonomous bots in a business slow to automate
 Iraq’s military and allied
militias attacked an Islamic BY ROBBIE WHELAN tailers truck to their stores by the millions
State-held town considered a each year.
JASON SZENES/EUROPEAN PRESSPHOTO AGENCY

gateway to the militants’ WILMINGTON, Mass.—When Target Corp.
stronghold of Mosul. A4 decided to revamp one of its biggest Califor-
 French police detained nia distribution centers, it had a choice. It
eight more suspects in con- could build a new warehouse, it could install
nection with the terror attack established technologies for picking prod-
in Nice, broadening a search ucts off shelves or it could take a risk on a
for a possible network. A4 new breed of robots from a reclusive billion-
aire.
 NATO rejected a Russian Target went with the billionaire’s bots.
proposal to require all mili- Target’s new automatons are from Sym-
tary planes in the Baltic re- botic LLC, part of a grocery empire run by
gion to fly with their tran- New England billionaire Rick Cohen. Mr. Co-
sponders operational. A5 hen, through his own national distribution
 Obama tried to reconcile network, and deals with some of the nation’s
the paradox of greater global biggest retailers, aims to show that robots
prosperity but security crises can overturn the business of storing, han-
in his final U.N. speech. A5 dling and hauling the cases of goods that re-
His sales pitch to grocery chains and re-
tailers, including Target, Coca-Cola Co. and
Wal-Mart Stores Inc. is simple: Symbotic’s
automation system includes autonomous ro-
bots that can travel untethered among stor-
age racks in a distribution center. They can
move up and down aisles to stack and re-
trieve cases. They coordinate with more-con-
ventional robots that perform simpler tasks.
That is in contrast to many other ware-
house-automation systems, in which the ro-
bots tend to be bolted down or limited to
fixed routes or tracks and are less flexible in A FIRST AND A LAST: Theresa May addressed the U.N. General
what they can do. Assembly as U.K. prime minister for the first time on Tuesday. Earlier,
Please see ROBOTS page A6 President Barack Obama made his eighth and final address. A5
 Blackstone bets on logistics buy......................... B11

 A fire destroyed housing

at a refugee camp on the
Greek island of Lesbos. A4
 Billionaire Joe Ricketts,
in a stunning turnaround, is
backing Trump and plans to
donate at least $1 million. A7
Inside
CHINA’S
WORLD A2
A Potential
Road to Ruin
CONTENTS
Arts & Ent............... A9
Business & Fin.. B1-5
Crossword.............. A12
Finance & Mkts..... B6-12
Heard on Street. B12
Markets Digest..... B8
€3.20; CHF5.50; £2.00;
U.S. Military (Eur.) $2.20
s Copyright 2016 Dow Jones &
Company. All Rights Reserved
Hedge Funds
Complicate
Vote on
Beer Deal
BY EYK HENNING
AND TRIPP MICKLE
As SABMiller PLC’s share-
holders have started voting on
a $100 billion-plus deal to be
acquired by rival Anheuser-
Busch InBev NV, some inves-
tors and bankers are warning
Opinion.............. A10-11 a group of hedge funds that
Personal Journal.. A8
Property Report...... B11
they could unintentionally
Sports........................ A12 jeopardize the deal.
U.S. News.................. A7 To close the transaction,
Weather................... A12 SABMiller needs support from
World News........ A2-5
75% of the shares voted, and
only a small minority of
shareholders plan to vote
against the deal, which they
believe undervalues the U.K.-
based brewer.
But because a significant
portion of shareholders has
been excluded from the vote, a
relatively minor faction would
be in a position to block one
Please see DEAL page A2
Hey, Check Out My New Phone!
It Does Absolutely Nothing. NBA
i i i
IS LIVE.
Entrepreneurs promote ‘NoPhone Air’ for
Powered by SAP HANA®, the NBA gives fans
people tired of being glued to their devices a live, statistical experience that spans from
BY RYAN KNUTSON and his business partner, Van
1946 to the most recent play. While financial,
travel, and HR solutions from SAP help the
NBA run live—on and off the court.
Gould, call it the NoPhone Air. NBA runs live. NBA runs simple.
The crowd gasped with “We took away the head- sap.com/nbalive
oohs and aahs when Chris phone jack. And then we took
Sheldon pulled his company’s
new gadget from a silky black
away everything else,” Mr.
Gould said to the crowd. “It
bag in front of hundreds of
techies.
may look like nothing is in
this packaging. But
“We are very that’s what’s so
proud to introduce beautiful about it.”
the least-advanced As millions of
NoPhone ever,” he people around the
said at a technology world race to buy
conference in Can- Apple Inc.’s new
ada this month. The iPhone 7 and wire-
NoPhone is a plas- less AirPods head-
tic rectangle that phones, Messrs.
looks like a smart- Sheldon and Gould
phone but does ab- Nothing but air are part of the
solutely nothing. growing smart-
More than 10,000 have been phone-resistant countercul-
sold in the past two years for ture. They were inspired to
about $10 each. make the NoPhone, pitched as
The latest model is simply “a fake phone for people ad-
a plastic package with nothing dicted to real phones,” after
but air inside. Mr. Sheldon Please see PHONE page A6
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Wednesday, September 21, 2016
Assessing the Costs of China’s Building Spree
CHINA’S WORLD
ANDREW BROWNE
SHANGHAI—Even the
harshest critics of authori-
tarian rule generally concede
that when it comes to build-
ing infrastructure China wins
hands down over the rich de-
mocracies.
America has practically
given up. Every four years,
The American Society of
Civil Engineers reviews the
condition of the country’s
crumbling schools, chroni-
cally con-
gested major
airports, pot-
holed roads
and decrepit
transit sys-
tems and of-
fers an overall grade. Its lat-
est, in 2013: D+.
Meanwhile, China can’t
build fast enough. Having re-
cently finished the sixth ring
road around Beijing, con-
struction crews are now
working on a seventh—100
miles out in some places—
part of plans to merge the
capital with surrounding mu-
nicipalities to create a “su-
percity” of 130 million peo-
ple, slightly larger than the
population of Japan. The na-
tional high-speed rail net-
work, nonexistent a decade
ago, is now more extensive
than the European Union’s—
and expanding rapidly. New
dams, bridges, tunnels and
subways are all in a day’s
DEAL
Continued from Page One
of the largest corporate take-
overs in history.
That has led financial ad-
visers and solicitors to press
hedge funds in recent days to
take steps to vote in favor of
the deal, according to people
familiar with the matter.
Hedge funds including Paul
Singer’s Elliott Management
Corp., TCI Fund Management
Ltd. and Davidson Kempner
Capital Management LLC con-
trol roughly 20% of SABMiller
shares through derivatives and
stock options. Those don’t
have voting rights.
To convert their options
and derivatives into voting
shares, these funds would
have to pay a 0.5% tax, or a to-
tal of about £73 million ($95
million) combined, based on
SABMiller’s current share
price. The hedge funds are un-
likely to want to spend the
money if the vote can pass
without them, according to fi-
PROFIT
Continued from Page One
lect interest on their lending
to strapped commercial
banks and on government
bonds purchased to stimu-
late economies.
From 2005 to 2015, the U.S.
Federal Reserve sent roughly
$700 billion in profits to the
U.S. government, more than
any other central bank. That
included $117.2 billion in 2015,
far higher than the $21.5 bil-
lion in 2005, three years be-
fore the financial crisis
struck. The Fed declined to
comment.
On one level, central banks
make their money like any
other investor or bank: They
lend at a higher rate than the
Profit Central
Central-bank involvement in markets has been lucrative for governments.
Central-bank* profits paid
to governments
$150 billion
100
50
0 Switzerland
2005 ’10
Transferred to the state
*Central banks in the U.S., the U.K., Japan, Switzerland, Germany, France, Italy and Spain falls from central-bank profits
Note: Adjusted for current exchange rates; Japanese figures are for fiscal years
Sources: Central banks; OECD (revenues);
Office for National Statistics (U.K. transfers)
work for state planners.
But at what cost? A re-
port by four academics at the
University of Oxford’s Saïd
Business School has created
a stir by arguing that what
outside observers often hail
as a towering strength of the
Chinese system has instead
led to colossal waste. All this
construction, they say, has
produced cost overruns
equal to one-third of China’s
$28.2 trillion debt pile in
2014, and unless China scales
back it is “headed for an in-
frastructure-led national fi-
nancial and economic crisis”
with global ramifications.
Examining data on 95
road and rail projects, the
authors say cost overruns
are typically about the same
as in democracies, and al-
though China handily wins
on speed it comes at the ex-
pense of quality, safety and
the environment.
Most of the finished
routes carry paltry traffic;
a few are clogged. Either
way, the outcome is grossly
inefficient.
If these failures are repre-
sentative across the board,
they not only suggest a Chi-
nese financial blowup but
challenge a conventional be-
lief that the more you build,
the more you lower costs for
businesses and households
and add to economic growth.
In China’s case, infrastruc-
ture may be the road to ruin.
F
ew dispute that debt
has become the Achil-
les’ heel of the Chinese
economy as the government
builds frantically to boost
growth at all costs, even as
it seeks to rebalance the
economy toward services
nancial advisers involved in
the deal.
Elliott, Davidson Kempner
and TCI declined to comment.
A U.K. court decided that
SABMiller’s two largest share-
holders—Colombia’s Santo Do-
mingo family and tobacco gi-
ant Altria Group Inc.—
wouldn’t have a say on the
deal because they are getting
a separate cash-and share of-
fer. This means shareholders
owning the remaining 60% of
SABMiller will determine the
outcome of the vote.
If more than a fourth of
them—amounting for just 15%
of overall SABMiller shares—
vote against the transaction,
this would be enough to kill
the deal, according to an anal-
ysis by Stifel Nicolaus & Co.
And if hedge funds choose
to stay on the sidelines, only
40% of SABMiller shareholders
would get to vote on the
deal—meaning that only 10%
of shareholders could effec-
tively block the acquisition.
Votes by proxy are due by
Sept. 26. Votes can also be
cast at SABMiller’s general
one at which they borrow.
Most do this in normal
times by extending very
short-term loans to banks, to
keep interest rates near a tar-
get. The Fed achieves similar
results by buying small
amounts of Treasury bills.
The financial crisis promp-
ted central banks to do much
more of this profitable busi-
ness. Many commercial banks
stopped borrowing from one
another, forcing central banks
to step in and provide credit.
The central banks later
started buying vast quantities
of bonds, in a policy called
quantitative easing, to push
down long-term rates and
spur economic activity.
Central banks are in the
rare position of being able to
finance their lending by issu-
ing money they never need to
Profits of central banks
between 2005 and 2015 as a
share of government revenues
Italy
Portugal
Germany
France
Greece
Netherlands
Japan
Spain
U.K.
Ireland
U.S.
’15 0% 0.5% 1.0%
Paid in taxes
THE WALL STREET JOURNAL. countries.
WORLD NEWS
The world's highest and longest glass-bottomed bridge, in China's Hunan province, opened in August.
and consumption. McKinsey
calculates that between
2000 and 2014 China added
$26.1 trillion to its debt, a
figure greater than the GDP
of the U.S., Japan and Ger-
many combined.
And debt is concentrated
in state-owned enterprises,
which build much of the in-
frastructure. China Railway
Corp., the national railway
operator, is groaning under
almost twice as much debt
as Greece. Still, China has
budgeted $120 billion for
more railway construction
this year.
Chinese leaders are well
aware of the dangers. “Trees
cannot grow to the sky. High
A worker at an SABMiller brewery in Cape Town in August.
meeting on Sept. 28. AB InBev
will hold a shareholder meet-
ing the same day, but its vote’s
outcome isn’t in question.
Bankers advising SABMiller
and AB InBev are monitoring
the situation, but remain con-
fident the deal will get ap-
proved, according to people
familiar with the matter.
Part of the reason for that
confidence is that several of
pay back. When they use this
power to buy bonds, the cou-
pons and principal payments
from the bonds end up at the
central banks, increasing prof-
its, and most eventually are
sent to government treasur-
ies. Governments are basically
paying themselves to borrow.
Though central banks’ abil-
ity to print money protects
them from insolvency, assets
they own can drop in value
just like any anybody else’s.
Last year, the Swiss National
Bank reported a 23.5 billion
Swiss franc ($24 billion) loss,
a result of its having aban-
doned the franc’s peg to the
euro in January 2015.
The SNB had maintained
the peg by buying assets de-
nominated in euros with
freshly printed francs. The
franc’s rise against the euro
after the peg was dropped de-
pressed the value of its assets
compared with its liabilities.
The Swiss central bank, un-
like others, passes a fixed
amount along to the govern-
ment each year, rather than a
percentage of profit. In 2015,
even though it ran a loss, it
sent its government 1 billion
Swiss francs. Its remittances
from 2005 through 2015 came
to 1.3% of government reve-
nue, the highest percentage of
any developed country.
In the eurozone, of which
Switzerland isn’t a part, the
policy of the European Central
Bank is implemented mostly
by the national central banks
of member countries. Wind-
have been a boon for many
THE WALL STREET JOURNAL.
build-out has gotten out of
hand. Local governments
have run out of worthwhile
projects and are getting
downright frivolous in their
spending habits, while com-
panies are getting gim-
micky. Hunan province
strung a glass bridge be-
tween soaring cliffs to at-
tract thrill-seeking tourists
at a cost of $3.4 million. A
Changsha firm threw up a
57-story building in 19 days.
Scott Kennedy, an expert
on Chinese industrial policy
FRED DUFOUR/AGENCE FRANCE-PRESSE/GETTY IMAGES
at the Center for Strategic
and International Studies in
Washington, says China
should keep spending on
infrastructure, but in dif-
ferent ways. He says the
country needs more invest-
ment in rural areas to nar-
row regional wealth dispar-
ities, along with well-
designed hospitals and
schools.
Of course, these are
choices that America can
only dream about. Both
leading presidential candi-
leverage inevitably will cre- a financial crisis. dates, Hillary Clinton and
ate high risks,” the People’s Barry Naughton, a profes- Donald Trump, have
Daily earlier this year quoted sor of China’s economy at pledged to invest more in
an “authoritative person”— the University of California, infrastructure to promote
likely a proxy for President San Diego, has argued in the growth and generate jobs,
Xi Jinping—as saying. past that an advantage of although it’s not clear how
Skeptics have argued the Chinese model is that it they would break through
with the findings of the Ox- builds infrastructure ahead the political gridlock that
ford study. Andrew Batson, of demand, rather than wait- prevents funds from being
the China research director ing for bottlenecks to raised and spent.
of Gavekal Dragonomics, emerge, like India. Asked What is indisputably
writes in a blog post that the about the Oxford paper, he clear is that in the realm of
paper makes “grand macro responded: “Building low-re- infrastructure, China has
claims about China based on turn infrastructure is not the far too much of a good
rather equivocal micro data.” most disastrous thing” an thing, while America and
To wit: It shows that China economy can do. other Western democracies
botches individual infra- don’t have nearly enough.
S
structure projects like every- till, there’s a wide- Both extremes threaten
body else, but doesn’t dem- spread consensus that long-term growth, human
onstrate that it does so on in recent years the well-being and financial
such a scale that it threatens Chinese infrastructure fragility.
quire SABMiller assets. The
BlackRock and State Street
funds combined own roughly
2.8% of SABMiller shares, ac-
At least two major share-
holders oppose the deal. Aber-
deen Asset Management PLC
has declared its opposition,
cording to FactSet. and Vontobel Asset Manage-
Voting against the deal ment is also expected to vote
“would be the equivalent of against it, according to people
shooting yourself in the foot,” familiar with the matter. They
said Stifel analyst Mark believe AB InBev’s offer under-
WALDO SWIEGERS/BLOOMBERG NEWS
Swartzberg. values the company. Collec-
Still, the hedge funds’ reluc- tively, Aberdeen and Vontobel
tance introduces uncertainty own about 2% of SABMiller.
into what appeared to be an AB InBev continues to move
easy vote after shareholder ahead with its integration
advisory firms Institutional plans. The company last week
Shareholder Services Inc. and announced it is centralizing
Glass, Lewis & Co. this month SABMiller’s Africa operations,
recommended shareholders creating four business units to
vote in favor of a transaction manage operations across 17
that SABMiller’s board unani- countries.
mously supports. The deal is critical to the
SABMiller’s large sharehold- “I am annoyed with fellow Belgian-based brewer’s future.
ers, including BlackRock In- hedge funds because they’re Taking over SABMiller reduces
vestment Management (UK) supposed to control risks in- AB InBev’s reliance on the
Ltd. and State Street Global stead of creating them,” said a U.S., where sales volumes of
Advisors Ltd., also own stakes hedge-fund manager who pre- Budweiser have been declining
in AB InBev and Molson Coors ferred to remain anonymous. for decades, and gives it ac-
Brewing Co., according to He added he would convert his cess to a growing African mar-
FactSet data. derivatives by the middle of ket that is expected to drive
That raises the likelihood the week. The deadline beer-industry volume over the
they will vote in favor of the is Thursday. next decade.
deal, because AB InBev and AB InBev and SABMiller de- —Laurence Fletcher
Molson Coors are due to ac- clined to comment. contributed to this article.
Less-wealthy ones such as
Italy, Ireland, Portugal and
Greece have seen central-bank
profits and remittances rise at
€32 billion of the €50 billion
France’s central bank earned.
Also, the Bank of France
pays corporate tax. Almost
tral banks of Switzerland,
Japan, Greece and Belgium
are publicly listed, sharing
their profits with private
a much faster pace than 60% of what the French gov- shareholders.
richer northern countries. ernment received from it Some central banks said
The gap widened in the was tax. comparing institutions is dif-
past two years because cen- Central banks in Italy, ficult, because each is react-
tral banks in weaker southern Japan and Portugal also pay ing to different domestic li-
countries had to lend more to tax. The Fed pays only real-es- quidity needs and has to
their financial sectors. Lend- tate taxes. follow different rules. Some
ers in these nations still need In some countries, private central banks, including Ger-
to borrow regularly from cen- investors can get in on the ac- many’s, didn’t immediately re-
tral banks. tion and take a slice of cen- spond to requests for com-
The Bank of Italy lent €158 tral-banking profit. The cen- ment.
billion ($176.6 billion) to
banks in 2015. In 2005, when THE WALL STREET JOURNAL.
Italian banks could still get CORRECTIONS  Europe Edition ISSN 0921-99
AMPLIFICATIONS
loans elsewhere, it was only The News Building, 1 London Bridge Street,
London, SE1 9GF
€21 billion.
The opposite happens in Thorold Barker, Editor, Europe
Grainne McCarthy, Senior News Editor, Europe
Germany, where banks have Cicely K. Dyson, News Editor, Europe
so much liquidity they almost One of marijuana’s two psy- Margaret de Streel, International Editions Editor
Darren Everson, Deputy International Editor
don’t need to borrow any- choactive ingredients, tetrahy-
more. Lending to banks by drocannabinol, was misspelled Joseph C. Sternberg, Editorial Page Editor
Germany’s Bundesbank, was as tetrohydrocannabinol in the Anna Foot, Advertising Sales
€58 billion in 2015, against Mind & Matter column in Mon- Jacky Lo, Circulation Sales
€204 billion 10 years ago. day’s Review section. Andrew Robinson, Communications
Jonathan Wright, Commercial Partnerships
All eurozone national cen-
tral banks gain income from The graphic that appeared Katie Vanneck-Smith,
Global Managing Director & Publisher
the ECB policy of bond buy- with a Page One article in the
ing, because their books hold Friday-Sunday edition about U.S. Advertising through Dow Jones Advertising
Sales: Hong Kong: 852-2831 2504; Singapore:
these bonds and the national communities hit by a decline of 65-6415 4300; Tokyo: 81-3 6269-2701;
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842 9600; Paris: 33 1 40 17 17 01;
These often-centuries-old outside of marriage, as a share New York: 1-212-659-2176
central banks are managed of all births to women of a given Printers: France: POP La Courneuve; Germany:
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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. Wednesday, September 21, 2016 | A3

WORLD NEWS
U.S. Says Russia Planes Bombed Convoy
Kerry, U.N. say fragile
cease-fire not over
despite Monday strike
that killed at least 12
U.S. intelligence agencies be-
lieve that Russian aircraft con-
ducted the strike that targeted
a humanitarian aid convoy in
northern Syria on Monday, ac-
cording to U.S. officials, chal-
lenging Russia’s assertion that
it wasn’t behind the attack.

By Adam Entous in
New York, Thomas
Grove in Moscow and
Felicia Schwartz in
New York

The bombing of the convoy

stoked doubts within the
Obama administration that it
can trust Moscow to meet its
obligations under the cease-fire

deal, U.S. officials said.
Secretary of State John
Kerry initially said that Syrian
forces were “evidently” respon-
sible for the convoy attack,
which killed at least 12 people.
U.S. officials said new intelli-
gence indicates that Russian
forces, rather than the Syrians,
conducted the strike.
U.S. officials said the Russian
and Syrian governments had
been notified in advance about
the 31-truck convoy to ensure it
wouldn’t be bombed by their
forces in the area. “There was
coordination ahead of time with
the Russians,” a U.S. official said.
On Tuesday evening, the
Russian military released what
it claimed was drone footage of
a pickup truck carrying a heavy
mortar and driving past the hu-
manitarian convoy.
Earlier Tuesday, the Russian
military said, “No airstrikes on
the United Nations humanitar-
ian convoy in the southwestern
outskirts of Aleppo were car-
ried out by Russian or Syrian
aviation.” Syria’s official state
news agency, citing an un-
named military source, also
called the allegation untrue.
Monday’s attack hit the
Damaged trucks that were used to carry humanitarian aid are shown on Tuesday, the day after a convoy was hit by an airstrike in Urem al-Kubra, Syria.
rebel-held town of Urem al-Ku-
bra, according to U.N. officials,
hours after the Syrian army de-
clared a cease-fire brokered by
the U.S. and Russia over.
In its earlier statement on
Tuesday, the Russian military
said the aid convoy was ob-
served by unmanned aircraft
passing over territory con-
trolled by the rebels.
After the aid was safely de-
livered at 1:40 p.m. local time,
the Russian center monitoring
the warring sides in Syria
stopped tracking the convoy,
the statement added.
“Any further information on
the whereabouts of the convoy
was known only to the militants
controlling these areas,” it said.
Russia’s military also sought to
discount the account of antigov-
ernment activists who presented
video evidence of the attack.
The Russian military said it
observed “no signs” the convoy
had been struck by munitions
and said that surrounding vehi-
cles and buildings didn’t show
the characteristic blast effects
from an airstrike.
Top U.S. and United Nations
officials said Tuesday that the
truce that began on Sept. 12
hasn’t collapsed, despite a resur-
gence of violence in recent days.
“The cease-fire is not dead,”
Mr. Kerry said after a meeting
with senior officials from coun-
tries with interests in the Syria
conflict on the sidelines of the
U.N. General Assembly.
The U.N.’s envoy for Syria,
Staffan de Mistura, said after
the meeting that the U.S. and
Russia would determine the
fate of the truce.
“The cease-fire is in danger.
The cease-fire has been seri-
ously affected. But the only ones
who can announce the cease-fire
is dead are the two co-chairs
and they have today not done
so. They want to give it another
chance,” Mr. de Mistura said.
The Syrian Observatory for
Human Rights, a U.K.-based op-
position monitoring group, said
12 people were killed in the as-
sault on the aid convoy. The dead
included employees, volunteers
and truck drivers for the Syrian
Arab Red Crescent, it said.
The International Committee
of the Red Cross, the Interna-
tional Federation of Red Cross
Red Crescent Societies and the
Syrian Arab Red Crescent said
in a joint statement that a Syr-
ian Arab Red Crescent staffer,
Omar Barakat, and about 20 ci-
vilians were killed in the attack.
Mr. Barakat was the head of the
group’s branch in Urem al-Ku-
bra, local activists said.
“There has been a flagrant
violation of international hu-
manitarian law, which is totally
unacceptable,” said Peter Mau-
rer, president of the ICRC.
He warned that the failure to
respect and protect aid workers
could endanger the lives of mil-
lions of Syrians caught in the
conflict.
U.N. Emergency Relief Coor-
dinator Stephen O’Brien called
for an independent investiga-
tion into the attack, which he
said could be a war crime if in-
vestigators find that aid work-
ers were deliberately targeted.
“Notification of the con-
voy—which planned to reach
some 78,000 people—had been
provided to all parties to the
conflict and the convoy was
clearly marked as humanitar-
ian,” he said.
Russian officials have consis-
tently dismissed the reports of
local observers who document
civilian casualties from regime
AMMAR ABDULLAH/REUTERS
and Russian airstrikes. They
have also consistently chal-
lenged the veracity of reports
from groups such as the Obser-
vatory.
With the U.N. saying further
aid convoys were temporarily
on hold, Russian airstrikes con-
tinued Tuesday in northern
Syria.
Warplanes carried out raids
in Aleppo in support of Syrian
government forces, the news
agency Interfax reported the
Russian military as saying.
While neither Washington
nor Moscow, the Damascus gov-
ernment’s most important ally,
formally accepted the Syrian
military’s assertion, Kremlin
spokesman Dmitry Peskov said
Tuesday the chances of restoring
the cease-fire were “very slim.”
—Gordon Lubold, Noam
Raydan and Farnaz Fassihi
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
A4 | Wednesday, September 21, 2016
REUTERS
A fighter trained in Iraq on Monday for an expected assault on the Islamic State stronghold of Mosul.
Iraq Attack Marks a Step
Toward Battle for Mosul
BY TAMER EL-GHOBASHY
AND GHASSAN ADNAN
BAGHDAD—Iraq’s military
and allied militias on Tuesday
launched an attack on Shirqat,
an Islamic State-held town
considered a gateway to the
militants’ Iraqi stronghold of
Mosul, Iraqi officials said.
Clearing the town of mili-
tants would help the troops
march closer to Mosul, some
60 miles away and the last
major city held by Islamic
State and its self-declared cap-
ital in the country, which
American and Iraqi officials
say will be liberated in a
planned joint offensive before
the end of the year.
Prime Minister Haider al-
Abadi announced the start of
the operation and two smaller
offensives in western Iraq in a
televised address from New
York, where he is holding
meetings with world leaders
during the United Nations
French Hold 8 Allegedly Tied to Nice Attack Panel Cites
BY INTI LANDAURO
PARIS—French police de-
tained eight more suspects in
connection with the terror at-
tack in Nice, prosecutors said
Tuesday, as investigators
broadened their search for a
possible network behind the
assault.
The eight men had links to
either 31-year-old Mohamed
Lahouaiej Bouhlel—who drove
a 19-ton truck through a Bas-
tille Day crowd, killing 86 peo-
ple—or to a friend of his who
has been in custody since July
as part of the investigation, a
spokeswoman for the French
antiterror prosecutor said.
Police detained the eight, a
mix of Tunisian and French
nationals, in a series of raids
Monday across the French Ri-
viera region that includes
Nice. In a terrorism investiga-
tion, police can keep suspects
in detention for questioning
for up to 96 hours before fil-
ing preliminary charges
against them.
On July 14, Lahouaiej
Bouhlel ripped through a
crowd of 30,000 people for
more than a mile along Nice’s
beachfront, where revelers
had gathered to watch a fire-
works display marking
Muslim Brotherhood on Ballot in Jordan Elections
BY SUHA MA’AYEH
AND RORY JONES
AMMAN—For the first time
in nearly a decade, the Muslim
Brotherhood contested parlia-
mentary elections in Jordan
on Tuesday in voting seen as a
bid by the kingdom’s pro-
Western monarch to bolster
public confidence in govern-
ment and revive the flagging
economy.
Only 38% of the more than
four million Jordanians eligi-
ble to vote were expected to
cast ballots, according to polls.
Official results were due late
Thursday in what Musa Maay-
General Assembly.
“These operations are the
preparation for getting rid of
Daesh from every inch of Iraqi
land and, God willing, the end
of these operations will be the
liberation of Mosul,” he said,
using the Arabic acronym for
Islamic State.
Iraqi officials said a combi-
nation of Iraqi military, police
and U.S. coalition air support
began the assault on Shirqat
at dawn, securing five villages
on the outskirts within hours.
Iraq’s influential Shiite
Muslim militias said they had
also advanced separately on
the town from the south.
The role of the militias,
known as Popular Mobilization
Units, has been a source of
tension ahead of the planned
operation to retake Mosul.
Mosul and its surrounding
villages are overwhelmingly
Sunni. The militias have been
accused of systematic abuses
against Sunnis in previous bat-
Police searched for evidence after a truck plowed through a crowd in Nice in July, killing 86 people.
France’s national day.
The attacker was shot dead
by police while he was still
driving the truck.
Authorities initially sus-
pected that Lahouaiej Bouhlel
had been recently radicalized.
The investigation later uncov-
tah, Jordan’s minister of polit-
ical and parliamentary affairs,
described as a step toward
“genuine and effective politi-
cal parties that represent peo-
ple.”
Voting was expected to fol-
low tribal, clan and geographi-
cal lines rather than party af-
filiation. Still, amid the
increasing threat of Islamic
extremism and instability
spilling from neighboring
Syria, how the Muslim Broth-
erhood fares in the balloting
was being watched closely.
The Islamist party, which
last participated in elections
in 2007, is trying to revive its
HK JP KO ML SI
WORLD NEWS
tles against Islamic State in-
cluding the June liberation of
Fallujah, a majority-Sunni city.
Militia leaders have said
the abuses are isolated inci-
dents.
Brig. Yehia Rasool, chief
spokesman for Iraq’s military,
denied any Shiite militias were
involved in Tuesday’s cam-
paign. The only militias in-
volved were Sunni tribal fight-
ers from the area, he said.
The U.S. views the Shiite
militias as proxies of Shiite
Iran, and has pressured Mr.
Abadi to sideline them during
major battles, including Mo-
sul.
But he has struggled to
contain them, as they reaped
political and popular support
following their battlefield suc-
cess against Islamic State after
the group swept through the
country in 2014, seizing
roughly one-third of its terri-
tory.
Cooperation between Iraq’s
ered evidence that Lahouaiej
Bouhlel conspired with several
others, planning the assault
for months.
Although Islamic State
claimed responsibility for the
attack in Nice, investigators
haven’t found any link be-
political standing after boycot-
ting elections in 2010 and
2013 to protest what it said
was vote-rigging and election
laws that discriminated
against Islamist parties.
Under the banner of its po-
litical wing, Islamic Action
Front, the Brotherhood has
campaigned on a message of
political moderation, with its
slate of candidates including
Christians and women.
“We want to prove that the
[Muslim Brotherhood] still has
a popular presence among
Jordanians,” said Ali Abu al-
Sukkar, the Front’s deputy
head.
IN UK FR MN PR THE WALL STREET JOURNAL.
Fire on Greek Isle
Displaces Refugees
BY MARCUS WALKER
AND STELIOS BOURAS
ATHENS—Authorities on
the Greek island of Lesbos
were rushing to accommodate
several thousand asylum seek-
ers Tuesday after a fire
burned down much of the
housing at the island’s main
refugee camp.
Representatives at the Les-
bos mayor’s office and police
station said they hadn’t heard
of any injuries during the fire,
which forced the evacuation of
around 4,000 people from the
Moria refugee camp late Mon-
day and caused extensive dam-
age to the camp’s housing.
The mayor’s office said
some people were moved to
other accommodations on the
island, with priority given to
pregnant women, families and
unaccompanied minors. Other
asylum seekers had to spend
the night outdoors.
A police official said most
of Moria’s inhabitants were
back at the camp Tuesday and
tents would be erected to pro-
vide them temporary shelter.
As a backup plan, Greek au-
thorities will charter one or
two ferries to help accommo-
date refugees, a government
official said. Greece’s shipping
numerous fighting forces has ministry is expected to publish
in part slowed the start of a tender offer to ferry compa-
the highly anticipated opera- nies in coming days.
tion on Mosul. The new com- The fire, put out during the
mander of the U.S.-led coali- night, is believed to have been
tion fighting Islamic State, started during protests at the
Lt. Gen. Stephen Townsend,
said this month that the U.S.
had sent an additional 400
troops to assist in the battle
there. Iraqi officials expect
the offensive to start in Octo-
ber, he said. U.S. officials had
earlier this year said it
wouldn’t begin before the
end of 2016.
Gen. Townsend estimated
that between 3,000 and 4,500
Islamic State fighters remain
in the city, along with some
one million civilians.
Aid groups and the United
Nations have warned that an
anticipated exodus of resi-
dents before and during the
offensive could spark a hu-
manitarian crisis if proper in-
frastructure to house and pro- A migrant standing among the ruins of a burned tent on Tuesday
tect civilians isn’t in place. at the Moria refugee camp on the Greek island of Lesbos.
lice custody since then.
France’s fight against Is-
lamic State is testing the
country’s criminal justice sys-
tem as an unprecedented num-
ber of militants from Islamic
State territory return home
from Syria and Iraq.
The influx has exacerbated
overcrowding in French pris-
ons, making them fertile
ground for recruitment. Many
convicted terrorists use their
jail time to groom petty crimi-
nals for jihad missions in Iraq,
Afghanistan and Syria—or at-
tacks at home.
On Tuesday, French Justice
Minister Jean-Jacques Urvoas
CLAUDE PARIS/ASSOCIATED PRESS
announced plans to build up to
16,100 new prison cells by
2025.
“Individual cells are one of
the tools, although not the
only one, to help prevent pris-
oners from becoming fanat-
ics,” Mr. Urvoas said.
Earlier this year, the French
government began to experi-
ment with special measures
tween Lahouaiej Bouhlel and such as segregating radicals
terror groups. from other prisoners by hous-
French authorities last ing them on special floors or
month already filed prelimi- wards. But so far implementa-
nary terror charges against tion has been piecemeal and
five other men and a woman sluggish.
as part of the investigation. —Noemie Bisserbe
They have all been kept in po- contributed to this article.
Fares Braizat, chief execu- which along with some other
tive of NAMA Strategic Intelli- Islamist groups were seen as
gence Solutions, a research threatening, particularly by
company, said the Brother- the Gulf’s Sunni monarchies.
hood’s presence on the ballot Under Jordan’s revised
is healthy for Jordan. “They election laws, candidates for
will create a lot of competition parliament could no longer be
within parliament,” he said. listed on the ballot as unaffili-
The Brotherhood has been ated individuals. Instead, they
under siege since the 2013 were required to appear as
military coup in Egypt against part of slates defined by polit-
the democratically elected ical party, geography or a
government of President Mo- loosely defined political
hammed Morsi, a senior agenda.
Brotherhood official. The take- Despite the changes aimed
over by Abdel Fattah Al Sisi, at encouraging party politics,
Egypt’s current president, un- family and local community
leashed a regionwide crack- ties were expected to be the
down on the Brotherhood, main factors in voting.
camp by asylum seekers frus-
trated at the time it is taking
to process their asylum claims.
Police on Lesbos said they
have arrested nine asylum
seekers and are looking for 18
other suspects in connection
with fighting that broke out
among migrants Monday.
The outbreak of violence
came after world leaders gath-
ered at a United Nations sum-
mit on refugees Monday to
discuss sharing the burden of
housing and educating them in
coming years.
Local officials said the dam-
age to many of the prefabri-
cated houses would worsen an
already severe overcrowding
problem on Lesbos, where
some 5,700 refugees and other
migrants are living in facilities
designed for 3,500 people.
Overcrowding on Lesbos
and other Greek islands near
the Turkish coast has grown
more severe since March,
when a deal between the Euro-
pean Union and Turkey to
stem migration turned the is-
lands into processing centers.
Refugees and other mi-
grants who land on the islands
must now wait in camps like
Moria while Greek authorities
decide on their asylum claims.
The EU-Turkey deal envis-
ages that most migrants who
have arrived since March 20
would be sent back to Turkey,
but delays have left thousands
stuck on the Aegean islands
for months.
GIORGOS MOUTAFIS/REUTERS
Hurdles in
U.K. Fight
In Mideast
BY NICHOLAS WINNING
LONDON—The U.K. military
is making progress in its fight
against Islamic State in Iraq,
but the campaign in Syria is
being complicated by a lack of
partners on the ground, a panel
of British lawmakers found.
In a report due to be pub-
lished Wednesday in the U.K.,
the cross-party parliamentary
defense committee also said
the government needs to focus
on how to counter new threats
linked to the Islamist militant
group, both in terms of coun-
tries to which it might migrate
as well as in Syria, where other
dangerous Islamist groups are
planning to take control.
The U.K. government has
faced repeated criticism from
lawmakers and others for
what they see as a failure to
adequately plan for stabiliza-
tion and reconstruction after
taking part in military opera-
tions with allies in the Middle
East, including in Iraq and
Libya. In both Iraq and Libya,
the fall of dictators was fol-
lowed by periods of violent in-
stability that allowed extrem-
ist groups to develop.
The Defence Committee
said it was clear that U.K. air-
strikes had been effective in
helping win territory from Is-
lamic State in Iraq, in part be-
cause the air campaign was
supported by training and lo-
cal forces that were able to
take and hold ground. But the
situation in Syria was much
more complex, it said.
In response to the report,
the U.K. government said it
was supporting the Iraqi gov-
ernment to deliver stabiliza-
tion, reconciliation and re-
form, and was working with
international partners and the
United Nations for a political
settlement in Syria.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, September 21, 2016 | A5

WORLD NEWS

NATO Snubs Russian

Air-Safety Proposal
Plan calls for military York on Wednesday on the
sidelines of the United Na-
planes in Baltic to fly tions General Assembly.
with transponders on; Moscow made the proposal
to have all military planes fly
usefulness questioned with their transponders on at
a meeting of the NATO-Russia
BY JULIAN E. BARNES Council in July. European offi-
cials had long complained
BRUSSELS—The North At- that Russian planes frequently
lantic Treaty Organization re- fly without their transponders
sionally operate without tran-
sponders while flying national
reconnaissance or surveil-
lance missions. NATO officials
say some Russian aircraft
aren't equipped with tran-
sponders.
Some Western officials
viewed the transponder pro-
posal as a distraction. These
officials said that the real is-

SAVOSTYANOV SERGEI/ZUMA PRESS

jected a Russian air-safety on, making it more difficult to sue was trying to get a
proposal that would require identify such aircraft. broader agreement by Russia
all military planes in the Bal- Air safety in the Baltic re- on increasing transparency
tic region to fly with their gion has been moving higher and notification of their mili-
transponders operational, ac- up the alliance agenda since tary exercises.
cording to allied officials. Russian aircraft buzzed a U.S. Spokeswomen for NATO
Allied officials say the pro- destroyer and a Polish heli- and Russia’s delegation for
posal would do little to im- copter in the Baltic Sea in the alliance declined to dis-
prove air safety—or prevent April. U.S. and allied officials cuss the dialogue and referred
Russian aircraft flying danger- believe an accident between to a statement released after Sukhoi fighters in a drill on Sept. 9 in Crimea. Some Russian aircraft don’t have transponders.
ously close to ships or planes two planes or a ship and a a meeting last week between
flown by Western allies. plane could easily trigger a NATO Deputy Secretary Gen- the strategy for further possi- Mr. Grushko said last week NATO-Russia Council. The al-
Still, key NATO allies are wider conflict. eral Alexander Vershbow and ble actions,” Mr. Grushko said. that NATO was “searching for liance is also pushing for Rus-
keen on advancing the mili- All allied planes flying mis- Russian Ambassador Alexan- In addition to the tran- any excuse to justify its deci- sian military leaders to re-
tary dialogue with Russia and sions for NATO—such as the der Grushko. sponders, Russia has pro- sion to suspend practical co- sume a dialogue with senior
hope to continue talks with Baltic air-policing mission— In his statement, Mr. posed an exchange of military operation with Russia.” NATO generals, including
Russian officials aimed at de- currently fly with their tran- Grushko said Russia would experts on air safety. NATO But NATO officials have Czech Gen. Petr Pavel, the
veloping a new air-safety sponders on, meaning they study the alliance’s response diplomats have said conven- said they are continuing to head of the organization’s
measure. emit an identifying signal in to the proposals presented in ing such a meeting of military press for further dialogue at military committee.
NATO Secretary-General response to other radio sig- July by Russian military rep- experts would violate the alli- more senior levels. Allied dip- “The channel is there, it is
Jens Stoltenberg and Russian nals. resentatives. “This reply will ance’s decision to suspend lomats said a consensus is open and ready, but it is not
Foreign Minister Sergei Lav- But some allies, including be thoroughly studied, includ- practical cooperation with emerging in the alliance to re- being used,” Gen. Pavel said in
rov were due to meet in New the U.S. and Norway, occa- ing with a view to determine Moscow. sume regular meetings of the an interview Sunday.

At U.N., Obama Reflects on World Turmoil New U.K.

BY CAROL E. LEE Leader
UNITED NATIONS—Presi-
dent Barack Obama, in his
eighth and final address to
Stresses
the United Nations General
Assembly, tried to reconcile
the global paradox that he
Global Role
says has taken shape during BY JENNY GROSS
his two terms in office: a
world more prosperous than LONDON—British Prime
at any time in recent history, Minister Theresa May, in her
yet rife with political and se- maiden speech to world lead-
curity crises. ers at the United Nations Gen-
That dynamic, he said Tues- eral Assembly, said the U.K.’s
day, has fueled the conflict in decision to leave the European
Syria and the spread of Is- Union wasn’t a vote for walk-
lamic State, two major secu- ing away from world partners.
rity challenges that emerged Mrs. May, who took office
during his tenure and will be in July after the referendum
handed over to his successor. on EU membership, also said
It has created a Middle East Tuesday that people want “a
where “basic order has broken politics that is more in touch
down,” he said, and is re- with their concerns and bold
flected in Russia’s “attempting action to address them.”
to recover lost glory through “We must never forget that
DREW ANGERER/GETTY IMAGES

force.” we stand here, at this United

To reverse the trend, Mr. Nations, as servants to the
Obama called on world leaders men and women that we rep-
to make a “course correction” resent back at home,” Mrs.
in which nations address an May said. “And as we do so we
approach to globalization that must recognize that for too
he said has ignored the inequi- many of those men and
ties it has generated and ex- women the increasing pace of
posed “deep fault-lines in the President Barack Obama delivering his final speech to the United Nations General Assembly on Tuesday. globalization has left them
existing international order.” feeling left behind.”
“A quarter-century after the agreement on Syria, negoti- scription for world leaders to economic crisis. permanently occupy and settle Her address comes as the
end of the Cold War, the world ated between the U.S. and confront global challenges af- Yet, some of the major pol- Palestinian land.” U.K. begins the long process of
is by many measures less vio- Russia, and by a series of ter- ter he leaves office in January. icy initiatives he outlined as While he highlighted his ef- extricating itself from the EU
lent and more prosperous than rorism incidents over the The four “areas where I be- top priorities during his first forts on nuclear nonprolifera- after Britons voted in June to
ever before, and yet our soci- weekend in New York, New lieve we must do better to- U.N. General Assembly address tion, namely the Iran deal, Mr. end four decades of member-
eties are filled with uncer- Jersey and Minnesota. gether” were: creating a more- in 2009 got scant mention. Obama mentioned the ex- ship, rejecting the recommen-
tainty and unease and strife,” The president didn’t men- fair global economy, Mr. Obama then spotlighted panded threat of North Korea dation of then-Prime Minister
he said. “As people lose trust tion either news development democratic governance, reject- a peace agreement between in passing. David Cameron and many
in institutions, governing be- in his remarks. ing fundamentalism and rac- the Israelis and Palestinians as “When North Korea tests a business leaders.
comes more difficult and ten- Instead, he presented a ism, and increased interna- critical. On Tuesday, he said bomb, that endangers all of Mrs. May and her newly
sions between nations become broad look at the global land- tional cooperation. simply that “surely, Israelis us,” he said. formed government have
more quick to surface.” scape and his foreign-policy Mr. Obama held up interna- and Palestinians will be better Mr. Obama met with Presi- sought to emphasize that the
Mr. Obama’s speech comes legacy, touting the Iran nu- tional cooperation as an ap- off if Palestinians reject incite- dent Muhammadu Buhari of U.K. will remain an active
as his foreign-policy approach clear deal and restoration of proach he said led to some of ment and recognize the legiti- Nigeria and was scheduled to player on the global stage, in-
is being tested by the latest U.S. relations with Cuba, and his top foreign-policy achieve- macy of Israel, but Israel rec- meet with U.N. Secretary-Gen- cluding in fighting terrorism,
breakdown of a cease-fire offered a four-pronged pre- ments, such as addressing the ognizes that it cannot eral Ban Ki-moon. as well as being open to trade.
On Monday, Mrs. May
hosted a discussion in New
tinue nationwide protests, rais- THE PHILIPPINES as secretary, he had paid her vigilante killings since the presi- York with senior executives at
World ing the prospect of further
violence and increasing pressure
Drug Lord Accuses three million pesos ($62,700)
over several months.
dent took office in June, saying
she isn’t impartial. Ms. De Lima
a number of large U.S. compa-
nies, including Amazon.com
Watch on Mr. Kabila to step down at
the end of his constitutional
Duterte Foe of Graft
A convicted drug lord told
Ms. De Lima, who was justice
secretary from 2010 to 2015, de-
answered that she isn’t the prob-
lem—the extrajudicial killings are.
Inc., Goldman Sachs Group, In-
ternational Business Machines
mandate in December. lawmakers he had bribed the nied the allegation in a Senate —Cris Larano Corp. and Morgan Stanley.
—Nicholas Bariyo then-justice secretary to allow speech, saying that criminals are She urged attendees to in-
him to continue his narcotics being used to implicate her “to fit NORTH KOREA vest in the U.K., saying she
IRAN business behind bars—escalating the president’s narrative that I am wants the U.K. to be the
CONGO a political battle between Presi- a drug-lord coddler.” Mr. Colanggo
Launch-Engine Test “global leader in free trade.”
Court Sentences dent Rodrigo Duterte and one of was presented by current Justice Is Called a Success Some international companies
Violence Escalates Internet Advocate his strongest critics over the ad- Secretary Vitaliano Aguirre, who North Korea said it had suc- operating in the U.K. have ex-
As Protests Mount An Iranian court sentenced a ministration’s war on drugs. was appointed by Mr. Duterte. cessfully tested a high-powered pressed concern that Brexit
Thousands of protesters ran- U.S.-based internet-freedom ad- Herbert Colanggo, who is Mr. Colanggo’s testimony rocket engine for launching sat- uncertainty will hurt business.
sacked shops and battled police vocate to 10 years in prison on serving a life sentence, testified came a day after Senate allies of ellites, elevating concerns it is In her speech Tuesday, Mrs.
for a second day, as anger over espionage charges and fined him before the House of Representa- Mr. Duterte removed Ms. De making progress in developing a May also urged the U.N. to be
fears the president plans to ex- more than $4 million, his lawyer tives’ justice committee that Lima as chairwoman of a com- long-range ballistic missile. responsive to the migration
tend his 15-year rule rattled the said Tuesday. during Sen. Leila De Lima’s time mittee investigating police and The description of the new crisis facing Europe, an issue
fragile stability of the resource- The sentence for Nizar Zakka, engine matched that of a rocket on which the U.K. has faced
rich nation. a Lebanese citizen and perma- booster the U.S. has alleged criticism for not doing
In several cities across the nent resident of the U.S., was Pyongyang was collaborating on enough. She told reporters
Democratic Republic of Congo, another example of the Iranian with Iran, experts said, indicating Monday she was proud of Brit-
rock-wielding demonstrators government targeting people the North Korean technology ain’s response to the crisis in
faced off against police, torching with U.S. ties to win political le- might be shared with Tehran. Syria and the aid Britain has
vehicles and gas stations to pro- verage, said Mr. Zakka’s Wash- South Korea’s Defense Minis- donated to the region.
test President Joseph Kabila’s ington-based lawyer, Jason try said the engine tested could On security, Mrs. May said
perceived plan to extend his ten- Poblete. be used for a long-range missile. countries could only overcome
ure in office by delaying elec- Mr. Zakka, 49 years old, is Pyongyang’s official Korean threats by working together.
tions slated for November. among a number of Iranian dual Central News Agency reported “When extremists anywhere
The second day of conflict nationals and people with foreign that dictator Kim Jong Un had in the world can transmit their
came after more than a dozen connections Iranian authorities guided the ground test of an en- poisonous ideologies directly
people, including three police- have arrested in recent months. gine with 80 tons of thrust at into the bedrooms of people
ROMEO RANOCO/REUTERS

men, were killed in protests on Mr. Zakka was arrested a the main space research center vulnerable to radicalization, we
Monday. Supporters of Mr. year ago after traveling to Iran in North Korea’s far northwest. need not just to work together
Kabila torched the party head- to participate in a conference at The test was successful, the to prevent conflict and instabil-
quarters of opposition leader the invitation of the Iranian gov- report said, providing a “firm sci- ity in nation states but act
Étienne Tshisekedi. ernment, according to his sup- entific and technological guaran- globally to disrupt the net-
The government condemned porters. He was later accused of tee” for North Korea’s plan to works terrorist groups use to
that action, but activists and op- spying for the U.S. Herbert Colanggo told Philippine lawmakers he bribed the then- launch more satellites. finance their operations and
position groups vowed to con- —Asa Fitch justice secretary to let him continue his drug business in prison. —Alastair Gale recruit to their ranks,” she said.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A6 | Wednesday, September 21, 2016
ROBOTS
Continued from Page One
“What we’re doing with au-
tonomous bots is not that dis-
similar from what Google is
doing with autonomous cars,”
Mr. Cohen said in an interview
at Symbotic’s Wilmington
headquarters. “I think within
five years, it’ll change distri-
bution.”
For retailers, the objective
in automating warehouses is
controlling the three big costs
of conventional human-staffed
distribution centers—labor,
time and real estate—to meet
the demand of the high-cost,
low-margin industry.
“Every project we look at,
we look at automation as a po-
tential part of it,” said Frank
Bruni, Kroger Co.’s vice presi-
dent of supply-chain opera-
tions. The grocer has bought
warehouse-automation sys-
tems from Germany’s Witron
Logistik + Informatik GmbH, a
Symbotic competitor.
About 6% of Kroger’s distri-
bution centers are fully auto-
mated, Mr. Bruni said, and a
warehouse-worker shortage,
rising wages and other factors
are driving the company to
look at more robotic systems.
“Twenty-five, 30 years ago,
there were a lot of folks who
made careers working in ware-
houses. Today I don’t think
that dynamic exists as much.”
Target in 2013 wanted to
expand its Woodland, Calif.,
distribution center to keep up
with rising Southwest sales. It
considered building a new cen-
ter, then went with Symbotic
in 2014.
“Target was going to have
to build a new facility in Cali-
fornia, which is horrendously
expensive,” said Larry Sweet, a
Georgia Tech robotics profes-
sor who was Symbotic’s chief
technology officer until last
year and worked on the Target
project. “They wanted that fa-
cility to handle more volume,
but they couldn’t do it. Sym-
botic was able to put a system
in the building that helped
that.”
Until now, consumer-prod-
ucts retailers have found it
hard to automate even simple
procedures such as picking
products off a rack and assem-
bling odd-shaped containers
on a pallet. Such tasks were
performed by about 867,300
people in warehouses across
the U.S. as of August, accord-
ing to the most recent Labor
Department data.
Food, in particular, has re-
sisted robots. In the food-and-
beverage sector, where Mr. Co-
hen got his start, just 8% of
distribution centers owned by
the 75 largest North American
grocers are partially or fully
automated, according to sup-
ply-chain consultancy MWPVL
International Inc. Food whole-
salers and distributors operate
on thin profit margins—typi-
cally 1% to 2%—making them
reluctant to invest in automa-
tion, which can cost up to
$100 million for a warehouse.
That attitude is shifting as
rising labor and land costs
threaten profits. And they face
increased competition from
Amazon.com Inc. and other
technology firms that are
overturning longstanding
practices.
Labor impact
The International Brother-
hood of Teamsters, represent-
ing 122,000 grocery-ware-
house workers, has been put
PHONE
Continued from Page One
seeing everyone at a rooftop
bar in New York glued to their
smartphones.
Other anti-smartphone
converts have reverted back
to flip phones and created va-
cation companies, mobile
apps and fabric bags that
block cell signals.
Last week, superstar Kanye
West tweeted: “I got rid of my
phone so I can have air to cre-
ate.” Singer Katy Perry re-
plied: “unplug to connect.”
Stand-up comedian Brett
Kline got so frustrated with
smartphone selfie sticks that
he made a video of him snip-
ping them with bolt cutters all
over New York. It turned out
to be a prank, with fake
phones and actors as the vic-
tims, but video has more than
1.3 million views on YouTube
since Sept. 1.
“Technology is making
people sociopaths,” says
Buddy Bolton, a comedian
who recorded the selfie-stick
A Symbotic autonomous robot, resembling a driverless go-cart, in a C&S Wholesale grocery-distribution center in Newburgh, N.Y.
on the defensive by the rise of
automation, said Steve Vairma,
head of the union’s warehouse
division. “Employers are look-
ing to move more and more
into automation,” he said,
“and I think we’re going to be
faced with those challenges in
contract negotiations in com-
ing years.”
Mr. Cohen’s Symbotic ap-
proach is ambitious because
use of autonomous industrial
robots is still in its infancy.
Developing robots that can
work untethered has been
something of a crusade for en-
gineers at manufacturers such
as Boeing Co., which are
spending heavily on them. A
robot that knows its way
around a factory, the argument
goes, can do assembly tasks
more efficiently than its fixed-
in-place ancestors.
It is still difficult for robots
to perform precise tasks in
chaotic environments, said
Martial Hebert, a Carnegie
Mellon University professor
who specializes in vision and
recognition systems for auton-
omous robots. Advanced sen-
sors and software are bringing
down some of those barriers,
he said.
“The areas in which auto-
mation moves the fastest are
the areas where the environ-
ment is the most structured,
things like factories or ware-
houses with limited amounts
of products,” Mr. Hebert said.
“We’re getting to the point
where the technology is really
moving to the real world.”
Mr. Cohen is carrying out
his experiment through C&S
Wholesale Grocers Inc., the
country’s largest wholesale
grocery distributor by sales, of
which he is the third-genera-
tion chief executive.
His strategy has two
prongs: Install robots in C&S
warehouses to serve grocery
chains, and sell them to com-
panies that have their own dis-
tribution facilities. Over the
next year, Symbotic plans to
roll out nearly a dozen fully-
automated food warehouses
across the country from Penn-
sylvania to California, serving
grocery chains.
He has reached an agree-
ment to supply robots to Tar-
get and Coke’s distribution fa-
cility in South Brunswick, N.J.
Wal-Mart said it is testing
Symbotic’s system for use in
up to two of its large distribu-
tion centers. Wal-Mart is in-
terested in how the robots al-
low it to store more products
in its warehouses.
Symbotic said its system al-
lows food retailers and whole-
salers to cut distribution-cen-
ter labor costs by 80% and
operate warehouses that are
clip-and-run incidents with
Mr. Kline.
Even the original human
voice of Siri, the iPhone’s vir-
tual assistant, in the U.S. says
it is time for people to put
down their smartphones.
“Their minds are some-
where else, or they’re staring
at their phones. And they
don’t know how to relate to
other humans,” says Susan
Bennett, a voice-over actress.
“Everybody is running around
taking 15 million pictures of
their own face.”
The conference where
Messrs. Sheldon and Gould
unveiled the NoPhone Air on
Sept. 10 took place at a sum-
mer camp about two hours
west of Ottawa, where there
was no cellphone reception
and no devices allowed.
Toronto lawyers Steven
Pulver and Daniel Levine
started the Fireside Confer-
ence in early 2015. They had
attended dozens of tech con-
ferences over the years and
felt like smartphones were
taking over.
At most other events, says
Mr. Pulver, you spend “half
FROM PAGE ONE
25% to 40% smaller.
The company faces compe-
tition in the U.S. market from
companies such as Atlanta-
based Dematic Corp. and Aus-
tria’s Knapp AG, which have
installed systems that use ro-
bots to store and retrieve
cases of food and consumer
products. A number of smaller
companies are working on
ways of using autonomous ro-
bots to pick and pack individ-
ual items to fulfill online-shop-
ping orders directly to
customers.
For evidence robots work in
food warehouses, U.S. distribu-
tors can look to Europe, where
land and labor costs are higher
and automation in food distri-
bution is more common.
Robots Take On the Warehouse
Symbotic, a robotics company owned by the CEO of grocer C&S Wholesale,
is trying to upend the business of storing and shipping groceries.
Here's how a typical Symbotic distribution center works.
Trucks unload cases of
products, which are ferried
by a forklift and unwrapped.
…”The Box," a huge metal
enclosure divided into multiple
levels, each with multiple aisles.
Robots arrange cases in the
order determined by software
and assemble them into
"perfect pallets" according
to a grocery store’s layout.
the time tweeting or having
your head down in your
phone.” The two men decided
to create a technology gather-
ing without technology.
They worried last year that
no one would show up to the
first conference. Mr. Levine,
28 years old, says some peo-
ple told them: “We can’t get
away for a weekend and have
no cellphone.”
Other anti-smartphone converts have created
apps and fabric bags that block cell signals.
It turned out that the ab-
sence of cellphones led to so-
cial interactions many people
weren’t used to. Without
Google Maps, people had to
ask for directions around the
sprawling camp. Attendance
at this year’s conference
more than doubled to about
270 people.
“You have to go up to a
stranger, you might have to
meet them, you might have to
have a conversation,” says Mr.
Gould, 30. “I think we had
more eye contact this week-
“In the long run, if you
don’t automate, eventually…it
will really limit your supply
chain,” said Norman Leon-
hardt, head of sales for
Witron, the German automa-
tion firm. “America is moving
towards it. There aren’t
enough young people coming
into the workforce who really
want to work in warehouses.”
Witron has installed auto-
mation in more than a dozen
distribution centers in North
America run by companies
such as Kroger, Target and
Meijer Inc. Witron says its sys-
tems don’t use autonomous
robots.
Symbotic demonstrates its
robots’ potential in a C&S gro-
cery warehouse in Newburgh,
A stationary robot separates the load into individual cases of each
product. The cases are recorded into Symbotic’s software system
and travel by conveyor to…
Symbotic's autonomous robots zoom up and down aisles at speeds
of up to 25 miles per hour, storing and retrieving cases of food
products. The aisles are about 28 inches wide.
Another robot wraps the
pallets, which can be up to
9 feet high, with plastic
wrap.
end than probably any time
since we were children.”
Douglas Duncan of the Uni-
versity of Colorado has stud-
ied the impact that technol-
ogy can have on the
classroom. He has tried des-
perately to keep students off
their phones during his as-
tronomy class.
About 70% of college stu-
dents use their phones dur-
ing class, according to his
research, and grades for
those students are about a
half-letter lower on average
than for students who don’t
use their phones.
Last year, Dr. Duncan told
students to download Flipd,
an app that tracked their
phone use during his lec-
tures. He said he would get a
report showing which stu-
dents opened their phones
and give extra credit of one
percentage point to those
who opened them the least.
THE WALL STREET JOURNAL.
Symbotic robots, resembling
driverless go-carts, whizzed
freely among racks before
driving onto ledges along nar-
row aisles in a multi-leveled
metal enclosure company en-
gineers call “The Box.” They
can travel at 25 miles an hour
in the dark and use mechani-
cal extender arms to stow and
retrieve cases. The bots com-
MICHAEL RUBENSTEIN FOR THE WALL STREET JOURNAL
municate using sensors and a
wireless network.
They are limited at this
point to ferrying objects of
regular sizes and solid sur-
faces, such as cardboard
boxes. The occasional spill or
cracked container can throw
the robots off until fixed by a
human.
The autonomous bots de-
livered products to less-mo-
bile cousins in the warehouse.
A fixed-in-place robot sepa-
rated individual cases of
canned tomatoes and maca-
N.Y., where they are juxta- roni-and-cheese from pallets
posed with humans. by loading them on convey-
On one side, a team of ors, from which a lift trans-
about 20 human “selectors” ported them into the Box,
lined up around 9 p.m. to where other robots waited to
stretch. A manager gave a mo- grab them and store them in
tivational speech about safety racks.
and efficiency as they pre- At the other end of the
pared for an overnight shift Box, robots ferried the cases
using forklifts to retrieve cases to another area, where two
of paper towels and canned fixed robots arranged them
vegetables, loading them by into pallets up to 9 feet high,
hand onto pallets. Warehouse then shrink-wrapped them to
pickers can walk up to 20 be trucked to supermarkets.
miles and lift 50,000 pounds Unlike in conventional
during a shift, according to oc- warehouses, where cases of a
cupational-health studies. given product tend to be
stored in the same section so
humans can find them, Sym-
Bots in ‘The Box’ botic’s robots can put any
On the other side of the product in any spot on the
warehouse, more than 100 racks—mayonnaise rubs el-
bows with peanut butter and
coffee—allowing for denser
storage.
The robots’ software notes
where each product is stored,
and the bots can then find
them to construct “perfect
pallets” organized in sequence
according to individual super-
markets’ floor plans.
Each of Symbotic’s autono-
mous robots can drop off and
retrieve one case of products
a minute, about five times as
fast as a human can on foot.
The robots are 28 inches wide
and the aisles they travel only
slightly wider, compared with
the 10-to-12-foot aisles of a
conventional warehouse.
Mr. Cohen said he became
interested in robotics because
of a lifelong passion for cut-
ting fat at his family business.
His grandfather, Israel Cohen,
founded C&S in Worcester,
Mass., in 1918. Mr. Cohen be-
came CEO in 1989 and is sole
owner.
Over the years, he said, he
has experimented with ware-
house robots in C&S facilities,
building on an earlier hobby
of making computers from
kits. He said his allergy to
waste led him to invest in
Symbotic in 2007 and later
buy the rest of it.
“Taking waste out is fasci-
nating to me,” Mr. Cohen said.
“I walk through a warehouse,
and everyone sees what’s hap-
pening, and I see what’s not
happening.”
One limiter on Symbotic’s
growth is cost. Its systems
can run between $40 million
and $80 million for equip-
ment, according to MWPVL,
the consultant, an investment
big enough to make some dis-
tributors blanch.
Still, labor costs are “going
The pallets are loaded into to hit the grocery industry re-
a truck and shipped to the ally hard,” MWPVL founder
supermarket. Marc Wulfraat said. “Most
young people would rather
work at a desk than hoofing
THE WALL STREET JOURNAL. cases around.”
About a third of the class
used them anyway.
Phones are “pretty addict-
ing,” he laments.
tures, so he created the Light
Phone, a credit-card sized de-
vice that costs $100. The
“phone away from phone,” as
Flipd’s marketing director, he calls it, lets users make
Alanna Harvey, says the free and receive phone calls but
app has nearly 50,000 down- nothing else. Calls are for-
loads. It was originally devel- warded from the owner’s pri-
oped as a way for parents to mary phone number.
limit children’s smartphone “Do I always want a com-
usage by locking down certain puter in my pocket? Probably
apps or the entire phone dur- not,” says Mr. Hollier, 26, a
ing preset times. Flipd soon Brooklyn, N.Y., artist turned
realized adults were using it tech entrepreneur. The Light
on themselves. Phone will be available later
“We had people asking us this year and has more than
for more and more hours,” not 6,000 presales so far.
just the one or two hours Matt McCausland found it
Flipd allowed at first, she hard to put down the No-
says. “People were like: ‘I Phone that was in his gift bag
want 8 hours.’” at the tech conference in
Ms. Harvey, 25, has an Canada. He says he took at
iPhone, but it doesn’t have a least 50 fake group selfies in
data plan and she uses it two days.
only in areas with Wi-Fi ac- As a joke, “I would pull it
cess. Her primary device is a out when you would normally
flip phone, which she started pull your phone out,” pretend-
using to save money and kept ing to answer an incoming call
because she liked having or order car service using
fewer distractions. “There’s Uber, says Mr. McCausland.
only so much you can do,” “The ironic thing is it actually
she says. did set my mind at ease, so I
Joe Hollier thought even wasn’t missing my phone any-
flip phones had too many fea- more. My actual phone.”
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, September 21, 2016 | A7

U.S. NEWS
Billionaire Jumps on Trump Train U.S.
Watch
One-time foe Joe
Ricketts plans to
spend $1 million to
OKLAHOMA
back GOP nominee
U.S. Probes Shooting
BY BRODY MULLINS Of Unarmed Man
AND REBECCA BALLHAUS The U.S. Department of Jus-
tice has opened an investigation
Few Republicans have done into the police shooting of an un-
as much to fight the presiden- armed black man in Tulsa, Okla.
tial campaign of Donald Terence Crutcher, 40, was shot
Trump than Joe Ricketts and Friday by Betty Shelby, a Tulsa
his family. police officer who was respond-
But in a stunning turn- ing to a 911 call of an abandoned
around, Mr. Ricketts has now vehicle blocking a road.
decided to endorse Mr. Trump, Videos recorded by a helicop-
and plans to donate at least ter and dashboard camera, re-
$1 million to help him win the leased Monday by the Tulsa Po-
presidency in November. lice department, show Mr.
The founder of TD Ameri- Crutcher walking toward his car
trade Holding Corp. had do- with his arms raised and then
nated millions of dollars to placing his hands on the top of
help Wisconsin Gov. Scott the car. Just after a view of the
Walker’s failed bid to defeat man is blocked in two separate
Mr. Trump at the start of the videos, shots rang out and he
NAM Y. HUH/ASSOCIATED PRESS

Republican primary. When Mr. fell to the ground.

Trump prevailed, Mr. Ricketts Tulsa Police Chief Chuck Jor-
and his wife poured nearly $6 dan said Mr. Crutcher wasn’t
million into an anti-Trump su- armed and didn’t have a weapon
per PAC that accused Mr. in his vehicle. Before he was fa-
Trump in television advertise- tally shot, another officer, Tyler
ments of being a misogynist. Turnbough, hit him with a stun
A political adviser to Mr. gun, the department said.
Ricketts said many factors led Joe Ricketts, second from left, and his family members in 2010, at Wrigley Field, the home of the Chicago Cubs baseball team. The police department has
to his change of heart. One opened a criminal investigation
was the realization that with The super PAC also aims to Mr. Ricketts’s change in Joe and Marlene Ricketts later of the Cubs and the Ameri- into the shooting, and the Jus-
just weeks remaining until erase Mrs. Clinton’s huge ad- plans is one of the more re- donated another $2 million to trade founder’s son, re- tice Department is separately in-
Election Day, Mr. Trump re- vantage over Mr. Trump in markable reversals in an elec- the anti-Trump group. sponded to Mr. Trump: “It’s a vestigating whether a civil-rights
mains within striking distance television advertising. Mrs. tion campaign made up of re- The Ricketts family also little surreal when Donald violation occurred.
of Democratic presidential Clinton’s campaign has aired markable reversals. owns the Chicago Cubs profes- Trump threatens your mom.” A lawyer for Ms. Shelby, who
nominee Hillary Clinton. nearly 115,000 TV ad spots The anti-Trump super PAC sional baseball team, and a “We stand up for what we is on administrative leave,
“The Ricketts decided they since mid-June, compared to that Mr. Ricketts and his wife son, Pete, is the governor of believe in,” he added. “We couldn’t be reached Tuesday.
could not sit back and watch 20,000 aired by the Trump funded was behind a highly Nebraska. support the causes that we —Shibani Mahtani
Hillary Clinton become the campaign, according to the publicized set of campaign ad- When Mr. Trump learned in think are important. That’s
next president of the United Center for Public Integrity. Mr. vertisements that featured February that the Ricketts what America should be. DOMESTIC RELATIONS
States,” said Brian Baker, a Trump didn’t begin running women repeating the slurs family was behind some of the That’s who we are.”
longtime political strategist TV ads until mid-August—un- with which Mr. Trump had re- attacks on him, he tweeted: In May, Pete Ricketts, the
Angelina Jolie Files
for Mr. Ricketts. “Even though usually late in a general-elec- ferred to women, including “I hear the Rickets family, Nebraska governor, endorsed To Divorce Brad Pitt
the Ricketts supported other tion campaign. “dog” and “fat pig.” who own the Chicago Cubs, Mr. Trump. At the time, Mr. Angelina Jolie Pitt has filed
candidates during the primary, News that Mr. Ricketts and The advertisements were are secretly spending $’s Trump thanked Pete Ricketts for divorce from Brad Pitt, bring-
they believe it is time to unite fellow billionaire Sheldon paid for by Our Principles PAC, against me. They better be for his support, saying at a ing an end to one of Hollywood’s
behind the nominees … This is Adelson planned to donate to which received an early $3 careful, they have a lot to rally in Nebraska, “I love Pete, most star-studded, tabloid-gen-
all about helping Republicans Mr. Trump’s campaign sur- million donation from Marlene hide!” but I think his brother doesn’t erating romances.
win in the fall.” faced Monday. Ricketts, Mr. Ricketts’s wife. Tom Ricketts, the chairman like me as much as he does.” An attorney for Ms. Jolie Pitt,
Robert Offer, said Tuesday that
she has filed for the dissolution

No Single Answer for ‘Lone Wolf’ Attacks

BY ALAN CULLISON But experts are concluding
that for attacks committed by
Amid the anxiety prompted sole assailants—known as
by the latest U.S. terror at- “lone wolves” or “stray
tacks, security officials and ex- dogs”—there is no all-encom-
perts are vexed by an increas- passing explanation.
ingly recurring question: How “Fundamentally, the quest
can latent mass murderers for a single answer for the rea-
with no formal connection to son for terror is pretty
faraway terror groups be doomed—it’s like trying to an-
caught before they act? swer the question of why there
Partial answers may surface is crime,” said J.M. Berger, a
as investigators splice together fellow with George Washington
the biographies of Ahmad University’s Program on Ex-
Khan Rahami, who sowed tremism and a researcher on
homemade bombs in New York extremist issues. “It happens
and New Jersey, and Dahir for a lot of different reasons,
Adan, who went on a stabbing and when you examine it with
spree in a Minnesota shopping a broad lens, the answers are
mall before he was shot dead always unsatisfying.”
by an off-duty police officer. Law-enforcement officials
are investigating whether Mr.
Rahami, an ethnic Afghan,
could have been influenced by
several trips he took to his na-
tive country and to Pakistan in
the past five years.
After Mr. Adan’s stabbing
spree in Minnesota, Islamic
State claimed he was acting
under the terror group’s or-
ders, but police say they so far
believe he acted alone.
Islamic State has been quick
to claim responsibility for at-
tacks that it has had no clear
association with, as the group
tries to portray itself as having
a global reach. In fact, lone
wolf attackers in the U.S. have
usually been young people
with violent predilections and
contradictory motives.
Omar Mateen, who on his
own killed 49 and wounded 53
inside an Orlando, Fla., gay
nightclub in June, called 911
during the attack to pledge al-
legiance to Islamic State. But
at other times, he praised its
rival, the al-Nusra Front, and
was known to spew hatred
against women, Jews, black
people and gays. His own ex-
wife said he may have been
gay himself.
The quest for singular
causes has been denounced as
a fool’s errand. Poverty as a
cause of terror appears to be
one trope—yet some of the
most prominent attackers of
late have been from middle-
of the marriage. Mr. Offer said
the decision was made “for the
health of the family.”
The couple has six children
class backgrounds, said Mr. together: Maddox, Pax, Zahara,
Berger. Shiloh, and twins Knox and Vivi-
Lack of education also enne. The pair adopted children
doesn’t appear to be a cause, from Cambodia, Vietnam and
said Mr. Berger. “In fact it’s Ethiopia.
been shown there is an oppo- Though together for 12 years,
site correlation, and that peo- Mr. Pitt and Ms. Jolie Pitt only
ple who are more educated are wed in August 2014, in a private
more likely to become terror- ceremony in the French hamlet
ists,” he said. of Correns in Provence with
With motives murky, some their children serving as ring
experts say attention should bearers and throwing flower pet-
focus on symptoms rather than als.
ideology when trying to antici- It was the second marriage
pate the next attack. for Mr. Pitt, who previously had
Mia Bloom, who researches been married to actress Jennifer
suicide terrorism at Georgia Aniston. It is the third for Ms.
State, said that “perhaps we Jolie Pitt, who was previously
should have hotlines so that married to actors Billy Bob
people can come forward and Thornton and Jonny Lee Miller.
report what they know.” —Associated Press

PROBE The elder Mr. Rahami con-

firmed that the earlier FBI in-
quiry stemmed from a family
fight. He added that he had
Manhunt Over Two States
The search for the suspect in the bombings in New York City and
New Jersey lasted from Saturday morning to Monday morning.
on Monday after officials re-
leased his name and picture to
the public that morning, push-
ing out a text alert to millions
Continued from the prior page “no idea” his son was alleg- of cellphones.
his background and possible edly plotting attacks. 1 9:30 A.M. SATURDAY Around 11 a.m., two friends
motivation. The incident took place a 10 miles in Linden noticed a man sleep-
UNION COUNTY PROSECUTOR’S OFFICE/REUTERS

A pipe bomb explodes in

In 2014, he was arrested for few months after Mr. Rahami ing in the doorway of a bar on
Seaside Park, N.J., near the
allegedly stabbing a sibling in returned from Afghanistan Chelsea East Elizabeth Avenue.
starting area of a 5K race.
a New Jersey domestic dis- and Pakistan, officials said. He 2 One of the men, who
Nobody is injured in the
pute, officials said. When po- traveled to those countries in Elizabeth NEW
worked at the bar, said he
explosion.
lice responded to that inci- April 2013 and didn’t return to 3 YORK thought the man, who was
dent, Mr. Rahami’s father the U.S. until March 2014, the 4 CITY wearing a hoodie, looked like
2 8:30 P.M. SATURDAY
claimed his son was a terror- official said. When he returned Linden the suspect.
ist, officials said. to America, he told U.S. agents A bomb explodes in New York “That’s the guy that planted
The local Joint Terrorism that during his time away he City’s Chelsea neighborhood, the bomb,” the bar worker told
Task Force, which is run by had driven back and forth be- injuring 29. A second Jack Mazza, a 55-year-old me-
the Federal Bureau of Investi- tween Afghanistan and Paki- explosive is found nearby. chanic who works around the
gation, opened an assessment stan, the official said. 3 8:30 P.M. SUNDAY corner.
in late August of that year. An In Washington, a State De- Ahmad Khan Rahami was “No, it’s not,” Mr. Mazza
assessment is akin to a review partment spokeswoman on A pipe bomb is discovered arrested Monday in New Jersey. said he replied. “You can’t
of an individual to see if there Tuesday wouldn't disclose near an Elizabeth, N.J., train even see his face. How do you
NEW JERSEY
is anything suspicious about what type of visa Mr. Rahami station. It later explodes as a Mr. Rahami was interested in know?”
him, but it is not a full- was able to obtain for his wife robot attempts to defuse it. leading terrorist figures and The two men tried to wake
throated criminal probe. to allow her to move to the groups, including al Qaeda. the man and get him to move,
7:54 A.M. MONDAY
During that process, the fa- U.S. from Pakistan in recent Authorities didn’t offer other but he cursed and told them he
ther was interviewed twice, years. The spokeswoman said Police name Ahmad Khan details on what the suspect was sleeping, Mr. Mazza said.
one official said. In the second “visa records are confidential” Rahami as a suspect in the wrote about Mr. Awlaki or Still unsure if the sleeping
interview, the father recanted under the Immigration and Chelsea bombing, and he is Dzhokhar and Tamerlan Tsar- man was the suspect, they
the accusation, the official Nationality Act. also wanted for questioning naev, the Boston Marathon called police.
said. A review of government Obtaining the visa was a in connection with the New bombers. “A few minutes later, the
Seaside Park 1 Jersey bombs.
databases produced nothing source of frustration for Mr. As the investigation has cops showed up, and the guy
incriminating on Mr. Rahami— Rahami, who contacted his pressed on, Mr. Rahami has pulled out a gun and started
4 11 A.M. MONDAY
who was born in Afghanistan congressman, Democrat Rep. continued to receive treatment shooting through the glass at
and is a U.S. citizen—so inves- Albio Sires, in 2014, and Police in Linden, N.J., capture in a Newark hospital from them,” Mr. Mazza said in an
tigators closed the matter. pressed to see how to obtain At lantic
Mr. Rahami after a shootout, gunshot wounds, and he has interview. “Then he ran out
“We didn’t think he had any the immigrant visa for her, the O ce a n which resulted in two been charged with attempted and took off down Elizabeth
connection and we closed it. lawmaker said. officers being injured. The murder of police officers, Avenue. The cops were chasing
At the time, we did our due Mr. Rahami and his wife re- suspect was shot in the leg. while federal prosecutors in him and he was shooting while
diligence, and there was noth- portedly married in Pakistan, Source: Law enforcement officials THE WALL STREET JOURNAL. New York and New Jersey pre- he was running.”
ing there,” said the official. and his wife had trouble se- pare terrorism charges against Linden Police Captain James
Mr. Rahami’s father, Mo- curing a visa because her The probe into the New which authorities said he him, officials added. Sarnicki said, “I understand it
hammed Rahami, briefly dis- passport had expired, accord- York area bombings also wrote about radical jihadist Officials said that he spent was a walking gunbattle. He
cussed the probe with report- ing to Mr. Sires. turned up evidence of Mr. Ra- cleric Anwar al-Awlaki, who much of Monday in and out was walking and shooting off
ers outside his home Tuesday. Investigators are trying to hami’s alleged interest in ter- was killed by a U.S. drone of consciousness while being his gun indiscriminately,” Cap-
“Two years ago, I go to the track down Mr. Rahami’s fam- rorism, law-enforcement offi- strike in 2011. The cleric still treated and operated on for tain Sarnicki said. “Eventually,
FBI because my son was doing ily members outside the U.S. cials said on Tuesday. is cited as an inspirational fig- his wounds. Investigators additional officers responded
really bad, OK?’’ he said. “But and determine whether those When Mr. Rahami, 28 years ure among many would-be ter- would still like to talk to him and returned fire and were
they check almost two trips may have played a role in old, was arrested following a rorists in the West. as they try to determine if able to take him down.”
months, they say, ‘He’s OK, his alleged radicalization or shootout in Linden, N.J., on Officials said the writings, anyone provided assistance —Damian Paletta
he’s clean, he’s not a terrorist.’ factored into his learning how Monday, officials recovered a which also mentioned the Bos- to him. and Asa Fitch
I say, ‘OK.’ ” to build bombs, officials said. bloodstained notebook in ton Marathon bombers, show Mr. Rahami was captured 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 | Wednesday, September 21, 2016
Less Show, More Buzz in London
Intimate presentations
replace formal runways as
more designers offer
a close-up view of clothes
BY CHARLIE WELLS
Many designers at London fash-
ion week are turning away from
the spectacle of the runway show
in favor of an effective, if some-
what less sexy, tool—the presenta-
tion.
Some presentations have been
a cross between a performance-art
installation and a runway show,
staged in an intimate room and
running about two hours. Retail
buyers, editors and other guests
view and touch the latest collec-
tions, ask questions and even talk
business. Meanwhile, models, in-
stead of strutting down a straight
line, move around the room and
pose for photos on what is often
an elaborately furnished set.
London designers relying on
presentations tend to be either
much smaller and under-the-radar,
or much bigger and more main-
stream, than the buzz-worthy
brands who continue to draw
crowds with runway shows, like
Christopher Kane, J.W. Anderson
and Mary Katrantzou. At the run-
way show for Burberry, ruffled,
mismatched fabrics inspired by the
Virginia Woolf novel “Orlando”
called to mind the artsy crowd at a
college party; it was Burberry’s en-
trance into the see-now, buy-now
world, with looks available for
purchase immediately after the
show. Christopher Kane turned a
few heads for his partnership with
footwear company Crocs, which
models wore down the runway. His
show also offered furs layered
with lace, dresses held together
with key rings, and silhouettes
that revealed the models’ under-
garments. J.W. Anderson’s Henry
VIII-inspired collection featured
rippling sleeves, Tudor-style jack-
ets and handbags big enough to
bump against the knees of some in
the audience.
Other labels have found power
in presentations, where the clothes
are close enough to touch.
“The format is equally as im-
portant as the collection,” said
Kasha Crampton, head of womens-
wear at Aquascutum, whose pre-
sentation marked its first womens-
wear appearance at London
fashion week since it entered
bankruptcy protection and was
purchased by Hong Kong-based
YGM Trading in 2012.
At the Aquascutum event, held
on a set furnished like a lounge in
a lofty space near Buckingham Pal-
ace. Security let in guests, about
10 at a time, to drift through and
Apple’s Artificial Intelligence Is Finally Less Clueless
BY JOANNA STERN
Me: Siri, how are you tonight?
Siri: I’m happy to be alive!
Me: Me too. So, I’m thinking ra-
men for dinner.
Siri: OK, one option I see is Totto
Ramen which averages 4 stars and
is moderately priced.
Me: Great. Looks like I’m going to
be needing a Lyft.
Siri: Lyft can be there in 6 min-
utes. Do you want to request it?
Me: Yes. Great work!
Siri: Aw, shucks.
Buried in this fall’s news of an
iPhone 7 with a missing head-
phone port and
iOS 10 messaging
fun was something
bigger: Apple’s
longtime nuisance
of a personal as-
sistant is finally joining the future
of conversational computing. I
suddenly find Siri far more capa-
ble, in far more situations.
With the new iOS 10, Siri can
control third-party apps, like Uber
and WhatsApp. With the release of
Mac OS Sierra on Tuesday, Siri fi-
nally lands on the desktop where
it can take care of basic operating
system tasks, send emails and
more. With WatchOS 3 and the
new Apple Watch, Siri is finally
faster on the wrist. And with Ap-
ple’s Q-tip-looking AirPods arriv-
ing in October, Siri can whisper
sweet nothings in your inner ear
with unprecedented wireless free-
dom.
The groundwork is laid for an
AI assistant to stake a major claim
in your life, and finally save you
time by doing menial tasks. But
the smarter Siri becomes in some
places, the dumber it seems in
others—specifically compared with
Google and Amazon’s voice assis-
tants. If I hear “I’m sorry, Joanna,
I’m afraid I can’t answer that” one
more time…
PERSONAL JOURNAL
take pictures with smartphones
and professional cameras of mod-
els playing billiards, leafing
through books. They all wore the
spring 2017 collection, featuring
floral prints, slinky silk dresses
and the brand’s classic trenches.
One model wore leather bunny
ears; others wore leather chokers.
Ms. Crampton said the overall look
was supposed to be “a bit subver-
sive.”
Presentations are growing more
popular at London fashion week,
used this year by 32 labels, or 41%,
compared with 15 labels, or 21%, in
September 2013, according to an
analysis of British Fashion Council
data.
At many presentations, models
pose in tableaus that are ideal for
sharing on Instagram. Alice Ar-
cher, a designer who presented for
her second time on London’s offi-
cial schedule this year, said she
was conscious of how photogenic
the sets in her presentation must
be. Yet she says tries to be careful
to avoid having the set over-
shadow the clothes.
Cost is another factor. A pre-
Talking Points
Unlock Siri’s new capabilities with these commands
On iPhones and iPads
“I need an Uber home.”
“Send a WhatsApp message to Carlos.”
“Show me my scuba photos.”
“Send $5 to Jane.”
On Macs
“Find files from last Wednesday.”
“Put my computer to sleep.”
“Set a reminder to call Pat in 10 minutes.”
The App Commander
“Siri, get me an Uber” sum-
mons the ride-sharing service
without having to tap on the app,
then go through the various
menus. “Siri, tell Jarrard on
WhatsApp that I want to go to the
Cuban place for lunch at 2 p.m.,”
quickly sends the message through
the Facebook-owned messaging
service, surprisingly without ty-
pos. “Send $10 to Jarrard for my
half of lunch,” sends money via
Venmo or Square Cash, depending
on which one you’ve set up.
Many of my most-used apps,
however, aren't Siri-controllable
yet—and may not be because of
Apple’s restrictions. Music ser-
vices, to-do lists and other email
apps aren't supported by the de-
sentation in a designer’s own
space might cost from $32,000 to
$39,000, says designer Henry Hol-
land, whose label House of Holland
has put on menswear presenta-
tions and this week did a womens-
wear runway show. A catwalk
show’s costs are double those of a
presentation, Mr. Holland says.
Presentations, with their lower
price tags, are a window into fash-
ion week for brands lacking the
hefty marketing budgets of the
fashion establishment, whether
known names like Aquascutum and
Belstaff or up-and-comers.
Levi Palmer, half of the duo be-
hind the four-year-old shirt brand
Palmer/Harding, says presenta-
tions serve a purpose for his
young company from a content
perspective. Because models con-
stantly change poses, and the sets
are more complex than a runway,
the brand comes away with more
marketing fodder, in the form of
varied images.
There are downsides. Everyone
is a photographer, especially at
fashion week. Sometimes, Mr.
Palmer said, pushy, amateur shut-
veloper tools Apple provides. Ap-
ple says this is just the beginning
of how it envisions Siri being used
across iOS. Amazon’s Alexa not
only lets you use all sorts of third-
party apps; it allows you to set
them as your defaults.
Most of Siri’s third-party inte-
gration has been so reliable and
accurate that it’s spurred me to
start talking to it more and more.
In some cases, I’ve been impressed
with how much Siri has learned
about how we speak. She under-
stands and responds to casual
phrases like, “What’s up with the
weather today?”
Sometimes, though, I have to
carefully phrase the question.
“When’s the next train coming?”
pulls up the definition of “train”
* THE WALL STREET JOURNAL.
terbugs get in the way of models
just as they are about to go on set,
demanding “just one more.” “If I
catch them doing that, I tell them,
‘Stand back,’ ” Mr. Palmer said.
Designer Faustine Steinmetz
says last season, at her presenta-
tion at the Tate Modern art gal-
lery, some photographers started
directing her models and taking
apart her set, a peep-show built
from a range of boxes.
That didn’t happen Saturday,
when Ms. Steinmetz, known for
her denim experimentations,
showcased a collection she infor-
mally titled “Levi’s…on acid.” With
a long line of viewers and photog-
raphers waiting to enter the
ocean-themed set, handlers shuf-
fled people through, reminding
them, “OK, let’s move it along
now.” Visitors lingered to look at
blue-painted women wearing de-
constructed jeans, single denim
pockets strapped on as accesso-
ries, filmy jackets and even crys-
tals.
Still, the catwalk calls. Handbag
and accessories designer Anya
Hindmarch, who moved from fan-
on Wikipedia. “Show me transit di-
rections,” however, shows me the
latest train schedule. And when it
comes to general knowledge, Siri
comes in third place behind
Google’s and Amazon’s assistants.
The New Cursor
On the Mac, Siri doesn’t replace
the mouse or trackpad, but it com-
plements them in a big way. In
fact, Siri is a multitasking dream
on the bigger screen—once you get
the hang of delegating tasks to it.
Asking Siri to set reminders or
create calendar appointments
takes half the time of opening the
apps and manually typing in the
information. Unfortunately, you’ll
have to use Apple’s own apps.
Other than Facebook and Twitter,
there’s no third-party app control
on the Mac yet.
Another useful trick? Asking
Siri to launch an app while you’re
working in another. You can also
have it take care of system-re-
lated tasks, like adjusting the vol-
ume or locating files. I have a
very messy desktop, so “Show me
the images on my desktop” is a
lifesaver.
Siri’s biggest shortcoming on
the Mac is how you get its atten-
tion. You can’t simply say “Hey
Siri.” Instead, you press and hold
Command and Space bar, or click
on the Siri icon in the dock. One of
the best aspects of Amazon’s Echo
and Microsoft’s Cortana on Win-
dows PCs—albeit one that stokes a
lot of privacy fears—has been that
they listen for you, even if you’re
on the other side of the room. It’s
what has made Amazon’s Alexa
such a great houseguest: She is al-
ways quick to respond to your
voice, far faster than even the
voice “Hey Siri” command that’s
available on a newer iPhone. In the
home, Amazon is closer to giving
us Rosie from “The Jetsons” than
Apple.
Intimate presentations are more
popular with labels at London fashion
week including, clockwise from top
left, Alice Archer; Aquascutum;
Palmer/Harding and Faustine
Steinmetz.
GETTY IMAGES (4)
ciful presentations to even more
fanciful runway shows three years
ago, said she loves the creative fo-
cus of a runway. With all the en-
ergy, planning and specially writ-
ten music, it “feels like putting on
a mini West End show,” she said.
Presentations offer business ad-
vantages, designers say. During a
presentation, a designer can be
more or less approachable
throughout the course of the
event, rather than only during the
chaotic scrum immediately after a
runway show. Because buyers can
ask questions and see fabrics up
close during the presentation,
there is no need for “re-see” ap-
pointments afterward to talk fab-
rics and prices.
Ken Downing, fashion director
at Neiman Marcus, likes that he
can ask designers about prices and
materials during a presentation.
“You don’t have the opportunity to
do that in the grand drama of a
fashion show, with clothes flowing
by you at the speed of sound,” he
said. “In a fashion show, I’m not
quite sure if I’m looking at alumi-
num foil or lamé.”
The Future Best Friend
After you’ve used Apple’s Air-
Pods, you really wish for more rea-
sons to chat up Siri—whether
you’re at home, at work or even in
a car.
Double-tap on one of the white
pods and you hear a chime to let
you know that Siri’s all ears. The
mics are extremely impressive. Siri
had no problem skipping a song
while I was on the subway plat-
form or giving me a weather re-
port while I washed dishes. (You
could achieve this with wired ear-
phones, it’s just not as cool.) It
feels like the wireless future we’ve
been waiting for: artificial intelli-
gence that’s always there to lend a
hand.
We aren’t living in the future,
however. AirPods are a great prop
for my sci-fi script, but that’s all
they are right now. When I try to
keep up a conversation with Siri—
or any other virtual assistant—
things fall apart within seconds.
When I asked Siri to schedule a
meeting with Tim Cook and then
find out more information about
“him,” the assistant had no idea
what “him” I was referring to. “I’m
afraid I can’t answer that, Jo-
anna.”
The way Google’s assistant
does context requires collecting
and storing a lot of information
about you—something Apple has
vowed not to do. Apple’s made
baby steps forward in predictive
intelligence, but it’s still hard to
see how it can compete when peo-
ple willingly give their data to its
rivals.
“The hard part of the technol-
ogy is not taking it word by word
and turning it into text,” says Nor-
man Winarsky, past president of
SRI Ventures and a co-creator of
Siri, which SRI sold to Apple. The
hard part is recognizing “the in-
tent and context of the conversa-
tion.”
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
East and West, Fused in Paint
REVIEW
LANCE ESPLUND
New York
IN 1964, the painter Zao Wou-Ki stated: “It is
not easy to break free. Everybody is bound
by a tradition—I, by two.” Zao (1920-2013)
was a Chinese-born artist who became a
French citizen, and who immersed himself
in both ancient Chinese and European Mod-
ernist painting practices. He sought and
sometimes succeeded to fuse these dispa-
rate influences into an inimitable hybrid ab-
straction that touches on Eastern and West-
ern aesthetic traditions yet hovers,
elusively, outside of them.
An East-West fusion of this sort was diffi-
cult for Zao, who was pulled equally to-
ward—and revered—the meditative, atmo-
spheric, allover openness and unstructured
“emptiness” of
Eastern landscape
painting; the fron- A hybrid
tal, “alive,” picto-
graphic presence
abstraction,
and narrative sto- drawn from
rytelling of Chi-
nese calligraphy;
Chinese and
and the various European styles
practices of West-
ern representation
and abstraction,
specifically the
Abstract Expressionists’ calligraphic gesture
and the structure and flatness of the Mod-
ernist grid. The complications, strengths, tri-
umphs and shortcomings of his artistic un-
dertaking are evident in “No Limits: Zao
Wou-Ki,” Asia Society’s uneven though occa-
sionally beautiful and enchanting traveling
retrospective of 60 paintings, drawings and
prints from 1943 to 2007.
Born in Beijing, Zao studied and then
taught at the National Academy of Art (now
the China Academy of Art) in Hangzhou. In
China, he learned English, practiced Chinese
ink painting and calligraphy, and was intro-
duced to European Modernism through
Western magazines. Zao immigrated to Paris
in 1948, and quickly became a prominent
figure in the School of Paris. He showed
alongside European and American masters,
and was collected widely by patrons and
museums in Europe, America and Asia.
Zao arrived in Paris just as many midcen-
tury Western abstractionists were looking to
Asian art, and especially calligraphy, for in-
spiration. Zao, in turn, was greatly influenced
by Paul Klee, an artist inspired by all forms
of world art, and it was through Klee that
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ARTS & ENTERTAINMENT
‘Signs in Motion’ (1957), by Zao Wou-Ki
Zao rediscovered his own Asian roots. Klee
absorbed, combined and reinvented his
sources anew on his own abstract terms. Zao,
on the other hand, was influenced by Japa-
nese folding screens, Cimabue, J.M.W.
Turner, Paul Cézanne, Henri Matisse, Jackson
Pollock and Klee’s abstractions. But these
sources, at odds with his aesthetic heritage,
could prove combative on the canvas.
Examples here include Zao’s radiant
“Homage to Henri Matisse I—02.02.86”
(1986), a translation of Matisse’s interior
SUBSCRIBE.WSJ.COM/EMEA +44 (0) 20 3426 1313
Wednesday, September 21, 2016 | A9
tory and his aesthetic influences and meth-
odologies, but the handful of strong, mature
works here, such as “Red Pavilion” (1954),
“Chestnut” (1955), “Water Music” (1957),
“Signs in Motion” (1957) and “Untitled (Fire
in the Sky” (1965) ultimately do Zao little
favor beyond that of introduction.
“No Limits” presents a skilled, deter-
mined, ambitious and inventive painter
mired in his myriad sources. Despite the 20-
plus captivating works here, Zao often pro-
duces pictures that, though attractive for
their atmosphere, color and subtle brush-
work, occupy a realm of cultural and aes-
thetic ambiguity.
The show’s smaller of two rooms is dedi-
cated to Zao’s Western roots. Strong ink and
pencil drawings here include a landscape
reminiscent of Courbet; a Rembrandtesque
lion; a seascape suggesting Van Gogh; a girl
with a flower, recalling Picasso’s classicism.
Here, too, are pastiches of Cézanne, Arshile
Gorky and Klee.
From Klee, Zao learned how to transform
the canvas into a realm redolent of stone,
fresco, manuscript or aquarium. The dynamic
colored etching “Signs in Motion” combines
calligraphy and pictographs into a teeming
universe that ultimately resembles a bloody
shroud. The mostly white oil painting
“15.04.77” (1977) suggests snow blindness.
The oil-on-canvas “Chestnut” feels like an
Asian distillation of one of Corot’s silvery-
HERBERT F. JOHNSON MUSEUM OF ART/CORNELL UNIVERSITY
gray trees. Zao’s gorgeous blue-gray, maroon
and cream watercolor “Untitled” (1953) re-
calls a Klee-like castle drifting like a mirage.
Unfortunately, a number of pictures here
feel tentative, fragmentary, between desti-
nations. The same refusal to settle into a
cultural niche that gives Zao’s artworks
their restless power often keeps them from
a pictorial wholeness.
There are numerous exceptions. In the
second, larger gallery, Zao often combines
actual and invented calligraphic characters,
setting them afloat in moody, abstract
dreamscapes. In the apocalyptic “27.02.98”
(1998), black calligraphic forms smolder in a
blood-red caldron. Recalling Titian, Abstract
Expressionism and the mist of Asian land-
“Window at Collioure” (1914). Matisse’s ver- scape painting, Zao’s forceful picture evokes
sion pares down a window and shutters into a hell mouth or abstract forest fire. Born of
flat, torqued planes of color; Zao’s “Hom- two cultures, it is built out of freneticism,
age” transforms and relaxes those planes delicacy and deep feeling. Here, as with many
into floating, overlapping vapor and mist. of Zao’s Abstract Expressionist-inspired pic-
Missing the structural tension of the origi- tures, the canvas suggests not only what the
nal, Zao’s abstraction walks the line be- critic Harold Rosenberg describes as “an
tween interpretation and misinterpretation. arena in which to act,” but primarily a realm
This is the first Zao retrospective in the for reflection, contemplation.
U.S. But, judging by the best pictures shown
in the exhibition catalog, it is not definitive. Mr. Esplund writes about art for the
“No Limits” establishes Zao’s artistic trajec- Journal.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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A10 | Wednesday, September 21, 2016 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK Life During Wartime
America’s Terror Debate Returns Long after I returned to
the U.S. after living in
Jerusalem I kept think-
set up metal detectors, and people went
out. More than a few attacks were
stopped by lone Israeli civilians who

A
t about 8:30 p.m. Saturday a large bomb beth, N.J. This is in addition to the Somali- ing about soft targets. prevented massacres through the expe-
went off on a street filled with pedestri- American who stabbed nine people in St. Cloud, The peak-hour com- dient of a handgun.
muter train that took As for the Israeli government, after
ans in lower Manhattan. By noon Mon- Minn. on Saturday until an off-duty police offi-
me from suburban New much hesitation it did what govern-
day Ahmad Khan Rahami, the cer shot him dead. GLOBAL
York to Grand Central. ments are supposed to do: It fought.
suspected perpetrator, was in Good work by the With the first presidential VIEW
The snaking queue out- In April 2002 then-Prime Minister Ar-
custody after a shootout in debate less than a week off, By Bret
New Jersey.
FBI and NYPD. The these events naturally have Stephens
side the security check- iel Sharon sent Israeli tanks into
point at La Guardia Jenin, Bethlehem and every other nest
The first thing to say about candidates? Less so. devolved into a political fight Airport. The theater of Palestinian terror. He trapped
the disturbing events of the between Hillary Clinton and crowds near Times Square. Yasser Arafat in his little palace in Ra-
past several days is that the Donald Trump. The short ver- All of these places were vulnerable mallah. He ordered the killing of
New York Police Department and Federal Bureau sion of this debate is that all of this either has and most of them undefended. Why, I Hamas’s leaders in Gaza.
of Investigation have done very good work. something to do with Islam, which is Mr. wondered, weren’t they being attacked? All this was done in the teeth of
Since 9/11, whose 15th anniversary was noted Trump’s view, or is unrelated to the religion This was in late 2004, when Jack overwhelming international condemna-
Bauer was an American hero and mem- tion and the tut-tutting of experts who
the previous weekend not far from Saturday’s of Islam, Mrs. Clinton’s view. Our view is that
ories of 9/11 were vivid. Yet friends insisted only a “political solution”
explosion, the NYPD has made great progress one has to be obtuse not to recognize that it who were nervous about boarding a could break the “cycle of violence.” In-
in being able to track down terror suspects. In has a lot to do with radical Islam, a phrase flight seemed nonchalant about much stead, the Israeli military broke that
this case that included matching images of the that remains anathema to Democrats from more plausible threats. Maybe they ex- cycle by building a wall and crippling
alleged bomber from surveillance videos, a fin- President Obama on down. pected the next attack would be on the the Palestinians’ capacity to perpetrate
gerprint and databases. In their public responses to the planted same grand scale of 9/11. Maybe they violence. In 2002 there were 47 bomb-
On Monday morning the FBI produced a bombs and Minnesota assault, the two candi- thought the perpetrators would be su- ings. In 2007 the number had come
public photo of Mr. Rahami. Hours later police dates performed to expectations. If Mrs. pervillains in the mold of Osama bin down to one.
found him sleeping on a doorstep in New Jer- Clinton’s public persona gets any more “con- Laden, not fried-chicken vendors like
sey, where he was shot resisting arrest and sidered,” she may come to a full stop. Among Ahmad Khan Rahimi, the suspected
after shooting and wounding a policeman. The other things, she proposed “working with 23rd Street bomber. As attacks become more
Life in Israel had taught me differ- common, public tolerance
job now is to determine if the Afghan-born our allies.” Mr. Trump, in typically unre- ently. Between January 2002, when I
Mr. Rahami acted alone or with the aid and strained contrast, said, “This is something moved to the country, and October for liberal pieties will wane.
assent of others. that will happen, perhaps, more and more all 2004, when I left, there were 85 suicide
Mr. Rahami is now suspected of being re- over the country.” bombings, which took the lives of 543
sponsible for the New York bomb that went off Let’s hope the candidates raise their game Israelis. Palestinian gun attacks claimed What’s the lesson here for Ameri-
and the one that did not four blocks away; the before the presidential debate Monday, when hundreds of additional victims. In a cans? This past weekend’s terrorist
pipe bombs in Seaside Heights, N.J.; and an- what used to be called the war on terror is now small country it meant that most every- attacks hold at least two. One is that
other that exploded at a train station in Eliza- guaranteed to be the number one topic. one knew one of those victims, or knew there is a benefit for a society that al-
someone who knew someone. lows competent and responsible

Miami Accounting Vice

To this day the bombings are land- adults to carry guns, like the off-duty
marks in my life. March 2002: Cafe Mo- police officer who shot the knife-
ment, just down the street from my wielding jihadist in St. Cloud, Minn.

S
apartment, where my future wife had Another is that there is an equal ben-
en. Elizabeth Warren is still angry that cooking the books. In 2003 the SEC instituted a arranged to meet a friend who canceled efit in the surveillance methods that
more financiers weren’t thrown in cease-and-desist order against the sunny para- at the last minute. Eleven dead. Sep- allowed police in New York and New
prison after the 2008 financial crisis. dise for violating antifraud provisions of federal tember 2003: Cafe Hillel, another neigh- Jersey to swiftly identify and arrest
Last Thursday—the eighth law in a 1995 bond issuance. borhood hangout, where seven people Mr. Rahimi before his bombing spree
anniversary of the collapse of Sen. Warren wants more And it’s more than a Miami were murdered, including 20-year-old took any lives.
Lehman Brothers—the Mas- Nava Applebaum and her father, David, These are lessons the political left
sachusetts Democrat wrote to
defendants in financial problem. The Journal reports
that last month the SEC settled on the eve of her wedding. January in this country doesn’t want to hear,
FBI Director James Comey cases. Here they are. civil cases with no fewer than 2004: Bus No. 19 on Gaza Street, which lest they unsettle established convic-
and U.S. Justice Department 71 municipal issuers. Yet we I witnessed close-up before the ambu- tions that weapons can only cause vio-
lances arrived. Another 11 dead and 13 lence, not stop it, and that security is
Inspector General Michael haven’t heard a peep from the
seriously injured, including Jerusalem the antithesis of, not a precondition to,
Horowitz to demand an accounting. But in- progressive left about jailing government offi- Post reporter Erik Schechter. civil liberty.
stead of urging Justice to revisit its cold-case cials who mislead investors. Living in those circumstances had a But hear them they will. The eclipse
files on banksters, perhaps she should focus As for Ms. Warren, we have to give her credit strange, dichotomous quality. Things of al Qaeda by Islamic State means the
on the disturbing news on financial fraud in for including abuses by government-backed Fan- were absolutely fine until they abso- terrorist threat is evolving from elabo-
municipal government. nie Mae and Freddie Mac in her list of crisis-era lutely weren’t. Memories of bombings rately planned spectaculars such as
Last Wednesday a federal jury found that the outrages she sent to the Justice IG on Thursday. mix with other memories: jogs around 9/11 or the 2004 Madrid train bomb-
city of Miami defrauded bond investors by mis- And if she’s looking for potential areas of inves- the walls of the old city, weekend out- ings to hastily improvised and exe-
leading them about the city’s declining financial tigation, we suggest she spend even more time ings to the beach, the daily grind of cuted blood orgies of the sort we saw
condition. Specifically, Miami moved funds ear- examining government disclosures. editing a newspaper. The sense of this year in Nice and Orlando. As at-
marked for specific purposes into its General If there’s this much financial chicanery in normality was achieved through an ef- tacks become more frequent and closer
fort of will and a touch of fatalism. to everyday life, public tolerance for
Fund to hide fiscal deficits and pretend the city south Florida, imagine how much prosecutors Past a certain point, fearing for your liberal pieties will wane. Not least
was maintaining robust reserves. The scheme could find in Washington, D.C. Come to think own safety becomes exhausting. You among the casualties of the Palestinian
allowed the city to gain favorable grades from of it, we seem to recall Ms. Warren herself give it up. intifada was the Israeli left.
credit-ratings firms, which later downgraded claiming that the student-loan program would But it wasn’t just psychological ad- Living in Israel in those crowded
Miami after an auditor forced the city to reverse ring up huge profits for taxpayers, based on bo- justment that made life livable. Israelis years taught me that free people aren’t
the illegal fund transfers. gus government accounting that undercounts recoiled after each bombing, mourned so easily cowed by terror, and that jiha-
Wednesday’s loss in a civil case brought by the cost of defaults. Perhaps she’ll consider sur- every victim, then picked themselves dists are no match for a determined de-
the U.S. Securities and Exchange Commission rendering to Capitol police before more inno- up. Cafe Moment reopened weeks after mocracy. But it also taught me that de-
wasn’t the first time Miami has been caught cent taxpayers are placed in danger. it was destroyed. The army and police mocracies rarely muster their full
couldn’t provide constant security, so reserves of determination until they’ve
every restaurant and supermarket hired been bloodied one time too many.
The Boys Who Beat the FDA an armed guard, every mall and hotel Write bstephens@wsj.com.

M
iracles happen. The U.S. Food and exerted by outside forces,” presumably those LETTERS TO THE EDITOR
Drug Administration on Monday ap- meddlesome patients who dared to say the
proved a drug for muscular dystro- drug worked. The agency confirmed to us last
phy after months of delay and week that the neurology divi-
Lew Is Right on EU Tax but Lacks Credibility
bureaucratic infighting. This The agency approves sion’s clinical team leader, We agree with U.S. Treasury Secre- would be 12.25% for profits in low-tax
is a triumph for scientific in- Ronald Farkas, no longer tary Jacob Lew’s diagnosis of Amer- jurisdictions with deductions for
novation, and for young men
a drug after an ugly works at FDA, and he will not ica’s flawed international tax system taxes already paid.
who will live better and more bureaucratic brawl. be missed. (“Apple and the Case for U.S. Tax Re-
form,” op-ed, Sept. 14) and we agree,
This bipartisan approach generates
$170 billion of revenue that would be
independently—if the bureau- Even with “accelerated”
directionally, with his description of applied to America’s infrastructure
cracy doesn’t strike back. approval, Sarepta must now the proper solution. We encourage and creates a new national infrastruc-
The FDA announced accelerated approval for conduct a double-blind, randomized trial to the secretary and congressional lead- ture fund that would provide an addi-
eteplirsen by Sarepta Therapeutics more than confirm its initial findings, or FDA could pull ership to focus on our bipartisan In- tional $750 billion in financing to
100 days after the agency’s legally mandated the drug. Some patients will receive the rec- frastructure 2.0 Act. The way to get state and local governments. The ur-
decision date. The therapy is the first for Duch- ommended dose and others will be infused this done is to combine international gency of this problem demands em-
enne muscular-dystrophy patients, typically with more. Yet it isn’t clear who would sign tax reform with infrastructure invest- bracing a smart, practical plan that
boys who lose the ability to walk around age 12 up for a clinical trial when the treatment is ment. The $2 trillion of existing over- has bipartisan support, like the Infra-
before heart or respiratory failure in their 20s. on the market, and this could be an opening seas earnings would be “deemed” re- structure 2.0 Act. This is the only way
Ten of 12 boys in a clinical trial still walk after for more FDA sabotage. patriated and subject to a minimum to actually make progress.
four years on eteplirsen—nearly two football tax of 8.75% (less any tax already REP. JOHN K. DELANEY (D., MD.)
Sarepta is enrolling a placebo trial to certify
paid) and on a “go forward” basis, REP. RICHARD HANNA (R., N.Y.)
fields farther than a control group. later versions of the drug, which use the same deferral would end and the rate Washington
Agency documents released Monday reveal “exon-skipping” technology to jump over dif-
a protracted fight over the drug between ferent genetic code. Infusing a child’s muscles
Janet Woodcock, head of FDA’s drug evalua- with saline is not ethical, but this protocol is The Outrage of BDS Is Suspiciously Selective
tion center, and various reviewers. As early the only way to move new iterations through Allison Brown and Patrick Connors The target of these New York
as May 4 Dr. Woodcock planned to overrule a recalcitrant FDA. claim that the Boycott, Divestment campaigners, like the rest of the
the agency’s review, which Duchenne experts A Duchenne boy’s veins often weaken so and Sanctions movement is part of a BDS advocates, is the existence of
and clinicians had picked apart as error-rid- that a port must be inserted into his body, but long, honorable continuum (Letters, Israel itself. Omar Barghouti, a lead-
den and scientifically questionable. But a divi- we’ve heard the ports are banned in this study Sept. 13). I beg to differ. There is ing founder of the BDS movement,
sion director filed a complaint under an FDA on ethical grounds. That means a child whose nothing honorable about the BDS stated it with full clarity: “definitely,
movement’s goal of preventing dia- most definitely we oppose a Jewish
process for handling disputes. veins are deteriorating will be pricked as many
logue between Palestinians and Israe- state in any part of Palestine.” That
The FDA decision paper is a tour of toxic times as it takes to start treatment—six, seven lis who try to forge paths of mutual means all of Palestine—no Israel.
bureaucratic politics: The complaint charged needles. How is this more moral? understanding and respect. Nor is Meanwhile, Palestinians have a
Dr. Woodcock with the mortal sin of meeting If the grimness of placebo trials sounds ab- there anything honorable about BDS’s higher standard of living in Israel
with patients and families too often and at- stract, ask Mitch and Mindy Leffler. In 2011 attempts to shutter businesses in than in any Arab country. And they
tending a contentious committee meeting. An- their then-8-year-old son Aidan started a trial Judea and Samaria that provide good- have full democratic rights.
other charge is that Dr. Woodcock once men- for a drug called drisapersen, which FDA later paying jobs to Palestinians. BARRY SALWEN
tioned that destroying Sarepta might preclude rejected. The Lefflers, who have two other chil- BDS’s support of entrenched Pales- Wilmington, N.C.
later innovations, which is obvious and irrele- dren, flew or drove from their home near Seat- tinian rulers leave Palestinians with lit-
vant to approval. tle to Vancouver, B.C. once a week for two tle hope of escaping the oppression of Regarding those victims of Israel:
The criticism is even less believable given years, the first 48 weeks of which Aidan re- their corrupt leadership. Furthermore, The Palestinian Authority Septem-
the BDS movement diverts attention ber elections suddenly have been
that the sticking point was whether the drug ceived dummy treatment. Aidan is now 13 and
from human-rights abuses inflicted by scrubbed. Fatah fears Hamas’s West
produced protein at a level that was “reasonably in an eteplirsen trial. He still walks. the Palestinian Authority and Hamas Bank gains. Hamas is horrified at a
likely to predict a clinical benefit.” The drug has There will be more Duchenne drama, and against the Palestinian people. surging Fatah in Gaza. An increas-
already produced reasonable results in some some bubbled up Monday afternoon on the Hatred for the “other” deflects re- ingly despotic Palestinian Authority
boys. Dr. Woodcock seems to be the only em- not-so-breaking news that drug innovation sponsibility away from autocratic re- President Mahmoud Abbas contin-
ployee who noticed that a 2012 law directs FDA is expensive: Eteplirsen, now known as Ex- gimes’ neglect and abuse of their ues in the 12th year of a four-year
to exercise broad flexibility in approving first-in- ondys 51, will be priced based on a child’s people. Israel is the “other” for the term.
class drugs for rare diseases. weight and cost about $300,000 a year for Palestinian Authority and Hamas, as RICHARD D. WILKINS
Dr. Woodcock also deserves credit for po- the average patient. The drug is expensive to America is the “other” for North Ko- Syracuse, N.Y.
litical bravery because her boss, FDA Com- manufacture but years of government delay rea. Supporters of BDS buttress the
despots who deny their people basic
missioner Robert Califf, announced that he have no doubt added to the cost. Letters intended for publication should
rights such as freedom of the press, be addressed to: The Editor, 1211 Avenue
would “defer to Dr. Woodcock’s judgment” Congress allowed for accelerated approval inclusion for the LGBTQ community of the Americas, New York, NY 10036,
without taking a position himself. There’s a precisely to advance treatments for patients and other minorities, justice for or emailed to wsj.ltrs@wsj.com. Please
profile in noncourage. with no other options. But FDA reviewers hate women and children and freedom to include your city and state. All letters
FDA’s report notes that members of the re- the process because it reduces their life-and- worship—or not to. are subject to editing, and unpublished
view team plan to leave the agency due to con- death political control. Sarepta’s victory is a LYNN C. KOSS letters can be neither acknowledged nor
returned.
cerns about decision making and “pressures sign that death by bureaucracy isn’t inevitable. Fayetteville, N.Y.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
The Dangers of ‘Self-Driving’ Car Hype
By Scott Keogh
T
echnologists sometimes
describe auto makers as
mere “metal benders.” It’s
true that many of us have
been around for more than
a century—long before software com-
panies invented the concept of “pub-
lic beta testing.” But with the Na-
tional Highway Traffic Safety
Administration set to introduce
guidelines for autonomous vehicles,
it’s worth remembering that there’s a
lot of metal involved and it’s moving
at great speed.
Rushing adoption of
automated vehicles could
be hazardous—and turn
off consumers for good.
Software companies actively aim
to fail fast. They experiment in the
real world to work out kinks as they
go. This makes sense for those
developing a smartphone operating
system, but fine-tuning on the fly
isn’t feasible in the automotive
world. Automated-vehicle technology
can dramatically improve the safety
and efficiency of the transportation
system, but it’s all at risk. How com-
panies developing this technology
proceed over the next few years will
determine whether the public actu-
ally accepts these innovations.
No model on the road today
drives itself. Yet auto makers new
and old continue to oversell current
technology, prematurely suggesting
that vehicles with automated-driving
Why I’m Investing $500 Million In Migrants
By George Soros
T
he world has been unsettled by
a surge in forced migration.
Tens of millions of people are
on the move, fleeing their home coun-
tries in search of a better life abroad.
Some are escaping civil war or an op-
pressive regime; others are forced out
by extreme poverty, lured by the pos-
sibility of economic advancement for
themselves and their families.
Our collective failure to develop
and implement effective policies to
handle the increased flow has contrib-
uted greatly to human misery and po-
litical instability—both in countries
people are fleeing and in the countries
that host them, willingly or not. Mi-
grants are often forced into lives of
idle despair, while host countries fail
to reap the proven benefit that
greater integration could bring.
Governments must play the lead-
ing role in addressing this crisis by
Transatlantic Trade Talks Lack European Leadership
By Peter Robinson
And Thomas Niles
R
eaders following the progress
of negotiations over the Trans-
atlantic Trade and Investment
Partnership would be forgiven for
thinking that a deal is now impossible.
Between the Brexit vote, antitrade
rhetoric on the U.S. presidential cam-
paign trail and stern opposition by as-
sorted European political leaders,
TTIP appears to lack the kind of seri-
ous support needed to succeed.
The commercial and diplomatic
logic behind TTIP remain as compel-
ling as ever. An agreement would
further open each side’s market to
mutual trade, which currently
amounts to more than $1 trillion an-
nually. It would strengthen rules-
based investment in what is already
the world’s largest relationship for
foreign direct investment. And it
would improve market access for
trade in services while tackling
costly nontariff barriers, including
regulatory obstacles.
Done right, the effort to roll back
the impediments to trade and in-
vestment between the U.S. and the
European Union could be a huge
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functions are actually self-driving.
The media has often failed to vet
these claims. As auto makers, we
must resist the temptation to exag-
gerate and remain honest about the
technology’s limits.
Recklessly introducing the future
risks losing the most critical compo-
nent of the equation: the consumer.
Hype will only set false expectations
with an undecided public. Some 57%
of Americans are more worried than
excited about the rise of automated
vehicles, according to a Morning Con-
sult survey. A plurality thinks that
when full automation comes years
from now, self-driving vehicles will
make roads less safe. And a 54% ma-
jority believes that self-driving cars
will make traffic worse.
It’s no wonder many motorists
mistrust an innovation very few
people have seen in action. An array
of terms—driverless, self-driving,
robotic—vie to define some version
of the same technology. Add up all
the different state laws and regula-
tions, and public confusion can
hardly come as a surprise. Charting a
clear, deliberate path forward that
establishes a common understanding
is the only way to successfully see
this transformation through.
That starts with defining the tech-
nology based on its capabilities. SAE
International, a professional organi-
zation for automotive engineers,
characterizes these vehicles on five
different levels. A Level 0 car has no
automation, like a Model T. While a
Level 5 vehicle, with full automation,
will take someone from point A to
point B completely on its own.
Today, no vehicle on the road is
higher than Level 2—partial auto-
mation. Audi, the company I lead in
creating and sustaining adequate
physical and social infrastructure for
migrants and refugees. But harness-
ing the power of the private sector is
also critical.
Recognizing this, the Obama
administration recently launched a
“Call to Action” asking U.S. compa-
nies to play a bigger role in meeting
the challenges posed by forced mi-
gration. Today, private-sector leaders
are assembling at the United Nations
to make concrete commitments to
help solve the problem.
In response, I have decided to ear-
mark $500 million for investments
that specifically address the needs of
migrants, refugees and host commu-
nities. I will invest in startups, estab-
lished companies, social-impact ini-
tiatives and businesses founded by
migrants and refugees themselves.
Although my main concern is to help
migrants and refugees arriving in Eu-
rope, I will be looking for good in-
boost to both economies. Business
leaders on both sides of the Atlantic
are united in support of an ambi-
tious agreement.
But progress in the 4-year-old talks
has come more slowly than the gov-
ernments or the business communi-
ties had hoped. TTIP certainly faces
headwinds in the U.S., where the two
major candidates in this presidential
election have turned their backs on a
half century of bipartisan trade policy
and American global engagement. In-
stead, they pander to antitrade, isola-
tionist, protectionist forces.
But the greatest challenge to TTIP
right now comes from Europe, in the
form of naked antitrade and anti-
American prejudices from some Eu-
ropean leaders.
Over the past couple of years, the
European Parliament has consistently
belittled American policies and posi-
tions, issuing unhelpful “red-line”
declarations, for example, that no
single EU policy or regulation could
possibly be modified under a TTIP
agreement, or that the U.S. would
have to adopt wholesale the EU’s reg-
ulatory regime.
Particularly disappointing have
been a series of high-level political
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William Lewis
Chief Executive Officer and Publisher
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Ingrid Verschuren, Deputy Head
OPINION
the U.S., offers this technology in
the form of “traffic jam assist.” This
function aids drivers during some of
the most frustrating and stressful
parts of their commute. It keeps
them in their lane and allows them
to take their hands off the wheel in
slow-moving traffic for 15 seconds
at a time.
In 2018 Audi will deliver what we
expect to be the first vehicle on the
market equipped at Level 3, condi-
tional automation. The A8 model will
allow the driver to operate the
vehicle hands-free under 35 miles an
hour, when specific conditions are
met. When the most advanced levels
of automated vehicles are ready—
starting with Level 4, high automa-
tion—drivers will be able to delegate
the responsibilities of monitoring the
environment to the vehicle. While
that future won’t arrive until at least
the next decade, I believe there’s
reason to look forward to it.
vestment ideas that will benefit mi-
grants all over the world.
This commitment of investment
equity will complement the philan-
thropic contributions my foundations
I will invest in start-ups,
established companies,
social-impact initiatives
and businesses founded
by migrants and refugees.
have made to address forced migra-
tion, a problem we have been work-
ing on globally for decades and to
which we have dedicated significant
financial resources.
We will seek investments in a
variety of sectors, among them
emerging digital technology, which
seems especially promising as a way
statements in recent weeks from se-
nior Austrian, French and German of-
ficials calling for a stop to TTIP nego-
tiations because of American intran-
sigence. These complaints are
unfounded. In fact, the U.S. has been
quite forthcoming about eliminating
tariffs on industrial goods and agri-
culture, as well as removing barriers
to trade in services and in govern-
ment procurement. The EU has de-
clared far more areas of negotiation
to be off limits.
While Cecilia Malmström, the EU’s
trade commissioner, has, to her
credit, defended TTIP, the overall re-
sponse from the European political
leadership has been disappointing.
Many prominent EU leaders have re-
mained silent. And while Germany’s
Chancellor Angela Merkel has shown
consistency and courage with a
strong defense of TTIP, too many
other European leaders haven’t
matched her commitment or clarity.
Like all real-world negotiations,
getting to agreement on TTIP will re-
Notable & Quotable: Midnight for Dr. Schweitzer
Matthew King, writing Sept. 19 in
the American Interest, on the funding
crisis that threatens to close the Al-
bert Schweitzer Hospital, in what is
now Gabon, founded in 1913 by
Schweitzer, the Nobel Peace Prize-
winning doctor:
So now a great relic of the colonial
era is set to close. Schweitzer would
certainly object to such a character-
ization—he saw himself as a moral
figure out to right the wrongs of colo-
nialism in setting up the hospital, not
as a benevolent-looking agent whose
hospital would one day become a sym-
bol of colonialism’s more benevolent
face. But if we view Schweitzer as a
latter-day colonialist, suddenly the
line between the colonial era and the
present becomes quite blurry. Ameri-
can teenagers on mission trips and
college students embarking on “sum-
mers of service” appear to follow in
Schweitzer’s footsteps. So do Western
aid workers. There is more continuity
Wednesday, September 21, 2016 | A11
ISTOCK/GETTY IMAGES
Some 94% of incidents on roads
in the U.S. are caused by human er-
ror, according to the National High-
way Traffic Safety Administration
(Nhtsa). The agency also estimates
that safety innovations introduced
between 1960 and 2014, such as
seatbelts and electronic stability-
control systems, have saved more
than 600,000 lives. Automated vehi-
cles, by virtually eliminating human
error, have the potential to prevent
an estimated 90% of collisions—an-
nually saving about 30,000 lives in
the U.S. alone.
Drivers will also notice how traf-
fic flows more smoothly and how
much more efficient the transporta-
tion system becomes—reducing fuel
consumption, cutting vehicle emis-
sions and saving time. The typical
driver spends about 42 hours a year
stuck in traffic, according to the
Texas Transportation Institute.
Fully-automated vehicles will even-
to provide solutions to the particular
problems that dislocated people of-
ten face. Advances in this sector can
help people gain access more effi-
ciently to government, legal, financial
and health services. Private busi-
nesses are already investing billions
of dollars to develop such services
for non-migrant communities.
This is why money now moves in-
stantaneously from one mobile wallet
to another, drivers find customers by
using only a cellphone, and how a
doctor in North America can see a
patient in Africa in real time. Cus-
tomizing and extending these innova-
tions to serve migrants will help im-
prove the quality of life for millions
around the world.
All of the investments we make
will be owned by my nonprofit
organization. They are intended to be
successful—because I want to show
how private capital can play a con-
structive role helping migrants—and
quire tough decisions and compro-
mise. American business groups are
joining with other stakeholders in
pushing their government to achieve
an ambitious, comprehensive, high-
Many details of TTIP still
need to be negotiated. But
what’s missing is a sign of
seriousness from the EU.
standard TTIP agreement. They have
consistently opposed, for instance,
the U.S. government’s insistence that
the regulation of financial services be
excluded from TTIP.
But the real question isn’t what
detailed provisions will be included
in a TTIP agreement. Rather, it’s
whether the EU is serious about the
negotiations at all. Will European
leaders simply use TTIP to mollify
their own critics at home? If the EU
in the West’s relationship with Africa
than we are comfortable acknowledg-
ing, and for good or for ill, we owe our
collective impression of Africa as a
suffering land in need of our help to
none other than Dr. Schweitzer.
The model Schweitzer established
at Lambaréné—a personality-cen-
tered, one-off project in the middle of
the jungle—is emblematic of a flawed
approach to development in Africa.
The hospital was so dependent on
Schweitzer’s celebrity that in the de-
cades after his death, its funding has
seesawed; it now relies on a mix of
government and private sources to
continue operations. Today, with oil
revenue declining, the Gabonese gov-
ernment is cutting back on its sup-
port; it is uncertain whether private
sources will step up to provide more
funding. But this story is not unique.
Across sub-Saharan Africa, there are
countless schools, wells, and hospi-
tals that well-meaning Westerners
have constructed à la Schweitzer.
tually give drivers extra time each
day to catch up on email or connect
with a friend. But that won’t happen
until auto makers can credibly say
that a vehicle with the technology is
safer than one without.
A lot of different parties will need
to be involved—state and federal pol-
icy makers, safety advocates, city
planners, auto makers and insurers,
among others. Regulations, such as
the guidelines soon to be released
from Nhtsa, will need to encourage
breakthroughs and continuous learn-
ing. As Nhtsa administrator Mark
Rosekind asserted at a July sympo-
sium, the policy must be “nimble and
flexible, able to keep pace with tech-
nological innovation.” Regulators and
the industries they oversee often dis-
agree, but this is one instance when
both sides have every incentive to
work together.
The auto industry is now on the
verge of a reset due to the surge in in-
novation. The brands that build and
market the safest vehicles will win, re-
gardless of history or record of accom-
plishment. Reputations will have to be
re-earned, and that doesn’t come by
blowing smoke. At Audi, we inhabit
both worlds. We’ve been making cars
for more than a century, and we’ve
been developing piloted technologies
for more than a decade.
As this revolution unfolds, auto
companies are increasingly becoming
technology companies—and vice
versa. The importance of safety, and
being honest about it, will only
increase. Whether you develop soft-
ware or bend metal, we’re all auto
makers now.
Mr. Keogh is president of Audi of
America.
any profits will go to fund programs
at the Open Society Foundations,
including programs that benefit
migrants and refugees.
As longtime champions of civil so-
ciety, we will be focused on ensuring
that our investments lead to products
and services that truly benefit mi-
grants and host communities.
We will also work closely with or-
ganizations such as the Office of the
United Nations High Commissioner
for Refugees and the International
Rescue Committee to establish prin-
ciples to guide our investments. Our
goal is to harness, for public good,
the innovations that only the private
sector can provide.
I hope my commitment will
inspire other investors to pursue the
same mission.
Mr. Soros is chairman of Soros
Fund Management LLC and founder
of the Open Society Foundations.
is serious about cementing its mem-
ber economies more closely to each
other, then European leaders need to
stand up in support of a deal, and
they need to do so now. Meanwhile,
the European Commission should
move quickly to schedule multiple
negotiating rounds with the U.S. be-
fore the end of the year.
The two sides have agreed to con-
tinue talking, with the next round of
TTIP negotiations set for early Octo-
ber. Hopefully this will result in actual
progress and not additional excuses
for delay. Both the U.S. and EU need to
show the courage, vision and commit-
ment to the transatlantic relationship
and to push forward for the kind of
balanced, ambitious, high-standard
TTIP that both economies need.
Mr. Robinson is president and CEO
of the United States Council for Inter-
national Business. Mr. Niles, the
council’s past president, is a retired
U.S. diplomat who served as ambas-
sador to the European Union.
Many of them are now forgotten and
neglected places of no use to anyone
in particular. . . .
It is certainly unfortunate that the
century-old hospital in Lambaréné,
Gabon may soon close. Doctors, both
European and Gabonese, have per-
formed good works there for thou-
sands of patients and this piece does
not mean to diminish their work. But
it does intend to provoke questions
about how the West interacts with
Africa, and about the ways in which
charity and government aid can actu-
ally achieve worthy goals in Africa.
Schweitzer’s model is not enough,
and we would do well to be skeptical
of NGOs that issue fundraising calls
to “alleviate suffering in Africa.”
They must specify the country, spec-
ify the cause of the suffering, specify
the solution, and specify how it will
be measured and sustained. Other-
wise, we would do well to resist ab-
stract appeals to “help Africa.” It is
indeed midnight for Dr. Schweitzer.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A12 | Wednesday, September 21, 2016 THE WALL STREET JOURNAL.

SPORTS

Hackers Spotlight Drug Exemptions

Leaked documents
have no bombshells, Medical Document Leaks
but shed light on little- Cause Stir for Team GB Stars
known process
The recent leaking of star teroid in 2008 and another for
Fancy Bear finally hit a athletes’ medical documents an intravenous solution of sa-
nerve. caused a kerfuffle in Britain, line, morphine, and vicodin in
where some notable critics of 2014. He previously said the
By Matthew Futterman, drug use in sports were forced 2014 instance was his only ex-
Joshua Robinson and to defend their treatment. emption, telling reporters be-
Sara Germano Cyclist Bradley Wiggins, for fore a track meet in Birming-
FROM TOP: MATTHIAS HANGST/GETTY IMAGES; JAVIER SORIANO/AGENCE FRANCE-PRESSE/GETTY IMAGES; DAVID DAVIES/PA WIRE/ZUMA PRESS

example, wrote in his autobiog- ham last year that he had

For the fourth time in the raphy published after he won taken the approved drugs after
past week, the mysterious the 2012 Tour de France and collapsing at a training camp.
hacking Web site early on Olympic gold in London that he Farah has in recent years
Monday released a cache of had never received any kind of trained with the Nike Oregon
medical documents exposing shot, citing British Cycling’s “no- Project under the direction of
the pharmaceutical habits of needle policy.” The leaks showed U.S. distance-running legend
some of the biggest names in that Wiggins had received Alberto Salazar, who has been
international sports. asthma treatments through in- accused of manipulating the
And while the releases ha- tramuscular injections. exemption system for his ath-
ven’t shown that any of the A representative for Wiggins letes, a charge he has disputed.
athletes involved improperly said that the cyclist stood by Farah has refuted any accu-
used performance-enhancing his “no-needle” assertion, be- sations of doping, and with-
substances, the leaked docu- cause he was referring to “the drew from the Birmingham
ments have pulled back the historic (illegal) practice of in- meet under stress from the
curtain on an obscure—and at travenous injections of perfor- criticism.
times controversial—aspect of mance enhancing substances.” Neither Salazar nor Farah’s
the drug-testing system for in- Distance runner Mo Farah agent immediately responded
ternational sports. received two therapeutic-use to requests for comment.
The documents posted on exemptions, one for a corticos- —Matthew Futterman
FancyBear.net show instances
in which athletes—a group in-
cluding tennis stars Serena conditions can exacerbate In an interview, WADA
and Venus Williams, Rafael bronchial spasms. founding president and Inter-
Nadal, gymnast Simone Biles, Still, in locker rooms, swim- national Olympic Committee
distance runner Mo Farah and ming-pool decks and track in- member Dick Pound also de-
cyclist Bradley Wiggins—ob- fields, the therapeutic-use ex- fended the system as an effec-
tained “therapeutic-use ex- emptions can be a sore point tive means of stopping abuse.
emptions” to take medicine among athletes, who often feel “Our folks are not easy to
with ingredients on the their own drug regimens are convince” that an exemption is
banned-substances list. justified by legitimate health justified, Pound said, adding
The athletes named in the challenges while their compet- that “just because you are an
latest documents largely itors are unfairly getting an athlete you don’t give up your
shrugged off the incident, cor- advantage. right to medical care.”
rectly arguing that they did “Want a good solution for The leaks from Fancy Bear,
nothing wrong. TUEs? Make it compulsory to which is believed to be a Rus-
Yet the inclusion of Farah publicly disclose all TUEs,” sia-based group, also have to
and Wiggins in the most re- From top, Mo Farah of Great Britain, Rafael Nadal of Spain and Bradley Wiggins of Great Britain. tweeted Jonathan Vaughters, a be considered within the con-
cent batch of documents former cyclist who now runs text of WADA’s continuing in-
raised eyebrows because the advantage. If awarded, the ex- drug testing at multiple Olym- clude stimulants for treating the Cannondale-Drapac Pro vestigations into state-spon-
details of their treatment emptions aren’t publicly dis- pic Games and served on com- attention-deficit and hyperac- Cycling Team. “Any athlete sored doping in Russia. That
didn’t exactly square with the closed. mittees that evaluated exemp- tivity disorders. “It’s a bit of would think twice unless they probe, which uncovered evi-
way they had described it in Critics of the system say tion requests, said biased racket,” he said. really needed it.” dence that Russia corrupted
the past. the myriad exemptions al- doctors can corrupt the com- Max Cobb, executive direc- The hacked documents were the testing lab at the Sochi
To gain an exemption, ath- lowed show it can provide a plex approval system. He re- tor of U.S. Biathlon, said there culled from the World Anti- Olympics, has resulted in the
letes must apply to an inde- back door for athletes to take called seeing what he viewed could be environmental causes Doping Agency’s computer sys- suspension of the country’s
pendent panel for a ruling that performance-enhancing drugs. as an excess of requests from in some cases, such as the tem, and the organization in a track and field athletes from
the drugs are necessary and Don Catlin, the founder of healthy athletes to take cold, dry conditions where statement called the exemp- international competition and
will level the playing field the UCLA Olympic Analytical asthma medications that con- athletes train for winter en- tion process “a rigorous and forced them to skip the Rio
rather than provide an unfair Laboratory who has overseen tain steroids or drugs that in- durance competitions. Those necessary part of elite sport.” Games in August.

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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Euro vs. Dollar
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© 2016 Dow Jones & Company. All Rights Reserved.
Wells CEO Draws Senators’ Fire
Stumpf apologizes to
panel for allegedly
illegal sales practices,
is met with hostility
BY EMILY GLAZER
AND CHRISTINA REXRODE
Wells Fargo & Co. Chief Ex-
ecutive John Stumpf, appear-
ing before the Senate Banking
Committee, apologized numer-
ous times for allegedly illegal
sales practices, but was met
with rancor from legislators
on both sides of the political
aisle over his bank’s conduct.
Mr. Stumpf said he learned
of the nature of the situation
The Crazy Pokémon Chases Next Platform
World of
The BOJ
The Bank of Japan’s
meeting this week has the
world’s markets on edge, and
has led to a range of fore-
casts, including that the
bank will cut rates further,
buy more bonds, buy fewer
bonds or do
nothing at
all.
Out of
the white
noise one
STREETWISE idea has
JAMES taken hold:
MACKINTOSH Many cen-
tral-bank
watchers be-
lieve the BOJ will try to
steepen the yield curve,
meaning creating a bigger
gap between short- and long-
dated bond yields, perhaps
by buying more bonds ma-
turing soon and fewer ma-
turing in 10 years or more.
The broad thought is that
when the economy is im-
proving and inflation is ris-
ing, people are willing to in-
vest for future growth.
Demand to borrow for a long
time and the price of money
for the long run—in this
case, the yield on long-dated
bonds—goes up. Another
way of putting the same
thought is that if the econ-
omy is improving, eventually
the central bank will raise
interest rates, so the average
interest rate over the period
of the long bond will be
higher and a higher yield is
justified.
But to steepen the yield
curve in the hope of getting
more demand confuses cause
and effect. Just because ev-
Please see STREET page B10
 Bank of Japan is a wild card
for markets............................... B10
U.S. Biotechnology Stocks Climb
BY RIVA GOLD
AND CORRIE DRIEBUSCH
U.S. stocks rose Tuesday,
but moves in global markets
were muted as looming deci-
sions from the Federal Reserve
and the Bank
TUESDAY’S of Japan kept
MARKETS many inves-
tors on the
sidelines.
Yields on U.S. government
bonds fell ahead of Wednes-
day, when meetings of both
central banks conclude.
“No one wants to be on the
wrong side of any rate cuts or
rate hikes if they happen,”
said Mohit Bajaj, director of
exchange-traded funds trading
solutions at WallachBeth Capi-
tal. “People are sitting on their
hands.”
The Dow Jones Industrial
Average edged up 9.79 points,
COWBOYS TURN TO HIGH-TECH EAR TAGS TECHNOLOGY | B3
7000
6830.79 s 0.25% Gold
1400
1313.70 s 0.02% WTI crude
50
43.44 s 0.32% German Bund
0.10
yield -0.017% 10-Year Treasury
2.50
yield 1.687%
6500 1350 45 0.00 2.00
6000 1300 40 -0.10 1.50
5500 1250 35 -0.20 1.00
S J A S J A S J A S J A S J A S
Sources: Tullett Prebon; SIX Financial
THE WALL STREET JOURNAL. Wednesday, September 21, 2016 | B1
in 2013, years after it began, if executives serve jail time. Regulators found it had midlevel managers.
with the board learning in Most of the senators, opened about two million de- Mr. Stumpf fielded many
HANDOUT/AGENCE FRANCE-PRESSE/GETTY IMAGES
2014. though, focused specifically on posit and credit-card accounts questions about executive
“It was not fast enough, not Wells Fargo. Many weren’t without customers’ consent. compensation and potential
far enough,” Mr. Stumpf said. content with Mr. Stumpf’s an- In opening remarks, Sen. clawbacks, particularly around
“I apologize for that.” swers regarding who was re- Richard Shelby (R., Ala.) said former retail-banking head
Sen. Elizabeth Warren, who lower-level employees were Carrie Tolstedt, who stepped
was widely expected to take a trying to “hang on to low-pay- down from her position in
hard line with the bank, said
He said no senior ing jobs and make money for July.
Mr. Stumpf had shown “gut- executives had been the high-paying Wells Fargo Mr. Stumpf said he and
less leadership” by overseeing executives.” Sen. Joe Donnelly Chief Operating Officer Timo-
the dismissal of more than
fired over the (D., Ind.) added, “It all flows thy Sloan had removed Ms.
5,000 mostly lower-level em- questionable tactics. down hill.” Tolstedt from the job after de-
ployees with few repercus- In response to questions, ciding the part of the bank she
sions for senior executives. Mr. Stumpf said no senior ex- ran needed to move in a “dif-
She said Mr. Stumpf should re- sponsible for the mess, which ecutives had been fired over ferent direction.” He said that Emma Walmsley
sign, return money earned may have affected up to two the questionable sales tactics, he and Mr. Sloan had con-
during the sales scandal and
be criminally investigated.
She added that the only
million customer accounts.
Some focused on why the ac-
tivity spread across the bank’s
which resulted in 5,300 em-
ployees and managers being
terminated over five years,
cluded Ms. Tolstedt hadn’t
done enough to tamp down on
the bad behavior. Mr. Stumpf
Glaxo Taps
way Wall Street will change is branches nationwide. only as high up as regional Please see HEARING page B2
Consumer
Head as
BY TAKASHI MOCHIZUKI New CEO
TOKYO—Pokémon Co.’s BY DENISE ROLAND
chief executive said Tuesday AND JOANN S. LUBLIN
his company plans to create
games for Nintendo Co.’s next- LONDON—GlaxoSmith-
generation system, which peo- Kline PLC said its head of con-
ple familiar with the plans say sumer health care, Emma
is likely to meld features of Walmsley, will succeed An-
traditional consoles and hand- drew Witty as chief executive,
held devices. a move that punctuates the
Tsunekazu Ishihara was company’s growing emphasis
speaking in an interview as his on higher-volume, lower-mar-
company, an affiliate of Nin- gin drugstore staples such as
tendo that handles licensing of toothpaste and painkillers.
Pokémon characters, responds Ms. Walmsley, 47 years old,
to the world-wide social phe- will take up the post when Mr.
nomenon generated by its Witty steps down March 31,
smartphone game “Pokémon making Glaxo the first top-tier
Go.” Its makers say the game pharmaceutical company to be
has been downloaded more led by a woman. Ms. Walmsley
than 500 million times since takes up the top job lacking
TARO KARIBE FOR THE WALL STREET JOURNAL
its introduction in July. the direct pharmaceutical ex-
Mr. Ishihara said sales of perience that some investors
other Pokémon products have had sought amid Glaxo’s
been lifted by the game’s pop- checkered record for develop-
ularity, and the company is ing new blockbuster drugs.
hoping to bring “Pokémon Go” Instead, Ms. Walmsley
to China and South Korea. spent most of her career at
With higher global aware- cosmetics company L’Oréal SA
ness of the characters, fans before joining Glaxo six years
and analysts have been watch- ago. Still, analysts and inves-
ing whether Pokémon Co. tors saw her as a strong inter-
would roll out its games on nal contender for the job,
new platforms such as Nin- CEO Tsunekazu Ishihara says Pokémon plans games for Nintendo’s coming system, code-named NX. given her experience in the
tendo’s next game system, sort of consumer-focused
code-named NX, which Nin- developed by Niantic Inc., a products that, under Mr.
tendo has said it would start spinout from Alphabet Inc.’s Long-Running Franchise Witty, have become an impor-
selling by March 2017. People Google. Global sales of flagship Pokémon videogames on hand-held systems tant part of the company. Mr.
familiar with the matter have Although “Pokémon Go” is Witty became CEO in 2008,
said NX could be used both as free to download, players can Game Boy and Glaxo in March announced
a console with a television set pay for in-game items such as Game Boy Advance Nintendo DS Nintendo 3DS his planned departure.
and as a hand-held device. incense to attract animated 7 titles released 5 titles released 9 titles released 4 titles released The board voted unani-
“The NX is trying to change creatures, which are superim- between 1996 between 2002 between 2006 between 2013 mously to elevate Ms. Walms-
and 2000 and 2004 and 2012 and 2014
the concept of what it means posed on real-world street im- ley, according to a Glaxo
to be a home console device or ages. Official revenue figures spokesman. She is well re-
a hand-held device,” said Mr. haven’t been disclosed, but re- spected within the company,
Ishihara. “We will make games search company App Annie es- 70 million he said, having presided over
for the NX.” timates that the game has copies 62 a period of rapid expansion at
35 27
He declined to say whether earned more than $700 mil- the consumer unit after the
the games would be available lion—generating controversy formation of a joint venture
when the NX hardware first along the way because of acci- with Novartis AG.
goes on sale. dents a few players have suf- Note: Figures as of March 2016 Source: Nintendo THE WALL STREET JOURNAL. Shares in Glaxos settled flat
Attractive game titles are fered while concentrating on in London on Tuesday.
critical for any videogame the game. Other revenue esti- He said more features were entry-level players, he added. “I would have preferred a
platform, and Pokémon has mates are lower. planned for “Pokémon Go,” in- “Battling is a category that pharmaceutical person and
become one of the strongest “I feel like the reaction we cluding player-to-player bat- we do best at Pokémon, after Please see CEO page B2
global game franchises thanks saw was 10 times or even 100 tles and character trades. But all,” Mr. Ishihara said, but “it’s
to “Pokémon Go,” which was times bigger than we ex- these features will come important to really carefully  New GlaxoSmithKline chief
produced by Pokémon Co. and pected,” Mr. Ishihara said. slowly to avoid overwhelming Please see GAMES page B3 joins a very small club.......... B2
Summer Comeback
Nasdaq Biotechnology Index*
GE Boosts Salaries
or 0.05%, to 18129.96. The S&P
500 added 0.03% and the Nas-
daq Composite gained 0.1%.
the price of U.S.-traded oil
ticked higher. U.S. crude oil
rose 0.3% to $43.44 a barrel,
3750
To Attract Tech Talent
In Europe, the Stoxx Europe adding to Monday’s gains. BY TED MANN Inc. and Cisco Systems Inc.
3500
600 declined 0.1%. The Fed is widely expected Within the company, that
In the U.S., shares of to leave interest rates un- Tuesday When General Electric Co. has meant shaking up long-
health-care companies were changed, but investors are 3092.38 recruiters asked superiors to standing practices on every-
3250
some of the best performers, watching to see if officials sig- s1.4% sign off on generous pay pack- thing from how workers at its
boosted by biotechnology nal a rate rise in December. ages to lure engineers to a San Ramon, Calif., software
shares. The yield on the 10-year 3000 new software division in 2012, center are paid relative to
The Nasdaq Biotechnology U.S. Treasury note was at the bosses balked: You’re not their peers in industrial-busi-
Index is up around 15% since 1.687%, compared with 1.698% competing with Google and ness units, to finding footholds
the end of June, though it re- Monday. 2750 Amazon, they said. in or near big cities where
mains down nearly 13% in Expectations for the Bank Four years later, GE’s think- software engineers cluster.
2016. On Tuesday, the biotech of Japan are more mixed ing has changed: tech talent is GE says it’s working.
index gained 1.4%, lifted by ahead of the bank’s compre- 2500 what the conglomerate is af- “People are starting to say,
news in the group. hensive assessment of its ex- J F M A M J J A S ter, at tech talent rates. ‘Wow, these guys are starting
Allergan said it agreed to pansive stimulus program. In- *As of 4 p.m. EDT The success or failure of to do some cool things,’ ” said
acquire biopharmaceutical vestors are split on whether Source: FactSet GE’s foray into software—the Jennifer Waldo, the head of hu-
company Tobira Therapeutics the bank will cut its rates fur- THE WALL STREET JOURNAL. most broadly advertised angle man resources for GE Digital,
at a significant premium to ther into negative territory, al- of Chief Executive Jeff Im- the software unit. “Some people
Tobira’s current share price. ter its bond purchases or sig- with small losses. Japan’s Nik- melt’s effort to reorient one of still don’t view us as a technol-
Shares of Tobira, which devel- nal a meaningful shift in kei Stock Average dipped 0.2% the oldest industrial busi- ogy company, and that’s the
ops therapies for liver dis- monetary policy going for- even as bank shares rose, with nesses—will depend on luring tricky part for GE. We’re also an
eases, surged more than 700%. ward. shares of insurers and real-es- software minds away from Sili- industrial company…It’s not go-
Energy stocks also rose as Asian shares mostly closed tate stocks slipping. con Valley titans such as Apple Please see RECRUIT page B5
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Wednesday, September 21, 2016
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
A
Aerolíneas Argentinas
.....................................B5
Airbus..........................B5
Alphabet .............. B3,B12
Amazon.com........B3,B12
Amedisys.....................B5
Anheuser-Busch ......... A1
Apple......................A1,B1
Applied Materials.......B3
Automotive Holdings
Group.......................B11
B GlaxoSmithKline....B1,B2
Bank of Japan ..... B1,B10
BATS Global Markets.B6
Blackstone
Group................B10,B11
Bundesbank ................ A2
C Imperial Brands .......... B2
CBS..............................B2
Charter Hall Group ... B11
China Development
Financial Holding....B10
Cisco Systems.............B1
Crist|Kolder
Associates................B3
D-F
Davidson Kempner
Capital ManagementA2
Dexus Property
Group ...................... B11
easyJet........................B2
INDEX TO PEOPLE
A-C
Alexander, Helen ........ B2
Baum, Andrew............B2
Cohen, Rick.................A1
Costantini, Isela..........B5
E-G
Ellenberger, Don.........B6
Epstein, Boris ............. B5
Fairbairn, Carolyn ....... B2
Gold, Billie...................B2
H-K
Hampton, Philip..........B2
Howells, Mark.............B7
Comcast to Launch
Wireless Service
BY SHALINI RAMACHANDRAN
AND RYAN KNUTSON
Comcast Corp. Chief Execu-
tive Brian Roberts said Tues-
day the cable giant is aiming
to launch a wireless service by
mid-2017, creating a new line
of business that could help the
company better retain cable
customers in a fiercely com-
petitive pay-TV market.
Speaking at a Goldman Sachs
investor conference, Mr. Roberts
said the product would take ad-
vantage of Comcast’s 15 million
Wi-Fi hot spots and use airwaves
leased from Verizon Communi-
cations Inc. Comcast has a deal
with Verizon dating back to 2011
that allows the cable company to
sell wireless service using the
telecom carrier’s network at set
terms and pricing.
Mr. Roberts said because
Comcast essentially is renting
Verizon’s network, “we won’t
have to make the kind of invest-
ment” needed otherwise, such
as cell towers and other infra-
structure. “We believe there
will be a big payback with re-
duced churn, more stickiness
and better satisfaction,” he said.
Comcast will market the
wireless service inside its foot-
print, to existing and potential
Comcast cable customers, as op-
posed to nationwide. The com-
pany is interested in up-selling
customers to a bigger bundle of
services, Mr. Roberts said. Com-
cast declined to offer further
details about the service.
Comcast increasingly is
SAUL LOEB/AGENCE FRANCE-PRESSE/GETTY IMAGES
Sen. Elizabeth Warren told John Stumpf he should resign as CEO.
HEARING
Continued from the prior page
added that Ms. Tolstedt de-
cided to retire at this point,
but wasn’t fired.
Ms. Tolstedt hasn’t re-
sponded to requests for com-
ment, and the bank earlier this
week declined to comment on
her behalf.
Mr. Stumpf wouldn’t com-
ment in response to many
questions on what should be
done to his pay or hers, saying
he didn’t want to bias the de-
cision of the board’s compen-
sation committee. Mr. Stumpf
is the chairman of the board
but isn’t on that committee.
Mr. Stumpf said the San
THE WALL STREET JOURNAL.
BUSINESS NEWS
eBay.............................B3
Elliott Management...A2
ESPN............................B2
Facebook......................B5
Fannie Mae ............... B10
Service ...................... B3
Nasdaq ........................ B6
Nintendo......................B1
Novartis.......................B1
Oracle.....................B2,B3
Glaxo Hire Signals Change
BY SAABIRA CHAUDHURI
Ford Motor..................B3 P-R
Freddie Mac .............. B10
PayPal Holdings..........B3
In Charge
G-I Pokémon......................B1
LONDON—Emma Walms- Women CEOs are still rare among U.S. and British blue-chip companies S&P 100 FTSE 100
GE Digital....................B1 Quantified Ag ............. B3 ley’s appointment as Glaxo-
SmithKline PLC’s next chief CEO name Company Industry Market capitalization in billions
General Electric.....B1,B3 Ramsay Health Care.B11
General Motors ..... B2,B5 Royal Mail...................B2 executive puts her in line to Safra A. Catz* Oracle Software $161.73
Glassdoor.com.............B5 become the highest-profile Indra K. Nooyi PepsiCo Consumer products $152.08
S-U
woman in corporate Britain. Virginia M. Rometty IBM Technology services $148.03
SABMiller....................A1
Google ......................... B1 Marillyn A. Hewson Lockheed Martin Aerospace/defense $72.96
Severn Trent...............B2 Ms. Walmsley, 47 years old
GrowSafe Systems.....B3 Irene B. Rosenfeld Mondelez Consumer products $66.69
Guggenheim
Siemens.......................B5 and the chief of its consumer
Sutter Securities........B7 Lynn J. Good Duke Energy Utilities $55.43
Investments..............B6 health-care division, will take
TCI Fund Management Vicki Hollub Occidental Petroleum Oil and gas $54.10
Honeywell International her new post next year, when
.....................................A2 Mary T. Barra General Motors Automotive $49.54
.....................................B5
TD Ameritrade
current CEO Andrew Witty
Phebe N. Novakovic General Dynamics Aerospace/defense $46.45
Holding.....................A7 steps down on March 31.
IndCor Properties......B11 With her elevation, Britain’s Emma Walmsley† GlaxoSmithKline Pharmaceuticals $89.45
Tesla Motors...............B3
Intel.............................B3 Alison Cooper Imperial Brands Tobacco $42.37
The Webvan Group.....B3 FTSE 100—a list of the coun-
J-L TRW.............................B3 try’s biggest blue-chip compa- Véronique Laury Kingfisher Retail $9.45
JPMorgan Chase.......B10 Uber Technologies ...... B3 Alison Brittain Whitbread Gaming/lodging $8.35
nies by market capitalization—
Kingfisher....................B2 UBM.............................B2 Liv Garfield Severn Trent Utilities $6.41
gains its seventh female CEO.
KKR............................B10 V-Z Moya Greene Royal Mail Delivery services $5.77
LBA Realty................B11 The CEOs of EasyJet PLC,
Volvo Car.....................B3 Imperial Brands PLC, Whit- Carolyn McCall EasyJet Airlines $4.74
Lockheed Martin.........B2
Walt Disney................B2
L'Oreal.........................B1 bread PLC, Royal Mail PLC, *Co-CEO †Becomes CEO on March 31
Whitbread...................B2
Lyft..............................B3 Kingfisher PLC and Severn Source: Catalyst (CEO names); WSJ Market Data Group (market caps) THE WALL STREET JOURNAL.
Witron Logistik
M-O Informatik.................A6 Trent PLC are also women.
Microsoft.....................B3 YPF..............................B5 But GlaxoSmithKline is much ain’s big companies have been number of senior female exec- running things,” she said ear-
Moody's Investors Zoetis..........................B3 bigger than all of these, with a getting more diverse in recent utives at FTSE 350 companies. lier this year.
market capitalization of £80.2 years, with the number of Despite all this, the number According to CBI data from
billion ($104.5 billion), accord-
ing to FactSet. That compares
with £38 billion for Imperial
women on the boards of Brit-
ain’s 350 largest publicly
traded companies more than
of female executive directors
at FTSE 100 companies is still
at 10%. With Ms. Walmsley’s
January, there are only nine
more female executive direc-
tors on FTSE 350 boards than
Immelt, Jeff................B1 Schoenfeld, Gregg ...... B5 Brands. doubling since 2011. There are appointment, the number of in 2010, while the number of
Ishihara, Tsunekazu....B1 Singh, Vishal...............B3 In the U.S., the S&P 100 in- no more all-male boards left in female CEOs on the index has female chief executives has
Kohn, Stephen ............ B7 Sjeklocha, David ......... B3 dex has nine female CEOs at the FTSE 100. climbed by two since 2010. stayed roughly flat. Data from
Kurian, Thomas...........B3 Tsai, Joe....................B10 companies including General Glaxo Chairman Philip Carolyn Fairbairn, director- a global McKinsey & Co. report
Kusserow, Paul...........B5 W-Y Motors Co., Oracle Corp. and Hampton—along with Helen general of the Confederation of last year shows that if men
L-P Waldo, Jennifer .......... B1 Lockheed Martin Corp., ac- Alexander, chairman of UBM British Industry, has called for and women participated
Lu, Ming....................B10 Walmsley, Emma .. B1,B2 cording to the most recent PLC—earlier this year was ap- companies to look beyond the equally in the workforce, gross
Ma, Jack....................B10 Walters, Joe................B2 data from nonprofit Catalyst. pointed by the U.K. govern- boardroom to executive roles. domestic product could rise by
Muh, Bob.....................B7 Warburton, Catherine.B2 The upper echelons of Brit- ment to chair a review on the “We don’t have enough women $12 trillion, or 11%, by 2025.
Patel, Mehul................B5 Witty, Andrew.......B1,B2
R-T Woodford, Neil............B2
Ray, Doug....................B2
Rosengren, Eric...........B6
Yang, Rob..................B10
Yellen, Janet...............B6
CEO put increasing emphasis on
consumer-health-care prod-
ucts and vaccines.
He achieved that largely
buster drug Advair.
Ms. Walmsley held market-
ing and general management
roles at L’Oréal over 17 years
Ms. Walmsley also worked in
the U.S. and elsewhere in Eu-
rope. “Her international expe-
rience is what the board was
Continued from the prior page
she clearly lacks that,” said
one investor. “The positive is
anybody coming from outside
through a three-part, $20 bil-
lion deal with Novartis that in-
volved swapping Glaxo’s can-
cer-drug portfolio for the
in various regions, including
Europe, the U.S. and China.
People familiar with the
matter said Ms. Walmsley reg-
recognizing,’’ he said.
Other internal candidates
considered for the job were
Abbas Hussain, global head of
of pharmaceuticals brings a
fresh set of eyes.” The investor
said Ms. Walmsley’s strong
Swiss company’s vaccines
business and pooling their
consumer-health-care busi-
ularly weighs in on other parts
of the business during execu-
tive team meetings. “Just be-
pharmaceuticals, Roger Con-
nor, head of manufacturing,
and Jack Bailey, head of
track record for margin im- nesses into a joint venture cause they’re not talking Glaxo’s U.S. pharmaceuticals
leaning on its broadband busi- provement made her a “good controlled by Glaxo. about consumer” doesn’t business, according to people
ness as the overall pay-TV person” for the job, and that Mr. Witty pushed the trans- mean she lacks a point of familiar with the matter.
business stagnates and con- she could apply her brand- action as a way to reduce view, one of these people said. Ms. Walmsley’s strategy at
sumers cut the cord or trade building experience to the Glaxo’s dependence on the Glaxo directors also liked Glaxo’s consumer business has
down to discounted packages. pharmaceutical side of the risk-laden drug-discovery part the fact that Ms. Walmsley has been to champion a selection
In search of new revenue business. of the business, which suc- worked in a senior post in of so-called power brands,
streams, the cable giant has Andrew Baum, an analyst at ceeds or fails on the outcomes China during her time at such as Sensodyne toothpaste.
been weighing its wireless op- Citi, said Ms. Walmsley’s lack of lengthy and expensive clini- L’Oreal, said another person The shift is starting to bear
tions for at least a year, engag- of pharmaceuticals experience cal trials, patent life cycles familiar with the matter. In fruit across the company as a
ing in discussions with Verizon wouldn’t preclude her from and the willingness of govern- 2014, a Chinese court found a whole. Glaxo has posted solid
and testing potential services. improving Glaxo’s research ments and health insurers to local subsidiary of Glaxo and revenue and earnings growth
It will be stepping into a productivity, but said she spend ever-tighter budgets on five of its executives guilty of for the past few quarters. Still,
competitive U.S. wireless mar- would need to bring in some medicines. By contrast, vac- bribery, handing out sus- Mr. Witty has had to defend
ket, which has four national senior hires for that business. cines and consumer health pended prison sentences, fin- the tack. Neil Woodford, a U.K.
players who already have more Ms. Walmsley’s consumer care are considered more sta- ing the company nearly $500 fund manager and one of
than 100% penetration in the experience, however, lines up ble businesses. million and capping a high- Glaxo’s biggest investors, has
U.S.—meaning there are more well with Glaxo’s strategic Since the Norvartis deal profile scandal for the com- pushed for breaking up the
active cellphones in use than shift engineered by Mr. Witty. closed last year, the consumer pany there. Her prior China company into its pharmaceuti-
people in the U.S. As a result, While other major drug com- business has been an impor- stint represented “another ad- cal, vaccines and consumer-
wireless revenue growth is panies have increasingly fo- tant source of growth for the vantage,” this person said. health constituents.
slowing and carriers are locked cused on expensive new thera- company as its prescription- The spokesman for Glaxo A spokesman for Mr. Wood-
in a price war over a finite pies for cancer and other drug business struggles with said “her experience in China ford declined to comment
amount of existing subscribers. diseases, Mr. Witty, 52, has the decline of its old block- was relevant,” but added that Tuesday.
Comcast could reduce its in-
frastructure costs by integrat-
NFL Faces U.S. Presidential Debate
ing its Wi-Fi network so that
calls and data could be routed
through its Wi-Fi hot spots in-
stead of cell towers. New Street
Research analyst Jonathan BY ALEXANDRA BRUELL “NBC Nightly News” anchor
Chaplin said a cable company Lester Holt, with 30-second
could “easily steer more than In the highly anticipated spots costing $200,000 to
75% of data traffic to Wi-Fi.” matchup between the veteran $250,000, according to ad buy-
“We believe this will mark a and the rookie, the loser next ers. NBC hasn’t guaranteed
turning point for the U.S. com- Monday night may be ESPN. ratings for the presidential
munications landscape,” said The first presidential de- sound-off, said one buyer. CBS
Mr. Chaplin, who is bullish on bate between Democrat Hillary also sold out its ad packages
DAVID RICHARD/ASSOCIATED PRESS
cable’s prospects to steal some Clinton and Republican Donald around the debate, which in-
market share from wireless in- Trump on Sept. 26 is expected clude 30-second units that cost
cumbents. He estimated that to reduce ratings for ESPN’s between $200,000 and
the wireless business could be Monday Night Football. Multi- $225,000, according to people
worth at least $6 a share of ple ad buyers are predicting familiar with the matter.
upside for Comcast’s stock, TV viewership in the range of That’s high for news pro-
translating into more than $14 about 10.3 million to 11 million gramming and on par with the
billion of market value. people for the game; that ad rates typically fetched by
would be down 15% to 20% prime-time shows, ad buyers
from last year’s average Mon- Viewership for ESPN’s Monday Night Football is expected to drop. said.
day Night Football rating. CNN was selling ad inven-
ESPN, majority owned by this election, with surging au- viewers, including people who tory above $55,000—but only
Walt Disney Co., already took diences for primary debates tune in through the live with packages that range from
a hit on advertising pricing be- and the conventions, thanks in stream, according to people fa- $800,000 to $1 million, includ-
cause of expected competition large part to the curiosity and miliar with the matter. ing other debates and election
with the debate coupled with a controversy surrounding Mr. ESPN is hoping that the night buy-ins.
weaker game matchup, accord- Trump’s candidacy. But the ability to live stream will help Other networks are looking
ing to people familiar with the fact that the debate could si- its numbers against the de- for at least $500,000 in overall
matter. The game is the lowest phon viewers away from one bate. commitments to buying com-
priced of any Monday night for of the most powerful fran- “Fortunately technology is mercial space around election
the 16-week NFL schedule, the chises on TV—even if just for such that viewers no longer coverage in order to buy into
people said. one game—shows just how un- need to choose,” said an ESPN the debates, according to a
When Mr. Trump and Mrs. usual this election cycle has spokeswoman in an emailed personal familiar with the
Clinton duke it out across net- become. statement. “The debate or the matter.
works that night, ad buyers The debate, which starts at game can be streamed, and “The fact that we’re selling
predict viewership for the de- 9 p.m. Eastern time, will run we’ll be reminding fans of that out debates is unique in a mar-
bate may be up anywhere from without commercial breaks in the coming days. We do ex- ketplace where TV ratings are
Francisco bank will expand its
internal investigation to possi-
ble cross-selling abuses in
20% to 50% from the 67 mil-
lion people who watched Dem-
ocratic incumbent President
across all major networks, but
advertisers can buy ad space
in pre- and postdebate cover-
pect we’ll see a lift in our
streaming numbers.”
According to multiple ad
dramatically down over the
last four years,” said one TV
ad buyer.
2009 and 2010 to try to spot Barack Obama and Republican age. The timing means it will buyers, the football game air- While some ad buyers said
more problems, and contact all challenger Gov. Mitt Romney compete with the football ing during the Oct. 9 debate is they have marketers who are
of the bank’s customers. in the first presidential debate game between the Atlanta Fal- more of a sure bet for ratings, shying away from political
The bank, the third largest in 2012. cons and New Orleans Saints, with a matchup of more popu- events, Catherine Warburton,
in the U.S. by assets, paid a Ratings will be strong with which starts at 8:30 p.m. lar teams—the Green Bay chief investment officer at
$185 million settlement earlier “so many people still on the “There may be some slight Packers versus the New York MDC media agency Assembly,
this month and entered into fence about who to vote for impact” to NFL ratings, and it Giants. NBC is airing the game said she has more clients who
an enforcement action with and the bitterness and nasty- may get bigger in swing states Sunday night and pushing its are interested this year.
two regulators and a city offi- fighting between the two” be- like Virginia, Ohio and Michi- debate coverage to MSNBC. “As the primary debate cov-
cial over the sales tactics. cause that unfortunately gan, said Doug Ray, U.S. chief Despite the competition erage progressed, viewership
Senators also asked ques- makes for great TV, said Billie executive of Dentsu media with football, networks airing continued to grow,” Ms. War-
tions about how the bank Gold, vice president and direc- company Carat. the first debate haven’t strug- burton said. “The debates will
plans to refund its customers. tor of programming for the re- Ad buyers’ estimates for 11 gled to sell advertising. Multi- continue to be ‘must watch’ TV
“We will do everything we search arm at Dentsu Inc. The million viewers at most indi- ple networks have already sold for the American public and
can to make it right by our firm is estimating more than cate that ESPN is likely to fall most or all of their ad space could take viewers away from
customers,” he said. 80 million viewers for the de- short of the audience it is for before and after the de- other programming including
But he added the bank is bate. promising advertisers. The bate. NBC has sold out its ad the all-powerful NFL.”
still reaching out to customers For more than a year there network guaranteed advertis- space around the first presi- —Suzanne Vranica
and it will take time. has been outsize interest in ers 12 million to 14 million dential debate, moderated by 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. Wednesday, September 21, 2016 | B3

TECHNOLOGY @wsjd | wsjd.com

Oracle Declares Tagged for Healthier Meat

Cloud Ambitions BY JACOB BUNGE

Cowboys are adding algo-

Lean Beef
Cattlemen test electronic
BY JAY GREENE Oracle isn't starting from rithms to their saddle bags. ear-tags to monitor animal
scratch. It operates several Drugmakers, startups and health and boost elusive profit.
SAN FRANCISCO—Oracle smaller data centers to handle cattlemen are betting that
Corp. is brashly moving to pro- many existing customers. The sensors and data-sifting soft- Average annual returns to

IAN C. BATES FOR THE WALL STREET JOURNAL

vide computer power and stor- company has spent “many bil- ware can help keep cattle in cattle feeders, per head
age as a service for companies, lions” of dollars building its 26 Western U.S. feedlots healthier $100
but it faces an uphill climb data centers, Thomas Kurian, than cowboys can alone. New Estimate
against the market pioneer president of product develop- tags clipped to animals’ ears 0
and leader, Amazon.com Inc. ment, said in an interview. “I aim to monitor movement and
“Amazon’s lead is over,” think people discount how feeding patterns for early
Larry Ellison, Oracle’s execu- much we’ve already spent,” he signs of sickness. –100
tive chairman and chief tech- said. With low cattle prices
nology officer, said during a Mr. Kurian acknowledged pinching ranchers’ profits, de-
–200
Sunday keynote speech at the that Oracle’s data centers are velopers believe they can save
Oracle OpenWorld conference. smaller than those run by Am- feedlots money on drugs like
“Amazon is going to have seri- azon. He said that allows the antibiotics and avoid treating –300
ous competition go- company to reach healthy cattle. The tactic also One aim of tagging is to avoid giving antibiotics to healthy cattle. ’87 ’90 2000 2010
ing forward.” more markets and ex- appeals to some health offi-
Note: Figures do not include financial hedges
Now, though, Ora- pand as needed. Ora- cials and consumers who say death. But longtime cattle Mr. Sjeklocha persuaded or feed additives use.
cle barely registers cle co-CEO Mark Hurd antibiotics are overused. hands remain leery that a him to follow Southfork’s sys- Sources: Livestock Marketing Info. Center;
in the market, where on Monday declined Startups like Southfork So- computer program could tell tem. Out of the 12 animals the U.S. Department of Agriculture
Microsoft Corp.’s to disclose how many lutions Inc., Precision Animal them more about a steer than cowboy wanted treated, only THE WALL STREET JOURNAL.
Azure and Alphabet data centers Oracle Solutions LLC, Quantified Ag they can glean from horse- two wound up being ill; Cattle
Inc.’s Google Cloud plans to build or how and GrowSafe Systems Ltd. back. Empire saved money on labor data provider Livestock Mar-
Platform also com- much it intends to are jockeying to get their sen- David Sjeklocha, who helps and unneeded pharmaceuti- keting Information Center.
pete and have a sig- spend. sors and tags into cattle pens, oversee about 240,000 cattle cals. U.S. feedlots are on track to
nificant head start. IDC’s Mr. Gillen seeking to carry a data revolu- as operations manager of ani- Quantified Ag, which ana- lose about $90 an animal this
Oracle said last said it could cost Ora- tion in U.S. agriculture into mal health for Kansas-based lyzes animals’ mobility and year. Those estimates don’t in-
week that in the Larry Ellison cle “multiple tens of livestock operations. Cattle Empire LLC feedlots, temperature, invested more clude financial hedging strate-
three months ended billions of dollars” to Animal pharmaceutical had to persuade one cautious than $1 million to develop its gies or the use of growth-pro-
Aug. 31, it generated $171 mil- build a world-wide network of companies like New Jersey- cowboy to stick to recommen- system and currently charges moting feed additives, which
lion in revenue from what it cloud data centers. In its most based Zoetis Inc. also see the dations provided by Southfork, around $18 an animal for the can improve profitability.
calls cloud infrastructure as a recent annual securities filing, technology as a way to diver- an Idaho-based developer of service, according to Vishal Zoetis, the world’s largest
service. In its most recent Oracle reported capital expen- sify as restaurants and food cattle sensors. Singh, chief executive of the animal drugmaker by sales,
quarter, Amazon reported rev- ditures of $1.2 billion in its fis- companies push to reduce the Southfork’s system moni- Lincoln, Neb.-based company. began investing in Southfork
enue of $2.9 billion for its cal year ended May 31. “The level of antibiotics used in tors the trips steers and heif- Southfork and Precision An- several years ago and earlier
comparable Amazon Web Ser- company does not appear to meat production. Food regula- ers make to the feed trough imal Solutions are testing this year acquired its technol-
vices unit. Neither Microsoft have the sheer scale it needs tors also have sought to curb for signs they aren’t eating their systems ahead of wide- ogy. The companies didn’t dis-
nor Google break out revenue to effectively compete with some uses of the drugs. enough and might be getting scale commercial release, and close terms of the deal.
figures for the market. Oracle these other providers at the The widespread use of anti- sick. have yet to settle on pricing. Jon Lowe, Zoetis’s head of
“must somehow alter the per- moment,” Mr. Gillen said. biotics to raise chickens, hogs Early in a pilot that began Officials say the savings on cattle business, acknowledged
ception in the market that it’s Catching up will require “a and cattle has drawn criticism in late 2013, one cowpoke drugs and labor could be that widespread use of the
not able to compete effectively massive acceleration and a from government and con- thought Southfork’s system meaningful as feedlots face technology could cut some an-
at the same level and scale as massive investment,” he sumer groups who say it has- was missing some sick animals immense profit pressure. imal drug sales. But he said
Amazon, Microsoft and added. tens the development of har- and called Mr. Sjeklocha from Rapid expansion in the U.S. Zoetis sees that trend as inevi-
Google,” International Data Even so, Mr. Ellison said Or- dier bacteria, putting human horseback: “He said ‘Doc, this cattle herd has sliced whole- table as livestock and poultry
Corp. analyst Al Gillen said in acle is in a position to chal- health at risk. ain’t right, if these cattle are sale beef prices by 17% over producers scale back antibiotic
an email. lenge Amazon. Oracle said its Developers say their sys- sick, they need to come out,’ ” trailing 12 months and caused use in response to consumer
To persuade customers to latest infrastructure offerings tems can reduce medication said Mr. Sjeklocha, who holds the average feedlot to lose a demand.
use its offerings, Oracle must are 11.5 times faster and 20% costs by about 15% per animal a doctorate in veterinary med- record $307 an animal in 2015, “I don’t think we ultimately
do more than create solid cheaper than “the fastest solu- and save more sick cattle from icine. according to estimates from lose in the long-term,” he said.
technology to handle cloud- tion offered by the competi-
based computing and storage. tion.” He added: “We now have

U.S. Outlines Self-Drive Car Rules

It also needs to build massive a tech advantage over Amazon
data centers around the globe, in infrastructure as a service.”
table stakes to compete in the during his speech
rapidly growing but intensely An Amazon spokeswoman
competitive market. declined to comment. BY MIKE SPECTOR

The Obama administration

Intel Appoints
said companies developing driv-
erless cars should adopt a series
of government recommenda-
tions to certify their vehicles are

Head of Finance ready for U.S. roads, a policy

aimed at front-running possible
STEPHANIE STRASBURG FOR THE WALL STREET JOURNAL

conflicting local rules and poten-

BY TATYANA SHUMSKY April announced its largest re-
AND DON CLARK structuring plan, aiming to
slash 12,000 employees, or 11%
Intel Corp. said veteran fi- of its workforce, by mid-2017.
nance executive Bob Swan Intel reported second-quar-
would be its next finance chief, ter net income of $1.3 billion,
ending months of speculation down more than half from a
about who would replace long- year earlier and dinged by a
time finance chief Stacy Smith. $1.41 billion restructuring
Mr. Swan was chief financial charge linked to the layoffs in
officer of eBay Inc. for nine the quarter.
years, engineering the com- Mr. Krzanich, who became
pany’s spinoff of PayPal Hold- CEO in 2013, has tried to move
ings Inc. last year. After eBay, the company’s technology into
Mr. Swan went to General Atlan- newer markets, such as wearable
tic LLC, a growth equity firm, as devices, drones and smartcars.
an operating partner in 2015. He also brought in external
“I’m thrilled to join Intel, a management talent to spark
company where incredible in- fresh ideas at the 48-year-old
novation is supported by company, which historically
strong financial management,” promoted most senior execu-
Mr. Swan said. He will join the tives from within. Mr. Swan is
company Oct. 10. the first CFO recruited from
Mr. Swan, 56 years old, suc- outside Intel since 1983.
ceeds Mr. Smith, who was pro- As part of the new strategy,
moted to executive vice presi- Intel said its future lies with
dent with responsibility for the growing cloud-computing
sales, manufacturing and oper- market, for the first time shed-
ations in April. Mr. Smith, 53, ding its long-held focus on
joined Intel in 1988 and had personal computers.
served as CFO since 2007. In “PCs will still be a very
his new role, Mr. Smith has meaningful part of the busi-
about half of the company’s ness…but they won’t represent
employees reporting to him. the growth engine of Intel,”
Both Mr. Swan and Mr. said Richard Lane, analyst at
Smith will hold the title of ex- Moody’s Investors Service Inc.
ecutive vice president, Intel Before joining eBay, Mr.
said, reporting directly to Swan was CFO of Electronic
Chief Executive Brian Krzanich. Data Systems Corp., TRW Inc.
Mr. Swan comes to Intel at a and The Webvan Group Inc.
tumultuous time. The Santa He spent 15 years at General
Clara, Calif., company, whose Electric Co., according to Fac-
microprocessors power the vast tiva. “Bob has a broad range of
majority of computers, has been experience in the tech sec-
grappling with pressures that tor…but it will certainly be a
include a slowdown in the PC steep learning curve to under-
industry and a failure to build a stand the intricacies of chip-
major franchise in chips for making,” Mr. Lane said.
smartphones. The chip maker in Mr. Swan also is likely to at-
tract a new breed of finance
talent to Intel. “Everyone
wants to work for Bob Swan,”
said Peter Crist, chairman of
executive recruitment firm
Crist|Kolder Associates. “He
has the breadth of experience
and mentors well. There are
very few magnets for talent
like Bob Swan.”
SCOTT EELLS/BLOOMBERG NEWS
tially reducing traffic fatalities.
The U.S. Transportation De-
partment, in guidelines re-
leased on Tuesday, urged that
car makers and other develop-
ers submit to a 15-point “safety
assessment” outlining how
driverless cars are tested, safe-
guards should systems fail and
how vehicles are programmed
to comply with existing traffic
laws. The guidelines also expect
companies to detail plans to
prevent vehicle hacking. A lidar and camera unit on the roof of an Uber Technologies self-driving car in Pittsburgh.
The policy amounts to sug-
gestions as opposed to firm companies to share and sub- ing technologies deemed to collaboration between auto
regulations with legal force. mit information. have promising safety benefits. makers and [regulators] is
Federal highway safety regula- While the path toward reg- “This is a change of culture critical to avoid policies that
tors have resisted developing ulation is still hazy, the new for us,” said Transportation become outdated,” said a
official rules for driverless guidelines are an endorsement Secretary Anthony Foxx on a spokeswoman for the Alliance
cars amid concerns the years- by regulators of a safer future call with reporters Monday, not- of Automobile Manufacturers,
long process could result in with cars driven by robots and ing officials typically make cars an advocacy group represent-
rules rendered moot by fast- not people. The recommenda- meet specific standards. “It isn’t ing car makers. “We look for-
emerging technologies. tions give auto makers and prescriptive in the sense that ward to working with [regula-
The Self-Driving Coalition technology companies a firmer we’re saying there have to be tors] and state policy makers
for Safer Streets—a lobbying sense of regulators’ expecta- certain proof points. We have to to produce a consistent, na-
group that represents Google tions, indicating they should have a level of confidence. It’s tionwide approach.”
parent Alphabet Inc., Ford aim to comply with uniform really creating a more open- Tesla, which isn’t a member
Motor Co., Uber Technologies safety guidelines rather than a ended type of approach.” of AAM or the Self-Driving Co-
Inc., Lyft Inc., and Volvo Car patchwork of state regulations. Regulators will investigate alition for Safer Streets, didn’t
Corp.—cheered the new policy, Auto makers and technol- and urge recalls when systems have an immediate comment.
saying it “provides for the ogy companies have been con- pose unreasonable risks to The development of driver-
standardization of self-driving cerned about conflicting rules safety, officials said. less cars has sparked a techno-
policies across all 50 states, in different states. California, The National Highway Traf- logical arms race among tradi-
incentivizes innovation, sup- for instance, previously pro- fic Safety Administration is tional car manufacturers,
ports rapid testing and de- posed requiring drivers obtain probing the May fatal crash of technology titans and Silicon
ployment in the real world.” special licenses for autono- a Tesla Motors Inc. electric Valley startups. But hurdles
Instead, U.S. officials are mous cars and subjecting car driving itself with its Au- with infrastructure, regula-
hoping to spur companies to them to specific tests. topilot system. Officials sug- tions, and clarity on legal liabil-
share data on crashes, detail The U.S. guidelines suggest gested policy makers consider ity could slow down adoption.
their latest systems to regula- states retain prominence over giving regulators the ability to U.S. officials are attempting
tors and take steps to ensure driver's licenses, car registra- clear such systems before they to balance encouraging adop-
technologies are traffic-ready. tions, traffic laws, insurance hit the market and require tion of promising technologies
Current regulations set out and legal liabilities. But they companies to immediately ad- that researchers contend will
specific safety standards for say states should steer clear of dress technologies deemed cut traffic fatalities while ensur-
seat belts, brakes and other conflicting safety standards “imminent hazards,” but those ing they’re safe. Traffic deaths
traditional systems envision- for driverless cars, leaving authorities would require con- topped 35,000 in 2015, accord-
ing human drivers. The latest that oversight to federal offi- gressional approval. ing to government figures,
autonomous-vehicle guidelines cials. Officials said they would “Guidance is the right ac- largely because of human error.
largely lack specific bench- consider exempting companies tion to take since the technol- —John D. Stoll
marks and delineate areas for from existing rules for emerg- ogy is developing quickly and contributed to this article.
GAMES Google Maps, the service on
which “Pokémon Go” is built,
is limited in China and South
Korea.
held console, the 3DS, and the
most recent Pokémon games
for the device, released two
years ago, both of which profit
new market for Pokémon Co.
Mr. Ishihara declined to
give specific figures, but he
said sales of Pokémon prod-
Continued from page B1 Nintendo owns 32% of Nintendo directly. More Poké- ucts such as Nintendo games
consider any feature that may Pokémon, and its stock price mon games are coming in No- software and trading cards are
increase the difficulty and surged with the popularity of vember for the Nintendo 3DS in some cases running 30% to

Mr. Swan’s starting salary
will be $850,000, and he will
be eligible for an annual bonus
with a target payout of $1.1
million, according to an Intel
filing with the Securities and
Exchange Commission.
—Kimberly S. Johnson
Bob Swan to join Intel in October. contributed to this article.
raise the barrier to entry for “Pokémon Go.” Nintendo has system. 50% ahead of what would nor-
more casual users.” said “Pokémon Go” would Analysts said “Pokémon Go” mally be expected thanks to
As for expanding “Pokémon have a limited impact on its brought in new consumers and “Pokémon Go” publicity. He
Go” to China, one of the own earnings because it brought back old videogame said that the effect was espe-
world’s largest smartphone doesn’t directly sell the game. fans. “Pokémon Go” is also cially notable in the U.S.,
games markets, Mr. Ishihara But information from video- available in many countries where the company ran an ad
said he wanted to do so but he game data provider Famitsu where Nintendo isn’t operat- during the Super Bowl in Feb-
said issues with maps need to shows rising sales of Nin- ing its games business, such as ruary to mark Pokémon’s 20th
be addressed first. Use of tendo’s five-year-old hand- Brazil, bringing in a further anniversary.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Wednesday, September 21, 2016 THE WALL STREET JOURNAL.

BUSINESS NEWS

Seed Makers Defend Mergers SEC Probe Asks

U.S. lawmakers
question executives at
If Exxon’s Assets
a hearing about recent
wave of combinations Reflect Oil Drop
BY JACOB BUNGE BY BRADLEY OLSON said the attorney general
AND ARUNA VISWANATHA wouldn’t comment on the case.
U.S. Senators on Tuesday Exxon has defended its
challenged executives from the The U.S. Securities and Ex- practice of not writing down
world’s largest seed companies change Commission is investi- the value of assets, saying that
to justify a wave of mergers, gating how Exxon Mobil Corp. it is extremely conservative in
which some lawmakers said has valued its assets in the booking the value of new
could lead to higher prices for face of the current plunge in fields and wells, which lowers
farmers and consumers alike. oil prices—and how it esti- its need to reduce the value of
Senior officials from Mon- mates their future worth in a those assets if falling prices
santo Co., Bayer AG, DuPont world of increasing climate later affect the reserves’ value.
Co. and Dow Chemical Co. change regulations, according In response to a report in
said their combinations would to people familiar with the The Wall Street Journal about
ANDREW HARRER/BLOOMBERG NEWS

yield higher-performing crops matter. the New York attorney gen-

and more effective chemical The SEC sought information eral’s probe into write-downs
sprays by integrating research and documents in August from last week, an Exxon spokes-
and sharing regulatory costs. If Exxon and the company’s audi- man said the company follows
successful, the mergers would tor, PricewaterhouseCoopers all rules and regulations.
shrink the seed and pesticide LLP. The federal agency has The Irving, Texas-based
industry’s top six global play- been receiving documents the company performed account-
ers to four companies. company submitted as part of ing tests last year on its assets
The tie-ups were catalyzed a continuing probe into similar most “at risk” of an impair-
by a deep slump in the U.S. ‘This is an industry that desperately needs to invest more,’ said Monsanto’s Robert Fraley, at right. issues begun last year by New ment and found that they are
farm economy, which was hurt York Attorney General Eric still worth far more than the
by four consecutive bumper cide and seed maker Syngenta Sen. Amy Klobuchar warned officer, who estimated that Schneiderman, the people corresponding value on
crops that sent commodity AG agreed to sell itself to that fusing companies with Monsanto spends about $1.5 said. Exxon’s books, an indication
crop prices plunging. The deal- China National Chemical Corp., different specialties—such as billion annually developing The formal investigation is no impairment is needed, it
making boom could reorder or ChemChina, for $43 billion, Bayer’s focus on pesticides and new products. Asked what examining Exxon’s longstand- said earlier this year.
the $100 billion global market while Dow Chemical Co. and Monsanto’s deep portfolio of would happen if the mergers ing practice of not writing Exxon has also ardently de-
in seeds, pesticides and plant DuPont Co. in December an- seed genetics and biotechnol- weren’t permitted to advance, down the value of its oil and fended its record of climate re-
genes that enable crops to sur- nounced a merger that would ogy capabilities—could leave Mr. Fraley said it was unlikely gas reserves when prices search against critics, as well
vive herbicides and repel bugs. lead to the spinoff of three in- few avenues for upstarts to Monsanto and its rivals would fall. Exxon is the only ma- as its view the use of fossil fu-
Net farm income in the U.S. is dependent companies, includ- penetrate the research-inten- be able to release new prod- jor U.S. energy producer that els will grow in coming de-
projected to drop 11.5% this ing one focused on seeds and sive business. “It poses a ques- ucts as swiftly. hasn’t taken a write-down or cades, which corresponds to
year, a third straight annual agricultural chemicals. tion of whether some mergers The executives played down impairment charge since oil the predictions of major global
decline, and some farmers are “To me, it looks like this are too big to fix,” she said. concerns about reduced com- prices plunged two years
skeptical their bottom lines
will benefit from the cost sav-
consolidation wave has be-
come a tsunami,” said Sen.
Seed and pesticide execu-
tives defended the deals as
petition by pointing to long-
standing agreements to license
ago. Peers including Chevron
Corp. have lowered valuations
One issue for SEC is
ings and improved products Charles Grassley, chairman of necessary to speed the devel- biotech crop genes to competi- by a collective $50 billion. how Exxon’s view of
envisioned by merging seed
makers.
the Senate Judiciary Commit-
tee, who convened the hearing.
opment of new crops and
chemicals that can take around
tors. They also talked up the
potential for smaller rivals,
But the probe is also hom-
ing in on how Exxon calculates
regulations affects
The merger splurge crested “I’m concerned that further a decade and hundreds of mil- such as seed developer AgReli- the impact to its business from its future outlook.
last week when German phar- concentration in the industry lions of dollars to bring to ant Genetics LLC or pesticide the world’s mounting response
maceutical conglomerate will reduce choice and raise market. manufacturer FMC Corp., to to climate change, including
Bayer agreed to acquire Mon- the price of chemicals and “This is an industry that peel off businesses that top what figures the company uses energy forecasters.
santo, the world’s largest seed seed for farmers, which ulti- desperately needs to invest players may need to divest to to account for the future costs Still, some investors such as
company by sales, for $57 bil- mately will affect choice and more,” said Robert Fraley, secure antitrust clearance for of complying with regulations the California Public Employ-
lion. In February Swiss pesti- costs for consumers.” Monsanto’s chief technology their mergers. to curb greenhouse gases as it ees’ Retirement System
evaluates the economic viabil- say Exxon and other energy
ity of its projects. companies should acknowl-

Bayer Boss Promotes Monsanto Deal

That represents an escala- edge the growing global re-
tion of the legal questions sponse to climate change may
Exxon faces over its past and mean that it will never be able
future response to climate to tap future wells that make
BY CHRISTOPHER ALESSI ences portfolio,” based on Bayer and Monsanto have was “very confident” about the change. The company has up a great deal of its multibil-
health care and agriculture. said they expect the deal to company’s pipeline of new spent much of this year con- lion-dollar value.
FRANKFURT—Bayer AG Mr. Baumann’s comments close by the end of 2017. drugs. Six of the product candi- fronting investigations by Mr. A potential sticking point in
Chief Executive Werner Bau- came less than a week after In an apparent concession dates have combined sales po- Schneiderman and other Dem- the probe is what price Exxon
mann on Tuesday defended the Bayer announced an agree- to concerned investors, Mr. tential of at least €6 billion, he ocratic state attorneys general. uses to assess the “price of
company’s planned $57 billion ment to acquire Monsanto for Baumann underscored the cen- said. Those include drugs for The probe may also signal carbon”—the cost of regula-
acquisition of U.S. seed maker $128 a share, following tral role of pharmaceuticals chronic heart failure, kidney the opening of a new front of tions such as a carbon tax or a
Monsanto Co. to a gathering months of haggling between for Bayer’s growth. disease and prostate cancer. climate-related regulation and cap-and-trade system to push
of investors and analysts, the two companies. The company expected “sig- Analysts at Jefferies said enforcement at the SEC, a di- down emissions—when evalu-
while laying out increased Bayer first launched its bid nificant” improvement in sales the new midterm targets offer rection with far-reaching con- ating certain future oil and gas
midterm sales and earnings for Monsanto in May, taking and profitability at the phar- a “marginal upside,” while an- sequences for the oil and gas prospects, people familiar with
targets for the crop and phar- investors and analysts by sur- maceuticals division, driven by alysts at Warburg said the ini- industry. The SEC has sepa- the matter said. The SEC is
maceuticals businesses. prise, and worrying some that recently launched blockbuster tial announcements confirmed rately begun as a policy matter asking how Exxon’s carbon
“There was a perception Mr. Baumann would shift the drugs, he said. Bayer now sees their “positive expectations.” to re-examine its disclosure price affects its balance sheet
that this was something that company too far away from its a combined peak annual sales At the crop-science divi- rules, including whether to re- and the outlook for its future,
came out of the blue and was core pharmaceuticals division. potential for those products— sion, Mr. Baumann said Bayer quire the mandatory disclo- the people said.
completely off strategy,” Mr. The proposed deal would including blood thinner Xarelto was targeting a “clean” earn- sure of potential climate risks When such a theoretical
Baumann said of the Monsanto mean crop science would com- and eye medicine Eylea—of ings margin of more than 30% by public companies. price for carbon is low, more
deal. “Just to set the record prise about half of overall rev- more than €10 billion, or more three years after the closing of Exxon declined to comment oil and gas wells would be
straight, we were crystal clear, enue, compared with 30% in than $11 billion, up from a pre- the Monsanto acquisition, on the SEC or New York in- commercially viable. Con-
in Sept. 2014, that our objec- 2015, while health care would vious forecast of €7.5 billion. compared with a pro forma vestigations. A spokeswoman versely, a high carbon price
tive is to build our life-sci- make up the other half. Mr. Baumann also said he margin of 27% in 2015. for PwC declined to comment. would make more of Exxon’s
An SEC spokeswoman de- assets look uneconomic to pull
clined to comment. A spokes- out of the ground in future

China Court Hears Tesla Crash Request man for Mr. Schneiderman years.

SHANGHAI—A Chinese man a third party, rather than When the system is turned ing there was no evidence that
whose son was killed while Tesla,” said Cui Qiuna, a law- on it warns the driver to keep the brakes had been applied.
driving a Tesla Motors Inc. yer for the Gao family. The hands on the steering wheel, In court Tuesday, Gao’s fam-
vehicle applied to a local Bei- court will review the family’s the car maker said, reinforced ily called on Tesla to admit its
jing court to investigate request. by repeated warnings to “be salespeople had exaggerated
whether the car’s Autopilot The family believes the car prepared to take over at any Autopilot’s capabilities and
driving system was engaged. was in Autopilot mode when it time.” In this case, it said, the publicly apologize for false ad-
In January, 23-year-old Gao collided with a road sweeper, driver took no action even vertising, said the family’s
Yaning died in a crash in the Ms. Cui said. though the road sweeper “was lawyers. In addition, the family
northeastern province of Hebei Tesla said the collision visible for nearly 20 seconds.” is seeking 10,000 yuan ($1,500)
while driving a Tesla Model S. damage makes it impossible to Mr. Gao’s traffic fatality was as compensation for the grief
Six months later his father, determine, and that the family first reported last week by they have suffered because of
ULIE DERMANSKY/CORBIS

Gao Jubin, filed a lawsuit ac- hasn’t provided it with any ad- state broadcaster China Cen- the son’s death.
cusing Tesla of exaggerating ditional information to allow it tral Television, which said The Beijing court didn’t is-
Autopilot’s capabilities. At a to investigate, despite re- video footage taken by a cam- sue a verdict on Tuesday, said
court hearing Tuesday, he peated requests. era inside the car showed the the lawyers. They said another
asked for an independent in- Tesla said in a statement af- vehicle maintaining its speed hearing would be held at the
vestigation into the crash. ter the hearing that even if Au- as it crashed into the road family’s request for an inde-
“The family insists the in- topilot was engaged, it wasn’t sweeper. The report also pendent investigation. Exxon Mobil’s Baton Rouge, La., oil refinery. Unlike rivals, Exxon
vestigation should be done by the cause of the collision. quoted Chinese police as say- —Rose Yu hasn’t reduced the book value of energy assets due to low prices.

hotel companies, has received
Business clearances from regulators repre-
senting more than 40 countries
Watch world-wide, including the U.S.
and the European Union.
As a result of the agreement,
Starwood shareholders will re-
ceive $21 in cash and 0.8 of a
share of Marriott for each share
MARRIOTT INTERNATIONAL of Starwood they hold.
—Anne Steele
Starwood Deal Clears
Last China Hurdle GENERAL MOTORS
Marriott International Inc. and
Starwood Hotels & Resorts
Union Accord Averts
Worldwide Inc. on Tuesday said Strike in Canada
China’s antitrust authority ap- The union representing Can-
proved their pending merger, ada’s auto workers reached a
clearing the last regulatory hurdle tentative agreement on a new
keep open a vehicle-assembly
plant in Oshawa, Ontario, beyond
a potential 2019 closure. Secur-
ing future investment in Canada
was the union’s priority during
the talks.
GM confirmed the tentative makes several light-selling se-
contract, saying it “will enable
significant new product, technol-
dans that were expected to fall
out of GM’s production plans by
ogy and process investments,” at
the plants. Mr. Dias said the
about 2019—would be retooled
under the pact to produce both
Oshawa plant—which now cars and trucks.
—Mike Colias
ALLERGAN
Drugmaker to Pay 19
Times Tobira’s Value
Allergan PLC on Tuesday said
it agreed to acquire Tobira Ther-
apeutics Inc., a biopharmaceuti-
cal company that develops thera-
pies for liver diseases, in a deal
valued at as much as $1.7 billion,
or 19 times Tobira’s previous
SPENCER PLATT/GETTY IMAGES
damage, and it can lead to scar-
ring of the liver and progress to
cirrhosis, liver cancer and even-
tual liver failure.
“NASH is set to become one
of the next epidemic-level
chronic diseases we face as a
society,” Allergan Chief Executive
Brent Saunders said in prepared
remarks, citing the rising rates of
diabetes and obesity. NASH has
no approved treatments avail-
able, the company said.
Allergan will make an upfront
payment of $28.35 a share in
cash, approximately six times To-
bira’s closing price Monday of
$4.74 a share. Tobira holders also
will each receive one contingent

to the deal’s closing, now expected four-year contract with General market value. value right to receive as much as
before the market opens Friday. Motors Co., averting a strike Tobira focuses on products $49.84 a share linked to certain
The companies last month that threatened to disrupt pro- that treat nonalcoholic steato- development and regulatory
agreed to give the Chinese Min- duction of GM’s sport-utility and hepatitis, or NASH, a common milestones.
istry of Commerce additional other high-margin vehicles. liver disease associated with Shares of Tobira surged 715%
time to review the tie-up, per Unifor President Jerry Dias obesity and type-2 diabetes. to $38.65 in Tuesday trading in
the agency’s request. said early Tuesday that GM has NASH occurs when the accumu- New York, while Allergan shares
The transaction, which will committed to spending “hun- lation of liver fat is accompanied fell 2.9% to $238.27.
create one of the world’s largest dreds of millions of dollars” to Marriott and Starwood are expected to close their deal on Friday. by inflammation and cellular —Tess Stynes
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, September 21, 2016 | B5

MANAGEMENT
WORKAROUNDS
New Leader
At Aerolíneas
Pushes Change
AMEDISYS INC.

One CEO’s Hands-On Ex-GM executive battles unions, government

Crisis Management dependency to bolster the Argentine airline
When unprecedented flooding
hit Louisiana last month, Paul BY TAOS TURNER difficult to streamline
Kusserow, chief executive of Ba- Aerolíneas, which was on track
ton Rouge-based Amedisys Inc., BUENOS AIRES—As head of to lose $1 billion this year, af-
considered the safety of both his General Motors Co.’s opera- ter dropping $1 million to $2
staff and clients. The disaster tions in Argentina, Isela million a day for much of the
left nearly a quarter of the com- Costantini cut costs and raised past decade. The CEO said the

ENRIQUE MARCARIAN/REUTERS
pany’s 400 employees with revenue at one of the most ad- airline lacked the organiza-
flooded homes and property, and mired companies in the coun- tional trappings of a normal
put at risk the firm’s local hos- try. Last year, she quit and business, such as budgets, per-
pice patients. took a very different job at the formance and sales targets.
Among the 13 people who urging of Argentine President “We had more employees
died in the flooding was Bill Mauricio Macri: running the than we needed. The challenge
Borne, Amedisys’s founder. country’s bloated state-run air- was that we didn’t know ex-
Mr. Kusserow, who joined line, Aerolíneas Argentinas. actly where we had the extra
Amedisys as CEO in December Nine months later, Ms. employees,” she said.
2014, described the days after Costantini is finding it tough Ms. Costantini, one of nu-
the rains began: to overhaul the flagship car- merous CEOs who accompanied
‘I knew I was going to find a black box, but I didn’t know how
We knew the flooding might rier. With 12,000 workers, six Mr. Macri into power last year, big it was going to be.’
shut down fuel stations and that powerful unions and a deeply is finding that the company’s
wait times would be huge at the ingrained bureaucratic culture, omnipresent, politically active
remaining ones, so we brought in the 65-year-old airline is more unions oppose change. To save ISELA COSTANTINI
a fuel truck on Aug. 14 and were like a government ministry money, she asked pilots to agree
dispensing fuel to caregivers so than a cost-conscious com- to fly a smaller, less expensive
they could get out to see their pany, she said in an interview. plane to Rome. They balked.
patients. “I knew I was going to find Aerolíneas has too many of cost. There was no culture of Aerolíneas doubled the num- to as low as $260 million in
We started to collect informa- a black box, but I didn’t know administrators, yet Ms. revenue,” Ms. Costantini said. ber of flights and passengers 2016. She expects the airline
tion on whose property and how big it was going to be,” Costantini is pushing to in- Mrs. Kirchner’s government flown. It improved punctuality, to be profitable within four
homes were damaged and we Ms. Costantini said. crease earnings, rather than nationalized Aerolíneas in added 3,000 employees and years. Sales are up 10% this
just wired them all $2,500 For managers who have reduce head count, in part be- 2008, claiming that its previous burned through $5 billion in year, and in July Aerolíneas
straight out of the bank account. worked in private enterprise, cause unions easily could react owner, Spain’s Marsans Group, taxpayer subsidies, according flew a record one million pas-
I went to a Lowe’s in New Or- moving to the public sector by shutting down flights. In- had run up $890 million in to Guillermo Dietrich, Argen- sengers, up 13% on the year.
leans in the middle of the night can be a jarring shift. Leaders stead of firing thousands of debt and mismanaged flights tina’s transportation minister. But with the Macri adminis-
with our general counsel. There must balance the interest of workers, she is trying to woo that often were canceled and By one estimate, the govern- tration facing budget prob-
were long lines. We bought more stakeholders, including them, inviting them to partici- punctual only 50% of the time. ment was spending more on lems, it is unclear how much it
mops, buckets, fans, bleach, anti- government officials and pate in corporate decisions. The nationalization was part Aerolíneas than Argentina’s will fund Aerolíneas.
mold spray, anything that was deeply vested political inter- Her approach appeared to of a broader increase in gov- poorest province was allocat- Franco Rinaldi, author of a
on the shelves. ests, said Philip Armstrong, be working until last week, ernment control over Argen- ing to public education. book about Aerolíneas, said
Every crisis is an opportunity vice chairman of the Interna- when pilots unexpectedly went tina’s economy, which included Mr. Dietrich has described Ms. Costantini has vastly im-
to do the right thing. tional Corporate Governance on strike for nearly a day to the expropriation in 2012 of the previous management as proved the company, but
—Lauren Weber Network. “You have to have a demand better pay and bene- energy company YPF. Mr. “disastrous,” claiming its for- added that she must take
very high level of political as- fits. Though the strike ended, Macri, then mayor of Buenos mer chief executive, Mariano painful actions to truly over-
tuteness and judgment.” the pilots union has called the Aires, criticized those moves, Recalde, had no business plan. haul it. The airline has 160
Since taking office in De- company’s management “in- but as a presidential candidate, “That’s a lie as big as an employees per plane, but can
Shorter M.B.A.s Are cember, the market-friendly transigent” and is doubling he promised to keep the com- Airbus A330,” Mr. Recalde operate efficiently with closer
All the Rage Now Macri administration has laid down on calls for higher wages. panies in government hands. said in an interview, referring to 100, he said.
Graduate business programs off almost 11,000 employees In many ways, Ms. Costan- Though it could save the to the company’s new aircraft. “She’s focused on reducing
offering one-year M.B.A.s and across ministries, slashing tini is building from the ground government money, “privatiz- He nearly tripled the fleet to costs without making the hard
master’s degrees in specializa- payrolls that had soared under up. Early on, when she asked ing Aerolíneas would be like 75 planes, he noted. and inevitable decision that you
tions such as data analytics saw Mr. Macri’s populist predeces- employees to find ways to cut privatizing the national soccer Ms. Costantini has slashed have to make,” Mr. Rinaldi said.
a marked increase in applications sor, Cristina Kirchner. spending, a staffer replied, “I team,” Ms. Costantini said. non-operating costs, boosted “If you don’t reduce the work-
this year, according to a Gradu- But the 45-year-old Ms. don’t have a budget,” she re- “People feel like they own it.” revenue, and she says force, it’s going to be impossible
ate Management Admission Costantini is finding it more called. “There was no culture Under Mrs. Kirchner, Aerolíneas could cut its losses to turn the company around.”
Council survey of 872 programs
around the world.
Overall, business programs in
2016 reported a total of 440,000
applications; in 2014, 748 pro-
RECRUIT Competitive Pay
GE Digital, General Electric’s software unit, is now offering salaries for
low Google or Facebook Inc.,
where such employees are paid
an average of about $250,000
as Cisco, but also fast-growing
firms like Google and Apple.
Some in the industry are
grams reported 292,058 applica- Continued from page B1 software engineers that are on par with IBM and SAP but below and $ 220,000, respectively. skeptical. GE Digital “would
tions. ing to feel like Google, exactly.” Google and Facebook. GE, which was incorporated struggle to draw at the level of
Gregg Schoenfeld, director of Steve D’Aurora, a former in 1892, established GE Digital talent that an Apple or a Face-
research at GMAC, said a widen- leader of Apple’s Siri team, said Average salary for senior software engineers* as a stand-alone software unit book or a Google could draw,”
ing variety of graduate-level he “harbored the same skepti- in 2015, distinguishing it from said Mehul Patel, CEO of Hired
business programs paired with cism” when Harel Kodesh, the COMPANY SALARY, IN THOUSANDS its industrial divisions, which Inc., an online recruiting ser-
high unemployment in Europe chief technology officer at GE $0 $50 $100 $150 $200 $250 make jet engines, power tur- vice. Though GE can beat out
are significant factors creating a Digital approached him last Google bines and medical scanners, industrial competitors and en-
“mixed picture” in graduate-busi- year. The 43-year-old Mr. D’Au- Facebook among other products. The terprise players, the best
ness programs this year. rora said he was concerned that digital unit, with 28,000 em- young talent either wants to
Some 65% of European grad- the company would be bureau- Apple ployees, makes up a small per- join a startup or work on Face-
uate-business programs reported cratic. “I’m a little older…and I SAP centage of Boston-based GE’s book’s big next project, he said.
receiving more applications this have kids, and it’s not like I have GE Digital 333,000 world-wide workforce. GE counters with examples
year, as opposed to 46% of U.S. to work at Apple or Google,” he GE Digital has more than like Darren Haas, a co-creator
IBM
programs. After the U.S. eco- said. “It really came down to 1,700 workers at its headquarters of Siri who was head of cloud
nomic recession in 2008, similar what Harel told me: We’re going GE in San Ramon, about an hour engineering at Apple. He
application growth patterns to change the world.” U.S. average drive from San Francisco and joined GE Digital in June.
emerged. The company now offers Oracle San Jose. That is a 40% increase Boris Epstein, a co-founder of
“A good way to ride out a bad base pay, bonuses and equity since the beginning of the year. Binc Inc., a Silicon Valley hiring
economy is in school,” said Mr. to GE Digital employees in line *Average salaries as of Sept. 2. Source: Glassdoor THE WALL STREET JOURNAL. The company says it will surpass firm, said, “We don’t often hear
Schoenfeld. with competitors in Silicon 2,000 workers in the complex candidates asking for opportu-
Master’s degrees in manage- Valley, not just Siemens AG cause in other GE offices $138,000, according to data during the next two years. nities at GE.” But the company
ment and online M.B.A. programs and Honeywell International around the country the shift in collected by Glassdoor.com. In presentations this sum- is further along than many other
also saw an increase in applica- Inc. “Honestly, we couldn’t compensation for digital work- That is on par with Interna- mer, the company pledged to traditional enterprises. “Success
tions this year, according to the hire anybody if we didn’t,” Ms. ers is coming more gradually. tional Business Machines Corp. aim high in its search for talent, for GE doesn’t necessarily have
survey. Waldo said. But the issue is A senior software engineer and SAP AG, according to the plucking programmers not just to align for them beating out
—Dahlia Bazzaz “sensitive,” she added, be- at GE Digital earns about careers website, but well be- from enterprise companies such Google and Facebook for talent.”
©2016 Dow Jones & Co. Inc. All rights reserved. 6DJ3377

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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B6 | Wednesday, September 21, 2016
Markets Tighten Ahead of the Fed
Stocks and bonds are
down and the dollar
up as central bank
prepares to meet
BY BEN EISEN
While Federal Reserve offi-
cials have been wrestling with
whether to tighten monetary
policy in recent weeks, the fi-
nancial markets may have al-
ready done much of the work
for them.
Stock and bond prices have
slumped and the dollar has
strengthened. Goldman Sachs
Group’s gauge of U.S. financial
Tightening
Markets are giving the Fed
a reason not to act this week.
Goldman Sachs Financial
Conditions Index
102
101
100
99
J F M A M J J A S
Source: Goldman Sachs Group Inc.
THE WALL STREET JOURNAL.
ADVERTISEMENT
Legal Notices
FINANCE & MARKETS
conditions—a closely watched
barometer that both reflects
economic growth and offers a
view of investor expectations
of market trends—is at its
tightest level since June. The
financial-conditions index was
at 100.27 Friday, up from 99.86
on Aug. 18. Tighter conditions
reflect greater difficulty in bor-
rowing.
“The market is calling the
shots now, not so much the
Fed,” said Don Ellenberger,
head of multisector strategies
at Federated Investors. “That is
going to be the case until the
Fed surprises the market and
hikes [interest rates] even if
stocks have sold off a little bit.”
The rising cost of borrowing
dollars for brief periods is hit-
ting financial institutions and
other companies around the
globe, a tightening of condi-
tions that further limits al-
ready slim prospects that the
Fed will raise interest rates at
its meeting ending Wednesday.
Reflecting the tighter bor-
rowing conditions, the three-
month U.S. dollar London in-
terbank offered rate—a
borrowing benchmark—this
month hit its highest level
since 2009 and has been creep-
ing higher in response to
money-market changes due to
be implemented next month.
That lifts the cost of borrowing
for the trillions of dollars of
debt tied to the rate.
Investors have been pulling
out of prime money-market
INTERNATIONAL NOTICES
Janet Yellen has cited tightening conditions as damping growth.
funds ahead of the changes,
which allow funds to stop in-
vestors from pulling money or
charge them to do so when
markets are volatile. That dis-
appearing buyer base has
pushed up the borrowing costs
that Libor reflects.
Tighter markets in many
ways have the same impact as
rising interest rates because
they make it more difficult and
expensive for consumers and
companies to borrow. While
conditions are still quite easy,
they depend in part on buoyant
markets. The moves under-
score the delicate interplay be-
tween investors and central
bankers, which have only be-
come more fraught after years
of easy-money policies.
At the same time, central
banks in Europe and Japan are
 
THE WALL STREET JOURNAL.
Mismatch
The spinoff of real-estate shares
from financials in the S&P 500 led
to a hiccup in one ETF's prices
cials have advocated raising in- Guggenheim S&P 500 Equal Weight
terest rates sooner rather than Financials exchange-traded fund
later. Federal Reserve Bank of Premarket trades
Boston President Eric Rosen- $40 $44.27 canceled at or
gren earlier this month sug- above $34.01
gested lifting rates to avoid let- 30
ting the economy overheat. $31.01
But a decision to lift interest 20
rates would be a major sur-
ANDREW HARRER/BLOOMBERG NEWS
prise to investors. Futures mar- 10
kets are indicating a 15%
chance of a move, while a De- 0
cember rate increase looks Friday Monday
more likely, according to CME close close
Group data. Sources: FactSet; Nasdaq (canceled trades)
In February, Federal Reserve THE WALL STREET JOURNAL.
Chairwoman Janet Yellen cited
tightening financial conditions
as damping growth.
With the Fed largely ex-
Sector
getting into a similar sort of
game with markets, where pol-
icy makers are being pushed
pected to sit tight, Japan has
become the focal point. The
Bank of Japan, the country’s
Switch
toward ever more aggressive
monetary policies, even as
there is a growing consensus
central bank, will publish an
assessment of its policies
Wednesday.
Trips Up
An ETF
that such policies are having That comes as investors
little beneficial effect on the have speculated about whether
economy. Japan has reached the limits of
It has become a familiar pat- the effectiveness of monetary BY CORRIE DRIEBUSCH
tern in recent years. U.S. mar- policy. The BOJ has bought
kets tighten financial condi- $800 billion in assets annually The rollout of the first new
tions just enough that central since late 2014 and adopted sector for the S&P 500 since
bankers don’t want to risk fur- negative interest rates, but the the turn of the century hit a
ther ructions by lifting interest yen defied expectations and snag on Monday.
rates. Events such as the selloff rose. Still, inflation hasn’t Roughly 1,200 trades of the
of August 2015 helped push the trended higher and the cur- Guggenheim S&P 500 Equal
Fed to wait until December for rency has strengthened more Weight Financials exchange-
its first interest-rate increase. than 15% against the dollar this traded fund were canceled
Similar market turbulence at year. Monday morning, according to
the beginning of 2016 has “The Fed is watching Japan FactSet, as prices didn’t accu-
helped keep the Fed on hold all and doesn’t want to end up in rately reflect adjustments made
year, analysts say. the same situation,” Mr. Pzegeo for a new real-estate sector.
Some Federal Reserve offi- said. Stock-exchange operators can
cancel trades when they are
clearly out of line with market
Banks Test Blockchain prices at the time of execution.
The trades, which occurred
before the U.S. stock market
Network to Share Data opened, affected more than
650,000 shares, FactSet data
show. The value of the trades if
BY TELIS DEMOS ments. R3, a bank consortium they had gone through was
focused on blockchain applica- about $26 million, according to
 

Some big banks are applying tions, is working with the Secu- FactSet.
a bitcoin-style system to an- rities Industry and Financial It wasn’t immediately clear
           other technology pain point, Markets Association to set how the trades occurred, but
      the identification tags attached standards and monitor further Nasdaq Inc. said it, NYSE Arca,
to things they trade. testing and potential imple- Bats Global Markets Inc. and
           !" #$% & Banks including Citigroup mentation. Investment manager the Financial Industry Regula-
Inc., Credit Suisse Group AG AllianceBernstein LP is also in- tory Authority determined to
$# and HSBC Holdings PLC have volved in the test. cancel all trades in Guggenheim
       
&    used technology developed by In these networks, partici- S&P 500 Equal Weight Finan-
startup Axoni to test a new way pants work off a single data- cials ETF that were executed
to share trade-reference data. base, akin to a shared Google between 9:24 a.m. and 9:27
   They are doing so using a so- document, to mitigate expenses a.m. ET at or above $34.01.
"'("$% % )*% (
+
,
+,
+- $#
+  %.) /0$ )( '# $*) called blockchain network, the and the opportunity for errors
$0
&  1 1 firms are set to announce Tues- or miscommunication when
About 1,200 trades
2 day. each bank maintains its own re-
Such a network uses a led- cords. were canceled,
           !" #$% & ger that parties involved can Blockchains haven’t yet been
see to track information, rather put to live use in bank trading.
affecting more than

than maintaining their own, in- But banks have bet millions of 650,000 shares.
  dividual records. This is akin to dollars through investments in
$( #) )# 3)45& the kind of network that marks startups that it can work, and
all bitcoin ownership and have declared success in early The Guggenheim S&P 500
  6     



  '#)'     trades. tests such as with credit-de- Equal Weight Financials ETF
"'% 
 
    
  
  

 
 *.)/) The new application to ref- fault swaps. closed at $44.27 Friday, sug-
4$(( ))% 1    
 *.)/) /0$7  
    erence data is the most recent Reference data is costly not gesting that some market par-
 
  
      !  ! 
    of a series of projects in which only to constantly monitor and ticipants were trading the ETF
  
 " " "# 
"$    %
 &    ' big banks hope to take costs update, but banks also pay out- as if the split hadn’t occurred.
/0$ )( '# $*) *.)/)  
  
 ! 
  
out of their complex, expensive side firms such as Bloomberg The ETF closed at $31.01 Mon-

  
  
 
 ( )  (
 *   '   and often troubled back-office LP and Thomson Reuters Corp. day.
$ %      +,- .  ' "/0 1
  2!  2 ,
 3 systems. Banks are working on to access data they collectively A spokesman for Guggen-
4 56 7
 (  '& tests involving international produce. If banks could auto- heim said in a statement that
2
    
  18( 
  


  
  money transfers, derivatives, matically share the data among “the trades were based on in-
  
 "    %
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!
 
  
      

  18(  tural commodities. it, they could potentially reduce rately reflect the change in the

& Created by firms such as Ax- their reliance on those vendors. price” related to the firm’s de-
oni, Digital Asset and Symbi- The banks could also maintain cision to separate real-estate
   18( 
 
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  ( 
!(

   !  ont, these networks differ from a measure of control over data shares from its financial ETF.

   !!!&( 
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  the universal public blockchain that is now readily accessible The creation of an 11th S&P
 (&3<3&& used by bitcoin. Instead, the to third parties and rivals. 500 sector by splitting real es-
networks are privately con- Though seemingly basic, ref- tate from financials marked the

  
     ; (   18( 
 (
  trolled by the banks involved. erence data can also be rife first new-sector rollout for the
: ,;
   =>4 4   (  (&3<3& !     
Some early bitcoin develop- with errors, especially in more index since 2001, according to
&& 
$ &&  ' &
ers have criticized these proj- complex trades, studies have S&P Dow Jones Indices. A
      ects, saying they undermine found. A 2012 study by spokesman for S&P Dow Jones
bitcoin’s original promise of Capgemini Consulting said that Indices said Monday that the
& 2 
 
    (     
 
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  %
 
  
! 
  
 banks. Banks, though, have fo- the major contributors to…op- the trading activity of products

  
    
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? 
cused on private ledgers given erational risk,” and makes up based on its indexes.
the confidential nature of much as much as 70% of the data Ahead of the spinoff, ex-
& 2 
      (!((    !
 
 ( trade data. used in trades. It said banks change-traded funds that track
)& And banks are struggling to were spending $2 billion glob- the financial sector had some
find ways to increase revenues ally that year to integrate dif- options on how to adjust. One
 
at a time of record-low interest ferent data sources. option was to sell their real-es-
2 ((!         !   
        rates, reducing trading volatil- In one example, executives tate holdings and distribute the
  
  
 ( )& +(     
  ity, and muted capital markets. at Opus Global, a bank technol- gains or losses from the sale to
  3 
  
   
 
  
(   18( 
& So cost-cutting through new ogy provider, earlier this year investors, but that could incur
technology is seen as one of the found that some Dow Jones In- taxes, which ETFs seek to

  
          8  
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The reference-data proto- were marked differently in ma- transferring real-estate stocks

  
         (
@ 
. 8 0    : type was used for corporate jor databases. There were seven in their financial ETF and dis-
,;
      7
2& bonds. Via the network, the differences in name, spelling, tributing a specific number of
A      %
      
) . 3 !(  B (;
   banks shared information such abbreviations or punctuation real-estate ETF shares to inves-

   (  ) 7( , C )  B (;
  
  as the name of the issuer and for Goldman Sachs Group Inc., tors.
 (   ) ) 3 D 
0    +,- .  '       
 how to calculate interest pay- and six for DuPont Co. Guggenheim Investments
( ) 

 
       (  
 ( )   chose that option, replacing for
 & investors the real-estate stock
holdings in its Guggenheim S&P
ELIZABETH SHAFIROFF FOR THE WALL STREET JOURNAL

E    
   

  
    .     500 Equal Weight Financials
(             
   
& -((
 ETF (ticker: RYF) with shares
 
  !((  (
 
           ((    of the Guggenheim S&P 500
       
& E  8
      !((  (
Equal Weight Real Estate ETF
  F & 2
 !((  B   ;     & (EWRE), along with a small
-((
  
  !   (  

 ( )   
B  amount of cash for fractional
     (  
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      8 
  @ 
shares.
. 8 0   
 !     
  
(
     ! In the time of the canceled

( (
@ 
. 8 0  !  : ,;
   
  .  '.)D trades, shares of the financials
/0 . G A(
   7
  (  '  8  =>4 >H "#4"   ( ETF were trading at around
 .+0  (&3<3&  3
    . 3 !(   
 $44, even though when ac-
(   7
2& counting for the distribution
shares should have been trad-
+
 
  ing in the $30s, said Dave Na-
Banks see cost-cutting through new technology as one of the dig, director of exchange-traded
best hopes for increasing profits. funds at FactSet.
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.
Cheap Borrowing Raises Finra Board Seat
Won by 3 Votes
Emerging-Market Concern
BY JON SINDREU
Amid swelling money in-
flows into developing econo-
mies, the Bank for Interna-
tional Settlements continues to
sound alarms about the dan-
gers of cheap borrowing.
According to research pub-
lished Sunday by economists at
the BIS, money raised offshore
by emerging-market compa-
nies—usually in dollars through
foreign subsidiaries—is often
used to invest in short-term fi-
nancial assets, something that
doesn’t happen with domestic
credit.
The findings suggest firms
with access to international hot
money often act as surrogate fi-
nancial intermediaries, lending
the money again to local specu-
lative enterprises, which are
more vulnerable to these
sources of credit drying up.
“This could raise financial-
stability concerns,” the report
said. “In particular, an in-
creased volume of such invest-
ments could pose the risk of
sudden reversals and might
amplify financial cycles.”
Ultralow yields in advanced
nations—and the expectation
that central banks will keep
them there a long time—have
pushed investors into emerg-
ing-market assets, lowering
borrowing costs for companies
there and boosting economic
ADVERTISEMENT
Legal Notices
The Bank for International Settlements warned of a credit
buildup and steep debt repayments.
growth. However, some inves-
tors have long cautioned about
credit buildups in these coun-
tries. The BIS recently warned
about the steep debt-repay-
ment schedule they will face
between this year and 2018.
To be sure, as long as the
U.S. Federal Reserve keeps in-
terest rates low, dollar bor-
rowing is likely to be cheap for
a time, so developing countries
will have an easy time refi-
nancing these debts.
But these findings give
strength to what some econo-
mists have long argued: That
INTERNATIONAL NOTICES
FINANCE & MARKETS
flows are taken away, these
nations crumble.
If this theory proves true,
the same thing could happen
again soon.
BIS figures confirm that
bond issuance by emerging-
market firms is higher when
volatility is low in the U.S.
stock market, and vice versa.
“Investors appear to be less
receptive to offshore [emerg-
GIANLUCA COLLA/BLOOMBERG NEWS
ing-market] issues when risk
aversion is high,” the BIS re-
port said.
Indeed, the main reason
why emerging-market compa-
nies issue debt offshore is be-
cause they find it hard to
raise money domestically, re-
search shows. This could the-
oretically be a boon for na-
tions that need productive
investments but don’t have
investment into emerging mar- banks solid enough to finance
kets isn’t usually driven by them. But there is growing ev-
these countries getting more idence that companies that
productive, but rather by in- tap foreign debt markets of-
vestors in rich nations needing ten do so for speculative rea-
somewhere to put their money. sons, while solid local compa-
This “liquidity-driven” nies could get access to credit
theory of international flows anyway.
suggests that hot money cre- Case in point: The profit-
ates faster growth in these ability of offshore issuers has
countries, rather than faster been on a clear decline in the
growth being the lure that at- past three years, the Basel,
tracts the money. Fueled by Switzerland-based BIS said.
the need to get returns, inves- For investors in hard-cur-
tors then go on to justify why rency, emerging-market assets,
certain countries have attrac- there couldn’t be a clearer
tive economies. But when hot warning sign.
 
Wednesday, September 21, 2016 | B7
BY DAVE MICHAELS
The chief executive of a San
Francisco investment bank pre-
vailed in a hard-fought election
to join the board of the Finan-
cial Industry Regulatory Au-
thority, the front-line regulator
of stockbrokers, knocking off an
incumbent and a well-known
challenger who campaigned on
the message that rigid over-
sight is choking small firms.
Bob Muh, the CEO of Sutter
Securities Inc. and a former
Bear Stearns partner, narrowly
defeated three other candi-
dates to win a seat on the
Finra board. He beat the sec-
ond-place candidate, Stephen
Kohn of Lakewood, Colo., by
just three votes, according to
people familiar with the mat-
ter. Robert Keenan, a sitting
board member who also upset
an incumbent when he won his
last election in 2013, placed
third. Mark Howells, a broker
based in Scottsdale, Ariz., also
competed in the race.
Finra, one of the country’s
most powerful financial regu-
lators, allows the industry it
oversees to elect some of its
officers. While Finra isn’t a
government agency and ulti-
mately answers to the Securi-
ties and Exchange Commis-
sion, Congress has sanctioned
its role as a standard-setter
and rule-enforcer for the bro-
kerage industry.
Finra’s bylaws require that
INTERNATIONAL NOTICES
a majority of its 24-member
governing board have no in-
dustry ties. But Finra re-
serves three board seats to
represent its 3,550 small-firm
members.
Turnout in the election
was about 43%, meaning
about 1,500 of Finra’s small-
firm members voted, people
familiar with the matter said.
Mr. Muh, 78 years old, was
seen as a moderate and expe-
rienced voice in a campaign in
which Mr. Kohn accused Mr.
Keenan of playing fast and
loose with campaign rules and
not pushing back hard enough
against regulations that bro-
kers oppose.
“I certainly can’t call it a
landslide or a mandate, but
I’m delighted I’ll have the
chance to convince the inde-
pendent directors on the
board of some the changes
that are need for the small
firms,” Mr. Muh said in an in-
terview Monday after Finra
announced the results.
Many smaller brokers have
chafed at its prescriptive over-
sight in recent years, resulting
in an environment that hasn’t
been hospitable to incumbents
running for re-election to
Finra’s board, Mr. Keenan said.
“It is a disadvantage being the
incumbent,” he said. “So many
small firms are angry over the
huge increase in compliance
costs to meet the many new
rules.”
 

 

 

                     
           
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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B8 | Wednesday, September 21, 2016 THE WALL STREET JOURNAL.

MARKETS DIGEST
Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
16492.15 t 27.14, or 0.16% Year-to-date t 13.35% 341.00 t 0.27, or 0.08% Year-to-date t 6.78% 2139.76 s 0.64, or 0.03% Trailing P/E ratio * 24.47 21.17
High, low, open and close for each 52-wk high/low20012.40 14952.02 High, low, open and close for each 52-wk high/low 385.43 303.58 High, low, open and close for each P/E estimate * 18.25 16.52
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 2.14 2.20
All-time high: 2190.15, 08/15/16

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

17500 360 2200

65-day moving average

17000 350 2160

16500 340 2120

16000 330 2080

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

Session open Close

Close Open
t

15000 310 2000

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

International Stock Indexes Data as of 4 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 3 p.m. ET
World The Global Dow 2418.09 1.48 0.06 2033.03 • 2489.23 3.5 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1681.21 –0.25 –0.01 1471.88 • 1956.39 –2.0 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 898.91 1.23 0.14 691.21 • 1044.05 13.2 3.250 Australia 2 1.636 85.3 84.8 67.3 124.6 1.627 1.427 1.932
4.250 10 2.123 43.5 41.5 28.7 64.6 2.125 1.868 2.781
Americas DJ Americas 516.19 –0.06 –0.01 433.38 • 529.32 5.9
1.250 Belgium 2 -137.9 -132.0 -86.1 -0.580 -0.566 -0.175
-0.596 -135.8
Brazil Sao Paulo Bovespa 57689.45 339.07 0.59 37046.07 • 60310.50 33.1
1.000 10 0.213 -147.5 -146.1 -140.6 -117.3 0.249 0.174 0.962
Canada S&P/TSX Comp 14532.56 36.33 0.25 11531.22 • 14855.69 11.7
1.000 France 2 -0.607 -138.9 -137.4 -131.9 -87.9 -0.596 -0.565 -0.193
Mexico IPC All-Share 46368.16 497.12 1.08 39924.09 • 48956.06 7.9
0.250 10 0.281 -140.8 -139.1 -139.2 -117.1 0.319 0.189 0.964
Chile Santiago IPSA 3164.87 11.47 0.36 2730.24 • 3259.22 7.5
0.000 Germany 2 -0.662 -144.5 -142.9 -136.4 -92.6 -0.650 -0.610 -0.241
U.S. DJIA 18129.96 9.79 0.05 15450.56 • 18668.44 4.0
0.000 10 -0.017 -170.5 -169.3 -161.2 -146.6 0.017 -0.031 0.669
Nasdaq Composite 5241.35 6.33 0.12 4209.76 • 5287.61 4.7
0.250 Italy 2 -0.093 -87.6 -84.9 -83.9 -56.1 -0.070 -0.085 0.125
S&P 500 2139.76 0.64 0.03 1810.10 • 2193.81 4.7
1.600 10 1.255 -43.3 -38.9 -44.3 -37.3 1.322 1.138 1.761
CBOE Volatility 15.60 0.07 0.45 11.02 • 32.09 –14.3
0.100 Japan 2 -0.269 -105.2 -104.5 -95.8 -67.0 -0.266 -0.204 0.016
EMEA Stoxx Europe 600 341.00 –0.27 –0.08 303.58 • 385.43 –6.8 0.100 10 -0.057 -174.6 -174.5 -166.7 -180.1 -0.035 -0.086 0.334
Stoxx Europe 50 2834.76 –1.77 –0.06 2556.96 • 3305.96 –8.6 4.000 Netherlands 2 -0.613 -139.6 -138.4 -133.5 -92.4 -0.606 -0.581 -0.238
Austria ATX 2346.36 –3.74 –0.16 1929.73 • 2515.09 –2.1 0.500 10 0.092 -159.7 -158.4 -151.5 -130.8 0.127 0.065 0.827
Belgium Bel-20 3540.96 4.68 0.13 3117.61 • 3773.73 –4.3 4.450 Portugal 2 0.460 -32.3 -21.6 -15.3 -33.8 0.563 0.602 0.348
France CAC 40 4388.60 –5.59 –0.13 3892.46 • 5011.65 –5.4 2.875 10 3.305 161.7 165.4 141.6 40.7 3.364 2.997 2.542
Germany DAX 10393.86 19.99 0.19 8699.29 • 11430.87 –3.3 0.250 Spain 2 -0.190 -97.3 -96.8 -93.4 -53.1 -0.190 -0.180 0.155
Greece ATG 560.59 3.12 0.56 420.82 • 731.18 –11.2 1.950 10 0.987 -70.1 -67.5 -62.9 -18.4 1.035 0.952 1.950
Hungary BUX 28208.66 –355.88 –1.25 20452.90 • 28838.82 17.9 4.250 Sweden 2 -0.646 -142.9 -141.6 -139.2 -116.6 -0.638 -0.638 -0.480
Israel Tel Aviv 1439.18 –9.49 –0.66 1378.80 • 1589.24 –5.9 1.000 10 0.278 -141.0 -140.7 -144.9 -140.3 0.303 0.132 0.732
Italy FTSE MIB 16207.10 –192.16 –1.17 15017.42 • 22874.96 –24.3 1.250 U.K. 2 0.109 -67.4 -64.1 -59.4 -7.2 0.138 0.161 0.614
Netherlands AEX 444.45 –0.25 –0.06 378.53 • 474.87 0.6 2.000 10 0.701 -98.8 -93.4 -96.1 -40.9 0.776 0.620 1.725
Poland WIG 47528.84 123.76 0.26 41747.01 • 51909.32 2.3 0.750 U.S. 2 0.783 ... ... ... ... 0.778 0.754 0.686
Russia RTS Index 969.71 –0.04 –0.004 607.14 • 1017.32 28.1 1.500 10 1.688 ... ... ... ... 1.710 1.581 2.135
Spain IBEX 35 8686.10 –29.40 –0.34 7579.80 • 10631.60 –9.0
Sweden SX All Share 510.86 –0.61 –0.12 432.78 • 530.82 1.1 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 8237.54 41.83 0.51 7425.05 • 9080.56 –6.6 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 51335.75 –640.14 –1.23 45975.78 • 54760.91 1.3 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 9/19/2016
Turkey BIST 100 77313.46 –357.29 –0.46 68230.47 • 86931.34 7.8
One-Day Change Year Year
U.K. FTSE 100 6830.79 17.24 0.25 5499.51 • 6955.34 9.4 Commodity Exchange Last price Net Percentage high low
339.50 2.25 0.67% 449.00 314.75
Asia-Pacific DJ Asia-Pacific TSM 1461.39 3.44 0.24 1188.42 • 1499.93 5.2 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 989.00 16.50 1.70 1,186.25 868.00
Australia S&P/ASX 200 5303.60 8.80 0.17 4765.30 • 5587.40 0.1
Wheat (cents/bu.)
CBOT
CBOT 406.00 2.00 0.50 551.50 386.75
China Shanghai Composite 3023.00 –3.05 –0.10 2655.66 • 3651.77 –14.6
Live cattle (cents/lb.) CME 106.975 -0.375 -0.35% 125.500 101.275
Hong Kong Hang Seng 23530.86 –19.59 –0.08 18319.58 • 24099.70 7.4
Cocoa ($/ton) ICE-US 2,852 -20 -0.70 3,216 2,728
India S&P BSE Sensex 28523.20 –111.30 –0.39 22951.83 • 29045.28 9.2
Coffee (cents/lb.) ICE-US 157.00 4.20 2.75 157.80 119.40
Japan Nikkei Stock Avg 16492.15 –27.14 –0.16 14952.02 • 20012.40 –13.4
Sugar (cents/lb.) ICE-US 22.69 -0.06 -0.26 22.95 13.48
Singapore Straits Times 2854.69 2.55 0.09 2532.70 • 3083.07 –1.0
Cotton (cents/lb.) ICE-US 70.84 2.34 3.42 77.98 54.19
South Korea Kospi 2025.71 9.93 0.49 1835.28 • 2066.53 3.3 Robusta coffee ($/ton) ICE-EU 1959.00 -1.00 -0.05 1,963.00 1,423.00
Taiwan Weighted 9161.58 8.70 0.10 7664.01 • 9262.89 9.9
Copper ($/lb.) COMEX 2.1610 0.0045 0.21 2.3290 1.9710
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1317.80 unch. unch. 1,384.40 1,066.00
Silver ($/troy oz.) COMEX 19.300 0.010 0.05 21.250 13.865
Currencies London close on Sept. 20 Aluminum ($/mt)* LME 1,576.00 7.50 0.48 1,700.50 1,451.50
Tin ($/mt)* LME 19,405.00 280.00 1.46 19,625.00 13,225.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Tue YTDchg Copper ($/mt)* LME 4,755.00 3.00 0.06 5,070.50 4,320.50
Country/currency in US$ per US$ (%) Lead ($/mt)* LME 1,942.00 5.00 0.26 1,967.00 1,598.00
20%
Europe Zinc ($/mt)* LME 2,224.00 9.00 0.41 2,364.00 1,467.00
Bulgaria lev 0.5710 1.7513 –2.7 Nickel ($/mt)* LME 9,970.00 270.00 2.78 10,950.00 7,750.00
10 s Yen Croatia kuna 0.1487 6.724 –4.1 Rubber (Y.01/ton) TCE 169.30 4.20 2.54 169.40 149.50
Euro zone euro 1.1169 0.8954 –2.8
0 Palm oil (MYR/mt) MDEX 2690.00 48.00 1.82 2,725.00 2,180.00
Czech Rep. koruna-b 0.0413 24.193 –2.8
Denmark krone 0.1498 6.6752 –2.9 Crude oil ($/bbl.) NYMEX 44.20 0.34 0.78 53.39 34.10
–10 s Euro s WSJ Dollar index
Hungary forint 0.003614 276.71 –4.7 NY Harbor ULSD ($/gal.) NYMEX 1.4172 0.0098 0.70 1.6112 1.0272
Iceland krona 0.008686 115.13 –11.6 RBOB gasoline ($/gal.) NYMEX 1.3288 -0.0246 -1.82 1.4812 0.9764
–20 Norway krone 0.1205 8.3016 –6.1
0.2596 3.8519 –1.8
Natural gas ($/mmBtu) NYMEX 3.122 0.117 3.89 3.1480 2.1680
2015 2016 Poland zloty
Russia ruble-d 0.01544 64.761 –9.9 Brent crude ($/bbl.) ICE-EU 46.43 0.01 0.02 54.12 33.05
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1165 8.5832 1.6 Gas oil ($/ton) ICE-EU 416.25 -6.25 -1.48 481.75 307.00
Tue Tue
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0222 0.9783 –2.4
Turkey lira 0.3361 2.9756 2.0 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1289 7.7575 0.1
Ukraine hryvnia 0.0389 25.7190 7.2
Argentina peso-a 0.0659 15.1690 17.2
India rupee
Indonesia rupiah
0.0149
0.0000762
66.9835 1.2
13126 –5.1
U.K. pound 1.2973 0.7708 13.6 Cross rates London close on Sep 20
Brazil real 0.3063 3.2645 –17.6 Middle East/Africa
Japan yen 0.009831 101.72 –15.4
Canada dollar 0.7556 1.3235 –4.4 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002945 339.54 0.2 Bahrain dinar 2.6527 0.3770 –0.03
Chile peso 0.001483 674.30 –4.8 Australia 1.3257 1.7197 1.3552 0.0130 0.1709 1.4804 1.0018 ...
Macau pataca 0.1252 7.9896 –0.2 Egypt pound-a 0.1126 8.8805 13.4
Colombia peso 0.0003436 2910.00 –8.3 Canada 1.3235 1.7167 1.3530 0.0130 0.1706 1.4780 ... 0.9983
Malaysia ringgit-c 0.2419 4.1343 –3.9 Israel shekel 0.2648 3.7766 –3.0
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.7315 1.3671 –6.6 Kuwait dinar 3.3141 0.3017 –0.6 Euro 0.8954 1.1614 0.9151 0.0088 0.1154 ... 0.6764 0.6752
Mexico peso-a 0.0504 19.8358 15.3
Pakistan rupee 0.0096 104.550 –0.3 Oman sul rial 2.5964 0.3852 0.1 Hong Kong 7.7575 10.0622 7.9296 0.0763 ... 8.6656 5.8615 5.8507
Peru sol 0.2945 3.3958 –0.5
Philippines peso 0.0209 47.824 2.1 Qatar rial 0.2746 3.642 –0.01 Japan 101.7150 131.9300 103.9700 ... 13.1120 113.6000 76.8600 76.7300
Uruguay peso-e 0.0341 29.290 –2.1
Singapore dollar 0.7340 1.3624 –3.9 Saudi Arabia riyal 0.2666 3.7511 –0.1 0.9783 1.2690 ... 0.0096 0.1261 1.0928 0.7391 0.7379
Venezuela bolivar 0.100150 9.99 58.4 Switzerland
South Korea won 0.0008942 1118.28 –4.9 South Africa rand 0.0720 13.8830 –10.3
U.K. 0.7708 ... 0.7880 0.0076 0.0994 0.8611 0.5824 0.5815
Asia-Pacific Sri Lanka rupee 0.0068540 145.90 1.2 Close Net Chg % Chg YTD % Chg
0.7543 1.3257 –3.4 Taiwan dollar 0.03194 31.312 –4.9 U.S. ... 1.2973 1.0222 0.0098 0.1289 1.1169 0.7556 0.7543
Australia dollar WSJ Dollar Index 86.95 0.04 0.05 –3.58
China yuan 0.1499 6.6723 2.8 Thailand baht 0.02877 34.760 –3.5 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

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

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Asia Titans 50
One month 0.54306% 0.19560% ¥ TakedaPharm 4502 4644.00 1.02 -23.43 £ RoyDtchShell A RDSA 1826.50 -0.33 19.69 Last: 141.91 s 0.82, or 0.58% YTD s 4.1%
Three month 0.86589 0.32650 Asia Titans HK$ TencentHoldings 0700 209.00 -0.19 36.87 € SAP SAP 79.77 0.91 8.71
145
Six month 1.25939 0.52725 HK$ AIAGroup 1299 50.60 -1.27 8.58 ¥ TokioMarineHldg 8766 3897.00 -0.56 -17.30 € Sanofi SAN 69.83 0.29 -11.16 High
One year 1.56467 0.84155 ¥ AstellasPharma 4503 1569.50 -0.82 -9.36 ¥ ToyotaMtr 7203 5952.00 1.47 -20.51 € SchneiderElectric SU 60.27 -0.33 14.67 Close 140
Euro Libor AU$ AustNZBk ANZ 26.79 0.45 -4.08 AU$ Wesfarmers WES 43.17 0.79 3.75 € Siemens SIE 103.60 -1.00 15.26 Low 135
20.61 29.74
t
One month -0.37400% -0.11571% AU$ BHP BHP 2.33 15.40 AU$ WestpacBanking WBC 0.57 -11.38 CHF Syngenta SYNN 425.50 -0.58 8.46
Three month -0.32157 -0.04071 HK$ BankofChina 3988 3.62 0.28 4.62 AU$ Woolworths WOW 22.78 1.11 -7.02 € Telefonica TEF 9.15 -0.49 -10.62 50–day 130
Six month -0.21400 0.02000 HK$ CKHutchison 0001 99.60 -1.58 -4.60 € Total FP 41.46 -0.54 2.49 moving average 125
One year -0.07114 0.13600 HK$ CNOOC 0883 9.24 -0.54 14.50 Stoxx 50 CHF UBSGroup UBSG 13.27 -1.56 -32.02
120
Euribor AU$ CSL CSL 102.45 0.42 -2.72 CHF ABB ABBN 21.75 0.46 21.10 € Unilever UNA 40.54 -0.66 1.08
One month -0.37100% -0.10300% ¥ Canon 7751 2902.00 0.02 -21.03 € ASMLHolding ASML 93.78 1.20 13.60 £ Unilever ULVR 3579.00 -0.13 22.30 24 1 8 15 22 29 5 12 19 26 2 9 16
Three month -0.30100 -0.03900 ¥ CentralJapanRwy 9022 17465 -0.68 -19.14 € AXA CS 18.75 -0.58 -25.68 € Vinci DG 67.07 -0.46 13.41 July Aug. Sept.
Six month -0.20000 0.03400 HK$ ChinaConstructnBk 0939 5.93 0.68 11.68 € AirLiquide AI 96.03 -0.92 -7.35 £ VodafoneGroup VOD 222.70 0.61 0.77
One year -0.05700 0.15000 HK$ ChinaLifeInsurance 2628 21.15 -1.63 -15.74 € Allianz ALV 132.40 0.99 -19.05 CHF ZurichInsurance ZURN 252.20 -0.32 -2.40
Yen Libor HK$ ChinaMobile 0941 95.35 ... 8.97 € Anheuser Busch ABI 113.00 0.71 -1.22
DJIA Stoxx 50
One month -0.09343% 0.02929% HK$ ChinaPetro&Chem 0386 5.31 -0.38 13.22 £ AstraZeneca AZN 5112.00 0.65 10.73
72.62 0.57 -15.09 63.70 -0.56 -8.41 Last: 2834.76 t 1.77, or 0.06% YTD t 8.6%
Three month -0.03571 0.07786 AU$ CmwlthBkAust CBA € BASF BAS 71.09 0.57 0.52 $ AmericanExpress AXP
Six month -0.00593 0.11929 ¥ EastJapanRailway 9020 8974.00 0.28 -21.62 € BNP Paribas BNP 44.95 0.06 -13.93 $ Apple AAPL 113.57 -0.01 7.89 2925
One year 0.09243 0.23257 ¥ Fanuc 6954 16915 -0.27 -19.76 £ BT Group BT.A 388.35 0.96 -17.67 $ Boeing BA 127.82 0.27 -11.60
¥ Hitachi 6501 473.40 -0.50 -31.54 € BancoBilVizAr BBVA 5.22 -0.74 -21.72 $ Caterpillar CAT 81.70 -0.22 20.22 2850
Offer Bid
TW$ Hon Hai Precisn 2317 80.20 -0.25 98.51 € BancoSantander SAN 3.88 -1.00 -14.94 $ Chevron CVX 97.69 -0.36 8.59 2775
Eurodollars
¥ HondaMotor 7267 2961.00 -0.75 -24.27 £ Barclays BARC 166.45 -0.33 -23.96 $ CiscoSystems CSCO 31.10 0.26 14.53
One month 0.6000% 0.5000%
42.34
2700
Three month 0.9500 0.8500
KRW HyundaiMtr 005380 138500 1.09 -7.05 € Bayer BAYN 92.10 0.55 -20.47 $ CocaCola KO 0.57 -1.44
HK$ Ind&Comml 1398 4.97 1.02 6.20 £ BP BP. 423.95 -0.55 19.76 $ Disney DIS 92.99 0.39 -11.51 2625
Six month 1.3500 1.2500
¥ JapanTobacco 2914 3966.00 0.20 -11.30 £ BritishAmTob BATS 4812.50 1.05 27.62 $ DuPont DD 66.70 -0.94 0.15 2550
One year 1.6500 1.5500
¥ KDDI 9433 3067.00 1.69 -2.76 € Daimler DAI 61.10 -0.38 -21.24 $ ExxonMobil XOM 82.54 -1.54 5.89
Latest 52 wks ago
2124.00 2.83 4.73 $ GenElec GE 29.69 0.88 -4.69 24 1 8 15 22 29 5 12 19 26 2 9 16
¥ Mitsubishi 8058 € DeutscheTelekom DTE 14.50 -0.07 -12.25
July Aug. Sept.
Prime rates ¥ MitsubishiElectric 6503 1253.50 0.80 -2.26 £ Diageo DGE 2181.00 1.04 17.48 $ GoldmanSachs GS 166.44 0.14 -7.65
U.S. 3.50% 3.25% ¥ MitsubishiUFJFin 8306 515.40 0.82 -31.92 € ENI ENI 12.47 -1.81 -9.64 $ HomeDepot HD 126.82 0.42 -4.11
Canada 2.70 2.70 ¥ Mitsui 8031 1343.50 0.41 -7.06 £ GlaxoSmithKline GSK 1645.00 -0.03 19.81 $ Intel INTC 37.14 -0.05 7.81
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥ Mizuho Fin 8411 174.20
2559.00
0.46
1.67
-28.46
3.02
£ HSBC Hldgs HSBA 583.40 0.40 8.80 $
$
IBM
JPMorganChase
IBM
JPM
154.47
66.46
-0.26 12.24
0.41 0.65
Dow Jones Industrial Average P/E: 20
¥ NTTDoCoMo 9437 € INGGroep INGA 10.70 -0.74 5.47
Policy rates AU$ NatAustBnk NAB 27.12 0.15 -10.20 £ ImperialBrands IMB 4007.00 1.08 11.72 $ JohnsJohns JNJ 117.95 0.25 14.83 Last: 18129.96 s 9.79, or 0.05% YTD s 4.0%
ECB 0.00% 0.05% ¥ NipponTeleg 9432 4614.00 2.37 -4.59 € IntesaSanpaolo ISP 2.01 -2.71 -34.97 $ McDonalds MCD 116.45 1.08 -1.43
Britain 0.25 0.50 1009.00 0.60 -21.14 $ Merck MRK 61.95 1.01 17.29 19000
¥ NissanMotor 7201 € LVMHMoetHennessy MC 150.05 0.67 3.55
Switzerland 0.50 0.50 ¥ Panasonic 6752 1018.00 0.34 -17.94 £ LloydsBankingGroup LLOY 56.44 -0.98 -22.76
$ Microsoft MSFT 56.81 -0.21 2.40
$ NikeClB NKE 54.86 -0.16 -12.22 18500
Australia 1.50 2.00 HK$ PingAnInsofChina 2318 42.40 0.36 -1.17 € LOreal OR 166.35 -0.15 7.12
U.S. discount 1.00 0.75 $ RelianceIndsGDR RIGD 32.00 -0.47 4.58 £ NationalGrid NG. 1072.50 0.37 14.40
$ Pfizer PFE 33.80 0.45 4.71 18000
Fed-funds target 0.25 0.00 KRW SamsungElectronics 005930 1585000 1.73 25.79 CHF Nestle NESN 77.65 0.71 4.16
$ Procter&Gamble PG 88.61 0.27 11.59
Call money 2.25 2.00 4546.00 2.69 -18.09 $ 3M MMM 177.61 0.50 17.90 17500
¥ Seven&I Hldgs 3382 CHF Novartis NOVN 79.30 0.89 -8.64
6477.00 1.14 5.51 $ TravelersCos TRV 114.72 -0.32 1.65
Overnight repurchase rates ¥ SoftBankGroup 9984 DKK NovoNordiskB NOVO-B 308.70 -0.03 -22.81 17000
3320.00 1.53 10.59 $ UnitedTech UTX 100.24 -0.20 4.34
U.S. 0.43% 0.15% ¥ Sony 6758 £ Prudential PRU 1370.50 -0.40 -10.48
3437.00 0.50 -25.38 $ UnitedHealthGroup UNH 137.46 -0.16 16.85 24 1 8 15 22 29 5 12 19 26 2 9 16
Euro zone n.a. n.a. ¥ Sumitomo Mitsui 8316 £ ReckittBenckiser RB. 7250.00 0.46 15.43
116.80 -0.51 24.59 $ VISAClA V 82.50 -0.01 6.38 July Aug. Sept.
HK$ SunHngKaiPrp 0016 £ RioTinto RIO 2360.00 0.04 19.22
Sources: WSJ Market Data Group, SIX 183.00 0.27 27.97
$ Verizon VZ 51.25 0.10 10.88 Note: Price-to-earnings ratios are for trailing 12 months
TW$ TaiwanSemiMfg 2330 CHF RocheHldgctf ROG 244.60 0.87 -11.51
Financial Information, Tullett $ WalMart WMT 71.98 -0.15 17.42 Sources: WSJ Market Data Group; Birinyi Associates
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THE WALL STREET JOURNAL. Wednesday, September 21, 2016 | B9

CEOCOUNCIL.WSJ.COM

WORLD-CLASS CEOs
IN THE RAREST
OF COMPANY.
EACH OTHER.
Nicholas K. Akins Thomas F. Farrell II James Lentz Rami Rahim
American Electric Power Dominion Resources, Inc. Toyota Motor North America Juniper Networks, Inc.

Mukesh Dhirubhai Ambani John J. Ferriola Richard I. Lesser Stephen S. Rasmussen

Reliance Industries Limited Nucor Corporation The Boston Consulting Group Nationwide Mutual Insurance Company

Johan C. Aurik Trevor Fetter William Lewis Solange Pinto Ribeiro

A.T. Kearney Tenet Healthcare Corporation Dow Jones & Company Neoenergia

Richard A. Barasch Andreas Fibig George M. Logothetis Timothy M. Ring

Universal American Corp. International Flavors & Fragrances Inc. Libra Group C.R. Bard, Inc.

Mitch Barns Daniel L. Florness Peter S. Lowy Carlos Rodriguez

Nielsen Fastenal Company Westfield Corporation Automatic Data Processing, Inc.

George S. Barrett John D. Forsyth Tamara L. Lundgren Virginia Rometty

Cardinal Health, Inc. Wellmark, Inc. Schnitzer Steel Industries, Inc. IBM
John F. Barrett Eric Foss Michael J. Massey Mitchell E. Rudin
Western & Southern Financial Group Aramark Corporation PetSmart, Inc. Mack-Cali Realty Corporation
Dominic Barton Mark P. Frissora Timothy J. Mayopoulos
McKinsey & Company Caesars Entertainment Corporation Fannie Mae Gisbert Rühl
Kloeckner & Co SE
Patrick Bass Robert C. Garrett Lowell C. McAdam
Hackensack University Health Network Verizon Communications Inc. Stephen H. Rusckowski
thyssenkrupp Quest Diagnostics
Marc Benioff Richard L. Gelfond John McAvoy
IMAX Corporation Con Edison, Inc. Thomas L. Ryan
Salesforce Service Corporation International
Jeffrey L. Bewkes Eli Gelman Daniel J. McCarthy
Time Warner Inc. Amdocs Ltd Frontier Communications Corporation Michael Sabia
Caisse de dépôt et placement du Québec
Aneel Bhusri Pat Gelsinger Bill McDermott
Workday, Inc. VMware, Inc. SAP SE Faiza J. Saeed
Cravath, Swaine & Moore LLP
John P. Bilbrey Seifi Ghasemi Karl McDonnell
The Hershey Company Air Products & Chemicals, Inc. Strayer Education, Inc. Kenneth A. Samet
MedStar Health
Jean-Laurent Bonnafé Daniel S. Glaser Jim McGrann
BNP Paribas Marsh & McLennan Companies VSP Global Anthony Scaramucci
SkyBridge Capital
Benjamin A. Breier Lynn J. Good Richard P. McKenney
Kindred Healthcare, Inc. Duke Energy Corporation Unum Group David T. Seaton
Fluor Corporation
Vincent Brun Alex Gorsky Michael M. McNamara
Vacheron Constantin Johnson & Johnson Services, Inc. Flex Jahja Setiaatmadja
PT. Bank Central Asia Tbk
Steven A. Cahillane Robert Greifeld Larry J. Merlo
NBTY, Inc. Nasdaq, Inc. CVS Health Gregg M. Sherrill
Tenneco Inc.
Gregory W. Cappelli CP Gurnani James S. Metcalf
Apollo Education Group, Inc. Tech Mahindra USG Corporation Keith Skeoch
Standard Life plc
Lloyd Carney James Hagedorn Alex Molinaroli
Brocade Communications Systems, Inc. The Scotts Miracle-Gro Company Johnson Controls, Inc. Frederick W. Smith
FedEx Corporation
Gregory C. Case Tom Hayes Steve Mollenkopf
Aon plc Tyson Foods, Inc. Qualcomm Incorporated Gary B. Smith
Ciena Corporation
Dominic Casserley James B. Hebenstreit Deanna M. Mulligan
Willis Group Holdings plc Bartlett and Company The Guardian Life Insurance Company of America Sir Martin S. Sorrell
WPP plc
Terrence W. Cavanaugh Paul Hermelin Oscar Munoz
Erie Insurance Group Cap Gemini SA United Airlines KR Sridhar
Bloom Energy
William C. Cobb Thad Hill Rupert Murdoch
H&R Block, Inc. Calpine Corporation 21st Century Fox and News Corp Todd A. Stevens
California Resources Corporation
Andrew Collins Lance Hockridge Dennis M. Nally
Sentient Jet Aurizon Holdings Limited PricewaterhouseCoopers International Ltd. Jeff Storey
Level 3 Communications, Inc.
Steven H. Collis David L. Holmberg Pierre Nanterme
AmerisourceBergen Corporation Highmark Health Accenture Christopher J. Swift
The Hartford
Luis Manuel Conceicao do Amaral Lisa Hook Janet Napolitano
Eurocash SA Neustar, Inc. University of California Anthony R. Tersigni
Ascension
Roger W. Crandall Mark S. Hoplamazian C.L. Max Nikias
Massachusetts Mutual Life Insurance Company Hyatt Hotels Corporation University of Southern California Mark Thierer
OptumRx
Theodore F. Craver, Jr. Donald L. Jernigan Indra K. Nooyi
Edison International Adventist Health System PepsiCo Robert Thomson
News Corp
Fred Crawford John D. Johns Gary Norcross
AlixPartners, LLP Protective Life Corporation FIS Adewale Tinubu
Oando Plc
Francisco D’Souza Thomas P. Joyce, Jr. John H. Noseworthy, M.D.
Cognizant Technology Solutions Danaher Corporation Mayo Clinic Fredric J. Tomczyk
TD Ameritrade Holding Corporation
Bal Das Rana Kapoor James O’Neil
BGD Holdings, LLC Yes Bank Limited Quanta Services, Inc. Paul A. Tufano
AmeriHealth Caritas Family of Companies
Doug DeVos Alex Karp Gavin Patterson
Amway Corp. Palantir Technologies BT Group plc Ronald N. Tutor
Tutor Perini Corporation
Craig S. Donohue Michael J. Kasbar Neal Patterson
The Options Clearing Corporation World Fuel Services Corporation Cerner Corporation N.V. Tyagarajan
Genpact Limited
Michael J. Dowling Declan Kelly Paul Perreault
Northwell Health Teneo Holdings CSL Limited Bernard J. Tyson
Kaiser Permanente
Jim DuCharme Christopher J. Klein Stefano Pessina
Prime Therapeutics LLC Fortune Brands Home & Security, Inc. Walgreens Boots Alliance, Inc. Erez Vigodman
Teva Pharmaceutical Industries Ltd.
Colin Dyer Sarah Krevans Douglas L. Peterson
JLL Sutter Health S&P Global Timothy R. Wallace
Trinity Industries, Inc.
Richard Edelman Roger A. Krone C. Michael Petters
Edelman Leidos, Inc. Huntington Ingalls Industries, Inc. Mark Weinberger
EY
Wolfgang Eder T.K. Kurien Nicholas T. Pinchuk
voestalpine AG Wipro Limited Snap-on Incorporated Dion Weisler
HP Inc.
Robert B. Engel Mary A. Laschinger Anne R. Pramaggiore
CoBank ACB Veritiv Corporation Commonwealth Edison Company (ComEd) Yuanqing Yang
Lenovo
Thomas A. Fanning Thomas A. Lawson Thomas M. Priselac
Southern Company FM Global Cedars-Sinai Health System Harold L. Yoh III
Day & Zimmermann
Scott D. Farmer Donald H. Layton Thomas J. Quinlan III
Cintas Corporation Freddie Mac R.R. Donnelley & Sons Company Timothy R. Wallace
Day & Zimmermann

U.S. ANNUAL MEETING MEMBERSHIP IS BY INVITATION ONLY.

NOV. 14–15, 2016 | WASHINGTON, D.C. LEARN MORE AT: CEOCOUNCIL.WSJ.COM

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B10 | Wednesday, September 21, 2016 THE WALL STREET JOURNAL.

FINANCE & MARKETS

Freddie Mac Pilot

Program Eases
Some Standards
BY ANNAMARIA ANDRIOTIS
Mortgage-finance giant
Freddie Mac and two nonbank
lenders are loosening income
and documentation require-
ments for mortgage applicants
in a new pilot program.
The changes an-
nounced Monday are designed
to help boost mortgage origi-
nations among first-time buy-
ers, applicants with low-to-
moderate incomes and those
who live in underserved areas.
The moves come nearly a
decade after the start of the
mortgage meltdown, as many
consumers remain shut out of
the housing market largely be-
cause they can’t meet the un-
YURIKO NAKAO/REUTERS
panies’ specialties include
lending to low-income and
Hispanic borrowers. The lend-
ers will sell the mortgages
they originate to Freddie Mac.
The partnership has been in
the works since late last year
and will be in effect for at
least 12 months. Freddie Mac
will determine whether to ex-
pand it beyond the pilot phase
if performance meets expecta-
tions. It declined to discuss
any numbers it has as goals
for loan volume or the delin-
quency level it would like to
stay below.
The pilot isn’t lowering
down-payment or credit-score
requirements. Rather it is
loosening income criteria, in-

derwriting criteria that most cluding for applicants who

lenders require. Under the
Freddie program, applicants
will be able to use the income
of people who will live with
them but aren’t going to be on
Analysts were split over what policy moves the Bank of Japan was likely to announce Wednesday and how markets would react. the mortgage to qualify.
In addition, income from
have two jobs.
Until now, Freddie Mac has
required that borrowers who
show their income from a sec-
ond job when applying for a
mortgage demonstrate that
they have held that job for at

BOJ Is Markets Wild Card

Even if an investor On Wednesday, the BOJ was
scheduled to release its own
knew what the central report card on how it believes
bank would do, it isn’t its policies have performed.
But whether the central bank
clear how to invest. would add to the arsenal had
analysts stumped. “We are ad-
BY MIKE BIRD mittedly uncertain about what
the BOJ is specifically likely to
Analysts were divided do,” said Bank of America
about what the Bank of Japan Merrill Lynch analysts in a re-
would do on Wednesday, and search note on Tuesday.
that is a big problem for in- At least four investment
vestors. banks—Morgan Stanley, J.P.
The BOJ’s meeting is one of Morgan Chase, HSBC Holdings
the hot topics in markets this PLC and UBS Group AG—sug-
week. But analysts weren’t gested that the BOJ would cut
quite sure what they were look- interest rates Wednesday. J.P.
ing for. Even if they did know, Morgan analysts predicted
the markets’ reaction is almost that central-bank Gov. Har-
completely unpredictable. uhiko Kuroda would signal his
“There is absolutely no con- willingness to cut rates as far
sensus on what the BOJ’s Pol- as minus-0.7%.
icy Board might have up its
collective sleeve,” said Chris
Scicluna, head of economic re-
search at Daiwa Capital Mar-
With inflation falling fur-
ther from the BOJ’s 2% target,
that may make sense. Gener-
ally, falling inflation would
increasing the gap between
long-term yields and shorter-
term yields.
A steeper curve usually
means that markets expect
tighter, not looser, monetary
policy. If an investor thinks in-
terest rates will be higher in
10 years than in one year, they
will demand a higher yield on
10-year bonds than on one-year
Japanese government bonds.
To achieve that, a lot of an-
alysts expected that the BOJ
would make its ¥80 trillion
($785 billion) a year asset-pur-
chase program more flexible,
Balancing priorities
of looser policy and
a steeper yield curve
is difficult.
an important part of how
quantitative easing works, and
it is designed to lower borrow-
ing costs and shift investors
into riskier assets. But at the
same time, very low yields
squeeze pension funds, insur-
ance companies and banks,
which the BOJ doesn’t want.
“Even if the BOJ thinks that
a steepening of the yield curve
is desirable, there are almost
no options to achieve this
given the constraint of main-
taining the current monetary
policy,” said Deutsche Bank
analysts in a research note.
With so many possibilities,
it is hard to predict how mar-
kets will react. Indeed, it is
always hard to predict how
Japanese markets will react.
Cutting interest rates into
second jobs that borrowers
have held for a relatively short
period will be factored in. The
pilot also doesn’t require bank
statements that would show a
paper trail of how some bor-
rowers save for their down
payments.
Many of the pilot’s features
are similar to what Fannie
Mae currently allows on some
mortgages it purchases but
are new for Freddie Mac,
which is among the largest
purchasers of mortgages in
the country. Freddie Mac says
it purchases one in every four
mortgages originated by lend-
ers in the U.S.
The changes, which went
into effect on Monday, will ap-
ply to people who sign up for
a mortgage with Las Vegas-
based Alterra Home Loans or
Tustin, Calif.,-based New
American Funding. The com-
least 24 months, a period that
in the pilot is reduced to 12
months. Separately, self-em-
ployed borrowers will have
more options to prove their
business exists to the lenders.
In addition, borrowers who
will be living with family or
other individuals for at least
12 months after they purchase
the home will be able to use
those non-borrowers’ income
to get approved for the mort-
gage. The income will be fac-
tored in to help improve the
borrowers’ debt-to-income ra-
tio, a key figure that compares
borrowers’ monthly debt obli-
gations with their gross
monthly income.
Paperwork requirements
will also loosen for some bor-
rowers who don’t have bank
statements to show how they
have saved for their down
payment.

setting a budget of between

negative territory in January
boosted the Nikkei Stock Av-
erage for just two days before
it fell again. Banks have suf-
STREET yen, sell shares and buy bonds,
so driving down yields and,
typically, the yield curve.
In calm times, the yen
kets Europe. justify the Bank of Japan cut- ¥70 trillion and ¥100 trillion a fered most; the sector is Continued from page B1 weakens, shares rise and bond
The BOJ has already pulled ting rates or expanding its as- year. It could also buy more down by more than 25% year ery successful pop combo in- yields and the yield curve rise.
out all the stops in its bid to set-buying program. corporate bonds and municipal to date. volves music, doesn’t mean All have the same underlying
stimulate inflation and But many other analysts, debt and concentrate on buy- Likewise, the yen has gained that a group of central-bank cause, in shifting investor ex-
growth. In January, the bank including those at Deutsche ing shorter-dated debt. A rate more than 15% against the dol- officials playing tambourines pectations. Japan needs more
introduced negative interest Bank AG, BNP Paribas SA, cut wouldn’t be a typical way lar this year, a move that runs would top the charts. confidence in growth and in-
rates for the first time. It al- Credit Suisse Group AG and for a central bank to signal against the general principle In Japan, investors see little flation, and a steeper yield
ready has a bond-buying pro- Citigroup Inc., expected the that rates will be traveling that looser monetary policy prospect of inflation in an curve is merely a symptom,
gram that is so large that its BOJ to stand pat on rates. higher in the future. Balancing weakens the domestic cur- economy burdened by the de- not the cause of it.
balance sheet is bigger in U.S. That could also make sense, these two priorities—looser rency. So even if an investor veloped world’s biggest gov- The one certain effect of a
dollar terms than the Federal because further cuts may clash policy and a steeper curve—is knew the outcome of Wednes- ernment debt relative to gross steeper yield curve is to help
Reserve’s, despite Japan hav- with what markets believe is clearly difficult. day’s meeting, they might find domestic product, by an aging bank profits. Banks borrow
ing an economy one-third the the BOJ’s new aim: making the Using asset purchases to it impossible to know how to workforce and by an en- short-term via deposits or the
size of the U.S. yield curve steeper, meaning put pressure on bond yields is position themselves. trenched culture of deflation. money markets, and lend out
Yet the central bank is by longer term. Manipulating the
the far most powerful player yield curve to allow them to

KKR Hires New Chief for China

in the bond market, and its
current ¥80 trillion ($785 bil-
lion) a year of purchases has
the power to move yields
BY RICK CAREW around pretty much wherever
it likes, at least for a while.
HONG KONG—KKR & Co. A steepening yield curve
tapped a veteran Asian finance has usually come alongside the
executive to lead its China op- outcomes the BOJ wants: ris-
erations as the U.S. private-eq- ing share prices and a weaker
uity giant continues to broaden currency. Deutsche Bank strat-
the scope of its deal-making in egist Alan Ruskin calculates
Asia. that on average since 2009 a
Paul Yang, chief executive steeper curve coincided with
of Taipei-based merchant bank shares going up and, so long
China Development Financial as it involved 10-year bond
Corp., will take up the new yields rising, a drop in the
role, which also oversees trade-weighted yen. (Note that
RICHARD B. LEVINE/NEWSCOM/ZUMA PRESS
make more by buying longer-
dated government bonds with
money borrowed from savers
or the central bank isn’t far
from a transfer of profits from
the BOJ to commercial banks.
Monetary policy works in
mysterious ways, though. At a
time when ordinary rate-set-
ting has given way to experi-
ments with negative rates and
buying shares, perhaps back-
to-front policy will work bet-
ter, via some sort of so-far-un-
explained signaling effect.
Much more likely is that push-
ing longer-dated yields up and
short-dated yields down even

KKR’s business in Hong Kong the curve can steepen because further will just hand free
and Taiwan, in January, the a 10-year yield falls by less profits to the banks.
New York-headquartered pri- than the short-term yield falls, Either way, Wednesday’s
vate-equity firm announced something which tended to co- BOJ meeting matters a lot for
Tuesday. incide with a stronger yen.) the markets. Just don’t be
Mr. Yang will succeed David Each of these moves made fooled: None of the BOJ’s op-
Liu, who is leaving KKR at the sense. Panicked investors buy tions is great.
end of this year to start his
own private-equity firm with
another senior KKR executive. the right time for him to step
The new hire comes as KKR
expands the types of deals it KKR’s Asia team has diversified beyond traditional private equity. It has pursued deals that involve
Finance down,” the company said.
Mr. Shea will also join the
does across Asia.
The firm, which raised
helping Chinese firms invest abroad, such as Qingdao Haier’s purchase of GE’s appliance arm.
Watch company’s executive committee,
alongside two other new mem-
Asia’s largest private-equity KKR’s Asia team, led by Asia Alibaba Group Holding Ltd. nancial, Mr. Yang oversaw bers: Claudia Dill, CEO Latin
fund at $6 billion in 2012, had managing partner Joseph Bae, In 1999, Goldman led a $5 more than $20 billion of loan America, and Jack Howell, CEO
primarily taken minority has diversified beyond tradi- million fundraising that gave it and investment assets across Asia-Pacific, the company said.
stakes in rapidly growing Chi- tional private equity in the re- a big stake in the Chinese the region, including a private- —John Letzing
nese companies. gion since setting up shop in startup and Mr. Yang repre- equity operation that put the ZURICH INSURANCE
Recently, it has been pursu- Hong Kong in 2005. sented Goldman on Alibaba’s bulk of its capital into main- AUSTRALIA
ing more deals that involve The firm set up a pair of three-seat board with founder land Chinese firms.
Executives Shuffled
helping Chinese companies in- nonbank financial companies Jack Ma and executive vice The 48-year-old Mr. Yang ZURICH—Zurich Insurance
House Prices Rise
vest abroad, as well as buyouts in India to lend directly to chairman Joe Tsai. will report to Ming Lu, who Group AG has shuffled its exec- The average price of houses
of local Chinese companies. companies, helped portfolio Alibaba is today valued at heads KKR’s Asian private-eq- utive ranks and plans to merge across Australia’s capital cities in-
For example, KKR helped company Panasonic Healthcare $258 billion. uity business. two units, as recently hired CEO creased 2% in the three months
guide China’s Qingdao Haier Holdings Co. of Japan purchase “I have known and worked KKR has made more than Mario Greco puts his stamp on through June compared with the
Co., in which it owns a minor- a $1.1 billion diabetes-care with Paul since the founding $10 billion in investments in the company. previous quarter, after six months
ity stake, to buy General Elec- business from Germany’s Bayer days of Alibaba. Jack and I ap- Asia since 2005. The firm’s The insurer said Tuesday it of declines, the Australian Bureau
tric Co.’s appliance business for AG, and invested in an Indone- preciated the sensitivity and first Asia fund, a $4 billion ini- will combine its corporate and of Statistics said Tuesday.
$5.4 billion. That deal closed in sian motorcycle-hailing sophistication he brought to tiative raised in 2007, earned commercial units to form a sin- In Sydney, the country’s com-
June this year. startup. advising Chinese entrepre- an annualized return of 13.8% gle business, dubbed commercial mercial capital, house prices
That same month, KKR Paul Yang earlier worked at neurs,” said Mr. Tsai. after fees. insurance. It will be headed by gained 2.8% quarter over quarter,
hired Rob Yang (no relation to Goldman Sachs Group Inc.’s He said he expects KKR’s Its more recent $6 billion James Shea, who is succeeding leading the gains.
Paul Yang) from rival private- Asian private-equity operation, new China head to be “very ef- Asia fund has netted investors Thomas Hürlimann, who has run Overall, quarterly house prices
equity firm Blackstone Group where he built ties with top fective in today’s complex deal- an annual return of 24.8% after the firm’s global corporate busi- rose by 4.1% compared with a
LP to build out its China real- Chinese executives including making environment in China.” fees through June, according ness. year earlier.
estate operation. those at online shopping giant At China Development Fi- to public disclosures. Mr. Hürlimann “decided it is —Vera Sprothen
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, September 21, 2016 | B11

THE PROPERTY REPORT

Shunned Aussie Properties Gain Favor
Colleges and hospitals
Hot Property
get new attention An influx of foreign investment has helped drive up commercial
thanks to foreign property prices in Australia...
capital, lack of supply Commercial property deal value, in Australian dollars
Half year
A$60 billion
BY REBECCA THURLOW

SYDNEY—Hospitals, car 40 Domestic

yards and college dorms used Cross-border
to be the ugly ducklings of
20
Australian real estate—
shunned by the big domestic
property trusts in favor of 0
glitzy office towers and big- 2007 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16
BRENDON THORNE/BLOOMBERG NEWS

box retail malls offering better

returns. ...rent increases have failed to ...but yields remain above those
Not any longer. keep up with asset prices... in comparable countries.
An influx of capital from
foreign investors, including Yields on Australia’s prime Property yields for Australia,
Middle East sovereign-wealth commercial property, by sector U.K. and U.S.
funds and Asian property 9%
trusts, has shifted the compet-
itive landscape in Australia, 8 Industrial
pushing up prices for commer- 7 Retail Australia
cial property and forcing many Steady foreign buying in Sydney and elsewhere has pushed up prices for commercial property.
local real-estate investment 6 Office
trusts, or REITs, to expand lows set before the global fi- Demand for property in ing China and a lower Austra- 5 U.K.
their horizons in search of nancial crisis. Australia, the U.K. and the eu- lian dollar are bolstering the
yield. Analysts blame a lack of rozone has surged in recent appeal of the market to for- 4 U.S.
Australia’s biggest office supply. According to realtor years as low interest rates eign buyers. FY2007 ’09 ’11 ’13 ’15 ’16 FY2007 ’09 ’11 ’13 ’15 ’16
landlord, Dexus Property Savills, commercial property have driven investors around In Australia last year, 38% Note: Fiscal year ends June 30. A$1 billion = US$750 million
Group, recently agreed with worth a combined 107 billion the world to seek riskier as- of commercial-property deals Sources: Real Capital Analytics (deal value);
hospital operator Ramsay Australian dollars (US$80.6 sets to boost returns, and the over US$10 million involved a Savills (yields by sector); MSCI (property yields) THE WALL STREET JOURNAL.
Health Care Ltd. to develop a billion) has been sold in the growing stock of capital at foreign party, up from 16% in
128-bed private hospital on a past four years in Australia— sovereign-wealth funds and 2008, according to Real Capi- That has led Dexus to berg said. “Obviously, the de-
site it owns in Sydney. In Au- nearly a quarter of the sector’s pension funds looks to find a tal Analytics. In the U.S., 20% branch into medical real es- mographics of that space are
gust, Charter Hall Group total value. Among the foreign home. The value of deals of deals involved foreign coun- tate. quite positive.”
launched a second fund an- owners of Australian offices across the three markets over terparties. In an interview, Chief Exec- Over the next 40 years, the
chored by properties leased to and retail malls are U.S.-based the past two years was up The steady stream of for- utive Darren Steinberg said government expects the pro-
car dealer Automotive Hold- Blackstone Group and Singa- nearly 50% on the prior two eign capital has helped to the A$8.65 billion-valued trust portion of Australia’s popula-
ings Group and is also devel- pore’s Frasers Centrepoint, years, according to RCA. drive up prices faster than is in talks with several medi- tion that is more than 65 years
oping a college campus. Facing which completed a A$2.6 bil- Analysts say overseas inter- rents. Still, yields offer a good cal-facility operators and he is old will almost double to
an apartment glut partly lion acquisition of Australand est in Australian commercial margin above government “reasonably confident” it will around 25%. Unlike in the U.S.,
caused by a surge of foreign in 2014. real estate has been helped by bonds and are among the be able to launch its first med- however, Australian property
investment, property company “Given that level of turn- its relatively high rental yields highest globally. According to ical fund within two years. trusts have been slow to in-
Mirvac Group is considering a over, it’s unsurprising to find compared with elsewhere in MSCI’s IPD property indexes, He said Dexus’s deal with vest in health clinics and hos-
foray into affordable-housing out there isn’t a lot left for the world, and political uncer- Australian yields were at Ramsay for the Sydney hospi- pitals.
projects. sale, because the people who tainty such as Brexit in the 6.21% in June compared with tal sparked interest from local David Harrison, Charter
Driving the shift toward currently own it want to keep U.K. and the U.S. presidential 4.9% in the U.K. and 4.6% in and offshore pension funds Hall’s chief executive, said
more exotic assets are falling it,” said Tony Crabb, Savills’s election. Australia is viewed as the U.S. wanting exposure to a sector venturing into new asset
capitalization rates—a key head of research in Australia. a haven because of its stable But intensifying competi- set to benefit from Australia’s classes offers the opportunity
measure of investment returns Commercial-property sales political system and an econ- tion from foreign buyers is aging population. to buy properties at lower
from property—for office in Australia fell 57% to A$10.2 omy that has gone 25 years making it tougher for Austra- “We’ve had some reverse prices and benefit from appre-
blocks, industrial warehouses billion in the first half of 2016, without a recession. lian real-estate investment inquiry from investors that are ciating values as the sector at-
and shopping malls. They re- according to Real Capital Ana- Recent free-trade agree- trusts to source the properties looking to get invested into tracts more institutional in-
cently dropped close to record lytics. ments with countries includ- they need to maintain growth. the medical space,” Mr. Stein- vestors.

Blackstone Makes Big Bet

ADVERTISEMENT

Business Real Estate & Auctions

On U.S. Logistics Centers  
  

AUCTIONS

BY PETER GRANT

Private-equity giant Black-

stone Group LP has cut a deal
to pay $1.5 billion for a portfo-
lio of logistics centers, in the
latest sign that this e-com-

merce-driven business is one
of the hottest areas in the
commercial-property industry.
 

Blackstone, the world’s
largest private real-estate

 

  
MICHAL KRUMPHANZL/ZUMA PRESS

owner, has signed a contract

to buy the 12 million-square-
foot portfolio of mostly West 
 


 
Coast property from LBA Re-
alty LLC, an Irvine, Calif.-
based investment company 2 34 5 

with properties in the western
U.S., according to people fa-
%&' !(""")  *
+  ,
+*
miliar with the matter. %!'  
 * -. / +
Once closed, the deal will An Amazon distribution center in Dobroviz, the Czech Republic.
mark Blackstone’s biggest pur- %0' 1
 22 **
chase of U.S. distribution cen-
ters since it exited from the
in the U.S. sector. “Now logis-
tics has moved up in its im-
industrial sector increased
4.5% versus the industry aver-  "6 " 7 + " " !$- " !"8
U.S. logistics business in 2015 portance in corporate strat- age of 4.2%.
by selling IndCor Properties egy.” Investing now could be par-
for $8.1 billion. Big private-equity firms like ticularly risky. An expected   *& +, !-&  . /$
Logistics properties typi- Blackstone and foreign inves- surge in new supply in several
cally include warehousing and tors such as Singapore’s GIC parts of the country—includ-     
distribution facilities for mov-
ing goods from manufacturers
Pte. Ltd. and the Abu Dhabi In-
vestment Authority have been
ing the Atlanta and Dallas re-
gions—could weigh on re-
!"# $
to stores and customers. among the most recent inves- turns, analysts said, while the
Investor demand for such tors. Meanwhile, other inves- torrid growth of e-commerce
real estate has shown unusual tors such as private-equity gi- could slow. Because of razor-
resilience during what many ant TPG, LBA and Ross Perot thin margins and high delivery
analysts and investors con- Jr.’s Hillwood Development costs, online retail remains un-
sider to be a late stage of a Co. have been responding by profitable or barely profitable
bull market for commercial putting logistics portfolios on for many companies despite
property. Prices keep rising the block. Hillwood sold a $1.1 its surging popularity.
even as those in other com- billion portfolio earlier this But so far, demand growth
mercial-real-estate sectors, month to Singapore-based from tenants is outpacing new )%0
1
such as office buildings, have Global Logistic, whose major supply, according to analyst
shown signs of cooling. shareholders include GIC. Eric Frankel of Green Street.
Executives at logistics com- Stock investors also have “In some markets there’s
panies say their businesses are been bullish. Big public logis- meaningful new supply, but
benefiting from the growing tics companies such as Prolo- it’s being absorbed very
importance of distribution in gis Inc. are trading at a pre- quickly,” he said.
retail and other industries. In- mium of about 7% to the value Investor appetite for logis-
creasingly, business profitabil- of their properties, analysts tics property began growing in
ity is being determined by the say. Companies that own other the early years of the eco-
efficiency, speed and costs of properties like malls, office nomic recovery and expansion
moving goods, they say. buildings and hotels are trad- partly because they expected
Some businesses, like re- ing below asset values. online retail to grow. Also
tailing, are being completely The logistics sector’s prices were low thanks to the
transformed by distribution as strength is being fueled by ris- pounding the sector took dur-
consumers migrate online, ing demand for space from ing the downturn.     
cutting out the need for Amazon.com Inc. and other in- As the economy strength-
bricks-and-mortar stores. ternet retailers. ened, the sector was helped by  !"#$
Many mall owners have suf- Net income of real-estate improvements in the home-
fered while owners of logistics investment trusts that focus building and automotive in-
properties have been the big on logistics, warehouses and dustries, both heavy users of


winner from this trend. other industrial property is warehousing and distribution
“Distribution used to be expected to rise 4.8% this year, space. In some regions, other
just another part of the supply more than any other property factors fueled demand, includ-
chain,” said Charles Sullivan,
president of U.S. operations
type except apartment build-
ings and self-storage, accord-
ing marijuana legalization.
Blackstone also owns 150
 !"#!$
 # 
# %&!'& ( % ( )
for Global Logistic Properties ing to Green Street Advisors million square feet of logistics
Ltd., the second-largest owner LLC. Last year, income in the real estate in Europe.
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
B12 | Wednesday, September 21, 2016
Email: heard@wsj.com
China Can’t
Put Brakes
On Outflows
The leakage of China’s
capital is unrelenting, even if
it is no longer at the top of
investors’ minds. Events be-
yond Beijing’s control could
make matters worse.
Chinese banks’ foreign-ex-
change data show that capi-
tal continued to leave the
economy in August—the
24th month in a row of out-
flows, according to Goldman
Sachs’s gauge. And while at
first glance the pace slowed
from July, Standard Char-
tered said that when changes
in foreign-exchange reserves
are netted off against trade
and investment flows, Au-
gust was the worst month
since January.
China’s outflows this year
are north of $400 billion, re-
flected both in a $190 billion
decline in the country’s for-
eign-exchange reserves and a
weaker yuan, down about 3%
this year against the dollar
and more than 6% against a
basket of currencies.
That said, investors have
gotten more comfortable
about the yuan’s path. At-
tempts to get cash out or
pay off offshore debt have
grown less frenzied, with
turnover in China’s onshore
market for selling dollars at
its lowest since February, ac-
cording to the latest data.
Yet with an undercurrent
of outflows continuing, the
sentiment that the yuan is
following a weakening path
remains. What could shake
the relative calm is the Fed-
eral Reserve. While it isn’t
expected to raise rates this
month, odds it will do so by
December are reckoned at
close to 50% now. Higher
U.S. rates and a stronger dol-
lar are powerful, attractive
forces for Chinese capital.
China’s outflow problem
hasn’t gone away, and
doesn’t look as if it will any-
time soon. —Anjani Trivedi
Retail-Bank Executive Is J.P. Morgan Adds to Board
In Eye of Storm at Wells
BY EMILY GLAZER
Inside Wells Fargo & Co.,
some executives called Carrie
Tolstedt “the watchmaker” for
her obsessive attention to detail
in running the firm’s sprawling
retail-banking operation.
Now, the question is how al-
legedly illegal sales practices
could have escaped her notice
as the executive responsible for
the bank’s 6,000 branches
across the U.S.
On Tuesday, Wells Fargo
Chief Executive John Stumpf
will appear before the Senate
Banking Committee to explain
what happened. One big ques-
tion: Who is responsible in the
bank’s upper echelons for the
sales-practice problems and
who, if anyone, will be held ac-
countable?
That has taken on added im-
port given regulators disclosed
that Wells Fargo over five years
had fired 5,300 employees for
improper behavior. Mr. Stumpf
has declined to say how high up
the ranks the dismissals went.
Ms. Tolstedt wasn’t asked to
appear at the congressional
hearing. She stepped down
from her post atop the retail-
banking business in July and
plans to retire at the end of the
year. She continues to work at
the bank until then, reporting
to Chief Operating Officer Tim
Sloan, according to the bank.
Already some senators have
raised questions about her role.
Last week, a group of senators
led by Massachusetts Democrat
Elizabeth Warren sent a letter
to Mr. Stumpf asking whether
the bank will use its “clawback
authority” to recover compen-
sation to senior executives, es-
pecially to Ms. Tolstedt.
The senators noted that Ms.
Tolstedt received more than
$20 million in annual bonuses
from 2010 to 2015, “justified by
the company in certain in-
stances because of the ‘strong
cross-sell ratios’ in her divi-
sion.” They added: “That is a di-
rect reference to the extraordi-
nary number of accounts
created by her division, many of
HEARD ON THE STREET FINANCIAL ANALYSIS & COMMENTARY
Tax Crackdown Goes Past Apple
Forget Apple’s $14.5 bil-
lion spat with the European Uphill from Here
Commission over historic
Irish taxes. An international
Average cash tax rate for S&P 500 companies
reform project is targeting 50%
up to $240 billion a year it 40
says slips through loopholes
between countries’ tax 30
codes—a problem sometimes 20
dubbed double nontaxation.
10
Led by the Organization
for Economic Cooperation 0 out and value is created.”
and Development, the initia-
–10
tive is called “Base Erosion
and Profit Shifting,” or BEPS, –20
after the kind of corporate-
–30
tax practice it seeks to sub-
due. Progress isn’t as far ad- 1990 2000
vanced as it is on the OECD’s Source: FactSet
parallel project to clamp
down on private-banking tax One example: Roughly 50
havens, but it already is governments so far have in-
showing signs of badgering troduced country-by-country
companies into action. reporting, forcing companies
A set of principles was to supply tax authorities
published last October to with national breakdowns of
which 85 countries have sales, profits, taxes, employ-
signed up, including all ma- ees and assets. Most reports
jor economies. The OECD won’t be public, but they will
now is working on the cum- be shared among participat-
bersome process of imple- ing tax authorities, making it
menting the rules. easier to spot dubious prac-
U.K. Finance Needs Diplomacy to Do Without a Passport
London is Europe’s finan-
cial center, but the complex- Brexit Bounceback
ity of cross-border ties still U.K. bank stocks in the
is surprising. These ties are FTSE indexes*
in the passport regime that
gives financial firms the 325
right to sell products and 300
services throughout the sin-
275
gle market.
Brexit threatens that sys- 250
tem with an abrupt end,
225
which will hurt institutions
both inside and outside Lon- 2016
don. It is still possible the *As of Monday Source: FactSet
U.K. could retain its access, THE WALL STREET JOURNAL.
but that will depend on
goodwill from Brussels. 8,000 firms across the Euro-
More than 330,000 pass- pean Union hold almost
port licenses are held by al- 24,000 passports to sell
most 5,500 U.K. and interna- products and services into
tional firms in London, the U.K.
according to data disclosed This highlights two
for the first time by British things: first, the extreme dis-
regulators on Tuesday. ruption that financial firms
Meanwhile, more than would face if these ties were
FINANCE & MARKETS
fined the retail bank’s culture
and led many staff to engage in
practices that are now under
question. Wells Fargo said last
week that it would do away
with such goals.
Ms. Tolstedt’s attention to
LOUIS LANZANO/BLOOMBERG NEWS
detail paid off in some ways.
The retail-banking arm, along
with the consumer-lending unit,
were important drivers of reve-
nue and profit growth for the
bank, contributing about half of
the total annually. Wells Fargo
recorded 18 consecutive quar-
ters of year-over-year profit
Carrie Tolstedt was known for growth until early 2015. And
her dogged attention to detail. Ms. Tolstedt shared in Wells
Fargo’s growth. In 2015, she re-
which were never authorized by ceived total compensation of
customers.” Regulators said as $9.05 million, according to the
many as two million accounts bank’s proxy statement.
may have been opened without Although she was one of the
customers’ consent. The bank top-earning executives at the
neither admitted nor denied the bank, Ms. Tolstedt wasn’t
allegations in the settlement. known to flaunt her money. She
In response to questions re- wasn’t a high-end dresser, pre-
lated to clawing back pay, Mr. ferring simple suits, said people
Stumpf said in a CNBC inter- who know her. She often pulled
view last week that “to the ex- back her hair with a rubber
tent that’s a consideration, we band.
have a process” without elabo- Ms. Tolstedt was known by
rating further. many executives and employees
The bank declined to com- in the bank to be a tireless
ment on Ms. Tolstedt’s behalf, worker, spending nights and
and Ms. Tolstedt didn’t respond weekends on the job and poring
to requests for comment. In the over even small details. For in-
announcement of her retire- stance, leases for branches,
ment this summer, Mr. Stumpf known as “stores” inside the
called her “a standard-bearer of bank, would sometimes sit for
our culture, a champion for our months on her desk on the 12th
customers, and a role model for floor of the bank’s headquarters
responsible, principled and in- at 420 Montgomery St. in San
clusive leadership.” Francisco, a current executive
Ms. Tolstedt, a 27-year vet- said. This was because Ms. Tol-
eran of the bank, has headed its stedt insisted on signing every
retail operations since June one, even though others in the
2007. In that role, the 56-year- bank already had run the num-
old Nebraska native oversaw bers, the executive added.
the bank’s branches, was re-
sponsible for its business with
Ms. Tolstedt also insisted on
approving every “administra-
40 million retail-banking cus- tive assistant” position that
tomers, and led the bank’s ef- would be posted to recruiting
forts to cross-sell multiple because she didn’t want non-
products to customers. producing resources on the
Sales goals connected with books, this person said. Her op-
cross-selling also fell under Ms. erational reviews with regional
Tolstedt’s remit. More than bank executives would dive into
three dozen current and former the nitty-gritty of line items, in-
Wells Fargo employees have cluding debit cards, credit
told The Wall Street Journal in cards, online bill pay and check-
interviews that those goals de- ing accounts.
’10
THE WALL STREET JOURNAL.
tices. The U.S. Treasury is-
sued rules that force all U.S.
multinationals with revenues
above $850 million to file
country-by-country returns
for financial years starting
after June 30.
Some haven’t waited for
deadlines. Amazon.com last
year started booking sales
through individual European
countries rather than
suddenly severed; second,
the fact that it would cut
both ways, harming firms in
Britain and the EU.
There are some ways
around the passport prob-
lem, but they rely on good
political grace from the Eu-
ropean Commission.
In some areas of financial
regulation, the commission
can grant equivalence to the
rules of other countries. In
this case, it would mean Eu-
ropeans saying the U.K.’s
rules are as good as those in
Europe, which allows access
to the single market.
U.S. insurers already ben-
efit from this kind of deal
even though capital rules for
U.S. insurers aren’t close to
the standards that European
insurers operate under.
Commercial and retail
BY ANUPREETA DAS
Todd Combs, one of Warren
Buffett’s two stock pickers at
Berkshire Hathaway Inc., will
join the board of J.P. Morgan
Chase & Co., in a role that will
burnish his credentials and
raise his profile on Wall Street.
Mr. Buffett hired Mr. Combs
in 2010 to be one of two invest-
ment managers who would
eventually take over Berkshire’s
gigantic stock portfolio as part
of a succession plan. Since
then, Mr. Combs has steadily
expanded his role at the con-
glomerate.
Although senior Berkshire
executives occasionally sit on
boards of companies that Mr.
Buffett’s company owns a stake
in, it is less common for a Berk-
shire executive to sit on an out-
side board.
Mr. Combs is “an extraordi-
nary leader, investor and
thinker, with a deep under-
standing of finance and busi-
ness,” J.P. Morgan Chief Execu-
tive James Dimon said in a
statement.
Mr. Dimon, who is personal
friends with Mr. Buffett, got to
know Mr. Combs during his vis-
its with the Berkshire chief in
Omaha and was impressed, ac-
cording to people familiar with
the matter.
In particular, Mr. Dimon was
struck by Mr. Combs’s invest-
ment knowledge, especially the
payments business, from pro-
cessing to emerging technology,
according to a person familiar
with the board’s decision.
Mr. Combs, who graduated
from Florida State in 1993 and
worked as an analyst for a state
financial regulator, attracted at-
tention at Berkshire Hathaway
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THE WALL STREET JOURNAL.
through low-tax Luxem-
bourg. In January, Alpha-
bet’s Google cited BEPS in a
£130 million ($169 million)
settlement with the U.K. tax
authority that involved a
pledge to pay more tax in
the country.
BEPS wants to ensure
profits are taxed “where eco-
nomic activities are carried
The difficulty of pinning
down what creates value,
particularly for tech compa-
nies with few physical assets,
suggests corporate taxation
will remain controversial
even if the use of Caribbean
tax havens is stamped out.
To the chagrin of some Euro-
pean governments, there was
no international consensus
in favor of a special taxation
regime for the tech sector.
Still, BEPS looks set to
change corporate behavior in
a way the European Commis-
sion’s legal battle with Apple
over a now-defunct tax ar-
rangement can’t.
—Stephen Wilmot
banks face real problems
here because the European
capital directive, which sets
safety standards for bank
balance sheets, contains no
equivalence clause, accord-
ing to Moody’s. Without
passports, deposit taking
and lending between London
and Europe would be
blocked.
However, the picture is
brighter for investment
banking. New European rules
for financial instruments
that come into force in 2018
do have equivalence provi-
sions. That could allow in-
vestment banks in London to
continue advising clients
across Europe as well as un-
derwriting and trading secu-
rities and derivatives, ac-
cording to Moody’s.
This could leave banks
after sending a letter to Berk-
shire Vice Chairman Charlie
Munger. After some persis-
tence, the two met for lunch at
the California Club in down-
town Los Angeles. Mr. Munger
later phoned Mr. Buffett and
told him, “this is a guy I am
sure you are going to like,” Mr.
Munger recalled to The Wall
Street Journal a few years ago.
Mr. Combs previously ran
Castle Point Capital, an invest-
ment partnership he founded in
2005.
Castle Point, which wound
down when Mr. Combs joined
Berkshire, held an $11.4 million
position in J.P. Morgan, accord-
ing to a securities filing from
November 2010. The hedge
fund also had stakes in finan-
cial-service companies such as
MasterCard Inc., CIT Group Inc.
and U.S. Bancorp., and smaller
stakes in firms such as Wells
Fargo & Co.
Among Mr. Combs’s first
stock picks at Berkshire were
MasterCard and Visa Inc., two
of the largest payments-tech-
Todd Combs is a stock picker at Berkshire Hathaway.
INTERNATIONAL INVESTMENT FUNDS
FUND NAME
n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866
Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg
CAM-GTF Limited
For information about listing your funds,
please contact: Freda Fung tel: +852 2831
2504; email: freda.fung@wsj.com
WSJ.com/Heard
OVERSTOCK
What does it mean for the
stock market when a brash
and controversial figure who
upends decades of diplomatic
relations becomes president?
In the Philippines anyway, for-
eign investors have been
high-tailing it out of town,
selling shares 24 out of the
past 25 trading days, accord-
ing to stock-exchange data.
Since Rodrigo Duterte was
inaugurated as president on
June 30, he has come under
fire for insulting U.S. Presi-
dent Barack Obama, fraying
ties with the U.S. and backing
vigilante death squads.
Foreign investors make up
half of trading activity on the
Philippines stock exchange
and may be forgiven for being
spooked. While the stock-
market index itself has fallen
only modestly, the selling—
amounting to $500 million in
the past month—has pres-
sured the Philippine peso,
which is close to its weakest
since 2009. Investors may
keep voting with their feet.
like J.P. Morgan, Deutsche
Bank or Barclays being able
to operate investment bank-
ing from London, but not
commercial banking.
If U.S. insurers can get
equivalence, London-based
investment banks ought to as
well because U.K. rules on fi-
nancial instruments are es-
sentially identical to those in
the EU already. And as the
two-way passport data high-
light, French, Italian and Ger-
man investment banks will
probably want to keep access
to and from London, too.
If passports are lost,
blocking equivalence for in-
vestment banking would look
like a big political call.
International players may
well move some business
away just to avoid the risk.
—Paul J. Davies
nology companies. Berkshire
owned just under five million
MasterCard shares and 10 mil-
lion Visa shares as of June 30.
Although the positions are rela-
tively small for Berkshire, Mr.
Combs is known to be a thor-
ough reader of company re-
ports and filings, in the mold of
his boss.
Mr. Buffett has credited Mr.
Combs for bringing industrial
components maker Precision
Castparts Corp. to his attention.
Earlier this year, Berkshire
closed its largest-ever deal to
buy Precision for $32 billion. Al-
though Mr. Combs didn’t initiate
the acquisition, Mr. Buffett stud-
ied the company only because
Mr. Combs had bought the stock
for Berkshire’s portfolio.
Both he and Ted Weschler,
Berkshire’s other investment
manager, have taken on roles
well beyond picking stocks. The
duo regularly help Mr. Buffett
with deals, especially complex
transactions. The octogenarian
investor misses no opportunity
to praise them.
DANIEL ACKER/BLOOMBERG NEWS
NAV —%RETURN—
GF AT LB DATE CR NAV YTD 12-MO 2-YR
OT OT MUS 09/09 USD 311810.04 11.3 16.5 -6.8