* * * * * * WEDNESDAY, JUNE 13, 2018 ~ VOL. CCLXXI NO. 137 WSJ.com HHHH $4 .00

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WASHINGTON—A federaljudge ruled Tuesday that AT&TInc. can proceed with itsblockbuster acquisition ofTime Warner Inc., without anyconditions, marking a historicdefeat for the Justice Depart-

BY BRENT KENDALLAND DREW FITZGERALD

Tricky Path Ahead After North Korea Summit

usual political cast.The decision, in one of the

biggest antitrust cases in de-cades, is a milestone victoryfor AT&T as it looks to reposi-tion itself in a rapidly evolv-ing media landscape. Its dealfor Time Warner, now valuedat roughly $80 billion, hasbeen pending since October2016.

Underlining the magnitudeof AT&T’s victory, Judge Leontook the unusual step of urg-ing the Justice Department tolet the companies close their

PleaseturntopageA6

would suppress competition inthe pay-TV industry.

At one point waving his 172-page opinion in the air, JudgeLeon declared: “The court hasnow spoken and the defen-dants have won.”

The moment provided a fi-nal act of drama in a case thatcarried the highest stakes forthe two companies, their lead-ers and the Trump administra-tion’s antitrust enforcement.President Donald Trump wasdirect in opposing the deal,both before and after takingoffice, giving the case an un-

all-stock deal with 21st Cen-tury Fox, announced in De-cember.

U.S. District Judge RichardLeon told a packed courtroomthat the department hadn’tproved its case that the deal

ment that could rewrite themedia landscape and set thestage for more deals.

Other companies had beenwaiting to see how the AT&Tcase turned out, includingComcast Corp., which hasbeen planning a bid to buy thebulk of 21st Century Fox Inc.’sassets. The decision will giveammunition to Comcast as itargues to Fox and its share-holders that a tie-up betweenthe companies could with-stand a regulatory review. AComcast offer would disruptWalt Disney Co.’s $52.4 billion

AT&TBeats U.S. in Antitrust FightJudge backs $80 billionTimeWarner deal asmedia companies eyewave of consolidation

Gates Open� Up next, a possible

Comcast move on Fox... A6� AT&T CEO took big risk in

antitrust case................... A6� Heard on the Street: Open

line for M&A................... B16

President Trump, who departed Singapore on Tuesday, pledged big changes would come from his summit with the North Korean leader.

JONATH

ANERNST/REUTE

RS

Competitive About Meditation?Relax, Everyone Else Is, Too

i i i

Hard-chargers descend on ancient

practice, tweaking quest for inner peace

waiting for the 10 minutes tobe over to see if my streakwas alive,” he said. Thanks tothe app’s built-in grace period,his frantic attempt counted to-ward his total. He was, in thewords of the mindful on social

media, #Grateful.Type-A people

are descending onthe ancient prac-tice of meditationand tweaking thequest for innerpeace to suit theirh a r d - c h a r g i n gneeds—racking upstreaks and broad-casting their run-ning tallies to the

world. The result, for some:Meditation has never beenmore stressful.

In one online group, mem-bers regularly check a leader-

PleaseturntopageA8

This week, Alan Stein Jr.hit his 325th straight daymeditating—a streak he istending with the mindfulnessof a monk.

The 42-year-oldperformance coachfrom Gaithersburg,Md., has kept hisrecord using theHeadspace app, de-spite early-morningflights and travelacross time zones.On a recent worktrip to Atlanta, heremembered tomeditate only justafter the clock struck mid-night. Worried he’d blown hisrecord, he closed his eyes andquickly tried to meditate onthe hotel bed for 10 minutes.

“The whole time I’m just

LLEN GAMERMAN

Winning meditationWORLD CUPPREVIEW

The matches to watch,the missing Americansand the two stars who

still rule. A15-18

SINGAPORE—President Don-ald Trump launched a high-stakes diplomatic effort to ridNorth Korea of its nuclear weap-ons, betting that a friendlier ap-proach with North Korea’s KimJong Un—including a surprisepromise to halt military exer-cises with South Korea—wouldwork better than intimidation.

With the task ahead to makethe agreement concrete, Secre-tary of State Mike Pompeo isscheduled to travel to Seoul onWednesday for talks with SouthKorean and Japanese officials,followed by a trip to China. Thedecision to cancel the exercises,the refining of the timetablesfor denuclearization and possi-ble future sanction relief are ex-pected to be on the agenda.

North Korea said Wednesdaythat Mr. Trump had told Mr.Kim he intended to halt U.S.-South Korea military exercisesand lift sanctions against theNorth, suggesting through itsstate media that Mr. Trump hadexplicitly acceded to two long-standing North Korean demandsduring bilateral talks at theirsummit meeting a day earlier.

The North Korean report alsoquoted Mr. Trump as creditingMr. Kim’s “proactive peace-lov-ing measures” for having cre-ated the atmosphere of peace

PleaseturntopageA10

ByMichael R. Gordon,Jonathan Cheng

andMichael C. Bender

TrumpAide Says ‘Hell’Was TooHot

CANADIAN IRE: Trump trade adviser Peter Navarro apologizedTuesday at an event of The Wall Street Journal CFO Network fora comment about Canadian Prime Minister Justin Trudeau. A4

PAULMORSEFO

RTH

EWALL

STR

EETJO

URNAL

INSIDE

Tesla to Cut Workforce by 9%In Bid for Sustainable Profit

Model 3 compact sedan.In a memo to employees, Mr.

Musk said the job cuts aremostly aimed at salaried staffand won’t affect productionworkers assembling the com-pany’s vehicles. “This will notaffect our ability to reachModel 3 production targets inthe coming months,” he wrote.

Tesla investors welcomedthe news on Tuesday, sendingthe company’s shares up morethan 3% to $342.77. The stockhas fallen about 8.8% over the

past 12 months amid Tesla’sstruggles to crank up vehicleproduction.

The Silicon Valley automaker, which hasn’t turned anannual profit in its 15-year his-tory, is facing heightened scru-tiny from analysts and inves-tors after starting assembly ofthe Model 3 last July and miss-ing several production mile-stones that would have enabledit to generate free cash flow.

Mr. Musk has promised to fi-PleaseturntopageA8

Tesla Inc. on Tuesday said itwill cut about 9% of its work-force in an effort to deliver itsfirst profit during a make-or-break period of building amass-market electric car.

The layoffs of about 3,500employees come as Chief Exec-utive Elon Musk reorganizesTesla’s management structureto make it flatter, and as thecompany tries to ramp up pro-duction of the all-electric

BY TIM HIGGINS

The Gamble of the Trump-Kim Embraceso many others have failed:“This is a much different time,and this is a much differentpresident,” Mr. Trump said.

As that suggests, the pros-pects for turning Tuesday’svague agreement into lastingchange on the Korean Penin-sula hinge on two new factorsin the equation. The first isthe calculation that Mr. Kimrepresents not just a younger

North Korean leader but awholly different one preparedto shift his country’s strategicgoal away from a quest formore powerful arms into aquest for a more powerfuleconomy.

The gamble, in short, isthat this is a different timebecause the young Mr. Kimrather than his father orgrandfather is running the

Midway through the pressconference after his summitmeeting with North Korean

leader KimJong Un, Presi-dent DonaldTrump offered

his basic argument for whythis effort at diplomacy withPyongyang will succeed where

BY GERALD F. SEIB show in Pyongyang.The second calculation is

that it is possible to turn theusual process of reaching sig-nificant international agree-ments on its head. Normally,leaders have their subordi-nates carefully work out de-tails of big deals beforehand,ensuring that their countriesare in agreement before the

PleaseturntopageA10

ANALYSIS

� More coverage of theSingapore summit.......... A10-11

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Thhit hmeditendiof a m

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NS Salesforce.#1CRM.

Ranked #1 for CRMApplications based onIDC 2017Market Share RevenueWorldwide.

19.6%

6.5%

7.1%

3.2%

4.0%

salesforce.com/number1CRMCRMApplicationsmarket includes the following IDC-defined functional markets: Sales, Customer Service, ContactCenter, and Marketing Applications. © 2018 salesforce.com, inc. All rights reserved. Salesforce.com is a registeredtrademark of salesforce.com, inc., as are other names andmarks.

2013 2014 2015 2016 2017

Source: IDC, Worldwide SemiannualSoftware Tracker, April 2018.

CONTENTSBusiness News B3,8-9Crossword.............. A13Heard on Street. B16Journal Report.. R1-6Life & Arts...... A12-14Markets............. B15-16

Opinion.............. A19-21Singapore Summit A10-11Sports................ A15-18Technology............... B4U.S. News............. A2-6Weather................... A13World News........ A7-9

s 2018 Dow Jones & Company, Inc.All Rights Reserved

>

What’sNews

�Trump launched a high-stakes diplomatic effort to ridNorth Korea of its nuclearweapons, betting that afriendlier approachwith Kim,including a surprise promiseto haltmilitary exerciseswithSeoul, would work betterthan intimidation. A1, A10-11�Thepresident saidCanadi-answouldpayaprice for coun-tering the U.S. on trade, whilehis aides sought to tampdowntensionsbetween the allies.A4�House Republicanswillhold votes next week on twobills to protect Dreamers,Speaker Ryan’s office said.A4� Senior GOP senators sig-naled that Trumpwasunlikelyto block an effort to derail adeal to save China’s ZTE. A4� The U.S. military is pro-viding its Gulf allies with in-telligence to fine-tune a listof airstrike targets in Yemen’smost important port. A7�Eight people, includingfive Russians, were chargedby the U.S. with helpingship jet fuel to Syria. A4� Britain’s May narrowlyescaped a bruising Brexitdefeat in Parliament. A8�Rep. Sanford of SouthCarolina conceded in his Re-publican primary electionTuesday, defeated by a chal-lenger backed by Trump. A3�Hundreds of migrantswhose boat was denied en-try to Italy will be ferried toSpain by Italian vessels. A9� Kudlow is expected tomake a swift recoveryfrom a heart attack. A2

AT&T can proceedwithits acquisition of Time

Warner without any condi-tions, a federal judge ruled,marking a historic defeat forthe Justice Department. A1� The ruling paves a clearpath for Comcast to bid forFox assets and could triggera round of deal making bysmaller media companies.A6�Tesla plans to cut about 9%of its workforce in an effortto deliver a profit as it rampsupModel 3 production. A1� A recent divergence ineconomic fortunes looks set tokeep theFedandECBondif-ferent interest-rate tracks formanymonths to come.A2, B1�Powell is consideringhold-ing a press conference afterevery Fed policy meeting. A2�AstraZeneca and Lillyscrapped trials of an experi-mental Alzheimer’s drug,saying the treatment wasn’tworking as well as hoped. B1�Revolve is preparing foran IPO that is expected tovalue the online clothing re-tailer at over $1 billion. B1� U.S. stocks showed lit-tle reaction to the Koreasummit, but the AT&T rul-ing spurred after-hoursmoves in media shares. B16�Merrill will pay $15.7mil-lion to settle claims thattraders lied about prices theypaid formortgage bonds. B14� Facebook is crackingdown on e-commerce siteswith a new feature that letsusers leave feedback. B4

Business&Finance

World-Wide

JOURNAL REPORT

Hot startupsin hot sectors

Tech Companiesto Watch, R1-6

A2 | Wednesday, June 13, 2018 THEWALL STREET JOURNAL.

U.S.WATCHU.S. GOVERNMENT

Budget Deficit GrewIn Fiscal Year to Date

The U.S. government’s budgetdeficit widened in the first eightmonths of the fiscal year, re-flecting lower revenue from cor-porate taxes and ramped-upgovernment spending.

The deficit, or the differencebetween the amount of moneythe federal government spentand what it took in, totaled$532.24 billion in Octoberthrough May, the Treasury De-partment said Tuesday. Thatwas 23% more than the deficitof $432.85 billion during thesame period a year earlier.

Tuesday’s report showed thefederal budget deficit was$146.80 billion in May, 66%wider than the same month ayear earlier. Government revenuefell 10% last month comparedwith a year earlier, while spend-ing grew 11%.

Corporate income taxes fromOctober through May wereabout 25% lower than the firsteight months of fiscal 2017, pull-ing down revenue.

Over the same period, individ-ual income-tax collection rose.Much of this period reflected themonths before a tax cut passedin late December took effect. In-dividual income taxes fell to$92.5 billion in May from $104billion a year earlier.

Meanwhile, spending in thefirst eight months of the fiscalyear increased from a year ear-lier for military programs, Home-land Security, Medicare andMedicaid.

—Sarah Chaney

ECONOMY

Consumer PricesAccelerated in May

U.S. consumer prices lastmonth notched the heftiest an-nual growth since the beginningof 2012, a further sign that pricepressures in the economy aresolidifying.

The consumer-price index,which gauges what Americanspay for goods like lettuce andtoys and services like haircuts,rose a seasonally adjusted 0.2%in May from the prior month,the Labor Department saidTuesday. Prices rose 2.8% lastmonth from the prior year, thestrongest reading since February2012, when inflation was 2.9%.

Tuesday’s report came beforeFederal Reserve officials start atwo-day meeting in which theyare expected to raise rates tokeep inflation under control.

—Sharon Nunn

WASHINGTON

Sen. Paul Didn’t TalkTo Neighbor for Years

Sen. Rand Paul says hehadn’t spoken for years to aneighbor who said in court docu-ments that he lost his temperand attacked the senator after aproblem with yard debris in theirKentucky subdivision.

A statement from Sen. Paul’soffice Tuesday said he “had noconversations or discussions withthe attacker” in the last decade.

The neighbor, Rene Boucher, isfacing a 21-month sentence forassaulting a member of Con-gress. Dr. Boucher said in a sen-tencing memorandum that helost his temper on the day of theNov. 3 attack. Dr. Boucher saidSen. Paul repeatedly stacked yarddebris near their property line.

Dr. Boucher said he spoke withmembers of the homeowner’s as-sociation about the issue, but aPaul spokesman says the senatordidn’t hear from the association.

Sen. Paul’s statement said“any description of this attackthat implies a ‘yard dispute’ jus-tifies such violence and missesthe point.”

—Associated Press

through April 20 and esti-mates for the remaining firms.A footnote incorrectly said 86companies already had re-ported.

The U-2 spy plane first be-came operational in 1956 un-der the aegis of the Central In-telligence Agency, and AirForce U-2 operations beganthe following year. A U.S.News article Friday about theU-2 incorrectly said it becameoperational in 1957.

Readers can alert The Wall Street Journal to any errors in news articles by emailing wsjcontact@wsj.com or by calling888-410-2667.

The last name of GoodParty member Murat Agirelwas misspelled as Agirdir in aWorld News article Tuesdayabout candidates challengingPresident Recep Tayyip Erdo-gan in Turkey’s June 24 snapelection.

The type of hybrid long-term-care insurance policyshown in a graphic with an Ex-change article Saturday aboutlong-term-care insurance haspremiums that don’t increase,

while premiums for a tradi-tional long-term-care policyare subject to potential in-creases. The graphic incor-rectly reversed the informa-tion.

A chart of analysts’ first-quarter earnings-growth esti-mates for S&P 500 companiesaccompanying an April 23Markets article about earningsseason contained results ofthe 85 companies that had re-ported quarterly earnings

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Remains of Soldier Killed in Somalia Are Brought Home

ULTIMATE SACRIFICE: The body of Staff Sgt. Alexander W. Conrad of Chandler, Ariz., was moved at Dover Air Force Base in DelawareTuesday. Sgt. Conrad, 26, died of injuries from enemy indirect fire while supporting Operation Octave Shield, according to the Pentagon.

To fix the problem, the Fedcould raise interest rates at ameeting without a press con-ference, said Mr. Bostic. Or itcould send Mr. Powell out toface reporters after every

meeting. “It’s important thatthe market believes that wecould potentially move at anymeeting that we have,” he said.

The Fed is set to announceWednesday it will raise its

benchmark federal-funds rateto a range between 1.75% and2%. The central bank is enteringa delicate policy phase becauseas the economic expansionages, it becomes more difficult

the U.S. after outpacing itstrans-Atlantic counterpartover the past two years.

The American economy,fanned by the recent tax cuts,could grow by more than a 4%annual rate in the secondquarter, according to AtlantaFed projections, the fastestsince 2014. Unemployment hit3.8% in May, the lowest in 18

years, and inflation hasreached the Fed’s 2% target af-ter undershooting it for muchof the past six years.

In the 19-nation eurozone,where second-quarter growthis expected to be about 2%, theECB has signaled it could an-nounce as soon as this weekplans to phase out its bond-purchase program, known as

U.S. NEWS

eurozone growth that appearsto have continued through thespring, as well as the risksposed by international tradespats, higher oil prices and po-litical turbulence in the bloc’sNo. 3 economy, Italy.

The gap between the twocentral banks’ key policy ratesis expected to widen to about 3percentage points by the endof next year, from about 2 per-centage points today, accord-ing to forecasts by Fed officialsand investors.

That would be the biggestgap since late 2008, when theFed cut its short-term interestrates far below those of theECB as it reacted to the sub-prime crisis.

“With some uptick in politi-cal uncertainty, and inflationstill below target in the euroarea and Japan, monetary poli-cies among the advanced econ-omies look likely to be diver-gent for some time,” saidFederal Reserve governor LaelBrainard last month.

That reflects different eco-nomic fortunes: The eurozoneeconomy currently appears tobe growing at half the speed of

quantitative easing, which iscredited with supporting theregion’s economic recovery.

But analysts say that moveis probably necessary becausethe ECB is approaching thelimits of what it can buy underrules aimed at limiting the im-pact on markets, and ensuringthe program doesn’t financeeurozone governments.

Some investors had until re-cently expected the ECB tostart raising rates this year,but most now don’t see a firstincrease until late next year.

A political crisis in Italy lastmonth sent bond marketsswinging wildly and raisedfears that the new governmentcould push the country out ofthe eurozone. Rising oil pricesand the threat of trade warshave also raised concern in Eu-rope and around the world.

The U.S., by contrast hasbeen better insulated, partlybecause its economy is less re-liant on trade and because it isone of the world’s top oil pro-ducers.

Central banks in the U.S.and Europe are both expectedto move this week to unwindstimulus policies adopted sincethe global financial crisis a de-cade ago.

But the likely steps mask arecent divergence in the for-tunes of the world’s top twoeconomic blocs, which looksset to keep the central bankson different interest-ratetracks for many months tocome.

The Federal Reserve islikely to raise short-term inter-est rates Wednesday and pen-cil in more increases in comingyears, to keep the U.S. econ-omy from overheating.

The European Central Bankcould signal on Thursday itwon’t start raising rates forsome time even as it moves tophase out its €2.5 trillion($2.95 trillion) bond-buyingprogram.

ECB officials are ponderingthe causes of a slowdown in

By David Harrison inWashington and TomFairless in Frankfurt

U.S., Europe Rate Gap to Widen6

–1

0

1

2

3

4

5

%

’10 ’13 ’162007

Separate WaysThe U.S. and Europe have been diverging on their key policy rates.

Sources: Federal Reserve Bank of St. Louis,Bank of England, European Central Bank

Note: Since Dec. 2008, the Federal Reserve publishes a target range rather than a single rate.Eurozone rate is the deposit rate

Eurozone

U.S.

THEWALL STREET JOURNAL.

to determine how high to raiseborrowing costs to keep theeconomy on an even keel.

Mr. Powell generally wonsolid reviews for his first pressconference in March, duringwhich he breezed throughquestions at a rapid pace. Hisanswers were direct but pro-vided fewer clues about howhe was approaching particulardecisions than those of hispredecessor, Janet Yellen.

Mr. Powell doesn’t want anychange in the process to bemisread as a signal of plans toraise rates more aggressively.

“I would want to think verycarefully about it and makesure that no one would takemore frequent press confer-ences as a signal of the path ofpolicy,” he said in March.

Former Fed Chairman BenBernanke instituted press con-ferences as part of his broadercampaign to make the centralbank more transparent. Makingpress conferences more routinewould give Mr. Powell a chanceto assert his voice over otherFed officials who give speechesand interviews in betweenscheduled meetings.

Federal Reserve ChairmanJerome Powell is consideringholding a press conference af-ter every policy meetingrather than every other meet-ing, and his appear-ance Wednesday could helphim decide whether it wouldbe worth the trouble.

At issue for the Fed: Sincebeginning press conferences in2011, the central bank hasfallen into the pattern of mak-ing major policy changes onlyat meetings followed by anews conference.

The tactic has helped the Fedcommunicate policy changes inmore detail than its heavilyscrutinized, jargon-filled post-meeting statements. But thepractice has lulled markets intothinking the central bank won’tact between press conferences.

“We’ve evolved to a placewhere the market only thinkswe’ll move if there’s a pressconference,” Atlanta Fed Presi-dent Raphael Bostic said in aninterview this year. This is “asign that what we’re doing rightnow isn’t working.”

BY NICK TIMIRAOS

FedWeighs IncreasingPress-ConferenceFrequency

WASHINGTON—The WhiteHouse and friends of LarryKudlow said Tuesday he wasexpected to make a swift re-covery from his heart attackand resume work soon asPresident Donald Trump’s topeconomic adviser.

Mr. Kudlow, 70 years, washospitalized Monday afterwhat the White House called a“very mild heart attack.”

In a statement Tuesday,White House press secretarySarah Sanders said Mr. Kud-low remained at Walter ReedNational Military Medical Cen-ter as a standard precaution.“His doctors expect Larry willmake a full and speedy recov-ery,” she said.

“Everything we’re hearingis the news is good,” KevinHassett, chairman of the presi-dent’s Council of EconomicAdvisers, said at a Wall StreetJournal CFO conference inWashington.

Walter Reed hospital de-clined to comment.

Arthur Laffer, an economistand longtime friend of Mr.Kudlow, spoke to him on thephone Monday after Mr. Kud-low was admitted to WalterReed. “He told me, ‘I’m justfine, Art,’ ” Mr. Laffer said.“Larry doesn’t bull----” on thatstuff. When he says he’s fine,he means it.”

Stephen Moore, who withMr. Kudlow advised Mr. Trumpduring the 2016 campaign,said in an interview: “He’s go-ing to be fine. How he adjustshis schedule to recuperate,that has yet to be determined.He’ll be back on the job.”

BY PETER NICHOLASAND NICK TIMIRAOS

A ‘Speedy’RecoveryIs PredictedFor Kudlow

� No market taper tantrumover the ECB............................... B1

Fed Chairman Jerome Powell generally won solid reviews for his first press conference in March.

CAROLYNKASTER/ASSOCIATEDPRESS

CLIFFOWEN/ASSOCIATEDPRESS

THEWALL STREET JOURNAL. * * * * * * Wednesday, June 13, 2018 | A3

U.S. NEWS

Tuesday. Mr. Cunninghamfilmed an ad last year duringthe total eclipse, saying thatMr. Trump was a darkness fall-ing on democracy.

When Mr. Trump tweetedhis endorsement of Ms. Ar-rington over Mr. Sanford lateTuesday, Mr. Cunningham re-sponded, “Shame that neitherwill be in Congress next year.See you in D.C.”

The five-way South CarolinaGOP primary for governor isheaded to a runoff between in-cumbent Henry McMaster and39-year-old entrepreneur JohnWarren.

Mr. McMaster is a fixture instate politics and was amongthe first elected officials to en-dorse Mr. Trump in the state’s2016 primary.

Mr. McMaster was endorsedin turn by Mr. Trump, most re-cently in a tweet this pastweekend.

Mr. McMaster is headed toa June 26 runoff with Mr.Warren, a political newcomerwho self-financed his cam-paign, and says he is moresimilar to Mr. Trump, as anoutsider with a business back-ground.

At Mr. Stewart’s victoryparty in Virginia he called Mr.Trump, for whom he workedas Virginia state coordinator,the “greatest president” of thelast century.

Mr. Stewart will face Demo-cratic Sen. Tim Kaine in No-vember.

—Valerie Bauerleincontributed to this article.

Seattle Reverses on TaxTo Help the Homeless

The Seattle City Councilvoted to repeal a newly passedper-employee tax on big com-panies designed to raise fundsfor homeless services, a sur-prise move that came afterfierce opposition from thebusiness community andgrowing public debate.

The council passed the levyunanimously less than amonth ago. On Tuesday, sevenout of nine council membersvoted to repeal it in a specialmeeting which the council un-usually opened up to the pub-lic, bringing arguments fromall sides.

Housing advocates who sup-ported the tax to raise moneyto build more affordablehomes said they felt betrayedby their representatives. Busi-ness owners who praised thecouncil for its U-turn said theysupported efforts to help thehomeless but a new tax wasn’tthe right approach.

“This is a defining day inthe city of Seattle,” said Coun-cil member Lorena Gonzálezbefore voting in favor of therepeal, which she character-ized as a move forced by thebusiness community. Councilmembers strained to voicetheir votes over pro-tax pro-testers, who carried signsreading “Tax Amazon.” andchanted “We are ready to fight,

housing is a human right!”An antitax campaign backed

by major Seattle companies,including Amazon.com Inc., toput the measure to voters in areferendum in November hadgathered enough signatures byTuesday—more than doublethe number needed, said JohnMurray, an antitax campaignspokesman. City council mem-bers said that prompted themto move pre-emptively to re-peal the tax to avoid a longand costly political fight.

The Seattle tax passed May14 would have, starting nextyear, levied $275 per employeeon companies with more than$20 million in annual revenue,or about 3% of Seattle-basedbusinesses, according to theCity Council. It was projectedto raise about $47 million ayear, to be spent on afford-able-housing and homelessservices.

That version passed afterpressure from businesses re-duced what had been a pro-posed $500-per-employee tax.Amazon, Seattle’s biggest em-ployer, had slammed the tax.

On Tuesday, the companycalled the repeal vote “theright decision for the region’seconomic prosperity.” AmazonVice President Drew Herdenersaid in a statement the com-pany was committed to beinga part of the solution to endhomelessness in Seattle.

BY NOUR MALAS

Rep. Mark Sanford of SouthCarolina lost his Republicanprimary election Tuesday, de-feated by a challenger backedby President Donald Trumpwho accused him of being dis-loyal to the president.

State Rep. Katie Arrington,who was declared the winnerby the Associated Press in theCharleston-based district, hadportrayed Mr. Sanford as aTrump adversary because hehad been openly critical ofsome of the president’s poli-cies and provocative state-ments.

Mr. Trump weighed in di-rectly in the primary raceTuesday afternoon—justthree hours before the state’spolls closed—with an en-dorsement of Ms. Arringtonin a Twitter message that at-tacked Mr. Sanford.

“Mark Sanford has beenvery unhelpful to me in mycampaign to [Make AmericaGreat Again],’’ he tweeted.“He is MIA and nothing buttrouble.”

In an appearance late Tues-day before supporters inCharleston, flanked by his fouradult sons, Mr. Sanford gave aspeech thanking his family,and acknowledging he waslikely not to carry an electionfor the first time in his 25-year

political career.“I’ve always been a realist

and at this point, based on thenumbers I see, I think that Iwill end up losing this elec-tion,” Mr. Sanford said.

Mr. Sanford’s defeat camethe same night that, in Vir-ginia, GOP primary voters se-lected Trump ally CoreyStewart as their Senate nomi-nee over a candidate favoredby the GOP establishment.Together, the two primary re-sults were a sign of how thor-oughly the president hascome to dominate the Repub-lican Party.

Ms. Arrington will faceDemocrat Joe Cunningham, alawyer and yoga-studio ownerin Charleston, who carried hisinfant son with him to vote

BY JANET HOOKAND REID J. EPSTEIN

GOP Incumbent DefeatedPresident endorsedopponent of lawmakerfrom South Carolinain a tweet on Tuesday

GRACE

BEAHM

ALFORD/THEPOSTANDCO

URIER/A

SSOCIATE

DPRESS

Rep. Mark Sanford after voting Tuesday in a primary for his seat. He lost to state Rep. Katie Arrington.

Voters Head to the Polls in Five States

PRIMARY DAY: Voters filled out ballots at a polling location on Tuesday in Lebanon Church, Va. Primaries also were held in four otherstates, including Nevada, Maine, North Dakota and South Carolina, and there were two special legislative elections in Wisconsin.

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A4 | Wednesday, June 13, 2018 P W L C 10 11 12 H T G K B F A M 1 2 3 4 5 6 7 8 9 O I X X * * * * * THEWALL STREET JOURNAL.

WASHINGTON—PresidentDonald Trump said Canadianswould pay a price for counteringthe U.S. on trade, while his aides

sought to tamp down tensionsbetween the allies after a dust-up with Prime Minister JustinTrudeau over the weekend.

U.S. officials have beenhammering the Canadianleader for declaring Saturdayafter meeting with Mr. Trumpand other world leaders thatCanadians “will not be pushedaround” by the U.S. Mr. Trumpsaw the statement as a slightafter concluding what he con-sidered friendly meetings.

“I think that Justin proba-bly didn’t know that Air ForceOne has about 20 televisions,and I see the television,” Mr.Trump said Tuesday after con-cluding his summit with NorthKorean leader Kim Jong Un inSingapore. “He’s giving a newsconference about how he willnot be pushed around by theUnited States. And I say, ‘pushhim around? We just shookhands.’ It was very friendly.”

“That’s going to cost a lotof money for the people ofCanada,” Mr. Trump said.

Mr. Trump’s latest commentssuggested the U.S.-Canada spatcould simmer for a while, po-tentially hanging over discus-sions to rewrite the North

By Vivian Salama inWashington and Paul

Vieira in Ottawa

U.S. NEWS

Alex Azar, secretary of the Department of Health and Human Services, prepares to testify before Capitol Hill about the administration’s plan to combat high drug prices.

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American Free Trade Agree-ment. The conflict sharpenedlast week, in the days after theU.S. imposed tariffs on steeland aluminum from Canada andthe European Union. Canada re-sponded by imposing retalia-tory tariffs on a range of U.S.products, including toilet paper,orange juice and whiskey, effec-tive on July 1—Canada Day.

The Toronto-based C.D.Howe Institute said Tuesdayits research indicated thatamong major economies, “Can-

ada suffers the largest nega-tive impact” from the U.S.steel and aluminum tariffs.The think tank said the tariffswould lead to 6,000 job lossesin Canada and shave $8 billionCanadian dollars ($6.15 billion)off its annual economic output.

Mr. Trump’s top trade ad-viser, Peter Navarro, who onSunday said there was “a spe-cial place in hell” for worldleaders who “stab [Mr. Trump]in the back on the way out thedoor,” apologized Tuesday forhis remarks, which he ac-knowledged referred to Mr.Trudeau. “I used language that

Mr. Trump’s latestcomments suggestedthe U.S.-Canadadispute could simmer.

Trump trade adviser Peter Navarro apologized for insulting Canadian Prime Minister Justin Trudeau.

Mr. Azar said in testimonybefore the Senate health com-mittee that companies areworking with industry middle-men, including pharmacy-bene-fit managers, to make sure“they’re not discriminatedagainst” for cutting their prices.Middlemen currently have anincentive to provide more fa-vorable coverage to drugs withhigher list prices, he said.

The secretary didn’t iden-tify any of the companies thatwere considering such pricecuts. President Donald Trumpsaid in late May that drugcompanies would announce“voluntary massive drops in

prices” in two weeks.Sen. Elizabeth Warren (D.,

Mass.) said she and Sen. TinaSmith (D., Minn.) had sent let-ters to several large drugmak-ers—including AbbVie, Glaxo-SmithKline and Johnson &Johnson—asking if they havelowered prices. None has cutlist prices, according to astatement from the senators,and one company, Novartis AG,said “we do have some plannedprice increases later this year,”according to a copy of a letterfrom the company that thesenators posted online.

The Food and Drug Admin-istration also released guid-

ance Tuesday to make it easierfor drug companies to provideinsurers and other payers witheconomic information abouttheir drugs, including thosethat aren’t yet approved.

Drug companies said thisguidance will make it easierfor them and insurers to enterinto so-called value-based con-tracts in which the price of adrug is more closely tied tohow well it works for patients.

Mr. Azar also urged Congressto take action to ban gag clausesthat prevent pharmacists fromtelling consumers about lower-priced drug options.

Democrats said the admin-

istration’s proposals omit keysteps that would lower costs,such as allowing the importa-tion of lower-cost prescriptiondrugs.

Sen. Patty Murray (D.,Wash.) called the proposal a“big nothing-burger.”

The administration’s 39-pageblueprint contains dozens ofinitiatives to change govern-ment rules the administrationcontends have allowed drug-makers and pharmacy-benefitmanagers to game the system.The plan moves to increase re-bates and discounts for Medi-care enrollees and providesother incentives to lower prices.

Health and Human ServicesSecretary Alex Azar touted onTuesday the administration’splan to combat high drugprices, saying several drugcompanies are looking at “sub-stantial and material” pricecuts, while Democrats said theplan would accomplish little.

BY STEPHANIE ARMOURAND PETER LOFTUS

Lawmakers Scrutinize Drug PlanTrump official sayssome companies areconsidering price cuts;Democrats have doubts

Leader Chuck Schumer (D., N.Y.)and Chris Van Hollen (D., Md.).

The Senate is expected topass the defense bill this week.The measure would then moveto a conference committee withthe House, which has alreadypassed its own version of thedefense authorization bill thatdoesn’t address the China deal.Both chambers must pass iden-tical bills before they can besent to Mr. Trump.

On Monday, Mr. Cotton pre-dicted that Mr. Trump wouldn’tuse his veto power to reject thedefense bill over the ZTE lan-guage. Mr. Cotton, who speaksregularly to Mr. Trump, de-clined to say whether the presi-dent had given him a personalguarantee. “I don’t reveal myprivate conversations with thepresident,” Mr. Cotton said.

In a Tuesday interview, Mr.Van Hollen said: “If the presi-dent’s backing down, that’s agood thing for the country.”

The fight over ZTE betweenTrump administration officialsand lawmakers began lastmonth. Just weeks after theCommerce Department hadbanned U.S. companies fromselling to ZTE, as punishmentfor ZTE’s failure to honor anearlier U.S. agreement to re-solve the firm’s sanctions viola-tions, Mr. Trump suggested hewas considering reversing thepenalty. He tweeted May 13 thathe and Mr. Xi were “workingtogether to give massive Chi-nese phone company, ZTE, away to get back into business,fast.” He added: “Too many jobsin China lost. Commerce De-partment has been instructedto get it done!”

The tweet incensed manymembers of Congress, as wellas intelligence and military offi-cials, who moved swiftly to de-nounce any prospect of a re-prieve through a series oflegislative actions and an ag-gressive public campaign.

But despite widespread bi-partisan opposition, Mr. Trumpand the Commerce Departmenton Thursday struck a new dealwith ZTE, which requires thecompany to pay a $1 billionfine, replace its entire board ofdirectors and senior leadershipteam and fund a team of U.S.compliance officers to monitorthe company for 10 years.

WASHINGTON—ZTE Corp.once again appeared to teeteron the brink of demise Tuesdayas senior Republican senatorssignaled that President DonaldTrump was unlikely to block acongressional effort to derail adeal he brokered to resuscitatethe Chinese telecommunica-tions giant.

The president hasn’t issuedtweets urging Republicans tostand down, and lawmakers de-tect no backlash buildingwithin Congress against themove to unravel the WhiteHouse agreement.

“I don’t think the presidentcares about ZTE,” Sen. BobCorker (R., Tenn.) told report-ers. “Someone told me that hegave [GOP lawmakers] a winkand a nod and told them hedidn’t care. I don’t know ifthat’s true or not, but I think hedid what he did for the Chineseleader but he doesn’t reallycare what Congress does.”

Representatives for theWhite House, the CommerceDepartment and ZTE didn’t im-mediately comment.

Mr. Trump had spent theprevious week in closed-doormeetings trying to sell SenateRepublicans on the deal, whichcoincided with his effort tobuild goodwill with ChinesePresident Xi Jinping ahead ofthis week’s talks with North Ko-rea about denuclearization. Andin a briefing late on Mondaywith GOP senators, CommerceSecretary Wilbur Ross againtried to get lawmakers to droptheir resistance to the ZTEagreement.

But on Monday night, theSenate added language thatwould undo the deal to a must-pass National Defense Authori-zation Act bill. The accord hadsought to save ZTE by allowingit to resume buying compo-nents from U.S. suppliers de-spite the fact that it had brokenan earlier settlement with theCommerce Department oversanctions-busting sales toNorth Korea and Iran.

The amendment to reverseMr. Trump’s rescue of ZTE wasbacked by a group of senatorsincluding Tom Cotton (R., Ark.),Marco Rubio (R., Fla.), Minority

BY SIOBHAN HUGHESAND KATE O’KEEFFE

Senators MoveTo Kill ZTE Deal

CHIP SOMODEVILLA/GETTY IMAGES

was inappropriate,” he said atan event of The Wall StreetJournal CFO Network.

Kevin Hassett, chairman ofthe White House Council ofEconomic Advisers, said at thesame event: “What peopleneed to do at this moment istake a step back, take a deepbreath.”

A spokeswoman for Mr.Trudeau declined to commenton Mr. Navarro’s apology. EarlyTuesday, when asked about at-tacks from the president andhis top advisers, Mr. Trudeausaid he was “focused on de-fending jobs for Canadians andsupporting Canadian workers.”

So far, the attacks on Mr.Trudeau appear to have givenhim a lift at home. In a rareshow of political unity, the coun-try’s Parliament unanimouslyendorsed amotion condemningthe attacks from Trump aidesand the administration’s metalstariffs, which the U.S. justifiedon national-security grounds.

Some ofMr. Trudeau’s politi-cal foes have come to Canada’sdefense, among them StephenHarper, the former Conservativeprime minister whom Mr.Trudeau defeated in 2015. “Idon’t understand the obsessionwith trade relations over Can-ada,” Mr. Harper told Fox Busi-ness Sunday. “Canada is the sin-gle biggest purchaser of U.S.goods and services in theworld.”

Trump Says Trade Spat to CostCanadians ‘a Lot of Money’

� See video of Navarro’sapology at on.wsj.com/navarro

WASHINGTON—Eight peo-ple, including five Russianbusinessmen from a companywith ties to the Russian mili-tary, were charged here Tues-day on allegations they helpedship jet fuel to Syria, in viola-tion of U.S. sanctions.

In an indictment handed upTuesday by a federal grandjury, five employees at Russianfreight forwarding companySovfracht and three Syrianmen who allegedly worked withthem, were charged with vio-lating U.S. sanctions on Syriaand Crimea.

Sovfracht was barred by theU.S. Treasury Department inSeptember 2016 from access tothe U.S. financial system with-out a special license over its al-leged involvement in Russia’srole in a crisis in Ukraine.

The company is close to theRussian military, and its allegedfront company was nominatedas the general agent of the Rus-sian naval fleet, according to aSeptember 2016 email the al-leged front company sent to an-other firm, the indictment said.

“The defendants allegedlyconspired to defy our sanctionsagainst Syria and Crimea, en-dangering both American inter-ests in the region as well asour foreign policy and nationalsecurity at home,” John Dem-ers, who runs the Justice De-partment’s national security di-vision, said.

A representative for Sov-fracht couldn’t immediately bereached for comment. The de-fendants aren’t in custody andare believed to be overseas.

The U.S. attorney’s office inWashington filed a civil case inSeptember 2016 to seize $2.5million in funds held at two U.S.banks, alleging that the fundswere illicit payments that werepart of a Sovfracht scheme toship Russian fuel to Syria.

After that case was filed,the employees used anotherfront company, Maritime As-sistance LLC, to circumventthe U.S. sanctions and makepayments in U.S. dollars, theindictment said.

BY ARUNA VISWANATHA

U.S. FilesChargesOver SyriaSanctions

WASHINGTON—House Re-publicans next week will holdvotes on legislation to protectyoung immigrants brought tothe U.S. as minors and livingin the U.S. without authoriza-tion, the office of SpeakerPaul Ryan (R., Wis.) saidTuesday.

The planned votes were partof a deal that allowed HouseGOP leaders to stave off an up-rising from centrist Republi-cans aimed at forcing votes ona series of immigration mea-sures, including new protec-tions for the “Dreamers.”

Party leaders had ratchetedup negotiations to avert avote on bills supportedmostly by Democrats, whichthey fear will infuriate theirbase of loyal GOP voters.Tuesday’s deal buys GOP law-makers at least anothermonth for negotiations.

Centrist Republicans whohad formed a coalition withHouse Democrats fell short ofcollecting the final two signa-tures needed to advance a pro-cedural motion called a dis-charge petition. The petitionhad 216 signatures, short ofthe 218 needed to trigger aquartet of immigration voteslater this month.

The bipartisan coalitioncould still collect the last twosignatures, but any voteswouldn’t come to the Housefloor until late July at the ear-liest.

The night marked a come-from-behind victory for Mr.Ryan, whose grip on the HouseGOP has weakened since hesaid he would leave Congressin January.

—Kristina Petersoncontributed to this article.

BY SIOBHAN HUGHESAND NATALIE ANDREWS

GOP SetsVotes onImmigrantMeasures

THEWALL STREET JOURNAL. Wednesday, June 13, 2018 | A7

“We expect all parties tohonor their commitments towork with the U.N. Office ofthe Special Envoy of the Sec-retary General for Yemen onthis issue, support a politicalprocess to resolve this con-flict, ensure humanitarian ac-cess to the Yemeni people, andmap a stable political futurefor Yemen,” he said.

Mr. Mattis told Pentagonreporters on Monday that hebacked that view.

Mr. Mattis has privately ex-pressed reservations about thelooming operation, according tothe people familiar with thetalks, but others in the Trumpadministration see the U.A.E.military moves as a chance togive the Gulf nation more bar-gaining power in peace talks.

The Pentagon chief has voicedconcerns that a protracted as-sault on the port could worsenthe humanitarian crisis and un-dercut American counterterror-ism operations in Yemen, whereelite U.S. forces work alongsidetheir U.A.E. counterparts to tar-get Islamic militants.

The U.S. provides the Saudi-led coalition with modest sup-port for the fight in Yemen. U.S.pilots carry outmidair refuelingoperations for coalition war-planes that use American-madeweapons to carry out airstrikesin Yemen. The U.S. shares lim-ited intelligence with the Saudi-led coalition, including informa-tion used to pinpoint hospitals,mosques, U.N. offices and otherlocations meant to be off-limitsfor airstrikes.

military planning. The U.N.and aid groups were scram-bling to get their internationalstaff out of the port as theU.A.E. has indicated that amilitary offensive could beginas soon as this week.

Mr. Griffiths has warned thatany assault on the port could bea death knell for his nascent at-tempts to broker a deal.

Initially, the U.A.E. assuredthe U.S. and United Kingdomthat it wouldn’t target the portwithout support from bothWestern allies. But that changedover the weekend when theU.A.E. said its forces near theport had come under attack.

Top Trump administrationofficials have expressed strongconcerns about the U.A.E.’s ef-forts to target the port, but

they have tempered their ob-jections in recent days.

One U.S. official said thatWashington was giving theU.A.E. a “blinking yellow light”of caution.

On Monday, Secretary ofState Mike Pompeo and De-fense Secretary Jim Mattis of-fered qualified support for theU.A.E. as the U.S. dropped itsappeal for a de-escalation andinstead turned its focus to-ward ensuring that an ex-pected assault doesn’t makethings worse for Yemen.

Mr. Pompeo said he hadmade clear to Emirati leadersthe U.S. “desire to address theirsecurity concerns while pre-serving the free flow of human-itarian aid and lifesaving com-mercial imports.”

WORLD NEWS

WASHINGTON—The U.S.military is providing its Gulfallies with intelligence to fine-tune their list of airstrike tar-gets in Yemen’s most impor-tant port, one sign of theTrump administration’s deep-ening role in a looming assaultthat the United Nations sayscould trigger a massive hu-manitarian crisis.

While the U.N. is workingfuriously to broker a deal toavert a United Arab Emiratesassault on a Red Sea port, theU.S. is helping the Gulf nationdevelop a list of targets meantto be off limits for airstrikes,American military officialssaid Tuesday.

“The intent is to minimizethe number of civilian casual-ties and the harm to criticalinfrastructure,” said one U.S.military official.

The expanded U.S. militaryhelp comes as the Trump ad-ministration is giving theU.A.E. cautious backing for itsdeveloping efforts to seize theport of Hodeidah from Iranian-backed Houthi forces.

Hodeidah serves as themain gateway for three-quar-ters of the humanitarian andcommercial goods flowing intoYemen, where most of thepopulation relies on interna-tional aid.

The U.N. has warned that anassault on the port could trig-ger a broad humanitarian crisis,derail new efforts to broker apeace deal and leave as manyas 250,000 people dead.

Martin Griffiths, the U.N.special envoy for Yemen, hasbeen working to broker a last-minute agreement for the U.N.to manage the port, accordingto people familiar with thetalks, but the U.A.E. appearedto be moving forward with its

BY DION NISSENBAUM

U.S. Expands Its Role in Yemen FightingPentagon gives alliesintelligence to refinelist of targets in keyport city of Hodeidah

Sudanese forces fighting alongside the Saudi-led coalition in Yemen gathered on Tuesday near the port city of Hodeidah.

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Some LawmakersOppose U.A.E. PlanTo Attack Port City

Opposition to the UnitedArab Emirates’ plans for amilitary assault on, and sei-zure of, Yemen’s Red Sea portof Hodeidah is rising inWashington.

The Trump administrationviews the fight in Yemen as akey battle in its effort tocombat Iran’s expanding influ-ence across the Middle East.U.S. and United Nations offi-cials say that Iran has pro-vided the Houthi fighters inYemen with ballistic missilesthey have used to repeatedlyto target neighboring SaudiArabia—an accusation thatTehran denies.

But Republican and Dem-ocratic lawmakers have circu-lated letters of concern aboutthe U.A.E.’s plans.

U.S. lawmakers have un-successfully tried to cut offAmerican support for the warin Yemen because of con-cerns about American culpa-bility in airstrikes that theU.N. estimates have alreadykilled more than 4,000 civil-ians.

Hodeidah is Yemen’sfourth-largest city and ishome to more than 400,000people.

In the House, lawmakerswere gathering signatures fora letter that urges DefenseSecretary Jim Mattis to do allhe can to forestall an attack.

“We urge you to use allavailable means to avert acatastrophic military assaulton Yemen’s major port city ofHodeidah by the Saudi-led co-alition, and to present Con-gress with immediate clarifi-cation regarding the fullscope of the U.S. military in-volvement in that conflict,”said a copy of the letter re-viewed by The Wall StreetJournal.

Vietnamese lawmakers on Tuesday voted to require web firms to store user data in the country.

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Twitter Inc. The group haswarned that the measurescould deter investment andundermine local businessesthat have profited from aboom in social media in recentyears

The U.S. Embassy in Hanoi,meanwhile, warned last weekthat the law “might not beconsistent with Vietnam’s in-ternational trade commit-ments,” notably with theWorld Trade Organization.

Tuesday’s vote at the Na-

tional Assembly, which iswidely regarded as a rubberstamp for the government,was conducted amid strict se-curity, with police placing bar-ricades at the roads leading tothe building.

Vietnam has seen a surge inprotests in recent days overplans to allow foreign compa-nies 99-year land leases atstrategic sites. Many of thethousands of demonstratorswho took to the streets of Ho

Chi Minh City, Hanoi and othercities said they were worriedthat companies from Viet-nam’s historic rival, China,would use the proposals to geta foothold in the country.

In some areas, cars weretorched outside police sta-tions. The government pledgedto review the plans.

Some of the demonstratorshad also railed against the cy-bersecurity law, but there waslittle prospect of Vietnam’sgovernment relenting on thatmeasure.

Late last year, Hanoi intro-duced a new 10,000-strong cy-ber unit called Force 47 to pa-trol the web to counter what itdescribed as any “wrongfulopinions” about the govern-ment.

The country has increasedthe penalties for anyone usingFacebook as a platform to at-tack the government.

In November, a young blog-ger was given a seven-yearprison sentence for “spreadingpropaganda against the state.”Another, Nguyen Ngoc NhuQuynh, has begun a hungerstrike against her treatment inprison, according to hermother. Ms. Quynh was sen-tenced to 10 years in June lastyear for protesting the gov-ernment’s inaction on environ-mental issues.

Vietnam’s plans to vigor-ously police the internet tooka step forward when it ad-opted a cybersecurity law thatrequires internet companiessuch as Facebook and Googleto store their Vietnam-basedusers’ data on servers in thecountry.

Critics say the new lawcould make it easier for au-thorities in the one-party com-munist state to track downcritics online. Legislationpassed by the National Assem-bly also requires internet com-panies to open offices in thecountry, which they have beenhesitant to do, in addition toremoving content within 24hours at the government’s re-quest.

Last year, China enacted alaw requiring that cloud datafrom China-based consumersbe stored in the country,sparking worries about pri-vacy. And Vietnam has steadilyincreased scrutiny of what isposted online as Facebook’sreach has grown.

Both Facebook Inc. andGoogle, owned by AlphabetInc., have long flagged theiropposition to the law throughthe Asia Internet Coalition,which also includes companiessuch as Apple Inc., Yahoo and

BY JAMES HOOKWAY

Vietnam Tightens Web GripWith New Cybersecurity Law

Critics say themeasure could makeit easier to trackdown online critics.

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WORLD NEWS

Some people are using goal-tracking services like Bee-minder, which charges feeswhen users don’t stick to newhabits, including meditation.

Michael Merchant, a 29-year-old San Francisco tech en-trepreneur, found the site help-ful about five years ago eventhough he “felt so much shame”when he lost $810 after repeat-edly failing to practice mindful-ness an hour a day. He couldhave logged false data but de-cided to come clean.

“It’s weird to admit, but itwas kind of cathartic,” said Mr.Merchant. “I’ve paid for myscrew-up. Literally.”

The guidelines for whatcounts toward a meditationstreak can be loose; the compa-nies allow a broad swath ofmindfulness exercises to qualify.Among them: a Headspace ses-sion on eating mindfully and abedtime story on Calm read byactor Jerome Flynn, who playsthe deadly fighter Bronn on“Game of Thrones.”

To maintain their records,some people just let the audiofor an app’s meditation sessionplay on their phones whilethey’re, say, watching TV.

“People have said, ‘I don’twant to lose my streak...I put iton, but I didn’t meditate,’ ” said

WORLDWATCH

majority in an election lastyear. She has held on topower thanks to the supportof a small group of lawmak-ers from Northern Ireland.

Ministers had argued theamendment would have se-verely weakened the U.K.’shand in negotiations withBrussels. Rebels in Mrs.

May’s ruling Conservatives—who inflicted a defeat on thegovernment in a similar votein December—mostly fell intoline after senior officialspledged to listen moreclosely to their concerns thatParliament doesn’t have a bigenough role in the Brexitprocess.

Chief among those con-cerns is what happens if Mrs.May comes back from negoti-ations empty-handed. Therebels, led by former attor-ney general Dominic Grieve,want to prevent the U.K.crashing out of the EU with-out a deal.

Mr. Grieve on Tuesdaysuggested an alternativeamendment to the legislationthat would give Parliamentextra powers in the eventthat no political agreement

on withdrawal was reached.In a concession to the reb-

els, ministers signaled theywill consider his proposalsfor inclusion in the final leg-islation—a step that couldreduce the risk of a disor-derly exit.

A defeat for Mrs. Maywould have injected a freshdose of uncertainty into theprocess of untangling theU.K. from the EU.

The U.K. is scheduled toleave the EU in March nextyear and multiple aspects ofthe divorce agreement andthe U.K.’s future relationshipto the bloc have yet to beagreed. Mrs. May’s cabinet issplit over whether to seekclose ties or opt for a more-decisive break.

The parliamentary pitfallsfor Mrs. May haven't yetpassed. Lawmakers are dueto vote Wednesday on legis-lative amendments thatwould oblige the governmentto seek closer ties with theEU on customs than it says itwants, though analysts ex-pect her to see off that chal-lenge, too.

The political drama washeightened earlier Tuesdaywhen a junior minister inMrs. May’s administration re-signed from his post, citingunease over the govern-ment’s Brexit strategy.

Phillip Lee, a junior minis-ter in the Justice Departmentwho supported remaining inthe EU during the 2016 refer-endum, said the departure, ascurrently pursued, woulddamage businesses in his dis-trict, west of London, andthat he couldn’t allay thefears of the people in hisconstituency about the out-come.

LONDON—British PrimeMinister Theresa May nar-rowly escaped a bruising par-liamentary defeat on Tuesdayover her Brexit strategy, see-ing off a challenge thatwould have given lawmakersa much greater say over ne-gotiations with Brussels.

Yet deep divisions remainin London over the terms ofBritain’s withdrawal from theEuropean Union, with severaltricky issues still unresolvedalmost two years after voterschose to exit from the EU ina referendum.

Mrs. May is scheduled todiscuss progress with fellowEuropean leaders at a sum-mit in Brussels later thismonth.

Lawmakers on Tuesdaywere asked to consider anamendment to the govern-ment’s flagship Brexit legisla-tion that would have givenParliament the power to re-ject whatever Brexit agree-ment Mrs. May strikes withBrussels and dictate freshterms for renewed negotia-tions.

Mrs. May’s victory wasslim—324 lawmakers voteddown the proposition, with298 voting in favor—andcame only after her govern-ment made concessions torebels from her own Conser-vative Party. The narrowmargin reflects the loss ofMrs. May’s parliamentary

BY JASON DOUGLASAND STEPHEN FIDLER

U.K. Leader Dodges a Brexit LossVote limits Parliament’ssay in negotiationswith the EuropeanUnion, vindicatingMay

Brexit minister David Davis spoke in the debate in the Commons. Below, a reprieved Theresa May.

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FROM PAGE ONE

GREECE

Deal Is Reached on‘North Macedonia’

Greece and Macedonia agreedto rename the Balkan country“North Macedonia” in a break-through that could end a bitter27-year-old dispute and pave theway for expansion of the NorthAtlantic Treaty Organization andthe European Union.

The deal, reached betweenGreek Prime Minister AlexisTsipras and his Macedoniancounterpart Zoran Zaev, calls forGreece to lift its longstandingveto over NATO and EU mem-bership talks with its neighbor.

The accord must be ratifiedby referendum in Macedonia andby both countries’ parliaments.Nationalists in both countriesoppose any compromise andcould derail it. Messrs. Zaev andTsipras are to sign their accordon Saturday at Lake Prespa onthe countries’ border.

—Nektaria Stamouliand Marcus Walker

CONGO

Court Orders ReleaseOf Ex-Vice President

International Criminal Courtjudges ordered the interim re-lease of former Democratic Re-public of Congo Vice PresidentJean-Pierre Bemba days after hewon an appeal of his convictionon charges of war crimes andcrimes against humanity.

Mr. Bemba’s 18-year sentencewas overturned Friday, but he hadremained in custody because heis awaiting sentencing in anothercase in which he was convicted ofinterfering with witnesses.

Meanwhile, President JosephKabila won’t seek a third term inDecember elections because ofconstitutional limits that preventhim from running again, PrimeMinister Bruno Tshibala said.

—Associated Press

Tesla toCut 9% ofWorkforce

board to see who has meditatedthe most days in a row. A habit-tracking website charges thecredit cards of meditators ifthey miss their sessions too of-ten. One company is pitchingmeditators on a wristband thatreminds them to practice and, ifthey don’t, gives them a mildelectric shock.

Streaks are rampant on appssuch as Headspace and Calm,which are designed to log anddisplay the consecutive days auser has meditated or practicedmindfulness. Meditation, whichcan mean different things todifferent people, is a more fo-cused state than mindfulness,which is a state of calm atten-tion to the present.

“There’s something deep inthe human psyche about want-ing to compete and keep astreak going,” said Calm co-founder Michael Acton Smith.“It really helps motivate peo-

ContinuedfromPageOne

ple.”Desperate to maintain

streaks that can surpass 1,000days, some driven spiritual voy-agers have started looking fornew ways to protect their re-cords. On Headspace, the appcounts any session completed inan eight-hour period as its ownday. Pointing this out, a user onFacebook suggested loggingthree days in one by meditatingat 4 a.m., 2 p.m. and 11 p.m.

On Mindful Makers, a privateonline group of roughly 250meditators, members can checkthe streak rankings daily. RobinKoppensteiner was in secondplace with 71 days at the startof this week. Members aretrusted to report their ownmeditation updates.

“I have to admit I check ev-ery day to see if I’m still innumber two or if I’ve gone upto number one,” said the 29-year-old author from Vienna,Austria.

For him to rise, currentstreak leader Jason Leow mustfall. Mr. Leow, a 39-year-old de-sign consultant from Singapore,posted a tally of 88 days thisweek, a record for the group.He said he wouldn’t mind beingdethroned. “We’re all winnerswhen we meditate together,” hesaid.

Headspace co-founder and for-mer Buddhist monk Andy Pud-dicombe, calling this group asmall minority. “My hope isthat 99% of members are usingit not because they just want toreach a higher number. It’smore about our intention andour relationship with the runstreak rather than the runstreak itself.”

Mr. Puddicombe said histraining at a Tibetan monasteryin northern India featuredstreak-like exercises to fosteraccountability. He recalled writ-ing down the number of timeshe completed certain mantrasor visualizations every day.

Streaks are big business forHeadspace and Calm, which sellaccess to audio-guided medita-tions and other features for$12.99 a month, or less depend-ing on the package. Headspaceand Calm report roughly 30million and 26 million down-loads of their apps, respectively.

At Calm, Mr. Acton Smithsaid, purists on staff don’t wantbedtime stories to count towardthe tally since some users won’teven be awake for them.

Headspace, which added itsstreak counter at customers’ re-quest in 2014, soon will give us-ers the option to hide the tallyif it creates too much pressure.

“I’m fairly certain that thereis no precedent for this in tradi-tional Buddhist practice,” saidBenjamin Brose, associate pro-fessor of Chinese religions atthe University of Michigan.“Many monks meditate everyday for decades, and I havenever heard of anyone keepingtrack.”

Pavlok, which sells wearableelectronic shocking devices tohelp people change their behav-ior, suggests meditation as oneof the top uses for its wrist-bands, which cost $145 to$245.

Nicholas Rozier, Pavlok’s 37-year-old director of operationsbased in Moscow, Idaho, said hecranks his device to 100% to re-mind himself to meditate at 7a.m. for 10 minutes six days aweek. If he fails to log a session,which he self-reports, he getstwo zaps of 450 volts of elec-tricity on the inside of his leftwrist. He said it feels like a beesting.

Ultimately, all streaks aremade to be broken.

Amanda Bralley, a 37-year-old mother from Alpharetta,Ga., messed up her 18-day med-itation run while focused on herteenage daughter. “Today is#Day1 again,” she wrote onTwitter. “Namaste y’all.”

nally reach the goal of making5,000 Model 3 sedans a weekby the end of June—a rate thatif maintained would allow thecompany to show a profit inthe third and fourth quarters,he has said.

“What drives us is our mis-sion to accelerate the world’stransition to sustainable, cleanenergy, but we will neverachieve that mission unless weeventually demonstrate that wecan be sustainably profitable,”Mr. Musk wrote in the email toemployees Tuesday. “That is avalid and fair criticism ofTesla’s history to date.”

Mr. Musk made similar com-ments in May after burningthrough more cash in the firstquarter than analysts had ex-pected. At the time, he also re-iterated statements that hedidn’t want to raise morecash—even as several analystssaid Tesla will have to do so.

The company finished thefirst quarter with $2.7 billion incash on hand. Tesla announcedit was paring back planned cap-

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ital expenditures this year toless than $3 billion from $3.4billion last year. Its loss attrib-utable to common shareholdersin the first quarter was $710million, the fifth consecutivequarter of record losses.

Tesla said the latest work-force cuts are affecting all de-partments except productionworkers. They come as Teslaprepares to launch other vehi-cles over the coming years. Mr.Musk has said he expects to re-veal the Model Y compactsport-utility vehicle in March,ahead of production planned tostart in the first half of 2020.He also has said production ofthe company’s tractor-trailertruck and new sports car, theRoadster, will be in 2020.

“Cutting your way to profit-ability as you try to grow andlaunch vehicles is very diffi-cult,” Dave Sullivan, an analystfor AutoPacific Inc., said. “Itseems like a strange time to cutunless you have promises aboutprofitability for Q3 and yourrevenue can’t support currentstaffing levels.”

“Cutting heads will likelyonly lead to more delays, morestress and lower morale,” Mr.Sullivan said.

Tesla is facing increasedcompetition from traditionalauto makers, such as Porscheand Jaguar, which are racing tobring their own all-electric cars

to market, and from companiesworking to develop competingself-driving car technology. OnTwitter, Mr. Musk acknowl-edged that he was losing goodpeople. “I think they will findnew jobs quickly,” he said.

In May, Mr. Musk told work-ers he planned to change themanagement structure of thecompany following the abruptdecision by Tesla’s chief engi-neer, Doug Field, to take a leave

of absence. Tesla has lost sev-eral other high-profile execu-tives since the beginning of2017, including the chief finan-cial officer, who has been re-placed.

The auto maker finished2017 with about 37,500 employ-ees, a sharp increase from pre-vious years as it expanded itsambitions and acquired Solar-City Corp., the solar-panelmaker. Tesla continued an ag-

gressive hiring pace throughthe first months of 2018, hit-ting a total of about 40,000, ac-cording to a person familiarwith the effort.

Tesla had previously indi-cated that it finished 2017 withmore than 9,000 production-line workers—but that was be-fore a hiring spree to make upfor failed efforts to automatethe Model 3 assembly line.

“Tesla has grown and

evolved rapidly over the pastseveral years, which has re-sulted in some duplication ofroles and some job functionsthat, while they made sense inthe past, are difficult to justifytoday,” Mr. Musk said in hismemo.

He added: “We are also con-tinuing to flatten our manage-ment structure to help us com-municate better, eliminatebureaucracy and move faster.”

Under a flat managementstructure, employees work fortop leaders with few layers ofmanagers in between.

Mr. Musk has already takencommand of several significantroles at the company, includ-ing oversight of vehicle pro-duction from Mr. Field inApril, and the sales and ser-vices divisions in February fol-lowing the departure of JonMcNeill as Tesla’s president ofglobal sales.

His moves are being closelytracked both by short sellersbetting the company will failto turn into a major automo-tive player, and by supporterswho believe in his vision of afuture where electric-poweredcars are driven by computers.The latter group has won outso far, pushing Tesla’s marketvalue to over $50 billion, rival-ing that of General Motors Co.,which sells far more vehiclesand is profitable.

The job cuts are mostly aimed at salaried staff and won’t affect production workers.

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Swedish prosecutors filedrape charges against a French-man at the center of amonthslong sexual scandalthat led the institution thatawards the Nobel Prize for Lit-erature to cancel this year’saward.

Jean-Claude Arnault, a pho-tographer and cultural figurein Sweden, was charged withraping a woman twice inStockholm in 2011, a prosecu-tor said Tuesday, citing “ro-bust and sufficient” evidence.

Mr. Arnault has denied theaccusations. His lawyer, BjörnHurtig, didn’t respond to mes-sages requesting comment.

The scandal erupted lastyear when 18 women accusedthe photographer of sexual as-sault and harassment between1996 and 2017, leading Swed-ish prosecutors to investigate.

The Swedish Academy,which awards the literatureprize, was drawn into thescandal because it was financ-ing events at Mr. Arnault’s cul-tural club, and because hiswife, Swedish poet KatarinaFrostenson, sat on the acad-emy’s jury.

The academy stopped fund-ing the club, but disagreementemerged among jury membersover whether Ms. Frostenson,a co-owner of the club, shouldbe removed.

Several members, includingMs. Frostenson, left the acad-emy, but a question remained asto whether jury members knewabout the accusations beforethey became public last year.

Citing findings by a lawfirm it hired to conduct an in-dependent investigation, theacademy has said “unaccept-able behavior in the form ofunwanted intimacy had indeedtaken place, but the knowledgewas not widely spread in theacademy.”

BY DAVID GAUTHIER-VILLARS

Man IsChargedIn NobelScandal

MADRID—A top Spanishcourt upheld most of a graftconviction against the king ofSpain’s brother-in-law in acase that has tarnished themonarchy’s image.

The Supreme Court ruled onappeal a ruling that Iñaki Ur-dangarín, the husband of Prin-cess Cristina de Borbón, wasguilty of misuse of public funds,influence peddling and taxfraud for using his standing as

grants from Africa and theMiddle East and to deport halfa million migrants now on Ital-ian soil.

As such, Rome views Spain’soffer to take the migrants as avictory, as it has been pressingEurope to more equitablyshare the burden of seabornemigration. Italy had earlier

urged Malta to take the mi-grants, but the small nationshrugged off the request, say-ing it wasn’t its responsibility.

The Italian Coast Guard saidit estimates the boats will takefour days to reach Valencia.Italian authorities said doctorswill be on the Coast Guard shipto give assistance in case of

medical emergencies. TheUnited Nations is supply-ing staff to assist the minorson the boat.

“Teams relieved that solu-tion starts to be found,” SOSMediterranee said on Twitter.“However, results are unneces-sary prolongation of time atsea for already vulnerable peo-

ple.”The Italian government’s

position has won popular sup-port at home, with the Leaguegetting a strong showing in lo-cal elections on Sunday. Theparty’s support in nationwideopinion polls has risento 27% from the 17% it won inMarch parliamentary elections.

ROME—Hundreds of mi-grants whose boat was deniedentry to Italy will be trans-ported to Spain by ItalianCoast Guard and Navy vessels,a possible resolution to an in-cident the new Italian govern-ment has used to highlight itstough stance on migration.

The 629 migrants werepicked up off the coast of Libyalast weekend by a boat run bymigrant-aid group SOS Medi-terranee, but the Italian gov-ernment on Sunday refused toallow the vessel to dock. Thatleft the migrants stranded un-til Spain offered to take them,although it wasn’t clear howthey would get there.

Italian officials said Tuesdaythat two ships operated by theCoast Guard and Navy wouldtake 500 of the migrants to theSpanish port of Valencia. Therest will be taken by the aidvessel, which has received foodand supplies from Italian au-thorities.

Italy’s new government, acoalition between the anties-tablishment 5 Star Movementand the hard-right League, haspledged to halt mass migrationto the country.

The new interior minister isMatteo Salvini, head of theLeague, who has become a ris-ing star in Italy for his toughstance on migration. The newgovernment promises to stemthe flow of undocumented mi-

BY GIOVANNI LEGORANO

Italy to Ferry 500Migrants to Spain

Stranded migrants aboard an Italian coast guard vessel. Officials said ships would take 500 of the migrants to the Spanish port of Valencia.

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a member of the royal family toorchestrate a kickback schemetied to public contracts.

The judges dismissed a lowercourt decision convicting Mr.Urdangarín of falsifying docu-ments, lowering his prison sen-tence by several months to fiveyears and 10 months.

Mr. Urdangarín, an Olympichandball medalist turned busi-nessman, can appeal to anothertop court.

The case against King FelipeVI’s brother-in-law is one of

dozens stemming from Spain’sproperty boom years, whenbanks financed a constructionbinge that collapsed in 2008 af-ter a decade of overbuilding.

Court rulings and investiga-tions show members of the po-litical and business establish-ment seized on the surge in realestate spending to inflate con-struction contracts, for in-stance, and then illegally profitfrom kickback schemes.

Earlier in June, the center-left Socialist Party used a cor-

ruption ruling tied to the prop-erty boom to oust the formerprime minister and install itsown leader as premier.

The investigation into Mr.Urdangarín’s finances ensnaredhis wife, Princess Cristina, ex-posing the monarchy to criti-cism that the country’s eliteswere using their positions toprofit. In an attempt to shieldthe monarchy, King Felipestripped his sister and brother-in-law of their titles of Duchessand Duke of Palma in 2015.

BY JEANNETTE NEUMANN

Court Affirms Guilt of King’s Brother-in-Law

Iñaki Urdangarín can appeal hisconviction on graft charges toanother top court in Spain.

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WORLD NEWS

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A10 | Wednesday, June 13, 2018 * * * * * * THEWALL STREET JOURNAL.

THE SINGAPORE SUMMIT

BY CHUN HAN WONG

After Offenses, a Charm Offensive

After trading taunts, insults and war threats over the past year, President Donald Trump and North Korean leader Kim Jong Unturned chummy in Singapore, conducting their negotiations at the Capella Hotel on Tuesday with a casual demeanor.

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Document OffersNew Relations andSecurity Guarantees

Q: WHAT’S IN THE AGREE-MENT THE TWO LEADERSSIGNED?A: The two leaders committed toestablishing “new U.S.-DPRK rela-tions in accordance with the desireof the peoples of the two coun-tries” for peace and prosperity.

President Donald Trumpcommitted to providing unspec-ified “security guarantees” toNorth Korea, and North Koreanleader Kim Jong Un reaffirmedhis “unwavering commitmentto complete denuclearization.”

They said they would “jointheir efforts” to establish “alasting and stable peace re-gime” on the Korean Peninsula.

Q: WHAT ELSE DID THEYCOMMIT TO?A: Mr. Trump later told report-ers the U.S. would cease “tre-mendously expensive” joint mili-

than anybody could have ex-pected—top of the line,” Mr.Trump said. He lauded Mr. Kimas “a very worthy, very smartnegotiator” and a “very tal-ented man” who loves hiscountry.

Q: WHAT’S NEXT?A: Mr. Trump said the two menwould meet again “manytimes,” and said he would inviteMr. Kim to the White House.The U.S. president said he ex-pected they would have a “ter-rific relationship.”

Trump and Kim signed Tuesdaydidn’t set deadlines for action.Still to be answered are whenNorth Korea will turn over itsnuclear weapons, how the U.S.will verify that step, when puni-tive economic sanctions will belifted and what type of U.S. se-curity guarantees will be offeredto Pyongyang.

summit that he was open to vis-iting Pyongyang and was readyto welcome Mr. Kim to theWhite House. Mr. Pompeo andnational security adviser JohnBolton plan to meet next week,possibly with their North Ko-rean counterparts, to discussnext steps, the president said.

The document Messrs.

“We’re prepared to start anew history and we’re ready towrite a new chapter betweenour nations,” Mr. Trump said.

As a result of these talks, Mr.Kim said, “the world will see amajor change.”

Mr. Trump, who describedTuesday’s talks as honest, directand productive, said after the

and disrespectful, the presidentsaid, to pursue the “war games”even though defense officialshave said they are needed tomaintain training for an ever-ro-tating staff of U.S. and Koreanmilitary who participate.

The move appeared to sur-prise many at the Pentagon andSouth Korean officials. Mr.Trump’s critics accused him ofmaking a major concession be-fore winning anything concretefrom Mr. Kim.

South Korea’s Defense Minis-try said it was trying to deter-mine the meaning of Mr.Trump’s remarks, and a seniorSouth Korean national-securityofficial said “nothing haschanged” on the exercises.

Voicing concern, Japan’s de-fense minister Itsunori Onoderasaid Wednesday that the exer-cises play an important role inpreserving peace in East Asia.

A White House official saidTuesday that the U.S. militarywould continue to train with itsSouth Korean counterparts andconduct military drills—but notlarge-scale, joint exercises.

The clarification, comingwhile Mr. Trump was still flyingback from Singapore, was issuedafter Vice President Mike Pencespent much of the day meetingwith lawmakers who sought tounderstand what the presidenthad promised.

A Pentagon spokeswomansaid Defense Secretary JimMat-tis had been consulted on themove and was behind it.

China and Russia were quickto suggest that sanctions onNorth Korea be relaxed as nego-tiations progress which, if thatwere to happen, could ease eco-nomic pressure on North Koreabefore any tangible progress onthe process for denuclearizationhas been made.

Prime Minister Shinzo Abe ofJapan, after talking by phonewith Mr. Trump, called themeeting a success but said itneeded to be followed by swiftaction. “We will seek full imple-mentation of U.N. SecurityCouncil resolutions based on thesuccess of this historic meet-ing,” he said late Tuesday.

While Mr. Trump said theeconomic sanctions will re-main, he said that a key link inthe sanctions chain—NorthKorea’s border with China—had weakened recently, refer-ring to administration chargesthat China’s enforcement ofsanctions has eased, whichBeijing denies.

“I think, over the last twomonths, the border is moreopen than it was when we firststarted,” Mr. Trump said. “Butthat is what it is.”

Mr. Trump, taking a step out-side the formal U.S.-North Ko-rean agreement, said he wouldstop U.S. and South Korean mili-tary exercises—an importantsignal for deterrence for SouthKorea and a constant irritant forthe North—while negotiationsare under way.

It would be inappropriate

Tricky PathAhead AfterAgreementthis year—not the president’s“maximum pressure” campaignagainst Pyongyang—and saidthe two leaders accepted eachother’s invitations to visit theirrespective countries.

The report, published earlyWednesday, put a distinctlyNorth Korean spin on the meet-ing between the two leaders,the first between a sitting U.S.president and a leader of NorthKorea. The report also quotedMr. Kim as saying that, if theU.S. were to take “genuine mea-sures for building trust,” thenthe North could reciprocate in a“commensurate” fashion—aclear suggestion that U.S. con-cessions would have to comebefore any North Korean move.

Tuesday’s agreement, whichMr. Trump described as “verycomprehensive” after decades offailed U.S. efforts, provided al-most no particulars on how tocome to a denuclearization thatwas complete, verifiable and ir-reversible—oft-stated U.S. goals.Mr. Trump said he would main-tain economic sanctions butwould stop the “war games”with South Korea as negotia-tions with the North continue.

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SINGAPORE—As PresidentDonald Trump and North Ko-rean leader Kim Jong Un exudedmutual warmth during a Tues-day summit, with beamingsmiles and breezy back-patting,months of distant bickering dis-solved in close-up bonhomie.

Over the past year, the twoleaders traded taunts, insultsand war threats as Washingtonpressed Pyongyang to give upnuclear weapons.

Though both men startedplaying nice as they preparedto meet for the first time, ten-sions kept simmering as Mr.Trump swung between cancel-ing and restoring plans for theSingapore summit at the 11thhour.

Then, on Tuesday, summitstagecraft signaled a tilt towardfull-on diplomatic niceties, por-traying the septuagenarianpresident and the 30-somethingdictator as equals in the glare ofthe global limelight.

The proceedings startedwitha red-carpet handshake just af-ter 9 a.m., against a backdrop ofU.S. and North Korean flags. Asthe two leaders approachedeach other from opposite endsof a hotel walkway, Mr. Trumpreached out first for a hand-shake.

Grasping hands for roughly13 seconds, they exchangedpleasantries while Mr. Trumpbriefly placed his left hand onMr. Kim’s right arm. Both menappeared relaxed as they chat-ted, smiling broadly at times.

Their casual demeanor con-tinued as they retreated awayfrom the cameras for a privatechat, seated on wooden chairswith cushions and separated bya small flower-topped table.

Just before journalists leftthe room, the two leaders shookhands, andMr. Trump flashed athumbs-up at Mr. Kim.

“I think the entire world iswatching thismoment,”Mr. Kim

told Mr. Trump, through atranslator. “Many people in theworld will think of this as ascene from a fantasy…sciencefiction movie.”

Emerging from a workinglunch, the two leaders strolledthrough a hotel garden, brieflyunaccompanied by aides ortranslators.

Mr. Kim, who brought along

two luxury cars—a Mercedesand a Maybach—for this sum-mit, peered inside Mr. Trump’sarmored limousine. In a mo-ment captured by televisioncameras, Mr. Trump gestured toa Secret Service agent to open arear passenger door of his presi-dential ride, allowingMr. Kim aquick glimpse.

At the end of a signing cere-

mony, whereMessrs. Trump andKim signed a joint declarationon denuclearizing North Korea,the two leaders exchanged afirm handshake and put theirhands on each other’s backs.

Even after parting ways withhis North Korean counterpart,Mr. Trump kept up the charmoffensive by expressing admira-tion for Mr. Kim’s leadership

qualities.By the president’s reckoning,

since Mr. Kim ascended topower in North Korea, he has“run it, run it tough,” a feat thatMr. Trump said only one in10,000 people would be capableof.

The president said Mr. Kimwasmaking “a first bold step to-ward a brighter future.”

Gamble ofSummitEmbraceleaders personally exposetheir reputations and run therisks that come with shakinghands on a big world stage.

This time, Mr. Trump is do-ing the opposite. The Trump-Kim handshake happened atthe outset, and it is to be fol-lowed later by agreement onthe tough details. There is noagreement yet on how to ver-ify the North Korean promiseto “denuclearize,” how tomake that agreement irrevers-ible, or when the U.S. will lifteconomic sanctions. Those arethe key elements of an actualdeal, and they have been leftfor the underlings to resolvegoing forward.

As Mr. Trump well knows,the standard against whichany such final deal will be

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judged is the Iran nuclearagreement negotiated underformer President BarackObama—one that Mr. Trumphas belittled and discardeddespite some detailed verifica-tion provisions.

The Iran precedent, as wellas the uncertainty ahead,prompted cautious reac-tions—and even some rum-blings of unease—from Mr.Trump’s allies on the right.Senate Majority Leader MitchMcConnell hailed “a historicfirst step in an important ne-gotiation.” But in a statement,he also pointedly said hebacked the American goal of“‘complete, verifiable and irre-versible denuclearization ofthe Korean Peninsula,” andcautioned: “If North Koreadoes not prove willing to fol-low through, we and our alliesmust be prepared to restorethe policy of maximum pres-sure.”

Similarly, GOP Sen. TomCotton, a vociferous critic ofthe Iran nuclear deal, toldconservative radio host HughHewitt that generally the U.S.

should be wary of sittingdown with “two-bit dictators,”but added that doing so wasnecessary “once North Koreahad nuclear weapons” and themissiles to carry them.

Still, the one indisputableaccomplishment of Tuesday’smeeting is that it took the U.S.and North Korea off a path to-ward war, which they seemedto be walking just a fewmonths ago, and Mr. Trump’sfriends and foes alike cheeredthat. “It was a welcome im-provement to see the two ofthem having a dialogue ratherthan engaging in name callingand saber rattling,” said Dem-ocratic Sen. Chuck Schumer.

The scene that unfolded atthe summit in Singaporespoke loudly to Mr. Trump’sbelief in his own ability to sizeup other leaders and thenmove them in his direction inpersonal negotiations. An in-ternational agreement on nu-clear arms isn’t a real estatedeal, but Mr. Trump has sug-gested in this case that hedoesn’t see the dynamic as sodifferent. In each case, the

personal relationship is key.That proposition will be

tested in coming months andMr. Trump suggested a coupleof times on Tuesday that itwill take six months to figureout whether the effort willsucceed. Meanwhile, he in-sisted, “we haven’t given upanything.”

That isn’t quite true. Mr.Trump gave up one of hisstrongest cards by giving Mr.

Kim legitimacy and interna-tional recognition up front. Healso gave up something by an-nouncing that the U.S. willstop holding joint military ex-ercises with South Koreawhile diplomacy plays out, re-moving an irritant and grant-ing a favor to North Korea.Implicitly, Mr. Trump is alsogiving up, for now, militarythreats against North Korea.

Yet it is also important toremember that Mr. Trumpdidn’t give up the most pow-erful card he holds: He didn’tagree to roll back any eco-nomic sanctions on North Ko-rea. That is the prize Mr. Kimis seeking above all others,and it hasn’t been provided.

That will leave the U.S.with significant leverage inthe negotiations ahead. If his-tory is a guide, Washingtonwill need that leverage be-cause the path from theframework signed by Messrs.Trump and Kim to a full, de-tailed agreement will be longand difficult.

It will require a degree ofopenness North Korea has

never before shown in lettingthe world look inside its mostsensitive operations. Eventu-ally, the process also will re-quire agreement on issuesranging far from nuclear mat-ters. Though the two leadersagreed to a framework forpeace between their countries,they didn’t agree to a plan toformally end the Korean War.That is a tricky process thatwill involve protecting the in-terests of South Korea andJapan as well the U.S.

The diplomacy ahead willhave to take into account thewishes of the biggest partynot in the room in Singapore:China. The Chinese are un-doubtedly pleased that Mr.Trump talked Tuesday of po-tentially withdrawing Ameri-can troops in South Korea,but they also will insist onbeing dealt into the diplo-matic process that liesahead—and they have theability to disrupt it if theyaren’t happy.

In sum, the war cloudshave dissipated. The weatherahead is hard to predict.

Kim Jong Un got no immediaterelief from economic sanctions.

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The White House said Tues-day that the U.S. military wouldcontinue to train with its SouthKorean counterparts and con-duct military drills—but notlarge-scale, joint exercises—in aclarification of an offer by Pres-ident Donald Trump to NorthKorea’s leader Kim Jong Un.

The clarification, comingwhile Mr. Trump was still fly-ing back from his summit withMr. Kim in Singapore, was is-sued by a White House officialafter Vice President MikePence spent much of the daymeeting with lawmakers whosought to understand what thepresident had promised.

Mr. Trump said at a Tuesdaynews conference in Singaporethat for the duration of talks,he was stopping U.S. “wargames,” which he said were“tremendously expensive” andprovocative to North Korea.The offer wasn’t part of thejoint statement betweenMessrs. Trump and Kim, andwas criticized by some lawmak-ers for giving away too much.

Mr. Pence met in closed ses-sion with GOP lawmakers, andsome later said he told themthat “regular readiness train-ing and training exchanges”would continue, according to aTwitter message by Sen. CoryGardner (R., Colo.).

Late Tuesday, a White Houseofficial clarified Mr. Pence’scomments, saying: “The VP wasasked about force readinessand said that while the semian-nual war games would cease—assuming parameters of thedeal are met—regular readi-ness training would continue.”

BY BEN KESLINGAND MICHAEL R. GORDON

WhiteHouseAssuresOn Drills

tary exercises with South Korea.He also said Mr. Kim had

agreed to destroy a missile-en-gine testing site.

Q: WHAT WAS THE MOOD?A: Chummy, at least as far asMr. Trump was concerned. Thetwo men shook hands for 13seconds in front of the cam-eras, Mr. Trump patted Mr. Kimon the back, and he emergedeffusive about his counterpart.

“We had a really fantasticmeeting, a lot of progress, re-ally very positive. I think better

THEWALL STREET JOURNAL. * * * * * * Wednesday, June 13, 2018 | A11

THE SINGAPORE SUMMIT

bility on the peninsula.Sen. Tom Cotton (R., Ark.)

said he believed the “proof ofthe pudding will be in the eat-ing,” saying the next large-scale joint military exercisewasn’t scheduled until springof 2019.

“I suspect by that point,we’ll have, well before thatpoint, actually, we’ll knowwhether Kim Jong Un is seri-ous about these commitments,”he said. “I believe that DonaldTrump is going to continue thecampaign of maximum pres-sure, and he will not grant one-sided unilateral concessions.”

Senate Minority LeaderChuck Schumer (D., N.Y.) andother Democrats expresseddoubt that the meeting wouldlead to any concrete results.

“What the United States hasgained is vague and unverifi-able at best. What North Koreahas gained, however, is tangi-ble and lasting,” Mr. Schumersaid on the Senate floor. “Pres-ident Trump has granted abrutal and repressive dictator-ship the international legiti-macy it has long craved.”

House Minority LeaderNancy Pelosi (D., Calif.) saidMr. Trump had inappropri-ately elevated North Korea tothe equal of the U.S. “Thepresident handed Kim Jong Unconcessions in exchange for

sion” in agreeing to halt jointmilitary exercises with SouthKorea. He said a scorecard atthis stage of the game wouldshow the North Koreans “wayahead on points” for havingbeen treated as equals in ne-gotiations on the world stage.

Robert Einhorn, a formerU.S. negotiator on North Ko-rea’s missile programs andspecial adviser on nuclear is-sues to the Obama administra-tion, said calling off wargames with South Korea mightmake sense, but it should havebeen planned with Seoul.

Victor Cha, who helpedoversee North Korea policy inPresident George W. Bush’ssecond term and is now aGeorgetown University profes-sor, said the meeting was justa first step on a long roadahead, and previous negotia-tions had gone further.

“This is the bare bones ofan agreement on denucleariza-tion. On paper the commit-ment is less than we have gotbefore in 2005 and 1994,though this time it comesfrom the leader directly,” Mr.Cha told The Wall Street Jour-nal. “Success will be deter-mined by Pompeo’s ability toput some meat on the bones.Otherwise it’s just a photo op.”

—Louise Radnofskycontributed to this article.Cindy and Fred Warmbier, parents of Otto Warmbier

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“The amount of money wespend on that is incredible,” Mr.Trump said. “South Korea con-tributes, but not 100%, which iscertainly a subject we have totalk to them about also.”

Fumio Ota, a retired Japa-nese admiral and member of aforeign-policy think tank in To-kyo, said Mr. Trump had “con-ceded too much to North Ko-rea” without extracting“concrete commitments” fromPyongyang on denuclearization.

“Military exercises are avery strong bargaining chip anda way to pressure North Ko-rea,” Mr. Ota said. “Mr. Trumpshould not have given it up.”

Mr. Trump said a draw-down of U.S. troops based inSouth Korea wasn’t a part of

current negotiations, butstressed that he ultimatelywanted to “get our soldiersout.” He added: “I’d like to beable to bring them home.”

Japan and South Koreaweren’t participants in Tues-day’s talks. The two have de-pended on the Trump adminis-tration to protect their interests.

Mr. Trump has upended U.S.foreign policy, antagonizingthe country’s closest partnersand raising questions aboutWashington’s reliability as anally. Last week, the U.S. refusedto endorse the final communi-qué of the Group of Seven in-dustrial nations summit andMr. Trump lashed out at Cana-dian Prime Minister JustinTrudeau over trade differences.

Talks over North Korea’snuclear disarmament are beingseen as a test of Washington’scommitment to its Asian allies.

Leif-Eric Easley, a professorat Ewha University in Seoul,said Tuesday’s deal will raiseconcerns in Tokyo about the re-duction of military exercises anda loosening of sanctions aimedat Pyongyang “while leaving inplace North Korea’s current ca-pabilities that threaten Japan.”

Mr. Onodera said Tues-day that “we definitelyshouldn’t let down our guarduntil we can confirm that spe-cific actions have been taken.”

Mr. Trump appeared up-beat and said the process of de-nuclearization was “going to govery quickly.” The document,

however, left most of the toughnegotiations for future talks.

Wi Sung-lac, Seoul’s formerenvoy on nuclear issues and avisiting professor at Seoul Na-tional University, said SouthKorean officials would have todrill into the question of“what would be given by Mr.Trump to Kim Jong Un in ex-change for denuclearization.”

Of particular concern, Mr.Wi said, were U.S. “securityassurances” to Pyongyang,which would affect America’smilitary presence in the re-gion, from the future of U.S.forces based in South Korea tothe deployment of U.S. aircraftcarriers and nuclear subma-rines. “The heart of the gameis the exchange between denu-

clearization and security as-surances,” Mr. Wi said.

U.S. officials have sought toallay concerns in recent weeksand said that a drawdown ofU.S. troops in South Koreawould depend on negotiationsbetween Seoul and Washington.

A troop withdrawal “wouldserve the North Koreans verywell in terms of their securityconcerns, it would serve theChinese in terms of pushingout American influence in theregion, but it would deeplyconcern the Japanese,” saidStephen R. Nagy, a senior as-sociate professor in the De-partment of Politics and Inter-national Studies at theInternational Christian Univer-sity in Tokyo.

SINGAPORE—PresidentDonald Trump and North Ko-rean leader Kim Jong Un de-clared the “opening up of anew future” for their countriesafter talks on Tuesday. Buttheir agreement also raisednew and complex questions forWashington’s regional allies,chiefly Japan and South Korea.

In a joint statement, Mr.Trump “committed to providesecurity guarantees” to NorthKorea, a key subject of con-cern for the U.S.’s partnersand one with potentially far-reaching consequences forAsia’s security landscape.

The document didn’t give de-tails of what was promised, butMr. Trump said in a press con-ference later that military exer-cises with South Korea wouldbe canceled, in a conciliatorymove to Pyongyang that breakswith longstanding U.S. policy.

“Under the circumstanceswhen we are negotiating avery comprehensive, completedeal, I think it’s inappropriateto have war games,” Mr.Trump said. He described theexercises as “provocative” and“tremendously expensive.”

South Korea’s Defense Min-istry appeared unaware of Mr.Trump’s decision and on Tues-day said it was still trying todetermine the exact meaningof his remarks.

Japan’s defense ministerexpressed concern Wednesday.

“U.S.-South Korea exercisesand the U.S. military presencein South Korea have an impor-tant role in the peace and se-curity of East Asia,” DefenseMinister Itsunori Onodera toldreporters in Tokyo.

Mr. Trump articulated atransactional approach to U.S.security partnerships, speak-ing at length about the ex-penses involved in flying U.S.combat aircraft from Guam toSouth Korea “to practice anddrop bombs all over the placeand go back to Guam,” playingdown the strategic signifi-cance of the collaboration.

BY NIHARIKA MANDHANA

U.S. Deal Tests Ties With Asian AlliesSouth Korea, Japantry to assess Trump’splan to scrap militaryexercises in the region

The governments of Japanese Prime Minister Shinzo Abe, above right, and South Korean President MoonJae-in, below center, are assessing President Trump’s plan to end war games around the Korean Peninsula.

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FlashpointsPresident Trump said he would end joint military drills with SouthKorea, a source of security for allies and tension for their neighbors.

ChinaChina had already suggested the U.S. end the drills in tandemwith North Korean steps to lower tensions, and praisedTuesday's agreement.

JapanTokyo has pressed the U.S. to stick to a hard line until North Koreacompletely denuclearizes, which could take years.

South KoreaSouth Korea appeared unaware of Mr. Trump’s plans to end theexercises. He also said he would like to eventually bring home the28,500 U.S. troops based there.

North KoreaPast U.S. military exercises with South Korea elicited virulentprotests and threats from North Korea.

RussiaRussia praised the U.S. move to end war games, saying it wasnecessary to ease tensions on the peninsula, Reuters reported.

WASHINGTON—Republi-can members of Congress re-acted to President DonaldTrump’s meeting with NorthKorea’s leader Kim Jong Unwith cautious optimism, say-ing they supported the goalsoutlined in the joint communi-qué the two signed after thesummit, but noted that itlacked detail and was only astarting point for negotiations.

Democrats also noted thelack of specifics in the two-page statement, which reas-serted North Korea’s commit-ment to denuclearization inexchange for unspecified U.S.security assurances, saying thesummit had legitimized a bru-tal regime and failed to makeprogress on the nuclear issue.They also criticized Mr.Trump’s decision to unilater-ally suspend military exerciseswith South Korea without con-sulting with Seoul.

“Only time will tell if NorthKorea is serious this time, andin the meantime we must con-tinue to apply maximum eco-nomic pressure,” said HouseSpeaker Paul Ryan (R., Wis.),referring to the sanctionsframework the U.S. and allieshave imposed on North Korea.

Sen. Lisa Murkowski, anAlaska Republican, said that“while the joint statement isshort on details, the signifi-cance of the meeting cannotbe understated.”

Several other Republicansplayed down Mr. Trump’s an-nouncement he would canceljoint military exercises withSouth Korea.

“I don’t think canceling awar game is going to matterover the arc of time,” Sen. Lind-sey Graham of South Carolina,a senior Republican on the Sen-ate Armed Services Committee,told NBC. “The one thing that Iwould violently disagree with isremoving our troops.”

Mr. Graham noted that twoprevious Korean peace sum-mits—in 2000 and 2007—failed to end nuclear-weaponstesting or secure lasting sta-

BY JESSICA DONATIAND BYRON TAU

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Sen. Lisa Murkowski, standing, said the meeting was significant but noted the statement was vague.

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son’s death.They have said their son

was “brutally tortured andmurdered” while in North Ko-rean captivity for more than ayear.

Mr. Trump has also saidtheir son was “tortured be-yond belief.”

Mr. Warmbier died in June2017 at age 22, shortly afterreturning home to Ohio in acoma.

He had been detained atPyongyang’s airport in Janu-ary 2016 as he was preparingto leave the country after atour.

He was initially sentencedto 15 years of hard labor afterthe North Koreans said he al-legedly defaced a politicalposter.

His parents’ lawsuit, filed infederal court in April, saiddoctors concluded his brainwas severely damaged becauseof a lack of blood flow andthat he was beyond recovery.

The exact cause of his inju-ries during his detention re-main unclear. His parents areseeking damages to be deter-mined by the court.

The lawsuit said North Ko-rea falsely claimed Mr. Warm-bier contracted botulism andthat he then was given asleeping pill.

The parents of Otto Warm-bier, the American college stu-dent who died nearly a yearago following his imprison-ment in North Korea,said they hoped his deathwould lead to “something pos-itive,” as the U.S. pursues di-plomacy aimed at nuclear dis-armament in the secretivecountry.

President Donald Trump,speaking after Tues-day’s summit meeting withNorth Korean leader KimJong Un, said Mr. Warmbier’sdeath had been a catalystthat helped make the talkspossible. The president alsocited his friendship with thefamily.

“Otto did not die in vain,”Mr. Trump said. “He had a lotto do with us being here to-day.”

Mr. Warmbier’s parentssaid in a statement issued bytheir attorneys: “We appreci-ate President Trump’s recentcomments about our fam-ily. We are proud of Otto andmiss him. Hopefully some-thing positive can come fromthis.”

Mr. Warmbier’s parents,Fred and Cindy Warmbier, aresuing North Korea over their

BY JON KAMP

Student’s ParentsHope for ‘SomethingPositive’ FromDeath

vague promises that do notapproach a clear and compre-hensive pathway to denuclear-ization and nonproliferation.”

Sen. Brian Schatz of Hawaii,which is believed to be withinrange of North Korea’s missiles,said the president’s positivecomments about the North Ko-rean leader reflected an “abdi-cation of American leadership,”calling them “embarrassing.”

“What did we get? Do weget something later? Becauseit looks like [Mr. Kim] got allthe stuff. Does our stuff getannounced in a few months?”Mr. Schatz, a Democrat, wroteon Twitter shortly after the

summit concluded.Away from Capitol Hill, vet-

erans of the Washington for-eign-policy establishment hada range of opinions.

Former National SecurityAgency and Central Intelli-gence Agency director MichaelHayden said the U.S. had madea “pretty significant conces-

Republicans andDemocrats alike saidthe two-pagestatement was vague.

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A12 | Wednesday, June 13, 2018 THEWALL STREET JOURNAL.

John Naveira of Burbank, Calif.,an executive vice president at SonyPictures, on his 1972 Datsun 240Z,as told to A.J. Baime.

At work, my parking spot is atthe bottom of a 94-foot tall rain-bow sculpture in Culver City. Therainbow is a nod to “The Wizardof Oz,” which was filmed on whatis now the Sony Pictures lot inthe late 1930s. When I park my240Z there everyone can see it,and the symbolism is obvious. It islike a pot of gold at the end ofthe rainbow.

It was 2012 when my son camehome and told me he saw a Dat-sun 240Z for sale three blocksaway. The Z has always been animportant car for me, but I hadnever owned one. When I was injunior high, a neighbor parked herred Z next to my mother’s ChevyImpala, and I fell in love with thatcar. My wife once owned a 280Z,and both of her brothers haveowned 240Zs.

I took a look at this car in myneighborhood, snapped photos and

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John Naveira stands with his 1972 Datsun 240Z in his work parking spot, in front of a 94-foot tall rainbow sculpture near the Sony Pictures lot.

LIFE&ARTS

visas. Carnivals and circuses relyheavily on these seasonal employ-ees to run each summer.

“It’s extremely hard to get goodlabor that will travel, pass a drugtest, a criminal background checkand only work six months,” says BillJohnson, a former Showmen’sLeague president and the owner ofFantasy Amusement Company, a 33-year-old amusement park that oper-ates around Illinois and Indiana.

There are an estimated 250 or-ganized carnivals in the U.S., partof a broader mobile amusement in-dustry generating an annual $3.15billion in revenue, according to in-dustry trade group the OutdoorAmusement Business Association.

ARTS

FromWreckage to ReunionForest Park, Ill.

DURING THE EARLY hours ofJune 22, 1918, a locomotive with asleeping engineer at its controlsplowed into the back of a circustrain near Gary, Ind., smashingthrough cars filled with sleepingpassengers and sparking a firethat spread through the wreckage.

Eighty-six men, women andchildren were killed, and morethan 120 were injured. The deadincluded a lion tamer, strongmen,a trapeze artist and clowns, alongwith workers who set up andbroke down the traveling Hagen-beck-Wallace Circus, one of thebiggest in the U.S. at the time.

Though it remains one of themost deadly railroad disasters inU.S. history, the train wreck is alsoremembered for what happenednext. It spurred other circuses tosend performers that helpedHagenbeck-Wallace put on showsscheduled as soon as two days af-ter the crash. The tragedy also ral-lied a fraternal order of entertain-ers, the Showmen’s League ofAmerica, that continues to pre-serve traditions of outdoor showbusiness and honor its dead.

“We’re all traveling people.That’s the thread,” says JimmyDrew, who furnishes rides to fairsin 10 states. Of the kinship withthe 1918 circus casualties, he says,“we have to remember who wewere to know where we’re going.”

Showmen’s League members,many of them operators of family-owned carnivals that travel thecountry, gathered last month atWoodlawn Memorial Park in thisChicago suburb to mark the cen-tennial of the wreck. In a coinci-dence that forever linked the 105-year-old group to the disaster, theShowmen’s League bought a ceme-tery plot shortly before the wreck.

It named the plot Showmen’sRest, intending it as a final homefor entertainers, many of whomwere rootless. That June, however,the League offered it as a massgrave for those who died in theHagenbeck-Wallace wreck.

In the cemetery,plaques commem-orate the victims,some with nick-names or circusduties. “Baldy”lies next to “4Horse Driver.”Dozens are anony-mous, bearingonly a number and“Unknown Male”or “Unknown Fe-male.”

At a podium be-side a live circusband and a cen-tury-old gildedhorse cart, Father John VakulskasJr. led a prayer as League mem-bers laid out a flowered wagonwheel with a missing spoke, asymbol of loss.

Mr. Vakulskas is a Catholicpriest who travels the countryministering to the carnival com-munity—blessing rides, leadingmasses, baptizing the children ofitinerant workers. He wore a stoleembroidered with a carouselhorse, a ferris wheel and otheremblems of traveling shows.

Afterward, he spoke of linger-ing misperceptions about carnivalworkers and why they take of-fense at “carny.” “It’s a pejora-tive,” he said.

The Showmen’s League straddlestwo worlds. Consider its headquar-ters. Eight years ago it bought abuilding in Chicago’s former meat-packing district, Fulton Market,which soon took off as one of thecity’s trendiest neighborhoods. Thegroup’s airy office, where a largepainting of its first president, Buf-falo Bill Cody, greets visitors, isacross the street from a Google of-fice and near some of Chicago’s hot-test restaurants and bars.

When members assemble, theyare just as likely to talk about newrides, games and food trailers asbusiness concerns, especially thefederal cap on the number of non-agricultural guest workers granted

Nearly half of its roughly 15,000seasonal workers are foreign. Butone-third of the industry’s visa re-quests went unfilled last year.

Some things that carnivals com-pete with are relatively new—casi-nos, Netflix, smartphone apps—butthe core challenges haven’tchanged drastically.

“We’re not that much differentthan farmers and ranchers. We’reseasonal, we depend on theweather, and all our money comesin a short amount of time,” saysGuy Leavitt, current president ofthe Showmen’s League.

Mr. Leavitt’s children representthe third generation of his familyto work for Ray Cammack Shows,a carnival operator started in 1961by his father-in-law.

The arcana of their industryunites “show people” almost asmuch as the family ties. Mr. Drew,who operates Drew Exposition, atraveling amusement park based inAugusta, Ga., was so enamored ofa ferris wheel made for the 1962World’s Fair that he put an illus-tration of it on his company’s let-terhead before he bought one.

“My mouth would drop open tolook at that machine,” said Mr.Drew, 72 years old, whose companybegan with one carousel purchasedby his mother and father in 1948.

The Showmen’s League hasabout 1,100 members, down from apeak of about 1,500. These days itputs more of a priority on grant-ing college scholarships and otherservices, but it still offers a burialground. There are many plots re-maining at Showmen’s Rest.

At the cemetery, Mr. Johnsonpointed out the plot he bought forhimself. It is steps away from thegraves of the Hagenbeck-Wallacewreck victims and right next tothat of his late mentor, Bill Knight.

Mr. Knight brought Mr. Johnsoninto the business, hiring him atage 12 to pick up balls on the milk-bottle game and later manage adart game for a cut of the profits.

“I’ll be honored to be close tohim,” Mr. Johnson said. “Hopefullywe’ll see each other again some-day and cut a few jackpots,” carni-val lingo for swapping stories.

BY JOHN JURGENSEN

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MY RIDE | By A.J. Baime

A CLASSIC DATSUN Z GETS A HOLLYWOOD ENDING

Dozens of Hagenbeck-Wallace Circusperformers andworkers were killed ina 1918 train crash,above. The Circus Hallof Fame in Peru, Ind.,brought a 100-year-old wagon, left, to thecentennial, whereFather JohnVakulskas Jr., belowright, was amongthe attendees. AtWoodlawn MemorialPark, below left, aplot called Showmen’sRest is meant as afinal home forentertainers.

THEWALL STREET JOURNAL. Wednesday, June 13, 2018 | A13

Academy of Fine Arts in 1894, he ar-gued that “The realism of our timemust penetrate the work of art.”Carl E. Schorske, in his ground-breaking “Fin-de-Siècle Vienna: Poli-tics and Culture” (1980), calledWagner’s buildings and projectsthat responded to the changing so-cial rhythms and psychologicalproblems and necessities of modernlife “functional futurism.”

In 1897, Wagner found commonground with the Vienna Secessionand its anti-traditional aims. Thiscan be seen in the sinuous and flo-ral Art Nouveau details in many ofWagner’s projects from the turn ofthe century, including the largestcommission of his career, the Vi-enna Metropolitan Railway, forwhich Wagner designed 42 via-ducts, 78 bridges, 15 tunnels and36 stations. While many of the gatebuildings for the elevated subwaylines saw the light of day, only twoof his ornate pavilions for the un-derground lines—in white marblefestooned with green iron andgold—at Karlsplatz were realized.

“Browsing through his life’swork, you might weep tears at rageat these magnificent ideas never re-alized and at the designs chosenabove his,” wrote Adolf Loos, who,

despite his famous aversion for thesort of modernist ornament thatWagner often employed, admiredthe elder architect. Learning aboutthe projects that never came topass, it’s easy to share Loos’s bitter-ness. Then again, what Wagner didmanage to achieve in Vienna isnothing short of breathtaking.

Wagner’s grandest accomplish-ment is arguably Am Steinhof, thepsychiatric hospital in the westernpart of the city built between 1903and 1907. Much of Wagner’sthought about the form and func-tion of the modern metropoliscomes together on the generouslyappointed sanatorium grounds,which contain 60 pavilions laidout in a grid. At its peak standsthe Church of St. Leopold, withstunning stained glass by Moserand angels with golden wings be-neath a gilded-iron cupola. At theopening, a journalist quipped, “Isit not a beautiful irony of fate thatthe first sensible Secessionistbuilding in Vienna has been builtfor the insane?”

Back in the heart of Vienna, thePostal Savings Bank was the onlychance that Wagner ever got totransform the historicist characterof the Ringstrasse. It is a monu-

ment to the Machine Age. Alumi-num is the defining material, fromthe nearly 17,000 caps that punctu-ate the marble and granite façadeto the statuesque vents prominentlydisplayed in the atrium-like ca-shier’s hall, a sleek and airy marvelof iron, glass and light.

Wagner’s aluminum vent, itsfunction aestheticized, is a fore-runner of the revolutionary exte-rior Renzo Piano designed for thePompidou Center in Paris. This isone of the constructive connec-tions made in “Post-Otto Wagner:From the Postal Savings Bank toPost-Modernism,” a sprawlingshow at the Austrian Museum ofApplied Arts/Contemporary Artthat examines the global impact ofWagner’s work. It makes clever,persuasive comparisons betweendesigns by the Viennese masterand architectural visionaries fromLe Corbusier to Robert Venturi andDenise Scott Brown, and discussesWagner’s theoretical plans for the“unlimited city,” the elastic me-tropolis of the future, laid out inan unsentimental grid, that he con-sidered the logical outcome ofmodernism and industrialization.Though Wagner was wrong to pre-dict that Vienna would become

such a city, his thinking about infi-nite urban expansion can easily beapplied to Asia’s megalopolises.

The exhibit also discusses Wag-ner’s lasting influence as a teacher.At the Academy of Fine Arts, hetaught a generation of the multi-ethnic empire’s most brilliantminds. Along with the celebratedJosef Hoffmann, his pupils in-cluded the pioneering Czech mod-ernist Josef Gočár and the vision-ary Hungarian István Medgyaszay,who transmitted Wagner’s philoso-phy throughout Mitteleuropa.

A full immersion in the Wagneruniverse, as presented in theseshows and reflected in the city heushered into the modern age, un-derscores Schorske’s assessmentthat Wagner “hammered out ideasof urban life and form whose influ-ence is still at work among us.”

Otto WagnerWien Museum Karlsplatz, through Oct. 7

Post-Otto Wagner: From the PostalSavings Bank to Post-ModernismAustrian Museum of Applied Arts/Contemporary Art, through Sept. 30

Mr. Goldmann writes aboutEuropean arts and culture.

TheWSJ Daily Crossword | Edited by Mike Shenk

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Across1 Words beforea hike

7 Trunk offshoot

11 “The LighterSide of...”magazine

14 “Be rightthere”

15 Frisbee sport

17 Laissez-fairesystems

19 Verges on

20 Seller ofAerotypegasoline inthe 1930s

21 Back track?

27 Hirsute TVcousin

Previous Puzzle’s Solution

28 Tech companythat sellsClearPathmainframes

29 “With luck!”

31 “My word!”

32 Not quitebug-free

35 Deli creations

40 Ended the sameway

41 Hit showdesignations

43 Dice

46 Bandedmetamorphicrock

48 Unwantedbasementdweller

49 Just in time

53 Good name fora mechanic

55 One that gets ascoop

56 Nightgownwearer of poem

63 Desperation

64 Clue heading

65 Ave.intersectors

66 Pretty miffed

67 Dough raisers

Down1 That guy

2 Italian article

3 Black goo

4 Disapprovingsound

5 Minute

6 Pieces of eight?

7 “Filthy” gain

8 Expression ofconcession

9 Place of highelev.

10 Book jacketfeature, often

11 Williams of“Game ofThrones”

12 Bikini Atoll trials

13 Early explorer ofthe southeasternU.S.

16 Montreal Mrs.

18 Stud setting

21 Reuniongreeting

22 ___ about(roughly)

23 Soup served withsushi

24 F’s enharmonic

25 Course pro?

26 Strong desire,with “the”

30 Short breaks

32 Watson’s creator

33 Called before

34 Where dreamsare made?

36 Avoid like theplague

37 Tent for rent, say

38 Performer’sverve

39 Unremarkable

42 Fed. ID

43 Standsuncomfortablyclose to

44 “Ugh, that’sawful!”

45 Precociousswimmers

46 “Shoo!”

47 Spot

50 Jag or Buc

51 Omitphonetically

52 Digit associatedwith the starts ofthis puzzle’s fivelongest answers

54 Have creditors

57 Networkingconnections

58 Midsummer baby

59 Target of somestudent walkoutsigns

60 Floors in a ring

61 Believer

62 Scrollwork shape

s

Solve this puzzle online and discuss it atWSJ.com/Puzzles.

E L A T E S T U B S H A SR E G A N A I S L E A R ES M A L L S C R E E N R E XE M I L I A E R A G D A Y

A N E S T S C R O DS T O W S H E A R T S

F I S T R A C E B L I M PI N A H I G H T E A V E EA C C R A E M T S P E N DT A K E I N O U T T A

L E R O I A R I A SS T U D S C H D I N N E RW O N A H E A D O F T I M EA R C N E U R O L E T I NN O H A S P E N E R A S E

GETTIN’ PIGGYWITH IT |By Samuel A. Donaldson

WeatherShown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.

City Hi Lo W Hi Lo W City Hi Lo W Hi Lo WToday Tomorrow Today Tomorrow

City Hi Lo W Hi Lo W

Anchorage 64 50 pc 67 52 sAtlanta 87 71 t 88 72 pcAustin 96 73 pc 95 74 pcBaltimore 85 65 pc 83 60 sBoise 91 55 s 76 53 sBoston 76 66 sh 80 57 sBurlington 78 61 c 68 49 shCharlotte 88 71 pc 92 70 pcChicago 81 60 s 82 62 pcCleveland 82 61 pc 80 59 sDallas 95 77 pc 96 77 pcDenver 92 60 pc 95 61 sDetroit 83 60 pc 83 59 sHonolulu 87 75 pc 88 75 pcHouston 94 76 s 91 76 pcIndianapolis 86 58 pc 83 63 pcKansas City 82 64 pc 90 71 sLas Vegas 107 82 s 106 81 sLittle Rock 90 70 t 90 73 pcLos Angeles 84 63 s 83 63 sMiami 85 77 pc 86 76 tMilwaukee 78 59 s 77 61 pcMinneapolis 80 60 s 82 67 pcNashville 88 71 t 90 70 cNew Orleans 90 73 pc 88 75 pcNew York City 79 68 c 82 61 sOklahoma City 88 69 pc 92 70 s

Omaha 84 67 pc 93 74 tOrlando 91 72 t 91 73 tPhiladelphia 83 66 pc 83 62 sPhoenix 110 86 pc 107 83 sPittsburgh 81 57 t 79 55 sPortland, Maine 75 60 sh 75 52 pcPortland, Ore. 67 52 sh 69 52 pcSacramento 98 56 s 92 54 sSt. Louis 86 66 t 88 71 pcSalt Lake City 97 73 s 94 64 sSan Francisco 74 56 pc 70 55 pcSanta Fe 94 64 pc 89 58 pcSeattle 66 52 r 67 52 pcSioux Falls 80 59 s 87 72 tWash., D.C. 87 70 pc 84 64 s

Amsterdam 64 55 c 67 54 rAthens 91 72 s 92 71 sBaghdad 106 81 s 109 82 pcBangkok 91 79 sh 90 79 tBeijing 82 63 t 87 67 sBerlin 67 53 pc 74 57 pcBrussels 67 50 pc 68 53 rBuenos Aires 52 38 pc 51 36 pcDubai 104 89 s 104 89 sDublin 67 55 pc 66 47 pcEdinburgh 63 56 pc 60 49 pc

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LIFE & ARTS

One of Wagner’s subway pavilions at Karlsplatz, above, and his ‘View of the City Museum on Karlsplatz’ (1907), top WIENMUSEUM

(3)

Gottlieb Theodor Kempf vonHartenkampf’s ‘Portrait Otto Wagner’(1896), below

ViennaONE HUNDRED YEARS ago, asWorld War I drew to a close andthe Austro-Hungarian Empirebreathed its last, Viennese Mod-ernism lost four of its main propo-nents, Gustav Klimt, Egon Schiele,Koloman Moser and Otto Wagner.

Of these luminaries, it wasWagner, a bold and uncompromis-ing architect and urban planner,who left the most indelible markon the fabric of this city. Hisgreatest works, many of whichline these streets, are marked bytheir creator’s inimitable gift foruniting elegance, sophisticationand utility. In the Austrian PostalSavings Bank (ÖsterreichischePostsparkasse), completed in 1912,a futuristic fusion of marble, alu-minum and glass that is perhapshis most celebrated building, Wag-ner created a Gesamtkunstwerkfor the modern age whose everydetail (down to the furniture thatWagner designed) expressed thebelief that a life spent in “interi-ors executed in the styles ofpast centuries” was an “artisticabsurdity.”

“The only possible point of de-parture for our artistic creation ismodern life,” Wagner insisted in1895. Striving for a “harmonizationof art and purpose,” he achieved arevolutionary synthesis of design,material and function that not onlyhelped define the architecture ofhis age, but had a world-wide im-pact on urban planning.

On the centenary of his death,Vienna is honoring Wagner withtwo ambitious and insightful ex-hibits. Though independently cu-rated, they demand to be seen inconversation with each other.

The first and more immediatelysatisfying is at Wien MuseumKarlsplatz, Vienna’s city museum.It takes us on a tour of the archi-tect’s major projects and commis-sions—including many that werenever realized—with a combina-tion of thoroughness and elegance.

The exhibit is a coup for theWien Museum, an excellent andunfairly neglected venue in thismuseum-saturated city. This loca-tion can also boast a special con-nection to Wagner, who spent adecade drafting plans for a CityMuseum on Karlsplatz. His bolddesigns (thwarted by conservativeofficials) are presented in greatdetail in the show’s largest gal-lery. A handsome 500-plus-pageexhibit publication also doubles asthe first complete catalogueraisonné of Wagner’s realized andunrealized projects and designs.

Wagner rebelled against the his-toricism that had held sway overliberal Vienna and had inspired itsmost remarkable architecturalachievement, the RingstrasseBoulevard. In a speech given at the

EXHIBITION REVIEW

TheManWhoMade ViennaModernBY A. J. GOLDMANN

A14 | Wednesday, June 13, 2018 * * * * THEWALL STREET JOURNAL.

As the health debate swirls,Americans craving high-proteinfoods are gobbling up more eggs.Americans ate about 276 eggs perperson last year, up from 253 in2000, according to the USDA’s percapita “disappearance” of eggs, ametric used to estimate long-termconsumption trends.

Eggs can be a good source ofprotein and other nutrients, saysAlice Lichtenstein, a member of theadvisory committee for the govern-ment dietary guidelines who alsoserves as a spokeswoman for theAmerican Heart Association and aprofessor of nutrition science andpolicy at Tufts University. But shecautions that Americans shouldmake sure they’re not also eatingmore accompaniments like bacon,sausage and buttered toast. “Youhave to look at the whole consump-tion pattern,” Dr. Lichtenstein says.

Eggs have gotten the blessing ofweight-loss company WeightWatchers International Inc., which

The Z logo, inset. When Nissan launched its Datsun 240Z in model year 1970, it quickly becamea phenomenon. Mr. Naveira’s car is from 1972. He replaced the smaller original motor with a2.8-liter 280ZX engine.

DAVID

WALTERBANKSFO

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Americans are eating more eggs, but government guidelines on their healthiness can be confusing.

ARE EGGS GOOD for you or not?It’s never been more confusing

for consumers to answer thatseemingly simple question. Vilifiedfor years for their high cholesterolcontent, eggs more recently havebroken back into dietary fashion.Nutrition experts today are toutingeggs’ high levels of protein, essen-tial vitamins and nutrients likebrain-booster choline.

Government guidelines some-times contradict nutrition experts’advice as they play catch up withthe latest scientific findings. Di-etary advice from the U.S. depart-ments of agriculture and healthand human services includes eggsas part of a healthy diet, but alsosays cholesterol intake should beas low as possible. And the Foodand Drug Administration says thateggs are too high in total fat, satu-rated fat and cholesterol to be la-beled “healthy” by food marketers.

It’s such a scrambled issue thatone egg brand is petitioning for anofficial government reassessmentof eggs. “There’s so much new sci-ence out there about eggs, it’s timefor the FDA to get with the pro-gram,” says Jesse Laflamme, chiefexecutive of Pete and Gerry’s Or-ganics, who filed a citizen’s peti-tion urging the agency to rethinkits ban on calling eggs “healthy.”

Eggs’ bad rap stems from theirhigh cholesterol: One large eggyolk has 186 milligrams. U.S. guide-lines used to advise people to limitdietary cholesterol to 300 milli-grams a day. The current advice re-moves that cap, after studiesshowed that the cholesterol in fooddidn’t raise blood cholesterol levelssignificantly. But the guidelinesstill advise cholesterol intake bekept as low as possible.

late last year added eggs to thefoods its members can eat withouttracking. “It’s a high-quality pro-tein and good for satiety,” saysGary Foster, the company’s chiefscientific officer. Members consis-tently name eggs as their favoritefood on the untracked list, he says.“Eggs don’t feel so ‘diety,’” he says,noting that members are unlikelyto overeat eggs, unlike the tempta-tion with cookies or donuts.

They’re also becoming morefashionable. “Eggs have alwaysbeen a restaurant and homekitchen workhorse, but they havegarnered new levels of respect,”David Sprinkle, publisher and re-search director of market-researchfirm Packaged Facts wrote in a re-port last month, highlighting therising profiles of deviled eggs, frit-tatas and meringues in restaurants.

Some 36% of restaurant brunchmenus offered eggs Benedict lastyear, up from 30% in 2007, accord-ing to Datassential, a food-trend

research firm. Chilaquiles, a Mexi-can dish that includes eggs, torti-llas and salsa or mole, were listedon 10% of brunch menus in 2017,nearly double the percentage thatlisted it in 2007, Datassential says.Eggs on burgers now appear on15% of menus, and pizzas toppedwith egg are listed on 11%.

Instagram mentions of #eggsnumber nearly 10 million. JohanEngman, owner of Breakfast Repub-lic, a chain of seven restaurants inthe San Diego area, recalls trying tofigure out how to spruce up a tradi-tional Mexican sandwich, mindful ofhow many of his patrons like topost photos of their meals on socialmedia. “We decided we needed toadd eggs to make it look better,” hesays, ultimately serving it with thetop bun pushed to the side so thattwo sunny side-up eggs sit atop thesandwich.

Kate Gormley, a pharmaceuticalsaleswoman in Richmond, Va., usu-ally eats two pasture-raised eggs

each day, one for breakfast and onehard-boiled and sliced over a saladat lunch. “When I eat eggs, theymake me feel so much fuller, itkeeps me from snacking and givesme energy,” she says.

Egg brand Pete and Gerry’s Or-ganics is putting the health debateto the test, hoping to win the gov-ernment’s blessing to label eggs“healthy.”

“Eggs are among the most af-fordable sources of protein andalso have significant amounts ofother nutrients, including vitaminD and choline,” says a citizen’s pe-tition filed in April by CEO Mr.Laflamme.

The FDA, which has a broaderreview underway of its definitionof “healthy” foods, acknowledged itreceived Mr. Laflamme’s petition.“As the agency considers how tomodernize the definition and crite-ria for use of the term ‘healthy’ infood labeling, we are actively re-viewing a large body of informa-tion and analyses,” a spokeswomansaid in a statement.

Mr. Laflamme’s petition was in-spired by one filed in 2015 by KindLLC, a maker of fruit-and-nut bars,which had campaigned for changeafter it received a warning letterby the agency to stop using theterm “healthy” on its packaging.Kind asserted that the FDA shouldmodify its criteria, in part becausenuts, a main ingredient in many ofits snacks, naturally have more fatthan the FDA standard allows. Thecompany noted that avocados,salmon and eggs are also generallyconsidered to be good for you, butdon’t meet the FDA’s standard of“healthy.” In 2016, the FDA re-scinded its demand that Kind re-move “healthy” from its wrappers.

The car was so successful that Nissanstill builds Zs. Today’s is called the 370Z.But to me, nothing rivals the first genera-tion, model years 1970 to 1973. I often hearZ fans say that 1972 is the best year.

A friend tipped me off about a localrestoration shop called Pierre Z

that Nissan has commissionedto restore old Zs, so I had mycar restored by the samepeople Nissan has used.Pierre Z put a bigger280ZX engine in, and afive-speed manual trans-mission instead of thefour-speed. This reallyhelps in highway driving.Now the car drives like

a dream. All I have to do ischange the oil, and it will

run forever. I always keep mypassenger window open when

driving, because I always get a reac-tion from someone.

It keeps people smiling.

Contact A.J. Baime atFacebook.com/ajbaime.

got the serial number. I sentthe photos and serial num-ber to my brother-in-law,Doug Harrison, who stillhas his 1972 240Z. Hedid some research andcalled me.

“That car came intothe country just a monthafter mine,” he said. “Youhave to buy that car.” So Idid—for $2,200.

What is the Z? Datsun [thena division of Nissan in the U.S.]created the 240Z in 1969. Nothing likeit had ever existed. This was an affordableand reliable mass-produced Japanesesports car to compete against more expen-sive British sports cars. It was a poor man’sJaguar, with a 2.4-liter engine.

ContinuedfrompageA12

A classic Z’sHollywood home

FROM

TOP:GETT

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FOOD | By Ellen Byron

The Great EggShell Game

Government advice on whether eggs are healthy sometimescontradicts nutrition experts

LIFE & ARTS

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THEWALL STREET JOURNAL. Wednesday, June 13, 2018 | A15

The value of the Russian ruble has fallenby half since 2010, amid a wider economicslowdown for the country. Its foreign policymeans that it has fewer friends around theworld than a bear at a picnic. And on thesporting front, Russia has been embar-rassed repeatedly by allegations of system-atic state-sponsored doping by its athletes,

racist behavior by its fans, andviolent assaults by homegrownhooligans.

“It’s something that we cannotand do not underestimate,” FIFApresident Gianni Infantino said.He hopes, however, that his firstWorld Cup in charge since takingover from Blatter, will gosmoothly once the games wereunderway.

“As soon as it kicks off, the fo-cus will be on the pitch,” he said.

That’s not necessarily good news for Rus-sia either, because right now, the Russiansoccer team is dreadful. The host nation hastumbled to No. 70 in the world for the firsttime, making it the lowest-ranked team atits own party. Though it faces relatively softopposition in the opener here on Thursday,67th-ranked Saudi Arabia, victory in thatpetrodollar showdown is far from certain.The only people who aren’t fretting over itmight be Russia’s own players.

“As soon as the Russian championshipended,” said the country’s top striker, FedorSmolov, “I turned off all the sports news.”

WORLD SOCCER has spent much of thepast decade grappling with the fallout ofone evening in Zurich in December 2010.

That was the night that disgraced FIFApresident Sepp Blatter ripped open an enve-lope to reveal that the World Cupwould be held in Russia in 2018.That was the night, Blatter oftensays, when everything changed.

Since that night, when FIFAalso awarded the 2022 tourna-ment to Qatar, several of Blatter’sZurich guests have become defen-dants in New York courtrooms, in-mates of federal prisons and, oc-casionally, tenants in foreigncemeteries. But on Thursday, thebroadest consequence of that Decembernight will kick in, affecting more than 700players, millions of traveling supporters,and over a billion fans watching worldwide:The Russia World Cup is actually happening.

“We will gift you with a real celebrationfilled with sporting passion and strongemotions,” Russian President Vladimir Putinsaid in a video welcome message last week.

Putin, who is more of a hockey fan than asoccer man, hoped in 2010 that this world-class extravaganza would at least become ashowcase for his nation’s strength andwealth. But the reality is that the interimhas brought only world-class headaches.

Messi, RonaldoStill Rule

The pinnacle of the game still belongs to a pair of crankygeniuses who have never won the World Cup

they will both play in—Messi will be 34 in2022 and Ronaldo 37—it’s worth asking,why hasn’t anyone else come along?

Plenty of players have aspired to jointhem, but no one has been able to staythere for more than a season or two. Thelikes of Uruguay striker Luis Suárez, Brazilplaymaker Neymar and, lately, Egypt for-ward Mohammed Salah, all would concedethat Messi and Ronaldo operate on a higherplane. World soccer is suffering from a tal-ent bottleneck.

How this happened is down to every-thing from the eco-nomics of modernsoccer to evolu-tions in tactics andconditioning. Butmore than any-thing, what ex-plains Ronaldo andMessi’s extendedreign over worldsoccer is some-thing that no oneelse in the game’s150-year historyhas been able tomatch: uncannytiming.

After burstingon the scene in the2000s, their ca-

reers coincided with the infiltration of per-formance metrics and high-level sports sci-ence into the hidebound world ofinternational soccer. Combined with theirdedication to fitness (see: abs, Cristiano),that has allowed them to sidestep seriousinjury and extend their peaks into their 30s.

Some of the best players from earliergenerations saw their heydays cut short byalcohol (Paul Gascoigne), drugs (Diego Mar-adona), a penchant for the nightlife (Ron-aldinho)--or in the case of Northern Ire-land’s George Best, all of the above. ButRonaldo and Messi have long followed com-paratively abstemious lifestyles.

“For Ronaldo, there is only football,” saysCarlo Ancelotti, who coached the Portuguesefrom 2013 to 2015. “When Real Madrid ar-rives back from a road game, it is often 1

PleaseturntopageA18

FOUR YEARS is an eternity in the timewarp of international soccer.

In the time since the 2014 World Cup inBrazil, whatever you thought you knewabout the international game has agedworse than your iPhone 4.

The Netherlands, which came within apenalty shootout of reaching the final,didn’t even makethe field of 32teams for Russia.Tournament main-stays Italy, Chileand Cameroon alsofailed to make thegrade this timearound—as did aplucky soccer up-start known as theU.S. Even the wun-derkind who scoredthe dramatic win-ning goal for Ger-many was left offtheir roster for thistournament.

Only one thinghas remained stub-bornly unchanged, seemingly immune tothe passing of time: The pinnacle of thegame still belongs to a pair of cranky ge-niuses who have never won the World Cup,Lionel Messi and Cristiano Ronaldo.

“To compare players with Cristiano,Messi, they’re in a different orbit, a differ-ent stratosphere,” Real Madrid and Spaindefender Sergio Ramos said.

They have been the best two players inthe world for a decade. Their preeminencehas been recognized over and over by fans,coaches, players and the people in shinysuits who hand out the awards. The lasttime a player not named Messi or Ronaldowon the Ballon d’Or award for the game’stop player was back in 2007.

Their run of unchallenged dominancealso raises a puzzling question. Ahead ofwhat is almost certainly the last World Cup

BY JOSHUA ROBINSON ANDJONATHAN CLEGG

How theWorld CupLanded in Russia

BY JOSHUA ROBINSON

Russian Matryoshka dolls of Cristiano Ronaldoand Lionel Messi are seen at a shop.

Banners on displayin Moscow. Below,Russian President

Vladimir Putin.

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Top row, Argentina’s Lionel Messi and Portugal’s Cristiano Ronaldo. Bottom row, Uruguay’s Luis Suárez, France’s Paul Pogba, Brazil’s Neymar, and England’s Harry Kane.

WORLD CUP 2018

A16 | Wednesday, June 13, 2018 THEWALL STREET JOURNAL.

WORLD CUP 2018

MAYBE YOU’RE HERE for Iceland, thesmallest nation ever to make it to the WorldCup. Maybe you’re here for Panama, whoqualified at the expense of the U.S. Or maybeyou’re here for Brazil, because Brazil is al-ways here.

No matter who you are rooting for, youare guaranteed to see all 32 teams stickaround for at least half the tournament, be-cause everyone plays at least three games.

Now, if the group stage seems to lack

many knock-down, drag-out fights betweenheavyweights, that’s by design. Under FIFA’snew seeding system, most of the big boyswere kept apart in the draw. That means theknockout rounds should be wild.

With few obvious stumbling blocks for thefavorites in Russia—namely Spain, Germany,France, and Brazil—all of the heavy-hittersshould make it to at least the third week ofthe tournament. And then, anything can hap-pen. France could meet Argentina or Brazil

The Venues

Fisht Stadium, Sochi - Cap. 48,000 Kazan Arena, Kazan - Cap. 45,000

� ZabivakaThe official2018 WorldCup mascot

ThursdayGroup ARussia vs. SaudiArabiaMoscow11 a.m.

(All times areEastern.)

FridayGroup AEgypt vs. UruguayEkaterinburg8 a.m.Group BMorocco vs. IranSt. Petersburg11 a.m.Group BPortugal vs. SpainSochi2 p.m.

SaturdayGroup CFrance vs. AustraliaKazan6 a.mGroup DArgentina vs. IcelandMoscow9 a.m.Group CPeru vs. DenmarkSaransk12 p.m.Group DCroatia vs. NigeriaKaliningrad3 p.m.

SundayGroup ECosta Rica vs. SerbiaSamara8 a.m.Group FGermany vs. MexicoMoscow11 a.m.Group EBrazil vs. SwitzerlandRostov-On-Don2 p.m.

MondayGroup FSweden vs.South KoreaNizhny Novgorod8 a.m.Group GBelgium vs. PanamaSochi11 a.m.Group GTunisia vs. EnglandVolgograd2 p.m

TuesdayGroup HColombia vs. JapanSaransk8 a.m.Group HPoland vs. SenegalMoscow11 a.m.Group ARussia vs. EgyptSt. Petersburg2 p.m.

WednesdayGroup BPortugal vs. MoroccoMoscow8 a.m.Group AUruguay vs.Saudi ArabiaRostov-On-Don11 a.m.Group BIran vs. SpainKazan2 p.m.

The eight four-teamgroups play from June14-28, with the toptwo teams in eachadvancing to theknockout stage. Theround of 16 runsfrom June 30 toJuly 3, quarterfinalsare July 6 and 7and semifinals areJuly 10 and 11.The final is onJuly 15 atLuzhnikiStadium inMoscow.

GroupMatchSchedules

JUNE 14 JUNE 15 JUNE 16 JUNE 17 JUNE 18 JUNE 19 JUNE 20

Ekaterinburg Arena, Ekaterinburg - Cap. 35,000

France (7)France is, as ever, the World Cup’s moody artist. Capable of winningthe whole thing or flaming out in a cloud of Gauloise smoke, Les

Bleus have their most talented squad since they lifted the trophy in 1998,anchored by the likes of � Antoine Griezmann and Paul Pogba. The

weakest part of the team might be its defensive-minded man-ager, the 1998 World Cup-winning midfielder Didier Deschamps.

He was at the helm for France’s run to the final of the 2016 European Cham-pionship, an overtime loss to Portugal.

Australia (36)During their run of four consecutive World Cup appearances,the Socceroos played pretty much the same way. They were

physically strong, defensively solid, but with little ambition on the of-fensive end. Former manager Ange Postecoglou instilled a more attack-ing style of play. It won Australia admirers, but didn’t win enoughgames. So Postecoglou was replaced by Bert van Marwijk, aman whose claim to fame is turning the freewheeling Dutchinto a pragmatic, defense-first team.

Argentina (5)You may have heard that Argentina is led by a diminutiveforward named Lionel Messi. That alone is enough to make it

a World Cup contender. Throw in top-class attacking talent like strikersSergio Agüero � and Gonzalo Higuain, a strong World Cup pedigreethat includes two triumphs and an appearance in the final last time out,and it seems like Argentina should have one hand on the trophy. Yet ahistory of spectacular chokes—and an aging back line means that evenMessi may struggle to drag this team beyond the quarterfinals.

Iceland (22)The tiny Nordic nation has made some seriousnoise in world soccer in recent years—and we’re

not just talking about the awesome war chant they performduring matches. Iceland shocked England in the 2016 Euro-pean Championship. Then, they finished ahead of Croatia during qualifying to reach the WorldCup, becoming the smallest country ever to play in the tournament. But how will they fare whenthe surprise factor begins to fade?

Croatia (20)Croatia fields an experienced squad headlined by a handful ofworld-class players. Unfortunately, most of them happen to

play the same position. Playmakers Luka Modric �, Ivan Rakitic, MateoKovacic and Marcelo Brozovic would walk into most midfields in Rus-sia, but finding a way to incorporate them into a single lineup hasbeen an ongoing headache for coach Zlatko Dalic.

Nigeria (48)For years, Nigeria’s presence at a World Cupguaranteed fireworks. With a bunch of ab-

surdly talented attacking players and precious little interest inplaying defense, the Super Eagles thrilled fans across the globe.Sadly, this year’s Nigeria team isn’t likely to win over any neu-trals. With a squad notably lacking in creativity and still proneto defensive blunders on the back end, Nigeria looks no closer toending a record of never advancing past the round of 16.

Group D

Russia (FIFA ranking 70)Russia is the worst-ranked team in the tournament, sitting at No. 70in the FIFA world rankings. Its squad is among the oldest with an av-

erage age of nearly 29 and only two of its players are based outside the dis-tinctly mediocre Russian league. Luckily for the hosts, they landed in theweakest group at the World Cup--but even that could prove less hospitable

than January in Siberia. � Igor Akindeez

Uruguay (14)Uruguay seems to have a knack for courting controversy atWorld Cups—specifically through star striker Luis Suárez �. In

2010, he made one of the most important saves of the tournament byblocking a goal-bound shot with his hand (despite not being a goalkeeper).And in 2014, he drew a months-long ban for biting an Italian defender(though he maintains he simply fell on him teeth-first). Still, Suarez re-mains what makes Uruguay tick. Under the guidance of manager Oscar“El Maestro” Tabarez, Uruguay should cruise into the knockout rounds.

Group A

could face Germany as early as the round of16, should one of them fail to win its respec-tive group.

Of course, this tournament is also notablefor the teams that won’t be there, includingItaly, the Netherlands, and the U.S. But fewwill be sparing any thoughts for them inRussia. Here’s a look at the 32 teams thatdid make the cut.

—Joshua Robinson, Jonathan Clegg,Andrew Beaton

Portugal (4)Portugal wasn’t a popular winner when it con-quered the Euros two years ago. It played un-

imaginative, stultifying soccer and didn’t win a singlegame in regulation until the semifinal stage. But somehow, itworked. Two years later, the team is no more exciting. But Cris-tiano Ronaldo is coming off a third straight Champions League ti-tle with Real Madrid and looking to cap his career with the onetitle that has eluded him. Joao Moutinho �

Spain (10)Spain still relies on stalwarts like Sergio Ramos and GerardPique from their dominant run from 2008 to 2012, but has

also mixed in a collection of players who have blossomed since then,such as Manchester City’s David Silva. Question marks remain overwho can hold down a spot as the team’s permanent striker, butwith so much attacking talent in the lineup, it may not matter.

Iran (37)Carlos Queiroz, the Portuguese manager of the Iran nationalteam, hasn’t always had the easiest time handling one of the

world’s most reclusive nations. In 2015, he briefly quit after fall-ing out with the national soccer federation, only to be rein-stated. But sticking around has proved worthwhile. By lean-ing on players of Iranian heritage from around the world, hehas improbably turned the country into a World Cupregular, guiding it to a second straight edition ofthe tournament.

Group B

How the32 TeamsStack Up

Egypt (45)There is more to Egypt than Mohamed Salah, the 26-year-old forward who scored 43 goals for Liverpool this

season. At least that’s what Egyptian fans have been tellingthemselves ever since he dislocated his shoulder in the Champi-ons League final. Salah hopes to recover in time to play, thoughit’s going to be close. The supporting cast around him is defen-sively solid, but it needs its fleet-footed striker to be truly danger-ous on the break.

Saudi Arabia (67)Saudi Arabia’s biggest distinction at this World Cup?Not being the lowest-ranked team. That distinction

belongs to Russia, the side it will play against in the tourna-ment’s less-than-glittering opener—- No. 67 in the world vs.No. 70. Still, the Saudis haven’t won any of their past nineWorld Cup games. The man hoping to end that streak is theArgentine-born manager Juan Antonio Pizzi, who took overlast fall after failing to lead Chile to World Cup.

Denmark (12)Danish hopes at this World Cup revolve around the perfor-mances of its playmaking midfielder Christian Eriksen �.

The Tottenham Hotspur star has the talent to lift an entireteam—provided Denmark’s defense stays as solid as it wasduring qualifying. The Danes’ group is wide open, too, andtheir sights could be on the round of 16 in their firstWorld Cup appearance since 2010.

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Morocco (41)Morocco might be the most international team in Russia, consisting pri-marily of sons of the Moroccan diaspora. Of the 23 men in the squad,

eight hail from France, compared to just six born within Morocco’s borders. Thereare another five players from the Netherlands, two from Spain, one from Belgiumand one from Canada—and that’s without taking into account Morocco’s Frenchmanager, Hervé Renard. Lumped in a group with Spain and Portugal, Moroccowill take all the help it can get, no matter where it’s from. � Hakim Ziyech

Group C

Peru (11)Long a head-scratcher in international soccer, Peru boasted alarge population, a decent pedigree and arguably the sharpest

jerseys in the game—white with a single diagonal red stripe—but hadn’treached the World Cup since 1982. That finally changed when Peru saw offNew Zealand in a home-and-home playoff last November, becoming the fi-nal country to qualify for Russia. A doping suspension for star striker PaoloGuerrero was recently put on hold freeing him to play in the tournament.

THEWALL STREET JOURNAL. * * Wednesday, June 13, 2018 | A17

Volgograd Arena, Volgograd - Cap. 45,000

JUNE 21 JUNE 23 JUNE 24 JUNE 25 JUNE 26 JUNE 27 JUNE 28JUNE 22

ThursdayGroup CDenmark vs. AustraliaSamara8 a.m.Group CFrance vs. PeruEkaterinburg11 a.m.Group DArgentina vs. CroatiaNizhny Novgorod2 p.m.

FridayGroup EBrazil vs. Costa RicaSt. Petersburg8 a.m.Group DNigeria vs. IcelandVolgograd11 a.m.Group ESerbia vs.SwitzerlandKaliningrad2 p.m.

SaturdayGroup GBelgium vs. TunisiaMoscow8 a.m.Group FSouth Korea vs.MexicoRostov-On-Don11 a.m.Group FGermany vs. SwedenSochi2 p.m.

SundayGroup GEngland vs. PanamaNizhny Novgorod8 a.m.Group HJapan vs. SenegalEkaterinburg11 a.m.Group HPoland vs. ColombiaKazan2 p.m.

MondayGroup AUruguay vs. RussiaSamara10 a.m.Group ASaudi Arabia vs. EgyptVolgograd10 a.m.Group BSpain vs. MoroccoKaliningrad2 p.m.Group BIran vs. PortugalSaransk2 p.m.

TuesdayGroup CAustralia vs. PeruSochi10 a.m.Group CDenmark vs. FranceMoscow10 a.m.Group DNigeria vs. ArgentinaSt. Petersburg2 p.m.Group DIceland vs. CroatiaRostov-On-Don2 p.m.

WednesdayGroup FSouth Korea vs.GermanyKazan - 10 a.m.Group FMexico vs. SwedenEkaterinburg10 a.m.Group ESerbia vs. BrazilMoscow - 2 p.m.Group ESwitzerland vs.Costa RicaNizhny Novgorod2 p.m

ThursdayGroup HJapan vs. PolandVolgograd10 a.m.Group HSenegal vs. ColombiaSamara10 a.m.Group GPanama vs. TunisiaSaransk2 p.m.Group GEngland vs. BelgiumKaliningrad2 p.m.

� The official2018 WorldCup ball

Luzhniki Stadium, Moscow - Cap. 80,000

WORLD CUP 2018

Poland (8)If you like scoring, just tune into Poland. This team scores alot of goals. It gives up plenty of them, too. The man re-

sponsible for more of those than anybody in the country’s history,Robert Lewandowski �, is again leading the charge. At 29 yearsold, he remains a world-class striker for Bayern Munich and hasthe ability to carry this team to a surprising win or two—as longas his teammates aren’t a complete sieve in the back.

Colombia (16)Surprise contenders at the 2014 World Cup,Colombia lit up the early stages with their swash-

buckling style and scored one of the finest goals in tournamenthistory when star player James Rodriguez � smashed home athunderbolt against Uruguay in the round of 16. Colombia even-tually went out to Brazil but had chances to win that quarterfinaland could be primed for another deep run with James pulling thestrings..

Japan (61)This Japan squad will probably seem familiar. That’s because itis. Midfielders Keisuke Honda and Shinji Kagawa, along with at-

tacker Shini Okazaki combine to make this one of the World Cup’s mostexperienced sides. The problem with that is that this trio has an averageage of over 30, raising questions about if the team is past its prime—an

issue raised after a number of shaky qualifying performances.

Germany (1)The reigning-champ Germans are the favoriteyet again. But this time they look different.

Are they better? Mainstays from past squads are gone,though there is still an array of familiar talent from ThomasMuller to Mesut Ozil. Still, the player that should definewhether this team can go all the way is a newcomer. ForwardTimo Werner is just 22 years old and doesn’t have the interna-tional recognition of his peers. But he could determine whetherJoachim Low becomes just the second manager to win multipleWorld Cups. Torri Kroos �

Sweden (24)No, Zlatan Ibrahimovic is not on the roster. And this country moving forwardwithout its all-time leading scorer is the best way to understand how Sweden

will look at this tournament. This is a team founded on its defense, which was stingythroughout qualifying and took the team to its first World Cup since 2006, cappedoff by back-to-back shutouts against Italy in a playoff. But they’ll need to score, and

that’s still the question, so manager Janne Andersson will need to tap the abilities ofthose like Emil Forsberg to try and fill Ibrahimovic’s shoes.

Group F

Brazil (2)Brazil’s finish four years ago was utterly agonizing: playing in itshome country, it lost superstar Neymar Junior � — and then got

walloped 7-1 by Germany in the semifinals. This was a country so eager tomove past that loss it sent stars—including Neymar—to win gold at the 2016Olympics, an event soccer behemoths typically turn their noses at. Neymar isback this go around in the starring role, with a complement of studs formingarguably the world’s most talented team. And they know there’s only oneway to exorcise the 2014 debacle: win the whole thing.

Switzerland (6)Xherdan Shaqiri has been Switzerland’s budding star for nearly adecade. He made the 2010 World Cup roster as an 18-year-old. He

netted a hat trick in 2014. And he’s still only 26 years old. Thewinger will again lead a team that has been respectable in re-cent years but never quite dangerous. Manager Vladimir Pet-kovic will rely on Shaqiri, and newly minted Arsenal defenderStephan Lichtsteiner, as this team tries to take the next step.

Group E

Costa Rica (23)Giant slayers are fan favorites at the World Cup. And don’t for-get Costa Rica’s ability to assume that role. In 2014, Los Ticos

reached the quarterfinal after winning a group with Uruguay, Italy andEngland. And this small Central American country has the talent to

surprise again. Joel Campbell has immense potential up top. KeylorNavas plays keeper for the reigning European champions, Real Ma-

drid. So even if they struggle to score, they can make theiropponents do the same. � Bryan Ruiz

Serbia (34)Serbia is the enigma of this World Cup. Its recent results—failingto qualify in 2014, finishing last in its group in 2010—are nothing

but poor. Its play in qualifying was so shaky that the country sacked itsmanager. But this is also a squad bustling with talent from top Europeanclubs. The likes of Dusan Tadic, Sergej Milinkovic-Savic and Nemanja Maticform a team with far more potential than its recent performance wouldsuggest. That puts the pressure on manager Mladen Krstajic to getthis team, finally, into form.

Belgium (3)Possibly the most talented squad, certainly the mostcombustible. Belgium boasts some of the finest players

from the English Premier League—Chelsea playmaker � EdenHazard, Manchester United striker Romelu Lukaku, ManchesterCity midfielder Kevin de Bruyne—but has failed to live up to ex-pectations since reaching the World Cup quarterfinals in 2014.

Belgium lost to Wales at the same stage at the 2016 European Champion-ship amid reports of locker-room flareups. Head coach Roberto Martinezhas focused on team cohesion since taking over in 2016, but has been criti-cized for his lack of tactical acumen—by some of his own players.

Panama (55)The government declared a national holiday when Panama qualified forthe World Cup (at the expense of the U.S.) and if that suggests this is

a team just happy to be going to Russia, that’s probably not inaccurate. Panama facesBelgium in its opener, then England in its second game. At which point, it will likely beheading home. Working to keep Panama around a little longer is experienced coachHernan Dario Gomez, who previously led Colombia and Ecuador to the World Cup andbecomes only the second coach to manage three different countries at the tournament.

England (12)Inventor of the game, a former World Cup winner and, more recently, thepunchline of international soccer. England recorded its worst World Cup perfor-

mance ever in 2014 when it was eliminated inside five days. That shame lasted all oftwo years until the European Championships, where it was knocked out by Iceland inwhat amounted to a new low for English soccer. Head coach Gareth Southgate has jetti-soned many of the players involved in those calamities and England has some promisingyoung stars—with Harry Kane and Raheem Sterling �. But England hasn’t won a knock-out match in international play since 2002 and a quarterfinal spot looks like the ceiling.

Tunisia (21)Tunisia will be making its fifth World Cup appearance in Russia, but if that sug-gests a team of seasoned tournament operators, the reality is a little differ-

ent. It has just won just a single World Cup game in that period, and hasn’t made it tothe tournament in 12 years. The loss of playmaker Youssef Msakni to a knee injury inApril further dampens Tunisian hopes of reaching the knockout rounds, but with anopening game against England, an upset can’t be totally discounted.

Group G

Saint Petersburg Stadium, St. Petersburg - Cap. 67,000

Senegal (27)Senegal’s recent history—it hasn’t made aWorld Cup sine 2002—may seem to indicate

that simply making it to Russia is an accomplishment.But this is a side dreaming for more with a wealth of eliteplayers that could even make some European countriesblush. Winger Sadio Mane is a good bet to find the netat least a couple times, a knack he showed at Liver-pool. In the back, defender Kalidou Koulibaly was oneof the best in Italy for Napoli.

YOU MAY HAVE heardby now: The U.S., amaz-ingly, did not make the2018 World Cup. Thisprompted an existentialcrisis for American soccer, the firing of two separate managers—and months of pointing and laughing from the rest of the world.

But the World Cup is happening anyway. And as the tourna-ment kicks off Thursday, this presents a quandary for bummedout U.S. soccer fans: Who the heck to root for?

The idea of rooting for anybody but America is like slathering

hollandaise sauce on a hotdog. But fear not: You maynot be able to root forAmerica, but you can rootfor the next best thing. The

Wall Street Journal analyzed the 32 World Cup countries in awide array of factors, from geopolitics to economics to beerswilling—all with one question in mind: Which country is themost American? Users can pick their categories to see whichcountry is more American in every game.� Try it at wsj.com/worldcup2018

Who to Root for?

South Korea (57)There was a bright spot from South Korea’s uninspiring performance in 2014:� Son Heung-Min. Since then, Son has evolved from a budding young player into

a bonafide, Premier League threat on the attack, which he has displayed next to England’sHarry Kane at Tottenham. Son, 25 years old, is indicative of this entire team that is litteredwith younger players who are beginning to hit their strides. Yet the hopes for this team toadvance depend on the performance of one player, perhaps more than any other team, with

questions about how much attack South Korea can generate beyond Son.

Group H

Mexico (15)Not long ago, in 2012, a young Mexican team took gold at the Olympics. It was a mo-ment of hope: That, when those players fully developed, Mexico could be a dangerous

player in the World Cup. Players from that same team are now veterans in what could be theirlast go around in this tournament. This is one of the Cup’s most experienced squads, led byJavier “Chicharito” Hernandez. Mexico dominated during qualifying, but now it’s stuck in arguablythe tournament’s toughest group where making it to the knockout rounds could be a struggle.

A18 | Wednesday, June 13, 2018 THEWALL STREET JOURNAL.

WORLD CUP 2018

a.m. or 2 a.m. The players aretired, they get in their cars andthey go home. But Ronaldo doesnot go home. At 1 a.m. or 2 a.m.,Ronaldo goes to the ice bath.”

That professionalism leftMessi and Ronaldo prepared foran era in which the number ofgames the world’s top stars areexpected to play has skyrocketed.In 16 seasons as a pro, for in-stance, Ronaldo has played 250more club games than formerDutch great Johan Cruyffamassed over his 20-year career.

Messi and Ronaldo have usedthat experience to adapt their ge-nius on the fly. They are playingas effectively as they were a de-cade ago, but they aren’t playingin the same way.

As Messi became a more cen-tral figure for club and country,he literally came to occupy amore central position on thefield, starting out as a winger onthe right side, moving up front inthe middle of his career, and fi-nally dropping into a centralplaymaker position when Suárezjoined Barcelona in 2014.

Ronaldo’s evolution has beensimilar, but arguably more dra-matic. He, too, started out on thewing, before moving inside,where he used his pace andshooting ability to terrorize de-fenses. Now, at 33, his days oftearing up and down the field atbreakneck speed are over and hehas remade his game for a thirdtime. Cristiano Ronaldo 3.0 is apenalty-box finisher.

“At 30 years old, no onethought he could change hisgame,” said Leonel Pontes, Ron-aldo’s youth coach at Sporting Lis-bon. “But he changed his game.”

ContinuedfrompageA15

Competitions like the Champi-ons League have turned intosomething like the NBA, a stagethat can be completely takenover by a few outstanding indi-viduals. That only amplifies thevalue of Messi and Ronaldo.Their play is made up of count-less brilliant things, none easierto understand than goals.

Ronaldo has scored more than50 goals in six consecutive years.Messi has topped 50 club goalsin five different seasons. Youdon’t need to understand the nu-ances of the offside rule to knowthose numbers are ridiculous.

For all of their success, how-ever, the World Cup has stilleluded them both.

Ronaldo has at least tasted in-ternational glory. Portugal wonthe 2016 European Champion-ship, despite his limping off aquarter of the way through thefinal. “I had already won every-thing with clubs,” he said thatnight. “I lacked something withthe national team.”

Messi would kill for thatmuch. He has represented Argen-tina in three Copa America finalsand one World Cup final and lostall of them. He said recently thathe would happily trade one ofthe nine La Liga titles he haswon with Barcelona for a singleinternational trophy.

The irony is that the same fac-tors that have propelled Messiand Ronaldo to such heights inclub soccer are key reasons whythey have never won the WorldCup. The volume and intensity oftheir club schedules—where theyscore all those goals and lift allthose trophies—leaves them fraz-zled whenever the World Cuprolls around.

This eats away at them con-stantly. Messi was so distraughtafter losing the 2016 Copa Amer-ica that he briefly quit the na-tional team. “It hurts me morethan to anyone else,” he saidthen, “not being able to be cham-pion with Argentina.”

Lionel Messi, front, and Cristiano Ronaldo during a match in 2014.

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ence, too—like the built-from-the-ground-up Sochi Olympics beforeit, this World Cup, spread across11 Russian cities, from Kaliningradto Ekaterinburg, is a pageant tothe Vladimir Putin era.

It’s a really big deal. But...Yes, it stinks the U.S. is not in

it! What do you want me to say?Am I supposed to pretend that it’sperfectly alright that the Ameri-can men have failed to make it forthe first time since 1990? Espe-cially after the U.S. men producedsuch tingly thrills in recent Cupsin South Africa and Brazil, reach-ing the round-of-16 both times?

It’s a bummer, big time. But ifit’s a bummer for me and you,what about the stateside peoplewho bought plane tickets andsewed American flag overalls?What about those Fox televisionexecutives, bidding big money forthe U.S. rights—and not having alocal outfit that can be counted onto goose ratings?

Look: it’s easy to be a crank orChicken Little. Today I prefer to

The World Cup ishere—but the UnitedStates is not, havingfailed to qualify. Areyou still pumped?

Is it tacky to put itso bluntly? Is it overly American?Parochial? Do I sound like I’mwearing a bald eagle hat? Is itjust, you know…rude?

Maybe! Even the casual sportsfan knows that, with or withoutthe United States men’s team, soc-cer’s every-four-years global com-petition is the most popular andwatched athletic event on theplanet. (Yes, even more so thanthe NBA Draft.) To not take theWorld Cup seriously—or worse, toignore it altogether—is to declareyourself in 2018 an unserioussports fan, because there is nobigger sports spectacle, withgreater stakes, than this.

And I am counting SEC collegefootball, if you’re wondering.

Just because Team USA won’tbe there when play begins in Rus-sia on June 14 doesn’t mean itcan’t be a sublime World Cup, orthat it won’t feature the tradi-tional heavies or the sport’s great-est talent (and isn’t like the U.S.was going to run away with thetrophy, anyway). Germany, Argen-tina, Spain, France…Iceland (HurraIceland!)…England, France, Bel-gium, Mexico…Messi, Ronaldo,Neymar, Mo Salah (MoSalah!)…they’re all in. (Italy alsomissed out, alas.)

You may have already picked anew team to root for. Maybe it’snot a new team—maybe it’s a na-tional team your family has al-ways rooted for. Ours is a nationof immigrants, after all.

There will be heroes and vil-lains, upsets and predictable routs,climaxing at the final at LuzhnikiStadium in Moscow on the thirdSunday in July. You gotta figureyou-know-who will be in the audi-

be an optimist.I think we’re going to learn a

lot about soccer in the U.S. in thenext month. I really do. There’snow a whole generation in thiscountry that has grown up famil-iar with the international game.Technology has made it easy tofollow world-class play. You prob-ably saw how nutso many of yourfellow Americans got a couple ofweeks ago for that wild Champi-ons League final between Liver-pool and Real Madrid. I can’t walkdown my street without passing ahalf-dozen kids in Messi jerseys.Major League Soccer continues togrow and bolster the domesticgame. And let’s not forget our ha-bitually tail-kicking United Stateswomen’s team, the winners ofthree women’s World Cups, in-cluding the most recent in 2015.

To be very clear: the whole‘Can Soccer Thrive in America?’question is kaput. It’s thriving.The traditional borders are com-ing down or are crumbling alto-gether.

I won’t claim it doesn’t hurtthat the U.S. men didn’t make it.Those stateside soccer bars werereally rocking in 2014! Likewise, Ican’t ignore FIFA’s ignominioushistory and the long shadow ofcorruption that has followed theWorld Cup. The next cup, Qatar2022, is already awash in humanrights controversies. Reform isbadly needed.

But you’ll see over the nextfour weeks: this event is stillcrazy, still worthwhile, still goodfor brilliant moments that reacharound the globe like no othersporting event on earth. Thosebars are still going to be rocking.

It’s the World Cup, people. Let’sdo this.

THE FANS | By Jason Gay

ACupWith It All,Just Not U.S.

Above, fans watch the opening gameof the 2014 World Cup from a bar inBrooklyn, N.Y. Left, Egypt’s Mo Salah.

THE COUNT

FROM EKATERINBURG TO ST. PETERSBURG TO KALININGRADThere’s a consequence to hold-

ing the World Cup in the largestcountry on earth: the travel isn’t ex-actly light.

This year’s World Cup in Russiawill take place in 11 cities, from Kali-ningrad in the west to Ekaterinburg,which is east of the Ural Mountains.If your knowledge of Russian geog-raphy is based on the board gameRisk, none of the host cities stretchas far east as Yakutsk or Kam-chatka.

And no team will have to criss-cross Russia like Egypt. This is partbad luck and part design by theEgyptians. Each country chooses abase and training ground, and Egyptset up its camp in Grozny, the capi-tal city of Chechnya. That’s betweenthe Black Sea and Caspian Sea,closer to the borders with Azerbai-jan and Georgia than it is to any ofthe cities where the World Cup willbe played.

With games in Ekaterinburg,Saint Petersburg and Volgograd—and trips back to Grozny in betweengames—the Egyptians could expectto travel approximately 5,300 milesduring the group stage. For someperspective: Grozny is closer to

Cairo than it is to Saint Petersburg.Egypt’s tally is an outlier, roughly

1,000 miles more than any other teamin the tournament. Still, the averageteam will travel 2,700 miles betweencities and their base camps during thegroup stage, with 12 squads going

more than 3,000 miles. If you worryabout how these long trips could affectone of the favorites, Brazil should be onyour radar: The Brazilians will go about3,700 miles, more than any of theother tournament favorites.

Other countries are stationed right

where they are going to play. Tenteams, including reigning world cham-pion Germany, have set up camp in theMoscow area.

The team with the easiest itiner-ary? Colombia is stationed in the Tatar-stan Republic, and its capital city is Ka-

zan—where the Colombians playtheir second game.

It turns out, Colombia will haveto do less traveling around Russiathan the Russians, who still have aneasy go of it—logging just 1,300miles. —Andrew Beaton

AcrossRussiaWithLoveEstimates onhow far every teamwill have to travel during the group stage:TEAM BASECAMP TOT. MILES TEAM BASECAMP TOT. MILESEgypt Grozny 5,288 Morocco St. Petersburg 2,671Nigeria Essentuki 4,286 France Kazan 2,649Poland Sochi 3,990 Ireland Moscow 2,580Denmark Anapa 3,852 CostaRica Samara 2,340SouthKorea St. Petersburg 3,806 Belgium Sochi 2,326Switzerland Tolyatti 3,760 Germany Moscow 2,134Brazil Sochi 3,737 Portugal Sochi 2,008SaudiArabia St. Petersburg 3,657 Iran St. Petersburg 1,993England St. Petersburg 3.554 Japan Saransk 1804Peru Moscow 3,242 Panama Sochi 1,783Sweden Gelendzhik 3,205 Mexico Moscow 1,476Croatia Leningrad 3,015 Tunisia Volgograd 1,452Spain Krasnodar 2,969 Russia Moscow 1,320Serbia Kaliningrad 2,963 Australia Kazan 1,310Uruguay Nizhny 2,898 Argentina Moscow 887Senegal Kaluga 2,680 Colombia Saransk 761Source: GoogleMaps.Note: Based off distance between cities. Calculations include trip frombase camp(general area inwhich team is located) to gameandback; camp to game to andback; and camp togame3.

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THEWALL STREET JOURNAL. * * Wednesday, June 13, 2018 | A18A

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GREATER NEW YORKProsecutors said this includedfalsely telling the Federal Emer-gency Management Agency thatshe had been forced out of herhome after the storm and col-lecting $25,000 in payments.

In the indictment, prosecu-tors said she used the funds topay her mortgage, shop at Vic-toria’s Secret and Kohl’s, andbuy tickets for a cruise with herhusband.

Her trial had been scheduledfor July.

Ms. Harris, 57 years old,served in the Assembly fromlate 2015 through April, whenshe resigned. She representedneighborhoods in southernBrooklyn including Bay Ridge,Coney Island and DykerHeights.

In Brooklyn federal court on

Tuesday, Ms. Harris pleadedguilty to four counts of the 11-count indictment. She said thatwhile working as executive di-

rector of a youth-and-commu-nity nonprofit called Coney Is-land Generation Gap, shesubmitted false documents

when applying for funding fromthe New York City Council. Hernonprofit received the funding,she said, her voice shaking.

However, she appropriatedthe money. “I didn’t return thesum to the city,” she told U.S.Magistrate Judge Robert Levy,adding that she instead wrote acheck to her personal account.

Ms. Harris also said that af-ter Sandy, she applied for fed-eral funding, claiming she hadbeen forced to leave her home.

“I falsely represented toFEMA that I was living forabout a year with my twin sis-ter at her home in Staten Is-land,” Ms. Harris said, her voicecracking.

She submitted falsified re-ceipts, a fake lease and signedher twin sister’s name, she said.

“These documents I filed withFEMA were false, and I knewthat at the time,” Ms. Harristold the judge.

She then pressured her sis-ter to lie to investigators, shesaid. Her sister couldn’t bereached for comment.

Judge Levy set Ms. Harris’ssentencing for Sept. 26. Underfederal sentencing guidelines,she faces up to 30 years inprison on the most seriouscount.

She had previously workedfor New York City’s Departmentof Correction. Since resigning,Ms. Harris has held a part-timecatering job, court papers say.

Ms. Harris’s lawyers said in astatement that she “admittedher guilt in an effort to moveon with her life.”

Former New York state As-semblywoman Pamela Harrispleaded guilty to fraud chargesTuesday, admitting she pock-eted city and federal fundingintended for vulnerable chil-dren and superstorm Sandy vic-tims.

Ms. Harris, a Democrat, wasindicted in January and accusedof defrauding governmentagencies out of tens of thou-sands of dollars from November2012 through January 2017.

BY CORINNE RAMEY

Former State Lawmaker Admits to FraudPamela Harrispocketed moneyearmarked for victimsof superstorm Sandy

Pamela Harris left federal court in Brooklyn on Tuesday afterpleading guilty to fraud charges, She will be sentenced Sept. 26.

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New York City has commit-ted $500 million to build thou-sands of affordable apartmentsfor low-income senior citizenson vacant public-housing land,a move advocates say wouldhelp reduce the wait list forapartments.

The plan, first pushed in theproposed new budget by NewYork City Council SpeakerCorey Johnson, will constructnew apartment buildings onlawns, parking lots and unusedland at New York City HousingAuthority developments.

“If you can get seniors livingnow in two-, three-bedroomapartments in NYCHA to moveinto new apartments, you makeroom for folks who are on thewaiting list,” said the Rev. Da-vid Brawley, pastor at St. PaulCommunity Baptist Church inBrooklyn’s East New York sec-tion and member of the MetroIndustrial Areas Foundation.

There are 207,000 familieson the wait list for publichousing, and addressing thatnumber could help reducehomelessness, Mr. Brawleysaid. There are currently morethan 58,700 people living inshelters across the city, accord-ing to the latest data.

Mayor Bill de Blasio, a Dem-ocrat, said the funds will helpin his quest to create a fairerNew York. “Fairness means allthe good people of the city canactually afford to live in theirown city,” Mr. de Blasio saidTuesday.

Housing activists have askedfor $2 billion from the city,which they said could build15,000 apartments for seniors.The initial $500 million willbuild a few thousand resi-dences. Activists vowed tofight for more money.

The city’s $89.15 billion bud-get will be voted on this weekby the City Council.

BY KATIE HONAN

City AllotsMillionsFor SeniorHousing

driving under the influence.He was given six months pro-bation for the DUI, and thegun-possession charge wasdismissed.

“One of our sayings is that‘It takes what it takes,’ ” Mr.DeRoche said. “For John, ittook twice—we pray, justtwice—to go through the sys-tem, for him to really be look-ing at his life differently, as hedoes now.”

Mr. Rowland launched hispolitical career in 1981 as astate legislator. He went on toserve three terms in Congressstarting at the age of 27. Acocky and popular politician,he later set his eyes on thegovernor’s mansion. He waselected to three terms.

Mr. Rowland resigned in themiddle of his third term asgovernor and pleaded guilty toa conspiracy charge for takingbribes from state contractors.He spent 10 months in prison.

“It was a remarkable fall,”said Gary Rose, chairman ofthe department of govern-ment, politics and global stud-ies at Sacred Heart University

in Fairfield, Conn. “Because hefelt so confident, and becausehe was so brash, it was quitepossible that he felt that hewas untouchable.”

After his first prison sen-tence, Mr. Rowland began re-habilitating his image. Heworked on economic develop-ment in his hometown of Wa-terbury. He also hosted a polit-ical talk-radio show.

Mr. Rowland, however, wasunable to resist politics. Fed-eral prosecutors said he ap-proached congressional candi-dates, offering off-the-bookspolitical advice. In 2011, hesigned a contract to work for acongressional candidate’s hus-band in his nursing-homebusiness. But actually, he was

being paid for political advice,prosecutors said.

Mr. Rowland, who pleadednot guilty, was convicted onone count of conspiracy, twocounts of falsifying records,two charges of causing falsestatements and two counts ofmaking illegal campaign con-tributions.

His second corruption scan-dal stunned Connecticut’s po-litical community.

“I think it was a matter ofhim thinking he could getaway with it,” said EdwardMarcus, former chairman ofConnecticut’s DemocraticParty. “Despite all the politicsof it all, you have to feel sorryfor him as a human being. Hehad all these possibilities, andhe just blew it.”

Mr. Rowland said he hascome to terms with his secondconviction. When asked if hestill maintains his innocence,he said: “Well, sure. I meanthe process is such that youfight to protect yourself andprotect your rights. But youaccept the result.”

James Ackerman, chief ex-

ecutive of Prison Fellowship,said Mr. Rowland has a uniqueset of experiences that madehim a good fit for his organi-zation: a background in fund-raising and a record of incar-ceration. Mr. Ackerman notedthat about 25% of his fieldstaff that works with inmateshave criminal records.

“The path of restorationdoesn’t necessarily happenovernight,” Mr. Ackerman said.Mr. Rowland is “a man whounderstood the mistakes hemade and that he was pre-pared to own those mistakesand move forward.”

Mr. Rowland acknowledgedthat he has let his ego get thebest of him in the past. Headded he would have donethings differently after hisfirst prison sentence.

“I would just stay awayfrom politics. It’s my drug ofchoice sometimes,” Mr. Row-land said. “It’s intoxicating,and it’s exciting. But there aretimes when you have to walkaway from it and have to de-cide to do something differentand better with your life.”

NEW HAVEN, Conn.—For-mer Gov. John Rowland, oncea rising star in the RepublicanParty, is back home in Con-necticut after serving a secondprison term for public corrup-tion.

“It’s been a humiliating ex-perience for me,” the 61-year-old said in his first interviewsince being released. But it hasalso “been a good experiencein that it gives me a chance torefocus myself to be a betterperson, to contribute to soci-ety in a different way.”

Mr. Rowland, whose down-fall was one of many that con-tributed to the state’s nick-name “Corrupticut,” wassentenced in 2015 to 30months for attempting to con-ceal his paid role in a congres-sional campaign from the Fed-eral Election Commission. Heserved about 20 months infederal custody in prisons inNew York and Pennsylvaniaand halfway houses in Con-necticut.

He returned in May to hisMiddlebury, Conn., home,where he lives with his wife,Patricia Rowland.

Mr. Rowland said he isready to close that chapter inhis life and start a new career:helping inmates turn theirlives around. Prison Fellow-ship, a Christian organizationthat provides re-entry servicesand other programs to inmatesand operates in 76 prisonsacross the U.S., hired him tolead fundraising efforts in theNortheast.

He started in May and hesaid he hopes to assist familiesaffected by incarceration bysharing his own story and em-phasizing the importance offaith.

Craig DeRoche, the group’ssenior vice president of advo-cacy and public policy, firstconnected with Mr. Rowlandwhen he was providing theformer governor with peersupport. Mr. DeRoche, a for-mer speaker of the House inMichigan, was arrested in2010 for possession of a fire-arm while intoxicated and

BY JOSEPH DE AVILA

Ex-Governor Is Rebuilding Image After Prison

Former Connecticut Gov. John Rowland said he is refocusing his life to be a better person after two stints in prison for corruption.

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He hopes to assistfamilies affected byincarceration bysharing his own story.

NY

wsj_20180613_a018_p2jw164000_2_a018a0_1________ns2018.crop.pdf 1 13-Jun-18 06:12:02

A18B | Wednesday, June 13, 2018 * * THEWALL STREET JOURNAL.

NEW JERSEY

AG Calls for a HaltOf ‘Ghost Gun’ Sales

New Jersey’s attorney gen-eral on Tuesday demanded thatfirearms companies stop mar-keting and selling untraceableweapons, or ghost guns.

The weapons are illegal inNew Jersey, Attorney GeneralGurbir Grewal said in a letter tothe unidentified companies, andthe state will sue the gun mak-ers if they persist.

Mr. Grewel demanded theystop selling and advertising as-sault weapons to New Jerseyresidents that are unregisteredand lack a serial number.

The letter comes just a daybefore Democratic Gov. PhilMurphy said he plans to sign ahalf-dozen bills aimed at tight-ening the state’s already strictlaws.

—Associated Press

CONNECTICUT

Educators WeighResponse to Veto

Connecticut teachers, superin-tendents and state education of-ficials are debating next stepsfor student discipline followingthe governor’s veto of a bill thatsought to set new standards forsuspensions.

The bill aimed to help protectteachers from injury by remov-ing children who are acting outin violent ways.

Democratic Gov. Dannel Malloysaid he vetoed the bill because itwould have a disproportionateimpact on students of color andstudents with disabilities.

At a hearing Tuesday hostedby the Connecticut Commissionon Women, Children and Seniors,Bristol teacher David Hayes saidthe measure would have helpedclear up misunderstandingsamong some administrators overwhen it is appropriate to sus-pend a student.

The Connecticut Education As-sociation, the state’s largest teach-ers union, urged lawmakers to tryto override the governor’s veto.

—Associated Press

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GREATER NEW YORK

GREATERNEWYORKWATCH

METRO MONEY | By Anne Kadet

Farm Program Cultivates OpportunityAt age 24,

Paul Philpottwasn’t exactlyriding high.He’d just quita job at Wal-

mart and moved back in withhis parents in the projects. Sowhile he had no clue what toexpect, he was happy tocheck out a job-training pro-gram suggested by hismother.

Green City Force, it turnedout, was offering work onsmall farms located on pub-lic-housing developmentsaround New York City. Mr.Philpott was not impressed.

“You’re going to farm inthe hood?” he recalls think-ing after meeting a recruiter.“I don’t think that’s going towork!”

Eighteen months aftergraduating from the program,Mr. Philpott is running hisown hydroponic farm busi-ness out of a shipping con-tainer in a Brooklyn parkinglot.

“Farming in the city isnothing I’d ever thought I’dsay I’d do,” he says.

The 40-foot container,with its metal walls and pinkLEDs, looks more like a labthan a farm. There’s no dirt.A programmed system dis-penses a nutrient cocktail,controls water flow and mon-itors the temperature. Rowsof kale, chard and romainegrow on sliding columns sus-pended from the ceiling.

Mr. Philpott is not a biggreens guy. Lettuce, he says,is best served atop a burger:“If I’m really bored, I’ll eat asalad.”

But the profits on thesenutrient-dense greens are lu-crative. While growing costsare astronomical—$10 to $15a pound—high-end restau-rants pay double, says Mr.Philpott.

“It’s very crazy,” he says.“But we have very premiumingredients, and grow it anddeliver it to you directly.”

Customer Patrick Connolly,chef-owner of Rider, a bistro

in Williamsburg, Brooklyn,says he’s not a big fan of hy-droponic crops, but Mr. Phil-pott’s greens are exceptional.“The kale has spice to it,” hesays.

Mr. Philpott says that de-spite growing up in publichousing, he enjoyed a shel-tered childhood. “My momwas extremely protective,” hesays.

But then he attended highschool far from home, andfell in with the wrong crowd.“I can’t lie,” he says. “I did alot of dumb things.”

There was a lot of drinkingand fighting. “I hung aroundpeople who went stealing androbbing places,” he says.

He didn’t graduate fromhigh school until he was 20,and things went downhillfrom there. “I’d be on thestreets getting drunk all daywith my friends,” he says.“Especially if I lost my job.The week after, my check

would go to bottles and bot-tles.”

Green City Force, a non-profit that recruits youngadults from the city’s 15 high-est-crime public-housing de-velopments, offered Mr. Phil-pott a spot in its 10-monthUrban Farm Corps program.

Earning a $1,200 monthlystipend, Mr. Philpott learnedthe basics of farming andtending a produce stand, dis-tributing free vegetables at ahousing project in Red Hook,Brooklyn.

Early on, he aimed for aspot on the infrastructureteam and initiated projectslike repairing a dilapidatedgreenhouse. “I stepped upand showed I know what I’mdoing,” he says.

He soon joined the teambuilding new farms at public-housing complexes in Harlemand Canarsie, Brooklyn.

By the time he finished inearly 2017, he had landed a

coveted spot in the entrepre-neurship program at SquareRoots, the urban farm incuba-tor currently hosting his busi-ness.

Not all his peers fared sowell. Among the 24 traineesin his cohort, only 16 gradu-ated. This year, 28 of 40made it to the finish line, thenonprofit says.

But these graduates haveenjoyed a 95% job-placementrate, in occupations rangingfrom landscaping to workingas a chef’s assistant.

It’s a fine accomplishmentconsidering the 75% unem-ployment rate among youngadults in city public housing.

Mr. Philpott says the expe-rience gave him a new iden-tity as a community leader.When he’s not tending cropsthese days, he’s giving tours,supervising apprentices andvolunteering at a communitygarden in the Bronx.

When younger guys on the

block ask if he’s dealing, hetells them the cash in his wal-let is from his business. “Ipull out my Instagram andshow them the farm,” he says.

Brandee McHale, presidentof Citi Foundation, which fo-cuses on economic opportu-nity, says the foundation do-nated $1 million to Green CityForce because it’s not just an-other job-training program—participants contribute totheir community and becomerole models. “It has a multi-plier effect,” she says.

Mr. Philpott’s stint withSquare Roots will end in Oc-tober. What’s next? “I have noidea,” he says.

But it’s a happy dilemma,he adds, induced by the skillshe’s learned and contacts he’smade: “The weird thing is,now I have so many opportu-nities, I don’t know which Iwant to do.”

Anne.Kadet@wsj.com

Paul Philpott prepares kale from his Brooklyn hydroponic farm business to be packaged and distributed to high-end restaurants.

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THEWALL STREET JOURNAL. Wednesday, June 13, 2018 | A19

Standing ByTo Stand ByFirst in LineBy Kate Andersen Brower(Harper, 336 pages, $28.99)

BOOKSHELF | By James Rosen

OPINION

‘I only saw Eisenhower alone,” Richard Nixon lamentedin 1969, “about six times in the whole deal.” Thisdismal recollection exemplifies the tendency of former

vice presidents to remember their tenures with frustration,not elation. Kate Andersen Brower probes this institutionaldisharmony in “First in Line: Presidents, Vice Presidents, andthe Pursuit of Power,” an intimate, compulsively readableaccount of the dynamics that have shaped—and sometimesdestroyed—relations at the top of the American politicalhierarchy since World War II.

A former White House correspondent and now a CNNanalyst, Ms. Brower knows the terrain and has securedinterviews with all six living former VPs, though not the

incumbent. Their insights,along with Ms. Brower’sinstinct for the telling anecdote,make “First in Line” a valuableaddition to the literature of themodern presidency.

Though Ms. Brower’s sourcenotes make it difficult to tellwhich details are previouslyundisclosed, some seem newsy:Bill Clinton offering not to runfor president if Al Gore soughtthe 1992 Democratic nomination;the written agreement governingthe Obama-Biden work flow (e.g.,

“all printed words that go to BO goto JRB”); the disclosure that Mike Pence

consults Joe Biden frequently.We also learn new details about historical episodes.

Before Jimmy Carter used a prime-time Oval Office address,in July 1979, to scold the American people for “a crisis ofconfidence”—the infamous “malaise” speech—WalterMondale advised against it. “Some people around thepresident,” Mr. Mondale says, convinced Mr. Carter that “ourpolitical problems were basically emotional problems. . . . Icouldn’t go for that.”

Ms. Brower also illuminates the quiet internecine strugglefor influence that pitted Mr. Gore against first lady HillaryClinton—a rivalry so fierce that the two took separateplanes, carbon footprints be damned, to Nelson Mandela’sinaugural. Asked by the author about his workingrelationship with Mrs. Clinton, Mr. Gore “declined to answerand said facetiously he thought the interview might have tobe cut short.”

America’s newest former vice president, Ms. Browerreports, displayed in the White House a “surprisingly sharptemper that he quickly turned on members of his staff.” Mr.Biden is also said to be “laying the groundwork for a 2020presidential run.” As for the current vice president, Ms.Brower portrays Mr. Pence as pious but insincere, an operatorwho “perfected his aw-shucks, folksy modesty” and“calculated approach to political life” in Indiana, where heserved as governor. When the coarse “Access Hollywood” tapesurfaced during the 2016 presidential run and Donald Trumptelephoned the Pences to apologize, the governor and his wifeinitially refused to take the call, Ms. Brower writes. Theireventual decision to stand by the GOP nominee, she says,showed “their joint ambition overruling their concerns.”

This is uncharitable. Ms. Brower had already told us thatthe Pences had sized up Mr. Trump’s strengths andweaknesses unflinchingly and believed, as devout Christians,that Mr. Pence’s ascension to the ticket represented a callingfrom God. So why credit ambition rather than a sense ofduty as the prime factor in the couple’s decision making?

“First in Line” properly traces the empowered vicepresidencies of recent years to Carter-Mondale, the firstadministration in which the chief executive treated the vicepresident as a true partner. In a Fox News interview in March2017, Mr. Pence told me that he sees his boss daily andconfides his views in conversation rather than writing, evenas he takes notes to record Mr. Trump’s flurries of ideas. YetMs. Brower places Trump-Pence in the same category as Ike-Nixon and LBJ-Humphrey, power relationships in which thepresidents neglected, even abused, their understudies.

Alas, numerous problems plague the prose in “First inLine,” the most serious of which is narrative incoherence.Obama-Biden marked the rare instance when the principals’interpersonal dynamic improved over time, Ms. Browerasserts, only to report later that “eventually, [Obama’s] WestWing stopped letting [Biden] go anywhere near Congress.”In her treatment of Sarah Palin, John McCain’s running matein 2008, Ms. Brower relates the conventional wisdom thatvice-presidential nominees “cannot help their candidate getelected, but they can certainly hurt,” and she later quotesDick Cheney saying: “You’ve got to remember, no one isvoting for vice president.” Midway between those passages,however, Ms. Brower insists “there was no denying thatJohnson helped Kennedy win the South.” Elsewhere Ms.Brower writes: “If Cheney was Darth Vader in the WhiteHouse, ruthlessly seeking power and using Americanmilitary forces to upend the sovereignty of foreign nations,that was fine with Bush.” This is history as caricature.

And clichés proliferate. Joe Kennedy was “incrediblywealthy,” LBJ was “consumed by the quagmire of theVietnam War,” and the Clinton-Gore relationship was“nothing short of Shakespearean.” Twelve of 15 chapters,counting the prologue and epilogue, open with similarlyweak-sounding constructions, like “The Trumps werehunkered down at their golf club” or “Donald Rumsfeld . . .was summoned to Nixon’s penthouse.” My favorite: “WalterMondale was having lunch.” I’m hooked!

“First in Line” inevitably reminds us that, in the last century,five vice presidents moved up due to death or scandal. For thisreason, the chief duty of the vice president, particularly inthe nuclear age, is not attending funerals or presiding overthe Senate but meeting the most basic human requirementof self-preservation. Franklin Roosevelt understood this in1944, when the Manhattan Project was nearing its objectiveand he advised ticket mate Harry Truman—with whom FDRwould meet privately only twice in the 82 days of his fourthterm—against the use of airplanes for campaign travel. “Oneof us,” Roosevelt said, “has to stay alive.”

Mr. Rosen, a former chief Washington correspondent for FoxNews, is the author of “Cheney One on One,” among other books.

The experience of vice presidents in thepostwar years has included rivalry, neglect andeven, at times, a true spirit of partnership.

A Major League Pension Error

I will soon start receiving apension fromMajor LeagueBaseball. Yet my dad, who

racked up more active-rostertime in the big leagues, is in-eligible for a pension. Theleague should change that thisyear.

Before 1980, a ballplayerneeded four years of big-league service to be eligiblefor pension status. Thepost-1980 collective-bargain-ing agreement allowed eligi-bility for a lifelong pension af-ter only 43 game days on aMajor League roster. The cur-rent minimum benefit is$34,000 a year; the maximumis $220,000.

In the 1980s, I played partsof five seasons with the Mon-treal Expos, Minnesota Twinsand Boston Red Sox, accumu-lating 2½ years of roster sta-tus. My dad, who started the1962 All-Star Game as a rookiepitcher for the WashingtonSenators, accumulated three

years of roster duty. The newstandards cover me, but mydad and other living ex-bigleaguers from his era aren’tcovered.

While it isn’t standard fornonvested employees to beretroactively included in apension system, it also isn’tunprecedented. Major LeagueBaseball has previously ex-tended pension status to other

groups of former players. Inthe late 1990s the league cre-ated a pension plan for one-time Negro Leaguers and otherveterans who retired before1947—the year the pensionfund was established.

Recognizing that guys likemy dad had drawn the shortstraw, the organization andthe players union agreed in

2011 to provide retirees whoplayed between 1947 and 1979with a “stipend” based ontheir roster time. Allowing fora sizable New York City in-come-tax bite, my dad’s sti-pend comes to about $5,500 ayear. The gesture was wel-come, but inadequate.

Consider the incongruity: Amore recent retiree than mydad, who might have pitchedonly a handful of career in-nings, qualifies for a full pen-sion and lifetime health-carecoverage. That retiree’sspouse will receive his pensionwhen he dies. When my dad,who pitched almost 400 ca-reer innings, eventually passeson, his stipend goes with him.My mother won’t receive anickel.

Many former players frommy father’s era who don’t havepensions have suffered bank-ruptcy or home foreclosure.Some are so poor they can’t af-ford health insurance. My par-ents’ personally invested re-tirement funds are dwindling.

They are in their 80s now.What will they get by on whenthey reach their 90s?

This situation can only berectified if the Players Associ-ation chooses to stand up forits own retirees. The leaguehas enjoyed 15 consecutiveyears of rising revenue, thanksto skyrocketing income fromthe sale of digital and televi-sion media rights. Last yearMajor League Baseball pulledin more than $10 billion forthe first time. It’s safe to saythe national pastime is ingood financial shape.

It’s getting late in the gamefor this dwindling cohort of re-tirees, who gave the best yearsof their lives to the game weall love. They only want thepension they feel they haveearned. Baseball can afford tobe generous to them.

Mr. Stenhouse was a MajorLeague Baseball player from1982-86 and is CEO of theRhode Island Center for Free-dom and Prosperity.

By Mike Stenhouse

Baseball should doright by those whoplayed before 1980.

In our jokeytimes, it isperhaps fit-ting that theentire mediaand technol-ogy sectorhad beenwaiting onthe outcomeof a JusticeDepartment

antitrust suit that nevershould have been brought inthe first place. We refer, natu-rally, to the department’s law-suit opposing the merger ofAT&T and Time Warner, whichJudge Richard Leon so handilyrejected in his much-awaiteddecision Tuesday in favor ofthe two companies.

Indeed, the case probablywould not have been broughtif Donald Trump had notspontaneously and inappropri-ately denounced the deal dur-ing the 2016 campaign. Itwould not have brought, too,if his subsequently appointedantitrust chief, Makan Delra-him, had not been on recordbeing generically critical ofnegotiated consent decrees,which his agency had in thepast imposed on big-mediadeals to mollify critics withoutresorting to an unpersuasiveand high-risk lawsuit.

Voilà. Mr. Delrahim boxedhimself into a corner. An un-persuasive lawsuit was hisonly non-embarrassing wayforward given his own and hispresident’s statements. Unfor-tunately the lawsuit he filedlacked another important in-gredient: any grounding inreason.

On Big Media, the Court SpeaksAT&T may be the nation’s

“biggest” TV distributor, but85% of its customers are sub-scribers to its DirecTV satel-lite business, which everyoneagrees is becoming obsoletein a world where a two-wayconnection is necessary forvideo streaming. And the ideathat control of Time Warnerchannels like CNN and TBSwould be like owning a curefor cancer was silly on itsface and belied by the datapouring in from the realworld where customers arefleeing traditional cable indroves.

To cover its exposed hind-quarters, the department putforward a little-noticed sec-ond argument. It asserted anexpansive reading of the 1914Clayton Antitrust Act thatwould make the modern econ-omy impossible if accepted.Justice essentially arguedthat even a 0.1% possibilitythat a merger might raiseprices by 0.1% could be reasonenough for a judge to reject itunder the law.

The case was idiotic, andyet it hung over the entire in-dustry as a signal of whatmight be expected from theunpredictable and woollyTrump administration in aslew of deals coming down thepike. Let’s not over-intellectu-alize this: If a court had sidedwith the Justice Departmentin a case involving CNN’s par-ent company, Trump trust-busters would be tempted toplay the same antibusiness,populist card against a bunchof proposed deals. These in-clude Sprint’s pending tie-up

with T-Mobile as well as theMurdoch family’s apparentplan to sell big parts of 21stCentury Fox to either Disneyor Comcast.

On the other hand, the courtnow having decided againstthe Justice Department, theTrump administration mightbe expected to revert to stan-dard GOP permissiveness onantitrust, a development thatwould be very welcome right

now by shareholders and man-agements. Megadeals are inthe air as media companiesadapt to a marketplace beingtransformed by high-speedbroadband. Ditto in the health-care marketplace, where bigdeals like the one unitingAetna and CVS have beenbroached to cope with rapidchanges in technology andregulation.

Don’t be misled by much ofthe antitrust thumb-suckingJudge Leon’s decision will callforth. Tuesday’s ruling wasless important for any prece-dents it invokes than for whatit says about the incentivesguiding Trumpian regulatorsin the frenzy of deals that areabout to turn business-chan-nel pundits into overexcitedPekingese.

Still, the matter may re-main not fully settled until

Mr. Trump himself tweets orfails to tweet. Will he ac-knowledge Tuesday’s rulingor at least leave it un-denounced? Or will he use theoccasion to renew his claimthat the AT&T merger repre-sents “too much concentra-tion of power in the hands oftoo few” and is “an exampleof the power structure I’mfighting”?

Mr. Trump may have thelast word here, not JudgeLeon, not even the Justice De-partment’s Mr. Delrahim, whomust decide whether to pursuean unpromising appeal. ATrump tweet that calls for re-newed regulatory vigilanceagainst the president’s mediaenemies may leave the peanutgallery CEOs who were wishingfor Tuesday’s outcome feelinglike they snatched defeat fromthe jaws of victory.

Then again, Mr. Trump’spreference for Fox News overCNN has been noted by manyanalysts. Rich Greenfield, ofBTIG Research, has been par-ticularly insistent that anydeal by the Murdoch family(who also control this news-paper) to sell their Fox enter-tainment assets will flythrough regardless of who thebuyer might be.

Maybe so, though how Mr.Trump sees his interestsfrom day to day is not alwayseasy for outsiders to makesense of. One thing is certain:Mr. Trump’s perceptions offriend and foe in the mediabusiness will remain an irre-sistible talking point whenpossible media deals are be-ing evaluated.

But the real questionmedia moguls will askthemselves: Is DonaldTrump listening?

BUSINESSWORLDBy Holman W.Jenkins, Jr.

Jerusalem“Israel is thehome of allJews,” PrimeMinister Ben-jamin Netan-yahu declaredin his addressto the Ameri-can JewishCommi t t e eGlobal Forum

in Jerusalem last weekend.“Every Jew should feel athome in Israel.” There is a lotof history packed into theseterse sentences, and just asmuch controversy.

The assertion that Israel isthe home, not just a home, forall Jews is the core of classicalZionism. It implies that noother country can be a home,even if the Jews living therethink it is. The Jews of Andalu-sia thought they were athome—until Christian rulersarrived and expelled them inthe 15th century. The Jews ofGermany thought they werefully German until a regime de-fined by murderous hatred ofall Jews came to power.

But today, for the first timesince the Talmudic era, thereare two strong, self-confidentcenters of Jewish life. One ofthem embodies the Zionistproposition; the other rejectsit outright. American Jews, thelargest diaspora population,don’t believe they are living inexile, or even in danger. Amer-ica is different, they insist. Tothe extent that America restson civic principles rather thanethnic or religious identity, itsliberal democratic institutions

The Fracturing of the Jewish Peoplecan accept Jews as equal citi-zens, as George Washingtonpromised in his famous letterto the Touro Synagogue.

For most American Jews,the U.S. isn’t a temporaryresting place interruptingceaseless wandering; it istheir permanent home. Whenthey say “Next year in Jerusa-lem!” at the end of each Pass-over Seder, they don’t mean itliterally.

What if they are wrong andthe pessimists are right? Whatif the marchers in Charlottes-ville chanting “the Jews willnot replace us” are the harbin-gers of a momentous shiftfrom civic nationalism to whiteChristian identity as the basisof the American polity?

This is where the existenceof Israel becomes a transfor-mative fact. A poem by RobertFrost contains a thought-pro-voking line: “Home is where,when you have to go there,they have to take you in.” Is-rael is the only country thatguarantees immediate entryand citizenship to every Jewwho knocks on its door. This isthe sense in which Israel is thehome for all Jews.

It is also why Israel meansthe end of Jewish exile. Fortwo millennia, Jews faced aterrible choice between perse-cution and statelessness, aswhen the SS St. Louis,crammed with Jewish refu-gees, wandered from port toport in 1939 looking for acountry that would accept itspassengers. The creation ofIsrael gave Jews a thirdchoice.

In that sense, Israel fulfillsthe Zionist goal of the “nega-tion of the exile.” This is con-sistent with the existence ofpermanent Jewish communi-ties outside the state of Israel.The end of exile as an unchosenpolitical condition doesn’tmean the end of the diasporaas a voluntary condition.

The emergence of two per-manent poles of Jewish life—one in Israel and one in thediaspora—offers new possibili-ties but also presents newchallenges. The challenges areunderscored by an AmericanJewish Committee survey re-leased as its conference con-vened in Jerusalem.

In effect, Israeli Jews are ared state while American Jewsare a blue state. Seventy-sevenpercent of Israeli Jews ap-prove of President Trump’shandling of relations betweenthe U.S. and Israel, comparedwith only 34% of AmericanJews. Eighty-five percent of Is-raeli Jews, but only 46% ofAmerican Jews, back Mr.Trump’s decision to recognizeJerusalem as Israel’s capitaland move the embassy there.Fifty-nine percent of AmericanJews would support disman-tling at least some settlementsas part of a final settlementwith the Palestinians; only 39%of Israeli Jews would do so.

Eighty percent of AmericanJews but only 49% of IsraeliJews favor allowing Conserva-tive and Reform as well as Or-thodox rabbis to officiate at Is-raeli weddings, divorces andconversions. And 73% ofAmerican Jews but only 42%of Israeli Jews support bothsexes praying together at theWestern Wall rather than thestrict separation required byOrthodox Judaism.

Underlying these policy dif-ferences is a deep jurisdic-tional dispute. Although bothAmerican and Israeli Jews be-lieve that they are part of onepeople, and that they benefitfrom one another’s strength,they are divided by citizen-ship. Relying on the idea ofshared peoplehood, 53% ofAmerican Jews believe that itis appropriate for them to in-fluence Israeli security issues.Speaking as citizens of a sov-ereign state, 68% of Israelisdisagree.

When Israeli policy princi-pally affects Israeli citizens,noncitizens may offer advicebut cannot demand influenceon the outcome. But when Is-rael acts as the guardian of thepatrimony of the entire Jewishpeople, as it surely does withthe Western Wall, it has agreater responsibility to weighthe views of the wider Jewishcommunity. Because securityissues occupy a gray zone inthis continuum, Jews in andoutside Israel will continue todebate not only the substanceof these issues but also theirrespective claims to a stake intheir resolution.

Israel has become ared state while U.S.Jews remain blue.

POLITICS& IDEASBy WilliamA. Galston

A20 | Wednesday, June 13, 2018 THEWALL STREET JOURNAL.

Quarterly Guidance Versus the Long TermRegarding Jamie Dimon and War-

ren E. Buffett’s “Short-Termism IsHarming the Economy” (op-ed, June7): While there is pressure from quar-terly earnings, the amount spent oncompliance costs, financial reportingas well as other regulations have hin-dered innovative companies from go-ing public on the stock exchange.

While the authors speak mountainsof truth, their suggestions don’t solvethe problem.

MARK ZASHINShort Hills, N.J.

Managers and investors would dowell to appreciate what Mr. Buffettproved running Berkshire Hathawaythe past 54 years: Managers cantrain their shareholders. Berkshirehas never engaged in short-term be-havior, whether quarterly earningsguidance or otherwise, and todayboasts a unique shareholder groupthat trades far less, holds far longerand has enjoyed far greater returnsthan any peer.

PROF. LAWRENCE A. CUNNINGHAMGeorge Washington University

Washington

Of course having to have your feetheld to the fire isn’t the most desir-able thing. Why would anyone won-der why CEOs would like to see quar-terly guidance done away with? Iagree with the authors’ statementthat investors are entitled to get fi-nancial and operating metrics on amore frequent than annual basis sothey can gauge how the business isdoing on an interim basis. But with-out prior guidance as to where thosegoal posts are being set, the samevolatility and gyration in stock pricesthat they see being caused by quar-terly earnings forecasts is as likely.

Messrs. Buffett and Dimon allegethat guidance on a quarterly basishurts the underlying economy andyet they provide no evidence forthat statement. Corporate earningshave been growing, employmentnumbers are better and GDP hasbeen increasing. It is hard to allegethat the U.S. economy has suffered;it is much easier to say that theseforecasts are to blame for a wholehost of factors.

What information do investorsneed on an interim basis to gaugehow a company is doing in fulfillingits business goal for a given year?Some metrics will have to be pro-vided in advance of the actual quar-terly release of numbers, otherwise ina great many cases investors will belooking at results for a given quarterand not know if a business is oncourse.

Managements make detailed fore-casts on a quarterly basis for theirboards and lenders, but somehoweven watered-down versions of thisdata, due to confidentiality reasons,should not be presented to equity in-vestors. Sounds like managementwould prefer not to have its feet heldto the fire every so often.

STEVE KAUFMANNew York

Decades ago as a young executive, Imet John Mars of Mars Inc. The com-pany had made a very large invest-ment in a global expansion that wascosting a lot with no end in my lim-ited sight. When I gamely inquiredwhy, Mr. Mars replied: “I am not do-ing it for me. I am not doing it for mychildren. I am doing it for my grand-children.” Lesson learned.

JOHN RUFFLEYSummit, N.J.

LETTERS TO THE EDITOR

Letters intended for publication shouldbe addressed to: The Editor, 1211 Avenueof the Americas, New York, NY 10036,or emailed to wsj.ltrs@wsj.com. Pleaseinclude your city and state. All lettersare subject to editing, and unpublishedletters can be neither acknowledged norreturned.

“When it sounds too good to be true,get the auditors involved early.”

THEWALL STREET JOURNAL

Taiwan Is Not a Part of the People’s RepublicRegarding “Avoiding Apologies to

China” (Business News, June 4): Itmust be stressed that Taiwan is not,nor has it ever been, part of the Peo-ple’s Republic of China. This is thereality that China refuses to face upto while pressuring the world to ac-cept its false claim.

The consultants quoted in the arti-cle suggest that companies refer tothe usage of China’s territories usedby international organizations suchas the United Nations. The problemhere is that China is using the veryfalse claim it pushes onto the multi-national companies to obstruct thedemocratic nation of Taiwan fromparticipating in these organizations.

When companies talk about re-

specting local culture and sensitivity,they seem to have only China’s sensi-tivity in mind. The truth is, they arethinking only of the sheer scale ofthe Chinese market. Yet oneshouldn’t forget that China is still atotalitarian regime. Kowtowing toChina puts democratic values at riskand will have a grave effect on theliberal international order. Theglobal community should rejectChina’s intimidation tactics and itsfalse narrative. International compa-nies will do well to note that cavingin to China’s coercion now will onlyinvite more.

BRIAN SUTaipei Economic and Cultural Office

New York

Pepper ...And Salt

Dumbing Down New York’s Public SchoolsRegarding your editorial “Pro-

gressive Education Today” (June 7):I am a rising freshman at Stuyve-sant High School. I have been fol-lowing your coverage on thechanges New York Mayor Bill deBlasio plans to make to the admis-sions process for Stuyvesant and theother specialized high schools by

lowering standards. I believe thesechanges could interfere with a sys-tem that in my experience is fairand accessible. When I studied forthe entrance exam, also known asthe SHSAT, I had no tutor and tookno course explaining the study pro-cess. I simply reviewed the KaplanExam Prep book that I got at my lo-cal public library after reaching outto the coordinator of the freeSHSAT prep courses offered there. Iwas accepted to Stuyvesant HighSchool without paying for a tutor orcourse. I don’t believe that my caseis exceptional.

What feels the most gratifying isknowing that each student in myclass was admitted on the exactsame standards. I believe that anyreforms must maintain this levelplaying field.

JENNA ROBERTSNew York

With Mayor de Blasio so intent ondiversity, rather than quality, I sug-gest he start with the makeup of theNew York Yankees and see the reac-tion of the team’s management andthe fans. Certainly the percentage ofnon-Hispanic European-Americansand Asian-Americans on the teamdoesn’t reflect their proportion ofthe population of the city.

NELSON MARANSNew York

The Disabilities Act OftenOvershoots Intended Mark

Don Wagstaff and Paul Hale (Let-ters, June 6) ask different versionsof the same rhetorical question re-garding accommodating the disabledafter college. Both make the pointthat changing metrics or providingcustomized work environments can-not be continued in the workplace.They are wrong.

The Americans With DisabilitiesAct is one of the best ever examplesof the law of unintended conse-quences. No one would argueagainst maximizing job opportuni-ties for disabled individuals. Thestatute, however, has been abusedresulting in exactly the types of ac-commodation decried by Messrs.Wagstaff and Hale.

If the accommodations describedin the letters are “reasonable” andwouldn’t pose “undue hardship,”employers are required to providethem. Employers are presented withrequests every day to accommodateemployees who claim they cannotwork with a certain supervisor,can’t handle the case load or haveto take a break 15 minutes everyhour. Often employers provideseemingly absurd accommodations,not because the statute compelsthem to do so, but because the costof lawsuits alleging failure to ac-commodate is quantifiable, whilethe diminution in productivity from“overaccommodating” is more diffi-cult to measure.

MICHAEL H. LEBPasadena, Calif.

Promises, Nuclear Promises

D onald Trump and Kim Jong Un both re-ceived what they most wanted fromtheir one-day summit in Singapore on

Tuesday: Images of the twomen shaking hands, talkingacross the table and gettingalong famously. Whether thisphoto-op summitry achievedanything beyond the bonho-mie is a lot less clear.

InMr. Trump’s telling, his willingness to en-gage in personal diplomacy has persuaded theyoung Kim to abandon the nuclear-weaponsprogram that he and his forbears have spent de-cades building. Mr. Trump gave Kim the legiti-macy of equal billing on theworld stage, but therisk was worth the gamble and has paid off inan historic change of heart.

“Chairman Kim and I just signed a jointstatement in which he reaffirmed his ‘unwaver-ing commitment to complete denuclearizationof the Korean Peninsula,’” Mr. Trump told thepress after the summit. “We also agreed to vig-orous negotiations to implement the agreementas soon as possible. And he [Kim] wants to dothat. This isn’t the past. This isn’t another ad-ministration that never got it started and there-fore never got it done.”

In this telling, the two leaders have mappedout a non-nuclear future, Mr. Kim has agreedto a radical change in policy, and all that’s leftis for the two sides to work out the details.Peace is at hand.

i i i

Yet everything hangs on those details, noton the promises, which North Korea has madeand reneged onmany times. And there is littlein the joint communique or in North Koreanstatements to demonstrate that Kim has com-mitted to do what Mr. Trump claims.

The communique itself is a terse and generalstatement promising to “contribute to peaceand prosperity on the Korean Peninsula.” In re-turn for Kim’s commitment to denuclearize, thestatement says, “President Trump committedto provide security guarantees” to the North.There are no details about timing or process orspecific goals. Asked at his press conferenceabout the lack of details, Mr. Trump said “wedidn’t have time.”

The danger for Mr. Trump is that he is nowcommitted to the same open-ended negotiatingprocess that trapped his predecessors. ThePresident claimed at his press conference thatKim had vowed to dismantle a missile site, butthat may be the same site the North is alreadydismantling.

Asked how the dismantling will be verified,Mr. Trump said “it’s going to be achieved byhaving a lot of people there, and as we develop

a certain trust. And we thinkwe have done that.” But thetwo sides announced no de-tails on which sites inspectorswould be allowed to see orwhen.

If the past is a guide, all ofthis will be subject to painful and perhaps end-less negotiation, and the North will insist onconcessions from the U.S. at every stage. Havingcommitted to talks, Mr. Trump will be underpressure to make more concessions lest Kimwalk away.

Mr. Trump made the first large and unilat-eral concession Tuesday when he cancelledwhat he called U.S.-South Korean “war games.”The exercises are a North Korean bugbear, andMr. Trump even adopted the North’s languagein calling them “very provocative.” But their vi-tal purpose is to maintain readiness in case ofan attack from the North, and his announce-ment startled U.S. allies. Restarting the exer-cises is possible, but the price could be an endto the talks.

Mr. Trump said U.S. sanctions will remain inplace amid negotiations, but lifting them willbe a prime negotiating target for the North.China was quick on Tuesday to call for sanc-tions relief, andMr. Trump said Beijing has al-ready eased enforcement “over the last coupleofmonths, but that’s okay.” Okay? Does hewantthe sanctions in place or not?

Amid all the smiles and handshakes, no oneshould forget that Kim rules North Korea as avast penal colony. It is also the regime that kid-napped and killed AmericanOttoWarmbier. Mr.Trump at least acknowledged the Warmbierfamily, though his surmise that Otto’s deathchanged the political dynamics in the Northseems fanciful.

Perhaps guaranteeing Kim’s survival inpower is necessary to eliminate his nuclearthreat to the U.S. mainland. But there is no ex-cuse for a nuclear deal that doesn’t entirelyeliminate the program—with on-demand in-spections everywhere. This is what Mr. Trumpis insisting for Iran, and he can’t adopt a lesserstandard on North Korea.

Donald Trump’s diplomacy is transactionaland personal, so the test of this summit will bewhether his gut instinct is right about Kim’scommitments. We hope it is, but we’ll believeit when Americans are packing and haulingaway the missiles and enriched uranium.

Trump says he can tellKim has changed, butthe evidence is scant.

Justice’s Antitrust Humiliation

W ell, that was a rout. Federal JudgeRichard Leon on Tuesday gave theJustice Department amuch-needed

kick in the shins by greenlight-ing AT&T’s merger with TimeWarner without conditions.President Trump’s antitrustchief Makan Delrahim shouldreflect long and hard on howthe government somisjudgedthe law and the media marketplace.

The Justice Department last November suedto block the $85 billion deal on the dubioustheory that the combined companywouldhindercompetition by forcing competitors to pay hun-dreds of millions of dollars more per year forTime Warner’s “indispensable” programming.If rivals refused, AT&T could supposedly with-hold its content and grab rivals’ customers.

The theory ignores the “tectonic changes” inthe media and broadband markets, as JudgeLeon explained in his 172-page analysis. “Genericstatements that vertical integration ‘can’” leadto “‘an unfair advantage over its rivals’ do notcome close to answering the question before theCourt,” he added.

Lo, video subscriptions aredecliningwhileTVad revenueshaveplateaued.Consumers are “cut-ting the cord” fromcable andbuying cheaper al-ternatives over theweb. Facebook andGoogle’sdigital adplatformshave surpassedTVadvertis-ing in revenue. Google’s YouTube boasts 1.8 bil-lion registered monthly viewers, which is 72times as many as AT&T’s TV subscribers.

The last time Justice went to court to stopa vertical merger was 1977, and it lost. Unlikewith horizontal mergers between direct com-petitors, the governmentmust prove that a ver-tical deal would reduce choice and harm con-sumers. Yet Justice couldn’t show how acombined AT&T-TimeWarner would pose anymore of a threat to competition than these

other vertically integrated companies.Government lawyers relied heavily on testi-

monyby aUniversity of California, Berkeley pro-fessor, but several economistsdisputed hismodels and JudgeLeon said he largely agreedwith their critiques.

The government also citedexpert testimony from AT&Tcompetitors. But “in the final

analysis, the bulk of the third-party competitortestimony proferred by the Government wasspeculative, based on unproven assumptions orunsupported—orevencontradicted—bytheGov-ernment’s own evidence,” Judge Leon noted.

To significantly increasemarket share, AT&Twould have towithhold content frommost com-petitors,whichwould reduceTimeWarner’s $31billion in annual advertising and subscriptionrevenue. This would be self-defeating. Amajorgoal of themerger is tomonetize customer dataas YouTube and Facebook do.

Judge Leon also pointed out that Comcast’sacquisition of NBCUniversal in 2011 did notcause content prices to increase. And Justicecouldn’t explainwhyor howconditions imposedon that merger failed to prevent anti-competi-tive conduct. Thus, the government “failed tomeet its burden to show that the proposedmerger is likely to substantially lessen competi-tion,” Judge Leon concluded.

Justice could have accepted AT&T’s offer toarbitrate content fees, yet it refused to settle foranything short of divestiture of Turner Broad-casting. Bad call. President Trump famously op-posed themerger during the 2016 campaign, buthostility to CNN isn’t a legal argument.

Judge Leonhaswisely refused to stay his rul-ing if the government appeals since Justice hasalready delayed the deal’s closing by 18months.Mr. Delrahim should avoid another humiliationby conceding defeat and walking away.

Judge Leon blows awaythe federal case againstAT&T-TimeWarner.

Tariffs and the Tax Cut

M ore than a few conservative intellec-tuals havewarmed to Donald Trump’strade protectionism because it sup-

posedly helps blue-collar Americans. But whatif his tariffs do the opposite?

Erica York at the Tax Foundation crunchedsome numbers recently showing that Mr.Trump’s proposal for a 25% tariff on importedcars, trucks and parts could eliminate half of theincome gains from tax reform for millions ofAmericans. Those in the lowest income quintilecould lose 49% of their tax gains. Say for ease ofcalculation that these folks received a $100 after-tax bonus from changes like the doubled stan-dard deduction. After auto tariffs that would bewhittled down to $51, Ms. York notes.

The tariffs shave gains in all income brack-ets, but no one is hurt more than the poor andmiddle class. Take the fourth income quintile,

or a household making at most about $70,000a year in adjusted gross income. The Tax Foun-dation says auto tariffs could erase nearly 30%of that family’s after-tax income bump. Ditto forthe third quintile, or a family earning no morethan $43,000 a year.

Tariffs are inherently regressive becauselow-income Americans spendmore of their in-come on household goods. Commerce SecretaryWilbur Ross has argued that no one will noticeprice increases—what’s a few cents more for acan of soup? But people in Mr. Ross’s incomestrata are not the Trump base.

The Commerce Department is still lookingat whether a muffler is a national securitythreat under Section 232 of the Trade Expan-sion Act of 1962. President Trump should aban-don the idea lest Americans wonder if they re-ally benefitted from that tax cut.

REVIEW & OUTLOOK

OPINION

THEWALL STREET JOURNAL. Wednesday, June 13, 2018 | A21

E uropean Council PresidentDonald Tusk recently saidthat Donald Trump’s ap-proach to trade, climatechange and the Iran nu-

clear deal is undermining “the rules-based international order.” This isabsurd. The global order began un-raveling long before Mr. Trump’s de-but on the world stage.

Start in 1989. That remarkableyear saw the fall of the Berlin Wall,the collapse of the socialist model,and the rise of globalization. By theearly 1990s, China, India, EasternEurope and a host of commodity-producing countries had joined theglobal capitalist club.

That was the beginning of the so-called Washington Consensus—anew global order based on deregu-lating market access, liberalizingcapital and trade flows, encouragingdomestic competition, fortifying therule of law, and reducing taxes, debtand market subsidies. By 1995, theleaders of this new world order es-tablished the World Trade Organiza-tion, which China joined six yearslater.

Much of the world initially em-braced the Washington Consensus.Countries became more productive,which lowered real wage costs glob-ally. Global trade grew at more thantwice the rate of global economicoutput. Soon an ocean of excess sav-ings began to swirl around a newlyliberalized international financialsystem, a lot of it directed to U.S. as-sets. Long-term U.S. interest ratesdropped to abnormal lows. Financialrisk became underpriced. Equitymarkets boomed.

Even the Asian crisis of the late1990s failed to end the party. Indeed,many countries learned and grewfrom it. They tied their currencies to

Who Unraveled the New World Order?

the U.S. dollar, eschewed consump-tion and refashioned their econo-mies as large export platforms. Theglobal ocean of excess savings grewlarger.

But the story went downhill fromthere. Many members of this new or-der, including China, failed to deliver

on their promises. They created ob-stacles, invented hardship scenariosand developed loopholes to avoidtheir commitments. In some cases,they engaged in outright intellec-tual-property theft, currency manip-ulation and cyberwarfare. The greatvision suddenly blurred.

By 2007 the world-wide under-pricing of financial risk, combined

with reckless bank leveraging,helped set the stage for the financialcrisis. In 2009 British Prime Minis-ter Gordon Brown declared, “The oldWashington Consensus is over.”

This global order still had cre-ated unprecedented wealth, helpingto raise a billion people out of pov-erty. But it also had led to wealthinequality, flat real wages, and aninternational financial systemhugely out of balance. Centralbanks injected tens of trillions ofdollars of liquidity, trying to pro-tect asset prices based on an orderthat no longer existed.

It eventually became clear that theoriginal vision of a new global eco-nomic order was only a romanticizeddream. Many nations took part in theglobal system—but not to liberalizetheir economies or make them moretransparent and accessible. Theycame to game the system.

In response, the Trump adminis-tration has offered some one-off tar-iffs. But this is like a doctor writingout a prescription for an aggressive

drug, with potentially negative sideeffects, without a long-term plan forthe patient’s health.

The U.S. economy—the patient—has an amazing ability to innovateand reinvent. A long-term plan isnecessary to preserve and protectthese unique strengths in today’sincreasingly lawless world. Espe-cially since the values of free andopen economies, fair play and therule of law are increasingly out offashion.

Tariffs are a poor substitute forstrategic planning about the futureof the global economy. Instead oftariffs, the U.S. should form a “val-ues coalition of the willing.” Thisgroup of nations would agree to atougher order that demands moretransparency, accountability and fairplay, along with fewer tariffs andother barriers to economic entry.This would be backed by the rule oflaw.

Not all economies would make thecut. Europe is a mixed bag. After theBrexit vote, German policy makersimmediately feared that with Britainout of the European Union, Berlinwould be isolated. It would have tofight off Brussels’ mercantilist, anti-free-market technocrats without an-other large country as an ally.

In China and other mercantilisteconomies, production bears no rela-tion to market demand, the definitionof the word “contract” is the begin-ning of negotiations, and cyberwar-fare is simply part of business. Thosecountries should be treated sepa-rately as such.

The world has changed since1989. The global order is gone. It istime to build a new one.

Mr. Smick is founder, chairmanand CEO of the Washington globalmacroeconomic market advisory firmJohnson Smick International Inc.

By David M. Smick

GETT

YIM

AGES/ISTO

CK

It wasn’t Trump. Theglobal economic consensusbegan falling apart yearsbefore he entered politics.

OPINION

Don’t BeSo Sure theGig Is Up

By Liya Palagashvili

Godspeed to AT&T-Time Warner

W hen the Justice Departmentfiled suit last year to blockthe merger of AT&T and

Time Warner, its argument hingedon seemingly reasonable fears of amonopoly. On Tuesday a federal dis-trict court disagreed. “The govern-ment has failed to meet its burden,”Judge Richard Leon ruled, “to es-tablish that the proposed ‘transac-tion is likely to lessen competitionsubstantially.’ ”

This is great news for the enter-tainment industry—and for anybodyworried about genuine monopolies.Here’s why: In bringing the suit, theJustice Department’s antitrust chief,Makan Delrahim, argued that AT&T–Time Warner would quickly domi-nate the market for cable television,allowing the combined behemoth toraise prices at will. That sounds bad,right? Nobody wants that.

But think about it for a minute.Is this merger really about cableTV? That market is shrinking. Lastyear only 79% of American house-holds paid for cable or satellite sub-scriptions, down from 84% in 2014and from a peak of 88% in 2010.Would AT&T and Time Warner re-ally ink an $85 billion deal merelyto gain control of a business in ob-vious decline?

Of course not. This merger isabout something else. It’s aboutwhere all of those former cablesubscribers are going: online. Be-tween 2013 and 2017, the numberof streaming-only households inthe U.S. tripled. Today nearly 200

million households use a subscrip-tion streaming service at least oncea month. AT&T–Time Warner wantsa piece of this growing market.

The problem is that breaking inisn’t easy. Readers of The Wall StreetJournal may remember an articlelast month titled “Tech’s Titans Tip-toe Toward Monopoly.” Its author,technology columnist ChristopherMims, explained that the unique

characteristics of digital marketshave allowed a small number of in-ternet giants—among them Amazon,Google, Netflix and Facebook—todominate their industries and fore-stall entry by competitors.

These companies have put seri-ous money into customer connec-tions, data analytics and back-endsystems, and these investmentsscale very well. Netflix has pene-trated more than half of U.S. house-holds. Google and Facebook controlalmost three-quarters of online ad-vertising. Amazon does nearly halfof all online retail sales. These areastonishing numbers.

Now that these tech giants haveestablished their downstream powerin the distribution business, theyare beginning to amass upstreampower by getting into the content-creation business. Soon, Mr. Mims

asked readers to imagine, policymakers might decide they need toregulate Silicon Valley the sameway that the steel, rail and tele-phone industries were in the 20thcentury.

Given the dominance of SiliconValley’s internet giants, it makes nosense to prevent AT&T and TimeWarner from merging. These com-panies aren’t trying to join forcesbecause they want to take controlof a dying industry; they want tobe allowed to compete in a newone.

Judge Leon’s decision was wise.The focus for courts and antitrustagencies today should be to ensurehealthy competition in the new en-tertainment landscape. With anyluck, AT&T and Time Warner willshortly be integrating content cre-ation and distribution. Other compa-nies, including Disney, probably willfollow suit. That will give them lever-age to compete against the tech gi-ants that are fast becoming the dom-inant entertainment players.

We have no idea who will ulti-mately win this battle for the futureof America’s living rooms. But wedo know one thing for certain: In amarket with more choices, custom-ers will win.

Messrs. Smith and Telang areprofessors of information systemsat Carnegie Mellon University,where they co-direct the Initiativefor Digital Entertainment Analytics.They are co-authors of “Streaming,Sharing, Stealing: Big Data and theFuture of Entertainment” (MITPress, 2016).

By Michael D. SmithAnd Rahul Telang

The $85 billion mergerisn’t aimed at dominatingcable TV. It’s an attemptto take on Silicon Valley.

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The Attack on Educational ExcellenceNew York Mayor Billde Blasio stands 6½feet tall but stillmanaged to come upshort last week. Theprogressive Demo-crat wanted to elimi-nate the entranceexam for the city’seight elite publichigh schools to en-sure that more black

and Hispanic students were admit-ted. State lawmakers, citing opposi-tion from Asian families, blocked themove. Good for them.

The number of available slots atthese schools is fixed, and last yearAsian students were awarded 52.5%of them, according to the city’s De-partment of Education. By contrast,whites comprised 28% of the total,while Latinos and blacks were 6.5%and 3.8%, respectively. You’ll findsimilarly lopsided racial and ethnicresults in other large cities—Boston,Chicago, Philadelphia—where blackand Latino students are under-represented in academically selectivepublic high schools while whites andAsians are overrepresented.

Asian families in particular fearthat replacing an objective test withwhat amounts to a racial quota sys-tem would come at the expense ofAsian children. Given that otherschools and programs for high-achieving students around the coun-try are being pressed to becomemore “diverse,” those concerns areunderstandable.

After the Montgomery Countyschool district in Maryland changedadmissions standards for gifted-and-talented programs—by broadeningthe definition of “gifted,” amongother adjustments—black and Latinoacceptance rates ticked up whileAsian admissions fell. Thomas Jeffer-son High School for Science andTechnology is an elite magnet schoolin Northern Virginia that also usesan entrance exam. The school’s ac-ceptance rate matches GeorgetownUniversity’s (just 17%) and its stu-dent body last year was 2.2% Latino,1.5% black and nearly two-thirdsAsian. A 2017 profile of the high

school in Washingtonian magazinenoted that administrators are underconstant pressure from outsiders toincrease the number of black and La-tino students by watering down theselection criteria.

In the upside-down thinking of af-firmative-action advocates, academi-cally rigorous schools should be morefocused on achieving racial balanceand less focused on maintaining highstandards. Asian displays of academicexcellence therefore become problem-atic. Asians are somehow to blamefor outperforming others, and theyare to be punished for the historicalinjustices that blacks suffered at thehands of whites. This is what happenswhen you try to reconcile what is ir-reconcilable: group preferences onthe one hand and equal treatment ofindividuals on the other.

But Mr. de Blasio’s decision to callfor an end to the test, instead of call-ing for better test preparation, isalso revealing. What he and othercritics of selective schools are sayingis that these low-income black andLatino kids will never measure up, sowe must stop trying to measurethem. The mayor and his allies seemto have given up on the very stu-dents they claim to be helping. How,exactly, you help one group by hold-ing it to lower standards than other

groups isn’t clear. Deciding whichgroups deserve special treatment isalso problematic. Schools today thatare considered “too Asian” were intimes past branded “too white” or“too Jewish.”

Mr. de Blasio and his fellow edu-cation egalitarians also convenientlyignore the ample evidence of minor-ity academic success because it un-dermines their argument that theproblem is the exam requirement,

not poor exam preparation. But if themayor is genuinely concerned withincreasing the number of black andbrown students matriculating at tophigh schools like Bronx Science andStuyvesant, he ought to pay a visit toone of New York’s high-achievingpublic charter schools.

Success Academy, for example,operates 46 public charter schools inNew York. They serve more than15,000 students, the vast majority ofwhom are poor and black or Latino.Success students regularly shellactheir peers in the city and state on

standardized tests. A spokeswomanfor Success Academy told me byemail that the acceptance rate forSuccess applicants at the city’s eliteschools this year was more thandouble that of black and Latino stu-dents citywide, and “there werethree Success middle schools whosestudents of color were three to fourtimes as likely to gain admission.”This year, Success Academy gradu-ated its first high-school class, andall of its members are college-bound.These students didn’t need someoneto make school admissions tests lessrigorous. They needed educators andeducation-policy makers who be-lieved in them.

Similarly, Mr. de Blasio doesn’tneed to overhaul admissions at high-performance schools to boost per-centages of minority students. In-stead, he could give successfulcharter schools, private schools andparochial schools more access to un-derprivileged students—somethinghe has resisted out of fealty toteachers union leaders who vehe-mently oppose school choice. Here’san idea: Leave the best schoolsalone, and make sure the next mayorcares less about union support andmore about the 47,800 children nowsitting on New York’s charter schoolwaiting list.

Schools considered ‘tooAsian’ were once branded‘too white’ or ‘too Jewish.’

UPWARDMOBILITYBy Jason L.Riley

D ata confirm the “gig econ-omy” is taking off—or dothey? A 2017 Upwork study

found that 36% of the labor forceengaged in some form of contractor freelance work in 2017. In 2015the Mercatus Center counted 1099-MISC and W-2 tax forms, which re-port contractor and employee in-come, respectively. The number ofW-2s declined 3.5% between 2000and 2014, while the 1099-MISCcount grew 22% (albeit from a muchsmaller base).

But then the Bureau of Labor Sta-tistics weighed in. Its Contingentand Alternative Employment Ar-rangements survey, released lastweek, caused a flurry of clickbaitheadlines like “Everything wethought we knew about the gigeconomy is wrong” and “Gig econ-omy jobs aren’t really taking overAmerica’s workforce.”

But there are reasons to doubtthe BLS survey, which was last con-ducted in 2005. The new surveyfound that as a percentage of allworkers, those in alternative em-ployment arrangements—includingcontract, freelance and on-callwork—was lower in 2017 (10.1%)than in 2005 (10.7%).

Does this mean that the gig econ-omy is shrinking? Not necessarily—for three reasons. First, the BLS sur-vey measures only workers whoseprimary job is a contractor or free-lancer. Thus, for example, 69% ofUber drivers are not considered inthe BLS study because they alsohave payroll jobs. Studies by Up-work, McKinsey Global Institute andMBO Partners all account for sec-ondary work and report a signifi-cantly higher proportion of freelanc-ers and contractors.

Second, the BLS statistic is a ra-tio of workers in alternative em-ployment arrangements to the totalnumber of people employed. Thatcan be misleading. As the work-force grows, the denominator in-creases so that the ratio goesdown. In fact, total employmentgrew more than 10% between2005-17. Alternative employment,as measured by the BLS, grew onlyslightly less quickly.

Third, the BLS data may have asampling bias, because the survey isconducted as an in-person or livetelephone interview. Unadjusted dif-ferences in traits of contractors andgig workers, such as working longerhours, affects whether they are likelyto be absent or missed during thesurvey, and can lead to undercover-age of that type of worker.

A notable study by economistsLawrence Katz and Alan Kruegerused the same questions as the BLSsurvey, but worked with a differentsample population (the RAND Amer-ican Life Panel) and used an internetsurvey. It found that alternative em-ployment arrangements as aworker’s primary form of employ-ment grew more than 50% between2005 to 2015, when they collectedtheir data.

It would at least be hasty to con-clude that alternative employmentarrangements declined between2005 to 2017. And more important,the BLS data are not an accurate de-scription or measure of gig-economywork, since they exclude most work-ers engaged in this type of workthrough supplementary income.

Ms. Palagashvili is an economicsprofessor at State University of NewYork-Purchase and a research fellowat the Classical Liberal Institute atNYU Law.

Contract work has fallen asa share of employment, aBLS study finds. But thereare reasons to doubt it.

© 2018 Dow Jones & Company. All Rights Reserved. * * * * * THEWALL STREET JOURNAL. Wednesday, June 13, 2018 | B1

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BEIJING—China’s promiseto liberalize access to its rap-idly evolving securities mar-kets comes with a new hurdlefor Wall Street firms, leavingthem uncertain about meetinghefty asset requirements to dobusiness in the world’s sec-ond-largest economy.

China’s leadership made a

BY CHAO DENGAND LINGLING WEI

pledge to ease foreign owner-ship caps on domestic securi-ties firms to 51% from 49%, inpart to cool trade tensionswith the U.S. The catch:China’s securities regulator isrequiring that majority ownershave at least 100 billion yuan(about $15.6 billion) in net as-sets.

The threshold is so highthat only a handful of foreignsecurities firms currently op-erating in the China marketcan meet it, according to theAsia Securities Industry andFinancial Markets Association,or Asifma, a Hong Kong-basedindustry group.

To do so, though, the com-

panies would need to applyunder their global units—asopposed to smaller regionalentities—potentially leavingthose wider businesses on thehook for losses or missteps inChina, according to peoplewith knowledge of the matter.

Goldman Sachs Group Inc.and Morgan Stanley, whichhold minority stakes in securi-ties firms in China, are assess-ing the potential risks posedby the asset-value require-ment, according to the people.Japan’s Nomura Holdings Inc.and Switzerland’s UBS GroupAG have applied to set up ma-jority-owned joint ventures inChina using their global head-

quarters, these people said.JPMorgan Chase & Co. has

made the application using itsHong Kong-based Asia entity.One month later, the securitiesregulator still hasn’t formallyaccepted it.

Overall, the requirement ef-fectively amounts to a newbarrier limiting the foreignfirms’ participation in themarket, according to the peo-ple and business groups. “It’samong the highest in theworld,” said Jacob Parker, vicepresident of China operationsat the U.S.-China BusinessCouncil. “This is delaying thesubmission of applications.”

Press officials at China’s se-

curities regulator didn’t re-spond to requests for com-ment.

Domestic firms are also re-quired to meet the threshold.Industry groups and people fa-miliar with the government’sthinking said that by settingthe bar high the governmenthopes that only the fittestcompanies will pass.

“The direction China is go-ing for is to level the playingfield,” said Lyndon Chao, headof equities at Asifma. The reg-ulator is trying to put off sub-par domestic applicants and“foreign players are justcaught in the thick of it, just

PleaseturntopageB14

Foreign Banks Hit a Great WallBeijing’s vow to openup access comes witha catch, as regulatorsaffix onerous demands

HEARD ON THESTREET | By StephenWilmot and Aaron Back

Grocers AreSqueezedOn NearlyAll Sides

The next top players inthe grocery business mayfeel more like survivors thanwinners.

The industry is trying tokeep up with rapidly chang-ing consumer tastes. But newcompetition, ranging fromEuropean discounters likeAldi to Amazon.com’s WholeFoods, will leave even thebest-positioned supermar-kets struggling for growth.

The big losers will be re-gional chains, which accountfor the bulk of sales in theU.S.’s highly fractured super-market industry. Already thisyear chains like Tops Mar-kets and Southeastern Gro-cers, the owner of Winn-Dixie and Bi-Lo, have filedfor bankruptcy.

Aldi and fellow Germandiscounter Lidl have wreakedhavoc across Europe. In theU.K., where Tesco used to beso dominant locals called it“Tescopoly,” the discountersdefeated both Warren Buffettand Walmart. Mr. Buffett fa-mously called his $2.3 billioninvestment in Tesco a “hugemistake” and Walmart soldits struggling U.K. chain ear-lier this year.

The same discounters,which cut prices by focusingon a limited range of mainlyprivate-label products, nowhave their sights on the U.S.Aldi has committed roughly$5 billion to upgrading andexpanding its stores. It wants2,500 locations by 2022, upfrom roughly 1,700 now, ex-cluding the almost 500Trader Joe’s stores owned byan Aldi sister company. Lidlis much further behind, hav-ing opened its first U.S.stores last June.

The most likely victims oftheir expansion aren’t Wal-mart and Kroger, the toptwo chains in the U.S., butthe smaller chains that stilldominate U.S. food retail. Inthe U.K., the top four chainsaccount for almost two-thirds of grocery sales; in theU.S. the figure is 42%.

Walmart and Kroger havethe resources to fight back.But they had grown by tak-ing market share fromsmaller players, which willbe harder with Aldi and Lidltrying to expand.

In an interview, KrogerChief Financial Officer Mi-chael Schlotman said thechain can compete on morethan price, citing its pre-pared foods and in-store res-taurants, online ordering andin-store pickup system andcustomer-loyalty programs.“We started competingagainst Walmart in 1992,” hesaid. “There’s always beenpeople out there competingmainly on price, offsettingselection and experience.”

A key growth opportunityfor U.S. chains is private-la-bel brands, which account foronly around 15% of packaged

PleaseturntopageB2

35

0

5

10

15

20

25

30

2018

0

’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’182008

5

0

1

2

3

4

%

’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’182008

From the sovereign debt crisis of 2010-2012 to the recent political turmoil in Italy,eurozone bonds have fluctuated wildly in recent years.

Euro Stoxx 50Volatility Index

15

–10

–5

0

5

10

%

2018

Germany DAXStoxx Europe 600

FTSE MIBFTSE 100

European stock indexes

Sources: Thomson Reuters (yield premium, German 10-year yield, Volatility Index); FactSet (stock indexes) THEWALL STREET JOURNAL.

July 26, 2012ECB President Mario Draghisays the ECB will do ‘whateverit takes’ to save the euro.

Jan. 22, 2015The ECB announces abond-buying stimulus.

Dec. 8, 2016The ECB says it wouldextend its asset purchases,but at a slower pace.

May 29, 2018A sharp reaction to an Italianpolitical crisis sends Italianbond yields spiraling higher.

5

2

3

4

percentage points

1

Yield on Germany’s10-year bond

Italy’s 10-year bond yieldpremium over Germany

’15 ’17

FORD ATTRACTSBRAINS WITHAI STARTUP

AUTOS, B2

PAY FOR NEWLAWYERS HITS

$190,000

LAW, B8

Stepping OutU.S.-listed IPO volume is on pace for one of the busiest yearson record.

2018: $29.34 billion

THEWALL STREET JOURNAL.Source: DealogicNote: Volumes are year to date

$60 billion

0

10

20

30

40

50

1995 ’97 ’99 2001 ’03 ’05 ’07 ’09 ’11 ’13 ’15 ’17

tar retailer BJ’s WholesaleClub publicly filed for an IPOlast month.

Revolve, founded in 2003, ispart of a cohort of companiesthat have stayed private formore than a decade and areseeking to tap what has beenseen as a hospitable IPO mar-ket.

Revolve’s growth strategyhas been bolstered by retain-ing and collaborating with so-called influencers, the social-media stars courted byfashion, beauty and luxurybrands for their large numbersof internet followers, to show-case the brands and offeringssold on its website.

U.S. IPO activity hasramped up this year, with 88deals listing on U.S. exchangesraising more than $29 billion,according to Dealogic.

That dollar volume is up25% from the same time lastyear, which was already ele-vated well above 2016’s levels.

In addition to Revolve, techcompanies Eventbrite and Up-work, also founded more thana decade ago, have taken stepstoward initial public offeringsthat are expected later thisyear, The Wall Street Journalhas reported.

Revolve, the Los Angeles-based online clothing retailer,is preparing for an initial pub-lic offering of stock in late2018, according to people fa-miliar with the company’splans.

The retailer, known for sell-ing designer brands throughits website, last week met withbankers who came to pitch forroles underwriting the com-pany’s IPO, the people said.The deal is expected to valueRevolve well in excess of $1billion, they added.

Should it move forwardwith an IPO this year, Revolvecould seek to capitalize on in-vestors’ excitement over an-other online retailer, StitchFix, which in its brief life as apublic company so far has de-bunked worries over whetheronline retailers can success-fully compete against Ama-zon.com Inc. Stitch Fix, whichselects and ships outfits formore than two million clientsand made its debut in Novem-ber 2017, is trading 65% aboveits $15 IPO price.

Retail and e-commerce IPOshave been relatively rare in re-cent years. The brick-and-mor-

BY MAUREEN FARRELL

Online Retailer Revolve Preps IPO

phrase credited with keepingthe common currency togetherduring the then-raging sover-eign-debt crisis.

But his track record isn’tflawless. In late 2015, the eurorocketed and stock marketssank after the ECB announcedmeasures that fell short ofmany investors’ expectations.But in general, the ECB hasavoided roiling markets.

Last week, Peter Praet, theECB’s chief economist, laid thegroundwork for Thursday’smeeting by signaling that thebank would decide whether it

PleaseturntopageB15

balance correct. That could setup a potential volatile day oftrading should he stray fromthe expected course.

If for instance, Mr. Draghiin his press conference talksabout the challenges in Italy“in a very blasé fashion…you’dexpect that to lead to a furtherwobble in the market and aloss of confidence,” said MarkDowding, a senior portfoliomanager at BlueBay AssetManagement.

Investors view Mr. Draghias a skilled communicator, fa-mous for his 2012 declarationto do “whatever it takes,” a

bond-buying program as soonas Thursday. His job of com-municating the withdrawal ofstimulus comes at a delicatemoment. The Federal Reserveis expected to make an inter-est-rate move on Wednesday.Trade tensions between Eu-rope and the U.S. are high, re-gional growth is slowing and,notably, Italian politics haveset investors on edge in theeurozone.

Based on the relative stabil-ity of the euro and Germangovernment bond yields, in-vestors seem to be bettingthat Mr. Draghi will get the

A major global central bankis set to wind up its massivebond-buying program. The lasttime that happened—the Fed-eral Reserve’s 2013 taper—global markets convulsed formonths.

This time, in the case of theEuropean Central Bank, mar-kets are digesting the newsjust fine—for now. But thebackdrop implies a tricky roadahead.

ECB President Mario Draghiis expected to signal furthertrims to the central bank’s

BY CHRISTOPHER WHITTALL

NoMarket Taper TantrumOver ECB

INSIDE

AstraZeneca PLC and EliLilly & Co. on Tuesdayscrapped two late-stage trialsof an experimental Alzhei-mer’s drug they were co-de-veloping, the latest blow inthe long quest to find a break-through for the memory-rob-bing disorder.

The companies said the de-cision was taken after an inde-pendent data-monitoring com-mittee concluded that trialsassociated with lanabecestat,the experimental drug,wouldn’t achieve their originalgoals. The companies said thetreatment wasn’t working aswell as they had hoped andthat ending the trials wasn’t aresult of any safety concerns.

An AstraZeneca spokesmansaid the two will continue tojointly pursue an early-stagetrial of another experimentalAlzheimer’s drug. Lilly sepa-rately has other Alzheimer’scompounds in clinical trials,according to a companyspokeswoman.

Current treatments for Alz-heimer’s can alleviate symp-toms, but don’t slow the condi-tion’s underlying progression.The brain disease affects anestimated five million Ameri-cans, and tens of millions glob-ally, but has been tough for thedrug industry to crack becausescientists don’t fully under-stand what causes it.

Pfizer Inc. in January saidit would stop trying to dis-cover new drugs for Alzhei-mer’s and Parkinson’s disease.Axovant Sciences Ltd. andBiogen Inc. have also reporteddisappointing results fromAlzheimer’s research.

Lanabecestat is known as aBACE inhibitor, aimed to pre-

PleaseturntopageB2

BY PREETIKA RANAAND PETER LOFTUS

Alzheimer’sTreatmentScrapped inBig Blow

Apparel seller Revolve co-hosted a Los Angeles event in February.

ARAYA

DIAZ/GETTYIMAGESFORFLAUNTMAGAZINE

Costly ConditionTotal U.S. spending for healthcare, long-term care and hospicefor people with Alzheimer’s orother dementias

Source: Alzheimer's Association

THEWALL STREET JOURNAL.

*Estimate

*

$300 billion

0

50

100

150

200

250

2010 ’12 ’14 ’16 ’18

B2 | Wednesday, June 13, 2018 * * * * THEWALL STREET JOURNAL.

BUSINESS & FINANCEINDEX TO BUSINESSESThese indexes cite notable references to most parent companies and businesspeoplein today’s edition. Articles on regional page inserts aren’t cited in these indexes.

A - BAbiomed....................B15Adyen.....................B2,R6Aldi..............................B1Alibaba Group.............B4Alphabet................A6,B2Amazon.com...B1,B16,R5AMC Entertainment.B16AMC Networks...........A6Ant Financial ServicesGroup.......................B16

Argo AI........................B2AstraZeneca................B1AT&T...............A1,A6,B16Automatic DataProcessing.................B8

Axovant Sciences .......B1Biogen .........................B1Blackstone Group .......B6Block.one...................B14Busan Industrial .......B15

C - DCasper..........................B2CBS.................A6,B3,B16Charter ......................B16Ciena............................B9Comcast .........A1,A6,B16Contemporary AmperexTechnology..............B16

Credit Suisse Group ...B3DCT Industrial Trust...B6D.E. Shaw Group.........B8Discovery ....................A6Dunkin' Brands Group B9

E - GEducation Realty Trust.....................................B6Eli Lilly ........................B1Epic Games.................B4Eventbrite ...................B1Facebook................A6,B4Ford Motor.............B2,R5Gecamines...................B2

General Motors .....B2,R5Glencore ......................B2Goldman Sachs GroupB1Guess?.........................B3

H - KHon Hai Precision.....B16Hyundai Cement.......B15Hyundai Engineering &Construction...........B15

Iqvia Holdings.............B3Johnson & Johnson............................... B2,B3JPMorgan Chase.........B1Katanga Mining..........B2Kraft Heinz .................B2Kroger..........................B1

L - MLaSalle Hotel ..............B6Lidl...............................B1Lionsgate.............A6,B16Lockheed Martin.......B16Merck...........................B2Milbank, Tweed, Hadley& McCloy...................B8

Morgan Stanley.....B1,B6Mosaic.........................B9

N - ONamkwang Engineering& Construction........B15

Netflix ............A6,B2,B16News Corp.................B16Nintendo......................B4Nippon Prologis ..........B6Nissan Motor..............B2Nomura Holdings........B1Northrop Grumman..B16Nuveen........................B6Oaktee.........................B6

P - RPebblebrook Hotel......B6Penthouse Global........B3Pershing Square .........B8Pfizer...........................B1

Proskauer Rose...........B8Prudential Financial....B6RealPage .....................B6Red Hat.......................B9Revolve........................B1

S - TSachem Head..............B8Sephora.......................B2Southeastern Grocers B1Sovfracht ....................A4S&P Global................B14Spotify Technology.....B2Starwood Capital........B6Stitch .....................B1,R6Sunny OpticalTechnology Group...B15

Tencent Holdings........B4Tesco............................B1Tesla............................A1Time Warner..A1,A6,B16Tops Markets..............B1Tory Burch...................B2Toyota Motor..............B2Twitter ......................B1621st Century Fox........................A1,A6,B16

U - VUber Technologies ......B2UBS Group.............B1,B6UnivisionCommunications.......A6

Upwork Global ............B1Verizon Communications...................................B16Viacom.................A6,B16

W - ZWalmart......................B1Walsin Technology....B15Walt Disney...A1,A6,B16Waymo........................B2Winston & Strawn......B8Xiaomi.......................B16ZTE..............................A4

Netherlands-based AdyenBV, which facilitates paymentsfor companies including hottechnology firms such as UberTechnologies Inc., is set to gopublic this week in what wouldbe the largest technology IPOin Europe this year.

In a sign of the robust de-mand for its shares, Adyenpriced its initial public offeringat €240 ($282.82) a share, thehigh end of its initial expectedrange. The IPO raised roughly€849 million, excluding an un-derwriter’s allotment on theEuronext Amsterdam stock ex-change. The deal values thecompany at €7.1 billion.

Adyen, which is set to starttrading Wednesday under thesymbol ADYEN, is also set to beone of the largest tech debuts inthe history of the Amsterdamexchange, according to Dealogic.

Adyen’s software allows techgiants such as Netflix Inc. andSpotify Technology SA and re-tailers such as Tory Burch andSephora to accept paymentsboth online and offline in doz-ens of countries and currenciesthrough a single platform.

Some investors see Adyenas a way to indirectly get expo-sure to a slate of some of thefastest-growing private techcompanies that are Adyen’s cli-ents, including online retailerCasper Inc. and ride-hailingcompanies Uber and Grab Inc.,which is based in Singapore.

Adyen was founded in 2006by Pieter van der Does, now 49years old, and Arnout Schuijff,50, who previously sold a pay-ments startup to Royal Bank ofScotland Group PLC.

Last year, it processed $122billion in payments, up 61%from 2016, reaping fees ofabout 0.2% of its transactionvolume.

In addition to choosing Am-sterdam, an unconventionalvenue, for its listing, Adyen isan unconventional tech startupfor several reasons. It has beenprofitable since 2011 and hasbarely spent any of the $266million in venture capital it hasraised on operating expenses,according to people familiarwith the matter. All proceedsare going to existing investorslooking to sell some of theirshares. Also, Adyen obtained aDutch banking license last year.

Morgan Stanley and JPMor-gan Chase & Co. are the leadunderwriters on the IPO.

BY MAUREEN FARRELLAND PETER RUDEGEAIR

Tech FirmAdyenTees UpBig IPO

such as organic groceriesand prepared foods.

The losers in the grocerybusiness will be consumerbrands like Kraft Heinz,which are hurt by private-la-bel goods, and smallerchains, hurt by the discount-ers. Big supermarket groupsshould do better, but it willbe hard to match pastgrowth rates.

to match the high pay and eq-uity offered by Silicon Valley.That has forced car makers andtheir suppliers to get more cre-ative to recruit workers.

General Motors Co. com-mitted roughly $1 billion twoyears ago to buy Cruise Auto-mation, a driverless-technologystartup in San Francisco thathad only 40 employees at thetime. With GM’s backing,Cruise has expanded to 740employees, making it a key re-cruiting hub in Silicon Valley.Last month, the unit attracteda $2.25 billion investment fromJapan’s SoftBank Group Corp.

Toyota Motor Corp. in 2016created a robotics and autono-mous-driving research instituteaffiliated with Stanford Univer-

sity, Massachusetts Institute ofTechnology and the Universityof Michigan. Nissan MotorCorp. is working with NationalAeronautics and Space Admin-istration engineers to developrobotic-vehicle technology.

Ford’s partnership withArgo is unique: The auto makerdidn’t acquire the startup out-right, choosing instead to be-come its client and financialbacker. Argo’s task is to de-velop a so-called “virtual driversystem,” which consists of sen-sors, software and hardware,and then work with Ford engi-neers to integrate it into a newdriverless-vehicle design.

Ford likely won’t be first tomarket with a self-driving car,said Sam Abuelsamid, an ana-lyst with Navigant Research.Alphabet Inc.’s autonomous-car unit,Waymo, plans to starta robot-taxi service in the U.S.later this year. “But they’remaking the right moves to puttogether a business modelthat’s going to be commerciallyfeasible,” Mr. Abuelsamid said.

Argo’s Mr. Salesky, who for-merly served as a director ofhardware development withGoogle’s self-driving car pro-gram, said he started Argo in2016 with Peter Rander, thecompany’s president, to workmore closely with auto makers.

Argo benefits from its prox-imity to Pittsburgh’s CarnegieMellon University, which hasone of the world’s top roboticsresearch institutions. Messrs.Salesky and Rander were bothresearchers there, and many ofArgo’s recent hires have comefrom a group of scientists thatUber poached from CarnegieMellon three years ago to buildits own driverless-car program.

PITTSBURGH—In the autoindustry’s war for tech talent,Ford Motor Co. made an un-usual $1 billion bet last year tofund an artificial-intelligencecompany in Pittsburgh withfewer than a dozen employees.

The aim was to build exper-tise in automated driving byoffering job recruits a poten-tially lucrative perk that Dear-born, Mich., car maker couldn’totherwise provide: an equitystake for new hires in a fast-growing startup.

The company, Argo AI, hassince grown to about 330 em-ployees, in part by luring awaysoftware engineers and robot-ics researchers from Apple Inc.,Uber Technologies Inc. andother tech companies. Ford,which holds a majority stake inthe company, is banking onArgo to help it catch up in therace to build driverless cars.

“Every employee is anowner,” said Argo Chief Execu-tive Bryan Salesky. “They’reable to benefit from the upsidebeing created in a direct way.That can’t be offered with alarge company where the stockgoes up and down with earn-ings.”

Ford aims to start selling afully autonomous car for com-mercial use in 2021. Argo isalso working on an autono-mous-driving system that theycan eventually sell to othercompanies, too.

As cars become more high-tech, auto makers are scram-bling to hire workers with ex-pertise in fields such asrobotics, computer science andmachine learning. But they areoften at a disadvantage, unable

BY CHRISTINA ROGERS

Ford’s Driverless HopesAre Riding on Startup

Staffing at Argo AI has risen sharply following Ford’s $1 billion commitment to the Pittsburgh firm.

ARGO

Argo AIArtificial-intelligence startup backedby Ford since 2017

Cruise AutomationSelf-driving car firm bought by GeneralMotors in 2016

Toyota Research InstituteRobotics and automated-drivingcenter established in 2016

Note: Figures as of JuneSources: the companies (employees);Glassdoor (openings)

Car ChaseVehicle makers pushing intoautomated driving are jostling forhigh-tech talent.

THEWALL STREET JOURNAL.

33050

740138

30087

Employees Openings

food and household products,compared with over 40% inthe U.K, according to Nielsen.Margins on these private-la-bel goods are several per-centage points higher thanon other goods, Mr. Schlot-man said. Kroger’s private-la-bel sales are up 40% over sixyears and now account foralmost 30% of unit sales.

Among the most promis-ing private labels is WholeFoods’ 365 brand, which Am-azon has tried to expand on-line. If Amazon can expandWhole Foods’ private labelbroadly, the impact will befelt in high-margin products

ContinuedfrompageB1

INDEX TO PEOPLEA - B

Abuelsamid, Sam........B2Ackman, William........B8Bewkes, Jeff...............A6Bousbib, Ari................B3Burton, Sean...............B6

C - DCampbell, David........B16Chao, Lyndon...............B1Choi, Paul..................B15Cooper, Kyle..............B15Demos, David............B14Dowding, Mark............B1

E - GEdelman, Scott...........B8Epps, Sarah.................B4Gannon, Kevin.............B6

Gibbs, Ker..................B14Gray, Jonathan............B6Grossman, Jeff ...........B8

H -KHatheway, Larry.......B16Holland, Kelly..............B3Isaacs, Stefan...........B15Jaspon, Kate...............B9Jhaveri, Ketan.............B8Khoman, Ehsan.........B15King, Stephen.............B3

L - MLarimer, Dan.............B14Leon, Richard.......A1,B16Litvak, Jesse.............B14Ma, Jack....................B16Marciano, Paul............B3Moylan, Jim................B9

Munk, Alfonso............B6Musk, Elon..................A1Parker, Jacob...............B1Parsons, Jay................B6Phil Owens..................B6Ponvert, Renny...........B8Rander, Peter..............B2Rodriguez, Carlos........B8

P - SSalesky, Bryan............B2Schuijff, Arnout..........B2Shander, Eric...............B9Siegmund, Jan............B8Stephenson, Randall ..A6

W - ZWinograd, Eric ..........B15Zhu, Chaoping...........B14Zuckerberg, Mark .......B4

GrocersFeel theSqueeze

Labs, said in the joint state-ment with AstraZeneca.

Indianapolis-based Lillyjoined forces with the U.K.’sAstraZeneca to co-developlanabecestat in 2014. Lilly wasresponsible for the two tri-als—one for patients withearly Alzheimer’s and theother for those suffering amilder form of the disease—while AstraZeneca agreed totake on manufacturing. Morethan 3,000 patients were en-rolled across the trials, whichwere expected to conclude asearly as next year, the Astra-Zeneca spokesman said. Fol-low-on studies would havelasted until 2021.

On Tuesday, shares of bothLilly and AstraZeneca tradeddown less than 1%.

earlier this year.Merck and other companies

have also focused drug devel-opment on a different protein,tau, that forms twisted pro-teins in the brains of Alzhei-mer’s patients.

Companies continue to lookbecause the need is high and abreakthrough could potentiallyreap big commercial rewards.Lilly, which has spent threedecades trying to find a block-buster and in 2016 shelved anamyloid-targeting compound itspent $1 billion developing,said it was committed to fur-ther research despite the lat-est setback.

“We won’t give up on find-ing a solution for Alzheimer’spatients,” Daniel Skovronsky,president of Lilly Research

Other drugs targeting amy-loid in different ways alsohave failed to help patients intrials over the past decade, in-cluding those developed byLilly, Pfizer and Johnson &Johnson. The mounting set-backs of amyloid-targetingdrugs have raised doubtsabout that approach.

Some companies have stuckwith the amyloid hypothesisbut have tested such drugs inearlier stages of the disease,on the belief that the olderfailed trials had patientswhose disease was too ad-vanced to be helped. But theMerck drug also failed to helppatients with an earlier-stageform of the disease known asprodromal Alzhiemer’s, in aseparate study that was halted

known as KCC, for its failure toresolve the capital deficiency.

Katanga Mining owns 75%of KCC, which operates a giantcopper and cobalt mine inCongo’s southeastern copperbelt. Gecamines owns the re-maining stake. Glencore owns86% of Katanga Mining.

Glencore said Gecamineswill receive a one-time pay-ment of $150 million to re-solve a number of “historicalcommercial disputes.” Glen-core will also waive a $285million payment Gecamineshad agreed to make severalyears ago. Gecamines hasagreed to withdraw from itslawsuit, Glencore said.

Glencore has faced numer-ous headaches involving Ka-tanga Mining. In November,it shuffled Katanga’s boardafter an internal reviewfound weaknesses in controlsover financial reporting.

ated a shortfall in capital thatviolated Congolese law.

In April, Gecamines broughtKatanga Mining to court inCongo, seeking to dissolve itsKamoto Copper Co. subsidiary,

2015 to revamp its infrastruc-ture and boost production.

Along the way, Katanga Min-ing ran up a staggering debtthat Congo’s state-run miningcompany, Gecamines, said cre-

Swiss mining giant Glen-core PLC unveiled a $5.6 bil-lion restructuring of its trou-bled Congo copper company,Katanga Mining Ltd., resolv-ing a dispute with Congo’sstate-run mining companyabout a debt load it has builtup over the past decade.

Glencore said Katanga Min-ing will issue $5.6 billion instock, which it will use to re-tire debt. The company hadbeen saddled with $9.2 billionin high-interest debt, most ofwhich is owed to Glencore.

The move is the latest in asaga involving Katanga Min-ing, one of Glencore’s flagshipCongolese copper mines.

The operation has beenplagued with spills and poweroutages as it struggled to meetproduction targets. Glencore sus-pended operations at Katanga in

vent an enzyme from produc-ing the sticky substanceknown as amyloid that buildsup in the brains of Alzheimer’spatients. Many drugmakershave pursued the theory thattargeting amyloid could slowor halt the progression of Alz-heimer’s. But another BACE in-hibitor, from Merck & Co.,failed last year in a clinicaltrial of patients with mild tomoderate Alzheimer’s.

ContinuedfrompageB1

Alzheimer’sTreatmentScrapped

BY SCOTT PATTERSON

Glencore Settles Congo Mining Dispute

The Swiss firm unveiled a $5.6 billion restructuring of Katanga Mining.

DIANAZEYNEBALH

INDAWIFO

RTH

EWALL

STR

EETJO

URNAL

Top ShelfMarket share of top four U.S.supermarket chains

THEWALL STREET JOURNAL.Source: Department of Agriculture

40

0

10

20

30

%

1992 2000 ’10

June 13, 2018

An investment in Tortoise MLP Fund, Inc. (the “Company”), a non-diversified,closed-end management investment company, is subject to investment risk,including the possible loss of the entire principal amount invested. Investmentreturn and the value of stock will fluctuate. The rights offering is subjectto certain risks, including economic dilution and voting dilution.

All of the costs of the rights offering, including offering expenses and sales load,will be borne by the Company and indirectly by all of its Common Stockholders,including those who do not exercise their rights. The rights are transferable andare expected to be admitted for trading on the NYSE during the course of theoffer; however, there can be no assurance that a market for the rights will develop.

Investors should carefully consider the Company’s investment objectives andpolicies, risks, and charges and expenses before investing. The Company’sprospectus, which contains this and other information about the Company, whenavailable, can be obtained, by calling the phone number listed above. Aninvestor should carefully read the Company’s prospectus before investing.Thiscommunication is not an offer to sell these securities and is not solicitingan offer to buy these securities, nor shall there be any sale of these securities inany state where the offer, solicitation or sale is not permitted.

UBS Securities LLC is acting as dealer manager for the rights offering. In the U.S.,securities underwriting, trading, and brokerage activities and M&A advisoryactivities are provided by UBS Securities LLC, a registered broker / dealer that isa wholly owned subsidiary of UBS AG, a member of the New York StockExchange and other principal exchanges, and a member of SIPC.

© UBS 2018. All rights reserved.

Tortoise MLP Fund, Inc.Transferable Rights Offering for Shares of Common Stock

NYSE Symbol “NTG”NYSE Rights Symbol “NTG RT”

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THEWALL STREET JOURNAL. * * * * Wednesday, June 13, 2018 | B3

BUSINESS NEWS

BY PATRICK THOMAS

Notes: Industry groups defined by Standard & Poor's. Shareholder return reflects 1-year total shareholder return through the month-endclosest to each company's fiscal-year end.

Ari Bousbib

Brenton L. Saunders

Alex Gorsky

Ian C. Read

Leonard S. Schleifer

Richard A. Gonzalez

Marc N. Casper

Giovanni Caforio

HowardW. Robin

Kenneth C. Frazier

IQVIA Holdings

Allergan

Johnson & Johnson

Pfizer

Regeneron

AbbVie

Thermo Fisher Scientific

Bristol-Myers Squibb

Nektar Therapeutics

Merck

28.7

21.1

24.4

15.7

2.4

60.1

35.0

7.8

386.7

1.5

Highest-paid pharmaceutical CEOs

CEO/COMPANY

Pay PrescriptionTop-paid pharmaceutical and life-sciences CEOs include chiefs at a mix of biotech and traditionaldrugmakers, as well as instrument and software makers for the industry.

Sources: MyLogIQ LLC (pay); Institutional Shareholder Services (performance) THEWALL STREET JOURNAL.

SHAREHOLDERRETURNTOTAL PAY

$38.0 million

32.8

29.8

27.9

26.5

22.6

22.3

18.7

18.1

17.6

s

s

s

s

s

s

s

s

t

t

%

BUSINESSWATCH

GUESS

Executive ChairmanResigns After Inquiry

Guess Inc. co-founder PaulMarciano has resigned as execu-tive chairman and will leave thecompany next year after an in-ternal investigation determinedhe exercised “poor judgment” insome situations involving mod-els and photographers.

The company and Mr. Mar-ciano, who hasn’t admittedwrongdoing, have reached settle-ments with five people totaling$500,000 to resolve allegationsof inappropriate conduct fromthe Guess executive, a securitiesfiling said Tuesday.

An internal investigation, thecompany said Tuesday, found in-stances in which Mr. Marcianoplaced himself in situations “inwhich plausible allegations ofimproper conduct could, and did,arise.” In some cases, Guesssaid, no conclusion could bereached because people eitherdeclined to be interviewed orprovided insufficient information.

—Maria Armental

CREDIT SUISSE GROUP

Bank Wins RulingIn New York Suit

The New York Court of Ap-peals handed Credit SuisseGroup AG a major victory in a fi-nancial crisis-era lawsuit regard-ing its underwriting of residentialmortgage-backed securities.

In a 4-to-1 ruling Tuesday, thecourt said the New York attor-ney general’s office was late inpursuing claims under the Mar-tin Act, a law used to police se-curities fraud. The office arguedthat the law had a six-year stat-ute of limitations. Two lowercourts agreed, but the appealscourt ruled that it is three years.

The initial complaint filed in2012 by former Attorney Gen-eral Eric Schneiderman claimedthat the firm had deceived in-vestors in 2006 and 2007 re-garding its risk evaluations ofmortgage loans underlying thesecurities. As a result, investorssuffered $11.2 billion in losses,the suit claimed. Credit Suissehas denied the allegations.

—Robert Barba

PENTHOUSE GLOBAL MEDIA

Magazine’s PublisherHas a Sale AccordWGCZ Ltd., an owner of adult

websites, has an agreement topurchase the assets of Pent-house’s bankrupt publisher outof bankruptcy for $11.2 million.The sale, which must be ap-proved by a judge, is anticipatedto close Friday, court papers say.

The deal with the Czech Re-public-based company marks thesecond time Penthouse haschanged hands in two years.

Kelly Holland, the owner andchief executive officer of themagazine’s publisher, PenthouseGlobal Media Inc., acquired themagazine in February 2016 in atransaction that was financedwith a $6 million high-interestloan. The company sought chap-ter 11 protection less than twoyears later. A court-appointedtrustee was later installed.

Ms. Holland and lawyers rep-resenting the trustee didn’t im-mediately return messagesTuesday seeking comment.

—Jonathan Randles

companies, which includesdata providers like Iqvia aswell as instrument supplierssuch as Mettler-Toledo Inter-national Inc.

The Journal’s analysis ex-cludes CEOs who changed jobsor served less than a full year.

about 22% compared with 19%overall, according to perfor-mance data from ISS Analyt-ics.

The Journal analysis usedStandard & Poor’s industrygroup for pharmaceutical, bio-technology and life-sciences

overall median of $12.1 millionfor CEOs at all S&P 500 com-panies, according to a WallStreet Journal analysis of paydata from MyLogIQ LLC.

Median overall shareholderreturns for companies inthese medical sectors were

Iqvia Holdings Inc. ishardly a household name, butits boss made more last yearthan the chief executive ofJohnson & Johnson—or anyother big pharmaceutical orbiotech company.

Iqvia doesn’t have someblockbuster drug or cutting-edge genetic treatment. It is adata company that collectsprescription sales, medicalclaims and other patient re-cords, and analyzes that infor-mation for drugmakers, insur-ance companies andgovernments. It also providestesting services to drug com-panies.

Last year, the Durham, N.C.,company paid its chief execu-

cial circumstances around theappointment of our CEO asthe CEO of the new companythat resulted from themerger,” an Iqvia spokesmansaid. Much of the chief’s com-pensation is tied to the com-pany’s performance, he said.

Mr. Bousbib, 56 years old,joined IMS Health in 2010 af-ter spending 14 years in exec-utive roles at industrial con-glomerate UnitedTechnologies Inc. In 2015, IMSincreased his pay to morethan $34 million from about$25 million.

The company said in its2015 regulatory filings thatMr. Bousbib might be an at-tractive job candidate forother companies, which con-tributed to his increased com-pensation, along with his per-formance as CEO.

The median CEO pay in2017 for 25 pharmaceutical,biotechnology and life-scienceexecutives in the S&P 500 was$16.08 million, above the

tive, Ari Bousbib, $38 million.J&J, the largest U.S. pharma-ceutical company by revenue,paid its CEO, Alex Gorsky,$29.8 million in 2017. J&J hadabout $76 billion in revenue in2017; Iqvia’s was about $8 bil-lion.

The two companies deliv-ered similar shareholder gainslast year. J&J’s stock-price ap-preciation plus dividends re-turned 24.4% to investors,while the smaller company re-turned 28.7%.

Mr. Bousbib’s 2017 pay in-cluded a one-time retentionequity award valued at about$20 million following an Octo-ber 2016 merger between IMSHealth, a data company wherehe was CEO, and Quintiles,which assisted pharmaceuticalcompanies with clinical trials.The combined company wasrenamed Iqvia.

“The special one-time re-tention equity grant vestsover four years and wasawarded to recognize the spe-

Iqvia CEOLedPeersIn Pay at $38MillionAri Bousbib was topsin pharmaceuticalindustry last year ashead of data processor

rithm that links the results ofthe seven questions to one ofthe 11 lists.

“All of the books were giventhematic tags by Scribner, andwe then created an algorithmso that the potential answersto every question linked backto some element of a StephenKing book,” said Skilled Cre-ative Chief Executive BrandonKaplan.

As for Mr. King, the authorpronounced himself a bit per-plexed by this latest marketingventure.

“The technology has out-raced my ability to compre-hend,” he said, via email.Scribner “told me all about it,and I’m like, ‘OK, sounds good,whatever, knock yourselvesout.’ ”

cians, the mentalists or thescientists?”

The questions are intendedto help the app in discerningusers’ taste in different genresacross Mr. King’s body ofwork.

At the end, the programprovides five or six titles cho-sen from a total pool of 56Stephen King books picked byScribner editors.

There is currently noshopping experience in theapp.

The books, including somenot published by Scribner,were put into 11 lists by Scrib-ner editors.

Skilled Creative, an emerg-ing-technology creativeagency that is based in Man-hattan, then created an algo-

launched “Stephen King Li-brary,” a free, voice-activatedapp available on Amazon Al-exa and Google Assistantsmart speakers, smartphones,tablets and other voice-en-abled devices.

What follows is a splashof eerie music and the voiceof narrator Jeremy Bobb,who asks seven seeminglyunrelated questions such as:“Imagine an apocalypticworld. You have to belong toone of three groups to sur-vive. Your options are: themagicians, who are mastersof illusion; the mentalists,who spin a web of grippingmind games; or the scien-tists, who are creating cut-ting-edge technology. Do youcreate ties with the magi-

That productivity made iteasier for Scribner, an im-print of CBS Corp.’s Simon &Schuster Inc. publishing arm,to choose him for the proj-ect.

“We began to talk aboutvoice-activation technologylate last year, with the aim ofcreating a reading list tailoredto a person’s specific likes anddislikes,” said Roz Lippel,Scribner’s associate publisher.“We wanted to find a way tointroduce Stephen King to newreaders and entice longtimefans.”

Mr. King has sold morethan 350 million books world-wide throughout his career,according to Scribner execu-tives.

The company on Monday

than 50 books since his firstnovel, “Carrie,” was pub-lished in 1974, according tolongtime agent Chuck Ver-rill.

It could be the opening to aStephen King short story: Avoice-activated device thatsounds suspiciously like “TheTwilight Zone” narrator RodSerling asks seven questionsand then spits out the namesof five or six books written byMr. King it says will suit yourtastes.

At a time when publishersare increasingly concernedabout how consumers will dis-cover authors and newly pub-lished books, Mr. King’s pub-lisher, Scribner, is betting thata bit of tech wizardry willspark sales of the author’sthrillers, science-fiction andfantasy books.

Mr. King has written more

BY JEFFREY A. TRACHTENBERG

Stephen King Spawns App to Suggest Books for Certain Tastes

Author Stephen King

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B4 | Wednesday, June 13, 2018 THEWALL STREET JOURNAL.

TECHNOLOGY WSJ.com/Tech

LOS ANGELES—The biggestgame of the year is coming tothe hottest console right now.

Nintendo Co. is bringingthe combat-survival game“Fortnite” to the Switch, se-curing the most talked-aboutgame as the company hopes tocarry strong sales for its vid-eogame console through themachine’s second year.

Nintendo announced thenews Tuesday during its pre-sentation at the annual E3 vid-eogame expo here. “Fortnite,”which analysts estimate hasabout 50 million players,landed on the Switch Tuesday.

The move is a coup for Nin-tendo, whose previous con-sole—the Wii U—was roundlycriticized for a spotty lineupof games through its five-yearrun, including a dearth of the

BY SARAH E. NEEDLEMAN

biggest games outside of thosethe Japanese videogamemaker develops itself. “Fort-nite” was created by EpicGames Inc.

The game’s appearance onthe Switch will mark its sweepof all major game-playing de-vices. “Fortnite” is alreadyavailable for Sony Corp.’s Play-Station 4 and MicrosoftCorp.’s Xbox One, the Switch’smain competitors, as well asfor personal computers andmobile devices.

“It’s vitally important forgame publishers to have thewidest possible hardwarereach for as long as possible,”said Lewis Ward, an analyst atresearch firm IDC.

A key draw for “Fortnite” isthat it lets some gamers usingdifferent devices to play to-gether, a feature known ascrossplay.

Switch gamers will be ableto join with people using anXbox One, PC, Macintosh andmobile devices.

As with efforts recently in-volving other games, Sony re-mains the holdout in allowing

for crossplay with its consolerivals. A Sony representativedidn’t say whether the com-pany would consider connect-ing with other consoles, butsaid that it listens to custom-ers and already offers cross-play with computers and mo-bile devices.

“Fortnite” combines “Mine-craft”-style building with amode known as battle royale,a last-man-standing take onthe traditional shooter game.

It was an almost immediatedraw for gamers. It didn’t hurtthat Epic released the battle-royale mode free of charge.

“You could never build abusiness plan intended to getas many users as ‘Fortnite’has,” said Cowen & Co. analystDoug Creutz.

The game is a “freak of na-ture,” he added.

Last month alone, “Fort-nite” generated an estimated$296 million in revenuemainly from sales of virtualgoods and other so-called mi-crotransactions, according toSuperData Research.

“Fortnite” is so popular, it

was even credited with givinga boost to sales of headsetsthat players wear so they canchat with each other whilebuilding forts and huntingdown enemies.

The game’s impact on thebroader videogame industrygoes beyond just its spread toevery major device. It can alsobe traced to Activision Bliz-zard Inc.’s announcement lastmonth that it is adding a bat-tle-royale mode to its next“Call of Duty” game. Elec-tronic Arts Inc. said Saturdaythat it was planning to do thesame for the company’s “Bat-tlefield” franchise.

The spread of “Fortnite”could help raise the game’sbudding profile in competitivegaming, or esports. Epic,which is 40%-owned by Ten-cent Holdings Ltd. of China,announced in May plans todole out $100 million in prizemoney for “Fortnite” competi-tions during the game’s2018-2019 season, an amountthat far eclipses other prizepools for major videogamecontests.

‘Fortnite’ Joins the SwitchCombat-survival gamebuilds on wild successwith its addition toNintendo’s console

The videogame’s popularity was credited with boosting sales of headsets that players wear so they can chat with each other.

JILLIANKITCHENER/R

EUTE

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rived weeks later from China.Facebook said it has already

started warning hundreds ofe-commerce sites that have re-ceived a high volume of nega-tive feedback. Among thosenotified were the types ofbusinesses mentioned in theJournal article.

To leave feedback, usersmust click on their recent adactivity to find the new toolthat lets shoppers specifywhether they are satisfied ordissatisfied with an adver-tiser’s product quality, ship-ping speed or customer ser-vice. Facebook shares withadvertisers the feedback, butnot the identity of the peoplegiving it.

Facebook said it is also pro-viding tips to businesses that

are receiving negative feed-back, such as telling them toset more realistic expectationsabout shipping times or pro-vide more transparencyaround the return policy.

The company said it wouldimmediately ban businessesthat it considers obviousscammers.

Facebook has come underscrutiny about lax oversight ofits platform after CambridgeAnalytica, a research firm withties to President DonaldTrump’s 2016 campaign, im-properly obtained the data ofmillions of Facebook users.

The incident sparked an in-vestigation by the FederalTrade Commission and has ledto congressional appearancesby Chief Executive OfficerMark Zuckerberg.

Facebook Inc. said it wouldcrack down on e-commercebusinesses that flood users’feeds with ads for productsthat are unsatisfactory ordon’t arrive on time.

The social-media giant isrolling out a new feature thatlets people leave feedbackabout their shopping experi-ence after viewing a Facebookad. The company said it iswarning businesses that re-ceive a high volume of nega-tive feedback to give them achance to address the griev-ances. If feedback doesn’t im-prove over time, Facebook willreduce the number of adver-tisement that businesses candeliver and could eventuallyban them from the platform.

“There are some companiesthat are just bad actors andwe have no tolerance for that,”said Sarah Epps, a productmarketing director at Face-book. “As soon as we can de-tect those companies, we en-force against them, but forcompanies that do want to im-prove, we want to give themthat opportunity.”

The announcement comesabout three weeks after TheWall Street Journal publishedan article about online store-fronts that have been usingFacebook ads to profit fromproducts listed on online mar-ketplaces such as AlibabaGroup Holding Ltd.’s AliEx-press. The entrepreneurs be-hind these storefronts markup the products and transfershopper details to an AliEx-press seller, for instance,which ships the goods to thecustomer. The storefront billsthe customer, betting shop-pers won’t stumble on AliEx-press or other sites chargingless for the same items.

Shoppers have complainedabout misleading marketingand low-quality goods that ar-

BY KHADEEJA SAFDAR

Facebook to TakeA Harder Line onE-Commerce Ads

The company warns itwill cut the number ofads or eventually banfirms from platform.

B6 | Wednesday, June 13, 2018 THEWALL STREET JOURNAL.

under $2,700 a month, up2.5% from one year ago, ac-cording to real-estate softwareand analytics firm RealPage.That increase is roughly inline with inflation.

Investor appetite has re-

mained strong in apartmentmarkets throughout the coun-try, even though across theU.S. rent growth is slowingand vacancy rates are rising.

PGIM executives say theysaw a unique opportunity be-

cause of the high barriers todevelopment in prime loca-tions in San Francisco and sur-rounding suburbs like MenloPark and Berkeley, where thebuildings are located.

The buildings in the portfo-

lio were developed from 2012to 2017.

“If you were to try to buildthese assets, these marketsare hard to find developmentopportunities,” said AlfonsoMunk, Americas chief invest-

The real-estate investmentarm of Prudential FinancialInc. is buying a 50% stake in a$500 million rental apartmentportfolio in the San FranciscoBay Area, its largest-ever mul-tifamily purchase on the WestCoast.

PGIM Real Estate is buyingthe stake in roughly 750 apart-ments concentrated in andaround San Francisco, joiningwith the developer and man-ager of the properties, Los An-geles-based CityView. Theseller is a public pension fund,the Los Angeles County Em-ployee Retirement Association,which will continue to own theremaining 50% stake.

Several times during theyears following the recession,annual rent growth rates inthe San Francisco Bay Areamultifamily market were inthe double-digit percentagesin some parts of the region.

The market began to cool in2016. There were even somecases of rents falling in SanFrancisco.

Today, the market is stabi-lizing, albeit with rents at highlevels. Bay Area pricing has in-creased 52% since the begin-ning of 2010.

An average apartment inthe Bay Area rents for just

BY LAURA KUSISTO

THE PROPERTY REPORT

ment officer for PGIM Real Es-tate.

PGIM also is looking at in-vesting in other assets thatCityView develops along theWest Coast in places such asthe East Bay in the San Fran-cisco area and Koreatown inLos Angeles.

The San Francisco market isfacing headwinds from newsupply and frustration amongtenant advocates with how farrents have risen. Investors inCalifornia are weighing therisks that voters in Novemberwill decide to repeal a law thatwould allow municipalities toexpand rent control to newerbuildings, such as the ones inthis portfolio.

Some investors have beenselling properties, fearing theimpact on the market.

While most parts of the BayArea have seen little new de-velopment, there have been afew areas, such as SoMa nearthe city’s financial district,where developers have beenable to push through projects.

There are some 11,000 unitsunder construction in the BayArea.

“A lot of people panickedwhen we got a lot more supplythan typical and job growthslowed down a bit,” said JayParsons, a vice president atRealPage. “Some sanity hasbeen restored a bit in SanFrancisco.”

Sean Burton, chief execu-tive of CityView, said all of thebuildings are virtually fullyleased because they are welllocated.

Prudential Sets Heart on San FranciscoFirm’s property armsees opportunity inthe apartment marketwith stake purchase

The rental market in the San Francisco Bay Area has stabilized after a period in which prices cooled. The CityView ArcLight.

CITY

VIEW

Blackstone Triples DownBlackstone Group LP is tri-

pling the fundraising goal forthe nontraded real-estate in-vestment trust it launched lastyear, breathing new life intoan industry that hit the skidsabout four years ago followinga flurry of bad publicity.

In a new registration state-ment filed Tuesday with theSecurities and Exchange Com-mission, Blackstone Real Es-tate Income Trust said itplanned to raise an additional$10 billion on top of the $5billion the trust said it wouldraise in its initial filing. Thenew registration is necessarybecause BREIT has been sell-ing shares at such a high ratethe first $5 billion would likelybe all sold out before the endof 2018.

The trust has used the pro-ceeds, plus debt, to purchaseassets valued at $8 billion, in-cluding over 100 properties,mostly rental apartment build-ings and industrial real estate,throughout the U.S.

BREIT “is in the catbirdseat at the moment,” saidKevin Gannon, a managing di-rector at Robert A. Stanger &Co., an investment bank thatspecializes in nontradedREITs.

Nontraded REITs are simi-lar to traded REITs in thatthey raise money from thepublic to invest in office build-ings, warehouses, stores andother commercial property.They also both offer attractivedividends. For example, BREIThas been paying a 5% annualrate.

The big difference betweennontraded and traded REITs isthat nontraded REITs aren’tbought and sold in the stockmarket. Rather, investors typi-cally hold them for a long timeand cash out—either at aprofit or a loss—when thecompany does an initial publicoffering, gets acquired or goesthrough some other disposi-tion of assets known as a li-quidity event.

Nontraded REITs rose inpopularity as the U.S. economyrecovered from the 2008 fi-nancial crisis. With interestrates low and the stock marketscary, investors liked them fortheir relatively high dividendsand low volatility.

Blackstone, which hasmostly been known as an in-vestor of institutional capital,entered the nontraded REITmarket in 2017, when the in-dustry was struggling to re-cover from bad publicity andcriticism over poor disclosureand upfront fees that could beas high as 15%.

Particularly painful was the2014 disclosure of NicholasSchorsch’s American RealtyCapital Partners Inc. that it

had falsified financial resultsto cover up accounting errors.Fundraising by nontradedREIT sponsors fell to $4.5 bil-lion in 2016 from $19.6 billionin 2013, according to Stanger.

When Blackstone enteredthe picture, it immediately at-tracted attention because ofits strong record with institu-tional investors. Last year,BREIT raised 45% of the $3.8billion raised by the top 10sponsors, according toStanger.

As of the end of the Aprilthis year, the top 10 sponsorshad raised $3.5 billion. Black-stone accounted for 67% ofthat, Stanger said.

“We want to bring every-thing we’ve done in the insti-tutional world for individualinvestors,” said JonathanGray, president of BlackstoneGroup, on a video on BREIT’swebsite.

Other firms with big insti-tutional followings—includingStarwood Capital Group LLC,Oaktree Capital ManagementLP and Nuveen LLC, an affili-ate of London-based TH RealEstate—have all indicatedplans to launch nontradedREITs of their own, accordingto Stanger.

Critics of nontraded REITsremain vocal. They maintainthat investing in traded REITsremains a better option forsmall and large investors alike

because fees are generallylower and stock market liquid-ity—the ability to buy and sella security easily at or near astated price—is a big advan-tage.

“If you’re not going to givethe liquidity and have a feeload that’s potentially higher,how do you provide a returnprofile that’s more attractivethan the REIT space?” saidPhil Owens, managing directorof Green Street Advisors’ con-sulting unit. “That’s a questionwe haven’t gotten answered.”

But Mr. Owens also saidBlackstone’s current fundrais-ing strength gives it an edgeover traded REITs when itcomes to bidding on proper-ties because many REIT shareshave been trading at large dis-counts to the private marketvalues of their underlying as-sets. That makes it difficult forthe traded REITs to raise freshcapital by selling stock, hesaid.

Blackstone’s fee structure isdifferent than the earlier classof nontraded REITs that cameunder fire. The highest up-front fee, charged by salesforces at firms like UBS GroupAG and Morgan Stanley, is3.5%. Blackstone’s manage-ment fee is 1.25%. Blackstonealso gets an incentive fee of12.5% of BREIT’s profit. Butthat only kicks in after inves-tors receive a profit of 5%.

BY PETER GRANT

A bidding war has emerged for LaSalle Hotel Properties, which owns this property, L’Auberge Del Mar.

LASALLEHOTE

LPROPERTIES

Breaking AwayMarket share for nontraded REIT sponsors

Source: Robert A. Stanger & Co. THEWALL STREET JOURNAL.

Blackstone Group

Black Creek Group

Griffin Capital

CIM Group

Carter/Validus Advisors

67.1%

6.2

5.6

5.2

3.6

44.7%

4.5

8.1

6.5

9.2

2018 through April 2017

The private-equity firm now wants to raise a total of $15 billionfor the nontraded real-estate investment trust it launched in 2017.

HYA

TT

Buyers Cherry-Pick REITsThe mergers-and-acquisi-

tion bug has hit the real-estateinvestment trust industry, thelong-anticipated result of thediscounts that REIT stockshave been trading at comparedwith the private-market valua-tions of their properties.

But the private and publiccompanies that have been inthe buying mode haven’t beenfixated on the REITs that aretrading at the steepest dis-counts. Rather, in many cases,they are looking for targetsthat own the kind of propertymost likely to weather a down-turn, well aware that a bullmarket in commercial real es-tate is in its ninth year.

In other cases, buyers aresimply going after theREITs that are among the lead-ing owners of certain propertytypes, such as skilled nursingfacilities. Buyers can do thispartly because the world isawash these days in privateequity and debt capital.

“High-quality companieswith high-quality growth num-bers aren’t usually targets fortakeouts,” said Matthew Wer-ner, managing director at Chil-ton Capital ManagementLLC. “But with high-qualitycompanies trading at signifi-cant discounts to net assetvalue at a time of record pri-vate capital looking for ahome, even the best companiesare vulnerable to takeouts.”

Since April, there have beeneight announced deals forREITs totaling $16.5 billion, ex-cluding debt, according to datafrom Dealogic, up from twoannounced deals totaling $4.4billion in this year’s firstquarter. In the fourth quarterlast year, announced REIT ac-

quisitions totaled $16.4 billion.A few of the REITs with the

strongest balance sheets alsoare shopping around. For ex-ample, San Francisco-basedREIT Prologis Inc., the largestowner of industrial space in theU.S., made an all-stock offer forDCT Industrial Trust in April.

Industrial real estate hasbeen among the strongest-per-forming property types in re-cent years thanks to the e-commerce revolution, which isincreasing demand for ware-houses and distribution space.“REITs that benefit from anadvantageous cost of capitalhave lately become somewhatmore active on acquisitions,likely seeing an open windowin choppy conditions,” said

real-estate research firm GreenStreet Advisors.

Student housing is one ofthe property types that is con-sidered to be a defensive play,as enrollment in colleges areexpected to stay steady. One ofthe target companies in thissector is Memphis, Tenn.-based Education RealtyTrust, which owns and man-ages more than 44,000 beds at53 universities in 24 states. Anumber of private-equity firmsare in talks to buy that REIT,according to people familiarwith the matter.

REIT shares have been slug-gish for the past two years dueto slowing income growth and

concerns about higher interestrates. In 2017, the total returnsof the FTSE Nareit All EquityREITs index reached 8.7%,while total returns for the S&P500 rose 21.8%.

But the intensifying M&Abinge has started to changethat. Total returns in the FTSENareit All Equity Index outper-formed the S&P 500 for thethird straight month in May,reaching 3.5% compared withthe S&P 500’s 2.4%.

Some of the buyers in theM&A trend have been willingto bet on property types thattypically suffer most during arecession, like hotels. Indeed,one of the hottest takeoverbattles is over LaSalle HotelProperties, which owns 41 ho-tels across seven states. Peb-blebrook Hotel Trust, anotherlodging REIT, on Mon-day raised its offer for LaSallein a bidding war with Black-stone Group LP.

Pebblebrook, is offeringabout $4.17 billion for LaSallein cash and stock, implying amerger price of $37.80 a share,sweetening its bid for the thirdtime since it first made an of-fer in March that valued thecompany at $29.95 a share.

The LaSalle board initiallydismissed Pebblebrook’s offerand then agreed to a $3.7 bil-lion, $33.50 a share bid byBlackstone last month. Theboard has said it would considerPebblebrook’s revised offer.

Other pending deals includeWelltower Inc.’s $2 billion offerto buy Quality Care PropertiesInc., which owns skilled nursingand assisted-living proper-ties. Quality Care on Tues-day said another party made anacquisition proposal that couldlead to a “superior offer,” butdidn’t give details on pricing.

BY ESTHER FUNG

Eight deals for REITstotaling $16.5 billion,excluding debt, wereannounced since April.

B8 | Wednesday, June 13, 2018 THEWALL STREET JOURNAL.

BUSINESS NEWS

Many midmarket firms uni-formly raised salaries in 2016to match those of the mostelite Wall Street firms, despiteprofitability that makes thebusiness case behind raisingsalaries vary widely. Averageannual profits-per-partner inthe nation’s top 100 firmsrange from $460,000 to $5.7million, according to theAmerican Lawyer.

“I think it was hard forsome firms to swallow the[2016] increase. It will be evenharder to swallow this in-crease,” said Grover Cleveland,a consultant who trains newlawyers.

In addition to the impact onprofits, some firms may fearangering clients, who have be-come more sensitive to hourlyrates and the appearance ofsubsidizing hefty lawyer sala-ries.

Two years ago, the salaryraises for associates cost bigfirms between $6 million and$14 million a year, according to

Jeff Grossman, the managingdirector for Wells Fargo PrivateBank’s Legal Specialty Group.

Law firms usually absorbthe cost by raising rates 3% to5% each year, even as clientspush back on paying for inex-perienced lawyers. New Yorklaw firms list billing rates for

their most junior lawyers atbetween around $500 and$600 an hour, according toBodhala, a market intelligencefirm.

“I hear again and again,damn those associate salaries,that is why our rates go up ev-ery year,” said Ketan Jhaveri,Bodhala’s co-founder. Risingpartner compensation alsoplays a large role in rates, Mr.Jhaveri said, but clients oftenfocus on the junior lawyer pay.

Milbank’s chairman, ScottEdelman, said the raise followsseveral months of discussionsat the management level. Reve-nue and profits have been ris-ing, he said, and “we want tosend the message to our associ-ates that they’re valued here.”

Only a minority of lawschool graduates land at firmspaying top dollar. But lawfirms compete fiercely to hirethat slice of students. “We’reonly interested in the top ofthe law school population gen-erally,” said Mr. Edelman.

Competition for the mostelite law students is ratchetingup, with several national lawfirms boosting starting sala-ries for new law school gradu-ates to $190,000 in recentdays.

But whether the raises willlead to an across-the-boardpay bump—as they have his-torically—is an open question.Compared with past rounds ofpay hikes, fewer firms haverushed to match the pace setlast week by New York firmMilbank, Tweed, Hadley &McCloy LLP.

Milbank lawyers in theirfirst eight years of practicewill get raises of between 4.8%and 6.4% this year. Associatesat the top of the scale willmake $330,000 a year.

Milbank’s move comes twoyears after the last widespreadraise for junior lawyer pay,which set incoming salaries at$180,000. That increase wasthe first of its breadth innearly a decade, and quicklybecame the new standard.

Law firms typically raisesalaries in line with theirpeers, citing the need to staycompetitive when hiring fromlaw school campuses.

So far, firms to follow Mil-bank on raises include Cra-vath, Swaine & Moore LLP,Simpson Thacher & BartlettLLP, Proskauer Rose LLP andWinston & Strawn LLP.

Simpson Thacher and Cra-vath sweetened the deal bydoling out summer bonuses ofbetween $5,000 and $25,000on top of the raises. Cravathtold associates it will paymore than Milbank to severalclasses at the high end of thescale, topping out at $340,000.

BY SARA RANDAZZO

NewLawyers Get $190,000Milbank sets paceon starting salariesfor elite students,but rivals hang back

Not every firm has rushed to match Milbank’s lead, with some wary of angering their clients.

CAITLINOCHSFO

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All Together NowLarge law firms tend to raisesalaries in line with theircompetitors.Standard first-year law firmassociate pay

THEWALL STREET JOURNAL.Source: the firms

$200,000

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50,000

100,000

150,000

2000 2010

recent performance, includingaccelerated bookings and im-proved business retention. HisPershing Square CapitalManagement LP, which ownsabout 7.2% of ADP, includingderivatives, hasn’t called forMr. Siegmund’s departure.

Two other activist hedgefunds, D.E. Shaw Group andSachem Head Capital Man-agement, also have builtstakes in the firm. The WallStreet Journal reported in Maythat the investors hadn’t de-cided whether to push forchanges at the company, citingpeople familiar with the mat-ter, but had separately metwith ADP management.

Research firm ManagementCV last year criticized Mr.Ackman’s proxy fight as mis-guided but noted it raisedsome valid points. It said ADPshould change its CFO.

Mr. Siegmund, the research

firm wrote, “is an ADP lifer(like CEO Rodriguez) and isunlikely to be able to exact thehard cost cuts and restructur-ing steps that would materi-ally shrink ADP’s cost base andimprove operating margins.”

Renny Ponvert, Manage-ment CV’s research director,said in an interview that Mr.Rodriguez needs a counterbal-ance to help him run the com-pany, rather than someonewho “just works for him as aclerical CFO.”

ADP declined to commenton Management CV’s criticism,but the company has repeat-edly defended its executives.

—Bowdeya Twehcontributed to this article.

Automatic Data Process-ing Inc.’s finance chief plans toresign, the payroll-processingcompany said Tuesday, a de-parture that comes as the firmfaces scrutiny from a trio ofactivist investors.

Jan Siegmund will remainin the role while ADP looks fora replacement, Chief ExecutiveCarlos Rodriguez said during ameeting with investors Tues-day. He said Mr. Siegmund hadbeen planning to leave for awhile, but the company had“successfully convinced himfor some period of time nowto stick around, because of allthe exciting things we havegoing on.”

Mr. Siegmund joined ADP in1999 and was tapped as fi-nance chief in November 2012.

ADP executives on Tuesdayoutlined plans to increasemargins and accelerate therollout of their newest plat-forms. The company, which of-fers human-resources softwarethat handles such tasks aspayroll processing and time-keeping, said it expects toreach its target for adjustedearnings before interest andtax margin of between 21% and22% a year ahead of schedule.

Shares closed up 4% at$139.30.

As it tries to jump-startgrowth, ADP has been facingincreased pressure from activ-ist investors including WilliamAckman.

Last year, the company de-feated Mr. Ackman in a heatedproxy fight. Mr. Ackman hadaccused ADP of falling behindtechnology-heavy startups andsaid its margins were “vastlybelow their potential.” At theheart of ADP’s problems, hecharged, was an “insular, bu-reaucratic and staid corporateculture.”

Since then, Mr. Ackman hassaid he is encouraged by ADP’s

BY CARA LOMBARDOAND MARIA ARMENTAL

ADP CFO Steps DownAmid Activist Scrutiny

Executives onTuesday outlinedplans to increase thecompany’s margins.

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New accounting rules areprompting some corporate fi-nance chiefs to change howthey do business.

More than half of the S&P500 companies disclosed someimpact on their accountingpolicies since December, whennew rules unified how compa-nies account for revenue fromsales and services. The change,which was in the works formore than a decade, replacespreviously disparate, industry-specific rules and aligns U.S.standards closer to interna-tional guidelines.

For finance chiefs of somecompanies, including Red HatInc., Ciena Corp. and MosaicCo., adopting the new reve-nue-recognition standard fromthe Financial Accounting Stan-dards Board means adjustingtheir business operations to bein line with the new account-ing framework, which is morefocused on contracts and whengoods and services are deliv-ered to customers.

lion during its fourth quarter,and 81% of them included mul-tiple technologies, he said.

Some companies expect thenew rules to accelerate reve-nue, while others say the tim-ing of when they can recordrevenue as earned will be de-layed, even though their un-derlying business remains un-changed.

Telecommunications net-working-equipment makerCiena expects to recognizesome of its revenue sooner

when it switches over to thenew rules in November, saidCFO Jim Moylan.

“We are certainly talkingabout how we will restructureour contracts in a way to getaccess to that favorable ac-counting,” Mr. Moylan said.

In the past, Ciena wouldsell and install its internet-networking equipment butonly pass title and control tothe customer when everythingwas deployed. Under the newaccounting rules, the company

plans to pass title to its cus-tomers sooner so it can recordrevenue on the equipmentfirst and later book the reve-nue on the service as it de-ploys that equipment, Mr.Moylan said.

Other companies doubleddown on explaining the ac-counting changes to investors.Dunkin’ Brands Group Inc.held a special call with ana-lysts and investors last Octo-ber to discuss pending reve-nue accounting changes. CFO

BY TATYANA SHUMSKY

About 380 companies in thestock index have reported un-der the new rules as of June 8,and 294 companies in the in-dex disclosed an impact on fi-nancial statements fromadopting the standard, accord-ing to Audit Analytics.

Finance teams spentmonths rewriting accountingprocesses and procedures andpreparing new financial state-ments to comply with the newrules. Roughly one in five pub-lic companies surveyed byPricewaterhouseCoopers LLPsaid they spent or expected tospend $1 million or more onthis effort.

Software-service providerRed Hat previously would tai-lor the price for its subscrip-tion bundles for each cus-tomer. Now, the Raleigh, N.C.,company will have uniformpricing and discounts for cli-ents of its open-source soft-ware, said Chief Financial Offi-cer Eric Shander. The newreporting rules require compa-nies to more thoroughly ac-count for the cost of sales,such as discounts.

“We’re being much moreprescriptive on where you’replacing the discount,” Mr.Shander said. “It will be morestandardized.” The companyclosed 169 deals over $1 mil-

Kate Jaspon again walkedstakeholders through the newmath during an analyst and in-vestor day in February.

Dunkin’ now records itsfranchise fees over the term ofthe related license, amongother changes. Previously,Dunkin’ recognized franchisefees up front, either when anew restaurant was opened orwhen a renewal agreement be-came effective.

“Given the sweepingchanges to revenue accountingrules, we felt it was importantto educate our investmentcommunity on the impacts toour financial results early inthe process and with greattransparency,” Ms. Jaspon saidin a written statement.

But other companies areopting to adjust operatingpractices, where possible,rather than disrupt the pat-tern of revenue investors havecome to expect.

Fertilizer maker Mosaicchanged some of its arrange-ments and systems to ensurethat revenue could be re-corded when control of itsproducts—potash and phos-phate—transferred to the cus-tomer. “The policy changes didnot affect our business eco-nomics,” said a spokesman forMosaic.

Updated Accounting Rules ReverberateSome companiesadjust operationsto comply with newrevenue regulations

A Mosaic potash mine. The fertilizer maker is revising business practices in light of the new rules.

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B14 | Wednesday, June 13, 2018 THEWALL STREET JOURNAL.

BANKING & FINANCE

Trump and Mr. Xi a year ago.So far, none of the three majorcredit raters—S&P Global Inc.,Moody’s Investors Service andFitch Ratings—have receivedlicenses to operate in China.

For securities firms, the as-

set-value requirement on own-ership is also higher than thatin domestic insurance andcommercial banking, accordingto Mr. Parker, with the U.S.-China Business Council.

“They want foreigners to

on several billions of dollars ineach other’s goods this year.The White House has said itwould move forward with ad-ditional tariffs on $50 billionof Chinese products shortly af-ter June 15, and Beijing hasvowed to retaliate in kind.

In attempts to defuse thetensions with Washington,President Xi Jinping and otherChinese leaders and senior of-ficials have over the past ninemonths discussed easing ac-cess to the financial sector.

Brokerages, banks andcredit-rating services areamong the areas Beijing hasoffered to liberalize. Chineseregulators issued draft ruleslast week that, if adopted,would scrap a 20% ceiling fora foreigner holding a domesticbank.

Global credit-ratings firmsare still waiting after Chineseofficials promised immediatemarket access as part of aquick “100-day” market-open-ing package made after a sum-mit between President Donald

use their global entities andthey don’t want too manyfirms coming in,” said an ad-viser to the securities regula-tor. Even if firms tick allboxes, the adviser suggestedthat U.S. ones may be at a dis-advantage, since ownershipapproval is “a political deci-sion up in the air with the on-going trade war.”

Even with ownership, op-portunities may be limited forforeign firms. China’s capitalmarkets are still developing,driven by individual investors,offering less upside for WallStreet banks that cater to in-stitutional investors. Marginsfor investment banking arethinning globally, including inChina. Chinese domestic firmshave also built a stronghold oninvestment banking and salesand trading, with key relation-ships with state-owned firms.“This is like closing the barndoor after the animals have allleft,” said Ker Gibbs, chairmanof the American Chamber ofCommerce in Shanghai.

kind of as collateral damage,”he said.

The asset requirement addsto skepticism among foreignbusinesses and Western gov-ernments, which say China’sgovernment frequently offerswider access to foreign firmsonly to undo the promiseswith burdensome rules orother barriers.

Those complaints have inpart fueled the Trump admin-istration’s criticism that Bei-jing unfairly skews businessrules to favor its companies,contributing to the U.S.’s $375billion trade deficit withChina. Washington and Beijinghave already increased tariffs

ContinuedfrompageB1

ForeignBanks HitGreat Wall

hai-based economist at J.P.Morgan Asset Management.“The government is focusedon maintaining stability, fi-nancially and socially.”

In the past, Beijing has of-ten leaned on banks and localgovernments to extend a life-line to struggling state-ownedenterprises, and even privatecompanies if they are large

employers, Mr. Zhu said.The authorities have also

stepped in with more sweep-ing action when there arebroader signs of marketstress, as in January whenChinese government-bondprices fell to a three-year low.The central bank cut theamount of cash it requiresbanks to hold with it in re-serve, unleashing around 450billion yuan of liquidity intothe market.

Market participants expectthe central bank to ease finan-cial conditions further laterthis year, if China’s pace ofeconomic growth slows andbond defaults pick up. How-ever, if the authorities yield topressure on the bond marketand bail out failing companies,“they could end up concealingthe risk again and kicking thecan down the road,” Mr. Zhusaid.

There have been some indi-cations of heightened marketnerves. Yields on five-yearcorporate bonds with a ratingof AA-minus, the equivalent ofjunk bonds in China, thanks to

the country’s generous credit-rating system, are now 3.67percentage points above thoseon corresponding Chinesegovernment bonds, the widestgap in two years. The gap,known as the credit spread,measures the extra returnthat investors demand for in-vesting in risky corporatebonds versus buying relativelysafe government debt.

Part of the reason thisyear’s defaults have grabbedmore attention is that some ofthe issuers—from a shoe andgarment maker to a new en-ergy equipment manufac-turer—were listed companies.In previous years, nearly all thefirms that failed to repay bondinvestors were privately held.

Among the 13 issuers thathave defaulted this year, fourare listed companies, com-pared with just one out of 11in the same period last year.

Still, “the total amount [ofdefaults] involved remainsvery small and I don’t thinkthere’s panic in the market,”said Moody’s Mr. Chung.

The defaults that have oc-

curred domestically this yearhave in part resulted fromBeijing’s efforts to clampdown on shadow banking.Many companies in China,particularly in the private sec-tor, have long had limited ac-cess to traditional bank loans,with major banks preferringto lend to state-owned compa-nies. Instead they have reliedon obtaining loans from out-side the formal banking sys-tem.

The volume of trust loans,a key form of shadow bankingin China, shrank year overyear in March and April, thefirst such falls since Novem-ber 2015.

It isn’t just in China’s do-mestic bond market where jit-ters are increasing. In lateMay, China Energy Reserve &Chemicals Group, a Beijing-based conglomerate, failed torepay investors the principalamount of a $350 millionbond, the first default on dol-lar-denominated Chinese cor-porate bonds this year.

—Manju Dalalcontributed to this article.

SHANGHAI—Beijing’s de-termination to tame China’ssoaring debt levels has wonplaudits from bullish observ-ers who believe the govern-ment is finally tackling its keyeconomic problem.

Why, then, has there beenso little stress in the country’sbond market?

Defaults on Chinese bondsmight appear to have risensharply this year, in volumeterms. A total of 13 issuershave defaulted on a combined20.2 billion yuan ($3.1 billion)worth of corporate bonds inChina’s domestic market in2018, up 41% from the sameperiod last year, when 11 issu-ers had defaulted.

Yet default levels remaintrivial at just 0.08% of the to-tal $4 trillion of corporatebonds outstanding in China.Absent a major financial cri-sis, the corporate-debt defaultrate is typically around 2%globally, according to IvanChung, a Hong Kong-basedanalyst at Moody’s InvestorsService.

The low default rate hasparticipants in China’s bondmarket, now more open thanever before to foreign inves-tors, wondering when the painfrom Beijing’s war on debtwill hit—and just how com-mitted the government is totackling the problem.

In an effort to lower debtlevels, Beijing has raised keyshort-term interest rates sev-eral times in the past year topush up borrowing costs. Ithas also cracked down onshadow banking as well as onvarious forms of short-termdebt issued between banks todeter speculative, leveragedbets that have amplified riskin the bond and stock mar-kets.

China’s total debt couldreach nearly 250% of its grossdomestic product by the endof this year, according to S&PGlobal Ratings, up from 170%in 2012. Corporate debt ac-counts for just under half thetotal.

“The reason why the bonddefault rate remains quite lowin China is still because ofgovernment intervention,”said Zhu Chaoping, a Shang-

BY SHEN HONG

BeijingWar on Debt Doesn’t Move Default Rate

Rising TideRevenue earned by global and Chinese investment banksfrom Asian clients, excluding Japan and Australia

THEWALL STREET JOURNAL.Source: Dealogic

$12

0

2

4

6

8

10

billion

’072006 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18*

Chinese banks

Other

*Data for 2018 are as of Tuesday.

Block.one couldn’t bereached for comment.

Since the Friday call, EOS’stokens have fallen roughly20%, cutting $4 billion off itsmarket value, currently atabout $10 billion.

The platform technicallylaunched on Saturday after thevolunteers smoothed overtheir differences during a sec-ond meeting Friday, broadcastpublicly on YouTube. The plat-form isn’t yet available forpublic use.

Participants wrangled overissues big and small, fromphilosophical questions totechnical arcana.

At one point, some threat-ened to break off and launchcompeting versions of thesoftware.

“We’ve spent too long ca-tering to consensus. Thosewho are ready should go,” saidGreg from a developer groupcalled EOSsxsw, according tothe call transcript. Partici-pants generally were identi-fied by first name and group

affiliation, when possible.The tense call in some ways

wasn’t unusual. There havebeen far more caustic fightsamong bitcoin’s proponentsover the years. But EOS’smessy launch shows just howdifficult it is to build a plat-form for millions of userswhen you take its develop-ment out of the hands of aguiding leader.

EOS is a network that al-lows developers to build andhost applications. It is similarto Google’s Android, but be-cause it is based on the con-cepts behind blockchain, asoftware protocol designed torun on a network of linkedcomputers, there is no centralauthority.

EOS isn’t alone in thisquest. Messaging app Tele-gram, another digital-tokenproject called Tezos, and eventhe second-largest cryptocur-rency project, Ethereum, areall striving to build what hasbeen called a “world com-puter.”

Investors pumped some $4billion into EOS in a sale ofdigital tokens that ended thismonth. In a promotional videofor its initial coin offering,Dan Larimer, Block.one’s chieftechnology officer, called EOSa “blockchain technology thatcan support real-world usecases serving millions of us-ers.”

Much of the trouble stemsfrom Block.one’s hands-off ap-proach to development of theplatform. While the companydesigned and released thesoftware, it has said that itwon’t control it. Instead, de-velopment has been left todozens of individuals and

communities that operate ingroups.

The biggest disagreementFriday involved the platform’sneed for RAM, or random ac-cess memory. The way EOSworks, all the resources a de-veloper needs to run it arepurchased with EOS tokens,including the RAM needed toboot up the program. Theplatform’s first user, whowould be randomly chosenfrom among the group, wouldneed to make an in-networkpurchase of RAM before thenetwork was operational.

Some participants sug-gested taking advantage of asmall window dubbed “godmode” to create new tokensthat could be used to “gift”the RAM to the first user. Oth-ers worried that creatingthese new tokens—an esti-mated 19,000, valued at about$260,000—would look likethese insiders were essentiallyprinting money for them-selves.

“What damages public per-

ception more,” asked one par-ticipant, Aaron, “a ~0.002% in-crease in initial supply vs anindeterminate delay in thelaunch of EOS?”

Without resolving that de-bate, the group moved on tovoting over whether to launchthe software at all. At times,participants were confusedabout what topic they werevoting on, and where. Someusers were voting within amodule inside Zoom, the vid-eoconferencing service hostingthe call, while others werecasting votes on messagingsite Telegram.

“For crying out loud wewasted more time talkingabout how to vote than vot-ing,” said a participant namedDavid, according to the calltranscript.

At the second meeting onFriday, the group spent aboutan hour debating before vot-ing unanimously to launch thenetwork, agreeing to issue theextra tokens needed for theinitial user’s RAM.

Software companyBlock.one raised $4 billion forits EOS project from investorson the promise that the block-chain platform could changethe way the internet works.But infighting among the soft-ware’s fragmented developersshows it still has a way to gobefore the platform lives up tothe hype.

More than 200 volunteerdevelopers working to launchEOS spent a fraught threehours on a conference call Fri-day arguing about issues re-lated to the platform’s launch.A transcript of the call wasposted on the social-mediasite Reddit, and two partici-pants confirmed its validity toThe Wall Street Journal.

BY PAUL VIGNA

At Platform Launch, Discord on AgendaBlock.one pulls in $4billion for EOS projectbut developers bickerover range of details

Some developersthreatened to launchcompeting versionsof the software.

Downtown Beijing. In an effort to cut debt levels, China has raised key short-term interest rates several times in the past year.

LIHE/XINHUA/ZUMAPRESS

WASHINGTON—Bank ofAmerica Merrill Lynch will pay$15.7 million to settle claimsthat its traders lied about howmuch they paid to acquiremortgage bonds, allowing thebank to charge a higher priceto clients buying securities.

The sanction includes $10.5million that must be returnedto customers and a $5.2 mil-lion civil penalty, the Securi-ties and Exchange Commissionsaid Tuesday. In some cases,the SEC said, Merrill’s tradersalso failed to disclose thattheir markups “bore no rea-sonable relationship to theprevailing market prices.”

The bank neither admittednor denied the SEC’s claims.

The settlement is the latestexample of the government’sbattle with Wall Street overbrokers accused of lying aboutthe prices they paid to obtainbonds. A U.S. appeals courtlast month tossed out the con-viction of former JefferiesGroup LLC trader Jesse Litvak,who was accused of cheatingcustomers out of $2 million byinflating prices he said he paidfor residential mortgage-backed bonds.

Mr. Litvak’s long-runningcriminal case became a symbolof a government crackdown onWall Street practices and ledto changes at many dealers,from mandatory training toheightened surveillance oftraders. But the Justice De-partment found it difficult toconvince juries that lying bybond dealers was a crime. Mr.Litvak’s attorneys comparedhis techniques with those ofused-car salesmen, whose ten-dency to bluff is well recog-nized by customers.

On the same day that Mr.Litvak prevailed, a federal juryin Connecticut acquitted DavidDemos, a former managing di-rector at Cantor Fitzgerald &Co. Mr. Demos also had beenaccused of overstating priceshe paid to coax clients to payhim more.

In the civil case that theSEC settled Tuesday, the regu-lator accused Merrill’s tradersof similar conduct, sometimesinflating or deflating whatthey paid by significantamounts.

In one example cited by theSEC, a Merrill trader allegedlymisled a bond seller abouthow much another bank clientwas willing to pay for thebond.

The maneuver allowed Mer-rill to get the bond for a lowerprice from the seller and im-mediately unload about $15million of it at a profit of$386,042, the SEC said.

The SEC also said MerrillLynch failed to supervise theaccused traders because thebank’s policies weren’t reason-ably designed to prevent ordetect the wrongdoing. The al-legations covered a periodfrom 2009 to 2012.

A spokesman for the banksaid Merrill has improved itsprocedures since that time andaddressed the problems raisedby regulators.

BY DAVE MICHAELS

MerrillSettlesBond CaseWith SEC

4.0

2.0

2.5

3.0

3.5

percentage points

2016 ’17 ’18

Paying UpDifference between the yieldof five-year corporate* andgovernment debt in China

*AA-minus ratedSource: Wind InfoTHEWALL STREET JOURNAL.

THEWALL STREET JOURNAL. Wednesday, June 13, 2018 | B15

MARKETS

would scale back its bond-buy-ing program further. The ECBis currently set to buy €30 bil-lion ($35 billion) of govern-ment and corporate debt amonth at least until the end ofSeptember.

There are uncertaintiesabout whether it keeps theprogram open-ended whilecutting back monthly pur-chases or announces a hardend date for purchases alto-gether.

When the ECB last cut itsbond buying in January to €30billion from €60 billion, it did

ContinuedfrompageB1

South Korea’s Han River. Busan Industrial’s shares started surging a day before North Korean leader Kim Jong Un visited the South.

SEO

NGJO

ONCH

O/B

LOOMBERGNEWS

non-OPEC supply for this yearby 130,000 barrels a day, to59.75 million barrels a day,largely as a result of burgeon-ing U.S. shale-oil production.The group predicts total U.S.crude output will rise in 2018by more than double the ratelast year, to average a record10.51 million barrels a day.

Mr. Cooper said prices hadfallen far enough from three-year highs reached in May tosatisfy traders who had bet onlower prices. That in turn cre-ated room for a bounce assome of them cashed in, hesaid.

Enthusiasm over oil’s rallyhas waned in recent weeks astraders speculate that OPECand its allies may raise pro-

duction caps at a meeting nextweek, after more than a yearof holding back output byroughly 1.8 million barrels aday.

The coordinated productioncuts, set to expire at the endof this year, helped boostprices by more than 40%. Butgeopolitical risks to supply inIran and Venezuela, two OPECmembers, prompted the Sau-dis and Russians to reconsiderthe output curbs in recentweeks.

“The geopolitical riskswhich remained front and cen-ter for most of May have nowbeen superseded by a policyshift by OPEC+, wherein theyare deliberating to revive out-put on concerns that prices

have risen too much, leadingto weakening demand and aslowdown in the global econ-omy,” according to Ehsan Kho-man, head of research for theMiddle East at MUFG BankLtd.

Traders also pointed toseeming progress at talks be-tween U.S. and North Koreanleaders as a positive signal forthe global economy and, byextension, crude demand.

President Donald Trumpand North Korean leader KimJong Un pledged to work to-ward the denuclearization ofthe Korean Peninsula and tobegin negotiations at the earli-est possible date.

The oil market is also look-ing ahead to the release

so on the back of the eurozoneeconomy growing at its fastestrate in a decade the previousyear.

This time around, the back-drop is less salubrious. In It-aly, the eurozone’s third-larg-est economy, concerns that anew antiestablishment govern-ment in Rome could crash thecountry out of the eurozonehave convulsed local bondmarkets in recent weeks in away reminiscent of the re-gion’s sovereign-debt crisis.

The Euro Stoxx 50 VolatilityIndex, Europe’s “fear gauge,”rose to a two-month high inlate May, according to Thom-son Reuters, while the cost ofcontracts that protect againstswings in the euro also surged.

Italian bonds rallied thisweek after the country’s newfinance minister told local me-dia the government is commit-ted to staying in the euro. Butyields remain elevated.

The other backdrop: Growthisn’t as robust as it was inJanuary. After booming in2017, the eurozone’s economyhas slowed this year. A relatedworry is an escalating trade

war with the U.S. after Wash-ington placed tariffs on Euro-pean steel and aluminum andthe European Union promisedretaliatory measures.

Investors have remainedsanguine about the ECB’splans, with many unwilling tomake big bets that the with-drawal of stimulus will lead tomuch higher bond yields.

Investors know full wellthat the ECB taper is coming,said John Taylor, a portfoliomanager at AllianceBernstein.But, he said, “people are notwilling to start selling almostuntil the ECB has spent theirlast penny.”

That has meant the spreadin interest rates between Trea-surys and German governmentbonds, considered the bench-mark in the eurozone, hasstayed historically wide, re-flecting the ECB’s still-easymoney policies and the Fed’stightening policy.

Some are predicting that asthe ECB tapers, that spreadwill shrink, as will the end ofthe decadelong bull run inGerman government bonds,known as bunds, one of thebiggest overall beneficiaries ofthe ECB’s buying.

“If you look at where bundyields are trading versus any-thing else in the globe, there

is a big disconnect,” said Mr.Taylor. He thinks Germany’s10-year yield will rise toward1% by the end of the year.

At around 0.5%, Germany’s10-year-bond yield is still byfar the lowest among theGroup of 10 industrializedcountries apart from Japan,where the central bank is pin-ning yields at around 0%. Thatcompares with nearly 3% inthe U.S., 1.4% in the U.K. and2.3% in Canada.

That German yields haven’talready moved higher is testa-ment to the sway that theECB’s buying still holds overmarkets.

“It’s somewhat psychologi-cal,” said Stefan Isaacs, a port-folio manager at M&G Invest-ments, who is also bettingagainst German bonds. “Any-one who has [bet against]bunds for a significant periodof time in the last 10 years haslost money.”

MarketsTake ECBIn Stride

Wednesday of the Interna-tional Energy Agency’smonthly oil-market report, aswell as data on U.S. petroleuminventories from the EnergyInformation Administrationfor the week ended June 8.

The American PetroleumInstitute, an industry group,said late Tuesday that its owndata showed crude-oil invento-ries rose by 833,000 barrels,according to a market partici-pant, with gasoline stocks ris-ing by 2.3 million barrels anddistillate inventories by 2.1million barrels.

Gasoline futures for Julydelivery fell 0.7%, to $2.0899 agallon, while July diesel roseless than 0.1%, to $2.1618 agallon.

Oil prices rose in the U.S.after a monthly report fromOPEC showed solid demandalongside higher output.

The Organization of the Pe-troleum Exporting Countriessaid on Tuesday that itpumped 35,000 extra barrels a

day in Mayfrom amonth ear-lier, to av-

erage 31.87 million barrels aday. Higher output was drivenby the group’s de facto leader,Saudi Arabia, which pumped85,500 more barrels a day, butpartly offset by productionoutages in Nigeria, Venezuelaand Libya.

However, OPEC kept itsworld oil-demand forecastslargely unchanged at a growthrate of 1.65 million barrels aday, meaning demand shouldstand at 98.85 million barrelsa day this year.

“The overall supply and de-mand fundamentals lookpretty good globally,” saidKyle Cooper, a consultant forION Energy. “Global produc-tion is not soaring, even asU.S. production never ceasesto astound and amaze.”

Oil for July delivery ad-vanced 0.4%, to $66.36 a bar-rel, on the New York Mercan-tile Exchange. Brent crude, theglobal benchmark, fell 0.8%, to$75.88 a barrel, on ICE FuturesEurope.

OPEC raised its forecast for

BY CHRISTOPHER ALESSIAND BENJAMIN PARKIN

Steady Demand Gives Boost to U.S. Crude

Higher OPEC oil output in May was driven by Saudi Arabia, which pumped 85,500 more barrels a day.

AHMEDJA

DALLAH/R

EUTE

RS

Roller CoasterU.S. crude-oil price Tuesday

THEWALL STREET JOURNAL.Source:CQG

$66.60

65.80

66.00

66.20

66.40

a barrel

10 11 noon 1 29

$66.36s0.4%

COMMODITIES

Whoever says investorsaren’t excited about the pros-pect of thawing relations be-tween North Korea and theworld hasn’t been looking atSouth Korean constructionstocks.

A small company calledBusan Industrial Co. has be-come the best performer inSouth Korea’s benchmark Ko-spi index this year—and oneof the biggest gainers in all ofAsia. The South Korean con-struction-materials manufac-

turer, which sports a marketcap of just $174 million, ac-cording to FactSet, has soaredby 498% this year. The overallindex has risen 0.05%.

Busan is one of many infra-structure stocks that Koreaninvestors, mostly retail, haveembraced as they search forcompanies that will benefitfrom the potential opening upof North Korea, said PaulChoi, head of research for Ko-rea at brokerage CLSA.

Other big year-to-date win-ners in South Korea’s stockmarket include Hyundai Ce-ment Co., which makes con-struction materials and hasrallied 383%. Shares of Namk-wang Engineering & Con-struction Co. have risen 297%.They all fell on Tuesday.

Busan Industrial’s recentrally stands out from the rest.

Its shares started surging onApril 26, a day before KimJong Un became the firstNorth Korean leader to setfoot in the South since the Ko-rean War. Two weeks later,the stock had quadrupled invalue. By June 1, at its peak,the stock was up nearly 700%for the year.

Its rally since April 26alone exceeds the stock’s gainduring the prior 10 years, ac-cording to FactSet data.

A representative for BusanIndustrial wasn’t available forcomment.

South Korean PresidentMoon Jae-in has been pushingplans to connect the Northand South Korean economies,including opening air, roadand rail links that would re-quire major construction ef-forts. Like Busan Industrial,

other construction-relatedstocks have taken off since theinter-Korean summit in lateApril.

Busan Industrial’s rallyputs it ahead of the biggestyear-to-date gainers in othermajor indexes through Tues-day. Sunny Optical Technol-ogy Group Co. shares rose73% this year, making it thebest 2018 performer in HongKong’s Hang Seng Index. Thebiggest winner in Taiwan’sTaiex this year is WalsinTechnology Corp., which hassurged 288%. Further away,medical-device companyAbiomed Inc. shares havegained the most in the S&P500, up 123% this year.

Investors bidding up sharesof South Korean constructioncompanies may have gottenahead of themselves. On Tues-

day, after the Singapore sum-mit between President DonaldTrump and Mr. Kim, Busan In-dustrial shares dropped 10%.The shares of many of itspeers also fell. The Kospi in-dex slipped 0.1% Tuesday.

Mr. Choi from CLSA saidthe recent rally prompted himto cut his ratings on some ofthe infrastructure companieshe covers. That includesHyundai Engineering & Con-struction Co., which is up92% this year.

“After all, nothing has beendecided” on North Korea, hesaid. “Even if we think of apretty bullish scenario, wethink a lot of it is alreadypriced into the [infrastruc-ture] related stocks,” headded.

—Yun-hwan Chaecontributed to this article.

BY SAUMYA VAISHAMPAYANAND STEVEN RUSSOLILLO

South Korean Stocks Get a LiftShares of tinymanufacturer BusanIndustrial surge 498%on year, tops on Kospi

0.5%The current yield on Germany’s10-year-bond

U.S. Treasurys stalledTuesday after a historic sum-mit between North Korea andthe U.S. and data on con-sumer prices failed to driveswings in the bond market.

The yield on the bench-mark 10-year U.S. Treasurynote settled at 2.959%, un-changed from Monday.

Yields, which rise as bondprices fall, initially climbedafter North Korea’s Kim JongUn and President Donald

Trump signedan agreementsaying NorthKorea wouldpursue “com-

plete denuclearization of theKorean Peninsula”—althoughthe two leaders provided fewdetails for how that wouldproceed.

Bond yields then graduallydrifted back to the flatlineover the rest of the tradingsession as investors largelyshrugged off the Labor De-partment’s latest release onconsumer prices.

The consumer-price index,which measures what Ameri-cans pay for everything fromused cars to newspapers, rosea seasonally adjusted 0.2% inMay from the previous monthand 2.8% year over year—inline with the expectations ofa group of economists sur-veyed by The Wall StreetJournal. Investors had beenclosely watching for signsthat inflation, a threat togovernment bonds because itchips away at the value oftheir fixed payments, is accel-erating,

“Over the medium term, itseems clear that inflationarypressures are rising but thatthe rise remains gradualrather than abrupt,” wroteEric Winograd, senior econo-mist at AB, in an email. Thelatest CPI print should nei-ther sway the Federal Re-serve, which will wrap up atwo-day policy meetingWednesday, nor change inves-tors’ views on the path of in-flation, Mr. Winograd added.

BY AKANE OTANI

TreasurysSteadyAfter CPI,Summit

CREDITMARKETS

AUCTIONRESULTSHere are the results of Tuesday's Treasury auctions.All bids are awarded at a single price at themarket-clearing yield. Rates are determined by the differencebetween that price and the face value.

FOUR-WEEKBILLSApplications $117,621,275,500Accepted bids $35,000,150,500" noncompetitively $808,894,200" foreign noncompetitively $100,000,000Auction price (rate) 99.860778

(1.790%)Coupon equivalent 1.817%Bids at clearing yield accepted 24.75%Cusip number 912796PQ6

The bills, dated June 14, 2018,mature on July 12, 2018.

29-YEAR, 11-MONTHBONDSApplications $33,318,151,000Accepted bids $14,000,008,100" noncompetitively $7,069,000" foreign noncompetitively $0Auction price (rate) 100.481809

(3.100%)Interest rate 3.125%Bids at clearing yield accepted 81.29%Cusip number 912810SC3

The bonds, dated June 15, 2018,mature onMay 15,2048.

The dollar rose as investorsawaited the conclusionWednesday of the Federal Re-serve’s two-day monetary pol-icy meeting.

The WSJ Dollar Index,which measures the U.S. cur-rency against a basket of 16others, rose 0.3% to 87.27.

Most market participantsexpect the Fed to raise ratesWednesday. Investors also willbe trying to determinewhether the central bank plansto accelerate the pace of itsrate increases this year. Expec-tations of higher rates tend tomake the dollar more attrac-tive to yield-seeking investors.

Robust consumer-price datareported Tuesday argues forthe Fed to signal an increasingrisk of two more rate increasesthis year, analysts at Common-wealth Foreign Exchangewrote in a note to clients.

“Such a scenario wouldlikely keep the dollar broadlysupported,” the note said.

In emerging markets, thedollar was up 1.6% against theTurkish lira and up 1.2%against the South African randin late New York trading.

BY IRA IOSEBASHVILI

Dollar GainsAs Rate RiseIs Expected

B16 | Wednesday, June 13, 2018 * * * * THEWALL STREET JOURNAL.

Riskier DebtShows PathTo Growth

Is it risk on or risk off?This year has seen a stringof trades on riskier bondsblow up, from emergingmarkets to Italy. But thehigh-yield market is sendingthe opposite message: thatgrowth is here to stay.

High-yield corporatebonds are outperformingother fixed-income securi-ties, and perhaps surpris-ingly, it is the riskiest bondsposting the biggest returns.Triple-C-rated globalbonds—those most exposedto the risk of default—havereturned 3.5% so far in 2018,according to ICE BofAML in-dexes.

Meanwhile, the overallspread between global high-yield bonds and Treasurys,at 3.66 percentage points,has rarely been tighter sincethe global financial crisis. Inthe cornerstone U.S. market,the spread has modestlytightened this year.

That matters becausehigh-yield corporate bondsshould be among the assetsmost sensitive to any deteri-oration in the growth out-look or tightening in finan-cial conditions. The key riskfor investors is of defaultsthat lead to permanent lossof capital.

However, defaults are lowand investors seem to be-lieve that picture will per-sist.

Standard & Poor’s said inMay it expects the defaultrate in the U.S., the biggesthigh-yield market, to declineto 2.5% by March 2019 from3.4% in March of this year.

For now, the resilience inhigh-yield markets is a signthat global growth is still ontrack and that upsets in Italyand emerging markets canbe contained.

This canary in the coalmine is still singing.

—Richard Barley

overseas expansion and forits existing foreign share-holders to cash out.

Xiaomi’s targeted valua-tion of about $75 billionlooks pricey, valuing it atmore than 100 times last

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

As long as the big tech isthe enemy, companies arepretty much free to buy, selland trade assets to keepfrom falling behind. A federaljudge said as much when heapproved AT&T’s $85.4 bil-lion acquisition of TimeWarner.

Judge Richard Leon isn’twrong that Silicon Valley gi-ants like Netflix, Apple andAmazon.com pose realthreats to media companies.

For investors, this meansa wave of deals in whichcompanies will invokethreats from tech giants asexcuses to spend billions os-tensibly to fight back. Thefirst example could comequickly when Comcast de-cides how much to bid forassets owned by 21st Cen-tury Fox, which has agreedto sell them to Walt Disney.

The Justice Department,which opposed the AT&T-Time Warner deal on thegrounds that it would lead tofewer choices and higherprices for consumers, willhave a tough time trying tostop the frenzy. The JusticeDepartment’s antitrust vigor

is now diminished.If Judge Leon had to make

this ruling even just a fewyears ago, the outcomewould probably have beendifferent. In 2011, he was re-luctant to approve Comcast’sacquisition of NBCUniversal,a similar merging of distribu-tion channels with mediacontent. The deal wentthrough only after Comcastagreed to strict conditions toprotect consumers.

The ruling suggests Judge

Leon is adapting to thetimes. Netflix, which had amarket value of around $20.6billion in 2014, is now worth$158.5 billion, surpassing themarket value of all the legacymedia companies. Amazonand Apple, which both havemarket caps bigger than ev-ery major media companycombined, pose a similarproblem. Though media isn’ttheir core business, both arespending billions to createoriginal content, drawing top

Hollywood talent away fromthe incumbents.

Any wave of deal makingrisks going out of control.Time Warner, after all, wasone half of one of the worstmergers in history whencombined with AOL at thetop of the tech bubble. Com-cast shares fell after the de-cision as investors worried itwould overpay for the Foxassets to beat out Disney,which has offered $52.5 bil-lion in stock.

CBS and Viacom, whoserecent merger talks havebeen complicated by quarrelsand lawsuits, may feel re-newed pressure to consoli-date. That doesn’t necessar-ily mean with each other.Now that vertical deal mak-ing has been blessed, Veri-zon or Charter Communica-tions could seek to acquireCBS. Other assets like LionsGate or AMC could getsnapped up, too. Cash-richtech companies could alsojoin the party.

Judge Leon made a well-reasoned decision. MediaCEOs may not do the same.

—Elizabeth Winkler

Xiaomi’s IPO Receives a Vital Helping Hand From HomeForget Chinese stocks

joining MSCI’s indexes: Abigger opening-up is takingplace in Chinese markets—for the country’s own tech-nology giants.

Smartphone maker Xi-aomi is set to be the firstone to test this out.

The company could raiseup to half of the $10 billionit is hoping for in an initialpublic offering this summerby issuing depositary re-ceipts in Shanghai—a newmarket mechanism designedby Beijing to lure its bigtechnology firms to list athome.

Xiaomi’s Hong Kong list-ing will still take place, al-lowing it to raise capital for

year’s earnings, excludingone-time items. But the dealwill be easier to pull off withthe help of mainland Chineseinvestors.

Thanks to capital controls,piles of cash are trapped in-side China with few invest-ment options beyond thecountry’s stock markets,where sky-high valuationsare commonplace.

This is especially true forcompanies with strong brandrecognition like Xiaomi. Fox-conn Industrial Internet, asubsidiary of TaiwaneseiPhone assembler Hon HaiPrecision, has gained 74%since making its debut inShanghai last Friday.

The company is now

worth $74 billion—alreadybigger than its Taiwan-listedparent’s $51 billion, eventhough FII’s revenue lastyear was only one-third ofits parent’s.

China’s leader in car bat-teries, Contemporary Am-perex Technology, hasgained 58% in just two dayssince its IPO in Shenzhen.

Newly listed stocks inChina return on average200% one month after theirdebut, according to GoldmanSachs.

There is a pot of cashstanding by to snap up theseChinese depositary receiptstoo: Chinese regulators haverecently approved six lead-ing asset managers to launch

funds worth a total of 300billion yuan ($47 billion) toinvest in them.

All of this could help Xi-aomi out of a hole: The com-pany has faced serious ques-tions about its valuationsince its IPO processlaunched, with expectationsalready lowered way belowinitial hopes that it could beworth about $100 billion.

It is good news too forother Chinese unicorns plan-ning to list, including JackMa’s Ant Financial, cur-rently valued at $150 billionafter a $14 billion privatefundraising round. For Chi-nese tech stocks, home iswhere the heart is.

—Jacky Wong

AT&T Call Clears Way for M&A

Homeward BoundMarket values for China’s largesttechnology companies

Source: FactSet, staff reports*Reported valuations for private companies

$0 billion 600300

AlibabaTencentAnt Financial*BaiduDidi Chuxing*Xiaomi*Meituan Dianping*JD.com

The showman in chief justgot one-upped by a pancakehouse.An early Tuesday perusal

of Google Trends gave asnapshot of what was on theminds of the world’s citizensleading up to the nuclearsummit between U.S. Presi-dent Donald Trump andNorth Korean leader KimJong Un. In South Korea, forexample, a four-letter acro-nym led the list on June 12,CVID, which stands for “com-plete, verifiable, irreversibledenuclearization”—a statedU.S. demand going into thesummit, though perhaps notafter.But in the U.S., the sum-

mit didn’t even make it intothe top 20 search queries onMonday, when the meetingbegan in U.S. time zones. TheNo. 1 search was for anotheracronym, IHOb, a publicitystunt by International Houseof Pancakes. The chain isadding several hamburgers toits menu.As far as public interest

goes, Mr. Trump’s nucleardeal was a nothingburger.

OVERHEARD

Dethroned by NetflixMarket value of leading media companies

THEWALL STREET JOURNAL.Source: FactSetNote: 2018 data is year to date

$0 billion 15050 100

Netflix

Disney

Comcast

TimeWarner

Fox

Charter

CBS

Viacom

2018

2014

sory firm that oversees $4.2billion. “I’m keeping an eye oninflation and interest ratesthat are relative to that. Sur-prises with either of those canthrow things off a bit.”

The S&P 500 rose 4.85points, or 0.2%, to 2786.85,

while the Nasdaq Compositegained 43.87 points, or 0.6%,to 7703.79 to close at a newrecord.

Meanwhile, the stock mar-ket appeared to have little re-action to the day of talks be-tween President Donald Trump

and North Korean leader KimJong Un in Singapore thatended with a vague commit-ment to denuclearize the Ko-rean Peninsula. Analystslargely said the outcome of thetalks remained unclear andthat North Korean risks more

generally were difficult toprice.

“It may be an interestinghistoric moment, but it’s onlya modest step in removingthat tail risk—markets are tak-ing it somewhat skepticallyand want to see much more

MARKETS

concrete follow-up,” said LarryHatheway, chief economist andhead of investment solutionsat GAM Holding.

Fewer than 5% of fund man-agers surveyed by Bank ofAmerica Merrill Lynch in Juneviewed North Korea as the big-gest tail risk for markets, farbehind a trade war or a hawk-ish policy error from the Fedor ECB.

On Tuesday, investors stuckto a strategy that has workedthroughout much of the rallyover the last decade: buyingshares of technology compa-nies. Tech firms in the S&P500 gained 0.6%, as shares ofTwitter jumped $2.07, or 5%,to $43.49 after a JPMorganChase analyst raised the so-cial-media stock’s price target.

Defense stocks struggled af-ter Mr. Trump said he wouldhalt joint military exerciseswith South Korea as long astalks remain productive withNorth Korea. Shares of Lock-heed Martin and NorthropGrumman fell more than 1%.

Yields on 10-year U.S. Trea-surys settled at 2.959%, littlechanged from a day earlier.

The Fed began its two-daypolicy meeting in Washingtonon Tuesday, and investorslargely expect officials to raisethe benchmark short-term in-terest rate by another quarterpercentage point at its conclu-sion. On Thursday, the ECBwill announce its own policydecision, which could includedetails on how it plans towind down its bond-buyingprogram.

Elsewhere, the Stoxx Eu-rope 600 declined 0.1% aftergiving up earlier gains tomatch the muted index move-ments in other stock-marketregions.

Early Wednesday, shares ofSouth Korean companies,which generate roughly halftheir revenue abroad, weredown less than 0.1%, whileJapan’s Nikkei was up 0.3%and Hong Kong’s Hang Sengwas down 0.5%.

Stocks showed little reac-tion to a landmark summit be-tween President Donald Trumpand North Korean leader KimJong Un Tuesday, but inves-tors traded sharply after hourson a federal judge’s go-aheadfor AT&T Inc.’s planned acqui-sition of Time Warner Inc.

Just after the Dow JonesIndustrial Average closeddown 1.58 points, or less than0.1%, at 25320.73, U.S. DistrictJudge Richard Leon an-nounced his decision, rejectingthe Justice Department’s alle-gations that the deal wouldsuppress competition in thepay-TV industry. The rulingcaused shares of several bigmedia companies to swing,with investors expecting far-reaching impacts on deal-mak-ing activity that could reshapethe industry landscape.

AT&T shares fell 1.8% in af-ter-hours trading as of 5 p.m.ET, while Time Warner addednearly 5%. Comcast, which hasbeen planning a bid to buy thebulk of 21st Century Fox’s as-sets that could disrupt WaltDisney’s roughly $52 billiondeal, declined 2.9%. Any offerfrom Comcast could raise simi-lar concerns with the JusticeDepartment. Disney shares slid1.4% and Fox rose 4.3%. Foxand Wall Street Journal parentNews Corp share commonownership.

The ruling came after a dayin which several analysts saidinvestors were reluctant tomake major moves beforeother big decisions: announce-ments from the Federal Re-serve and European CentralBank this week that couldshape the next leg of theglobal economic recovery thatbegan in the wake of the fi-nancial crisis 10 years earlier.

“Investors don’t like sur-prises,” said David Campbell, aprincipal with Bingham, Os-born & Scarborough, a SanFrancisco-based financial advi-

BY MICHAEL WURSTHORNAND RIVA GOLD

U.S. Stocks Move Past North Korea TalksShares of some defense companies declined following thesummit between the U.S. and North Korea. After-hourstrading action picked up for media stocks aftera federal judge allowed AT&T's acquisition ofTime Warner to proceed.

Source: FactSet THEWALL STREET JOURNAL.

Yield on the 10-year Treasury note Share-price performance Change in after-hours trading*

South Korea’s Kospi Composite Japan’s Nikkei Stock Average Hong Kong’s Hang Seng

2480

2450

2455

2460

2465

2470

2475

Sun. Mon. Tues.

23000

22600

22700

22800

22900

Sun. Mon. Tues.

31300

30900

31000

31100

31200

Sun. Mon. Tues.

2.98

2.94

2.95

2.96

2.97

%

Sun. Mon. Tues.

0.8

–0.2

0

0.2

0.4

0.6

%

Monday Tuesday

Nasdaq Composite

Dow industrials

S&P 500

0

–4

–3

–2

–1

%

10 11 noon 1 2 3 4

Lockheed Martin

Raytheon

Northrop Grumman

TimeWarner

Fox

DISH

Walt Disney

AT&T

Comcast

4.9%

4.3

2.1–1.4

–1.8

–2.9 *As of 5 p.m.

© 2018 Dow Jones & Company. All Rights Reserved. THEWALL STREET JOURNAL. Wednesday, June 13, 2018 | R1

put savings an investor is dependingon for retirement.

For individuals who want a pieceof the action, angel groups are anoption that’s growing in popularity.They offer the inexperienced inves-tor a way to learn from more-sea-soned hands about the language ofinvesting as well as how to pickprospects. Some angel groups poolinvestor contributions in a fund andthe group decides which startups toback with that money. Other groupsgive members the option to back in-dividual companies.

The Angel Capital Association of-fers a list of its member groups onits website, angelcapitalassocia-tion.org. Angel groups often invite

prospective members to visit meet-ings to get to know and evaluate thegroups.

Many investors instead haveflocked to online platforms, becauseof the wide access to startups theyoffer.

AngelList has provided a platformfor $800 million invested in morethan 2,000 startups, which went onto raise $7.4 billion in venture capi-tal. An average of 100 companies amonth raise money on the platform,according to San Francisco-basedAngelList. Fast-growing startupsthat have raised capital through An-gelList include the dog-walking appWag, which later raised $319 millionfrom venture investors, and real-es-

tate service Opendoor,which went on to raise$310 million from big in-vestors.

One catch: AngelList isonly available to accred-ited investors, generallydefined as having an an-nual income of $200,000for two years or having anet worth of more than $1million.

On its site, AngelListoffers funds managed bythe company’s executivesthat provide exposure to arange of startups. Inves-tors don’t have any say inwhich companies are fi-nanced through these so-called Access Funds. Butanother option on the sitegives them choices. Newinvestors can essentiallyfollow an experienced in-dividual investor in twoways: by choosing to in-

vest in all the same deals as the ex-perienced investor, through a smallfund, or by choosing to back onlysome of the companies the experi-enced investor is funding.

The minimum to invest in thenext AngelList Access Fund is ex-pected to be $100,000. The minimumto invest in individual deals is as lowas $1,000, though many lead inves-tors won’t accept checks smallerthan $5,000.

For a minimum $3,000 invest-ment, San Francisco-based Propel(x)matches investors with startups fo-cused on so-called “deep tech” ad-vances that hinge on scientific dis-coveries or some type of engineering

Pleaseturntothenextpage

YOU DON’T have to be aSilicon Valley venturecapitalist to invest in thehot new technology start-ups.

Individuals interestedin startups can investthrough angel groups oronline platforms forearly-stage investors likeAngelList, at angel.co,and Propel(x), at pro-pelx.com. Or they can in-vest in later-stage, butstill young, companiesthrough publicly tradedfunds that hold stakes incompanies already backedby venture capitalists.

Investing in fledglingcompanies can bring re-turns that are hard tofind when buying stock inpublicly traded compa-nies. And it can be a thrill. “Youcan’t discount how psychologicallyinteresting and intoxicating it is” formany people to get involved in start-ups, says Semil Shah, who investedthrough AngelList before going on tobecome a venture capitalist at twofirms, Haystack Fund and LightspeedVenture Partners. “It’s an excitingthing to be around people doing newthings.”

But those opportunities comewith a huge caveat: Investing intechnology startups is high-risk, par-ticularly for people who aren’t famil-iar with the volatile tech scene. An-gel investors, experts warn,shouldn’t invest money they can’t af-ford to lose. This isn’t the place to

BY TOMIO GERON

SELM

ANDESIGN

ARTIFICIAL INTELLIGENCE, block-chain, cybersecurity.

Startups working in these hot ar-eas of the technology industry takemore than half of the spots on thisyear’s Wall Street Journal listing of25 technology companies to watch.The list identifies startups that showsigns of becoming emerging leadersin the tech industry.

“Those three make a lot of sense,”says Charles Moldow, a general part-ner at Foundation Capital, a venture-capital firm in Palo Alto, Calif.“These are the areas we are most fo-cused on,” he says.

Artificial intelligence has bene-fited from advances in processingpower and analysis that are openingmyriad new ways to create products.Meanwhile, growing attention tocryptocurrencies has helped per-suade a crop of highly skilled entre-preneurs to work on putting the un-derlying blockchain technology tovarious uses.

As for the third: “Cybersecurityshould be a perennial anchor on thelist,” Mr. Moldow says. “So long asthere are black hats, there will needto be white hats.”

BY DAVE PETTIT The Journal 25 isn’t a ranking ofevery company working in the hotcorners of tech. Nor does it consistof companies with billion-dollar val-uations; far from it. Rather, the listspotlights young com-panies—all foundedsince the start of2013—that have at-tracted the attentionof the tech community,and cash from ven-ture-capital investors.These are companiesthat have expandedtheir workforces and,in some cases, have prominent back-ers and founders with prior entre-preneurial success.

Outside of the three predominanttechnology fields, companies on thelist include those working in areassuch as health care, financial ser-vices, education, and business solu-tions such as drones.

Tech Companies to Watch startswith a survey of technology-industrywatchers. Nominations were taken inan online survey conducted by theHarris Poll among executives andothers who make technology pur-chasing decisions for businesses, aswell as a survey that included read-ers of certain Wall Street Journal

publications and attendees of Jour-nal technology conferences. Surveyparticipants were asked to identifyyoung companies that are innova-tive, growing fast and expected to

continue to grow fast.Only those with valua-tions of $50 million to$500 million were con-sidered for the list.

From there, a dataanalysis was conductedto assess the experi-ence of the companies’founders, the invest-ments the companies

have attracted, the prior success oftheir biggest investors, the growthof their workforces, and the buzzthey have begun to generate in tradi-tional and social media. Equalweight was assigned to these fivecriteria to calculate overall scoresfor the companies.

From all of that, the top 25 com-panies emerged.

Top of the listAt the head of the list is Bitglass

Inc., a Campbell, Calif., cybersecuritycompany formed in 2013. No. 2 isBlockstream Corp., based in Mon-treal, which is four years old andone of five startups on the list

whose work is tied to blockchain.Highest on the list among six com-panies working with AI is Spoke, No.7, whose formal name is TownsendStreet Labs Inc. It was formed in2016 and is based in San Francisco.

Bitglass focuses on securing acompany’s data when it is used withso-called cloud applications likeSalesforce, Microsoft Office 365 andAmazon Web Services. The prior en-trepreneurial work of co-founder andChief Executive Nat Kausik helped liftthe company to the top of the list.Before co-founding Bitglass in 2013,Mr. Kausik was a founder of ArcotSystems Inc., a payments-securitycompany, in 1997. In 2010, Arcot wassold to CA Technologies. In 2000, Mr.Kausik co-founded a network-secu-rity company called FineGround Net-works that five years later was soldto Cisco Systems Inc.

The Journal analysis rewards com-panies for having founders who cre-ated or helped run other startups;they could draw on past experience indeveloping their business. Roger Lee,a general partner at Battery Venturesin Menlo Park, Calif., says past expe-rience is especially relevant if the en-trepreneur has previously launched asuccessful business in a similar mar-ket, with the same team.

Many of the most successful in-vestments by Foundation Capital arein companies created by repeat en-trepreneurs. “We love them becausethey bring a level of focus and disci-pline,” Mr. Moldow says. “There ismuch more intellectual honesty. Ifthey are screwing up, they are thefirst ones to say ‘We need help.’ A lotof first-time entrepreneurs think ourexpectation is that they are infalli-ble…and that leads to bad decisions.”

Who’s on board?The value that investors bring to

startups is another component ofthe analysis. Credit is given to com-panies for having on their boardsfirms that have made sizable VC in-vestments overall and that have in-vested in companies that have latergone public or been sold. Credit alsois given for the number of investorsthe startups have and the amount ofmoney the companies have raised.This analysis used data from DowJones VentureSource.

For instance, Spoke, which devel-oped a chatbot for businesses to re-spond to employee queries on hu-man-resource, IT and other issues,

Pleaseturntothenextpage

Hot Startups in Hot SectorsThree industries—AI, blockchain and cybersecurity—dominate the 2018 list

Top 25 TechCompanies to WatchThe full rankings, fromBitglass to Keybase

R4

Where Are They Now?A look at some of the companieson last year’s list—and what theirstories tell us about the current

state of startupsR5

New Funds Focus on DiversityStartups led by women and

people of color often struggle forfunding. How to change that?

R5

Success Strategies ofRising VC Firms

Index Ventures and Lightspeedhave invested in several

companies on the WSJ listR6

Tales From the Startup WorldRand Fishkin on hiring and more

R6

INSIDEHowIndividual InvestorsCanGet aPieceofStartups

Among the options: angel groups and online platforms

TechCompaniestoWatch2018

VIKTO

RKOEN

NAT KAUSIKCEO and Co-Founder, Bitglass

Q: What is the company’s big-gest challenge to continuedgrowth?A: “The biggest challenge isdistribution. There are so manymarkets world-wide, and wecan’t go into all of these alone,”he says. Bitglass is creating dis-tribution agreements. For theU.S. government market, for in-stance, it works with defensecontractors that have existingrelationships.

Q: Can you share a tip thathelped you as an entrepreneur?A: Larger companies tend to gofor safer hires. Smaller compa-nies should take a chance onfinding outliers who have achance to wildly outperform.“As an entrepreneur, if you hirefor the variance and weed outthe weak performers, you tendto outperform as a company,”he says.

Q: What was your worst day atthe office?A: “A time when a system wentdown. It happened when I wason a plane to Singapore,” hesays. When he landed, helearned a supplier’s softwareproblem caused an outage thataffected a large customer.

Q: What was your best day atthe office?A: “In early 2016, we won ourfirst Fortune 50 customer,” hesays. “That was a big stamp ofapproval that made a big differ-ence to us.”

A ConversationWith...

JOURNAL REPORT