Trump, Kim Gird for Talks

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G-7 FeudEscalatesAfterSummit

Nothing from a cow.The “Beyond Meat” patties

that offended Mr. Kendig weremade with pea protein, canolaoil, coconut oil, potato starch

and “natural flavor.” They’repart of a posse of look-alikesinvading meat country—fromplant-based burgers that ooze“blood” at first bite to chickenstrips grown in a tank frompoultry cells.

For thousands of years,meat came from slaughteredanimals, and milk wassqueezed from cows. Tech-style disruptions are now up-ending supermarket meat

PleaseturntopageA10

Staring at the pink, pre-packaged burger patties in themeat case of a Kansas grocerystore this spring, Larry Kendigfelt disgust.

Mr. Kendig, 68 years, was sobothered he took the depart-ment manager aside to explainhis beef with U.S. food labelingrules: Do shoppers really knowwhat goes into those burgers?

BY JACOB BUNGEAND HEATHER HADDON

The Real Beef With Meatless Meati i i

Cattle ranchers say veggie burgers invade turf; dairy squeezed

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A rout in emerging marketshas sparked concerns that theturbulence could spread fromdistant corners of the worldto the U.S. and elsewhere.

A sharp selloff in Brazilianstocks and its currency late

last week fed into a wider re-treat that hit assets fromMexico to South Africa andrattled Italy’s weakened bondmarket. Many currencies ofdeveloping countries are nearmultiyear lows, despite aboost from strong commodityprices and solid globalgrowth, while investor alloca-tions to emerging-market-fo-cused bond funds are at theirlowest level of the year, ac-cording to the Institute of In-ternational Finance.

The spasms highlight howa stronger dollar and higherU.S. bond yields can amplifythe problems of vulnerable

By Ira Iosebashvili,Ben Eisen

and Amrith Ramkumar

marketing to sell at Amazonand Whole Foods. “Don’t besurprised if the milk and cerealjust shows up at your doorbased on your usual eating

U.S. administration officialsescalated President DonaldTrump’s criticisms of CanadianPrime Minister Justin Trudeauand the global trading systemon Sunday, heightening tensionswith major allies as Washingtonenters an important stretch ofnegotiations on several fronts,from China to the North Ameri-can Free Trade Agreement.

After the Group of Seven in-dustrialized nations summitended Saturday in Canada witha joint communiqué stressingthe importance of a rules-basedinternational trading system, aspat erupted between Messrs.Trudeau and Trump.

Mr. Trudeau asserted Can-ada’s strength and indepen-dence and criticized U.S. tariffson Canadian metals. Mr. Trumplater withdrew his support forthe communiqué, an unprece-dented move that left the alliesdivided in a way they hadn’tbeen for decades.

On Sunday evening fromSingapore, where Mr. Trumpwill meet with Kim Jong Un ofNorth Korea, the president in atweet questioned why heshould continue to allow coun-tries to run a trade surpluswith the U.S. when, in his view,it comes at the expense of U.S.farmers and workers. He alsocriticized Canada’s trading

PleaseturntopageA9

By Vivian Salama inWashington and Paul

Vieira in Ottawa

sweeping economic sanctions topress North Korea to abandonits atomic arsenal, has of lateplayed down the likelihood of arapid solution to the standoff.

The president, who clashedwith important U.S. allies in theGroup of Seven industrial na-tions over trade and tariffsover the weekend, told report-ers he expected it “will take a

SINGAPORE—President Don-ald Trump and North Koreanleader Kim Jong Un arrivedhere to set the groundwork for

a high-stakes summit that couldreshape the security environ-ment in Asia, amid questions

By Jonathan Cheng,Andrew Jeong

and Chun HanWong

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� President Trump andNorth Korean leader KimJong Un are set to meet inSingapore at a summitthat could reshape the se-curity environment in Asiaafter months of turbulentdiplomacy. A1, A9� U.S. officials escalatedTrump’s criticism of Ca-nadian Prime MinisterJustin Trudeau and theglobal trading system. A1� The South Carolina Re-publican gubernatorialprimary is pitting aTrump ally against twowell-funded outsiders. A4� The U.N. launched adiplomatic effort to averta United Arab Emirates as-sault on a Yemeni port,fearing a civil disaster. A6� Buyers of Iranian oil,including close U.S. allies,are balking at Washing-ton’s attempts to isolateTehran economically. A7� Students needing toredo schoolwork are satis-fying criteria in individualsessions that can markedlycut learning times. A3� Southern Baptistswillchoose between a leaderwho has called for greaterroles for women and amore-traditionalist candidate. A3

A rout in emerging-market assets has

sparked concerns that theturbulence could spread tothe U.S. and elsewhere, fu-eling a cycle of accelerat-ing risk aversion. A1�Amazon’s acquisition ofWhole Foods, showcasing itsability to track orders andmarket to buyers, is shakingup the food industry.A1� KKR is nearing a dealto buy Envision Healthcarefor about $5.5 billion inone of the largest recentleveraged buyouts. B1�Star India has emerged asa prize asWalt Disney andComcast gear up for possiblebids for Fox assets.B1� Arif Naqvi is trying tokeep Abraaj afloat assome investors allege theprivate-equity firm mis-used some funds. B2� Cheaper and easier-to-program robots that workalongside humans are be-ing given new tasks. B4� Swiss voters upheldcommercial banks’ ability tocreate money, in a victoryfor the central bank. B3� U.S. allies are embarkingon a naval shopping spreeas territorial standoffs in-tensify in the Pacific. B3

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North Korean leader Kim Jong Un and President Donald Trump arrived in Singapore on Sunday for their summit. The unprecedentedmeeting, scheduled for Tuesday, is aimed at ultimately reaching a denuclearization agreement for the Korean Peninsula.

about whether the talks will bemore substance or symbolism.

Tuesday’s scheduled face-to-face meeting—the first be-tween a sitting U.S. presidentand a North Korean leader—fol-lows months of hurled insultsand tumultuous diplomacyaimed at ultimately reaching adenuclearization agreement onthe Korean Peninsula.

North Korean state mediareported on Monday that Mr.Kim outlined goals for the sum-mit, including establishing newrelations between the twocountries and building a perma-nent peacekeeping mechanism.

Mr. Trump, who has used

period of time” to achieve adeal. “At a minimum, I do be-lieve, at least we’ll have meteach other,” he said. “Hopefullywe will have liked each otherand we’ll start that process.”

Mr. Kim is scheduled to de-part Singapore at 2 p.m. Tues-day, just five hours after hissummit with Mr. Trump is setto begin, a person familiar withthe matter said. Mr. Trump isset to leave on Wednesdaymorning, this person added.

A senior U.S. official cau-tioned against hopes for abreakthrough in Singaporesuch as a formal end to the

PleaseturntopageA8

Trump, Kim Gird for TalksNorth Korean, U.S.leaders set stage forsummit after monthsof diplomacy, rancor

countries, threatening assetsthat investors recently consid-ered to be comparatively safe.

The repercussions rangefrom increased pressure oneconomies in Argentina andTurkey, which gorged on cheapdebt when interest rates stoodnear record lows, to the rise ofItaly’s populist and euroskepticgovernment, analysts said.

So far, few believe theweakness in riskier marketsthreatens the nine-year-longU.S. stock advance, but the re-cent market moves have bol-stered the case for caution.

More turbulence could bein store this week, when theEuropean Central Bank andFederal Reserve hold mone-tary-policy meetings. Manyexpect the Fed to raise inter-est rates, which would in-crease pressure on emergingmarkets and test the abilityof some countries to repay

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Emerging-Market RoutFeeds Contagion Fear

habits,” she added.Food retailers, manufactur-

ers and other suppliers havebegun to make fundamentalchanges to their strategies,driven partly by stronger salesfrom Whole Foods stores sincethe acquisition.

Whole Foods’ foot traffichas increased about 3% year toyear in each quarter since Am-azon bought the chain, accord-ing to an analysis by ThasosGroup, which uses mobile-phone location data to deter-mine trends. That came aftertwo straight years of stagnat-ing sales at the chain beforethe deal.

Higher foot traffic improvesa retailer’s likelihood of sales,and the figure can be a usedas a proxy for a chain’s health.Of 11 supermarkets analyzedby Thasos, Trader Joe’s andSprouts customers were mosteager to try Whole Foods afterthe acquisition to potentiallycheck out subsequent price

PleaseturntopageA4

Amazon.com Inc.’s year-oldacquisition of Whole Foods isprompting rival retailers andfood wholesalers to remakehow they sell their products, acostly overhaul involving newtechnology, investment and ac-celerated online strategies.

The e-commerce giantagreed to buy Whole FoodsMarket Inc. last June for $13.5billion and closed the deal inAugust. Since then, Amazonhas rolled out additional fooddeals and delivery options toits Prime members. Companies,investors and analysts expectmore changes as Amazon usesits data capabilities to trackwhat shoppers buy at the gro-cery chain and market to them.

The deal has been “shakingup the food industry from topto bottom,” said Angela Spivey,a food-and-beverage attorneyat McGuireWoods LLP, who isadvising clients on how tochange their packaging and

BY HEATHER HADDON

Amazon Stirs Up ChangeAcross the Food Business

Attention, ShoppersWhole Foods store traffic,change from a year earlier

THEWALL STREET JOURNAL.

Sources: the company (through Q2 2017);Thasos Group (Q3 2017 onward)

Note: Fiscal year ends in September

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� Nick Timiraos: Fed turnsfocus to long-term plan....... A2

Journal ReportIt’s time to A/B testyour financial life

Wealth Management R1-6

Tough TacticsAn insider’s guide to thepresident’s foreign-policydeal making........................... A9

wsj_20180611_a001_p2jw162000_6_a00100_27fffb5178f2018.crop.pdf 1 11-Jun-18 06:07:45

A2 | Monday, June 11, 2018 * * * * THEWALL STREET JOURNAL.

U.S. NEWS

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celerating in unison.“The world confused a

lucky confluence of growthfactors with a self-feedingsynchronized pickup,” said

Mohamed El-Erian, chief eco-nomic adviser at Allianz.“What’s becoming more evi-dent today is that with the ex-ception of the U.S., where pol-icy is driving growth, theother factors are proving to beless durable.”

Mr. El-Erian said he is keep-ing a close eye on countrieswith a lot of government debt,as well as corporate debt, suchas Turkey. Companies thatborrow heavily in dollars but

PileupRecord amounts of emerging-market debt are set to maturethis year and next year.

THEWALL STREET JOURNAL.Source: Institute of International Finance

Note: Includes all currencies and debt fromgovernments, financials, and other corporates.

$1.5

0.0

0.5

1.0

thousand

’15 ’16 ’17 ’18 ’192014

Matured Hasn’t matured

generate most of their revenuein local currencies, such assome in Latin American coun-tries, are also a worry, he said.

The potential for dimin-ished investment in thesecountries comes amid soaringlevels of emerging-market gov-ernment and corporate debt.

A record $1.6 trillion ofdebt issued by governments,financial companies andother businesses in all cur-rencies matures this year,while $1.7 trillion will maturein 2019, according to the In-stitute of International Fi-nance. That debt, concen-trated in China, South Korea,India and other countries,will either need to be paiddown or refinanced.

Developed countries thatsuffer from weaker growth,

America’s ConstitutionalConvention occurred in 1787.An article on Hamilton, Madi-son and populism in Satur-day’s Review incorrectly saidthat the convention happenedin 1789.

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Readers can alert The Wall StreetJournal to any errors in news articlesby emailing [email protected] or

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‘Rising global realinterest rates are theNo. 1 predictor offinancial problems.’

high leverage or an unpopulargovernment are also vulnera-ble to rising rates and a stron-ger dollar, Mr. Rogoff said. Po-litical jitters sent Italy’s bondson their worst one-day slidesince 1989 last month, al-though they have stabilizedsince. Countries at the euro-zone’s periphery, such as Por-tugal and Greece, could alsoexperience “big problems” ifglobal rates continue to rise,he said.

For now, many believe mar-kets will be able to weatherthe recent turmoil. The WorldBank estimates the globaleconomy will grow by 3.1%this year, unchanged from itsforecast in January andmatching the pace seen in2017, itself the strongest yearsince 2011. While recent turbu-lence has hurt countries withlarge debt loads, other emerg-ing markets have reduced debtand built up reserves in recentyears, analysts said.

Harry Gakidis, a portfoliomanager at Acadian AssetManagement, said he sees re-cent volatility less as the startof a crisis and more as part ofa sporadic selloff that happensfrom time to time.

“This is what you are get-ting compensated for,” he said.

Rising U.S. bond yields,however, may be wearingaway at that sentiment. Withtwo-year Treasury yields at2.5%, the assets of potentiallyvulnerable countries becomemuch less attractive, said Ed-ward Al-Hussainy, currencystrategist at Columbia Thread-needle Investments.

“Is the return high enoughto compensate you for therisks? Clearly the answer acrossthe board is ‘no,’” he said.

—Daniel Krugercontributed to this article.

dollar-denominated debt.“Rising global real interest

rates are the No. 1 predictor offinancial problems in vulnera-ble economies,” said KennethRogoff, a professor at HarvardUniversity and former chiefeconomist of the InternationalMonetary Fund. “The risks aregreater than people realize.”

A stronger dollar is a dan-ger for some countries be-cause it weakens their curren-cies and makes it moredifficult to pay back dollar-denominated debt. HigherU.S. rates dim the allure offoreign assets, especially inemerging markets, where in-vestors often take on greaterrisk in exchange for higheryields and returns.

More than $10 billion hasflowed out of mutual and ex-change-traded funds that in-vest in emerging-marketsdebt and equity in the pastsix weeks, according to Bankof America Merrill Lynch. Theoutflow has sparked some de-clines in assets that rewardedinvestors with rich yields andbig upside moves in recentyears: Stock markets in Bra-zil, Indonesia and Turkeyhave notched double-digitdrops since mid-February,along with many emerging-market currencies.

That weakness is concern-ing to some, who see it as evi-dence that the world hasslipped out of a brief period inwhich all economies were ac-

ContinuedfromPageOne

ContagionFearsIncrease

helping send unemploymentdown to 3.8% in May, an 18-year low. Inflation has also hitthe Fed’s 2% target after yearsof falling short.

The Fed traditionally ad-justs rates based on forecastsof where growth, employ-ment, inflation and other eco-nomic trends will be yearsahead, and not just on recentdata, because monetary policyworks with long time lags.

Some economists worrythe Fed risks falling behindthe curve if it raises rates tooslowly and allows inflation totake off or financial bubblesto build.

“How long can you playthis game? Are you playing

with fire? That’s a discussionwe haven’t heard,” said for-mer Fed governor LaurenceMeyer.

Top Fed officials, includingChairman Jerome Powell,have indicated they don’tfeel much urgency to raiserates more aggressively.

“There is no sense in thedata that we’re on the cusp ofan acceleration of inflation,”said Mr. Powell at his Marchnews conference.

Developments since thendon’t provide a conclusivecase for officials to pick upthe pace of rate increases yet.

The bright domestic eco-nomic outlook contrasts witha cloudier picture abroad.

THE OUTLOOK | By Nick Timiraos

Fed Turns Focus to Long-Term PlanThe big

question head-ing into theFederal Re-serve’s meet-ing this week

isn’t whether officials willraise interest rates—theywill—but rather how to frametheir policy plans for the restof the year.

The central bankers haven’tresolved a debate over howmuch to raise rates this yearto ensure the rapidly expand-ing U.S. economy doesn’toverheat, according to inter-views and public commentsfrom Fed officials.

In March, 12 of 15 Fed offi-cials were equally split be-tween raising rates a total ofthree or four times this year,leaving their median projec-tion at three.

They are on track to an-nounce Wednesday anincrease in their bench-

mark federal-funds rate by aquarter percentage point to arange between 1.75% and 2%—the second such rise this year.

They’ll also release updatedprojections indicating theyplan to raise rates at leastonce more in 2018.

The Wall Street Journal’ssurvey of economists thismonth found respondents ex-pected four rate increases thisyear, with several citing accel-erating economic growth, atightening labor market andfirming inflation.

Recently enacted tax cutsand government spending in-creases are spurring demand,

Trade tensions, the election ofpopulist parties in Italy, andturmoil in emerging marketshave all emerged as risks.

Emerging-market curren-cies have weakened sincemid-April on fears of capitaloutflows in response to risingU.S. rates, with the most acuteproblems occurring in Argen-tina and Turkey.

“Global growth has beensynchronized over the pastyear, but recent developmentspose some risk,” said Fed gov-ernor Lael Brainard in aspeech last month.

So far, these risks don’tlook as severe for the U.S.economy as market turmoil inearly 2016 that led the Fed toscratch plans for multiple rateincreases that year.

Most officials agree theyshould steadily raise ratesfrom low levels that stimulatethe economy to a neutral levelthat neither presses on thegas pedal nor the brake. Afterthat, some have suggestedholding rates steady for awhile to see how the economyresponds.

Two debates will con-sume officials as theyformulate their ap-

proach. The first centers onwhere the neutral rate sits.The second is how muchabove neutral to push rates tokeep the economy steady.

Even Ms. Brainard, theFed’s leading voice for raisingrates slowly, has said thestrong economic outlook sug-gests lifting rates to neutraland “after some time” to a re-

strictive level.“That’s where the angst is

today,” said Mr. Meyer. “Whatthe heck are we doing with anaccommodative policy? Anddo you want to be so aggres-sive that you then go beyondneutral?”

If the Fed decides to raiserates just once more this yearafter June, Mr. Powell willhave to explain why they aredeparting from their recentpattern of taking steps to re-duce stimulus at every othermeeting since December 2016.

Alternately, if officials de-cide to lift rates twice moreafter this meeting, he’ll haveto explain whether the Fed isconcerned about overheating.

Mr. Powell signaled lastmonth he sees less need forthe Fed to continue providingverbal guidance about thelikely path of rates, which itstarted doing after the finan-cial crisis.

Officials could updatethe postmeeting policy state-ment to reflect this, such asby discarding or modify-ing language saying it wouldseek to stimulate growth “forsome time.”

At the same time, they’llreassure markets they aren’tmoving to a more aggressiveapproach now that inflation isat 2%.

Officials have emphasizedthis target is “symmetric,”meaning they won’t raiserates faster if inflation over-shoots it a bit. The word“symmetric” appeared 10times in the minutes of theFed’s May meeting.

Distance from the Federal Open Market Committee’s goals*(zero=goal)

On TargetA measure of how the economy is performing compared with theFederal Reserve’s goals shows officials are closer to their objectivesthan they have been in recent history.

Recessions

0

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1970 ’80 ’90 2000 ’10 ’20

ECONOMICCALENDAR

TUESDAY: The Federal Re-serve beings its two-day policymeeting in Washington. Fed offi-cials are widely expected to raisetheir benchmark short-term inter-est rate by another quarter per-centage point. They also will re-lease updated projections for thepath of rate increases.

THURSDAY: China will releaseits monthly business activitiesdata (release time is Wednesdaynight in the U.S.). The world’ssecond-largest economy is show-ing more resilience than manyeconomists had expected. China’svalue-added industrial output, arough proxy of economic growth,is likely to have grown 7% in Mayfrom a year earlier, the same asin April. Growth in fixed-assetinvestment, a key gauge of con-struction activity, also may haveheld steady at 7% in the January-May period. Retail sales are ex-pected to accelerate a bit to 9.6%growth in May, from April’s 9.4%.

The European Central Bankreleases a policy decision, a dayafter the Fed. Last week, theECB’s chief economist, PeterPraet, sent a signal that the bankcould decide as soon as thisweek’s meeting to wind down itsbond-buying program.

The U.S. Commerce Depart-ment releases May retail salesfigures. Despite rising gas prices,Americans ramped up theirspending at the start of spring,signaling modest wage gains andthe recent tax overhaul helpedbuoy spending.

FRIDAY: The Bank of Japanreleases a policy statement. Thecentral bank is expected to stickto its monetary-easing policies,including negative interest ratesand large purchases of govern-ment bonds.

trend toward lower corporatetax rates in major countries—including the recent U.S. re-duction to 21% from 35%—won’t by itself causecompanies to alter their tax-avoidance moves. Companiescan still lower their tax billssignificantly by shifting profitsto places with effective taxrates between zero and 10%.

Such profit-shifting reducesthe taxes corporations pay inthe European Union by about20%, according to the paper,with a global annual revenueloss of $200 billion. An earlierestimate by the Organizationfor Economic Cooperation andDevelopment said all profit-shifting, not just through taxhavens, reduces global corpo-rate tax revenue by between$100 billion and $240 billion.

The research draws on datafrom countries such as Ireland,Luxembourg and the Nether-lands. According to the paper,companies typically make 30to 40 cents in profits for everydollar of wages. In Ireland, for-eign companies have $8 inprofits for every dollar ofwages.

The data come from 2015,before the new U.S. tax lawand amid efforts by developedcountries to cooperate againstcorporate profit-shifting.

“There are still large incen-tives and big possibilities forfirms to shift profits to low-taxplaces,” Mr. Zucman said in aninterview.

High-tax countries struggleto pull profits back from taxhavens, instead focusing theirtax-collection efforts on profit-

shifting to take advantage ofsmaller rate gaps betweenhigh-tax countries, Mr. Zucmansaid. Companies fight harderagainst audits of shifting totax havens, making that workless efficient for governmentsto pursue, he said.

Countries tax corporate in-come based on where eco-nomic value is created, andthose definitions lead to dis-putes about which countrygets to tax a given company.Mr. Zucman said the researchpoints toward a system thatbases corporate income taxeson the location of sales.

According to the Congres-sional Budget Office, the newU.S. law would reduce the$300 billion in annual profit-shifting out of the U.S. by$65 billion.

Multinational companiesshift about 40% of the profitsthey earn outside their homecountries into tax havens,eluding tax-collection efforts,according to an analysis thatpoints to persistent gaps ingovernment revenue collec-tion.

U.S. companies are amongthe most aggressive users ofprofit-shifting techniques,which often relocate paperprofits without bringing jobsand wages, according to thestudy by economists ThomasTorslov and Ludvig Wier of theUniversity of Copenhagen andGabriel Zucman of the Univer-sity of California, Berkeley.

Mr. Zucman said the re-search suggests the global

BY RICHARD RUBIN

Tax Havens Draw Sizable Chunk of Corporate Profits

Taxable profits of U.S.multinational affiliates asshare of compensation

Tax havens

Non-tax-haven countries

Pay vs. ProfitCompanies in countrieslabeled tax havens haveprofits that outweighwhat they pay incompensation.

THEWALL STREET JOURNAL.Source: paper by Torslov, Wier and Zucman

Note: Tax havens are low-taxcountries identified by paper’sauthors.

Ireland 774%Bermuda(and Carribean) 743Luxembourg 558Switzerland 304Singapore 216Netherlands 179

Belgium 60

China 86Japan 86Mexico 73

Canada 51India 37U.K. 33Italy 29Germany 25France 14Brazil 6

Many currencies of developing countries are near multiyear lows, despite solid global growth.

LEOCO

RREA/ASSOCIATEDPRESS

THEWALL STREET JOURNAL. Monday, June 11, 2018 | A3

U.S. NEWS

place of traditional summerschool and could also meanfewer students repeat a grade.It’s mostly an option offered inhigh school—but also showsup in middle schools. Studentswho take advantage of the op-tion typically have failed atleast one class and don’t wantto attend summer school, re-peat the class in its entiretyduring the school year or be

held back from advancing agrade level or graduating.

There’s no recent nationaldata on summer-school en-rollment. The Los Angeles Uni-fied School District said it hasfewer seniors graduating inthe summer, which it partly at-tributes to credit recovery.Schools praise the programs ashelping boost graduationrates, but some educators

question their rigor.Los Angeles Unified School

District officials say the pro-grams allow students tobreeze past content they’ve al-ready mastered and focus onfailed areas.

“We give them anotherchance. Who doesn’t want tograduate with their class?”said Carol Alexander, a direc-tor in the Los Angeles schooldistrict’s Division of Instruc-tion. “There’s no argumentthat students learn at differentrates.”

Some educators questionthe quality of credit-recoveryclasses, some of which areprovided by independent com-panies, and say they artificiallyboost graduation rates. Thefour-year national graduationrate rose to 84% in 2015-16from 79% in 2010-11, but na-tional test scores are flat andmore students are showing upunprepared for college-levelmath and reading.

“If the school sets up creditrecovery in such a way that it’seasier to get, then strugglingstudents can skip out on theregular course and get it incredit recovery,” said BobsonWong, a public high-schoolmath teacher in New YorkCity. He said he’s not opposedto the idea of credit recoverybut believes that in manycases it’s “a poor substitute forthe original course.”

Some administrators in theLos Angeles Unified SchoolDistrict say students mightfind credit-recovery classeseasier because they’ve alreadysat through the regular course.“It’s the second time they’rehearing this,” Ms. Alexandersaid.

LOS ANGELES—IsaacHipolito flunked a semester ofninth-grade English. Giving uppart of his summer to redo theclass wasn’t something hewanted to do.

So, on a recent day afterschool at Downtown MagnetsHigh School in Los Angeles,the 14-year-old and a smallgroup of students worked indi-vidually to get credit for theclass by completing a packetof work at their own pace.

Such programs, calledcredit recovery, allow studentsto satisfy course requirementsin a fraction of the time, some-times in days or a few weeks,depending on how muchknowledge they gained thefirst time around.

Just over one million high-school students in almost16,000 of the nation’s 24,000public high schools took atleast one credit-recovery classin the 2015-16 school year, ac-cording to a Wall Street Jour-nal analysis of the latest datafrom the U.S. Department ofEducation. Most credit-recov-ery classes are taken online;some are led by a teacher, orare a blend.

Mr. Hipolito, who said theregular class was hard to un-derstand, expected to have theclass redone in about half thetime of the regular four-monthsession and said it’s easier.

“We don’t have to read alot,” he said. “It’s a lot moresimple, not as specific. Wedidn’t have to do big essays.It’s more answering the ques-tions.”

In some school districts,credit recovery is taking the

BY TAWNELL D. HOBBS

New Way to Avoid Summer School

Los Angeles students in a program to recover school credits.

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ures who questioned Mr.Greear’s theology and commit-ment to the convention andwho recruited another candi-date, Ken Hemphill, 70, to run.

“We’re hoping to bringsome corrective to an overem-phasis on what has been calledthe ‘Young, Restless and Re-

formed’ movement,” said Da-vid Hankins, executive directorof the Louisiana Baptist Con-vention, who asked Mr. Hemp-hill to join the race.

Both sides agree that this isa crucial moment. Membershipin the denomination has beenfalling for more than a decade,

although church attendancehas ticked up this year andSouthern Baptists have main-tained significant influence inWashington.

Recently, the SouthwesternBaptist Theological Seminaryfired Paige Patterson, its long-time president and a demoni-

cation leader, after an old ser-mon, in which he recountedtelling an abused woman notto leave her husband and in-stead to pray, was made pub-lic. The seminary said Mr. Pat-terson also mishandled thecase of a student who said shewas raped in 2015. Mr. Patter-son’s lawyer denied the stu-dent said she was raped at thetime.

Karen Swallow Prior, aSouthern Baptist professor atLiberty University, said the fir-ing of Mr. Patterson exposed adivide between “people whohave wanted to change the mi-sogynistic, sexist culture ofthe SBC…and those who haveeither been blind to it or justdidn’t care.”

Mr. Greear has built hisNorth Carolina congregationinto a megachurch with multi-ple campuses that draw up-wards of 10,000 people, manyof them racial minorities andyoung people. Though hemaintains the denomination’sbelief in complementarian-ism—the view that womenhave different God-given rolesfrom men and men should beleaders at home and inchurch—he says there areroles other than senior pastorsthat women should hold.

“We need a culture change,

in terms of empowering diver-sity in our leadership,” Mr.Greear said in an interview.

His critics say he subscribesto Calvinist—or Reformed—theology, which includes thebelief that God elects thosewho will be saved.

Mr. Greear declined to di-rectly answer a question abouthis views but said, “The SBC,from its earliest days, has al-ways had more Calvinist-lean-ing Baptists and more free-will-leaning Baptists.”

A former president ofSouthwestern Seminary who isinterim pastor at Second Bap-tist Church in Springfield, Mo.,Mr. Hemphill holds to the “tra-ditionalist” theological viewthat anyone can be saved.

He also supports largerroles for women in the church.Although some people hadtried to lump in views aboutwomen “with the old guard,”he said, “I don’t think it’sabout generation.”

Jack Graham, a former de-nomination president and pas-tor of a megachurch outsideDallas, invited Mr. Greear tospeak at his church on Sunday.“This convention is about thefuture,” he said. “We are at atipping point, but I’m veryhopeful that changes and cor-rections can be made.”

The nation’s largest Protes-tant denomination is enduringa test of faith.

In recent months, one topSouthern Baptist Conventionofficial resigned, citing a “per-sonal indiscretion,” and an-other was fired following alle-gations that he mishandled asexual assault reported by aseminary student.

“God has brought a day ofreckoning to us,” J.D. Greear, aNorth Carolina megachurchpastor, said in a video on Face-book last month.

Mr. Greear now is the lead-ing candidate to be the nextpresident of the Southern Bap-tist Convention, which gathersin Dallas for its annual meet-ing this week.

At 45 years old, Mr. Greearwould be the denomination’syoungest president in decades,and he has advocated for giv-ing women a larger role in theconservative institution.

But he faces strong opposi-tion, especially from older fig-

BY IAN LOVETT

Leaders’ Exits Test Southern BaptistsA generational splitand the role of womenare big issues as a newpresident is selected

Choir members at a 2016 meeting of the Southern Baptist Convention in St. Louis

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Wildfire Rages in Hot, Dry Colorado

FIGHTING FIRE FROM THE AIR: A helicopter helped ground crews battle a wildfire over the weekend in Hermosa, in the southernpart of Colorado. Authorities have ordered residents of at least 1,000 homes to evacuate and have said the blaze is 10% contained.

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Standards IncreaseUse of Programs

A 2016 U.S. Department ofEducation-sponsored study byAmerican Institutes for Re-search, a nonprofit scientific re-search firm, and the Universityof Chicago Consortium onSchool Research, found thatninth graders in Chicago PublicSchools who failed Algebra 1and retook it in online creditrecovery scored lower on an

end-of-course assessment andreceived a lower grade for thecourse than students who re-did it in a traditional classroom.

Jessica Heppen, vice presi-dent for research and evalua-tion at American Institutes forResearch and the study’s leadauthor, said online credit-re-covery programs are growingin part because they are con-venient for schools and stu-dents. “Standards have in-creased and districts have tofind a way to…keep kids ontrack,” she said.

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ning sanctuary cities mirrorsMr. Trump’s.

“When the other candi-dates bear-hug Trump, theyare essentially endorsing Gov-ernor McMaster’s conserva-tive record,” spokeswomanCaroline Anderegg said.

But Mr. McMaster has beenrivaled in fundraising by twoyounger, first-time candi-dates. He has raised $4.4 mil-lion and spent $3.6 million asof May 28, according to StateEthics Commission filings.Lawyer Catherine Templetonhas raised $3.6 million andspent $2.5 million. Entrepre-neur John Warren, who con-tributed $3 million of the $3.3

million he has raised, hasspent $2.5 million.

If no candidate gets morethan 50% in the primary, thetwo top vote-getters will goto a June 26 runoff.

Ms. Templeton, 47, is a for-mer cabinet member of Ms.Haley’s. She has been cam-paigning since April 2017 on apromise to take on the estab-lishment, in the mold of Mr.Trump. She is running on herexperience firing bureaucratsand confronting political ap-pointees, describing herself inads as a “conservative buzzsaw.”

Mr. Warren, 39, jumpedinto the race early this year,

expected. Those chains haveslowed store growth to deploymillions of dollars of capitalfor technology.

“We are continuing to lookacross the U.S. and the worldfor potential partnerships,”Kroger Chief Executive Rod-ney McMullen said in an in-terview after the companysaid it would take a $250 mil-lion stake in British onlinegrocer Ocado Group PLC lastmonth.

Whole Foods remains asmall part of the roughly $800billion U.S. food retail market,with less than one-fifth thenumber of stores of Kroger,the nation’s largest grocer. Ex-ecutives at Kroger and otherlarge conventional chains saythey haven’t seen a big drop insales in the past year becausethey cater to mainstreamshoppers and have little over-lap with Whole Foods, whoseaverage customer householdincome exceeds $70,000, ac-cording to market research.

After Amazon extended dis-counts at Whole Foods to itsPrime members—which willhelp it gather data aboutshoppers’ preferences—ana-lysts said competitors mightneed to update their ownshopper-loyalty programs.Amazon now offers free, two-hour delivery and additional10% discounts on several hun-dred items for Prime members

in select markets.Many food makers are rede-

signing their packaging andformulas to better sell throughAmazon and Whole Foods,placing an emphasis on onlinerepeat purchases instead ofimpulse buys, industry consul-tants said.

Meanwhile, Whole Foods’main distributor, United Natu-ral Foods Inc., has experienceda flood of business in the pastyear. Net sales at the Provi-dence, R.I., company jumped

12% for its most recent quar-ter, ended in April. Business toWhole Foods alone increased24%. United Natural reportednearly $1 billion in sales toWhole Foods for the Aprilquarter, up from about $800million a year earlier, beforethe deal.

But United Natural hasstruggled to keep goods instock, resulting in millions ofdollars in lost sales and sud-den expenses for unforeseenstorage and staffing needs. OnThursday, its shares fell 14%,

ety take a more tolerant view ofpot, creating a cadre of sup-porters from both parties. Yetthe drug remains illegal underfederal law, posing a challengefor U.S. officials in decidinghow to pursue it.

President Barack Obama’sadministration took a largelyhands-off approach to statesthat legalized marijuana. Mr.Sessions initially showed deter-mination to change that, blam-ing marijuana for helping fuelthe opioid crisis and for caus-ing spikes in violence.

The Justice Department de-clined to comment. Mr. Ses-sions, however, recently toldmembers of Congress that thedepartment is now emphasiz-ing the pursuit of more danger-ous drugs.

In an unusual move by a Re-publican senator against hisown party’s attorney general,Mr. Gardner blocked nomineesfor Justice Department jobs af-ter Mr. Sessions announced hewas undoing the Obama admin-istration’s approach.

Mr. Gardner stood down af-ter receiving assurances thatMr. Trump would support pro-tections for pot-legal states likeColorado, essentially undermin-ing Mr. Sessions on the issue.

Supporters of relaxing mari-juana drug laws cheer the re-cent developments. “It was ter-rific,” Don Murphy, director offederal policy for the MarijuanaPolicy Project, said of Mr. Ses-sions’ threat to the industry. “Itmoved this issue to a burner.”

Mr. Sessions’ January mari-juana policy left federal prose-cutors to decide what resourcesto devote to marijuana crimes,stirring fear among dispensaryowners that raids and arrestswere imminent.

Instead, many U.S. attorneyscontinued to use their limitedmanpower to target unusuallybrazen marijuana operationsthat are also illegal under statelaw, such as sprawling mari-juana growers on federal landsor gangs that peddle pot alongwith other drugs.

ministration adopted a zero-tolerance policy last month toillegal immigration at the bor-der, pursuing criminal chargesagainst offenders, includingparents with minor children.

Homeland Security Secre-tary Kirstjen Nielsen, AttorneyGeneral Jeff Sessions and oth-ers in the Trump administra-tion have said federal law re-quires them to separatechildren when their parents

are being prosecuted and fac-ing jail time. Immigration andCustoms Enforcement said itprovides parents informationto track their children’swhereabouts.

“If people don’t want to beseparated from their children,they should not bring themwith them,” Mr. Sessions saidlast week in an interview withconservative radio host HughHewitt.

During Ms. Ulloa’s hearing,Judge Ormsby sought to reas-sure the parents in the room,saying that the government’sintent was to protect and carefor the children while theirparents navigated the courts.

The administration’s policyhas spurred backlash amongimmigrant-rights advocatesand some lawmakers, mostlyDemocrats.

A decadesold court settle-

ment governing the treatmentof immigrant children and amore recent court ruling bothbar the government from jail-ing children. A federal lawbars most unaccompanied mi-grant children from beingquickly deported, and requiresthey be turned over to Healthand Human Services, whereofficials find a sponsor in theU.S. to house them while theircase is decided in court. That

process could take years.Assistant federal public de-

fender Azalea Aleman-Bendikssaid her office determinedthat more than 400 childrenhad been separated from par-ents whose criminal caseswere heard in McAllen duringa 2½-week period ended thefirst week of June.

Hundreds of migrantspassed through JudgeOrmsby’s courtroom last week,filling most of the room’s sixwooden benches. The hearingswere conducted in English,with the immigrants listeningto a Spanish translatorthrough a headset. Each guiltyplea took roughly a minute.Most of those brought beforethe judge simply responded“si,” “no” or “culpable,” mean-ing guilty in Spanish, whenquestioned by the judge or aprosecutor.

On Wednesday, Diego Nico-las Gaspar of Guatemala ini-tially pleaded not guilty torafting across the river withhis 11-year-old son. Hechanged his plea to guilty inthe hopes of being quickly re-united with his son.

Prosecutors asked the judgeto sentence everyone with nocriminal or immigration his-tory in the U.S. to 10 days injail as a deterrence. JudgeOrmsby instead sentencedthem to time served and re-turned them to the custody ofimmigration authorities.

MCALLEN, Texas—NormaLeticia Ulloa Montoya was ar-rested after rafting across theRio Grande with her sons andillegally entering the U.S. Aday later, she was sent to fed-eral court here, separatedfrom her children, 9 and 6years old. It was unclear whenshe would see them again.

Ms. Ulloa joined more than70 other migrants in acrowded courtroom in thisSouth Texas city, includingabout a dozen other CentralAmerican parents. They facedmisdemeanor charges for ille-gally entering the U.S., an of-fense that carries a maximum6-month jail sentence.

“If one pleads guilty, doesone have a right to stay in thiscountry with their babies?”she asked U.S. MagistrateJudge Peter E. Ormsbythrough a translator. JudgeOrmsby said he didn’t know ifshe or any other migrant inthe courtroom could stay inthe U.S., or when they mightsee their children again.

Her question strikes at theheart of a debate that hasemerged after the Trump ad-

BY ALICIA A. CALDWELL

Migrant Parents Feel Bite of Border LawAfter border arrests,defendants’ anxietyratchets up as U.S.separates families

People charged with crossing the border illegally, including parents separated from children, at a hearing last week in McAllen, Texas.

months after his competitors.He is a former Marine whostarted a company that lendsmoney to residential propertyflippers.

Mr. Warren is emphasizinghis military background in theMiddle East and his experi-ence running Lima One Capi-tal, named for his military callsign.

“Much like PresidentTrump, John Warren is theonly true conservative out-sider running for governor,”campaign manager TaylorHall said.

The Templeton campaigndidn’t respond to a requestfor comment Friday.

The crowded and expensiveSouth Carolina GOP guberna-torial primary is coming downto whether voters want a vet-eran politician who is person-ally close to President DonaldTrump or one of two politicaloutsiders—one who resembleshim in tone, the other in pro-fessional experience.

The June 12 primary is un-usual because the governor,who has been in office for 16months, is in the race, and ithas been decades since a sittingSouth Carolina governor faced acompetitive intraparty foe.

But Gov. Henry McMaster,who was lieutenant governor,inherited the job when Mr.Trump made Nikki Haley hisambassador to the United Na-tions—a move seen as athank-you for Mr. McMaster’searly endorsement of Mr.Trump.

“He didn’t run and win theoffice,” said Joel Sawyer, aGOP political consultant whoisn’t involved in the race.

Mr. McMaster, 71 years old,has been a political fixturesince the 1980s, when Presi-dent Ronald Reagan namedhim U.S. Attorney for SouthCarolina.

Mr. Trump endorsed Mr.McMaster at a recent rallyand again in a Saturdaytweet.

Mr. McMaster is trying tomake the most of his experi-ence, saying his record ofsupporting tax cuts and ban-

BY VALERIE BAUERLEIN

Trump Shapes South Carolina GOP

Catherine Templeton, Gov. Henry McMaster, center, and John Warren faced off in a debate last week.

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Attorney General Jeff Ses-sions vowed to use federal lawto get tough on marijuana, an-nouncing in January he wasending Obama-era protectionsfor the nascent pot industry instates where it is legal. Sixmonths into his mission, he islargely going it alone.

Mr. Sessions’ own prosecu-tors have yet to bring federalcharges against pot businessesthat are abiding by state law.And fellow Republicans in Con-gress, with support from Presi-dent Donald Trump, are pro-moting several bills that wouldprotect or even expand the le-gal pot trade.

As a result, Mr. Sessions, anunabashed drug warrior, hasstruggled to make his anti-mar-ijuana agenda a reality, a nota-ble contrast with the success hehas had in toughening law-and-order policies in other criminal-justice areas.

Marijuana advocates say Mr.Sessions’ approach, in seekingto spur a crackdown on the le-gal marijuana market, haslargely backfired. It has cata-lyzed bipartisan support for re-search, they say, and for actionto improve the young industry’saccess to banks, which havebeen generally unwilling to ac-cept proceeds from pot sales.

Underlining the pushback,Sen. Cory Gardner (R., Colo.) onThursday joined Sen. ElizabethWarren (D., Mass.) in introduc-ing a bill that essentially wouldallow states to pass their ownmarijuana laws without federalinterference.

Mr. Trump on Friday reiter-ated his support for Mr. Gard-ner, saying, “I know exactlywhat he’s doing, we’re lookingat it, but I probably will end upsupporting that, yes.”

The dynamic highlights theunusual state of the nation’smarijuana laws. More states arelegalizing marijuana use formedical or even recreationalpurposes as many parts of soci-

BY SADIE GURMANAND NATALIE ANDREWS

Sessions’ MarijuanaFight Loses Steam

Recreational use legal

Calif.

Nev.Colo.

Ore.

Alaska

Wash.

Texas

Mont.

Ariz.

Idaho

N.M.

Utah

Wyo.

Kan.

IowaNeb.

S.D.

Fla.

Okla.

N.D.

Ala.

Mo.

Ark.

La.Miss.

Hawaii

Wis.

Pa.Ind.

Mich. MaineVt.N.H.

N.J.

Mass.

Conn.

Md.Del.

R.I.

D.C.

Ga.

Tenn.Ky.

S.C.

W.Va.

N.C.

Va.

Minn.

Ill.

N.Y.

Ohio

Medical use legal Marijuana decriminalized

Hashing It OutA growing number of states are legalizing marijuana use, but itremains illegal under federal law.

Source: NORML THEWALL STREET JOURNAL.

the largest drop in more thantwo years, after the companyposted its third-quarter earn-ings. The stock added 27 centsto close at $39.85 on Friday.

Amazon’s formula for at-tracting customers to WholeFoods was simple. After thedeal closed, the online retailerslashed prices on avocados,bananas and other items atWhole Foods’ 460 U.S. stores.That formula has helped driveyear-over-year sales growth ofgrocery goods and healthproducts at the chain by thegreatest levels in seven years,according to financial filingsby United Natural.

United Natural supplies thebulk of Whole Foods’ shelf-sta-ble and consumer products,but not fresh food. WholeFoods no longer discloses itsstand-alone sales figures sincethe acquisition, but its last fi-nancial filing, which includedpartial Amazon ownership,showed that between July andSeptember 2017, sales rose 4%to $3.7 billion from the year-earlier period.

“I do find myself goingthere more often,” said The-resa Bond, a 46-year-old li-brarian in Bridgewater, N.J.,who said she has noticed less-expensive prices on crackers,tortillas and tea at WholeFoods stores.

—Laura Stevenscontributed to this article.

cuts, with 8% of their regularshoppers visiting the rival.

A Sprouts spokeswomansaid traffic was up at thePhoenix chain in its most re-cent quarter and that thebrand “continues to resonate.”A Trader Joe’s spokeswomansaid sales were strong. Ama-zon and Whole Foods declinedto comment.

Grocery chains have accel-erated planned investments inonline delivery and pickup ser-vices, in some cases bumpingplans ahead to two-to-three-year timelines instead of fiveto seven years, according toSteve Caine, a Bain & Co. part-ner who consults with grocerson their online strategies.

Dozens of supermarketshave struck deals with Insta-cart Inc., an online grocery-de-livery service that has ex-panded to more than 200retailers from 30 before Ama-zon’s deal. Kroger Co., Wal-mart Inc. and Target StoresInc. have all stepped up e-commerce acquisitions, withmore technology investment


AmazonShakes UpFood Retail

Grocery chains haveaccelerated investingin online delivery andpickup services.

THEWALL STREET JOURNAL. * * Monday, June 11, 2018 | A5

NEW YORK

Latest Trade CenterTower Is Set to Open

An 80-story office buildingset to open this week at theWorld Trade Center will be thethird completed skyscraper atthe site where the twin towersstood.

Monday's ribbon-cutting forthe 1,079-foot 3 World TradeCenter marks a major step in therebuilding of the site, stalled foryears by disputes among govern-ment agencies, trade center de-veloper Larry Silverstein, insurersand 9/11 victims' family members.

The new $2.7 billion building,designed by Pritzker Prize-win-ning architect Richard Rogers,has been the fifth-tallest buildingin New York City since construc-tion topped out in 2016.

The lobby of 3 World TradeCenter faces the National Sep-tember 11 Memorial & Museum.

—Associated Press

FLORIDA

Orlando Prepares toMark Pulse Massacre

Survivors and victims' rela-tives are marking the second an-niversary of the Pulse nightclubshooting.

Ahead of Tuesday's commem-oration of the massacre of 49people at the gay nightclub,some survivors and victims' rela-tives have sued the Orlando Po-lice Department and the ownersof the nightclub.

The federal lawsuit againstthe police and city of Orlandowas filed last Thursday, and itclaims police officers should haveacted more aggressively to stopthe shooter. The state lawsuitagainst Pulse owners Barbaraand Rosario Poma was filed Fri-day, and it says the nightclubhad inadequate security.

The Pomas said in a state-ment that they hadn't seen thelawsuit and that the focus thisweek should be on healing.

The Orlando Police Depart-ment said their officers andother law-enforcement officersdid everything they could to saveas many lives as possible.

On Tuesday, a service will beheld at the nightclub, where amemorial is in development.

—Associated Press

U.S. NEWS

nies that say, ‘Enough al-ready.’”

The marketplace experi-enced similar tumult about ayear ago, as insurers were set-ting rates amid questionsabout whether the WhiteHouse would end some ACAsubsidies—a step the adminis-tration in October announcedit was taking. In some cases,state insurance regulatorsscrambled last year to ensuremarkets would be viable.

Rates next year: ACA pre-miums are expected to rise 15%next year, on average, largelybecause Republicans in theirtax law last year got rid of thehealth law’s penalty for theuninsured, according to thefederal Congressional BudgetOffice. The ACA’s backers ar-gue that lets healthier peopleopt out of coverage.

Ms. Corlette said insurerscould seek further increases asa buffer against uncertainty.

Lower premiums for somepeople: Should the courts in-validate the requirements oncovering people with pre-exist-ing conditions, healthy consum-ers likely would see cheaper in-surance, said Larry Levitt,senior vice president at theHenry J. Kaiser Family Founda-tion. Their premiums would nolonger be an average marketrate that ensures those withpre-existing conditions pay thesame premiums, he said.

Young, healthy buyers havealready seen their options in-creased by other moves takenby the Trump administrationto allow plans that offer lim-ited coverage for a lower price.

Expensive or hard-to-getcoverage for some people:People with pre-existing condi-tions could find they are nolonger able to get coverage,should insurers return to prac-tices followed before thehealth law of charging more tosuch consumers or refusing toinsure them, Mr. Levitt said.

That would vary, as somestates have laws seeking toprotect such consumers.

Consumers and insurersface new uncertainty with theJustice Department’s assertionlast week that key provisionsof the Affordable Care Act areinvalid.

In a brief filed Thursday,the department asked a federalcourt to unwind the healthlaw’s protections for individu-als with existing medical con-ditions, such as diabetes orasthma. The law, known asObamacare, prohibits insurersfrom refusing to sell coverageto people with pre-existingconditions or from chargingthem more than healthy con-sumers.

The brief was filed in a law-suit brought by attorneys gen-eral that may take months towind through the courts, and itisn’t clear what the outcomewill be. Changes would createwinners as well as losers.Meantime, insurers face newvariables as they are decidingwhere to sell coverage and atwhat rates in 2019.

Health insurers warned ofdisruption. “Removing thoseprovisions will result in re-newed uncertainty in the indi-vidual market, create a patch-work of requirements in thestates, cause rates to go evenhigher for older Americansand sicker patients, and makeit challenging to introduceproducts and rates for 2019,”America’s Health InsurancePlans, a trade group, said in astatement.

Here are four ways the casecould affect health-insurancemarkets:

Options next year: In theshort term, some health-insur-ance markets could see feweroptions if companies react torenewed uncertainty by leav-ing the marketplace, said Sa-brina Corlette, a research pro-fessor at the GeorgetownUniversity Health Policy Insti-tute. “Are some insurers goingto cry uncle?” she asked.“Maybe there are some compa-

BY MELANIE EVANS

InsurersSeeNewACAUncertainty

U.S. WATCH

The tower 3 World Trade Center, second from right, joins its neighbors One World Trade Center,left, and 4 World Trade Center, right, in New York. The center’s latest skyscraper opens on Monday.

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A6 | Monday, June 11, 2018 * * * * * THEWALL STREET JOURNAL.

a charge Tehran rejects. TheU.A.E.—Saudi Arabia’s mostimportant ally in a military co-alition fighting in Yemen—hasa significant military presencenear the port, where it is sup-porting Yemeni allies in theirpush to seize Hodeidah fromthe Houthi fighters.

U.N. officials have said anattack on the port, the gate-way for 80% of commercialand humanitarian supplies forthe country, could be devastat-ing to a country where mil-lions of people are on thebrink of famine.

Lise Grande, the U.N.’s top

humanitarian coordinator forYemen, said a fight for theport could claim the lives ofup to 250,000 of Hodeidah’sestimated 400,000 residents.

“We fear that a prolongedattack or siege on Hodeidahcould be catastrophic for civil-ians,” she told The Wall Street

Journal on Sunday. “In a veryworst case, we cannot rule outmassive casualties.”

The U.A.E. had initiallypromised not to launch an as-sault on the port withoutbacking from the U.S. and theU.K., which have both ex-pressed serious concerns

WORLD NEWS

about the impact of a militaryoperation. But U.S. and Gulfofficials on Sunday said theU.A.E.’s position shifted afterits forces outside the Yemeniport said they came under at-tack. That triggered a newpush by the U.A.E. to move onthe port, even though the U.S.and U.K. have expressedstrong reservations.

The Trump administrationis now reluctantly getting be-hind the U.A.E.’s militarymoves, but top U.S. officialsare encouraging their Emiratiallies to do all that they can toprevent a humanitarian crisisand to limit the impact on U.N.diplomatic efforts, people fa-miliar with the matter said.

One U.S. official character-ized the administration as giv-ing the U.A.E. a “blinking yel-low light” for the operation,not a green or red one.

“This isn’t our preferredscenario,” the official said.“What we are scrambling todo is, if there’s an inevitabilityto this, we want to ensure thatit causes the least amount ofdamage and make sure thingsare set up on the humanitarianside in the best way we can.”

There are growing signsthat the U.A.E. could launchthe offensive as soon as Tues-day, when the world’s focus isexpected to be on Singapore,where President DonaldTrump will hold a historic nu-clear summit with North Ko-rean leader Kim Jong Un.

WASHINGTON—The UnitedNations launched an urgentdiplomatic effort to head off anexpected United Arab Emiratesassault on Yemen’s most impor-tant port in the coming days,fearing an attack could create ahumanitarian disaster and de-rail the most promising push inyears to end the conflict, peo-ple familiar with the talks said.

Aid groups and U.N. offi-cials working in the Red Seaport city of Hodeidah arescrambling to get their inter-national staff out after Britishofficials warned them an at-tack on the city was imminent.

The U.N. special envoy forYemen, Martin Griffiths, trav-eled to the U.A.E. capital overthe weekend in an effort toforestall an attack. Mr. Grif-fiths had secured an agree-ment with Houthi rebels whocontrol Hodeidah to allow theU.N. to operate the portjointly, the people said. Butpeople briefed on the discus-sions said they doubted theU.A.E. would accept the offeror delay the planned assault.

Saudi Arabia has accusedIran of using Hodeidah tosmuggle missiles into Yemen—

BY DION NISSENBAUM

U.N.Seeks toAvertU.A.E.Attack inYemenInternational aid staffrush to leave Hodeidahafter a warning of an‘imminent’ assault

A Yemeni fighter with the Saudi-led coalition on the outskirts of the Houthi-held port city of Hodeidah.

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the United Arab Emirates andKuwait in a joint statementearly Monday said that moneyincludes a deposit in Jordan’scentral bank, funding to sup-port the country’s budget forthe next five years, WorldBank guarantees and financingof development projects.

One of America’s closestArab allies, Jordan has beenrelatively stable in recent

years despite wars in neigh-boring Syria and Iraq, deadlyunrest at home and the rise ofextremist groups across theMiddle East.

The mass rallies that rockedthe Jordanian capital of Am-man and other cities in recentweeks offer a striking re-minder of the 2011 ArabSpring uprisings that sweptthe Middle East, toppling lead-

ers across the region. Jordani-ans took to the streets to ex-press anger at highunemployment, rising pricesand plans to broaden the in-come-tax base.

Jordan’s monarch, King Ab-dullah II, responded to popularpressure by dismissing theprime minister last week. Heappointed a new premier,Omar al-Razzaz, a former

World Bank economist and ed-ucation minister who said hewould withdraw the tax bill,helping defuse the crisis.

The tax bill is part of aneconomic-overhaul plan backedby the International MonetaryFund and aimed at narrowingJordan’s growing public debt.The planned income-taxchanges followed austeritymeasures that include new

taxes on products like internetsubscriptions and the elimina-tion of subsidies on bread,which nearly doubled its price.

Meanwhile, the governmenthas struggled to contain risingunemployment, with an 18%jobless rate that is the highestin years.

Jordan, which has few re-sources of its own, has longrelied on foreign assistance.

AMMAN, Jordan—Saudi Ara-bia and its Gulf allies pledged$2.5 billion in support of Jor-dan’s monarchy after mass pro-tests over economic grievancesroiled the country, sparkingfears of another Arab Spring.

After a meeting in the Saudicity of Mecca, Saudi Arabia,

BY SUHA MA’AYEHAND MARGHERITA STANCATI

Saudis, Gulf Allies Pledge $2.5 Billion in Jordan Aid

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same approach as the Obamaadministration: asking buyersof Iran’s oil to voluntarilyeliminate or at least reducetheir purchases, backed by ex-plicit threats to punish anycompanies that do businesswith Iran by denying them ac-cess to U.S. markets and finan-cial institutions.

As the Obama administra-tion did, the current adminis-tration is giving companies upto six months to start makingthe reductions voluntarily. Butultimately, said U.S. TreasurySecretary Steven Mnuchin,“We will enforce compliance.”

Unlike the last time around,however, the buyers of Iranianoil are uniformly hostile to U.S.goals and likely to delay, resistand outright defy U.S. de-mands, according to analystsand officials in purchasingcountries. Even U.S. allies inthe EU, significant buyers ofIranian oil, hope to keep Iranin the nuclear deal without U.S.participation—something theIranians say is only possible ifoil sales continue unfettered.

To be sure, if Iran, whichhas said it would stick withthe deal for now, ultimatelydecides to abandon it and re-sume its nuclear program,some countries that are resist-

could prove challenging afterlast month’s U.S. withdrawalfrom the deal, known officiallyas the Joint ComprehensivePlan of Action, some analystsand officials say.

The U.S. may get “some re-ductions, but not a whole lot,”said Richard Nephew, a formerU.S. State Department officialwho implemented sanctionsduring the Obama administra-tion and is now a fellow at Co-lumbia University’s Center forGlobal Energy Policy.

Trump administration offi-cials say they are taking the

tarily. Japan and South Korea,close allies of the U.S. thatshared its concerns about Iran’snuclear program, reduced theirimports of Iranian oil underU.S. pressure. India, Iran’s sec-ond-biggest buyer, refused toacknowledge U.S. sanctions aslegitimate, but nonetheless re-duced purchases enough to pla-cate the U.S.

Even China, Iran’s best cus-tomer then and now, boughtless Iranian oil, even as it de-cried the unilateral U.S. sanc-tions and vowed to defy them.

Re-creating that scenario

The Trump administration’seffort to pressure Iran dependson countries deeply skepticalof the U.S. campaign againstthe Islamic Republic, creatingresistance that some analystsand officials in those countriessay could undercut one criticalelement of the push: curtailingIran’s oil exports.

The renewed U.S. targetingof Iran’s economy comes afterPresident Donald Trump with-drew the U.S. last month from alandmark deal in which Iranlimited its nuclear program inreturn for restored business andfinancial ties with the rest ofthe world. The other parties tothe accord—including the Euro-pean Union and China, whichhave begun developing exten-sive dealings with Iran—op-posed the U.S. withdrawal andare trying to maintain the deal.

The last time the U.S.ramped up the pressure onIran, the Obama administra-tion’s targeting of the IslamicRepublic’s oil sales was a criti-cal tool in disrupting Iran’seconomy and pushing its lead-ership toward the agreementto restrict its nuclear program.

Iran came to the negotiatingtable in 2015 only after its mostreliable customers had slashedtheir oil purchases across theboard. European buyers cutback aggressively and volun-

WORLD NEWS

ing U.S. sanctions could even-tually work more closely withthe U.S. again.

But that reluctance amongU.S. allies could hamper Mr.Trump’s efforts with Iran’stwo biggest customers: Chinaand India. Indeed, some ob-servers wonder whether oneor both might actually buymore Iranian oil, especially ifit is discounted.

China purchased Iranian oilat a rate of 671,000 barrels aday in April, while India im-ported 604,000 barrels a day.Together those two countriesbuy 60% of Iran’s total exports,more than double the combinedpurchases of the next two big-gest importers, South Koreaand Japan, according to Kpler,an oil-industry consulting firm.

During the last round, Indiarefused to recognize the U.S.oil sanctions, but it did even-tually cut imports from Iranby about 20%, enough to avoidsanctions from the Obama ad-ministration. The governmenthas recently reiterated that itdoesn’t recognize unilateralU.S. sanctions on Iran.

BY BILL SPINDLEAND ANANT VIJAY KALA

Oil Buyers Balk at Pressuring Iran

The oil tanker Devon astride a support vessel prepares to transport crude oil from Bandar Abbas, Iran.

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Back to the FutureIran's crude production andexports have recovered after thenuclear deal was reached.

Note: Certain months (Aug., Dec. 2011;June ’12; Aug.-Oct. ’17) were unreported.Source: Joint Organizations Data Initiative


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Landscape ChangedAfter 2012 Boycott

Europe, others decline to followU.S. lead in pressuring Tehran

In 2012, European Unioncountries voluntarily imposed acomplete boycott on oil fromthe Islamic Republic. Japan,South Korea and India also cutback, driven by the combinationof U.S. pressure and a desire tosee Iran restrain its nuclear pro-gram.

Even China, which decried

the U.S. oil sanctions andvowed to defy them, reducedpurchases of Iranian oil, in part,some analysts said, because itwanted Iran to enter into thenuclear deal.

Now the landscape looksvery different, some analystsand officials said.

Although the U.S. threat ofshutting companies out of U.S.markets remains potent, theTrump administration so farhas no active support or opencooperation from any purchaserof Iranian oil.

European governments,which tried to dissuade the U.S.

from pulling out of the Irandeal, have announced no plansto cut back on Iranian oil, andprivately officials say they hopeto avoid doing so.

Still, European companiesthat buy Iranian oil are depen-dent on U.S. markets and areexpected to curtail purchasesunder U.S. pressure, thoughfar more slowly than lasttime.

Companies based in otherclose U.S. allies, such as Japanand South Korea, are also likelyto grudgingly accede to theTrump administration demands,some analysts said.

QINGDAO, China—China’sPresident Xi Jinping warnedagainst unilateralism andtrade protectionism as he,Russian President VladimirPutin and Central Asian lead-ers used a regional meeting tocriticize U.S. policy.

At the annual summit of theShanghai Cooperation Organi-zation, Messrs. Xi and Putinand others pledged their sup-port of the Joint Comprehen-sive Plan of Action, the 2015Iranian nuclear deal fromwhich President Donald Trumpwithdrew the U.S.

“China is willing to workwith Russia and other coun-tries to preserve the JCPOA,”said Mr. Xi.

Iran’s President HassanRouhani, who attended as anobserver, praised China andRussia for supporting the deal.He warned of “destructiveconsequences” if it falls apart.

Founded in 2001 by Chinaand Russia to resolve borderdisputes with their neighbors,the SCO also includes India,Pakistan, Kazakhstan, Kyrgyz-stan, Tajikistan and Uzbekistan.Iran, Afghanistan, Mongoliaand Belarus are observers.

Messrs. Xi and Putin criti-cized U.S. trade policy, castingthemselves as upholders offree trade and multilateralism.

“We have reaffirmed ourreadiness, our willingness, togo with the rules of trade thatexist in the current world,”Mr. Putin said. “This is a veryimportant statement.”

India was the only SCOmem-ber to decline to endorse China’sBelt and Road infrastructure ini-tiative at the summit. The coun-try’s opposition is based partlyon a major project that runsthrough territory claimed byboth Pakistan and India.

—Chunying Zhangcontributed to this article.

BY EVA DOU

Xi, PutinFault U.S.At SummitIn China

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WORLD NEWS

Korean War of 1950-53, whichended in an armistice. “Apeace treaty comes way downthe road,” the official said.

Mr. Trump’s framing of thesummit as a “get-to-know-you” meeting marks a come-down in expectations from lateApril, when he batted awaythe notion that he would ac-cept anything less than theU.S.’s long-stated goal of com-plete, verifiable and irrevers-ible denuclearization.

For North Korea, the aimhas been clear and consistent,said Thae Yong Ho, Pyong-yang’s deputy ambassador toLondon until he defected toSouth Korea two years ago.

In a memoir published inMay, Mr. Thae wrote thatPyongyang’s goal has longbeen to be recognized as a defacto nuclear state. At a meet-ing of North Korea’s diplomatsin Pyongyang in 2016, seniorNorth Korean officials agreedto complete the country’s nu-clear program by 2017, fol-lowed by a diplomatic detentebeginning in 2018.

“The 2018 peace initiativeby Kim Jong Un is to presentthe world with a fait accom-pli,” Mr. Thae wrote, addingthat Pyongyang’s leadershipfeared that international sanc-tions would result in “consid-erable damage” if left in place.

In late April, a week beforehis first meeting with South Ko-rean President Moon Jae-in at


the inter-Korean demilitarizedzone, Mr. Kim convened anemergency meeting of the cen-tral committee of North Korea’sruling party, declaring the com-pletion of the North’s nuclearprogram and vowing to work to-gether with other nuclear statesto “make positive contributionsto the building of the world freefrom nuclear weapons.”

It remains unclear how muchprogress has been made towardnarrowing the gap betweenPyongyang, which prefers aphased approach to disarma-ment in exchange for conces-sions from the U.S. and others,and Washington, which wants arapid surrender of North Ko-rea’s nuclear capabilities.

Mike Pompeo, now U.S. sec-retary of state, visited Pyong-yang twice this spring to hashout parameters of a possibledeal with Mr. Kim. A seniorNorth Korean official hand-de-livered a letter from Mr. Kimto Mr. Trump this month.

In May, Mr. Kim turned over

three U.S. citizens who hadbeen detained in North Koreafor more than a year, and at theend of the month, blew up thesite of the country’s six nucleartests, in an attempt at goodfaith whose disarmament valuewas questioned by independentexperts. But North Korea hascontinued to defy sanctionsthrough ship-to-ship oil trans-fers, while conducting hackingoperations against South Korea.

Recurring tensions on bothsides prompted Mr. Trump totemporarily call off his meet-ing with Mr. Kim in May.

Since then, North Korea haslashed out at South Koreanconservative politicians aswell as journalists who havequestioned Pyongyang’s mo-tives in seeking dialogue, butsteered clear of any attacks onMr. Trump’s close advisers.

Even if the summit doesn’tproduce a sweeping denuclear-ization deal or a more modestdeclaration of amity and good-will, it will have raised the inter-

national profile of Mr. Kim, foryears an international pariah.

In recent months, Mr. Kimhas embarked on a flurry ofdiplomacy. He has meetingsplanned with Russian Presi-dent Vladimir Putin and Syr-ian leader Bashar al-Assad,and on Sunday afternoon, metwith Singaporean Prime Min-ister Lee Hsien Loong.

“It’s hard to see how a smallnation like North Korea couldever garner this kind of interna-tional attention had it not beenfor their nuclear threat,” saidLindsey Ford, a former senioradviser to the U.S. assistantsecretary of defense for Asianand Pacific security affairs.

Ms. Ford, now director ofpolitical-security affairs forthe Asia Society Policy Insti-tute in Washington, added:“We have to assume other na-tions could watch what’s hap-pening here and draw the con-clusion that behaving badlyseems to pay off a whole lotmore than playing nice.”

CAPITAL ACCOUNT | By Greg Ip

TradeWars of 2018:An Alternate History

Fights withallies and ri-vals for whatPresident Don-ald Trumpcalls unfair

trade practices have yieldedacrimony and retaliationfrom Canada, Mexico andEurope, while China has yetto budge. Here’s how eventsmight have unfolded with analternate approach:

Looking back from 2020,it was a masterful applica-tion of strategy and tacticsthat enabled Donald Trumpto win the trade war withChina.

The U.S. president beganunencumbered by the “en-gage with China at any cost”ideology of his predecessorsand recognized that successrequired leverage, whichcame from having allies.

Mr. Trump’s aides hadpersuaded him the real prob-lem with China was not thetrade deficit but how China’smercantilist state capitalismdiscriminated against foreignproducts in China and forcedforeign companies to give uptheir most precious intellec-tual property.

U.S. demands reflectedthat: If China didn’t change,the U.S. would ban Chinesecompanies from acquisitionsof, joint ventures with orsubstantial investments inany U.S. technology company,ban Chinese entities fromsupplying U.S. telecommuni-cations networks and subjectall Chinese investment tostrict reciprocity.

China assumed it couldundercut the U.S. by playingits allies off against it. But ata pivotal G-7 meeting, Can-ada, the European Union andJapan said they would jointhe U.S. in an unprecedentedcase at the World Trade Or-ganization alleging extensiveand undisclosed domesticsubsidies had “nullified orimpaired” the benefitsChina’s accession was meantto bring to its partners.

Emmanuel Macron,France’s president, had alsopersuaded the EU, Canadaand Japan to match the U.S.’sban on Chinese technologyinvestments and its policy ofstrict reciprocity on invest-ment. To slow China’s effortsto build a national championin aviation at their expense,the G-7 agreed to ban jointventures and further out-sourcing to China by theirown aviation companies.

The united front was pos-sible because Mr. Trump’saides had persuaded him toset aside irritants with U.S.allies by striking deals thatlet all sides declare victory.On the WTO, members

agreed to shorten the time ittook to achieve final rulingsand to narrow the sweep ofits appeals panel’s rulings.

On the North AmericanFree Trade Agreement, Can-ada and Mexico acceded toU.S. demands for higherNorth American content forautos and a minimumamount to be built by work-ers earning at least $16 anhour.

Canada agreed to slowlyphase out quotas on dairyimports in return for theU.S.’s doing the same on soft-wood lumber. Mr. Trumpdowngraded his Mexicanborder wall; in return, Mex-ico amended asylum laws tono longer let Central Ameri-can refugees transit throughMexico to enter the U.S.

As the U.S. noose tight-ened, China retaliated: U.S.companies suddenly foundtheir applications to expandin China being slow-walked,and U.S. exports of car parts

and agricultural productswere held up at Chineseports. The U.S. responded byannouncing a “Section 301”investigation that would hitChina with escalating tariffsfor its nontariff barriers.

China, boxed in on trade,played its foreign-policycard. At its prompting, NorthKorea broke off negotiationson admitting internationalweapons inspectors. In re-sponse, the U.S. declared itwould seek to expand missiledefenses in Japan and SouthKorea, step up naval patrolsoff North Korea and ask Viet-nam to host a new U.S. navalbase. China, alarmed, nudgedNorth Korea back to the ne-gotiating table.

By 2019, Chinese officialscapitulated. They announcedan end to joint-venture re-quirements, a phased elimi-nation of limits on foreigninvestment, tariff cuts incritical sectors and a phased-in move to a fully flexible ex-change rate.

As U.S. companies’ salesabroad boomed, they teamedup with the federal govern-ment to retrain thousands offormer factory workers forhigh-paying, high-skilledjobs. Mr. Trump had, aspromised, fixed the globaltrading system by relying asthe U.S. always had, on alli-ance-building.

Looking back from2020, how eventsmight have unfoldeddifferently.

would violate an understand-ing that Washington shouldhave only unofficial relationswith Taiwan.

“They’re setting new redlines,” the official said.

A senior State Departmentofficial is attending, anotherU.S. official said, though theTrump administration hasn’truled out higher-level repre-

sentation. The administrationhas told Chinese diplomatsthat its support for Taiwan isconsistent with the past andthat it is abiding by agree-ments with Beijing.

The renewed friction overTaiwan comes as tensions be-tween Washington and Beijingare already high.

The White House has said it

plans to move ahead afterJune 15 on President DonaldTrump’s threat to impose tar-iffs on $50 billion of Chineseimports. And the U.S. has pro-tested a Chinese militarybuildup in the South China Seathat it sees as a challenge toits ability to respond tothreats to its interests andthose of its allies and part-ners—among them Taiwan.

Though the Taiwan eventwas long planned, its coincidingwith the U.S.-North Korea sum-mit in Singapore adds to China’sconcerns that the Trump ad-ministration is seeking to bluntBeijing’s clout in the region.

The new $240 million homefor the American Institute inTaiwan, as the de facto em-bassy is known, is nine yearsin the making and well behindschedule. Located in a part ofTaipei known for its parks andtech companies, the complexhas been hailed by Kin Moy,AIT’s director and the de factoAmerican ambassador, as a“tangible symbol of U.S.-Tai-wan friendship.”

TAIPEI—Tuesday is a bigday for China, thanks to theTrump administration—andnot only because the U.S. pres-ident plans to meet with theleader of North Korea.

The U.S. will also be openinga new compound for its defacto embassy in Taiwan, a self-ruled island that China claimsas its own and has been a long-standing flashpoint betweenWashington and Beijing. To of-ficials in the U.S. and Taiwan,Tuesday’s ribbon-cutting cere-mony in Taipei symbolizes thestrength of their partnership.

Chinese diplomats haveurged the Trump administra-tion not to dispatch a seniorcabinet secretary to the event,a U.S. official said. Doing so,the diplomats suggested,

BY WILLIAM KAZER

U.S., China in Taiwan SpatTensions over de factoembassy compoundreflect Washington’sturn toward Taipei

The $240 million home for the American Institute in Taiwan, thede facto U.S. embassy, under construction in Taipei

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Singapore Foreign Minister Vivian Balakrishnan welcomed North Korean leader Kim Jong Un Sunday.

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Leaders setfor talks inSingapore

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WORLD NEWS

Trump’s Art of the Foreign-Policy DealAn insider’s guide to the president’s tactics for international negotiations

to some trading partners.When the waiver was up,they would face 25% tariffson steel, 10% on aluminum.

Canada, Mexico and the EUcommenced urgent negotia-tions. Emboldened, Mr.Trump set them a new May31 deadline. A week beforetime ran out, Canadian PrimeMinister Justin Trudeau pro-posed meeting with Mr.Trump and Mexico’s presidentto hash out a final Nafta deal.In a phone call, Mr. Pence toldMr. Trudeau he could havethe meeting in exchange foragreeing to a sunset clausethat would force new negotia-tions in five years. Mr.Trudeau refused, said peoplebriefed on the call.

Mr. Trump’s critics questionthe strategy, noting he has yetto successfully negotiate a ma-jor new trade deal. It alsoshows his deadlines aren’tbluffs, said Lawrence Kudlow,director of the president’s eco-nomic council. “The point is,when the president says some-thing, believe it,” he said.

Method 4: Don’t Calm the Wa-ters—Roil Them

Last year, Mr. Trumpfaced a deadline that col-

lided with a campaign prom-ise, his vow to move the U.S.Embassy in Israel from TelAviv to Jerusalem, as stipu-lated in a 1995 law.

The law allowed presi-dents to sign a waiver andpostpone the move sixmonths at a time, somethingevery previous president didroutinely. In June 2017, Mr.Trump deferred to his na-tional-security team, saidpeople familiar with the dis-cussions, signing a waiver ashis son-in-law, Jared Kush-ner, mapped out a MiddleEast peace plan.

Six months later, Mr.Trump met again with theteam. This time, he was in-tent on keeping his cam-paign promise.

Mr. Trump asked Mr.Kushner to assess what im-pact the embassy movewould have on his diplomaticefforts, said one of the peo-ple. Mr. Kushner “told thepresident it would add uncer-tainty to the peace processand create short-term disrup-tion,” the person said, but“thought it would be net ben-eficial over the long-term.”

Others in the room, in-cluding Rex Tillerson, then-secretary of state, urged thepresident to delay the move,said people familiar with thetalks. Mr. Trump cut off dis-cussion. “I hear you guys,”he told them, according toone of the people, “but Iwant to do it anyway.”

Mr. Tillerson told the pres-ident: “You’re making a hugemistake.”

Three months later, he re-placed Mr. Tillerson with Mr.Pompeo.

Method 5: Make It PersonalMr. Trump sees his per-

sonality as key to securingforeign agreements. WhenChinese President Xi Jinpingvisited Mr. Trump’s Mar-a-Lago resort in April 2017, thepresident shattered weeks ofcareful choreography by im-mediately seeking a one-on-one meeting with Mr. Xi.

“Got a minute?” Mr.Trump asked Mr. Xi, saidpeople familiar with themeeting. As the two strolledthe grounds, the Chinese del-egation repeatedly expressedfrustration that the presi-dent had breached protocol.“They were legitimately los-ing their minds,” said one ofthe people.

On Saturday, as he pre-pared to depart for Singa-pore, Mr. Trump said hewould know “within the firstminute” whether the summitwith the North Koreanleader would be a success.“Just my touch, my feel.That’s what I do.”

—Joshua Zumbruncontributed to this article.

President Donald Trump stunned allies by refusing to sign a communiqué at the end of a Group of Seven summit Saturday. Below,left, Mr. Trump with French President Emmanuel Macron, in April; and right, with Chinese President Xi Jinping in November.

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practices, adding, “Then Justinacts hurt when called out!”

German Chancellor AngelaMerkel said in a TV interviewlate Sunday that it was “sober-ing and somewhat depressing”to learn Mr. Trump wouldn’t en-dorse the final communiqué.

One senior European diplo-mat said Mr. Trump was in-volved in parts of the draftingof the statement and that hisdecision not to endorse it afterhis departure came as a com-plete surprise. “It was a bit of acold shower for us, that’s forsure,” the official said.

The end of the G-7 meeting—coupled with Mr. Trump’s newsconference Saturday, in whichhe said major U.S. trading part-ners had treated the U.S. “likethe piggy bank that everybodyis robbing”—left frayed U.S. tieswith countries that representthe postwar Western-led eco-nomic system. Adding to thetension was Mr. Trump’s call forRussia to rejoin the G-7, a sug-gestion most of America’s tradi-tional allies rejected.

Meanwhile, the Trump ad-ministration and the Kremlinare weighing a summit betweenMr. Trump and Russian Presi-dent Vladimir Putin.

In the next six weeks, theU.S. also will make crucial de-


An hourlong back-and-forth erupted as his team ar-gued they were close to abreakthrough in negotiationswith European allies, thesepeople said. “Ah, f—it,” Mr.Trump finally said, accordingto one of the people. “I’ll giveyou one more extension.”

He relented, even thoughhe didn’t see much value incontinuing talks with Euro-pean counterparts or givingCongress a chance to toughenthe deal, these people said.

“His gut instinct was thatwe were better off out,” saidSen. Bob Corker (R., Tenn.),chairman of the Senate For-eign Relations Committee.“He shared that with me onseveral occasions. In his heartof hearts, I think he did notwant that [negotiation] effortto be successful.”

“OK,” Mr. Trump said in aMay meeting with aides, ac-cording to a person familiarwith the meeting. “I’m shred-ding it.”

Method 2: Soften Up the Oppo-sition and Keep It Off Balance

Early in the administra-tion, even top advisers insidethe White House were con-cerned the president was be-

ing too confrontational withNorth Korea, said current andformer administration offi-cials. The speech preparedfor Mr. Trump to deliver tothe United Nations in Sep-tember sought to isolate KimJong Un. The president de-parted from the draft andturned it personal, calling Mr.Kim “rocket man” on a “sui-cide mission.”

Mr. Trump’s team got onboard with the new rhetoric.But as Mike Pompeo, thenCentral Intelligence Agencydirector, prepared for hisfirst trip to North Korea overthe Easter weekend, the pres-ident switched tactics andsurprised top advisers byurging restraint, the officialssaid. John Bolton, Mr.Trump’s national-security ad-viser, and Vice PresidentMike Pence were instructedto tone down their com-ments.

“Mike, you got it?” Mr.Trump told the vice presi-dent, according to one ofthese officials. “No f—ingcrazy talk from anybody inthe administration.”

The president told Mr.Pompeo the administrationwasn’t going to change its

policy but also needed to giveNorth Korea room to negoti-ate, these people said.

Method 3: Set Deadlines—Realor Imagined—to Create Pressure

No one loves negotiatingagainst deadlines more thanMr. Trump. “He never givesan order without a deadline,”an administration official said.

At times, deadlines are aresult of the president’s hur-riedness. Mr. Trump is so ea-

ger to make decisions thatstaff create arbitrary datesfor implementation, currentand former administration of-ficials said. He also likes tocreate deadlines with conse-quences to prevent othersfrom running out the clock.

When Mr. Trump’s steeland aluminum tariffs werefirst announced in March, hegranted one-month waivers

Donald Trump is scheduledto meet North Korean leaderKim Jong Un on Tuesday inSingapore after a year of tur-bulent foreign-policy maneu-vers built on the U.S. presi-dent’s willingness to takeoutsize risks.

He has riled Europeanleaders by quitting the inter-national nuclear deal withIran, is threatening tariffsand other punitive trademeasures against allies and iscontemplating a summit witha perennial U.S. adversary,Russian President VladimirPutin. After calling Friday forMoscow’s readmission to theGroup of Eight leading na-tions, Mr. Trump stunned al-lies by refusing to sign acommuniqué at the end of aGroup of Seven summit Sat-urday in Canada, castigatingthe summit host, CanadianPrime Minister JustinTrudeau, for criticizing U.S.trade policy.

“He has unrealistic expec-tations,” said one top admin-istration adviser, “and I meanthat as a compliment.”

The Wall Street Journal ex-amined key foreign-policymoments, many previouslyundisclosed, from Mr.Trump’s 16 months as presi-dent. Here’s a look at his stylein international dealings:

Method 1: “I Alone Can Fix It”Mr. Trump made this dec-

laration at the 2016 Republi-can National Convention.Twenty-two months later, onMay 8, 2018, he sat alone at asmall wooden desk in theWhite House basement. Astelevision cameras zoomedin, only a few staffers fromhis innermost circle watchedfrom afar in the DiplomaticRoom as he dramaticallysigned a stack of documentswithdrawing America fromthe seven-nation deal aimedat constraining Iran’s nuclearprogram.

It was a display of show-manship the president him-self devised, employingstagecraft learned on realityTV, administration officialssaid. That solitary actshowed Mr. Trump’s vision ofAmerica as a stand-alone su-perpower prepared to breakwith the past, confrontthreats and bend would-bepartners to its will.

In January, Mr. Trump hadsat in the Oval Office withforeign-policy aides, tellingthem he wouldn’t sign an-other extension of the Irandeal, said people familiarwith the discussions. He hadapproved one such extensionsix months earlier.

ByMichael C. Bender,Dion Nissenbaum andMichael R. Gordon

Mr. Trudeau didn’t addressMr. Trump’s tweets, insteadissuing a statement support-ing the G-7 communiqué theU.S. renounced. His spokes-woman noted Saturday thathis comments representednothing he hadn’t said beforein public and in private withthe president.

Canadian Foreign MinisterChrystia Freeland, a close allyof Mr. Trudeau, said Sundaycomments from the WhiteHouse attacking him aren’t “auseful or productive way ofdoing business.”

“We have to stand up for ourprinciples, our values in Europe,potentially with Canada orJapan,” Ms. Merkel said in an in-terview Sunday on ARD publicTV, adding that the recentevents don’t mark the end of thetrans-Atlantic partnership. “Wedo not let ourselves be draggedover the table time and again.”

Most European officials de-clined to comment on Mr.Trump’s tweets and the rift withMr. Trudeau, noting there waslittle alternative to the alliance.

Some foreign policy expertswarned that the presidentrisked upending the alliance.

“He really is a wrecking balland it’s hard to judge how per-manent the damage is, but it’scertainly dramatic,” said DanielSerwer, a professor at the JohnsHopkins School of Advanced In-ternational Studies and a for-mer U.S. diplomat.

—Kim Mackrael in Ottawa,Andrew Ackerman in

Washington, Nina Adam inFrankfurt and Laurence

Norman in Brusselscontributed to this article.

cisions on its next moves onNafta and whether to imposenew tariffs on China, as well asattend a North Atlantic TreatyOrganization summit mid-Julyin Brussels.

Having Western allies onboard to address issues such asChina’s overcapacity in steelcould build pressure on the U.S.’sbehalf. But that prospect seemeddim as Mr. Trump left the G-7meeting threatening to imposetariffs on Canadian-built cars.

The administration made noeffort at reconciliation. Thepresident’s senior economic ad-visers on Sunday attacked Mr.Trudeau in personal terms, say-ing the Canadian leader had be-trayed Mr. Trump by criticizingU.S. trade policy and threaten-ing retaliatory tariffs soon afterthe G-7 members agreed on ajoint policy statement and Mr.

Trump had departed.“There’s a special place in

hell for any foreign leader thatengages in bad-faith diplomacywith President Donald J. Trumpand then tries to stab him in theback on the way out the door,”senior White House trade ad-viser Peter Navarro said Sundayon Fox. “To my friends in Can-ada: That was one of the worstpolitical miscalculations of a Ca-nadian leader in modern Cana-dian history.”

Lawrence Kudlow, director ofthe White House National Eco-nomic Council, said on CBS:“Trudeau decided to attack thepresident—that’s the key point.”

In another tweet Sundaynight, the president lamentedthat “the U.S. pays close to theentire cost of NATO-protectingmany of these same countriesthat rip us off on Trade.”

Point of ViewAmong G-7 countries, the share of people with a favorable opinion ofthe U.S. has dropped since 2016.


Source: Pew Research Center, latest polls of between 905 and 1,505 adults in each country,conducted between Feb. 16 and April 17, 2017; margins of error: +/- 3.0 to 5.0 pct. pts.

Italy

Japan

U.K.

France

Canada

Germany

72%

72

61

63

65

57

612016

2017

57

50

46

43

35

G-7 TradeTensionsEscalate

‘The point is, whenthe president sayssomething, believe it,’an adviser says.

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cases and turning the stomachof cattle ranchers like Mr.Kendig. He and other old-school protein purveyors con-sider the meat section theirturf, a private reserve ofsteaks and chops with onething in common—a butcheredanimal carcass.

American cattle ranchersare dismayed to find the meatreplacements sold next to thereal thing. “Right in our beefcase,” grumbled Mr. Kendig,who raises about 300 cattlenear Osborne, Kan.

High-tech startups arebuilding burgers from plantproteins and compounds thatgrill and taste more like thereal thing than old-fashionedveggie burgers. Other firms areusing cell-culture technologyto grow animal muscle tissue—otherwise known as meat—instainless steel bioreactortanks, similar to the fermen-tors used to brew beer.

Even dairy cows are feelingthe squeeze, with consumermilk sales threatened by anocean of substitute “milk”made from nuts, peas and oats.The National Milk Producers


Federation has protested bev-erages made from potato, pis-tachio, duckweed, canary grassseed and other greenery bear-ing the “milk” moniker.

Cattlemen and dairy farm-ers are saddling up, and law-yering up, in response. TheU.S. Cattlemen’s Associationhas petitioned the AgricultureDepartment to bar plant-basedproducts from bearing labelsthat say “beef” or “meat,” withsimilar restrictions on meatgrown from animal cells.

Missouri this month passeda similar law, and the GoodFood Institute, which promotesmeat alternatives, plans a legalchallenge. Dairy farmers,meantime, are lobbying theFood and Drug Administration,which supervises milk labels.The milk producers federation

is pushing a bill, the “DairyPride Act,” to enforce rulesthat the word “milk” on labelsonly refer to the output of lac-tating animals.

Stakes are high for theroughly $200 billion U.S. meatmarket. Sales of alternativemeat products account for lessthan 1% of fresh meat sales inthe U.S. but are growing at anannual rate of 24.5%, accordingto Nielsen Total Food View.Sales of plant-based “milk”climbed 7% over the past year,while conventional milk salesdeclined by 4%.

High-tech upstarts say theproposed labeling rules are apoor defense, pointing out thaton a molecular level, plant-based meat products can con-tain the same amino acids, fatsand minerals as animal flesh.

“People don’t get angrywhen you call your cellphone aphone,” said Ethan Brown,chief executive of BeyondMeat.

Jaime Athos, chief executiveof the Tofurky Co., which sellsimitation tofu-based roastsand patties, objects to any banon the word “meat” in labels.Consumers hear tofu, he said,and “expect it to be bland ornot meat-like.”

To get better exposure, Be-yond Meat requires that retail-ers carry its products in thegrocery meat section, ratherthan the frozen-foods case—what Mr. Brown called the“penalty box.”

Alison Pham, 22, of Bokee-lia, Fla., is a vegan who seesthe realistic looking BeyondMeat patties as a way to gether father to try a plant-baseddiet. She reaches for the pack-age in the same meat-filledcases she long avoided.

“I don’t look at anythingelse,” she said.

In Washington, D.C., wherethe food label battle is beingwaged, industry groups arespending tens of thousands ofdollars on lobbying, accordingto financial filings.

The food fight surfaced inCapitol Hill cafeterias in 2012,when staffers formed the Con-gressional Vegetarian Staff As-sociation to protest a lack ofplant-based offerings on themenu. A “Meatless Mondays”sign, intended to support theirgoal, drew a letter of protest

from meat industry represen-tatives.

Adam Sarvana, a HouseDemocratic staffer who co-founded the vegetarian group,said its ranks have swelled inthe years since.

A meat-replacement lun-cheon hosted by the group lastyear ran out of Tofurky beforethe arrival of the guestspeaker, U.S. Rep. Ted Deutch,a Florida Democrat.

Mr. Sarvana said the groupstill battles prejudice, but “theidea we are dirty hippies isplayed out. The premise is be-coming more mainstream andtrendy.” Mr. Sarvana and othermeatless Capitol Hill staffersmust still contend with the in-fluence of such entrenchedprotein powers as the NorthAmerican Meat Institute.

The meat trade group’s an-nual hot dog lunch, an outdoorevent now in its fourth decade,draws more than 1,000 law-makers, staffers and meat-in-dustry lobbyists. The lunch isso popular, officials said, thegroup maintains an invitation-only policy and requires abadge for admission.

Missing from the menu arevegetarian hot dogs, said MeatInstitute public affairs headJanet Riley. “If it’s made oftofu, it’s a long tubular hot-dog-like food product,” shesaid, “not a hot dog.” The mid-summer cookout is open tonon-meat eaters, Ms. Rileysaid. “We do serve side saladsand cookies.”

WORLD NEWS

report and news on a dailynoon TV broadcast, critics sayshe effectively runs the coun-try. Ms. Murillo has also alien-ated many of Mr. Ortega’s oldSandinista comrades-in-arms.

Nicaraguans have growntired of corruption allegationssurrounding the ruling couple.They resent the Ortegas’ au-thoritarianism and say the rul-ing couple have come to re-semble the Somoza familydynasty, which ruled Nicara-gua for decades. Students saythe protests are a demand forfreedom and democracy.

“The students are playing akey role. For the first timesince he took power, Ortegahas lost the streets,” saidHumberto Belli, a former edu-cation minister.

The big question now iswhether Mr. Ortega, 72, will be

able to stay in power. He hassaid he is unwilling to leaveoffice before his five-yearterm ends in 2021.

After meeting with Nicara-guan bishops on Thursday fol-

lowing a breakdown in talksbetween the government, itsopponents and the private sec-tor, Mr. Ortega said he wouldstudy their proposals to “de-mocratize” the country.

tradition. “The awakening ofthe Nicaraguan people has noturning back.”

This granddaughter of arevolutionary fighter com-manded a hilltop campsitesurrounded by sandbagtrenches overlooking the now-closed campus.

What began as a protestagainst tax increases to fundNicaragua’s cash-strapped pen-sion system morphed into a na-tionwide movement that aimsto force Mr. Ortega’s ouster.

Nicaragua’s governmentsays that the protests are aplot to overthrow a democrati-cally elected government.

The rebellion caught mostNicaraguans by surprise. Justtwo years ago, Mr. Ortega wonhis third consecutive term aspresident by a landslide. Dur-ing his 11 years in power, hehas worked closely with thecountry’s private sector to de-liver economic growth. He haskept Nicaragua largely free ofthe toxic levels of violencethat afflict the region.

But the progress has comeat a high price. Mr. Ortega haslargely dismantled the coun-try’s fragile democratic institu-tions. He controls the country’scongress, its Supreme Courtand judiciary as well as its elec-toral agencies and most media.

The rebellion is also fueledby the deep unpopularity ofhis eccentric wife, Vice Presi-dent Rosario Murillo. Beyondgiving the national weather

MANAGUA, Nicaragua—Thechildren and grandchildren ofNicaraguan revolutionarieswho fought alongside DanielOrtega to topple a dictatorshipfour decades ago are nowleading a movement to ousthim from power.

The nation’s largest publicuniversity, once a stronghold ofMr. Ortega’s leftist Sandinistarevolution, has become a com-mand bunker for a student-ledrevolt. The government is loathto dislodge the several hundredstudent rebels holed up at Na-tional Autonomous University,where dozens of barricadesmade of paving stone andsheet iron control access.

More violence could furtherinflame a conflict duringwhich police and paramilitarygroups have killed at least 120people in the past sevenweeks. A student leader saidthat includes four people atthe university.

“Ortega is a murderer andhe has to go now,” said a 21-year old engineering studentwearing olive-green fatigueswho calls herself ComandanteTortuga (Commander Turtle),a moniker in the Sandinista

BY JUAN MONTES

NicaraguanStudentsLead RevoltGrandchildren ofrevolutionaries whofought at side ofOrtega seek his ouster

A rebel student leader who goes by the name Comandante Tortuga stood at a barricade last week. Below, a student leader known bythe pseudonym Tigrillo showed a gunshot wound he said he received during the university takeover.

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FROM PAGE ONE

AFGHANISTAN

Taliban AnnounceTheir First Cease-Fire

The Taliban on Saturday an-nounced their first cease-firesince the U.S.-led invasion of Af-ghanistan in 2001, saying theywould stop military operationsagainst government forces tomark the Muslim observance ofEid al-Fitr.

The proposed temporary lullin fighting comes after AfghanPresident Ashraf Ghani onThursday announced an eight-day unilateral cease-fire in offen-sive operations against the Tali-ban to coincide with theconclusion of the Muslim holymonth of Ramadan and thethree-day Eid festival that cele-brates its end.

The Taliban, Afghanistan’s larg-est and most potent insurgency,didn’t explain the move. But itappeared to be an effort to re-gain some political initiative afterMr. Ghani’s cease-fire announce-

ment and his offer in late Febru-ary to recognize the Taliban as apolitical entity and enter reconcili-ation talks without conditions ifthe Islamist movement endedfighting. The Taliban haven’t re-sponded formally to the Afghan

president’s peace proposal.The Taliban are fighting in

more areas of Afghanistan thanat any time since they wereforced from power nearly 17years ago.

In their announcement on

Saturday, the Taliban pointedlyexempted U.S.-led NATO forcesfrom their plan to suspend fight-ing for Eid, saying they wouldcontinue to attack “foreign in-vaders.” Eid begins June 16.

—Craig Nelson

IRAQ

Fire at WarehouseHarms Vote Recount

A fire broke out in a Baghdadwarehouse storing ballot boxesand voting equipment, in whatsome lawmakers said was an in-tentional act aimed at thwartinga manual recount of results foran election dogged by fraud alle-gations.

Interior Ministry spokesmanSaad Maan said the fire startedin one of four warehouses con-taining ballot boxes, documentsand equipment belonging to theIndependent Higher ElectoralCommission, which organized thevote on May 12. Army vehiclesarrived to transport the survivingballot boxes to a safe location asfirefighters worked to extinguishthe blaze.

The fire broke out hours afterIraq’s Supreme Judicial Council ap-pointed a panel of judges to over-see a manual recount.

—Isabel Coles

The American Meat Institute’s annual Hot Dog Lunch in 2016.

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DEVASTATION: A mourner in San Juan Alotenango, Guatemala, carried a coffin on Sunday with theremains of her best friend, who died after the eruption last week of the Volcán del Fuego.

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Mr. Ortega’s opponents aredemanding that he pass elec-toral and constitutionalchanges to level the politicalplaying field and guaranteefree, early elections.

At the university, protestingstudents share meals while aradio mostly plays heavy metaland techno. Most sleep here be-cause of fear that they could bekidnapped by police or paramil-itary gangs if they return home.

Gunmen have wounded sev-eral students during nighttimeattacks. Tigrillo, or Little Ti-ger, a 22-year-old engineeringstudent, was wounded lastmonth when a bullet grazedhis left temple.

“We won’t give up. Whowill win in the end, a corruptdictator or millions of Nicara-guans? The answer is obviousto me,” he says.

Pope Francis warnedagainst the “continued search”for fossil fuels Saturday andurged a gathering of oil exec-utives, investors and offi-cials to meet the world’s en-ergy needs while protectingthe environment and the poor.

“Civilization requires en-ergy, but energy use must notdestroy civilization!” he said ata Vatican climate change con-ference attended by top execu-tives including Exxon MobilCorp. Chief Executive DarrenWoods, BP PLC Chief ExecutiveBob Dudley and BlackRock Inc.Chief Executive Laurence Fink.

Environmental protectionhas been a signature themefor Pope Francis, who has saidhe took the name of St. Fran-cis of Assisi in part because ofthe medieval saint’s love forthe natural world.

At the conference, co-spon-sored by the University of NotreDame and featuring nearly20 speakers Friday and Satur-day, the pope said that an esti-mated 1 billion people still lackelectricity and noted that accessto energy is an essential re-source for escaping poverty.

But he warned that a fail-ure to reduce the use of fossilfuels would lead to a “spiral ofextreme climate changes dueto a catastrophic rise in globaltemperatures, harsher envi-ronments and increased levelsof poverty.”

The poor “suffer most fromthe ravages of global warm-ing,” he said, through watershortages and extreme weatherwhich in turn drive mass mi-gration, among other ways.

Pope Francis commendedoil-and-gas companies foradopting policies that accountfor “assessment of climate risk”and he encouraged the practiceof environmentally sensitive“green finance” investmentstrategies. But he warned that“markets and technology”wouldn’t be sufficient to stopclimate change, since our “cur-rent economic system thriveson ever-increasing extraction,consumption and waste.”

He lamented the “continuedsearch for fossil fuel reserves”despite the 2015 Paris Agree-ment, which “clearly urgedkeeping most fossil fuels un-derground.”

BY BRADLEY OLSONAND FRANCIS X. ROCCA

PopeDecriesFocus onFossil Fuels

THEWALL STREET JOURNAL. * * * * Monday, June 11, 2018 | A10A

said, there can be a “collectivesense of loss that many peoplefeel.”

Alan Ross, executive direc-tor of Samaritans suicide pre-vention center in New York,said that in many cases, indi-viduals are already struggling

with mental health and thenews of a death prompts themto seek help.

The national hotline is anetwork of crisis centers thatprovide over-the-phone coun-seling to individuals whomight be contemplating sui-

cide. Calls to the national life-line are directed to centersnear the caller where they cantalk to trained counselors. Thelifeline has a network of morethan 150 local crisis centers.

“The research is really clearthat these calls have been

INDIAN LIMITED EDITIONTRIBUTE TO BURT MUNRO

GREATER NEW YORKcase for parole to the boardthis week, according to aspokesman for the state De-partment of Corrections andCommunity Supervision. TheBlack Liberation Army, an off-shoot of the Black PantherParty, claimed responsibilityfor the killings.

Eddie Matos, 50, convictedin 1990 of murder for pushingOfficer Anthony Dwyer, 23,down an air shaft of a buildingin Times Square after a bur-glary, is slated for a parolehearing later in the month.

The parole board is now re-quired to use computer soft-ware, called Compas, to gaugethe danger an inmate wouldpose to society if released. In2017, Gov. Andrew Cuomo re-quired the board to explain toa felon the reasons for its de-cision if it went against thefindings of that software. Inaddition to the crime commit-ted, the board considers afelon’s level of remorse andbehavior in prison, and state-ments made by victims ortheir families.

In the wake of Mr. Bell’s re-lease, police officials say the

parole board isn’t puttingenough emphasis on the se-verity of the crime when de-ciding whether to release aninmate.

“Especially in the case ofmurder and murder of a policeofficer,” said Patrick Lynch,president of the Patrolmen’sBenevolent Association.“That’s the type of evil youdon’t put aside.”

Mr. Lynch said he is “ex-tremely worried” that Mr. Bot-tom and Mr. Matos will be re-leased.

Inmate advocates say theefforts to keep an inmate inprison indefinitely send a mes-sage that some people are in-capable of rehabilitation. Thisalso runs counter to a nationalmovement to lower the incar-ceration rate.

Those behind the push tocurtail the use of parole forpeople who have killed policeofficers are effectively encour-aging parole boards to ignorethe law, said Steven Zeidman,a professor at CUNY law andboard member of Prisoners’Legal Services of New York.

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Two men convicted of kill-ing New York City police offi-cers are scheduled this monthto appear before a paroleboard that could free them, re-newing a debate over when,and whether, parole should begranted to so-called cop-killers.

In April, Herman Bell, 70years old, was released on pa-role after spending four de-cades in prison for the murderof two police officers, JosephPiagentini, 28, and WaverlyJones, 33. The move prompteda public backlash, includingopinion articles and social-me-dia campaigns waged by thecity’s largest police union, theNew York Police Departmentand elected officials.

Anthony Bottom, 66, con-victed with Mr. Bell in the 1971Harlem murder of those offi-cers, is scheduled to make his

BY ZOLAN KANNO-YOUNGS

Wrenching Parole Decisions LoomTwo men who killedpolice officers decadesago are seeking release;victims’ families say no

Diane Piagentini, shown in 2004, with a photo of her husband,Officer Joseph Piagentini. One of the men convicted in his 1971murder has a parole hearing scheduled for this week.

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New York City has agreedto spend more than $2 billionover a decade to settle fed-eral prosecutors’ investiga-tion into health-and-safety is-sues at the country’s largestpublic-housing authority, ac-cording to a person familiarwith the negotiations.

An announcement of thesettlement is expected assoon as Monday, people fa-miliar with the negotiationssaid. City officials have beenengaged in negotiations withprosecutors from the South-ern District of New York, whobegan investigating lead paintand other issues in New YorkCity Housing Authority build-ings several years ago.

Under the terms of theagreement, New York Citywill spend $1 billion over thefirst four years, in addition towhat it has already promisedto the agency, said the personfamiliar with the negotia-tions. For each of the follow-ing years over the 10-yearterm, the city will spend $200million annually.

During the terms of theagreement, called a consentdecree, the public-housing au-thority will also be overseenby a federal monitor.

A City Hall spokesman de-clined to comment.

New York’s public-housingauthority oversees the equiv-alent of a small city, with176,000 apartment unitsacross the five boroughs.

Over the years, the agencyhas suffered as federal invest-ment has failed to keep pacewith needed repairs and localpoliticians have shied awayfrom bringing in more privateinvestment. The authoritynow needs an estimated $25billion in repairs, up from $6billion in 2005.

This past winter, some ofthe housing authority’s an-cient boilers gave out, leavingmore than 320,000 peoplewithout heat or hot water.

In addition, the city’s De-partment of Investigationsaid in a report late last yearthat the authority had failedto conduct lead-paint inspec-tions as required by federalrules and city laws for fouryears.

The report said formerHousing Authority Chair-woman and Chief ExecutiveShola Olatoye had submitteddocumentation to federal offi-cials showing the agency hadcomplied with federal rulesfor lead paint, which wasn’tthe case. Ms. Olatoye had saidshe verbally told the federalHousing and Urban Develop-ment Department officialsabout the lead-paint lapses.She resigned from the agencyin April.

HUD took disciplinary ac-tion against the authorityearlier this spring, when itcurbed the city’s ability tospend money on major re-pairs to its public housingstock.

BY CORINNE RAMEYAND LAURA KUSISTO

City to Pay$2 BillionIn HousingSettlement

The public housingauthority now needsan estimated $25billion in repairs.

PUERTO RICO STRONG: Zuleika Torrez of Paterson, N.J., joined the festivities on Sunday as crowds lined Fifth Avenue for the 61st annual celebration in Manhattan.

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shown to reduce emotionaldistress and suicidal crisis,”Mr. Draper said.

Democratic Sen. ChuckSchumer on Sunday called forincreased federal funding forsuicide-prevention programs,saying that several programsproven to directly help peopleand prevent suicide haven’t re-ceived funding increases foryears, even as suicides havebeen on the rise.

Mr. Schumer noted that aNew Yorker dies by suicide ev-ery five hours.

New York City’s own crisiscenter—NYC Well—waslaunched in October 2016 andhas since handled more than340,000 calls, texts, chats andonline mobile crisis referrals,according to a report releasedlast month by the New YorkCity Department of Health.

New York residents seekingsupport for mental-health con-ditions or substance abuse forthemselves or their loved onescan call 1-888-NYC-WELL ortext “WELL” to 65173.

As the world heard thenews that chef, writer andtelevision host Anthony Bour-dain died in an apparent sui-cide, the same phone numberflooded the internet.

The National Suicide Pre-vention Lifeline num-ber—1-800-273-8255—waspinned to the bottom of me-morial Instagram posts, sharedin tweets and ran alongsidenews obituaries.

Whenever a notable personcommits suicide, calls to thehotline spike, said DirectorJohn Draper. Just days beforeMr. Bourdain’s death, handbagdesigner Kate Spade also tookher life. Calls jumped 25% inthe two days after her death,compared with the same pe-riod the previous week, Mr.Draper said.

People often feel connectedto celebrities, whether througha television program or aproduct they purchased. Whena celebrity dies, Mr. Draper

BY LARA KORTE

Suicide-Hotline Number Spreads and Calls SurgeBourdain Left MarkOn City’s Food Scene

Gary Greengrass, third-gen-eration owner of Manhattan’sBarney Greengrass, laid outNova Scotia salmon scrambledwith eggs and onions on a ta-ble as a tribute to celebratedtelevision personality, authorand chef Anthony Bourdain.

Mr. Bourdain, who wasfound dead in France on Friday,featured Mr. Greengrass’s res-taurant on an early episode ofhis Food Network show, “ACook’s Tour.” That stamp of ap-proval certainly brought in busi-

ness from out-of-towners, whowould cite the show, said Mr.Greengrass. But more impor-tant, Mr. Bourdain’s praise“made us feel appreciated forthe hard work we do.”

New York’s culinary worldmourned the death of Mr. Bour-dain, a New Yorker, who rock-eted to notoriety with his 2000book “Kitchen Confidential.”

His enthusiasm and plainspeaking as a tastemaker influ-enced a generation of curiouseaters, and boosted restaurantsand purveyors around the city.

Allen Salkin, a food writerand author, recalled that Mr.Bourdain was one of those ce-lebrities who remembered to

shake the hand of every dish-washer. His television programstook a deeper dive into a res-taurant, ultimately earning therespect of staff and cooks, Mr.Salkin said.

“Every restaurant he evervisited still displays the photosof him eating there,” he said.

Restaurateur Jason Wang,the chief executive of Xi’an Fa-mous Foods founded in Queens,said in an Instagram post thatMr. Bourdain’s visit to his fam-ily’s food stall in 2007 “helpedbring our family out from livingin one room in Flushing to liv-ing the American dream.”

—Melanie GrayceWest and Charles Passy

Revelers Show Their Pride at the National Puerto Rican Day Parade

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A10B | Monday, June 11, 2018 * * * * THEWALL STREET JOURNAL.

But suburban properties arestill getting blown away bydowntown buildings. The over-all office vacancy rate for Man-hattan at the end of the firstquarter was 8.5%, according toreal-estate-services firm JLL.Meanwhile New Jersey’s over-all office vacancy rate was23.9%, JLL said.

Suburban landlords have re-sponded with features designedto create an urban-style envi-ronment. “If you are looking to

Less Desk Space,More Work Options

Landlords are redesigningoffice spaces to reflect the lat-est concepts in workplace effi-ciency.

Employees are getting lessdesk space of their own butmore options of places towork, with different furnitureand décor.

Food and drink also arevery important. Landlords have

been improving the cafeteriasthat were parts of the originaloffice-park designs and add-ing food trucks, restaurants,bars and coffee shops on cam-pus to provide accessiblechoices that extend beyond theworkday.

The basic office gym—witha handful of treadmills andweight equipment—also is go-ing the way of the slide rule.Top-tier office buildings nowoffer professional fitness-cen-ter operations with classessuch as yoga or spinning.

ane Piagentini.Edward Dwyer, the father

of Officer Dwyer, said hiskiller, Mr. Matos, shouldn’t befreed. “An eye for an eye,” hesaid.

Robert Boyle, Mr. Bell’s at-torney, said his 70-year-oldclient satisfied the criteria forhis release and took responsi-bility for the crime on hiseighth and final appearancebefore the board.

“Everyone is entitled tofair consideration when theygo before the parole board,”Mr. Boyle said.

Barbara Hanson-Treen,who served on the paroleboard from 1984 to 1996,agrees. She said the backlashafter Mr. Bell’s release threat-ens the independence of theboard and its process.

Ms. Hanson-Treen under-stands the pressure of consid-ering a convicted cop-killerfor parole. She said she over-saw the hearing for ShavodJones, who shot and para-lyzed NYPD Officer StevenMcDonald in 1986.

Even though OfficerMcDonald, who died last year,publicly forgave Mr. Jones,Ms. Hanson-Treen denied himparole, saying he would con-tinue to benefit from the pro-gramming in prison.

“It could’ve been Mrs.Smith or the milkman. Itwasn’t because of the value ofthe victim,” she said. “He wasnot ready to come out.”

Mr. Zeidman called such a po-sition “a dangerous [one] totake,” for law enforcement,which is required to upholdthe law.

Sentencing laws havechanged since Messrs. Matosand Bottoms were convicted.The most serious penalty forthe murder of a police officerused to be 25 years to life inprison with the possibility ofparole. That changed in 2005when the state passed a lawallowing judges to issue a lifesentence without parole.

Mr. Lynch said Messrs. Ma-tos and Bottoms “won the pa-role lottery by chance.”

In a statement, Mr. Bottom,who now goes by Jalil Mun-taqim, said in the 47 years hehas been in prison, he hasdone “everything necessary,required, and beyond to begranted release on parole.”

“But the Board continuesto deny me based on the na-ture of the crime,” he said. “Ifnot for the PBA lobbying theBoard of Parole to disregardthe law by denying me parole,I would have been released along time ago. What else can

ContinuedfrompageA10A

Two KillersOf OfficersSeek Parole

I do?”An attorney for Mr. Matos

couldn’t be reached for com-ment.

Mayor Bill de Blasio, aDemocrat who campaigned onpolice reform, and Commis-sioner James O’Neill said thismonth they believe both Mr.Matos and Mr. Bottom shouldserve their full life sentences.“That crime was an outrightassassination,” Mr. O’Neillsaid of Mr. Bottom’s case.

Officers Piagentini andJones were ambushed andshot multiple times byMessrs. Bell and Bottom as

they returned to their patrolcar after answering a 911 call.

Before Mr. Bell was re-leased, the NYPD issuedstatements through Twittersaying Mr. Bell wasn’t re-morseful. Mr. Lynch stoodwith the families of the deadofficers, sharply criticizingthe board.

The widow of OfficerPiagentini said someone whokills an officer isn’t deservingof redemption. “This is acrime of all crimes,” said Di-

The attorney for onereleased inmate saidhe took responsibilityfor his crime.

attract and retain the best andbrightest, you need to be in thebuilding that helps you dothat,” said Jeremy Neuer, exec-utive vice president at CBREGroup Inc., a real-estate-ser-vices firm. “The landlords whoare winning are providingunique experiences around ten-ants. If they’re not investing,they’re going to lose.”

SJP Properties, the owner ofthe Somerset Corporate Center,a five-building campus in

Bridgewater, N.J., sold two par-cels to be developed into a130,000-square-foot Life TimeInc. fitness center and an ACHotel by Marriott.

“We have seen the future,and if we want to keep ourbuildings 100% leased, we needto bring forth amenities,” saidJeffrey Schotz, executive vicepresident of leasing and mar-keting at SJP Properties.

At Kearny Point, N.J., de-veloper Hugo Neu Corp. is ren-ovating an early 20th-centurybrick building into a publicfood hall with a bar and brew-ery on a 130-acre campus,where the company has beenconverting historic shipyardbuildings into office and light-industrial space. The companyis adding walking paths and anamphitheater for events andconcerts, among other features.

“That’s what progressivecompanies want because that iswhat their talent is going towant as more and more peoplelive in cities.” said Nick Shears,director of leasing and market-ing at Hugo Neu.

Investing in amenities is

paying off for some landlords.For example, Rubenstein gotthe idea of a stand-alone ame-nity building from its redevel-opment project of a three-building campus in Whippany,N.J.

The campus wasonly 50% leased in 2012 when aventure of Rubenstein and Vi-sion, an investment-, develop-ment- and asset-managementfirm, purchased the campus for$25 million. The venture in-creased its occupancy partly byadding an amenity buildingthat included a fitness center,cafe and conference center.

Last year, the venture soldthe campus to Barclays PLC, for$69 million, Rubenstein’s Mr.Card said.

The Rubenstein and Visionjoint venture is creating a simi-lar type of amenity building atLatitude, a Parsippany, N.J., of-fice campus. This time, how-ever, the 2,500 square-footamenity center will join two of-fice buildings.

“In New Jersey, we like toplay off of the flight-to-qualitytrend,” Mr. Card said.

Herman Bell, right, in 1973. He killed a police officer in 1971 and was released on parole this past April.

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Owners of suburban officeparks have resorted to foodtrucks, yoga studios, cafes withbaristas and meeting spaces re-sembling hotel lobbies in theircampaigns to remake the imageof the sterile suburban campus.

Now another feature isemerging in the competition: a

s t a n d - a l o n ebuilding de-voted entirely toa m e n i t i e s ,

which serves as an office-parkclubhouse of sorts.

The Warren Corporate Cen-ter, an 800,000-square-foot of-fice park in Warren, N.J.,owned by a venture of Ruben-stein Partners LP and VisionReal Estate Partners, will soonhave a central hangout. Theventure is investing about $12million to build a 19,000-square-foot structure a shortwalk from the office park’s fivebuildings that will house alandscaped roof deck, a fullbasketball court, fitness center,dining, conference center andmeeting spaces.

“It’s all based around thehospitality experience broughtto the office world,” said Ste-phen Card, a principal of Phila-delphia-based Rubenstein, areal-estate investment-manage-ment firm.

The central amenity-ladenhangout is among the latestmakeover tools suburban officelandlords have used as theyequip their properties with fea-tures designed to appeal to ayounger workforce. Investing inthese major overhauls has be-come a prerequisite for leasingin suburban office markets thathave been struggling to com-pete with trendier downtownmarkets.

The vacancy rate is above20% in many suburban officemarkets in New Jersey andWestchester County, N.Y., ac-cording to brokers. That ratehas improved slightly in recentyears as developers have con-verted obsolete office proper-ties to other uses, such asapartment buildings or evenwarehouses.

BY KEIKO MORRIS

Next for Office Parks, a Clubhouse

PROPERTY

Rooftop yoga at Kearny Point, a redevelopment in Kearny, N.J. Suburban office parks are loading up on amenities to attract tenants.

RENEEROMAN

New York City plans to testdockless bike share systems infour boroughs this summer,and companies are lining upfor the chance to get in on theaction.

Dockless systems will betried out in Coney Island, inBrooklyn, and the Rockaways,in Queens, in the first weeksof July. Two more pilots areexpected to launch by the endof the month, one near Ford-ham University in the Bronxand the other on Staten Is-land’s North Shore.

Among the biggest concernsfor city officials is how thedockless bikes will affect thecityscape. Some cities withdockless bike shares such asDallas have received complaintsthat bikes are dumped on side-walks and clutter city streets.

“If you look around theworld you will see mixed re-sults of how dockless programshave been working,” said Mi-chelle Craven, an assistantcommissioner at New YorkCity’s transportation depart-ment who oversees the bikeshare program.

Twelve firms expressed in-terest in applying for the pilot.Only about half showed up forinterviews at the BrooklynNavy Yard on June 1, accordingto people who attended, inwhich each company demon-strated their technology andanswered questions from trans-portation department officials.

Among the companies com-peting in New York are Ofo andMobike, two major Chinesefirms that offer basic bikes thathave a locking mechanism onthe wheel.

Other competitors includePace, Lime, Motivate, the par-ent company behind Citi Bike,and Jump, which was recentlyacquired by Uber TechnologiesInc.

BY PAUL BERGER

DocklessBike ShareWill GetTrial Run

GREATER NEW YORK

NY

THEWALL STREET JOURNAL. * * * * * Monday, June 11, 2018 | A11

LIFE&ARTS

WORKING TO KEEP YOUR HEADabove water while opponents jumpon top of you will definitely getyou fit if you do it often enough.Water polo fanatic Chris Judge hasbeen doing it for 50 years.

He takes after his father, FrancisJudge, a water polo player whocompeted in the 1952 Olympic tri-als. “As a small kid I remember be-ing tossed around like a ball at mydad’s water polo team practices,”he says.

Chris Judge followed his father’spath into a sport he compares torugby in a pool. A four-year starterand later coach at Fordham Univer-sity in the Bronx, N.Y., he went onto play with the U.S. national waterpolo team and was an alternate forthe 1984 Olympic team.

Now 59, Mr. Judge, a certified fi-nancial planner based in Ardsley,N.Y., shows no signs of hanging uphis Speedo, despite his sport’sphysicality.

Water polo is one of the oldestOlympic team sports and one ofthe most physically taxing. Playersmust tread water in a pool averag-

ing 7 feet in depth.Touching the bottom of the pool

isn’t allowed and only the goaliecan use two hands. Teams of sevenplay four-to-eight-minute quarters.

“I always tell people you have tobe in shape just to come to prac-tice,” Mr. Judge says.

Players use an eggbeater kick,where their legs alternate breast-stroke kicks, to propel their hipsabove the water to block andthrow shots.

“At the same time, a 200-poundguy is grabbing you by the throat,”Mr. Judge says. At 6-feet-2 and 235pounds, he says his size helps himin the pool.

He introduced his four children,now 20 to 29, to water polo. Histwo daughters didn’t like gettingelbowed in the pool, he says, buthis two sons embraced the sport.His youngest attended college inSanta Barbara, Calif., which led toMr. Judge joining the Santa Bar-bara Masters team. For the pastfive years he’s competed with themaround the globe.

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ing best musical nominees “MeanGirls,” “Frozen” and “SpongeBobSquarePants.”

“All four of tonight’s best musi-cal nominees are based on movies,but only one of these movies paidfor my boat,” Ms. Fey said onstageto laughs from the audience at Ra-dio City Music Hall.

“Mean Girls” and “SpongeBob”each received 12 Tony nomina-tions, the most of any shows thisyear, but they were largely shutout. “SpongeBob” won for its sce-nic design, while “Mean Girls”went home empty-handed.

“Angels in America” won bestrevival of a play. Andrew Garfieldwon best lead actor in a play forhis performance as Prior Walter, ayoung gay man with AIDS. NathanLane, who portrays real-life attor-ney Roy Cohn, won best featuredactor, his third Tony in a decades-long theater career.

Mr. Garfield told reporters afterhis win that “Angels in America”was “for anyone who’s felt likethey don’t belong” and said thatworking on it “changed me—Idon’t know how yet, but it has.”

Mr. Springsteen’s “Springsteen on

Broadway,” which has played tosold-out crowds since it opened inOctober, wasn’t among the nomi-nees. Yet Mr. Springsteen received aspecial Tony award for his show, andhe returned the favor with a perfor-mance during the awards show.

Laurie Metcalf won best fea-tured actress in a play for her rolein “Three Tall Women.” Ms. Met-calf, an Oscar nominee for “LadyBird,” won a Tony last year aswell, for “A Doll’s House, Part 2.”

Glenda Jackson, one of theother stars of “Three Tall Women,”won best lead actress. Ms. Jack-

son, 82 years old, has won praisefor her take on the Edward Albeeplay’s matriarch, with Wall StreetJournal theater critic Terry Tea-chout calling it “an acrid, wised-upperformance that is as pointed asyou’d expect from so celebrated anactor.”

It was her first win after fourprevious nominations. Asked afterexiting the stage how it felt, “I wastempted to say ‘It’s taken you longenough,’ but I thought it was toorude,” she said.

—Kathryn Lurie contributedto this article.

TONY AWARDS

‘Band’s Visit,’ ‘Potter’Win Big‘Angels in America,’ ‘Three Tall Women’ win for acting performances

“The Band’s Visit,” the tale ofan Egyptian orchestra’s accidentalforay into an Israeli town, won 10Tony Awards on Sunday, includingbest musical, while “Harry Potterand the Cursed Child” took bestplay and swept the technical cate-gories.

The critically praised “TheBand’s Visit” wasn’t as high-profileas its best-musical competition,“Mean Girls,” “Frozen” and“SpongeBob SquarePants,” but itscored upsets such as best book ofa musical, beating “Mean Girls”creator Tina Fey.

“Music gives people hope andmakes borders disappear,” pro-ducer Orin Wolf said in an accep-tance speech. “Our show offers amessage of unity in a world thatmore and more seems bent on am-plifying our differences.”

“Harry Potter,” the two-partdrama drawn from author J.K.Rowling’s world of wizardry, wonsix Tonys, including best directionas well as scenic, costume, lightingand sound design.

Broadway, more than ever, hasbecome a way for artists to extendtheir brands, and this year talentsranging from Ms. Rowling to rockstar Bruce Springsteen to comediansMs. Fey and Amy Schumer foundtheir way to the Great White Way.Broadway reaped the benefits at thebox office, reaching a record $1.7billion in ticket sales for the 53-week season, which ended May 27.

The season was dominated byproductions based on popularmovies or television shows, includ-

BY CHARLES PASSY

WHAT’S YOUR WORKOUT? | By Jen Murphy

THE NONSTOP CHALLENGE OFWATER POLO

Chris Judge takes a shot in a pool in Pelham Manor, N.Y. At 59, he still spends hours a week on the sport.

Katrina Lenk and Tony Shalhoub, left,both won acting Tonys for theirperformances in ‘The Band’s Visit’;above, ‘Harry Potter’ actress NomaDumezweni and writer Jack Thorneonstage after the production won forbest play.

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The cast of ‘Carousel’ perform onstage during Sunday’s Tony Awards in New York. The musical was nominated for 11 awards, with wins for choreography and actress Lindsay Mendez.

A12 | Monday, June 11, 2018 THEWALL STREET JOURNAL.

LIFE & ARTS

cutlet sandwich. He and his wifetrade off cooking dinner.

“I’m famous for my chicken andpasta and my wife is great at fish,”he says. On Sunday evenings helikes to splurge on steak and pota-toes.

The Gear & CostWater polo is a minimalist sport.“I have a lot of Speedos,” Mr.Judge jokes. He estimates that hespent $400 on his home gymequipment. He pays about $550 ayear to use his community pool.

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“We usually look for tourna-ments in places that our wiveswould like to go on vacation,” hesays.

Last year, the team beat Ger-many in overtime to win the 55+FINA World Masters Championship

ContinuedfrompageA11

WELLNESS

Hospitals Address Doctor BurnoutDOCTORS WHO FEEL stressed orburned out are getting some ur-gent care.

To address what experts viewas a national epidemic of physiciandiscontent, hospitals are expand-ing their c-suites with the new po-sition of chief wellness officer.

In recent years hospitals havetried a variety of wellness pro-grams, but there is a sense thisapproach didn’t treat the causes ofphysician angst and alienation.

“Telling doctors to eat granola,do yoga and be more resilient isn’tgoing to address this problem,”says Tait Shanafelt, who was ap-pointed chief wellness officer ofStanford Health Care a year ago.Instead, hospitals need to reform asystem that has become debilitat-ing to physicians—and left pa-tients vulnerable to medical errorsand even malpractice, Dr.Shanafelt says.

Other major medical centers, in-cluding Mount Sinai Health Systemin New York and UAB Medicine inBirmingham, Ala., have appointedchief wellness officers. Johns Hop-kins Medicine in Baltimore hopes

to hire one this year.In a discussion paper published

last summer, the National Acad-emy of Medicine noted that morethan half of U.S. physicians exhib-ited signs of burnout, a syndromemarked by “a high degree of emo-tional exhaustion...and a low senseof personal accomplishment.” Thepaper cited links between doctors’disaffection and the care they gavepatients, with studies suggesting“a significant effect on quality andrisk of malpractice suits.”

To Antonia New, a vice chair ofpsychiatry at Mount Sinai, the pre-occupation with wellness seems ill-placed. “We all make a mistake byreferring to wellness and not call itwhat it is: Mental health,” Dr. Newsays. Physicians are exhibiting seri-ous malaise, she adds, pointing to aspate of young physician traineesuicides in New York. What is cru-cial, Dr. New says, is making suredespairing doctors have access totreatment and therapy.

Jonathan Ripp, a Mount Sinaiinternist, became chief wellnessofficer a couple of months ago,and says that stress and burnoutaffect senior physicians as well asresidents and medical students.One priority is reducing clerical

duties. A leading cause of physi-cian distress is electronic record-keeping, which requires doctors todo clerical and billing work, andcuts into time with patients. It hasalso increased “Pajama Time,” thehours doctors devote at home toelectronic charting that wasn’t fin-ished during the day, Dr. Rippsays. One solutionis having doctorsdictate notes di-rectly into elec-tronic records.

A related prob-lem is managingelectronic in-bas-kets filled with pa-tient demands. “Atypical physiciannowadays gets bombarded withtasks,” Dr. Ripp says.

He envisions a team approachwhere doctors focus on clinicalcare and leave some tasks to oth-ers. By shaving administrativeminutes here and there, Dr. Rippaims to reduce nightly electronicwork by an hour.

Lauren Peccoralo, a primary-care physician at Sinai, says everynight she spends between onehour and 90 minutes filling in pa-tient charts or doing administra-

tive work. This comes after a dayseeing patients, preparing dinnerfor her family and making sure herthree children go to bed. Late atnight, she reviews patient notesand test results. “I am not onlytyping, I am rethinking the wholecase,” says Dr. Peccoralo, who re-cently became Dr. Ripp’s deputy as

associate dean forfaculty well-beingand resilience.

Relieving doc-tors’ clerical bur-dens also is a pri-ority forStanford’sDr. Shanafelt. Hir-ing staff to sit inon appointmentsand take notes is

cost-effective, he says, because itfrees up doctors to see more pa-tients.

Yet even that may not be enoughto dispel burnout. Physicians havelost a sense of community and arefeeling more alone than ever, hesays: “We are interacting with ourpatients less. We are interactingwith our colleagues less. We are be-coming more isolated.”

As an example of frayed bonds,Dr. Shanafelt points out that hospi-tals’ physician lounges, where doc-

tors could meet, unwind and dis-cuss cases, have largely vanished.While two new Stanford hospitalshave them, Dr. Shanafelt, associatedean at the Stanford School of Med-icine, would like gathering placesfor doctors throughout his institu-tion and at other hospitals “to helpdrive community.”

“I am pretty sure everyone hasa room where they could offer ba-gels and coffee” for parts of theday, he says. At his initiative, somedepartments have begun gatheringsmall groups of doctors for dinnerat local restaurants. Stanford paysfor the food—but not alcohol—atthe meals, where participants areencouraged to discuss topics suchas “life as a physician.”

In January, David Rogers, a pe-diatric surgeon, became chief well-ness officer of UAB Medicine inBirmingham, Ala. The facility has aphysician dining room, Dr. Rogerssays, but “doctors say, ‘We don’thave time to have lunch.’ ”

He lets doctors track their angstthrough a “well-being index” in-vented by the Mayo Clinic. It has ashort quiz with questions such as“During the past month, have youworried that your work is harden-ing you emotionally?”

in Budapest. They were in Irvine,Calif., this weekend for the 2018Masters National Championships,where Mr. Judge’s team placedsecond.

The WorkoutThree afternoons a week Mr.Judge uses his lunch break toswim for an hour at a communitypool in White Plains, N.Y., goingbetween 2,500 and 3,000 yards. Heis chairman of the New York Ath-letic Club water polo program andplays at the club’s locations twonights a week.

“Most players are in their 20sand 30s, but I do my best to keep

up,” he says. “Iget there early,because it takesme a bit longerthan the youngguys to warmup.”

Mr. Judge willrotate throughpositions duringscrimmages,playing every-thing fromgoalie to centerforward.

In the fall, hecoaches the U.S.Military Acad-emy coed waterpolo club inWest Point, N.Y.He will oftenhop in with theplayers to dodrills that workon ball handlingand keeping

your hips high in the water.Three mornings a week Mr.

Judge works out in his basementgym. He warms up on the station-ary bike and uses stretch cordsand 2.5-pound dumbbells to workstabilizing muscles in his upperbody.

Lower-body work might includeleg lifts using resistance bands,step-ups holding 15-pound dumb-bells and squats performed with astability ball between his back andthe wall. His core circuit includesplank and crunch variations.

Mr. Judge has practiced yoga onand off since college and incorpo-rates poses into a stretching rou-tine.

Mr. Judge had hip-replacementsurgery in March 2016. He took upjuggling while recovering and stilloccasionally incorporates it intohis home routine. His childrenbought him juggling clubs—he willtoss them around while balancingon his stability ball with his feetjust off the ground. “It’s a greatway to work the core and eye-handcoordination without stressing myhip,” he says.

The DietMr. Judge sticks ripe fruit in thefreezer to add to breakfastsmoothies, mixed with juice andyogurt. He also has a bowl of ce-real with 2% milk. Wheaties, RiceKrispies and Kellogg’s Raisin Branare favorites.

On the weekends he has eggs,home fries and occasionally a fewstrips of bacon. He picks up lunchat a deli, usually a turkey andcheese sandwich or grilled chicken

BY LUCETTE LAGNADO

Nonstop burnof water poloas a workout

Water polo may be relatively ob-scure. Perhaps that’s because sofew athletes have what it takes toplay the exhausting game.

According to a 2016 study pub-lished in the Journal of Human Ki-netics, more than 58% of matchtime is played with a heart rategreater than 85% of maximum ca-pacity. The sport works big andsmall muscles, including the gluteusmedius and maximus and the hipadductors, says Naresh Rao, theNew York-based head physician forthe U.S. men’s water polo team.

Sports like football or baseball

require a sudden burst of intensepower, with a break between plays.In water polo, when you shoot ordefend a shot you put out an in-tense burst of power. Even in downmoments you continuously move bytreading water, he says. “Half of thetime is spent vertical, which utilizesdifferent muscle patterns thanwhen swimming.”

Dr. Rao estimates that a 150-pound person burns 50 caloriestreading water for 15 minutes, whilea water polo player burns 150 calo-ries playing for that same amountof time.

Why Water Polo Players Work Harder

Mr. Judge gets stretched out by Naresh Rao, the headphysician for the U.S. men’s water polo team.

System leavespatients vulnerable

to errors, onephysician says.


ART REVIEW

The VeryModelOf a Lost

MasterpieceAfter 200 years in Italy, the life-size plaster prototype ofCanova’s sole American commission is visiting the U.S.

ate for a poet than for themilitary leader and farmer.The finished plaster is stud-ded with tiny nail heads, or“points,” used by Canovaand his studio assistants asguides in the mechanical“pointing” process of trans-ferring that completed de-sign to the marble block forcarving.

The complex history ofthe work is clearly summa-rized in the Frick show andplaced in aesthetic contextin the masterly catalog es-says by Mr. Salomon, Mr.Guderzo, and Guido Bel-tramini, director of the Pal-ladio Museum, Vicenza.

Though this exhibitionstands persuasively on itsown, two concurrent showsin New York lend furtherdepth. “Canova e la Danza”at the Italian Cultural Insti-tute through June 28 fea-tures 16 of the sculptor’s el-egant tempera paintings ofdance subjects. Through

Sept. 23, “Antonio Canovaby Fabio Zonta,” at the Ital-ian Consulate, showcasescontemporary photographyof the sculptures at theCanova museum in Passa-gno. Whether or not youcatch all three shows, thisconcatenation brings intowelcome focus the unique

historical episode in Amer-ica’s all-too-brief connectionwith Italy’s greatest Neo-classical sculptor.

Canova’s George Washing-tonThe Frick Collection, throughSept. 23

Mr. Scherer writes aboutmusic and the fine arts forthe Journal.

New YorkANTONIO CANOVA(1757-1822) is widely re-garded as the foremost Neo-classical sculptor of his day.His marble statues of myth-ological heroes were cele-brated for the perfection oftheir poised athleticism, hisfemale and amatory groupsadmired for their refinederoticism and emotionaltenderness. Moreover, asfinished by his own hand,the carved surfaces of hisnudes achieved an illusionof luscious suppleness thatset the standard for sculp-tural finish through the ad-vent of Modernism.

Apart from Greco-Romansubjects, Canova sculptedpapal and civic monumentsand private portraits of Eu-ropean contemporaries. Buthis sole American commis-sion is among his leastknown works: the seatedportrait of George Washing-ton in ancient Roman armorcommissioned in 1816 bythe General Assembly ofNorth Carolina—leastknown because 10 years af-ter it was unveiled to tre-mendous praise in the Ra-leigh State Capitol in 1821,it perished in a conflagra-tion that destroyed thebuilding.

However, the life-sizeplaster modello of the statueis preserved in the Gypsoth-eca e Museo AntonioCanova, the museum of hiswork he established in Pos-sagno, Italy, his birthplace.Embodying the final stage ofcomposition prior to carvingin marble, this full-scaleplaster is not a cast or copy(unlike the 1909 plastercopy now in the North Caro-lina Museum of History orthe 20th-century marblecopy installed in the NorthCarolina State House in1970), but was modeled byCanova himself. And be-cause of its fragility, it hasnever left that country—un-til now.

Through Sept. 23, thismonument forms the dra-matic centerpiece of theFrick Collection’s exhibition

BY BARRYMORELAURENCE SCHERER

LIFE & ARTS

primary challengewas to achieve afaithful likenessyears after Wash-ington’s death.Painted portraitswere suggestedmodels, but Canovapreferred to usethe bust modeledfrom life by hiscontemporary,Giuseppe Ceracchi(1751-1801), whohad visited the U.S.twice. Ceracchi’sterra-cotta original(c.1791-92) and acontemporaneousmarble version at-tributed to him arein the show, to-gether with the riv-etingly animateWashington life mask takenby Houdon when he visitedMount Vernon in 1785 inpreparation for his ownstatue. If Ceracchi’s bustsare as accurate as Jeffersondeclared them, Washingtonat 60 had the massive neckof an Olympic weight lifter.

Exhibited alone in theFrick Oval Room to replicatethe original effect of thestate house rotunda,Canova’s serene monumentstrikes an uneasy balancebetween the conflicting de-mands of portraiture and al-legory. Wearing Roman ar-mor beneath a gracefullydraped cloak, Washingtonsits, poised in thought whileinscribing on a tablet theopening of his farewell ad-dress to the nation, in Ital-ian. The likeness is trans-formed by curly Roman-style hair, far removed fromthe 18th-century coif thatimparts the iconic Sphinx-like appearance to theFrick’s Gilbert Stuart por-trait hanging nearby, not tomention the version on thedollar bill. Viewed from theside, Washington’s Romannose seems larger than inthe frontal poses in the fa-miliar paintings. Moreover,though the muscular armsmay conceivably have beenlike Washington’s own inyouth—he was known tohave been strikingly tall andwell built in life—the ideal-ized, beautifully poisedhands seem more appropri-

“Canova’s George Washing-ton.” Organized by Xavier F.Salomon, the Frick’s chiefcurator, with Mario Guderzo,the Gypsotheca e Museo An-tonio Canova’s director, thisadmirable show brings to-gether for the first time allthe surviving objects andsketches related to the mon-ument’s creation, and offersvisitors the rare opportunityto examine in considerabledepth the exhaustive cre-ative process employed byCanova and by academicsculptors through the early20th century—including hisfirst rough bozzetto (model)capturing his initial ideasin a small lump of terracotta. Canova’s deftly mod-eled nude version of thestatue represents an inter-mediate stage that he fa-vored even when composinga costume piece.

The chief precedent inAmerica for Canova’s monu-ment was Jean-AntoineHoudon’s statue of Washing-ton in uniform, installed inthe State House in Rich-mond, Va., in 1796. ThomasJefferson, who had been in-strumental in selecting Hou-don for that work, recom-mended Canova to NorthCarolina. Washington, thewar hero and head of statewho had relinquished hispower to resume privatelife, was a novelty to Euro-peans ruled by hereditaryprinces who reigned untildeath. He was likened to thehero of the ancient Romanrepublic, Lucius QuinctiusCincinnatus, who ruled asdictator during a crisis andretired to his farm when itended. Canova, at the heightof his Neoclassicist reputa-tion, therefore conceived ofa seated Washington in clas-sical dress—the modern Cin-cinnatus.

Having never met Wash-ington personally, Canova’s

An uneasy balancebetween the demandsof portraiture and

allegory

Clockwise from left: AntonioCanova’s modello of ‘GeorgeWashington’ (1818); Canova’sprimo pensiero of ‘GeorgeWashington’ (1817); Jean-Antoine Houdon’s ‘Life Mask ofGeorge Washington’ (1785)

Gilbert Stuart’s ‘George Washington’ (1795), with its iconic Sphinx-like appearance, is far removedin likeness from Canova’s Washington, which is transformed in part by curly Roman-style hair

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The Work of a VisionaryThomas Chippendale

Iconic Chippendale. Remarkable craftsmanship.Incredible rarity. Thomas Chippendale himselfcrafted this undeniable museum-qualityPembroke table, making it one of the few trueChippendalemasterpieces to remain in privatehands. The entire table is veneered in yewwood, a costly selection that lends its strikingcolor and grain to this important creation.Its balanced design, exquisite proportionsand overall incredible quality make this aquintessential Chippendale creation. Originalbrass hardware, “S” lock and casters. Circa1760. 421/4”w (open) x 261/8”d x 285/8”h. #30-7569

A14 | Monday, June 11, 2018 THEWALL STREET JOURNAL.

SPORTS

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

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Anchorage 60 48 pc 60 47 cAtlanta 87 70 pc 86 72 tAustin 98 77 pc 96 74 tBaltimore 66 54 sh 74 63 pcBoise 70 45 pc 81 55 sBoston 65 53 s 76 58 sBurlington 75 52 s 83 63 sCharlotte 91 68 t 81 68 pcChicago 74 62 c 81 63 cCleveland 76 64 r 81 65 tDallas 96 77 s 95 75 sDenver 86 54 s 87 56 sDetroit 74 63 sh 80 66 pcHonolulu 86 74 sh 86 75 pcHouston 95 77 pc 95 77 pcIndianapolis 84 68 t 88 71 tKansas City 94 67 t 90 67 pcLas Vegas 102 80 s 106 79 sLittle Rock 89 72 t 91 75 tLos Angeles 83 63 s 84 62 sMiami 85 74 t 88 78 cMilwaukee 68 59 c 74 61 cMinneapolis 78 62 r 79 60 sNashville 93 71 pc 90 73 tNew Orleans 89 74 pc 90 75 tNew York City 71 55 pc 74 60 sOklahoma City 93 70 t 93 69 s

Omaha 92 61 pc 87 64 sOrlando 92 70 pc 91 71 cPhiladelphia 69 52 pc 75 61 sPhoenix 107 79 s 105 85 pcPittsburgh 71 60 r 76 65 tPortland, Maine 67 49 s 77 58 sPortland, Ore. 72 50 pc 81 56 pcSacramento 92 59 s 98 60 sSt. Louis 94 75 pc 93 75 cSalt Lake City 79 55 s 85 62 sSan Francisco 74 56 s 74 54 sSanta Fe 91 57 s 94 59 pcSeattle 69 49 pc 71 54 pcSioux Falls 78 51 r 78 53 sWash., D.C. 68 59 sh 74 68 pc

Amsterdam 70 54 pc 63 54 cAthens 90 72 s 91 71 sBaghdad 107 76 s 105 78 sBangkok 89 81 t 88 79 shBeijing 85 65 pc 89 64 pcBerlin 75 56 pc 73 57 pcBrussels 69 54 c 63 48 cBuenos Aires 62 46 sh 53 39 rDubai 103 93 s 102 89 sDublin 67 48 c 66 49 pcEdinburgh 59 49 c 65 49 pc

Frankfurt 79 59 t 70 55 rGeneva 76 60 t 69 57 tHavana 85 73 pc 86 73 tHong Kong 91 81 c 87 80 rIstanbul 82 69 s 82 68 sJakarta 93 78 pc 91 77 cJerusalem 81 64 s 75 62 tJohannesburg 65 38 s 62 43 sLondon 72 54 pc 66 50 pcMadrid 72 54 pc 76 54 pcManila 87 79 r 86 78 shMelbourne 62 52 s 59 47 rMexico City 77 59 pc 75 59 tMilan 83 67 t 83 63 tMoscow 69 55 pc 69 55 rMumbai 90 81 r 91 84 tParis 73 58 t 63 50 shRio de Janeiro 85 71 pc 88 73 sRiyadh 109 83 s 108 81 sRome 84 65 s 78 62 pcSan Juan 87 78 s 89 79 pcSeoul 74 59 c 79 63 sShanghai 90 72 s 93 73 pcSingapore 89 81 t 89 79 tSydney 63 50 pc 63 53 pcTaipei City 82 73 r 95 78 pcTokyo 72 65 r 79 68 tToronto 73 55 pc 78 64 sVancouver 63 47 pc 65 52 cWarsaw 80 58 t 77 56 pcZurich 81 59 c 70 56 t

Today Tomorrow

U.S. Forecasts

International

City Hi Lo W Hi Lo W

s...sunny; pc... partly cloudy; c...cloudy; sh...showers;t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice

Today Tomorrow

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DallasEl Paso

Billings

Portland

Miami

San FranciscoSacramento

Orlando

Atlanta

New OrleansHouston

PhoenixSan Diego

Los Angeles

LasVegas

Seattle

Boise

Denver

Mpls./St. Paul

St. Louis

Chicago

Washington D.C.

Boston

Charleston

Milwaukee Hartford

Wichita

Indianapolis

Cleveland

Buffalo

Austin

HelenaBismarck

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Omaha

Oklahoma City

San Antonio

Des MoinesSioux Falls

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PhiladelphiaCheyenneReno

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OttawaMontreal

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TheWSJ Daily Crossword | Edited by Mike Shenk

1 2 3 4 5 6 7 8 9 10 11 12 13

14 15 16

17 18 19

20 21 22 23

24 25 26

27 28 29 30 31 32

33 34 35 36

37 38 39 40

41 42 43

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Across1 Extremely

6 Muhammad Ali’sboxing daughter

11 Muffin topper

14 More in need of amassage

15 Thai orTaiwanese

16 Important period

17 Striking

19 Cornstalk growth

20 007 creatorFleming

21 “Sign of GoodTaste” advertiser,in the 1950s

22 Visit briefly

24 “No Scrubs”singers

25 Color

26 Finished stealing,maybe

27 “Tom Jones”author

33 Game show VIP

35 Saturnaliancelebration

36 Early auto brand

37 Hotel amenity

38 Copenhagencrowds

40 Jab

41 Words with hurryor heartbeat

42 Give up on apoker hand

43 Blood lines

44 Filling for quiltsand cushions

48 Creativeendeavors

49 Sturgeon eggs

50 Gobbled up

53 Premium brandy

56 Hitchhiker’s hope

57 Cruz in theCapitol

58 Log chopper

59 Sleepwear witha hood

62 All MajorLeague Baseballplayers, as ofnow

63 Singer Cara

64 Came to light

65 Number wornby Pee WeeReese

66 Many newdrivers

67 Ore sources

Down1 Start of a fitnessmotto

2 True

3 Spade suit?

4 Camcorderbutton abbr.

5 Weaver of Greekmythology

6 Obsequiousfollower

7 Tennis greatArthur

8 Grandfather clocknumeral

9 Sailors on leavemust regainthem

10 With indignation

11 Army transport

12 Typical AlJazeera viewer

13 Abe Lincoln’swife

18 See the sights

23 Peculiar

26 Address for aking

28 Twisty fish

29 “Mister Roberts”star

30 Agriculturalremedy for adrought

31 Its atomicnumber is 10

32 Olympus powers

33 Long story

34 Stereo precursor

38 “Whatever”

39 White vestments

40 Signing tool

42 Briefly

43 Nation on theSouth China Sea

45 Belt color

46 “Survivor” teams

47 Stir-fryingredient

51 Keyed up

52 Borders

53 Military wear,for short

54 Farm team

55 Heredity unit

56 “I’m a HonkyTonk Girl”singer Loretta

60 Nectar collector

61 Start for athleteor angle

s

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

DIAMONDDOINGS | By Charlie Oldham

Previous Puzzle’s Solution

The contest answer is MAINE. Taking the five gridcrossings only of pairs of states that border eachother in real life yields WYOMING/MONTANA,NEBRASKA/IOWA, ILLINOIS/INDIANA, NEVADA/ARIZONA and NEVADA/OREGON.

S O F A B O W S L A S S IT S A R U T A H I D A H OA C T I S T R E E T V I E WM A T Z O H N E B R A S K AP R Y O R J E N S E N

N E V A D A C H I AO C T A G O N I H E A R DS O Y O L E I D A D O OL U P I N E W Y O M I N GO P E N B R I L L O

D A R R E N E N S U EI L L I N O I S A S T E R NS E E A N Y B O D Y A L I TA S O N E E L I E N E A RT E X A S D E M S A S H Y

ParisGreetings from Paris, where I’ve

been reading with amusement thefretting over the Golden State War-riors, who have provoked an existen-tial crisis in basketball with an“overly dominant” team which haswon three out of the last four NBAtitles.

Three out of four titles. That’sadorable. The magic horsey wonthree big horsey races in a row?Way to go, horsey!!!.

Because Rafael Nadal won his11th French Open Sunday.

I know, I know: different sport,different circumstances, shortertournament, funky surface, no KevinDurant. And he didn’t have to winthe Preakness.

But still: if we’re going to talkabout dominance in modern sports,the conversation must include Na-dal, who has turned winning thismajestic clay-court tournament intoless of an accomplishment than anannual rite.

The 32-year-old Spaniard is al-most always the last man standingat Roland Garros. In his career, Na-dal has entered the men’s singlestournament here 14 times—winning11, losing twice, and withdrawingwith injury once. In total, he is 86-2here.

86-2! Put that in your StephCurry fan blog.

Sunday’s 6-4, 6-3, 6-2 defeat of

Rafael Nadalcelebrates afterwinning the FrenchOpen on Sunday.

Austria’s Dominic Thiem gives Nadala total of 17 victories in tennis’s fourmajor tournaments. (I tend to write“Slams,” but I always worry aboutoffending Bud Collins up in TennisHeaven—the late Collins insisted“Grand Slam” applied only to win-ning four majors in a calendar year.)Nadal’s total is second only to RogerFederer’s 20, with both men poisedto hit the grass at Wimbledon nextmonth.

The great geezer renaissance inmen’s tennis continues apace. Forthe past 18 months, Nadal and the36-year-old Federer have been alter-nating major titles, like a tennis ver-sion of Lemmon and Matthau, or aclassic rock twin bill. The men’sgame hasn’t had an under-30 Slamwinner (sorry, Bud!) since AndyMurray won Wimbledon in 2016 atthe age of…29.

Rafa, meanwhile, is making 32look like the new 22. Could he keepcranking out Roland Garros titlesdeep into his late 30s? Not long ago,it seemed crazy, given Nadal’s wildlyphysical style of play, and the havocit was playing on his body.

It feels less crazy today.“I can’t describe my feelings, be-

cause it’s not even a dream,” he saidafter his triumph. “Eleven times, itis impossible to think.”

He makes it look easy here, whichis unfair, because it’s terribly hard towin a tennis major—just ask the 20-millennial pileup of young talent stilltrying to break through. It’s alsofunny, because nothing about Na-dal’s playing style is easy—not hisZorro-like, open-stance forehand,which makes traditionalists hidetheir eyes; not his backhand, whichis a monster truck compared to aballetic one-hander; not his bespokeflurry of grunts, towelings, picks andtics. Nadal can’t be imitated becausehe’s so thoroughly a tennis one-off.On the clay, he parks so far behindthe baseline, he’s basically in Poland.His endurance is unparalleled. Thespinning on his strokes is absurd.

And yet, when it comes down toit, what makes Nadal Nadal is thathe is one of the most doggedly com-petitive people in all of sports. Na-dal doesn’t take a point off. There isno slack in his game. Ever. He’s fullycommitted, fighting to the end.Playing him, especially here, is likegetting chased down the hallwaywith a chainsaw…for roughly threehours.

This is what you’re up against, ifyou’re Thiem. The talented 24-year-old Austrian has been billed as aNext Gen hope—“one of the playersthe Tour needs,” Nadal called him—and he’d beaten Nadal on clay ear-

lier in the season, in Madrid. Hehung around for much of the firstset, beating back a 12-minute Nadalbreak attempt, but by the match’ssecond hour, it was clear he didn’thave enough. Thiem pluckily savedfour match points in the third set,but it was a mere postponement ofthe inevitable.

Losing to Nadal here is no shame,of course. As a Rafa runner up inParis, Thiem is in fine company:Federer (four times), Novak Djokovic(twice), Wawrinka (last year),among others.

Win a bar bet! Who are the twoplayers to beat Nadal in Paris?Robin Söderling (2009) and Djokovic(2015). Now go buy yourself an Ap-erol spritz.

Sunday’s final was the last go-round for one of the grand relics oftennis, Roland Garros’s Court Phi-lippe Chatrier, which will undergo amodernization in the off-season,and, eventually, add a roof. There’ssome hand-wringing about what itall means—if sprucing up Chatrier’sold concrete and cutting away its el-egant vines will irreparably changethe place.

I think Roland Garros will befine—a lot of care is going into thisrenovation. Still, it’s fitting that aonce-in-a-lifetime champion like Na-dal closed the old joint—or at leastthe memory of what the old jointwas. Sunday was an end, or the firstphase of a new beginning. What Ra-fael Nadal has done here, however,is forever.

BY JASON GAY

FRENCH OPEN | By Jason Gay

Nadal in Paris Is Ridiculous

Eleven titles at theFrench Open is one ofthe most dominant runs

in all of sports.

NBA

Summer ofLeBron

The NBA season is over. Andnow summer is coming.

LeBron James can become afree agent on July 1, and thequestion swirling around himsince last season is where hewill play next season. While heis 33 years old, his talents are noless immense than when he tookthem to South Beach in 2010 orreturned them to Cleveland in2014. And no one knows whereJames is taking them next.

“I have no idea at thispoint,” James said.

He’s been to eight consecu-tive Finals with the Heat andCavaliers, a run so long thatStephen Curry was only arookie the last time James wasstuck watching on television,and he’s already delivered achampionship to his hometownteam. It’s now time for a deci-sion—a decision, not The Deci-sion—about which team giveshim the best chance to keepplaying for titles.

He’s coming off another sea-son in which he was once againthe most valuable player in theNBA, even if he won’t be namedthe Most Valuable Player, andthat’s why this summer is goingto be fevered even by the stan-dards of recent summers. Thefrenzy of activity that has cometo define the first days of NBAfree agency will be delayed thisyear. The entire league will bewaiting on him.

But there is no basketballShangri-La waiting for him.

Whatever he chooses will bea compromise. Unlike two yearsago, when a serendipitous in-crease in the NBA salary cap al-lowed Kevin Durant to signwith the Golden State Warriors,*creating a team that now hasback-to-back titles,* most ofthe league will be squeezed fi-nancially, and there aren’tmany teams that can offer himthe maximum salary and maxi-mize his chances of winningchampionships.

“It will ultimately comedown to me,” James said.

BY BEN COHEN

LeBron James during the Finals.

TONYDEJA

K/A

SSOCIATE

DPRESS

CAMERONSPENCE

R/G

ETT

YIM

AGES

THEWALL STREET JOURNAL. * * * * Monday, June 11, 2018 | A15

The EvolutionOf a CultureKnow ThyselfBy Ingrid Rossellini(Doubleday, 469 pages, $30)

BOOKSHELF | By James Romm

OPINION

‘W ho are you?” asks Ingrid Rossellini at the outsetof “Know Thyself: Western Identity FromClassical Greece to the Renaissance.” It’s a

question that she intends her survey of art, literature andideas to help us answer. She declares in her preface thatshe proposes “to return to the early times of our historywith the intention of rediscovering the building blocks ofour contemporary personality.” This grand claim goesbeyond what she actually attempts in “Know Thyself,” tosay nothing of what she achieves.

The injunction “know thyself,” in its original Greekversion, was inscribed at the entrance to the oracularshrine of Apollo at Delphi. It was addressed to those whosought knowledge of their futures. Before we can gain suchknowledge, Apollo seemed to say—before we can knowwhere we are headed and steer our course straight—we

must know who we are andfrom where we have come.

The story of Oedipusexemplifies the maxim’smeaning. Oedipus learned,when consulting the Delphicoracle, that he was destined tokill his father and marry hismother. Because he had amistaken notion of who hisparents were, he ended upfulfilling the oracle’s prophecy inthe course of trying to escape it.Running away from his adoptiveparents, lest he commit murder

and incest, he fell in with the birthfather and birth mother he never knew and

could not recognize. Only later did he discover that hisignorance of the past had led him into fate’s trap.

Encountering the title of Ms. Rossellini’s book, readerswould guess that it includes prominent discussions of theDelphic maxim and of the myth of Oedipus or the playbased on it, Sophocles’ “Oedipus Rex.” In fact, despite along chapter on Greek thought and literature, the myth isbarely mentioned, and the play receives a single thinparagraph. One soon comes to realize that the book’s titleand preface are window dressing for what is, in essence, aCook’s tour of European civilization from Greek antiquity tothe end of the Renaissance. The larger themes of “identity”go unaddressed as we trot through three millennia ofcultural evolution.

A Cook’s tour is not a bad thing in itself. The BBC hasoffered up a valuable one in its recent “Civilisations”broadcasts, an update of the earlier “Civilisation” hostedby Kenneth Clark in the late 1960s. Before Clark came Willand Ariel Durant, co-authors of the “Story of Civilization”books. “Know Thyself” might be described as an update ofthat well-loved series, with the pacing quickened and thetime frame stopping short of the modern period. Analysesof paintings and sculptures take a lead role in each of thebook’s chapters, especially when Ms. Rossellini, whosebiography describes her as an itinerant university teacher,comes to her own field of expertise, the ItalianRenaissance.

As a tour guide, Ms. Rossellini is a stalwart ifuninspiring companion. Her voice is closer to the dry tonesof the college textbook than to Clark’s deeply personaloratorical flights. She never pauses from her itinerary for,say, first-person reflections or glimpses of her ownmoments of discovery.

A bigger problem concerns her reliability. No singleauthor could claim mastery of all the areas she covers, butshe commits errors that should have been caught by factchecking. Discussing the Persian invasions of Europedescribed by Herodotus, Ms. Rossellini confuses a bridgebuilt by Darius with a later one constructed by Xerxes. Sheshows a bust of the Roman general Pompey to illustrate itsevocation of Alexander the Great—by means of “the sameleonine hairstyle”—though the style she refers to belongsto a different bust. Such missteps are small, but theyundermine Ms. Rossellini’s authority. So too her off-targettranslations of foreign phrases, like the rendering of pueraeternus, Latin for “eternal boy”—a child who refuses togrow up—as “Immortal Baby.”

The subtitle of “Know Thyself” claims “Western Identity”as its theme, raising questions of how “Western” is definedand how other, non-Western cultures are to be regarded.Ms. Rossellini is certainly entitled to limit her survey toEurope, but she occasionally hints at a troubling dichotomybetween that continent and the two that border it.Imagining what might have happened had the Persiansconquered the European Greeks in the fifth century B.C., shespeaks of the snuffing out of “the light of civilization thatthe Greeks had so brilliantly achieved” and of a descent into“the darkness of chaos and confusion.” This demonizes thePersians far more than the Greeks did and imposes aManichaean scheme of light versus darkness onto an ancientworld where shades of gray were far more common.

Ms. Rossellini’s discussions of the Muslim rule of Spainand of the Crusades, two other cases in which Europe cameface to face with non-Europeans, give rise to a similardiscomfort. Her longest quotation is taken from a speechdelivered by Pope Urban II in 1095 urging a crusade towrest Jerusalem from the “wicked race” of the SeljukTurks. She doesn’t endorse such views herself, but merelyto quote them at length, without any distancing comment,shows a lack of sensitivity at the least. When she takesnote of the cultural fusion that resulted from the Muslimpresence in Spain, she mentions Arabic absorptions ofGreek and Judeo-Christian traditions but seems far lessinterested in what Europe learned in return, though shedoes circle back to this in a later discussion.

“Know Thyself” ends with an exhortation towardinclusiveness and the breaking down of boundaries betweenthe West and “the other.” This timely plea feels at oddswith the way that Ms. Rossellini herself has presentedother cultures and, like her title and grandiose preface,outstrips the more limited goals of the book itself.

Mr. Romm is the editor and translator of “How to Die:An Ancient Guide to the End of Life,” a just-publishedselection of Seneca’s writings.

A tour of European civilization from Greekantiquity to the end of the Renaissance, thoughnot quite in the manner of Kenneth Clark.

Charles Krauthammer Goes Out Like Gehrig

C harles Krauthammer isone of my heroes. Foryears my wife and I

watched Fox News’s “SpecialReport With Bret Baier,”where Charles softly deliveredhis insights on politics withimpressive and often sardonicwit and intelligence. We grewto rely on his electronic com-panionship and his politicalnavigational skills. He knewwhere true north pointed; andalthough he could bite, he sel-dom barked.

Now he has announced hehas a few weeks to live. Ourpain is sharp.

Charles is a serious base-ball fan. His final declarationthat “my fight is over” re-called for me the movingexit speech by Lou Gehrig,who—on July 4, 1939, dyingof his eponymous disease—called himself “the luckiestman on the face of theearth.” It is important toplay the game well, but it isalso important how oneleaves the arena.

For most of his life, Charles

was a quiet daily witness thatthe Fates can be cruel. Hesurely endured untold suffer-ing, and this latest medicalreport seems like piling on, touse a football term. He surelyhad a full dose of sufferingwhen he broke his neck divinginto a gym pool during hisfirst year at Harvard MedicalSchool. Despite that injury,

which paralyzed his legs to-tally and his arms partly, hefinished his medical trainingon time with the class of 1975.He became a psychiatrist andturned to journalism when ed-itors noticed his talent forwriting. His weekly column inthe Washington Post becamea Beltway staple.

Many admirers who watchedCharles on Fox News did notknow he was sitting in a

wheelchair. I noticed because Ialso “ride” a chair and am lim-ited. Charles never spoke ofthese issues, but I felt a spe-cial bond and wrote him a fanletter years ago to commendhis remarkable political com-mentary and his courage. Likehim, I had experienced a para-lyzing injury—I broke my backin a fall while at college—though mine was less severethan his.

It turned out he knew ofmy history for the same rea-sons I knew of his. When hereplied to my letter, he wasgracious and shared his per-sonal insight on our youthfulmisfortunes. He wrote thathe and I were fortunate—sort of—to have suffered ourinjuries when we were soyoung. We might have hadmore difficulty recoveringhad we been hurt at an olderage. His wise diagnosis hadthe ring of his psychiatrictraining.

Past great political pun-dits—Walter Lippmann, H.L.Mencken, Arthur Krock—werenot the presence that CharlesKrauthammer became with his

daily Fox News appearances.He is the finest of our currentpolitical translators and com-mentators, well-suited for ourage because of his contrastwith it. The prevalence ofbloviating, uncivilized scream-ers makes Charles’s self-effac-ing reserve especially refresh-ing. Slyly irreverent yetrespectful and civil, he has aclassic education and is liter-ate when those attributes arebeing devalued. He is an inspi-ration: We wish we knew whatCharles knows.

In his famous prayer, Car-dinal John Henry Newmanasked God to grant him eachnight “a safe lodging, and aholy rest and peace at thelast.” It is that “peace at thelast” we wish for our friendCharles Krauthammer. Wesaw him fight so well, andnow he tells us his fight isover. May peace come to thisfine man, who led his life insuch a noble manner, and setsuch a shining example.

Mr. Vincent was commis-sioner of Major League Base-ball, 1989-92.

By Fay Vincent

I, too, was paralyzedin a college accident,so I especially valuehis courage and grit.

Word from Ca-racas is thatlocals havetaken to scour-ing city streetsfor plastic gar-bage bags fullof rubbish and,when they findthem, empty-ing the con-tents so that

they can resell the bags.This sounds absurd, but it

is believable in a countrywhere extreme poverty hasspread like the plague. Humancapital is fleeing. Oil produc-tion is plummeting, and thestate-owned oil company is indefault. The garbage bag, im-ported with dollars, is a thingof value.

If anything was more pre-dictable than the mess cre-ated by Hugo Chávez’s Marx-ist Bolivarian Revolution, it isthe pathetic effort by social-ists to deny responsibility.The Socialist Party of GreatBritain tweeted recently thatVenezuela’s problem is thatsocialism has yet to be tried.It blamed the crisis on “aprofit-driven capitalist econ-omy under leftist state-con-trol.” Even more preposterousis the claim by some academ-ics that economic liberalismin the 1980s spawned the so-cialism that has destroyed thecountry.

Learning from history isimpossible if the narrative iswrong. So let’s clear the re-cord: By the time Chávez waselected, Venezuela alreadyhad 40 years of socialism un-der its belt and precious little,if any, experience with freemarkets.

Venezuela’s Long Road to RuinMilitary dictator Marcos

Pérez Jiménez was toppled inJanuary 1958. Romulo Betan-court, an avowed socialist,was elected president laterthat year.

When Venezuela promul-gated its 1961 constitution,Betancourt immediately sus-pended Article 96, which read:“All can freely engage in theprofitable activity of theirchoice, without any limita-tions other than those pro-vided for in this Constitutionand those established by lawfor security, health or otherreasons of social interest.”

This crucial protection re-mained on the shelf for 30years, as a string of socialistgovernments employed priceand exchange controls incounterproductive attempts toraise living standards.

Rent control in Venezueladates to 1939 but was not en-forced by Pérez Jiménez. InAugust 1960 Betancourt re-vived it, passing a new rent-control law and prohibitionson eviction. Since then, “notone apartment rental buildinghas been built,” writes Vladi-mir Chelminski in his 2017book, “Venezuelan SocietyCheckmated.” The legendaryslums that climb Caracas’shillsides are a testament tothis socialist stupidity.

Carlos Andrés Pérez tookthe presidency for the firsttime in 1974. World oil priceshad shot up as PresidentNixon’s domestic price con-trols crippled U.S. production.As a result, Venezuela feltrich. The national assemblygranted CAP, as the presidentwas popularly known, an “en-abling law” so that he could

rule by decree. He mandatedsalary increases for the entirenation and implemented, forthe first time, a minimumwage. He froze prices and is-sued crazy edicts. All commer-cial buildings had to employelevator operators, and allpublic restrooms had to haveattendants.

CAP put limits on foreigninvestment in everything fromtelecom and banking to foodand electricity distribution,forcing foreigners to sell whatthey owned in Venezuela. He

nationalized oil in 1976. Thestate expanded its role in iron,steel and aluminum and tookcontrol of coffee, cocoa andthe previously independentcentral bank.

CAP and his successors ranup unsustainable debt. Thebolivar had been fixed at be-tween 4.3 and 4.5 to the dollarsince the early 1960s. But bythe late 1970s, with the centralbank printing money, it wasno longer worth that.

Buying dollars with boli-vars became a lucrative na-tional pastime until 1983,when President Luis HerreraCampins announced exchangecontrols. He also reinforcedprice controls, which by thenapplied to virtually every-thing, from cement, hotels andbanking to parking lots, meat,milk and sugar.

When CAP returned topower in 1989, he inherited afiscal and monetary timebomb. Out of options, he liber-ated almost all prices, alongwith the exchange rate,opened the country to foreigninvestment, and lowered im-port tariffs. He restored Arti-cle 96 of the constitution. Ac-cording to Mr. Chelminski, aformer executive director ofthe Caracas chamber of com-merce, the positive effects in-cluded a notable recovery inforeign investment, exportsand economic growth.

But Cuba had already infil-trated the military. Now itcapitalized on the social un-rest generated by the suddenreversal of policies, which ex-posed pent-up inflation. CAPalso had credibility problemswith investors. After two coupattempts in 1992 he wasweakened and eventually re-moved for corruption.

Rafael Caldera took officefor a second time in 1994 andrestored price and exchangecontrols. By 1996, facing an-other collapse, he reversedcourse again, liberating pricesand opening markets. The ad-justment exposed reality butwas painful, especially in theface of falling oil prices. Thus,the ground was fertile for anantiestablishment candidatein 1998.

Chávez was inaugurated inFebruary 1999, in the midstof a recovery in oil pricesand with the bolivar at 576 tothe dollar. He tripled downon socialism, exacerbating along history of destroyingcapital that would lead to to-day’s disaster.

Write O’[email protected].

Few countries havebeen such a perfectexample of socialistpolicies in practice.

AMERICASBy MaryAnastasiaO’Grady

H ow much is a mutual-fund adviser’s advicereally worth?

How about nothing?Since 2000 the average an-

nual mutual-fund fee hasfallen by more than a third.For funds that track a stockindex, the average fee is nowless than 0.1%, but even thatis too high. That fraction of apercentage point means realmoney over time. If you in-vest $10,000 in a mutual fundtoday, and the stock marketrises 6% a year, a 0.09% ex-pense ratio will cost youmore than $1,500 over threedecades.

The industry has begun torealize this isn’t sustainable.In April Fidelity Investmentslaunched its first-ever free in-dex funds—that is, funds witha stated expense ratio of zero.The new funds, part of thefirm’s Flex suite, will be avail-able only to select Fidelity cli-ents, but other mutual-fundadvisers will likely emulatethe model.

Four factors should facili-tate the wider distribution ofzero-cost mutual funds in thenear future.

First, passive managementhas become more popularwith retirement savers and re-tail investors alike. In 2000index funds made up 7.5% of

Next Stop for Mutual-Fund Fees: Zeroequity mutual-fund assets. In2017 they accounted for morethan 21%. The rise of index in-vesting means fewer Ameri-cans are paying sizable fees toportfolio managers, who gen-erally fail to beat the market.This trend has reduced ex-pense ratios significantly.

Second, investors havecome to realize that passiveinvesting does not require afancy index. A fund need not

explicitly track the S&P 500to offer investors diversifiedexposure to large-cap U.S. eq-uities, and decoupling a fundfrom a name-brand index cancut costs. The SPDR S&P 500ETF, the largest fund trackingthe S&P 500, pays three basispoints for the right to use theS&P 500 name. Better to in-vest in a mutual fund thatholds a generic basket of eq-uities and saves on licensingexpenses.

Third, mutual funds are in-creasingly finding that theycan generate income fromnonfee sources. In fiscal 2017,the Vanguard Total StockMarket Index Fund earned

more than 63% of its expensesby lending securities. The de-mand for securities loans haslimits, but growth in thatmarket will allow an increas-ing number of funds to offsetsome or all of their expensesthrough loan income. Wise fi-nancial institutions will real-ize that offering a free mutualfund can attract customers towhom they can cross-sellother products, like life insur-ance and annuities.

Finally, free publicity likelywill buoy the first widely avail-able free fund. That will spareinvestors substantial advertis-ing costs. Marketing addednearly three-quarters of a ba-sis point to the SPDR S&P 500fund’s expense ratio last year.For smaller funds, the share islikely larger. The first trulyfree fund open to all will in-stead be able to rely on mediato spread the word.

Free mutual funds will addto the suite of complimentaryfinancial services now avail-able to Americans. More than100 million people can use thefree tax-preparation softwareoffered by the Free File Alli-ance, a consortium of filingcompanies including Intuitand H&R Block, though onlyabout three million taxpayersactually use the service.Mint.com manages bill pay-ments for more than 10 mil-lion users without fees, whileCredit Karma offers credit

scores gratis. The online bro-ker Robinhood charges noth-ing to execute daytime tradesfor its more than four millionusers.

The mutual-fund industryis ripe for disruptive change.While free funds won’t solveAmerica’s retirement-savingsproblems, they could make ameaningful difference. Ameri-can workers typically paytens of thousands of dollarsin fees over a lifetime of sav-ing for retirement. Free fundswill help ensure more Ameri-cans have a secure financialfuture.

If the notion of a free mu-tual fund seems exotic, con-sider that for centuries bankshave paid investors to man-age their money. That is whatwe call “interest.” While in-terest rates on bank accountshave fallen dramatically in re-cent decades, perhaps mutualfunds of the future, like banksof the past, will pay us tohold our savings. Meanwhile,eliminating fees seems like aworthwhile goal—and onethat now appears withinreach.

Mr. Birdthistle, a professorat Chicago-Kent College ofLaw, is author of “Empire ofthe Fund: The Way We SaveNow” (Oxford, 2016). Mr.Hemel is an assistant profes-sor at the University of Chi-cago Law School.

That could mean tensof thousands in extrasavings for investorsin retirement.

By William A. BirdthistleAnd Daniel J. Hemel

A16 | Monday, June 11, 2018 * * * * THEWALL STREET JOURNAL.

We All See the Iceberg but Nobody Is SteeringOhio Gov. John Kasich warns that

“Entitlements Will Eat America’sEconomy” (op-ed, May 31) and urgestoday’s Congress to pass a spendingbill that balances the budget. How, ex-actly, does he propose ending the cur-rent political game of fiscal chicken?Democrats can win big if they stick tothe narrative that today’s entitlementsare affordable as long as Republicansstop giving tax cuts to their richfriends. If there is a blue wave on thehorizon and if Democrats also capturethe White House in 2020, talk inWashington will shift to expanded en-titlements after tax cuts are rescinded.For a decade or more, Democrats haveheld military spending hostage to so-cial spending. Republicans whobroached the topic of Social Securityor Medicare reform were portrayed asheartless, right-wing fanatics.

If Mr. Kasich is serious, let him pro-pose specific benefit reforms and costreductions that he thinks Americanvoters will welcome and approve andthat Democrats and their mediafriends won’t demagogue to death.

ALAN JONESAtlanta

I am afraid entitlement reform isbeyond the capacity of our currentHouse and Senate. The members ofboth houses will do nothing that willjeopardize their fundraising andtherefore their re-election. The Repub-licans are Balkanized, and the Demo-crats are all Stepford wives under thecontrol of Nancy Pelosi and ChuckSchumer, appearing to fear having athought of their own let alone votingwith the Republicans.

Will entitlement reform hurt someof their constituents? Yes. Will realspending cuts hurt some of their con-stituents? Yes. Will it cut our yearlydeficit, eliminate wasteful spending,help reduce our national debt and bor-rowing from other countries? Yes.

Will Congress have the courage todo the difficult work even if it costsmembers their seats? Doubtful.

STAN VANTIEMFranklin, Tenn.

The claim that budgets were bal-anced in the late 1990s is true only ifone ignores the total national debt(public debt plus interagency debt)during those years. It is true that re-ceipts equaled or surpassed outlaysfrom 1997-2000, but Mr. Kasich conve-niently forgets that over $417 billionof those receipts used to balance an-nual budgets were taken from the en-titlement that Mr. Kasich now viewsas the culprit: Social Security. FormerRep. Kasich and his allies, like manyon both sides of the aisle before them,simply moved excess assets from So-cial Security to the general fund andproudly claimed budget surpluses. Atno time, according to Treasury statis-tics, did these “surpluses” decreasetotal national debt.

“The economic reality,” wroteThomas Sowell, “is that neither thegovernment nor anyone else canspend and save the same money.”Those in Congress who ignored thisadage—like then-Rep. Kasich—nowscream the loudest for “entitlementreform.”

MIKE SMITHSugar Land, Texas

LETTERS TO THE EDITOR

Letters intended for publication shouldbe addressed to: The Editor, 1211 Avenueof the Americas, New York, NY 10036,or emailed to [email protected]. Pleaseinclude your city and state. All lettersare subject to editing, and unpublishedletters can be neither acknowledged norreturned.

“Your testing indicates thatyou may have some gravitas issues.”

THEWALL STREET JOURNAL

Real Estate Need Not Be So Complex, CostlyRegarding Matthew Hennessey’s

“Buying a Home? It’s a Process” (op-ed, May 30): Home buyers have hadthe same experience for decades, andthe federal government’s solution, theReal Estate Settlement ProceduresAct of 1974 (Respa), didn’t simplifythe process. In 2001, for example, aFloridian moving to Washington wasappalled by it. “I can’t make anysense of this, and I’m a lawyer,” hesaid to himself. “What do most peopledo?” He was Mel Martinez, the in-coming HUD secretary, and he wouldhave enforcement and rule-writingauthority for Respa. He told his staffto write a new regulation that wouldmake the process simpler and less ex-

pensive, and we at HUD did.Drafting the proposed new rule

was the easy part. After three years,it was increasingly clear that therewouldn’t be any reform. SecretaryMartinez returned to Florida andwas elected to the U.S. Senate.Nothing happened until Dodd-Frankestablished a new Respa enforce-ment agency, the Consumer Finan-cial Protection Bureau. The CFPBwrote a new, more complicated rule,with more hoops to jump throughand more penalties for violations. Itwasn’t simpler, and it wasn’t lessexpensive.

JOHN C. WEICHERWashington

Does Premature Expostulation Hurt Anyone?There is a reason Jason Furman

didn’t cite any specifics to back uphis claim that “financial markets re-acted” to President Trump’s tweetabout Friday’s jobs report “with un-usual volatility for the early morninghours” (“The Economic Risks ofTrump’s Premature Tweeting,” op-ed,June 4). The reason is that theydidn’t. In the 69 minutes between thetweet and the actual release, futurescontracts on the S&P 500 meanderedrandomly in a narrow range of aboutone-tenth of a percent of the index’svalue. The yield of the 10-year U.S.Treasury bond rose less than twoone-hundredths of 1%, moving in thesame direction and at the same paceas it had been all night.

The more notable aspect of Mr.Furman’s commentary is that it maymark the first time that a formerObama administration official has ad-mitted that one of President Trump’stweets was truthful.

DONALD L. LUSKINChicago

A big “thank you” to Mr. Furman. Iam a former staff economist at theCommerce Department and there is

an “oath” and a “responsibility” forall government statisticians to pro-tect the confidentiality of the eco-nomic data. I am shocked that seniorWhite House staff defended the presi-dent’s tweet, arguing that the presi-dent didn’t release the actual data.One doesn’t need to release the ac-tual number to offer color on the eco-nomic data.

JOSEPH CARSONWestport Conn.

I find Mr. Furman’s objections spu-rious. It was a public dissemination,not a private or “insider” one.

ROLLIN V. AMOREWashington

Being Able to Gamble 24/7Means Increased Gambling

Holman Jenkins’s thesis that thepotentially exponential expansion ofsports betting is driven by the insa-tiable needs of the welfare statemakes sense and is disturbing (“GetReady to Hate Sports,” BusinessWorld, May 19). Clicking in bets froma mobile phone with its promise ofimmediate reinforcement, win or lose,will drive gambling behavior to here-tofore unimaginable heights. I’ll bet 3to 1 that the inherent moral hazard inthis scheme not only will yield littlebenefit for the poor, but will inevita-bly increase the needs of the welfarestate through further bankruptcies,mortgage foreclosures, substanceabuse and, of course, the need fornewer sources of revenue to feed theinsatiable welfare beast.

TOM O’HAREBoston College

Boston

Pepper ...And Salt

Using the English LanguageRegarding Joseph Epstein’s “Some-

times the Language Game Needs aPenalty Box” (op-ed, June 7): May Imake suggestions for the penalty box?I recommend the following, in orderof my desperation never to hear themagain: “iconic,” “impactful,” “pleth-ora” (one of the “many” words), “res-onate” (I’m sad about this one, a goodword beaten to death), “I” when in-correctly used in a prepositionalphrase that calls for an objective, notsubjective, pronoun, “quagmire,” “sounique” and finally, “like” when usedas filler repeatedly within the samesentence.

MARGARET MCGIRRGreenwich, Conn.

Awesome screed, dude!STEVEN KRONAvon, Conn.

Disruption Isn’t Enough

D onald Trump has proved in 18 monthsthat he can disrupt the global statusquo, for better (Iran) and worse

(trade). The question as hebrawls with his G-7 allies aftertheir annual summit and nowmeets with adversary KimJong Un is whether the Presi-dent knows that disruptionisn’t enough. Sooner or laterhe has to contribute to a better world order in-stead of merely blowing up the old one.

Unlike most of the U.S.-Europe foreign-pol-icy elite, we think the world needed some shak-ing up. Barack Obama saw America as an over-stretched power that needed restraining for theworld’s good. He thought the U.S. was better offwith its interests tied down like Gulliver in Lilli-put in amultinational web of collective security.As the U.S. retreated, regional powers likeChina and Russia and rogues like Iran, NorthKorea and Islamic State asserted themselves;the world became more dangerous.

Mr. Trump sometimes campaigned like anisolationist but he also asserted amoremuscu-lar defense of U.S. interests, and he has followedup as President. The Iran deal offered the illu-sion of containing Tehran’s nuclear ambitionswhile facilitating its imperialism. The Paris ac-cord punished the U.S. economy far more thanChina’s with little benefit to the climate. Hewithdrew from both. Mr. Trump’s demand thatNATO partners spend more on defense hasachieved more in a year than the previous twoPresidents did in 16.

i i i

Farmore troubling isMr. Trump’s willy-nillychallenge to global trading rules. His with-drawal from the Pacific trade deal was strategicfolly if his main priority is changing China’s be-havior. His steel and aluminum tariffs punishfriends who could forge an alliance against Chi-nese mercantilism. Blowing up Nafta wouldcause widespread economic damage with nocompensating benefits.

If Mr. Trump has some grand trade strategy,it isn’t apparent. On Saturday he tossed out onhis own at a postsummit press conference theidea of “no tariffs” across the G-7, which wouldbe a constructive goal. But he has no processor plans to negotiate it, and he accompanied theidea with a new threat to cut off access to theentire U.S. market and impose tariffs on Euro-pean cars.

Amid all of his bluster and threats, no one be-lieves Mr. Trump’s zero-tariff proposal is seri-

ous. His desire for a bilateral trade deal withJapan is also going nowhere because PrimeMin-ister Shinzo Abe doesn’t believe Mr. Trump’s

promises. The results so far ha-ven’t been better trade deals,asMr. Trump asserts. They’vebeen rancor and the biggestthreat to world commercesince World War II.

Now comes the summitTuesday with Kim Jong Un, another example ofMr. Trump’s disruptive impulses at work. Therisk of giving the North Korean dictator equalstatus on the world stage is obvious, but thennothing else across three Presidencies has con-tained the North’s nuclear threat.

Mr. Trump said Saturday he’ll be able to sizeup Kim’s sincerity “within the first minute,” andhe probably believes it. On the other hand, heis already playing down this first meeting andsays themain result may be establishing a per-sonal relationship with Kim.

The problem is that personal relationshipsrarely count for more than national interests,and Kim’s main interest is in his regime’s (andhis own) survival. Nuclear weapons are themeans of that survival and have brought himto this summit—diplomatic recognition his fa-ther and grandfather never achieved. Hewill beloath to give up that security.

Mr. Trump’s temptation will be to make aversion of the same mistake Bill Clinton andGeorge W. Bush did to trade easing sanctionsand other concessions for the mere promise offuture denuclearization. Both Presidents alsohoped, as Mr. Trump does now, for a historicnonproliferation achievement. But the North re-neged as it played for time to research and de-velop a nuclear threat that will soon be able toreach the U.S. mainland.

Perhaps Kim has had a revelation and wantshis nation to join the rest of the modern world.But the test of that commitment should be animmediate declaration of all of his nuclear andmissile facilities for inspection by American ex-perts. The dismantling can be done in stages,but the transparency and verification must beimmediate and complete. Mr. Trump’s instinc-tive judgment about Kim’s character and inten-tions isn’t enough.

Mr. Trump takes pride in shaking up theworld’s elites, but as President he’ll be judgednot on howmuch of Mr. Obama’s legacy he dis-mantles but on howmuch of his own he builds.Sooner or later he’ll have to show results thatadvance U.S. interests.

Trump has dismantledObama’s legacy, butcan he build his own?

The Senate’s Nuclear Insurance

W hether or not President Trumpstrikes a nuclear deal at his summitwith Kim Jong Un, the U.S. still

needs to prepare for attackson its homeland and abroad.China recently installed mis-sile systems on artificial is-lands in the South China Sea,while economic backwaterslike Russia and Iran investheavily in missile tests and research. At leastCongress is developing bipartisan support formissile defense.

The Senate this week is expected to vote onits version of the National Defense Authoriza-tion Act (NDAA), which the Armed ServicesCommittee approved 25-2 inMay.Whilemissiledefense can’t perfectly insulate the U.S. or itstroops abroad, the new legislation includes no-table improvements that wouldmake America’srivals think twice before striking.

The U.S. fields several missile-defense sys-tems around the world, but each has its own ra-dar. The Aegis Ballistic Missile Defense is de-ployed at sea and can bring down regionalthreats inside the atmosphere. The Ground-based Midcourse Defense (GMD) protects theU.S. homeland by targeting long-rangemissilesin space. But the systems don’t communicateand coordinate well.

One Senate NDAA provision calls for deploy-ing space-based sensors, which will help inte-grate the systems so the U.S. doesn’t lose sightof a missile. Space-based sensors aren’t cheap,but the cost of putting them into orbit is fallingas private companiesmake space deliveriesmoreefficient. The legislation also eases the way forfuture appropriations to pay for the sensors.

Yet the Senate doesn’t set a concrete time-line for deployment. No one can predict thespeed of innovation, but the military does bet-

ter when given a specific goal.Asking the Defense Depart-ment to deploy a space-basedsensor system by 2022 wouldset an aggressive but plausibletarget. It is also crucial, givenChinese and Russian advances

in hypersonic weapons.Hypersonic missiles can travel about one

mile a second, faster than modern jet fighters.Air Force Gen. John Hyten, who leads U.S. Stra-tegic Command, testified inMarch that the U.S.currently lacks a defense to “deny the employ-ment of such a weapon.”While hypersonic mis-siles are vulnerable during slower phases offlight, the trouble is identifying them earlyenough. “The only way that I know to be ableto, in my phrase, ‘see them coming’ is fromspace,” Pentagon technology chiefMichael Grif-fin said in April.

The best way to improve the accuracy andprecision of existing missile-defense systemsis through increased testing—which the legisla-tion encourages. As North Korea reminded theworld, even “failed” tests move a missile pro-gram forward.

The U.S.-led international order is under-pinned by America’s ability to deploy its forcesaround the world, and newmissile technologyis a growing threat. U.S. ships, aircraft and sol-diers can become vulnerable to an attack froma lesser country like Russia. The Senate shouldkeep the missile-defense provisions in its finalNDAA and work with the House and WhiteHouse to make sure they get funding.

Space sensors wouldbe a game-changerin missile defense.

New Bang for a Michigan Buck

I n Michigan the roads are so bad they’re ajoke on social media. “BREAKING NEWS:lost city of atlantis found in detroit pot-

hole,” local YouTube star Dem-etrius Harmon quipped onTwitter in February, garneringthousands of likes. “I don’t al-ways dodge potholes,” anotherMichigan meme says, “butwhen I do, I hit four more.”

So it’s a big deal that last week lawmakerspassed a reform that will save taxpayers 10%to 15% by repealing the state’s prevailing-wagelaw for construction on roads, buildings andother public works. That law, passed in 1965,mandated that contractors pay union wagerates even if non-union workers could do thejob for less. Some 27 other states have suchlaws, which let unionized contractors keeptheir bids high and still win government con-tracts. Non-union workers account for nearly80% of Michigan’s construction industry anddominate private building.

TheMichigan lawwas especially onerous, out-

lining some 500,000 classifications of construc-tion jobs and corresponding pay. This canmeanthat a contractormust pay one hourly rate for a

worker for installing drywallbut a different rate for painting.The rules deterred small busi-nesses from bidding for gov-ernment business and addedcosts when they did.

In 2014 Steve Zurcher,owner of St. George Glass &Window, won a con-tract to do work on Michigan TechnologicalUniversity’s new welcome center. At the timeMr. Zurcher’s glaziers normally earned $20 anhour. But because this was a public project, hehad to pay the prevailing wage of $43.35. Heraised his bid, but that cost taxpayers an addi-tional $12,000.

TheMackinac Center estimates that the pre-vailing-wage mandate has added about $400million a year to the cost of roads, buildings andother public works inMichigan. TheWolverineState will now have a lot more money to fillthose potholes.

The state will save $400million a year with itsprevailing-wage reform.

REVIEW & OUTLOOK

OPINION


University Boardrooms Need Reform

“You . . . have disgraced an institu-tion I had admired throughout myprofessional career,” Judge Randolphwrote, addressing Dean Ruger.

Mr. Ruger, meanwhile, directedhis fundraisers to tell alumni thathis treatment of Ms. Wax was“fairly common”—a brazen false-hood. No Penn professor’s teachingresponsibilities had ever beenchanged or limited for speaking outon public issues. He also claimedthat Penn Law did not “mandate”ethnic diversity in selecting appli-cants for law review, traditionallyan anonymous, merit-based pro-cess. That was misleading, sincePenn now encourages a subjectivestatement from law-review appli-cants, which is intended to revealtheir identity and tip the ethnicscales rather than reward academicexcellence.

Other than me, not a single Penntrustee, overseer or professor wrotepublicly about Ms. Wax’s treatmentor resigned in protest. Nobody inthe university community has an

incentive to speak out, and everyoneseems afraid to do so. Professorsfear retaliation; students worryabout social ostracism. I sent myletter of resignation to Angela Duck-worth, the Penn psychologist andauthor of the celebrated 2016 book“Grit: The Power of Passion and Per-severance.” She and I met last yearwhen I accepted the university’s Dis-tinguished Alumni Award and had alively email correspondence. She didnot respond to my resignationemail.

Trustees and donors candidly ad-mit in private that they do not wantto jeopardize their children’schances for admission. Many serveout of genuine interest and affec-tion for their alma mater, althoughthey also enjoy the prestige, influ-ence and perks, like access to theuniversity’s medical system, that gowith the positions. There’s no incen-tive to rock the boat, and universi-ties make sure they don’t get muchopportunity. At the trustee level,the board is large and its formal

meetings are entirely show and tell,with discussion severely limited andvote outcomes never in doubt. PennLaw overseers do not vote on any-thing. One Penn medical schoolboard member told me he wasdropped because he had asked toomany questions.

The corporate world offers a par-allel to trustees’ abdication of theirfiduciary duties. Reformers of the1980s argued correctly that the in-terests of shareholders were too of-ten subjugated to personal interestand small-group social dynamics onboards that compel unanimity. Justas the resulting realignment of in-terests between corporate boardsand shareholders unleashed spectac-ular value for American investors,an activist response by the govern-ing bodies of America’s universitiesis now essential.

The punishment of Ms. Wax coin-cides with the launch of the univer-sity’s latest fundraising campaigns,which seek $4.1 billion in all and$100 million for the law schoolalone. These philanthropic funds willmaintain the massive bureaucracythat coddles hypersensitive studentswhile issuing hollow claims to up-hold academic freedom and dissent.When universities violate their val-ues, trustees and overseers shouldresign, and donors should close theirwallets. Until that happens, nothingwill change.

Mr. Levy founded JLL Partners, aprivate equity firm, and created theLevy Scholars Scholarship at theUniversity of Pennsylvania LawSchool.

By Paul S. Levy

BARBARAKELLEY

I recently resigned as a trusteeof the University of Pennsyl-vania and an overseer of itslaw school to protest theshameful treatment of law

professor Amy Wax. Her career-threatening offense was to statethat in her experience with blackstudents over 17 years at Penn, fewhad performed in the top half oftheir class. Penn Law’s dean, TedRuger, declared her in error but re-fused to provide evidence. For dis-senting from politically correct or-thodoxy, Mr. Ruger forbade Ms. Waxto teach her much-admired first-year course in civil procedure—forwhich the university gave her anaward in 2015.

Since I quit, I have received aneducation in why universities cantrample free expression with impu-nity. My letter of resignation was

printed in full in the student news-paper and excerpted on this page. Ireceived well over 150 supportivemessages from, among others, trust-ees, students, law school professorsand alumni. One was from Judge RayRandolph, a 1969 law graduate whosits on the U.S. Court of Appeals forthe District of Columbia Circuit.

As in corporate Americain the 1980s, self-servingmanagers are puttinginstitutions at risk.

OPINION

The FedCan’t SaveJobs From AIAnd Robots

By Martin Feldstein

T he day is coming, experts tellus, when artificial intelligenceand robotics will massively

disrupt the labor market. Autono-mous vehicles will put 3.5 milliontruck drivers at risk of losing theirjobs. Checkout machines may re-place 3.4 million retail cashiers. Thatis only the beginning of the long listof jobs that will be destroyed bytechnological change.

The shift will not happen all atonce, and most of the people wholose their jobs will eventually findnew employment. The benefits ofautomation will include lower pro-duction costs, which will increase

real incomes and job-creating con-sumer demand. But the technologywill also cause individual hardshipand frequent periods of increasedunemployment.

These large supply shocks cannotbe offset by monetary policy. Theytherefore will present the FederalReserve with a new challenge. In1978 Congress gave the Fed a “dualmandate” of price stability andmaximum employment. This distin-guishes the Fed from the world’sother major central banks. The Eu-ropean Central Bank, the Bank ofEngland and the Bank of Japan, forexample, are required to target onlythe rate of inflation (although theymay informally pay attention to thelevel of employment).

The creation of the Fed’s dualmandate reflected concern in Con-gress that cyclical declines in thedemand for goods and serviceswould lead to increased unemploy-ment. Economic theory implies thatlow interest rates and an easy mon-etary policy can increase the de-mand for output and labor. Thus,Congress charged the Fed with pur-suing a monetary policy that wouldachieve maximum employment.

The coming challenge is differ-ent. Job losses will be caused not bylow demand, but by supply shocksas artificial intelligence allows ma-chines to replace labor. Technologi-cal unemployment has happened inthe past, such as when automatedlooms in factories replaced handlooms. But the experts expect thatAI will lead to much more wide-spread disruption.

If so, an easy monetary policywould be the wrong response. Poli-cies that increase aggregate demandwill not succeed in replacing thejobs that technology makes obso-lete. With regard to employment,the technological change that makesa truck driverless is equivalent todestroying the truck.

Monetary policy will still be anappropriate tool the Fed can use torespond to traditional cyclicalchanges in demand. But technologi-cal disruption will make the unem-ployment rate a very noisy signalof the demand level. The Fed’s pol-icy goal should therefore be shiftedso that it focuses solely on pricestability, in line with what othercentral banks now do. Achievingthe government’s goal of maximumemployment will require differentpolicies, like increased job trainingand the removal of state licensingbarriers.

Shifting the Fed to a single man-date of price stability would pro-vide an opportunity to reconsiderthe inflation target of 2%. The Fedadopted this as its definition ofprice stability in 2012, but othercentral banks don’t pursue a single,fixed inflation rate. The EuropeanCentral Bank aims at inflation “be-low, but close to, 2%.” Some centralbanks prefer a range of allowableinflation rates.

My own preference would be forthe Fed to use monetary policy toprevent sharp moves in measured in-flation. With this approach, the Fedwould tighten if the inflation rate be-gan to rise rapidly and would ease ifthere were a sharp decline.

But whatever the inflation goal,the Fed should not try to regulatethe rate of unemployment. Though itmay sound paradoxical, in an econ-omy in which job losses are beingdriven by technological disruption,the Fed would do better to ignoreemployment and focus exclusivelyon the rate of inflation.

Mr. Feldstein, chairman of theCouncil of Economic Advisers underPresident Reagan, is a professor atHarvard and a member of the Jour-nal’s board of contributors.

The central bank’semployment mandatecan’t be squared withcoming tech disruption.

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On Legal Weed, Let States Tend Their Own Gardens

‘F ederalism is not just for con-servatives.” That was mymantra in 2005, when I rep-

resented Angel Raich and Diane Mon-son before the U.S. Supreme Court.The two California women were chal-lenging the federal ban on medicalmarijuana as applied to states thatauthorized its use.

They lost 6-3, and the votes intheir favor all came from conserva-tives: Justices Clarence Thomas andSandra Day O’Connor and Chief Jus-tice William Rehnquist. Those jus-tices agreed with us—and with theeditorial page of this newspaper—that the noncommercial cultivation,possession and medical use of mari-juana is outside Congress’s power toregulate “Commerce . . . among theseveral States.”

Now the question has moved toCapitol Hill. Last week Sens. CoryGardner and Elizabeth Warren intro-duced legislation called the StatesAct, which would remove the federalban on manufacturing, distributingand possessing marijuana in statesthat have legalized it. The vote ontheir bill, or lack thereof, will be tell-ing. Do conservative Republicanssupport federalism even when it runsagainst their policy preferences? AreDemocrats willing to support diver-sity in state policy?

In 2002, when the Raich litigationbegan, medical marijuana was consid-ered a fringe issue. Publicity from thelegal case helped it gain acceptance asa reasonable policy option. To my sur-prise, the drive to authorize medicalmarijuana actually gained momentumfrom the courtroom loss. A smallnumber of states now have authorizedrecreational use as well.

Yet citizens who use marijuana le-gally under state law are still consid-ered criminals by the federal govern-ment. Although marijuana users arerarely prosecuted in these states, itdoes happen. Meantime, growers faceseizure of their crops, distributorsare subject to forced closure, andboth have a hard time leasing space,since building owners fear federalprosecution.

Further, because banks are barredby federal law from handling the pro-ceeds of “unlawful” conduct, mari-juana businesses are forced to storeand transport large amounts of cash.This makes them susceptible to theft,

and compels them to seek loans offthe books from illicit sources. Inthese ways federal criminalizationpreserves many of the ill effects ofblack markets, even in states thathave legalized marijuana.

The Obama administration movedto mitigate some of these effects. A2013 memorandum, issued by DeputyAttorney General James Cole, guidedU.S. attorneys to cease prosecutingmarijuana offenses in states that had

established their own effective regu-latory systems. Yet this didn’t solvethe practical problems confronting le-gal marijuana distributors, such asaccess to bank services. And by estab-lishing what amounted to sanctuarystatus for legal-marijuana states, the

Cole memorandum seemed to floutthe president’s constitutional obliga-tion to “take care that the laws befaithfully executed.”

The Cole memo was revoked whenJeff Sessions, a longstanding and vo-cal opponent of marijuana legaliza-tion, became attorney general in2017. But by eliminating the safe ha-vens mandated by the executivebranch, he created a powerful incen-tive for Congress finally to legislateon the matter. Also pushing lawmak-ers to act is the legal marijuana busi-ness, which has grown into a multi-billion-dollar industry.

The States Act is a compromise: Itwould simply conform federal mari-juana law in each state to whateverthat state’s law permits. To the ex-tent that marijuana is legal in Califor-nia or New Jersey, so too would it belegal there under federal law. Instates where marijuana is still illegal,federal law would also apply.

This adaptability would allow fed-eral law enforcement to continuebacking up the states by going aftermajor marijuana distributors in places

where it remains illegal. The fedscould still prevent the shipment ofmarijuana from states that permit itto ones that don’t. And the legislationwould prevent state laws regulatinghowmarijuana is distributed from be-ing invalidated for interfering withfederal law.

If enacted, the States Act wouldprovide a model for how the U.S. canmove from one-size-fits-all federalpolicies to 50 state solutions for so-cial and economic problems. In a na-tion as large as America, federalismallows for diversity. That’s a betterapproach than escalating every policydebate to the national level and thenforcing the losers to live under theregime of the winners.

Conservatives who profess a com-mitment to federalism should sup-port the States Act. Progressives,meanwhile, should embrace the di-versity and choice that federalismmakes possible.

Mr. Barnett, a law professor atGeorgetown, directs the GeorgetownCenter for the Constitution.

By Randy E. Barnett

A new Senate bill wouldconform federal marijuanaenforcement to each state’slaws—awin for federalism.

Oman Plays a Double Game on Iran

T he Obama administrationsought to help Iran cash in onthe 2015 nuclear deal, a Re-

publican-led Senate investigation re-vealed last week. The report alsoraises questions about the roleplayed by Oman, a strategically lo-cated if little-known sultanate.

During the run-up to the deal, ad-ministration officials promised thatIran would never get access to theU.S. financial system. But TeamObama was desperate to ensure thatIran, a pariah in the banking commu-nity, saw some material benefitsfrom the deal. Among other things,they sought to convert $5.7 billion ofIranian-held Omani rials, a decidedlyilliquid currency, into euros.

The problem was that the rialsfirst had to be converted into U.S. dol-lars. Under the sanctions regime, thisrequired a license from the U.S. Trea-sury. According to the Senate report,Treasury issued the license, thenasked two American banks to workwith Bank Muscat to process the

transactions. But the American banksbalked, fearing the legal and reputa-tional risks of doing business withIran. Oman then resorted to buyingsmall amounts of euros that it couldtransfer to Iran. It’s unclear if Iranhas received all $5.7 billion.

Why Oman? Between 2012 and2015, the country was the site fortalks between Iran and the other par-ties to the nuclear agreement. TheObama administration lauded Oman’s

contributions to the deal, but someof the sultanate’s neighbors view itspolicy toward Iran as too accommo-dating. The Omanis, less powerfuland less oil-rich than other Gulf Arabstates, have long argued they haveno choice but to play peacemaker.But that doesn’t explain some ofOman’s recent behavior.

In 2016 Reuters reported that Iranwas smuggling arms through Oman tothe Houthi rebels fighting the Saudi-backed government in Yemen. Theshipments allegedly included antishipmissiles, surface-to-surface short-range missiles, small arms, explosives,and unmanned aerial vehicles. Allshipments of weapons to the Houthisviolate a 2015 United Nations SecurityCouncil arms embargo.

In March 2017, Conflict ArmamentResearch, a U.K.-based nongovern-mental organization, reported thatUAVs used by the Houthis enteredYemen through Oman. In a January2018 report, the Security Council’spanel of experts on Yemen assertedthat a land route through Oman wasthe “most likely” explanation forhow Burkan-2H missiles had arrivedin Yemen. The second likeliest expla-nation, according to the report, wasthat Oman’s Salalah port was used asa transshipment point, due to its lax

inspection protocols. Local Yemeniauthorities also seized a pickuptruck on May 9, 2017, at the bordercrossing with Oman. The truck con-tained $3.42 million in foreign cur-rency and gold.

Perhaps most troubling, the Syr-ian airline Cham Wings began flyingbetween Damascus, Syria, and Mus-cat, the Omani capital, in 2015. Trea-sury imposed sanctions on ChamWings in 2016 for terrorism andarms proliferation. It’s possible thatthe airline has been bringing weap-ons, parts, personnel or cash intoOman from Syria for transshipmentto Yemen. It isn’t clear why else thisair bridge was established. As Trea-sury Undersecretary Sigal Mandelkerrecently observed, “People do not goon vacation in Syria.”

There is no evidence that Omaniauthorities directly engaged in illicitactivities on behalf of Iran. But U.S.officials have conveyed their con-cerns to Omani authorities severaltimes since 2016. The Saudis, Ye-menis, Emiratis and Israelis havealso expressed concerns. Omani offi-cials emphatically deny that there isa problem at all.

While most Americans probablycouldn’t point to Oman on a map, thecountry plays an important role inpreserving U.S. interests in the Mid-dle East. Oman has allowed the U.S.to use its military bases since 1980.The country is also crucial becauseOman, along with Iran, controls thecrucial oil-shipping lanes in theStrait of Hormuz.

President Trump has executed anear-total reversal of American policytoward Iran. Oman is in the unenvi-able position of having to adjust tothis new reality. American officialsshould be sympathetic, but not if Mus-cat is turning a blind eye to Iranianweapons smuggling on its soil.

Mr. Schanzer, a former terrorism-finance analyst for the U.S. Depart-ment of the Treasury, is senior vicepresident at Foundation for Defenseof Democracies, where Ms. Salter is aproject manager and Oman analyst.

By Jonathan SchanzerAnd Nicole Salter

The sultanate, a U.S. ally,seems to be helping Tehranwage a proxy war againstSaudi Arabia in Yemen.

© 2018 Dow Jones & Company. All Rights Reserved. * * * * THEWALL STREET JOURNAL. Monday, June 11, 2018 | B1

TECHNOLOGY: ROBOTS MOVE OFF THE FACTORY FLOOR B4

BUSINESS&FINANCE

PERSONAL TECHNOLOGY | By David Pierce

Don’t Settle for a TVThat Sounds Awful

You proba-bly bought anew TV in thepast fewyears. It’sprobably big-

ger than you ever thoughtyou’d want and thinner thanyou ever thought possible—practically wallpaper.

Only one problem withthis handsome new set: Itsounds like junk. It’s so thinand surprisingly inexpensivethat whoever made it didn’thave the space or money fora good set of speakers. So

while you can count Ber-nard’s nose hairs every timeyou watch “Westworld,” youcan’t hear him speak withoutcranking the volume to 100.And all the swelling, surging,emotional music you’re sup-posed to be hearing soundslike the tinkling of a farawayice-cream truck.

You need sound thatmatches the picture you paidfor. You could set up a fullsurround-sound system—even a wireless one—whichcan offer superlative audio

PleaseturntopageB4

INSIDE

AUTO LENDERSTAKE ON

MORE RISK

FINANCING, B5

LastWeek: S&P 2779.03 À 1.62% S&PFIN À 2.18% S&P IT À 0.69% DJTRANS À 0.41% WSJ$ IDX g 0.44% LIBOR3M 2.326 NIKKEI 22694.50 À 2.36% Seemore atWSJMarkets.com

vider of physician services tohospitals and other health-care facilities has been con-ducting an auction after an-nouncing a strategic reviewlast fall. A deal with the pri-vate-equity firm is expected tobe announced Monday, thepeople said.

The price represents a 5%premium to Envision’s closingprice of $43.64 on Friday andis nearly 70% above where thestock traded when the reviewwas announced.

Including debt, the deal isvalued at roughly $10 billion,making it one the largest pri-

vate-equity buyouts in recentyears. Buyout firms are sittingon over $1 trillion of cash,which poses a challenge withmarkets near record highs andbig companies on the prowlfor deals of their own.

Shares of Envision, whichalso provides post-acute careand ambulatory-surgery ser-vices, have fallen 23% over thepast year amid questionsabout its billing for emergencyservices and disappointingperformance.

Formed through the 2016merger of Envision Health-care Holdings Inc. and Am-

Surg Corp., the company hasbeen trying to turn its opera-tions around. Last August, itstruck a deal to sell its ambu-lance business to KKR portfo-lio company Air MedicalGroup Holdings Inc. for $2.4billion.

KKR has been on somethingof a buying spree. Just twoweeks ago it agreed to buyBMC Software Inc. from agroup of other private-equityfirms for about $8.3 billion in-cluding debt.

It has done a lot of otherdeals in health care. Last year,for example, the New York

firm joined with WalgreensBoots Alliance Inc. to buy in-stitutional pharmacy-servicescompany PharMerica Corp. for$1.4 billion.

That followed another dealto buy health-information pro-vider WebMD Health Corp. for$2.8 billion. KKR also bought amajority stake in nutritional-supplements maker Nature’sBounty Co. in a transactionvalued at roughly $3 billion.

Last November, the buyoutfirm also raised $1.45 billionfor a new fund focused onsmall, fast-growing health-care companies.

KKR & Co. is nearing a dealto buy Envision HealthcareCorp. for $46 a share, or about$5.5 billion, according to peo-ple familiar with the matter, inone of the largest recent lever-aged buyouts.

The Nashville, Tenn., pro-

BY DANA MATTIOLIAND MIRIAM GOTTFRIED

KKR Near Health-Care LBO DealPrivate-equity giantwould pay $5.5 billionfor a provider ofservices to hospitals

China Returns as Big Consumer of U.S. Cotton

THE COTTON IS HIGH: Prices are at a six-year high, a result of China’s return as a big buyer and poor growing conditions in Texas. B9

DUBINGXUN/X

INHUA/G

ETT

YIM

AGES

18,000

14,000

15,000

16,000

17,000

yuan a ton

2017 ’18

Cotton futures in China havesurged amid weather concernsand dwindling supplies...

THEWALL STREET JOURNAL.Source: Thomson Reuters

Note: 10,000 yuan = $1,556.40

$1.00

0.60

0.70

0.80

0.90

a pound

2017 ’18

...while U.S. cotton futures aregetting a boost from reneweddemand from China.

Corporate insiders are per-sonally capitalizing on the re-cent boom in buyback an-nouncements, vexing a topregulatory official.

Taking advantage of pricebumps that often accompany

share-repurchase announce-ments, company executiveshave been selling significantlymore of their stock immedi-ately after the news than theydo beforehand, according toan analysis by Robert J. Jack-son Jr., a commissioner at theSecurities and Exchange Com-mission.

In a speech on Monday, Mr.Jackson—appointed by Presi-dent Donald Trump and swornin this year to fill a Demo-cratic seat at the SEC—willurge regulators to review se-curities laws that provide pro-tection to insiders makingsuch trades.

Insiders who sell stock intobuyout bounces aren’t tradingillegally, of course, and Mr.Jackson isn’t accusing them ofthat. Other investors also havethe opportunity to take ad-vantage of the bumps. Butthese price surges can be es-pecially beneficial to corpo-rate executives holding largechunks of corporate stocklooking for an uptick to un-load shares.

“The SEC gives an exemp-tion from market-manipula-tion rules to companies doinga buyback,” Mr. Jackson saidin an interview. “The SECshouldn’t be making it easierfor executives to use them tocash out.”

Mr. Jackson, a former lawprofessor, examined stocktrades at 385 companies thatannounced buybacks in 2017through this year’s first quar-ter. He found the percentageof insiders selling shares morethan doubled immediately fol-

PleaseturntopageB6

By GretchenMorgenson

And TomMcGinty

InsidersMake HayOn RisingBuybacks

Buyback BonanzaValue of announced buybacksby U.S.-listed firms.

THEWALL STREET JOURNAL.Source: Birinyi AssociatesNote: 2018 data through June 8.

$800

0

200

400

600

billion

2010 ’15 ’18

which is fully owned by Fox,people familiar with the situa-tion said.

Comcast and Disney, neitherof which has a big presence inIndia, each view Star India asan important piece in theirplans to challenge Netflix Inc.and tap growth in emergingmarkets, the people said.

Star India reaches 700 mil-lion customers a month, with60 channels in nine differentlanguages; owns rights to airpopular cricket tournaments;and has a stake in a produc-tion company that makes Bol-

PleaseturntopageB6

As Walt Disney Co. andComcast Corp. gear up for apossible bidding war over abig chunk of 21st CenturyFox, both companies are inter-

ested in Fox’s marquee Holly-wood franchises like “TheSimpsons,” “Avatar” and “X-Men.”

But among the most de-sired assets is Indian mediaconglomerate Star India,

By Corinne Abramsand Debiprasad Nayakin Mumbai, and Shalini

Ramachandranin New York

A Coveted Fox AssetIn Any Deal: Star India

� Heard on the Street: Foxbidding to heat up................ B10

Midcap companies are old enough to knowwhat they’re doing. Andyoung enough to do it.MDY invests in growth-hungry, midcap powerhouses that offer immediate potential but aregrown-up enough not to be a flash in the pan. And it’s beaten 82% of the Morningstar U.S.Mid-Cap Blend Category over the last 3, 5 and 10 years. spdrs.com/MDY

MDY is one of the many first-to-market ETFs from State Street Global Advisors.

THEMIGHTYMIDCAPMDY

Before investing, consider the funds’ investment objectives, risks, charges and expenses. To obtain a prospectus or summary prospectus,which contains this and other information, call 1.866.787.2257 or visit www.spdrs.com. Read it carefully.

Not FDIC Insured • No BankGuarantee •May Lose Value2052632.1.1.NA.RTL

Source: Morningstar as of 3/31/18. Based on funds in the Morningstar Mid-CapBlendCategory (oldest shareclass). Rankingsarebasedon returnsafter taxes thatare net of all fees, maximum federal tax rate (39.6%) and applicable sales loads.Rankings reflecting lower tax rates may have resulted in less favorable results forexchange traded funds due to their tax efficiency. Universe: 111 funds for 10 years,131 funds for 5 years, and 145 funds for 3 years. MDY’s 1 year peer group percentileis 32% (54 of 177 funds). Past performance is no guarantee of future results.ETFs trade like stocks, are subject to investment risk, fluctuate in market valueand may trade at prices above or below the ETF’s net asset value. ETF sharesmay not readily trade in all market conditions. Brokerage commissions and ETFexpenses will reduce returns.

Investments in mid-sized companies may involve greater risks than those inlarger, better known companies, but may be less volatile than investments insmaller companies.©2018 Morningstar, Inc. All rights reserved. The information contained herein:(1) is proprietary to Morningstar and/or its content providers; (2) may not becopied or distributed; and (3) is not warranted to be accurate, complete, ortimely. Neither Morningstar nor its content providers are responsible for anydamages or losses arising from any use of this information.SPDR® S&P MidCap 400® ETF Trust, a unit investment trust, is listed onNYSE Arca, Inc.

SPDR®, S&P and S&PMidCap 400 are registered trademarks of Standard & Poor’sFinancial Services LLC, a division of S&P Global (“S&P”) and have beenlicensed for use by State Street Corporation. No financial product offered byState Street or its affiliates is sponsored, endorsed, sold or promoted by S&P.ALPS Distributors, Inc. (fund distributor); State Street Global Advisors FundsDistributors, LLC (marketing agent).State Street Global Advisors and its affiliates have not taken into considerationthe circumstances of any particular investor in producing this material and arenot making an investment recommendation or acting in fiduciary capacity inconnection with the provision of the information contained herein.

B2 | Monday, June 11, 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

Ally Financial..............B5

Amazon.com........A1,B10

American Honda Finance

.....................................B5

App Annie...................B6

Apple....................B3,B10

AT&T..........................B10

Auto Trader Group......B6

B

BAE Systems..............B3

BB&T............................B5

Bloomin' Brands .........B6

BT Group.....................B6

C

Carillion.......................B6

Cerberus CapitalManagement.............B2

Comcast...............B1,B10

Credit Suisse Group ...B4

CSX..............................B2

E

EchoStar......................B6

Envision Healthcare ...B1

F

Facebook......................B6

Fincantieri...................B3

Ford Motor Credit.......B5

H

Hulu.............................B6

Huntington IngallsIndustries..................B3

I

Inmarsat......................B6

Instacart......................A4

International Paper ....B2

J

J.C. Penney................B10

K

KAZ Minerals..............B6

KKR..............................B1

Kohl's.........................B10

KPMG..........................B2

Kroger..........................A4

L

Lockheed Martin.........B3

M

Macy's.......................B10

Microsoft.....................B3

Mitie Group.................B6

N

Navantia......................B3

Netflix..................B1,B10

News Corp ...........B6,B10

O

Ocado Group...............A4

P - R

Plexus Cotton .............B9

Rethink Robotics........B4

S

Santander ConsumerUSA Holdings ...........B5

Sears Holdings..........B10

Sky.............................B10

Sony.............................B3

Star TV........................B6

T

Target........................B10

Target Stores..............A4

TD Bank.......................B5

The Abraaj Group .......B2

Time Warner.............B10

Total............................A7

TTX..............................B2

21st Century Fox

............................. B1,B10

U

Union Pacific...............B2

United Natural Foods.A4

Universal Robots........B4

V

Valve............................B3

W

Walgreens BootsAlliance.....................B1

Walmart...............A4,B10

Walt Disney.........B1,B10

WPP.............................B6

INDEX TO PEOPLE

BY PAUL ZIOBRO

CSX Is Leak in Boxcar PoolThe railroad’s removalof some rolling stockputs a strain on theU.S.’s diminishing fleet

CSX said its decision to take back boxcars boiled down to the fraying promise of shared resources.

GENEJ.

PUSKAR/A

SSOCIATE

DPRESS

Abraaj Growth Markets HealthFund, was used for its statedpurpose or returned to inves-tors. The firm also said that aseparate audit it commis-sioned, carried out by KPMG,found that all the money in thehealth-care fund was handled“in line with the agreed uponprocedures.”

Mr. Naqvi said in a tele-phone interview that the dis-pute was caused by differinginterpretations of Abraaj’sagreement with investors. “Wefelt we were within our rightsto interpret it the way we

wanted,” he said. “In hindsightwould we have done thingsdifferently? Possibly.”

Abraaj told investors in Maythat it used money invested inanother fund for general cor-porate purposes, people famil-iar with that fund said.

Also in May, a Kuwaiti pen-sion fund asked a court in theCayman Islands to declare anAbraaj company based thereinsolvent, alleging that it wasunable to repay a $100 millionloan. A spokesman for Abraajsaid the firm is trying to reacha “consensual outcome” with

A

Alexander, Carol .........A3

Al-Hussainy, Edward..A2

B

Barbakoff, Nathan......R5

Beijk, Patrick...............B4

Boseman, Wayne........B9

Braca, Greg..................B5

Brown, Jeffrey............B5

C

Caine, Steve................A4

Craft, Zac....................B5

E

Edenzon, Irwin............B3

Egli, Peter ...................B9

El-Erian, Mohamed.....A2

F

Foux, Mikhail ..............B9

G

Gakidis, Harry.............A2

Galant, Debbie............R2

Gates, Bill ...................B2

Goldstein, Jeff............B5

Graham, Jack..............A3

H

Hemphill, Ken.............A3

Hipolito, Isaac.............A3

J

Jakob, Olivier..............B9

Jr., Robert J. Jackson.B1

K

Kadow, Joseph............B6

Kimmelman, Gene....B10

L

Lance Fritz ..................B2

M

Maestri, Luca............B10

McMullen, Rodney......A4

Messitte, Zach............R4

Muirhead, Angus........B4

Munster, Gene............B3

Murdoch, Rupert.......B10

N

Naqvi, Arif...................B2

P

Pachter, Michael.........B3

Pasic, Amir..................R4

Patterson, Gavin.........B6

Patterson, Paige.........A3

Praet, Peter ................A2

R

Rai, Vikram.................B9

Ramthun, Roy.............R2

Reynolds, Nadia..........R2

Rogoff, Kenneth.........A2

S

Sacconaghi, Toni.......B10

Schwarzenegger, Arnold

.....................................R5

Shankar, Uday.............B6

Slott, Ed......................R2

Smith, Elizabeth.........B6

Sorrell, Martin............B6

Spesard, Jenna...........R5

Spivey, Angela............A1

Swallow Prior, Karen

.....................................A3

W

Winter, Donald............B3

Wong, Wong...............A3

Railroads operate under asimple premise: share railcarsand everyone wins. Pooled re-sources, even among competi-tors, mean more cars availableto fill and fewer runningempty along tracks.

That decadesold systembuckled after CSX Corp. pulledhundreds of boxcars out of anationwide pool about a yearago to improve its own opera-tions. The move has put addedstrain on the shrinking fleet ofboxcars in the U.S. and addedcosts and complexity for somelarge shippers, industry execu-tives say.

At International PaperCo.’s Savannah, Ga., plant,which produces rolls of con-tainerboard used to makeboxes, the paper giant spendsextra time separating CSXboxcars from those of othercompanies that can still beshared. A mix-up can result ina $2,000 fee from CSX foreach car sent on the wrongtracks. The problem occurs atother facilities that are servedby two railroads.

“This adds additional com-plexity and inefficiency to oursystem,” said Fred Towler, asupply-chain vice president atInternational Paper.

CSX’s decision to pull twotypes of boxcars from the na-tional pool boiled down to thefraying promise of shared re-sources, the railroad said. In-stead of quickly reloadingempty cars, CSX said the box-cars were being recalled tocustomers on other rail lines,requiring CSX to ship the carsback empty, sometimes pastits own customers.

One problem is geographic.CSX operates in the easternU.S., where many boxcar ship-ments are received. That cre-

ates a glut of empty carsthere.

“The purpose of the pool isto reduce empty miles,” saidMichael Rutherford, CSX vicepresident of merchandise salesand marketing. “The momentit no longer achieves that ob-jective, it isn’t working. That’swhy we pulled out.”

The U.S. boxcar fleet hasdwindled to about 122,000from more than 660,000 in1971, according to AllTranstekLLC, a railcar managementand consulting firm.

“What’s left is the stuff thattruly wants to ship in a box-car,” said Richard Kloster, anAllTranstek senior vice presi-

dent. Mr. Kloster estimatesthat forest products accountfor close to two-thirds of box-car shipments.

About 25,000 of the re-maining boxcars, Mr. Klostersaid, are managed in a na-tional pool by TTX Co., a Chi-cago company jointly ownedby the biggest North Americanrailroads, including CSX. TTXalso manages pools of otherrailcars, including flatcars andautomobile carriers. Partici-pants in each pool can use thecars as their own.

Having as many railroads aspossible in the pool helpsmatch empty cars with cargonearest to where they are un-

loaded, Union Pacific Corp.Chief Executive Lance Fritzsaid. “That’s the magic,” Mr.Fritz said.

Mr. Rutherford said CSXisn’t to blame. Congestion onother railroads is causing theboxcar shortage, he said.

The change in CSX’s boxcaruse strategy is part of abroader reorganization thatMr. Rutherford said wouldhelp customers get their goodson faster, more reliable trains.CSX’s order fulfillments forboxcars to its customers arenow close to record levels, hesaid. “I find it hard to see thatcustomers aren’t benefiting,”Mr. Rutherford said.

Annual number of U.S.boxcars in service

700,000

0

100,000

200,000

300,000

400,000

500,000

600,000

1971 ’80 ’90 ’10 ’182000

Over the Hill

Average age of boxcars in the U.S.

THEWALL STREET JOURNAL.Source: FTR, AllTranstek

0 box cars 40,00010,000 20,000 30,000

0-5 years6-1011-1516-2021-2526-3031-3536-40More than 40

Most boxcars in the U.S. are over 35-years-old with the number of them in decline.

the lender. A court hearing forthe bankruptcy case in theCayman Islands is scheduledfor late June.

Some former employeessaid in interviews that asAbraaj’s leader, biggest share-holder and its driving force,Mr. Naqvi had a dominatingattitude that laid the ground-work for trouble.

Several of these former em-ployees blame the problems onwhat they say was Mr. Naqvi’soverly ambitious expansionbeyond Middle East deals.

In response, Mr. Naqvi saidhe is proud of the firm’s recentattempt to raise the biggestemerging-markets private-eq-uity fund.

The reversal of fortune is astartling turn for Mr. Naqvi,whose rise came by challeng-ing the perception that emerg-ing markets are riskier thanWestern markets as places toinvest.

“Dare I say it, cheekily, thatwhen risk came into the globalfinancial system and into allour lives it came from righthere, in New York City, in 2008with the Lehman Brotherscrash,” he said at a conferencein New York in September.

Abraaj’s first investors werewealthy Middle Eastern fami-lies who, Mr. Naqvi said, “of-ten sent us money in largechunks and said, ‘Deploy it asyou wish.’ ”

He raised bigger funds onthe back of successful invest-ments and hired hundreds ofstaff, including butlers. Abraajearned more than four timesits investment in five compa-nies sold by 2007 and reportednet annualized returnsthrough 2016 of 17.9%, com-pany fundraising documentsshow.

To expand Abraaj’s investorbase and geographical reach,in 2012 Mr. Naqvi led the take-over of Aureos Capital. TheLondon-based private-equityfirm had raised funds fromWestern institutions includingthe Gates Foundation. Soon af-terward, the Gates Foundationjoined with Mr. Naqvi’s foun-dation in Pakistan on a family-planning project.

By 2017, he was seeking toseal his legacy by raising $6billion for what would havebeen the biggest emerging-markets private-equity fund.Teachers’ Retirement System

of Louisiana and WashingtonState Investment Board agreedto invest.

Then everything changed.News of the investigation intothe health-care fund in Febru-ary caused “turmoil” as it “un-leashed the floodgates” of in-vestors asking Abraaj whatwas happening at the firm, Mr.Naqvi said in the telephone in-terview.

Mr. Naqvi released inves-

tors from their pledges to thenew fund.

Amid such concerns, Mr.Naqvi stepped back from man-aging Abraaj’s fund-manage-ment unit and put it up forsale. He remains the largestshareholder in the Cayman Is-lands-based company thatowns the fund-managementunit.

Mr. Naqvi said sale talks are“advanced.”

Arif Naqvi wooed the likesof Bill Gates, the World Bankand U.S. pension funds with anambitious pitch: Invest in his

emerging-markets funds tomake money—and help poorpeople, too.

Now some investors in thefunds of the Abraaj Group, theDubai-based private-equityfirm he founded, are allegingthe company misused some ofthe nearly $14 billion it man-aged, and a lender is suing foran unpaid debt. Mr. Naqvi istrying to keep his firm afloatand defend his reputation.

The 57-year-old Pakistanideal maker was in crisis talkslast week. Buyout firm Cer-berus Capital Managementoffered $125 million forAbraaj’s fund-managementunit, people familiar with theoffer said. A regulatory delayin the sale of a $1.77 billionstake in a power plant Abraajcontrols in Karachi, Mr.Naqvi’s native city, has madehis cash-flow problems worse.

“We have been working re-lentlessly with all our inves-tors, creditors and regulatorsround the clock,” Mr. Naqvisaid in a written response tointerview questions from TheWall Street Journal. “We re-main committed to workingthrough this in a confidentialand coordinated way, towardsa satisfactory outcome for allparties.” He denies wrongdo-ing.

His woes began this yearwhen the Bill & Melinda GatesFoundation and other inves-tors hired a forensic accoun-tant to look into possible mis-use of money they had putinto a $1 billion Abraaj health-care fund, according to peoplefamiliar with the audit.

The audit found that Abraajdidn’t spend all of the moneyon hospitals in countries in-cluding India and Nigeria aspromised, two of these peoplesaid. Instead, the auditshowed, it transferred somemoney out of the health-carefund, these people said. Theaudit didn’t show what themoney was specifically usedfor, they said.

Abraaj has said moneymoved out of the fund, the

By Simon Clark,William Louch

and Nicolas Parasie

Abraaj Founder Scrambles as His Empire Teeters

*Showing selected companies

Arif NaqviFounder,

The Abraaj Group

AbraajHoldings

(Cayman Islands)

AbraajInvestment

Management(Dubai)

Kuwait's PublicInstitution for SocialSecurity is suing fornon-repayment of$100 million loan.

Private-equity firmCerberus proposes tobuy for $125 million,according to peoplefamiliar with the offer.

The Abraaj Group's structure*

Major HeadachesThe Abraaj Group is facing a lawsuit from a lender and investigationsby powerful investors into alleged accounting irregularities.

Sources: staff reports; Bloomberg News (photo) THEWALL STREET JOURNAL.

Abraaj GrowthMarketsHealth FundFund size: $1 billionBill & Melinda Gates Foundation,World Bank and other investorshired forensic accountants toinvestigate whether money wasnot used for its stated purpose,according to people familiarwith the fund.

Abraaj Private EquityFund IV$1.6 billionAbraaj told investors in Maythat money from the fund wasused for general corporatepurposes, according to peoplefamiliar with the fund.

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BUSINESS NEWS

BY ROB TAYLOR

fleet is stretched too thin, re-sulting in cuts to training.

Defense companies say thecoordinated buildup among al-lies is also an opportunity forWestern allies to build a com-mon warship. By adoptingsimilar designs, they say,countries could share the costof future ship upgrades, withspare parts and maintenanceavailable at a wider range ofglobal shipyards.

“To have the Canadiannavy, the Australian navy, theRoyal Navy, the New Zealandnavy, operating the same frig-ate, that’s not an impossibledream,” said BAE’s managingdirector, Nigel Stewart.

Australia within weeks isdue to award a $26 billioncontract for nine frigates. BAE,Fincantieri and Spain-basedNavantia SA are competingfor the deal.

Warren King, chairman ofNavantia’s Australian unit,said the purchases createsome momentum for Canada

and the U.S. to buy the sameships. Navantia and BAE arevying for a Canadian contractto build 15 frigates valued atas much as $46 billion.

While frigates are amongthe smallest warships in theU.S. fleet, they are the back-bone of allied navies. Australiawants its new ships to be al-most as large as U.S. destroy-ers, capable of hunting subma-rines and equipped to defendagainst ballistic missiles.

About 250 new submarinesare expected to enter servicein Asia in the next decade asnations including Australiaand Japan seek to counterChina’s militarization of atollsin trade lanes running throughthe South China Sea.

“By 2025, half of theworld’s submarines will be op-erating off Australia’s easternseaboard,” Mr. Stewart said.

Frigates are also becomingmore important for the U.S.Navy as the Pentagon seekswarships that are cheaper

than destroyers but carrymore firepower than itssmaller littoral combat ships.Each new frigate costs $950million, the U.S. Navy esti-mates. A completely outfitteddestroyer costs $1.8 billion.

A multibillion-dollar Penta-gon program to commission20 missile frigates for con-struction in the U.S. has pittedFincantieri against AustalUSA, Lockheed, General Dy-namics Bath Iron Worksteamed with Navantia, andHuntington Ingalls.

In a sign that Australia’schoice could inform the U.S.competition, a board advisingAustralian defense officials isstacked with experts from theU.S. including former Secre-tary of the Navy Donald Win-ter and Irwin Edenzon, theformer president of IngallsShipbuilding.

“The whole world is lookingat Australia now,” said DarioDeste, chairman of Fincantieriin Australia.

At Sea, a Spending SpreeDefense firms pursuepotential windfall asWestern navies boostaging fleets in Pacific

BAE Systems Type 26Also vying for Canada

Sources: Navantia, BAE Systems, Fincantieri, Australian Strategic Policy Institute.

Note: Figures are estimates for BAE Systems and Navantia, images are renderings.

Fighting FrigatesAustralia's frigate contest will kick off $70 billion in decisions by nations including the U.S. and Canada.

Antisubmarine and antiair missiledefense, Australian Ceafar2 radar,Aegis combat system

Length and speed491 feet, 26+ knots

Displacement6,900 metric tons

Range7,000+ nautical miles

Helicopter hangars 1

Armament 24 strike missile cells

Fincantieri Marine FremmAlso vying for U.S.





Helicopter hangars 2


Navantia SEA5000Vying for U.S., Canada





Helicopter hangars 1-2



as Sony Corp.’s PlayStationand Microsoft Corp.’s Xboxand app stores owned by Ap-ple Inc. and Google Inc., whichmonitor submissions to vary-ing degrees before makinggames available.

Critics have railed againstviolent videogames for decades,but they remain some of thebest-selling franchises, includ-ing Take-Two Interactive Soft-ware Inc.’s “Grand Theft Auto”and Activision Blizzard Inc.’s“Call of Duty.” At the giant vid-eogame expo E3 over the week-end, violent games again wereon display, such as Ubisoft En-tertainment SA’s next install-ment of “Assassin’s Creed.”

For many, however, “ActiveShooter” crossed a line at atime when real-life schoolshootings in the U.S. have be-come all-too-frequent horrors.In March, President DonaldTrump met with industry lead-ers to discuss the impact of vi-olent games on children fol-lowing the high-schoolshooting in Parkland, Fla.

Valve identified Ata Berdyevas responsible for listing “Ac-tive Shooter” on Steam. “Ata isa troll, with a history of cus-tomer abuse, publishing copy-right material, and user reviewmanipulation,” the companysaid in a statement. “His sub-sequent return under newbusiness names was a fact thatcame to light as we investi-

CANBERRA, Australia—U.S.allies are embarking on a na-val shopping spree as territo-rial standoffs intensify in thePacific.

Contracts valued at $70 bil-lion are up for grabs fromAustralia to Canada, as gov-ernments update aging fleetsto protect shipping lanes andtheir territorial waters.

While defense spendingglobally has fallen over thepast decade, the Stockholm In-ternational Peace Research In-stitute expects spending thisyear to be the highest sincethe close of the Cold War. Na-tions in Asia and the MiddleEast are leading the charge.

That is a potential windfallfor companies such as Lock-heed Martin Corp. and Hun-tington Ingalls Industries Inc.in the U.S., BAE Systems PLCof Britain and FincantieriSpA, Europe’s biggest ship-builder. The new contractscould secure thousands of jobsand guarantee a pipeline ofwork for at least a decade.

Western navies are rebuild-ing their Pacific fleets asChina and Russia challengetheir dominance in the region.China is asserting more swayover the South China Sea, ten-sions on the Korean Peninsulaare high and Russia is showingrenewed interest in Asia. Latelast year, a Russian navy shipdocked in Papua New Guineafor training and Russianbombers visited Indonesia.

The U.S. has urged its alliesto spend more on defense.President Donald Trump hascalled for a U.S. naval fleet of350 ships. The current fleet of273 ships is the smallest since1916. Last year collisions be-tween U.S. guided-missile de-stroyers and merchant shipsthat left 17 sailors deadprompted criticism that the

ZURICH—Swiss voters onSunday overwhelmingly re-jected a proposal to barcommercial banks from cre-ating money, a victory forthe central bank which hadvehemently opposed the ini-tiative.

The Vollgeld Initiative,also known as SovereignMoney, attracted interna-tional attention because itwould have upended thebanking system in a countryknown for its banks.

Financial institutions inSwitzerland and around theworld create electronicmoney every day when theylend money to householdsand businesses.

But Vollgeld supporterswanted the Swiss NationalBank to create all the moneyin the economy, putting it indirect control of the moneysupply.

Swiss voters opted tomaintain the status quo, asexpected. Only 24% of voterssupported the initiative, ac-cording to provisional fig-ures released by the govern-ment, with 76% against.

“With conditions now re-maining unchanged, the SNBwill be able to maintain itsmonetary policy focus on en-suring price stability, whichmakes an important contri-bution to our country’s pros-perity,” the SNB said in astatement Sunday after thevote.

Opinion polls ahead of thevote had support at closer toone-third, suggesting sup-port waned in the cam-

paign’s final days.“Action is still urgently

needed, because the next fi-nancial crisis will happenwith certainty,” the commit-tee of the Sovereign MoneyInitiative said in a statementSunday, calling the results“respectable.”

“Politicians must nowtake concrete measures toguarantee that both ourmoney and the paymenttransaction system remaincompletely secure in a cri-sis,” they said.

Under the current systemin Switzerland and else-where, when a borrower isapproved for a loan, thebank creates an electronicdeposit for the borrower,which the borrower trans-fers to the seller’s bank ac-count.

Much of the money in theeconomy is created throughthese bank-created deposits.Regulatory limits, such ascapital ratios, keep banksfrom endlessly making loans.

Of the 645 billion Swissfrancs (about $652 billion)in circulation, only about 85billion francs are notes andcoins.

The Vollgeld Initiativewas put to a binding refer-endum because supportersgathered the required100,000 signatures underSwiss law.

It would have convertedthese electronic depositsinto central-bank-issuedmoney much like cash. Bankswould then have to actuallyhave money before they lendit out.

Supporters said thiswould limit costly boomsand busts and eliminate thedanger of bank runs.

Opponents—which besidesthe SNB included the federalgovernment and bank execu-tives—countered that itwould raise the cost ofcredit, overburden the cen-tral bank and damage theeconomy.

BY BRIAN BLACKSTONE

Swiss Vote DownMoney Overhaul

24%Swiss voters who supportedVollgeld Initiative

gated the controversy aroundhis coming title. We are notgoing to do business with peo-ple who act like this towardsour customers or Valve.”

Mr. Berdyev, who identifiedhimself in a telephone interviewas a social-media marketer inSeattle, said he didn’t createthe game but helped a friend inRussia list it. “It feels like theytried to put the blame on merather than show that they arecensoring the game,” he said.

Steam, which launched in2003, is among the largest dis-tributors of downloadable PCgames. It generates about $2.5billion yearly in PC game sales,according to estimates fromWedbush Securities analystMichael Pachter, who valuesValve at about $15 billion.

Valve asked customers in2012 to review game proposalssubmitted by developers new toSteam, and then vote on whichgames should be fully available.But five years later, it allowednew developers to list games as“coming soon” as long as theypaid $100 and their game de-scriptions met certain guide-lines. Steam says games withhate speech or pornographyaren’t allowed, and games withviolence and nudity are permit-ted with warning labels.

Developers praised Steamfor giving small creators aneasy publishing path, withgames taking only a few daysto get listed as “coming soon.”Many, though, said theyweren’t sure what Valve did toevaluate their submissions andhad no communication withthe company during that time.

“Humans at Valve are veryinvolved, with groups of peo-ple looking at the contents ofevery controversial title sub-mitted to us,” the companysaid in its statement onWednesday.

Steam has about 22,000videogames listed for sale orcoming soon, with an averageof 25 new games added daily,according to SteamSpy, a smallfirm that collects data on theplatform. Valve has an esti-mated 450 employees, accord-ing to research firm PitchBookData Inc.

A popular videogame-down-load store lowered its bar lastyear to make it easier for de-velopers to hawk their cre-ations. It ended up letting in agame that involved shootingup a school.

Valve Corp., the companybehind the online store Steam,pulled a preview of “ActiveShooter” on May 29, about aweek before the game wassupposed to go on sale. The re-moval followed days of mount-ing complaints from parents,advocacy groups and others.

The game’s fleeting pres-ence on Steam, which drawstens of millions of peopledaily, shows the industry isstill struggling with how tohandle games whose violentand extreme content has be-come immensely popular.

Valve, a closely held com-pany based in Bellevue, Wash.,said it removed “ActiveShooter” because of concernsabout the game’s origins andmotives. It wasn’t the first ul-traviolent videogame to ap-pear on Steam; it has soldgames, including “Hatred” and“Postal,” that involve playerscontrolling a character com-mitting mass murder.

“You don’t see egregiouscontent on the other majorplatforms because they havecontrols in place to preventthis kind of stuff,” said GeneMunster, an analyst at LoupVentures. “Steam is more likethe Wild West.”

When removing “ActiveShooter” last week, Valve saidit discovered the game’s creatorhad previously been bannedfrom Steam but had subse-quently submitted games, in-cluding “Active Shooter,” undera different name. Last week,Valve said it didn’t want to de-cide what games people playand content developers create,with exceptions for games itconsiders either illegal or“straight up trolling.” Valve re-sponded selectively to requestsfor comment and didn’t explainwhat it meant by trolling.

People also can downloadgames through consoles such

BY SARAH E. NEEDLEMAN

A School-Shooting GameIs Pulled After Complaints

Full Steam AheadEstimated number of new gamesadded to Steam each year

THEWALL STREET JOURNAL.Source: SteamSpyNote: 2018 is to date.

8,000

0

2,000

4,000

6,000

2010 ’12 ’14 ’16 ’18

SecuringCaptain Sophie’sMagic Fort.

Unisys improves and protects thehome buying process online andin-person for tens of millions ofpeople around the world. Whichmeans families just like Sophie’sget to build forts together intheir first home. Find out moreat Unisys.com/Banking.

Consulting | Services | Technology

wsj_20180611_b003_p2jw162000_0_b00300_17fffb5178f2018.crop.pdf 1 11-Jun-18 06:10:06

B4 | Monday, June 11, 2018 THEWALL STREET JOURNAL.

TECHNOLOGY WSJ.com/Tech

into hubs for all your con-nected devices.

The first smart thingsmart soundbars will do isreplace your remote for ba-sic functions. By integratingAmazon’s Alexa and othervoice assistants, these de-vices know what to do whenyou say, “turn the TV on,” or“turn the volume down.”

Some, like the $300 PolkCommand Bar, allow you to

connect your other home-theater devices directly tothe soundbar and switch be-tween them with your voice.

Voice command isn’t al-ways seamless. Alexa-en-abled devices are at theirbest only when paired withone of Amazon’s Fire TV de-vices: The Command Barcouldn’t do much with myRoku. And that clean, one-cable setup requires your TV

to support a two-way audiostandard called HDMI-ARC,which not all do.

The $400 Sonos Beam, asmall soundbar that will beavailable in July, also con-nects to your TV with a sin-gle HDMI-ARC cable. It alsooffers Alexa integration;Google Assistant is cominglater. And since the SonosBeam is compatible with Ap-ple’s AirPlay 2, you can also

quality but requires seriousmoney and time. Or youcould go the easier route andget a soundbar. Drop a longbrick of speakers on your TVstand, plug it in, and revel inthe new sound.

E ven stereo bars thatcost around $100—such as Vizio’s 29”

Sound Bar and the Amazon-Basics model with built-insubwoofer—will put your TVspeakers to shame. Priciersoundbars mean bettersound. They generally usemultiple speakers to blastsound right, left and center,and can sync with additionalspeakers behind you. Theyalso can bring out dialogueand tamp down loud noisesautomatically.

And the best soundbarsare becoming more than justspeakers: Manufacturers arestarting to embed voice as-sistants, turning the systems

ContinuedfrompageB1

ladders. In Japan, a cobotboxes takeout dumplings. InSingapore, robots give soft-tis-sue massages.

Cobots made up just 5% ofthe $14 billion industrial-robotmarket in 2017, according toresearch by Minneapolis-basedventure-capital firm Loup Ven-tures. Loup estimates saleswill jump to 27% of a $33 bil-lion market by 2025 as de-mand rises. About 20 manu-facturers have started sellingsuch robots in the past de-cade.

Smaller businesses are us-ing more cobots as labor costsrise. Artificial-intelligencesoftware is making it easier toteach them repetitive tasks.The latest models are sleekerand safer than their predeces-

sors, which were often con-fined in cages to protect themfrom injuring nearby humans.

Cobot arms brake whenthey touch humans, and don’thave “pinch points” that couldsnag fingers and skin. One co-bot maker, Boston-based Re-think Robotics, added smiley-face screens to its robots tomake them look friendlier.

“Robots are now crossingthe chasm from a niche to amass market,” said AngusMuirhead, who runs a roboticsfund for Credit Suisse. He lik-ened the current adoption ofrobotics to the introduction inthe late 1990s of smaller hand-sets that launched mobilephones into wider use.

When restaurateur PatrickBeijk opened Mofongo’s Dis-

tillery & Cocktail Bar in theDutch city of Groningen in2013, he went looking for amachine that could scale thespace’s jewel-colored wall ofspirit bottles. When Mr. Beijkopened a wine bar last year,he bought a two-armed cobotprogrammed to extract winefrom bottles without removingthe cork.

In Singapore, AiTreat—astartup at Nanyang Technolog-ical University—has createdrobots that can give Chinesemedical massages, which focuson acupressure points.

Both Mr. Beijk’s andAiTreat’s cobots were made inpart by Universal Robots,which sold its first cobot in2008. Last year, the companysold 8,600 units.

Robots are moving off theassembly line.

Collaborative robots thatwork alongside humans—“co-bots”—are getting cheaperand easier to program. That isencouraging businesses to putthem to work at new tasks inbars, restaurants and clinics.

In the Netherlands, a cobotscales a 26-foot-high bar totap bottles of homemade gin,whiskey and limoncello so thatbartenders don’t need to climb

BY NATASHA KHAN

Robots Shift From Factories to New JobsGrowing list of tasksincludes helping out atbars and takeoutshops, giving massages

command it with Siri on aniPhone. The Beam is smalland simple enough to be theright soundbar for manypeople and, based on mybrief time with it, sounds ex-cellent.

You spend a lot of time inthe living room, so why notget one gadget that does itall? Lots of people listen tomusic through their TV justbecause it’s usually the loud-est (or only) speaker in thehouse. A speaker like theBeam provides a far betterexperience, even when theTV is off.

R oku is thinking alongsimilar lines. Afteryears of making set-

top boxes, the company hasbecome a force in smart TVs:The company says one infour smart TVs sold in theU.S. runs its RokuOS soft-ware. Later this year, Rokuplans to roll out the RokuEntertainment Assistant, avoice-controlled tool forfinding stuff to watch andlisten to. One of the firstplaces that assistant will ap-pear: a soundbar made byTCL.

If you did buy an expen-sive 4K TV recently, youwon’t be itching to upgrade

anytime soon—even if manu-facturers try to wow youwith 8K, HDR and othermysterious upgrades. But theapps and services appearingon modern TVs change allthe time. The solution: Up-grade only what you need toin order to get the best con-tent.

Chinese brand Xiaomi hasbeen working on this for thepast few years. Its Mi TVBar, not currently for sale inthe U.S., attaches to any TVor projector and instantlymakes it smart. In its questto build ever-thinner TVs,Xiaomi moved all key ports,plus all the apps, into thesoundbar. That way you cankeep your screen for as longas it works, and upgrade thesoundbar whenever you needmore brains.

Right now, the best avail-able smart soundbar is thePolk Command Bar, though Ithink the Sonos Beam, whichstarts shipping next month,will likely be an even betterchoice, especially if you al-ready have Sonos speakersin your house.

Either way, your nexthome-theater upgradedoesn’t need to be a smartTV. It should be somethingsmarter. And louder.

TV ShouldSound aLot Better

Smart soundbars, like the $300 Polk Command Bar, can be controlled with the sound of your voice.

EMILYPRAPUOLE

NIS/THEWALL

STR

EETJO

URNAL

OtherCollaborative robots

Estimated value of industrialrobot sector

Estimated sales

Rise of the CobotsSales of robots that workalongside humans are expectedto continue rising.

Source: Loup Ventures THEWALL STREET JOURNAL.

2017 2018 2019 2020

$20 billion

0

5

10

15

600,000 units

0

150,000

300,000

450,000

2017 2018 2019 2020

©2018DowJones&Co.Inc.Allrightsreserved.6DJ6301

A fewof these are about to break throughTech-driven innovation is remaking business daily—and corporations, investors and

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Read our full rankings and special report on June 13.

With polling from:

THEWALL STREET JOURNAL. * * * * Monday, June 11, 2018 | B5

money is tight. “There’s somesecurity in that,” said Mr.Craft, who lives in Hawaii.

Lenders pushed into sub-prime auto lending after therecession, which helped boostvehicle sales. Subprime autolending peaked at $114.4 bil-lion in 2015, according toEquifax, accounting for 19% ofauto loans and leases thatyear. Higher loan losses fol-lowed, and lenders subse-quently tightened underwrit-ing standards. That resulted ina drop in new car sales andloan originations last year.

While subprime lending isdeclining, some banks areturning to consumers whosecredit scores are neither highnor low. TD Bank, SantanderConsumer USA and BB&T saythey have been extendingmore loans to borrowers theydefine as “nonprime” or “nearprime.” Santander and BB&Talso originate subprime autoloans.

Skeptics say the termnonprime is another way to la-

quarter, according to Experian.Zac Craft wanted a three-

year loan when he bought his2012 Chevy Cruze this yearbut opted for a five-year loandespite its slightly higher in-terest rate. Mr. Craft plans topay off the loan in three yearsto cut down on interest butwanted the option to makelower monthly payments when

death of its matriarch—a D-plus CinemaScore.

Less successful was “HotelArtemis,” starring Jodie Foster.The Global Road release, alsostarring Sterling K. Brown,Dave Bautista and Charlie Day,flopped with $3.2 million.

One of the early summer’smore breakout hits has beenthe Supreme Court JusticeRuth Bader Ginsburg docu-mentary “RBG,” which hasmade $9.1 million in six weeksof release through Sunday.

Opening over the weekendwas another documentary thatmay prove a similar sensation:the Fred Rogers documentary“Won’t You Be My Neighbor?”The Focus Features releasegrossed $470,000 in 29 the-aters for a per-theater averageof about $16,000.

chief Jeff Goldstein. “Numberone, it’s fun. Number two, ithits an underserved audience.Unfortunately, there is just alack of stories that are aimedright at women.”

Yet the weekend’s threenew wide releases were all fe-male-led.

The horror thriller “Heredi-tary,” starring Toni Collette,made its debut with $13 mil-lion, setting a new companyrecord for A24, the indie dis-tributor behind releases like“The Witch” and “Moonlight.”The feature-film directing de-but of Ari Aster, “Hereditary,”has received rave reviews andbeen hailed as the year’s scari-est movie since its debut atthe Sundance Film Festival.Audiences gave “Hereditary”—about a family cursed after the

‘Ocean’s 8’ stars, from left, Sandra Bullock, Sarah Paulson, Rihanna, Cate Blanchett and Awkwafina.

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NEW YORK—“Ocean’s 8,”the female-led overhaul of the“Ocean’s” heist franchise,opened with an estimated$41.5 million at the box office,taking the weekend’s top spotfrom the fast-falling “Solo: AStar Wars Story.”

“Ocean’s 8,” despite ho-humreviews, found nothing like thestormy reception than the fe-male-led “Ghostbusters” re-boot did on the same weekendtwo years ago.

Made for approximately $70million, “Ocean’s 8” and itscast, featuring Sandra Bullock,Cate Blanchett and Anne Hath-away, set an opening-weekendbest for the franchise, not ac-counting for inflation. Thethree previous “Ocean’s”films—starring Brad Pitt,George Clooney and Matt Da-mon, and based on the 1960original “Ocean’s 11,” withFrank Sinatra—all had debutswith between $36 million and$39 million in the past decade.

“Ocean’s 8,” also starringMindy Kaling, Sarah Paulson,Awkwafina, Rihanna and Hel-ena Bonham Carter, drew alargely female audience—69%female—for a result thatslightly surpassed expectations.

“We thought we’d come inin the $35-40 [million] range,”said Warner Bros. distribution

Associated Press

Female-Led Heist Film ‘Ocean’s 8’Bumps ‘Solo’ From Its No. 1 Spot

EstimatedBox-Office Figures, ThroughSundaySALES, INMILLIONS

FILM DISTRIBUTOR WEEKEND*CUMULATIVE %CHANGE

1. Ocean’s 8 WarnerBros. $41.5 $41.5 --

2. Solo: AStarWarsStory

Disney $15.2 $176.1 -48

3. Deadpool 2 TwentiethCentury Fox $13.7 $278.7 -41

4. Hereditary A24 $13 $13 --

5. Avengers:InfinityWar

Disney $6.8 $654.7 -35

*Friday, Saturday andSunday Source: comScore

BUSINESS NEWS

up from 7% of loans in late2009.

Lenders say borrowers needflexible terms because new ve-hicles are getting more expen-sive. Despite the longer repay-ment periods, averagemonthly loan payments con-tinue to rise, hitting a record$523 for borrowers whobought new cars in the first

and of itself,” TD Bank ChiefExecutive Greg Braca said atan industry conference thisyear.

Many auto lenders, includ-ing banks, nonbanks and thefinance arms of car manufac-turers, have been offeringmore loans with longer terms.Generally, these terms allowborrowers to make lowermonthly payments, but usuallyat a higher interest rate. That,combined with the longer pay-ment period, means that bor-rowers can end up payingthousands more for their carsthan if they opted for ashorter loan.

In the first quarter, the av-erage loan term for a new carexceeded 69 months, the sec-ond consecutive quarter it hadever been above that level, ac-cording to credit-reportingfirm Experian. Also in the firstquarter, new car loans origi-nated with repayment periodsof between 73 and 84 monthsrepresented more than one-third of total new car loans,

bel less-than-ideal borrowerswithout alarming investors.Nonprime and subprime cus-tomers can generate better re-turns because they tend to payhigher interest rates.

“When you can kind of op-erate in the belly of credit andgenerate 7-plus-percent yieldson new originations, that’spretty attractive business,”Ally Financial Inc. Chief Exec-utive Jeffrey Brown said at anindustry conference thismonth. Ally, one of the largestU.S. auto lenders, does busi-ness with borrowers acrossthe credit spectrum, includingsubprime.

Lenders say they typicallymake the longest loans toprime customers who can af-ford them and understand therisks.

A report last month byMoody’s Investors Service,however, found that borrowerswho sign up for loans that lastsix years or longer have lowercredit scores and owe a largershare of the vehicle’s pricethan consumers with shorterloans. The loan payments alsoaccount for a larger share oftheir income, said Moody’s.

At Ally, for example, bor-rowers with loans stretchingsix years or longer owed onaverage around 100% of thecar’s purchase price whenthose loans were originated,according to Moody’s. Borrow-ers with a shorter repaymentperiod owed 83%. Creditscores for borrowers with thelonger loans averaged roughly725, compared with about 760for borrowers with shorter-term loans.

Similar rifts exist withloans extended by auto mak-ers’ in-house financing arms,including Ford Motor CreditCo. and American Honda Fi-nance Corp.

A Ford Credit spokeswomansaid the company’s lendingstandards haven’t changed andthat longer-term loans are “arelatively small part of thebusiness.” Honda Finance haskept its maximum repaymentperiod at 72 months, a spokes-man said.

New risks are lurking inauto loans.

As loan growth slows,banks and other lenders havebeen tinkering with loan terms

in an effort to gain more con-sumers. They are originating agreater share of loans with re-payment periods of more thanfive years and, in some cases,extending loans to consumerswho are stretching further toafford their purchases. Bankssuch as TD Bank, SantanderConsumer USA Holdings Inc.and BB&T Corp., meanwhile,have said they are increasingtheir loans to riskier appli-cants.

Their moves come at an un-settled time for auto lending.Sales growth has been choppyand missed payments are upfrom a year ago. Also, used-car prices are under pressure,raising the risk of higherlosses for lenders when vehi-cles are repossessed. Facedwith these headwinds, manylenders shunned applicantswith low credit scores andhave been looking for ways tomake up the lost volume.

The latest underwriting ef-forts show that lenders, facedwith conflicting signals aboutthe health of the U.S. con-sumer, are engaged in a deli-cate balancing act to boostlending and profit withouttaking on overly risky custom-ers. Though unemploymenthas reached an 18-year lowand wages are creeping higher,some households are slidingdeeper into debt and fallingbehind on their credit cardsand other debt payments.

If “you only took on the fi-nancing for the top echelon ofthe super prime... [it is] very,very hard to make money in

By AnnaMariaAndriotis

and Christina Rexrode

Auto Lenders Are Taking On More RiskFaced with slowingloan growth, some arereaching out to lesscreditworthy buyers

Many auto lenders have been offering more loans with longer terms. A car dealership in the New York borough of Queens.

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Average monthly loan payment

Source: Experian THEWALL STREET JOURNAL.Note: All data are for the first quarter of each year.

2008 ’18

450

425

475

500

525

550

Average repayment period

2008 ’18

months

60

62

64

66

68

70

Speeding UpFor new cars, loans are longer and monthly paymentsare becoming more expensive.


BUSINESS NEWS

The media firm reaches 700 million customers a month, with 60 channels in nine languages, and owns rights to air cricket tournaments.

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Diverging Fortunes


15

–5

0

5

10

%

2014 ’16 ’18 ’20 ’22

U.S. India

Traditional TV and home video,change in revenue from a yearearlier

Source: PwC Global Entertainment andMedia Outlook

Note: Figures are PwC Estimates.

125

0

25

50

75

100

%

2014 ’16 ’18 ’20 ’22

U.S. India

Streaming video market, changein revenue from a year earlier

The American TV and homevideomarket is shrinking, while growthin streaming video services inIndia is outpacing the U.S. market.

Martin Sorrell, former CEO

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BUSINESSWATCH

BITCOIN

South KoreanExchange Hacked

A South Korean cryptocur-rency exchange said Sunday thatit suffered from a “cyber intru-sion,” prompting bitcoin prices tofall sharply and sending themcloser to the lows of the year.

Bitcoin dropped more than10% over the weekend, fallingbelow $6,700, according to re-search site CoinDesk.

Other large cryptocurrenciessuch as ethereum, ripple and bit-coin cash also fell. The latest de-clines came after a small ex-change called Coinrail said thatseveral alternative versions ofbitcoin appeared to have beenstolen in the attack. It didn’t dis-close the amount stolen.

—Steven Russolillo

MAN-MADE RISKS

World’s Cities FaceFinancial Threats

An estimated $320.1 billion inglobal gross domestic product isthreatened by man-made riskseach year, outweighing the po-tential impact of natural catas-trophes, according to Lloyd’s ofLondon.

The City Risk Index, whichLloyd’s built with Cambridge Uni-versity, puts the potential eco-nomic risk from natural disastersto 279 cities across the world atan annual $226.4 billion, out-weighed by the collective threatof man-made issues such as cy-bercrime, interstate conflict andmarket crashes.

Lloyd’s says the top 10 riski-est cities in the index face aGDP threat of $126.8 billion in

potential losses each year fromman-made disasters.

—Adam Clark

MITIE GROUP

U.K. ContractorCuts Pretax Loss

Mitie Group, a U.K. business-services contractor, said it re-duced its pretax loss by 58% infiscal 2018, though net debtrose year to year.

The company has said thecollapse of rival Carillion raisedsome fundamental questionsabout outsourcing, A.J. Bell ob-served.

Bell’s Russ Mould said Mitieis cutting costs as part of a planto prove it isn’t going the sameway as Carillion, yet it will taketime. It still needs to deal withlarge average net debt, lacklus-

ter organic growth and execu-tion risks, he said.

—Philip Waller

INMARSAT

Proposal RejectedFrom Rival EchoStar

After much expectation satel-lite-services company EchoStarCorp. might make a play for rivalInmarsat PLC, that has nowhappened.

Inmarsat, though, said itdidn’t like what it saw and re-jected what it calls a “highly pre-liminary and indicative nonbind-ing proposal” that “significantlyundervalued” its business.

Inmarsat shares rose 13%amid deal rumors Friday beforethe British company said it re-jected the approach.

—Robert Wall

AUTO TRADER GROUP

Online Sales SiteGets Upbeat Report

Auto Trader Group PLC hasenough levers to pull to meetmarket expectations for fiscal2019, despite facing headwinds,Barclays said.

“Investors had been nervouscoming into Auto Trader’s full-year results, fearing a down-grade on FY19 after six monthsof a notably tougher market forused car transaction volumes,”the bank said.

The online car-sales portalexpects lower revenue growth inthe fiscal year ending March 31,2019, on the back of fewer carsfor sale in the market, but Bar-clays analysts said the companycould resort to pricing steps andto adding sales of its advanced

and premium package-tiers todeliver revenue growth in linewith consensus.

—Adria Calatayudvaello

BT GROUP

Cost Cuts PromptDividend Speculation

The departure of BT GroupChief Executive Gavin Pattersonmight trigger a dividend cut, an-alysts said.

BT faces pressure to cutcosts because of demands fromregulators to expand fiber broad-band to homes, they said.

Brokerage Raymond Jamesquestioned whether BT canmaintain existing payouts if itsteps up broadband investmentwithout cutting spending else-where.

—Philip Waller

agh Herlihy sold a combined216,562 shares, generatingroughly $1.4 million in netproceeds, regulatory filingsshow.

On March 2, six days afterthe news, Chief Legal OfficerJoseph Kadow sold roughly281,000 shares generating$5.07 million, according to thefilings. Also that day, Chair-man and Chief Executive Offi-cer Elizabeth Smith sold150,000 shares generating$2.5 million, filings indicate.

The sales were executed atprices that were, on average,7% higher than the closingprice the day before the buy-back was announced. Thethree executives declined to

comment on the sales, but aBloomin’ Brands spokes-woman said in a statement:“We have had share buybackprograms in place continuallysince December 2014 and insimilar or larger amounts.”

In the interview, Mr. Jack-son said the SEC hasn’t lookedat buyback rules for morethan a decade. With the re-cent surge in such activity, hesaid, “it’s time to take anotherlook at these rules.”

At issue is Rule 10b-18 ofthe Securities Exchange Act of1934, which advises compa-nies how to proceed with buy-back timing and other me-chanics, such as prices paidand volume restrictions. It

Robert J. Jackson Jr. says it’s time to take a look at buyback rules.

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agenda for the future,” StarIndia Chief Executive UdayShankar said.

Wall Street research firmMoffettNathanson estimatedStar will make earnings beforeinterest, taxes, depreciationand amortization of $826 mil-lion by 2020, a 91% jump fromthis fiscal year. Fox, which had$7.17 billion in adjusted oper-ating income on $28.5 billionin revenue in its most recentfiscal year, has said it believesStar will earn $1 billion inEbitda by 2020.

Mumbai-based brokerageEdelweiss Securities peggedStar’s value at $14.3 billion asof 2016.

Disney in Decemberreached a $52.4 billion all-stock deal with 21st CenturyFox. Cable giant Comcast saidlast month that it is in the ad-vanced stages of preparing arival, all-cash bid.

The assets for sale includethe Twentieth Century Foxfilm and television studio, var-

ious cable networks and Fox’sstake in the streaming serviceHulu. But among the mostcompelling assets—especiallyfor Comcast—are the interna-tional ones, Star India andFox’s interest in European pay-TV operator Sky PLC.

21st Century Fox and WallStreet Journal-parent NewsCorp share common ownership.

Buying Star would comewith some risks. Sports-rightsdeals, if they follow the courseof the U.S. and Europe, couldbecome much more expensiveupon renewal. And there couldbe new competition from thetelecom companies driving In-dia’s wireless-data boom, in-cluding Jio, as they start offer-ing their users content.

While user cancellations ofcable and satellite-TV serviceare plaguing the U.S. pay-TV in-dustry, “in India, cord-cuttingis absolutely a nonissue” andpay-TV is still expanding, saidAbneesh Roy, senior vice presi-dent of research at Mumbai-

based Edelweiss Capital Ltd.Over the past 10 years, Star

India CEO Mr. Shankar has ex-panded Star’s distribution. Itnow reaches nine out of 10 In-dian homes.

Star’s programming in-cludes everything from prime-time soaps to dance competi-tions and highlights ofinternational sports events. Ithas worked to add content inlanguages other than Hindiand English. As the economygrew, people who spoke re-gional dialects had more pur-chasing power and more ap-peal for advertisers. “Notplugging into that changewould have been a loss of op-portunity,” Mr. Shankar said.

It agreed last year to ac-quire the global TV and digitalrights to India’s wildly popularannual cricket competition,the Indian Premier League, ina deal valued at $2.42 billionat current conversion rates.Star fended off a bid by Face-book Inc. for the digital rights.

Last month, 160 millionpeople watched the final onStar TV networks and 51 mil-lion watched it on Hotstar, upfrom 121 million on TV and21.6 million on Hotstar a yearbefore.

Hotstar is geared to run onmobile devices, targeting themany people who rely on cell-phones for entertainment.

Avadh Narayan, a 26-year-oldconstruction worker in Mumbai,doesn’t have a television butuses his mobile phone to watchHotstar. “TV is not available ev-erywhere,” he said. “So it’s easyto watch your favorite matchwherever you want.”

The service is second toYouTube for streaming-videoiPhone and Android down-loads in India, according toanalytics company App Annie.

“In this country, for manypeople, their first experienceof screen is with a mobilescreen,” Mr. Shankar said.

—Dana Mattiolicontributed to this article.

lywood movies.Perhaps its biggest selling

point now is Hotstar, a mobile-first streaming service that fea-tures its content and has 150million active monthly users.

Around 80% of the content isfree on Hotstar, with the com-pany charging as little as 199rupees ($2.95) a month for Hol-lywood movies and shows or299 rupees for a year of livesports. The service, which alsois available in the U.S. and Can-ada, has benefited from an ex-plosion of mobile-data usage byIndian consumers as prices havefallen in the past two years.

“Hotstar is setting the

ContinuedfrompageB1

Star IndiaAttractsInterest

according to data from BirinyiAssociates Inc. For all of lastyear, companies announced$685 billion in buybacks, upfrom $670 billion in 2016.

The recent activity followschanges to the tax law thatmade buybacks more attrac-tive for companies. Many in-vestors welcome the deals be-cause they often boost astock’s price, but some con-sider them a dubious use ofcorporate capital if they aremade at high valuations or ifthe returns from buybacksdon’t exceed an investment inthe business.

Stock repurchases canmake a company’s earningsper share appear better by re-ducing its number of sharesoutstanding. Buybacks canalso bolster executive pay atcompanies using benchmarksbased on earnings-per-shareincreases.

Mr. Jackson’s study didn’tidentify specific companies.But Bloomin’ Brands Inc., theoperator of casual-diningspots including OutbackSteakhouse, illustrates thetrend. Before the marketopened Feb. 22, the companyannounced its earnings andnoted the existence of a new$150 million stock-repurchaseprogram.

On that day and on Feb. 26,Chief Technology Officer Don-

also provides a “safe harbor”for officers or directors totrade in the shares during arepurchase without runningafoul of antifraud provisionsof the securities laws.

Mr. Jackson believes thatexecutives who sell into buy-backs are benefiting at the ex-pense of shareholders. “If anexecutive believes a buybackis the right thing for the longterm, they should put theirmoney where their mouth isand keep their stockholdings,”he said.

The study also found thatin the days leading up toshare-repurchase announce-ments, the companies’ stocksunderperformed the broadermarket by an average of 1.4%.During the 30 days after theannouncement, the compa-nies’ stocks outperformed theoverall market by an averageof 2.5%.

Mr. Jackson is scheduled topresent his analysis Mondayat the Center for AmericanProgress, a left-leaning thinktank in Washington. The studyparallels his past academicwork on corporate-governanceissues. He taught law at NYUand Columbia and was found-ing director of the ColumbiaLaw School’s Data Lab, whichused technology to study thereliability of company disclo-sures.

lowing their companies’ buy-back announcements as manyof the stocks popped.

Daily stock sales by the in-siders rose from an average of$100,000 before the buybackannouncements to $500,000after them. The sellers re-ceived proceeds totaling $75million more than had theysold before the announce-ment, the study concluded. At32% of the companies, at leastone insider sold in the first 10days after the buyback an-nouncement.

As is customary among SECcommissioners, Mr. Jackson iscareful to note that his viewsare his own and don’t reflectthose of the entire agency.The SEC didn’t return anemail seeking comment.

What’s clear is that suchcorporate share-repurchaseprograms have grown increas-ingly popular among compa-nies. So far this year, buybackannouncements from all U.S.publicly traded companies to-taled just over $500 billion,

ContinuedfrompageB1

BuybacksBenefitInsiders

The WPP PLC board inves-tigation that preceded the exitof Martin Sorrell as chief exec-utive addressed whether heused company money for aprostitute, people familiarwith the matter said.

The Wall Street Journal re-ported in April that the boardof the advertising giant waslooking into an allegation ofimproper personal behaviorand whether its chief execu-tive had misused company as-sets, and that the board hadretained a law firm for aprobe.

WPP said at the time the al-legation didn’t involve sumsthat were material to the com-pany. Mr. Sorrell said thenthat he rejected the allegation“unreservedly.”

Later that month, the Brit-ish company said it had con-cluded its investigation andthat Mr. Sorrell had steppeddown.

It is unclear what the probedetermined.

In a statement Friday, aspokesman for Mr. Sorrellsaid, “When Sir Martin Sorrellstepped down from WPP hesigned a nondisclosure agree-

ment which he has adhered toand will continue to adhereto.”

“The Company has not dis-closed details of the allegationof personal misconductagainst Sir Martin Sorrell be-cause it is prohibited by dataprotection law from givingsuch details,” a WPP spokes-man said in a statement Fri-day. “Martin chose to resignafter conclusion of the investi-gation.”

Under the terms of his de-parture, Mr. Sorrell, 73 yearsold, is eligible to receive amaximum of some 1.6 millionshares from various long-term incentive programs.

At WPP’s current shareprice of £12.16, the fullawards are worth more than£19 million, or more than $25million.

These shares will vest overthe next five years, accordingto WPP.

Mr. Sorrell, who didn’t havea noncompete clause in hiscontract, is planning to createan ad company.

BY NICK KOSTOVAND SUZANNE VRANICA

WPPLooked atPossibleLink toProstitute

An investigation thatpreceded Sorrell’s exitas CEO addressed hisuse of company funds.

THEWALL STREET JOURNAL. Monday, June 11, 2018 | B9

Energy Information Administration data on crude and gasoline stockpiles are due out Wednesday.

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MondayShort-selling reportsRatio, days of trading volumeofcurrent position, atMay15

NYSE 4.8Nasdaq 4

TuesdayFed two-daymeetingstarts

Consumer-price indexAll items,April up 0.2%May, expected up 0.2%Core, April up 0.1%May, expected up 0.2%

Treasury budgetMay, ‘17 $88.0 bil. deficitMay, ‘18, expected

$127.0 bil. deficit

Earnings expected*Estimate/YearAgo($)

H&RBlock 5.27/3.76

WednesdayFed policymeeting endsTarget rate 1.00-1.25

Mort. bankers indexesPurch., previous up 4%Refinan., prev. up 4%

EIA status reportPrevious change in stocks inmillions of barrels

Crude oil up 2.1Gasoline up 4.6Distillates up 2.2

Producer-price indexAll items,April up 0.1%May, expected up 0.3%Core, April up 0.2%May, expected up 0.2%

Thursday

Initial jobless claimsPrevious 222,000Expected 222,000

EIA report: natural gasPrevious change in stocks inbillions of cubic feet

up92

Business inventoriesMarch, previous 0.0%April, expected up 0.3%

Import-price indexApril, previous up 0.3%May, expected up 0.5%

Retail salesApril, previous up 0.3%May, expected up 0.4%

Retail sales, ex. autosApril, previous up 0.3%May, expected up 0.5%

Earnings expected*

Estimate/YearAgo($)

Adobe 1.54/1.02Jabil 0.45/0.31

FridayCapacity utilizationApril, previous 78.0%May, expected 78.1%

Industrial productionApril, previous up 0.7%May, expected up 0.2%

EmpireManufacturingMay, previous 20.1June, expected 18.5

ConsumerSentimentIndexMay, final 98.0June, prelim. 98.3

* FACTSET ESTIMATES EARNINGS-PER-SHARE ESTIMATES DON’T INCLUDE EXTRAORDINARY ITEMS (LOSSES IN PARENTHESES) � ADJUSTED FORSTOCK SPLIT NOTE: FORECASTS ARE FROM DOW JONES WEEKLY SURVEY OF ECONOMISTS

MARKETS

China’s return is likely to mean a period of higher prices for a fiber used in most apparel, textiles and upholstery.

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other loans and high-qualitycorporate bonds, analysts said.

The reduced appeal of mu-nicipal debt has the potentialto drive up borrowingcosts for state and local gov-ernments.

A widely followed munici-pal-bond index fell more in thefirst three months of the yearthan any first quarter of thepast 15 years. Muni priceshave recovered in the secondquarter.

Some analysts expect prop-erty-and-casualty insurancecompanies, another traditionalbuyer, to also unload munici-pal debt because of the changein tax rates.

Their combined holdingsheld constant at $327 billionin the first quarter, accordingto the Fed.

“If munis are less attractivefor banks, they might be evenless attractive to property-and-casualty companies,”which invest in lower-yieldingshorter-dated securities, saidMikhail Foux, head of munici-pal strategy at BarclaysPLC. “We could see more sell-ing by those companies goingforward.”

Municipal bonds could be-come slightly more appealingto banks later this year.

New rules passed by Con-gress and signed into law inMay made municipal bondsone of several investmentsthat count as “high-quality liq-uid assets.” Banks must hold adesignated amount of such as-sets to comply with postcrisisrules.

Banks reduced their quar-terly municipal-bond holdingsfor the first time in nine years,a sign of how much new U.S.tax rules damped demand fordebt from state and local gov-

ernments.Municipal se-

curities held byU.S.-chartereddepository insti-

tutions fell in the first quarterby nearly $16 billion to $554billion, according to FederalReserve data published Thurs-day.

Banks emerged over thepast decade as one of the big-gest buyers of tax-exempt mu-nicipal debt because the in-vestments were viewed asstable and safe. They hold 14%of outstanding municipalbonds, according to the Feddata.

But new legislation passedlate last year by Congressdropped tax rates paid bybanks to 21% from 35%, mak-ing tax-exempt bonds less ap-pealing.

“With the lower corporatetax rate, it makes less sensefor [banks] to buy tax ex-empts,” said Vikram Rai, headof municipal strategy at Citi-group Inc. Citi’s holding ofmunicipal bonds dropped to$21.4 billion in the first quar-ter from $22.7 billion in the fi-nal quarter of 2017, accordingto the bank’s quarterly state-ments.

Banks likely are replacingmuni holdings with mortgages,

BY HEATHER GILLERS

Banks Retreat FromMunicipal Bonds

CREDITMARKETS

below 70 cents a pound by2012, mills didn’t increasecotton purchases, according toU.S. trade data.

With China holding half theworld’s cotton in storage,some speculators were waryto return to a market theyknew could see a downturn ifChina decided to unleash itsstockpiles. China began auc-tioning off cotton in 2013 dueto shortages among its millsand increasing global competi-tion. China at one point held67 million bales of cotton instorage, enough to meet all itsneeds for about two full years.

Market participants werealways wary that China couldsuddenly unleash those stocksin earnest.

“They kept our prices artifi-cially low as they were sellingthose bales on our market,”said Wayne Boseman, presi-dent of Carolinas CottonGrowers Cooperative, Inc.

Demand is starting tospring back. In May, the USDAprojected cotton consumptionwould reach its highest levelever in 2018-19, with globalmill use at 125.4 million bales.That is in a year when worldproduction is expected to dropto 121.2 million bales from122.4 million bales last year.The largest year-over-yearchanges to cotton imports areforecast for China.

—Lucy Craymercontributed to this article.

Trump has pressed China tocommit to reduce the $375 bil-lion U.S. merchandise tradedeficit with China by $200 bil-lion.

Cotton is the latest globalcommodity market held insway by Beijing, whose policydecisions as a major purchaserand supplier of the world’scommodities often shift globalmarkets.

Chinese strategic cotton re-serves are likely to run low bythe end of August, accordingto analysts. China’s Ministry ofAgriculture and Rural Affairssaid in its monthly report onMay 10 that while the govern-ment sell-down of cottonstocks will continue in2018-19, the domestic supplyof high-quality lint is insuffi-cient and cotton imports areexpected to increase.

Overbooked auctions andsurging futures prices in Chinarecently led the country tolimit merchant participation indaily cotton auctions.

China’s move to beginhoarding the fiber eight yearsago pushed cotton pricesabove $2 a pound in 2011,bankrupting some mills andmerchants globally. Whenprices spiked, remaining millssubstituted cheaper, syntheticfibers into fabrics. The amountof cotton used in apparel im-ported to the U.S. dropped 12%between 2010 and 2011—andwhile prices had fallen back

who have long labored under amarket whose prices investorsperceived to be capped byChina’s cotton stores, whichfor years have accounted formore than half of all globalstocks.

China announced thismonth that it intends to raisecotton import volumes, amove that could increase Chi-nese purchases of American fi-ber at a time the Trump ad-ministration is calling formore imports from the U.S.

The shift has revived inter-est in markets that were untilrecently seen as being over-shadowed by Chinese policy.Open interest has reached all-time highs for this time ofyear, according to data fromthe U.S. Commodity FuturesTrading Commission. July cot-ton futures on the ICE FuturesU.S. exchange closed at 94.94cents a pound on Friday, thehighest level for a front-monthcontract since February 2012.

Commerzbank said thisweek that a commitment fromChina to buy large quantitiesof U.S. cotton should create alasting rise in price levels.

China last week offered topurchase nearly $70 billion ofU.S. farm, manufacturing andenergy products if the Trumpadministration abandonsthreatened tariffs on some $50billion in Chinese importsacross 1,300 categories ofproducts. President Donald

China is re-emerging as amajor consumer of U.S. cottonafter years of stockpiling the

fiber, ashift thatt o g e t h e rwith poor

growing conditions in Texashas sent prices surging to asix-year high.

The world’s most populousnation has purchased futurescontracts covering more than361,000 bales of U.S. cottonfor 2019-20, according to U.S.Department of Agriculturedata. That is enough to make400 million T-shirts. China hasnever booked that much cot-ton that far in advance at thistime of year, in data goingback to 1998.

“It’s very unusual to havethat many bales in the books,”said Peter Egli, risk managerat Plexus Cotton Ltd. “Chinais the biggest taker of forwardsales.”

China’s return to global cot-ton markets is likely to mean aperiod of higher prices for afiber used in most apparel,textiles and upholstery. It isalso a boon to U.S. producers

BY JULIE WERNAU

China Turns Cotton BuyerAfter years ofstockpiling, country isagain big customer ofU.S. producers

COMMODITIES

THE TICKER | Market events coming this week

CurrenciesU.S.-dollar foreign-exchange rates in lateNewYork trading

US$vs,Fri YTD chg

Country/currency inUS$ perUS$ (%)

Americas

Argentina peso .0395 25.2950 36.0Brazil real .2696 3.7086 12.0Canada dollar .7736 1.2927 2.8Chile peso .001587 630.10 2.4EcuadorUSdollar 1 1 unchMexico peso .0493 20.2893 3.1Uruguay peso .03216 31.0900 8.0Venezuela b. fuerte .00001379900.0001 772489.0Asia-PacificAustralian dollar .7600 1.3158 2.8China yuan .1561 6.4065 –1.5HongKong dollar .1275 7.8456 0.4India rupee .01481 67.520 5.7Indonesia rupiah .0000717 13947 3.4Japan yen .009129 109.54 –2.8Kazakhstan tenge .002988 334.64 0.6Macau pataca .1237 8.0861 0.5Malaysia ringgit .2507 3.9885 –1.8NewZealand dollar .7028 1.4229 0.9Pakistan rupee .00864 115.780 4.6Philippines peso .0189 52.903 5.9Singapore dollar .7489 1.3353 –0.1SouthKoreawon .0009303 1074.93 0.7Sri Lanka rupee .0062877 159.04 3.6Taiwan dollar .03350 29.851 0.6Thailand baht .03121 32.040 –1.7Vietnam dong .00004387 22793 0.4

US$vs,Fri YTD chg

Country/currency inUS$ perUS$ (%)

Europe

CzechRep. koruna .04571 21.877 2.8Denmark krone .1580 6.3302 2.0Euro area euro 1.1771 .8496 2.0Hungary forint .003683 271.55 4.8Iceland krona .009436 105.98 2.4Norway krone .1241 8.0559 –1.8Poland zloty .2751 3.6357 4.5Russia ruble .01604 62.332 8.1Sweden krona .1148 8.7102 6.4Switzerland franc 1.0151 .9851 1.1Turkey lira .2235 4.4740 17.9Ukraine hryvnia .0382 26.1560 –7.1UK pound 1.3411 .7457 0.8Middle East/Africa

Bahrain dinar 2.6476 .3777 0.2Egypt pound .0560 17.8510 0.4Israel shekel .2803 3.5671 2.5Kuwait dinar 3.3100 .3021 0.2Oman sul rial 2.5974 .3850 0.01Qatar rial .2748 3.640 –0.3SaudiArabia riyal .2667 3.7502 –0.01SouthAfrica rand .0765 13.0662 5.7

Close Net Chg %Chg YTD%Chg

WSJDollar Index 86.86 0.05 0.06 1.02Sources: Tullett Prebon,WSJMarketDataGroup

Falling BackBank holdings of municipal bonds droppedfor the first time since 2009.

Source: Federal Reserve THEWALL STREET JOURNAL.

$600

0

100

200

300

400

500

billion

’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’172008

Oil prices edged lower Fri-day as investors continued tobet on increased supply de-spite concerns over outputfrom Venezuela and Iran.

Light, sweet crude for Julydelivery fell 0.3% to $65.74 abarrel on the New York Mer-cantile Exchange. Brent, theglobal benchmark, fell 1.1% to$76.46.

On Friday afternoon, SaudiArabia said it has started in-creasing crude productionahead of a meeting to assesswhether to ease caps on out-put among major exporters.Oil futures were little changedin electronic trading followingthe announcement.

Traders have been antici-pating a ramp-up in crude

supply from the Organizationof the Petroleum ExportingCountries following commentsfrom Saudi Arabia and Russiain May that the countries wereopen to adding supply to themarket, after more than a yearof measured controls.

Prices traded slightlyhigher earlier in the sessionon uncertainty over supplydisruptions elsewhere.

The economic crisis in Ven-ezuela is curtailing the coun-try’s oil production, while theplanned reinstatement of U.S.sanctions against Iran is ex-pected to hit production fromthe third-largest member ofOPEC.

“If you take the expecteddecline for Venezuela and thenIran, you want to be 800,000to 1 million barrels a day

lower by year-end,” said Oliv-ier Jakob, oil analyst at con-sultancy Petromatrix, addingthis was a “conservative” esti-mate.

Analysts said that whileU.S. shale is driving global oil-production growth, it wasn’tenough to offset supply issueselsewhere.

The U.S. Energy Informa-tion Administration forecaststhe country’s production willrise to 10.7 million barrels aday on average in 2018 from9.4 million barrels a day lastyear.

This leaves OPEC members,along with Russia, to poten-tially plug any gap. OPEC andits allies are meeting later thismonth to discuss the outlookfor their deal to cut supplies,due to expire at the end of the

year. Saudi Arabia has thelargest spare production ca-pacity of any oil exporterglobally.

“The political leadership isclearly coming from Russiaand Saudi in terms of an in-crease, I think how they dividethe increase between differentcountries isn’t clear,” Mr. Ja-kob said.

Commerzbank estimatesthat to plug the growing sup-ply gap, global productionneeds to be raised by morethan the 300,000 barrels a dayfavored by Saudi Arabia.

Gasoline futures settlednearly unchanged at $2.1153 agallon.

Diesel futures declined 0.7%to $2.1643 a gallon.

— Stephanie Yangcontributed to this article

BY SARAH MCFARLANE

Oil Prices Drop as Saudis Increase Output


MARKETS

HEARD ON THE STREETEmail: [email protected] FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard

Apple Finds a WayTo Lift Momentum

If Apple reaches a marketvalue of $1 trillion, the ac-complishment may be all themore unique given the com-pany’s effort to lighten itsmassive cash load.

Apple has been buyingback its own shares at a furi-ous clip since last year’s tax-overhaul package freed upmore than $250 billion thatthe company had accumu-lated in its offshore bank ac-counts. Apple repurchasedabout 137 million shares onthe open market during itsfiscal second quarter thatended March 31, which ismore than triple the pace ofbuybacks averaged over theprevious eight periods. Italso represented about 6% ofthe total volume of Appleshares traded during thequarter—the highest per-centage seen in more thanfive years, according to ToniSacconaghi of Bernstein.

The elevated repurchaseactivity likely has continued.The company said on its lat-est earnings call that it in-tends to complete the $10billion remaining on its cur-rent buyback plan before theend of the June quarter. Italso announced a new $100billion buyback that FinancialChief Luca Maestri saidwould be executed “effi-ciently and at a fast pace.”Mr. Sacconaghi estimatesthat buybacks could accountfor 4% to 8% of Apple’s totalshare volume over the nextfour to six quarters

Buying back shares is tax-efficient way to return cashto shareholders. In the caseof Apple, it also may be help-ing boost demand for thestock during what is typicallya weak period seasonally, asiPhone sales generally cool inthe summer months. Ana-lysts also question whetherthe next iPhone cycle can de-liver the same lift to reve-

nues the current one hasthanks to higher sellingprices. The iPhone’s revenueis currently projected to re-main flat for the fiscal yearthat ends in September 2019.Yet the stock price hasjumped more than 13% sinceApple’s fiscal second-quarterreport last month.

What buybacks don’t do israise a company’s marketcapitalization—at least noton their own. Although theshare price does rise, all elsebeing equal, the share countfalls. But for those obsessingabout whether Apple will bethe first company to hit thevaunted $1 trillion dollarmark, the math has beenworking out in its favor. Itsnumber of shares outstand-ing has fallen by 25% onsplit-adjusted basis since thecompany began its first buy-back plan in September 2012,according to S&P Global Mar-ket Intelligence. But thestock price has doubledsince, bringing the com-pany’s total market value upby 49%. A steadily risingshare price has a way of tak-ing on its own momentum.

There are worse ways toblow off some cash.

—Dan Gallagher

Not so long ago, RupertMurdoch’s decision to sellthe crown jewels of his me-dia company, 21st CenturyFox, looked like an acknowl-edgment that the sun wassetting on his reign. Now, asWalt Disney and Comcastprepare to do battle overthose coveted assets, Mr.Murdoch looks set to go outin a blaze of glory.

On Tuesday, a U.S. federaljudge will determine howglorious that blaze can be.The judge is scheduled torule on AT&T’s acquisition ofTime Warner. If the deal isapproved outright, it will bea green light to Comcast tomake a formal bid for Fox as-sets—a vertical merging ofdistribution and content sim-ilar to AT&T-Time Warner.

Comcast’s bid, which is re-portedly planned as a $60billion all-cash offer, wouldtop Disney’s $52.4 billion all-stock offer. Disney wouldthen sweeten its bid and ahigh-stakes battle would en-sue, driving up the value ofFox. Of course, the JusticeDepartment may still objectto a Comcast acquisition ofFox assets even if it loses itscase against AT&T. But itwould have a much hardertime blocking the deal.

Alternately, if the U.S. gov-ernment wins its caseagainst AT&T, blocking the

merger, it will throw coldwater on Comcast’s plans. “Itwill embolden the JusticeDepartment to be moreforceful,” said Gene Kimmel-man, a former Justice De-partment antitrust attorney.That would likely leave Dis-ney the winner, even if itdoesn’t raise its offer.

The messiest—and per-haps most likely—scenario isthat the AT&T trial resolvessomewhere in the middle,with the judge rejecting thegovernment’s remedy andsaying the deal can gothrough if it meets specificconditions.

The Justice Department isunlikely to be pleased bythat; it has been trying to getaway from such remedies,which are difficult to overseeand which force it to play therole of industry regulator. Itmay appeal the decision.

This scenario is murky forComcast and for Fox. Itmeans the government willstill be inclined to toughenoversight of Comcast, thoughhow successfully is uncer-tain. A Fox-Disney mergercould also invite scrutiny, be-cause of the company’s con-trol over sports program-ming and its power on thestudio side. But these canlikely be remedied withoutblocking a deal.

“More regulatory clouds

hang over Comcast than Dis-ney,” said Mr. Kimmelman.

The battle would reverber-ate across the Atlantic, po-tentially pushing up thevalue of Sky, the satellite-TVcompany, which is 39%owned by Fox. Right nowshares trade at £13.59($18.21), well above the cur-rent offers, but as the onlyoption for growth in the U.K.,Sky is a crucial piece in thenew-media puzzle.

Mr. Murdoch will have toweigh all of this as he de-cides which offer to accept.Disney and Comcast willfight to the bitter end. Noother media assets are as at-tractive as Fox’s and bothcompanies see them as a ne-cessity to compete globallywith Netflix in the new-me-dia world. (Fox and NewsCorp, publisher of The WallStreet Journal, share com-mon ownership.)

The battle is personal, too:Comcast Chief ExecutiveBrian Roberts, who lost a bidfor Disney in 2004, is loatheto see it pull ahead. Mean-while, Disney CEO Bob Igerdoesn’t want to close out hiscareer by losing the shiniestpiece on the chessboard.

For the Murdochs and forFox investors, it is hard toimagine a more brilliant wayto end the empire.

—Elizabeth Winkler

Fox Bidding to Heat UpRupert Murdoch

LEONNEA

L/AGE

NCE

FRANCE

-PRE

SSE/

GETT

YIM

AGE

S

Fox and the HoundsShare price over past six months

THEWALL STREET JOURNAL.Source: WSJ Market Data Group

20

–20

–10

0

10

Jan. ’18 Feb. March April MayDec. 2017

21st Century Fox Inc. Cl B

Comcast Corp. Cl A

Walt Disney Co.

%

Back PayApple’s shares outstanding*

Sources: the company; S&P Capital IQ

*Adjusted for 7:1 split on June 9, 2014

8

0

2

4

6

billion

’12

First buybacks begin

’14 ’16 ’18FY2010

TraditionalRetailers AreSplit Online

When investors were bet-ting that Amazon.comwould crush every tradi-tional retailer, it didn’t mat-ter how their online saleswere doing. Now, a clear gaphas emerged between storeswith solid e-commerce oper-ations and those without.

At the far ends of eachgroup are Macy’s Inc., whichcontinues to beat analyst ex-pectations, and Sears Hold-ings Corp., whose tailspinappears to be accelerating.

A study by research firmEdison Trends highlights thedivergence among traditionalretailers. Sears, despitepromises by Chief ExecutiveEddie Lampert to boost e-commerce, has made littleprogress. Over the past 10months, Sears’s e-commercesales were just 17% of Macy’sand Kohl’s, even thoughSears’s overall revenue wasroughly two-thirds that ofMacy’s and about 10% lessthan Kohl’s.

Among a crop of five re-tailers analyzed by EdisonTrends—Sears, Kmart,Kohl’s, Macy’s, and J.C. Pen-ney Co.—Macy’s has seenthe strongest online growthin 2018, climbing 28% inmonthly order volume sinceJanuary. Meanwhile, Sears’sonline order volume fell 25%from January to May.

Penney looks only margin-ally better than Sears. Inves-tors, who were already dis-appointed by Penney’s weakfirst-quarter results and thesudden departure of ChiefExecutive Marvin Ellison,should keep a wary eye onthose numbers.

As Sears shutters stores,e-commerce could have beenthe company’s future. In-stead it has fallen far behindtraditional retailers and isway behind its big competi-tors, Walmart and Target.

—Elizabeth Winkler

FEB. 8 THROUGH JUNE 8

JAN.26TH

ROUGHFE

B.8

–40% 40 800

F5 Networks

Qorvo

Twitter(added to theS&P 500 June 7)

Electronic Arts

Motorola SolotionseBay

Micron Technology

SkyworksSolutions

349 stocks fell androse with the market.

Eight stocks rosein both periods.

142 stocks declinedin both periods.

Six stocksmoved against themarket in both periods—risingwhen the S&P slipped into acorrection and declining duringthe index’s recent recovery.

ChipotleMexican Grill

Macy’s

Abiomed(added to theS&P 500 May 31)

TripAdvisor

XL Group

Dr PepperSnapple

Under Armour(A and C shares)

An Uneven Recovery in Stocks

Source: FactSet By Lauren Pollock and Peter Santilli/THEWALL STREET JOURNAL.

After months of trading in a relatively narrow range, the S&P 500 is 3.3% below its all-time high set Jan. 26.The broad stock-market index slumped more than 10% over the nine trading sessions following that record and entered correctionterritory on Feb. 8 for the first time in more than two years. Technology stocks have powered much of the rebound, thanks toa big surge since late April. The sector is the best performer this year of the 11 segments in the index, with a gain of 14%.

15

0

5

10

%

January February March April May June

S&P 500

S&P 500tech sector

Jan. 26S&P 500 all-time high

Feb. 82018 low

Other stocksTech stocksS&P 500 stocks, change in share price

Index performance, year to date

25%

20

10

–10

–20

–25

0

Real estateEnergy

Consumer staples Materials

IndustrialsConsumer discretionary

Financials Telecommunications

Health care Utilities

S&P 500Feb. 8–June 8

+7.7%

S&P 500Jan. 26–Feb. 8–10.2%

Newell Brands

Align Technology

Abiomed

XL Group

Hess

Andeavor

Dr PepperSnapple

TripAdvisor

NewellBrands

Arconic

Arconic

AT&T

DominionEnergy

Note: Totals inmain chart add tomore than 500 because someS&P500 companies havemultiple classes of stock.

Everest Re

© 2018 Dow Jones & Company. All Rights Reserved. THEWALL STREET JOURNAL. Monday, June 11, 2018 | R1

gave a higher average score to the $5 winethan the $90 bottle.

We can apply this to any number of prod-ucts. We might learn that we prefer inexpen-sive T-shirts over fancier brands, or that a lux-ury sedan isn’t as much fun to drive as a morebasic coupe with a manual transmission.

At the very least, testing our more expen-sive preferences can provide reassurance thatthey’re really worth the extra money.

2.MONITORING YOUR PORTFOLIO MORE

VS. LESS FREQUENTLY

Thanks to our smartphones, we can now getconstant updates on our investment perfor-mance. My own research, done with RichardThaler, has shown that more frequent updatescould make people obsess over short-termlosses, when they should almost certainly befocused on their long-term investment goals.Over time, this can lead to an excessively con-servative portfolio and lower returns.

This suggests that investors should conductan A/B test on how they’re affected by thesenew forms of financial feedback. The A condi-tion could involve checking your investmentsmultiple times a day on a mobile app. How doyou feel? Does your blood pressure rise ondays when the market drops? The B conditioncould feature quarterly paper reports only.Does less feedback make you less stressed? Orare you missing relevant information?

While some people can benefit from contin-uous digital feedback—such data led me tochange my breakfast for the better when Ibought a blood-sugar monitor—others find ittoo stressful. This means that we need to fine-tune the amount of information and updates

Pleaseturntothenextpage

out our financial preferences before it’s toolate? I propose that we borrow an essentialtool used by the most successful technologycompanies, such as Amazon, Google and Expe-dia: the A/B test.

It’s a simple idea. To improve their sites andapps, these companies generate two versionsof a site (A and B). The versions are identicalexcept for one or two key differences. Perhapsversion A has a different color scheme fromversion B, or has the buy button located in adifferent part of the screen.

Then, the company randomly assigns usersto one of the two sites. The performance ofeach site is carefully tracked, allowing the firmto learn which version is more effective.

In research I’ve conducted with Hal Hersh-field at UCLA and Steve Shu at City Universityof London, we used A/B tests to experimentwith different versions of the same basic fi-nancial offer. Users of a saving app were ran-domly assigned to one of two groups. The firstgroup was asked if they would like to save $5a day, while the second group was asked ifthey would like to save $150 a month. (Theamounts are essentially equivalent.)

Although we had predicted that the $5 aday question would perform slightly better—itmade saving seem less painful and intimidat-ing—I was shocked by how much better it did:Those users given the $5 question were fourtimes as likely to sign up.

I believe we should use A/B tests to studyour own preferences, especially when it comes

to major financial decisions. There are threekeys to a successful self-experiment. First, thealternatives have to use randomization. Thiscan be easily done by flipping a coin to seewhich condition should go first. Then, weshould aim for scale, repeating the test asmany times as possible. Finally, we have totrack the results. In my own experiments,home cooking has yet to lose.

In the hope of inspiring your own A/B tests,I’ve outlined five categories in which this sim-ple process can be used to reveal your finan-cial preferences.

1.BUYING BASIC VS. LUXURY GOODS

Many people think luxury equals quality;the more you spend on something, the moreyou’ll like it.

An A/B test that investigates those assump-tions may offer some surprising insights intoour true preferences. For instance, I thought Ipreferred fancy dining, but an accidental ex-periment taught me that I prefer those home-made desserts.

Another common assumption involves wine.Research by Hilke Plassman, John O’ Doherty,Baba Shiv and Antonio Range showed thatwhen given tastes of wines and told how mucheach bottle cost, people preferred the more ex-pensive wine. But when the wines were sam-pled blind—a classic A/B test—the subjects

People often don’t know their true preferences,whether it’s the size of their house or where toeat or when to retire. There’s a simple solutionto this—and it could save you a lot of money.

Don’t Claim Social Securityat 62. Unless...

The conventional wisdomsays to wait. But at least one

counterargument is hard to refute.R2

Beer, the Bass Drum—and DebtA brewery worker and part-timemusician looks to save more.

R2

Alumni DonationsGet a Lot More Specific

College donors attach more stringsto gifts to colleges.

R4

For Retirees, Divided FinancesGet Tricky

Separate financial accounts workfor many couples. But maybe

not in retirement.R4

Experts’ VoicesRetirement insurance products aredisappearing. That’s dangerous.

R4

Best Bet/Worst BetArnold Schwarzenegger on

the move that changed his life—and the one he regrets.

R5

On the Road in a Tiny HouseA traveler and blogger looksto be debt-free within a year.

R5

The Hidden Social RiskOf Payment Apps

They allow people to pay othersexact amounts. And that can make

them seem petty.R6

Moving and the Tax LawIf you’re thinking of changingyour residence because of newdeduction limits, read this first.

R6

INSIDE

N MY LAST WORK TRIP, Ilearned a valuable lessonabout myself while meltingchocolate in a saucepan.What I learned changed mydining habits—as well as theway I think about my fi-nances.

Let me explain. For many years, I visitedfancy restaurants when traveling abroad forwork. I was convinced this was how I liked toeat when traveling.

On this trip, though, I was meeting a friendwho preferred that we cook at home. So wecompromised: The first night, we would eat ata restaurant I picked, and the second night, wewould cook at his place.

Much to my surprise, I vastly preferred thehome-cooked meal. By the time we were bak-ing profiteroles for dessert, I realized that Ihad totally misread my preferences.

If this mistake was limited to my diningchoices, it wouldn’t be such a big deal. How-ever, research suggests that the same basicmistake—not knowing what we really want—can have huge implications for our financiallives. We might think we prefer a big houseover a smaller condo, or that we want an ag-gressive investment portfolio. But if we don’ttest these assumptions, we might never knowthat we’re wrong—with potentially major fi-nancial consequences.

So what’s the solution? How can we figure

OBY SHLOMO BENARTZI

Dr. Benartzi (@shlomobenartzi) is aprofessor and co-head of the behavioraldecision-making group at UCLA AndersonSchool of Management and a frequentcontributor to Journal Reports. He can bereached at [email protected].

JOHNKUCZ

ALA

;GETT

YIM

AGES(7)

FollowThe ExpertsOnline atwsj.com/experts

It’s Time toA/B Test

YourFinancial

LifeWOULDYOU

BE BETTERtrying to save$5 a day or

$150 a month?

SHOULDYOU

retire nowor

wait afew years?

DO YOUPREFER

a pricey mealover a

less-expensiveone?

JOURNAL REPORT

R2 | Monday, June 11, 2018 THEWALL STREET JOURNAL.

mountains or visiting a foreign city.Perhaps they’ll realize that their

favorite spot really is the beach. Ormaybe they’ll discover that they’vebeen leaving happiness on the table,and that they most enjoy experienc-ing new places on vacation.

i i i

Americans are devoted to the pur-suit of happiness. Unfortunately, re-search shows that many of us don’tactually know what makes us happy,so we end up pursuing the wrongthings.

The good news is that self-experi-mentation can help us figure it out,allowing us to pursue the rightthings before it’s too late. Personal-ization is currently a buzzword, ascompanies like Amazon and Netflixpromise to improve our choices byoffering highly personalized recom-mendations based on our past pref-erences.

However, given the errors thatplague many of these preferences,it’s clear we can’t just rely on algo-rithms. If our past choices have beenflawed, then these future recommen-dations will be no better.

And that’s why we need to A/Btest our life, designing our own ex-periments and comparing alterna-tives so that we can ensure our deci-sions reflect what we really want.

JOURNAL REPORT | WEALTH MANAGEMENT

Danny Schroeder has found a wayto turn beer and music into regu-lar paychecks. And now he wantsto keep some of it in the bank.

The 2014 Eastern Washingtongraduate works as a special proj-ects assistant at Silver City Brew-ery, in Bremerton, Wash., wherehe helps in the production of ex-perimental beers, such as a recentMexican-style lager, an amber la-ger and some barrel-aged beers.During football season, you’ll findhim playing the bass drum before,during and after Seattle Seahawksgames in Blue Thunder, the NFLteam’s drumline, which also per-forms at parades and otherevents.

“I’d like to stay in the brewerybusiness and see how far I cantake that,” the 26-year-old says.“I’m learning a lot about the brew-ery process.” Eventually, he would

like more experience in distribution,sales and marketing as well. He sayshe’s interested, somewhere down theline, in starting a home-based brew-ery business, perhaps a mobile taproom that he can drive to weddingsand parties.

But first, he would like to get hisfinances in order. He makes $14 anhour at the brewery, or about $460 aweek after taxes, and $15.75 an hourplaying with Blue Thunder, or about$3,000 a year in take-home pay.

With his girlfriend he shares ahouse for which he pays $900 to$1,000 a month on rent and utilities.Other monthly bills include gas, $180,groceries, $200, eating out, $80, and$200 for the couples’ phones. Hedrives a paid-for 1997 Toyota Camry.

Mr. Schroeder owes roughly$2,000 on a couple of credit cards,for which he says there were somedelinquent payments. He pays $150 amonth and is being charged interestrates between 24% and 30%.

He and his girlfriend have talked

about marriage, he says, and buyinga home. But they want to get theirfiscal houses in order before they takethose next steps.

ADVICE FROM A PRO: Nadia Reyn-olds, a certified financial planner atSeattle’s Laird Norton Wealth Man-agement, says that considering hisage, Mr. Schroeder has plenty of timeto shore up his finances.He shouldn’t feel as if he has to

tackle everything at once. Financial se-curity can be a long-term process, bro-ken into steps, she says.As a first step, she recommends he

start monitoring his spending closely,perhaps using an online tool likeMint.com. To Ms. Reynolds, it doesn’tlook like Mr. Schroeder is living extrav-agantly, but knowing exactly where hismoney is going could help him find op-portunities to belt-tighten.This might “provide a little bit more

flexibility to do other things like paydown his credit card or start saving alittle bit to add to his financial stabil-

ity,” Ms. Reynolds says.She suggests he set up automatic

payments for his credit-card debt, setat least to the minimum payment, sothat he can establish a history ofmaking on-time payments.Ms. Reynolds would also like to see

Mr. Schroeder devote all of his BlueThunder earnings to savings and pay-ing down his debt.If over the next year he can get a

handle on where his money is going,

pay down his debt and make a habitof saving, Ms. Reynolds says he thenshould consider opening a Roth IRA.Even contributing $50 a month willhelp, she says.“At his age, 40 years down the

road when he’s going to start drawingon that, it will serve him well,” Ms.Reynolds says.

Mr. Kornelis is a writer in Seattle. Hecan be reached at [email protected].

THE GAME PLAN

BEER, THEBASSDRUM—ANDDEBT

An adviser suggests that Danny Schroeder set up automatic payments for hiscredit-card debt to establish a history of making on-time payments.

MATT

RIGGS

BY CHRIS KORNELIS

we get, conducting frequent tests tomake sure that our technology ishelping us, not hurting.

3.RETIRING NOW VS. LATER

One of the most important finan-cial decisions people make concernsthe timing of their retirement. Un-fortunately, many people are sotempted by the prospect of enjoyingtheir retirement that they retire toosoon.

For instance, I know several peo-ple who harbor the fantasy of play-ing golf seven days a week after theystop working. But it’s possible thatthe same game that’s extremely en-joyable when played once a week be-comes tedious when played everyday. After all, decades of researchshows that people consistently un-derestimate the power of adaptation,or the tendency to get used to ourcircumstances. This is why lotterywinners are rarely as happy as theywould have predicted; they get usedto the money.

Similar miscalculations mighthelp explain why, according to a2017 study by Rand Corp., 39% ofworkers over 65 who had retiredchanged their mind and returned to

Continuedfromthepriorpage the workforce. While some of theseworkers almost certainly needed ad-ditional income, the Rand authorssuggest that many are working be-cause they want to.

Maybe a leisurely life of golf andcards wasn’t as much fun as they ex-pected.

That’s why I think it’s importantto test-drive our dreams. Ratherthan guess what we’ll want to do inretirement, we should plan an ex-tended vacation that allows us tosimulate the retirement we think wewant. We might learn that we’re inno rush to stop working, and canthus enjoy a more luxurious retire-ment once it begins, or that we don’twant to retire at all.

4.SPENDING MORE VS.LESS IN RETIREMENT

People often decide how muchmoney they’ll need in retirement byprojecting forward their current life-style. Such forecasting leads many toconclude that they’ll need to main-tain their current standard of living;anything less feels like a loss. Finan-cial advisers, meanwhile, typicallyrecommend an income replacementof 70% in retirement.

To figure out which projection iscorrect, people should experimentwith higher and lower amounts ofspending during their working years.In this experiment, the A conditionwould involve cutting 40% of yourdiscretionary spending for a monthor two, while the B condition wouldinvolve cutting just 10%. How did theexperiences compare?

You might learn, for instance, thatyou’re just as happy spending muchless money and can thus retire ear-lier. Or maybe you miss the extraspending, and thus should save at ahigher rate during your workingyears. Either way, a simple A/B testcould be the difference between anenjoyable retirement and one that isprofoundly disappointing.

5.SPENDING ON THE USUAL VS.

NEW EXPERIENCES

We earn money so that we canspend it, investing in those thingsand experiences that make us happy.But many of these spending deci-sions reflect our strong bias for thestatus quo, as people tend to keepchoosing those products and experi-ences they’re already familiar with,even if there’s a better option avail-able.

That’s why it’s important to con-tinually try out novel experiences,like baking profiteroles at home.

I know many people whose defaultvacation choice involves a nice hotelon a pretty beach. In the spirit ofA/B testing, however, I believe thesepeople should try out some vacationalternatives, such as hiking in the

It’s Time to Start A/B Testing Your Financial Life

Ed Slott, an IRA expert in Rockville Centre, N.Y.Once that is done, she can then roll over

your IRA balance to her IRA (a spousal roll-over), and she will begin taking RMDs whenshe reaches 70½, based on her age each year.

Technically, a spouse has the option of re-maining a beneficiary, rather than doing aspousal rollover, and wouldn’t have to beginRMDs until the deceased spouse would havereached age 70½, Mr. Slott notes. But thatwouldn’t provide any advantage in your casesince you will be age 70½ this year.

i i i

My husband, who is retired, turned 65 in Mayand went on Medicare. He has a health sav-ings account. We had been in his company’sretiree medical high-deductible plan for thefirst four months of the year, and I (with afew years before I reach 65), remain coveredunder that plan. My question: What contribu-tions, if any, can we make to an HSA in2018?

Once a person is enrolled in Medicare, he orshe can no longer contribute to an HSA. Butgiven that your husband wasn’t enrolled fromJanuary through April, he can still contributeone-third (or four months’ worth) of the an-nual limit of $7,900, says Roy Ramthun, aconsultant who specializes in high-deductibleplans and HSAs. That amounts to $2,633.

(Note: The annual contribution limit is$6,900 for individuals covered under qualify-ing family medical plans. If you’re 55 or olderin 2018, you can contribute an additional$1,000.)

As for you, you must set up an HSA inyour own name, he says. The annual contribu-tion limit for people with single medical cover-age is $3,450. Given that you will have cover-age from May through December, yourcontribution limit is $3,450 x 8/12 = $2,300.And because you appear to be 55 or older, youcan also make a $1,000 catch-up contribution,bringing your total to $3,300. (Because youare eligible to contribute to an HSA for all of2018, you wouldn’t have to prorate your catch-up contribution like your husband.)

Combined, says Mr. Ramthun, you and yourhusband would be able to deduct $5,933 onyour 2018 income-tax return.

Have you spoken with many retirees whohave claimed Social Security benefits at age62? Almost everything I read and hear tellsme not to do this and, instead, to wait aslong as possible. It would be interesting tohear the other side, especially since so manypeople don’t seem to wait.

I am certainly in the “wait” camp. But yes, Ihave heard from and spoken with a number ofpeople who grabbed Social Security at 62, theearliest possible age for most. (Benefits at 62are roughly three-quarters of what they wouldbe at a person’s “full retirement age,” as de-fined by the Social Security Administration.)One argument in particular stands out as avalid reason for leaping early. But before weget to that…

Many retirees claim benefits at age 62 sim-ply because they need the money; they’re un-able to work or they want to enjoy retirementwhile they’re still relatively young, and their nestegg alone can’t support them. Others are wor-ried about the health of the Social Security pro-gram and want to get at least some benefitsbefore the system “runs out of money.” Andsome individuals apply early because they wantto invest the funds; they calculate that their fi-nances will come out ahead if they put theirSocial Security checks to work in the markets.

Are all these people wrong—or foolish? Ofcourse not. It’s just that the counterargumentstend to be equally, or a bit more, persuasive.

Need the money? Working just one or twoadditional years, or taking a part-time job, canfrequently do wonders for your nest egg andallow you to postpone claiming benefits.

Anxious about Social Security collapsing?Yes, the program is facing a financial shortfall,but it will never go broke. (The federal govern-ment—and I don’t think I’m going out on alimb here—will always collect taxes, and partof that revenue will always go to the SocialSecurity program.)

Planning to invest your monthly payouts?Few people can beat, with any regularity, the

Mr. Ruffenach is a former reporter and editor forThe Wall Street Journal. His column examines fi-nancial issues for those thinking about, planningand living their retirement. Send questions andcomments to [email protected].

ASK ENCORE | GLENN RUFFENACH

Don’tClaimSocial Security at 62.Unless…The conventional wisdom says to wait. But at least one counterargument is hard to refute.

guaranteed financial returns that come fromdelaying benefits.

Which brings us to the one reason forclaiming benefits early that’s tough to arguewith: poor or questionable health. Considerthis recent blog post from Debbie Galant, pub-lisher of a wonderful website about growingolder titled Midcentury Modern.

“A month ago I decided to apply for SocialSecurity. When I put it on Facebook, severalfriends wrote me privately, to see if I’d lost mymind. Because, as everybody knows, you’resupposed to wait as long as you can to pullSocial Security—so you can get a bigger check.And I’m only 62.

“But I’m not crazy. There’s an iron logic inmy decision. I’m taking my Social Securityearly because that’s $1,400 less a month Ihave to worry about making. I’m taking SocialSecurity early because I had cancer two yearsago, and…cancer taught me that life is not aGoogle calendar with an infinite number ofslots to fill. Life is finite. So I’ll give up somestuff—and the promise of more money later—for more freedom now to spend my time as Iwish.”

(I urge you to read Ms. Galant’s entire postat midcenturymodernmag.com. Search for:

Social Security. Then click on the post forMarch 28.)

Granted, even the health argument isn’tfoolproof; you might be unwell, but everymonth you’re able to delay claiming Social Se-curity means a larger survivor’s benefit foryour spouse (if you die first). On balance,though, an expectation that your life expec-tancy could be shorter than average is onereason to collect benefits sooner rather thanlater. Otherwise, I hope you will give the argu-ments to delay filing for Social Security thebenefit of the doubt.

i i i

Both my wife and I have individual retirementaccounts. I will turn 70½ this year. She is 69.If I start taking required minimum distribu-tions from my IRA and then die before she is70, and if she inherits my IRA, does she haveto continue with my RMDs? Or do the RMDs“stop” until she turns 70½? And if she hasto continue, how is that calculated?

If you die after beginning RMDs, and if yourwife is your beneficiary, she must first with-draw any part of your RMD for the year ofdeath that hasn’t already been withdrawn, says

AGE 62IN 2018

63 64 65 66 YRS.,4 MOS.

FULL MONTHLYBENEFIT BEGINS

67 68 69 70

Source: Social Security Administration THEWALL STREET JOURNAL.

Benefit BumpsA person who turns 62 in 2018 will reach full retirement age at 66 and fourth months, according toSocial Security. If the monthly benefit at full retirement age is $1,300, this person would be eligibleto collect the following at various ages:

$953 1,0181,097

1,1841,300 1,369

1,4731,577

1,681

Back to WorkFor some older adults, staying retiredisn't a consideration—out of financialneed or an urge to be back in theworkforce.


Source: Rand Corp.'s “How Americans Perceive theWorkplace" survey

Employed workers who hadpreviously retired

55-59 60-64 65-71

8% 25% 40%

Retirees age 50 and older who wouldreturn to work if the conditionswere right

College Non-collegegraduates graduates

57% 41%

AGE



There will be occasionswhen a specific gift isn’t whata school wants or needs. Ar-thur Criscillis, a managingpartner at Alexander Haas, anAtlanta-based fundraising con-sultant to nonprofit organiza-tions, says he knows of a lib-eral-arts college where adonor wanted to finance thecreation of an architectureprogram. “But it wasn’t withinthe purview of what the col-lege wanted, needed or shoulddo,” he says, so the schoolpassed on it.

A donor has the most lever-age when he or she makes acontribution in an area that isa high priority for the univer-sity, Mr. Criscillis says.

Mr. Weil is a writer inWest Palm Beach, Fla.Email: [email protected].

WHEN IT COMES to donatingmoney to their college almamaters, more alumni are at-taching strings to their gifts.

Instead of writing a checkand letting the school decidehow to spend it, alumni aredonating money with the stip-ulation that it be used for aspecific purpose—such asfunding an academic program,a professor, a sports team oreven the school band. In thisway, alumni can target an areaof the school where they havea personal connection, orwhere they think their moneycan have the greatest impact.

Some 90% of the contribu-tions that colleges and univer-sities used for current opera-tions last year were restrictedgifts, compared with 78% 20years earlier, according to theCouncil for Aid to Education,an education research andconsulting group.

Amir Pasic, dean of the In-diana University Lilly FamilySchool of Philanthropy, seestwo factors contributing tothat increase. First, donors arebecoming more “investment-minded,” meaning they wanttheir gifts to generate visibleresults. Second, big donors areaccounting for a larger shareof giving to higher education,and these outsize gifts oftengo for specific purposes. Manydonors are very interested infunding research and studentaid, says Linda Durant, vicepresident of development atthe Council for Advancementand Support of Education.

Finding a causeHow might someone who

wants to donate to their almamater pick a target for theirgift?

“Ask yourself what youwant to see changed as a re-sult of your gift,” says KenSpruill, director of private-foundation management ser-vices at Hawthorn, PNC FamilyWealth, a wealth-managementfirm based in Philadelphia.“Do you want to see the over-all university’s performance

higher? Do you want to sup-port a major? Do you want tosee more students go to col-lege, so you might support ascholarship or fellowship?”

Once donors have a generalarea in mind, they need to en-sure the cause fits with theuniversity’s mission. Schoolswill be reluctant to accept do-nations to start a program ifthey don’t see a benefit.

Experts say prospective do-nors could ask school officialswhat they see as their greatestneed or the area where theythink a gift could make thebiggest impact. “Do the an-swers mesh with your sense ofmaking a meaningful differ-ence through your giving?”says Dr. Pasic.

When alumni approach offi-cials at Ripon College inRipon, Wis., they often have ageneral idea of where theywant to give. “But it’s rare

that someone comes with afully baked idea,” says the col-lege’s president, Zach Mes-sitte. So the school oftenstarts by asking prospectivedonors about their experi-ences at the college, whichprofessors were important tothem and how the Ripon expe-rience impacted their career.

Dr. Messitte says an alum-nus recently told the collegethat he wanted to donate inthe math/science area andasked for help in refining hisrequest. So Ripon officialshelped him create an endowedmath professorship for statis-tics in the name of his family.“It was a need we had, and itfit with him and his wife,” Mr.Messitte says.

Others approach the schoolwith a detailed plan for howand when they want theirmoney spent. Kyle Greene,class of 2015, says he wanted

to help the cycling team, a ma-jor focus for him as a student.Last year, the team didn’t havea coach and was at risk ofshutting down, Mr. Greenesays, so he and his familycame up with a $250,000 giftthat would, among otherthings, fund a coach’s salaryfor three years.

The “gift came out of ne-cessity and a passion for theteam,” says Mr. Greene, a real-estate broker in Minneapolis.

Richard Rampell, a PalmBeach, Fla., accountant and amember of the Princeton Uni-versity class of 1974, says he,too, has been able to supporthis alma mater in ways thatare meaningful to him. He andhis wife, also a Princetonalumnus, have donated moneyto a professor doing researchon autism, because her brothersuffers from the condition. Mr.Rampell, who played tennis atPrinceton, helps finance teamtrips to California, and he hasdonated to the economics de-partment because that was hismajor in college.

“The way people generallygive is to support programsthat gave them a meaningfulexperience as an undergradu-ate,” says Mr. Rampell, a mem-ber of Princeton’s Planned Giv-ing Advisory Committee.

Mr. Rampell says that re-cently an accounting professorat Princeton died and two ofhis former students endowedprofessorships in his name,“as he had such a profoundimpact on their lives.”

Put it in writingTo ensure projects are exe-

cuted as a donor intends, awritten agreement is key, ex-perts say. Most schools have astandard gift agreement thatcan be tailored to describe thepurpose of a gift, the kind ofrecognition the donor will re-ceive, the expected impact ofthe gift and how results willbe measured and reported tothe donor, Dr. Pasic says.

It also might stipulate whatkind of involvement the donorcan have in the gift process,such as meeting scholarshiprecipients or visiting program

sites. In most cases, the agree-ment also will contain lan-guage about what the schoolcan do with the donor’s fundsif circumstances around theprogram change.

“Crafting the gift agree-ment to reflect the donor’s in-tent and how the organizationplans to use the gift is a vitalpiece of the puzzle,” Dr. Pasicsays. “You don’t want to haveto worry about pulling backfrom your gift or not havingtrust, because at some pointyou relinquish control.”

To gain a better under-standing of how the college oruniversity operates, a prospec-tive donor could make a smalltrial gift, and see how schoolofficials respond. “Do theythank you promptly and showyou what impact your gifthad?” Dr. Pasic says.

Alumni Donations Get a Lot More SpecificAs college donors attach more strings to gifts, here’s how they can get what they pay for

FOR SOME married couples, keepingseparate accounts poses no problemsduring their working years. But inretirement, it can require some re-thinking.

Many couples keep at least someassets separate in retirement, oftento preserve assets for children ofprior marriages. There can also be adesire to continue the financial inde-pendence they’ve grown accustomedto. But once couples with separateaccounts enter the drawing-downstage of their financial lives, rulesand sharing agreements that oncemade sense may no longer apply.

One spouse may have enjoyedmuch greater investing success thanthe other. One may have lots of dis-posable income, while the other mayhave to rely on taxable distributions.Out-of-pocket health-care costs arelikely to increase—and be unequal.And if spouses don’t communicateproperly, conflicting ideas aboutspending on travel, helping familyand leisure activities can create dis-agreements and other unpleasant is-sues.

Tamra Stern, a partner at MainStreet Research LLC, in Sausalito,Calif., recalls a wife who retired atage 58 and started spending so heav-ily on travel and other purchasesthat she had to go back to work for10 years to avoid being solely relianton her husband’s individual retire-ment account.

Of course, every couple’s situationis different. But here are a few cate-gories that couples with separate fi-nances typically need to address.

Health careBefore retiring, couples should

determine what their Medicare andprivate health-care premiums are go-ing to be. Once the premiums andestimates of out-of-pocket costs areknown, this should lead to a discus-sion about how these expenses willbe treated. Will they be sharedhousehold expenses and splitequally, or should each spouse payfor his or her own medical costs?

If one spouse appears likely to runout of money due to rising health-care expenses in retirement, thisneeds to be addressed. Does theother spouse begin to pick up most

or all of the joint expenses to keepthe couple afloat financially?

Income sourcesCouples need to consider how

their asset allocations will affecttheir ability to pay their expenses. Ifone spouse is mostly dependent on a401(k) for income, he or she mightrun down this savings sooner be-cause the distributions are taxable.

Steve Janachowski, chief executiveof Brouwer & Janachowski, a regis-tered investment adviser in Mill Val-ley, Calif., offers the real-life exampleof a couple in their 60s. While theywere working, each earned sufficientincome to split their expenses evenly.But after retirement, the husband be-came concerned about running out ofmoney. While he had saved $1 millionin a profit-sharing plan that he rolledover into an IRA, using that moneyto pay for his expenses would costhim almost half from a tax perspec-tive. His wife was in a far better po-sition, since she had recently re-ceived an inheritance of $1 million inafter-tax money in a trust and$400,000 in an inherited IRA.

The couple decided to draw downthe wife’s after-tax account to payfor expenses so their IRAs could con-tinue growing tax-deferred.

Social Security benefits can beanother tricky area for couples withseparate finances to navigate. Tomaximize benefits, married couplesneed to coordinate how and wheneach spouse should start collectingbenefits. Strategies can differ de-pending on their respective ages andmeans, and could have implicationsfor each spouse’s ability to pay their

share of expenses. Thus, the optionsneed to be discussed, advisers say.

Gifts to familyOnce they are no longer earning a

paycheck, couples may need to recon-sider how they are gifting money tochildren and grandchildren, saysKeith Moeller, a wealth managementadviser at Northwestern Mutual inMinneapolis.

Making separate gifts may nothave been a concern during theirworking years. But before retire-ment, a couple should discuss whathappens if one spouse can no longerafford to give as much. Is the otherspouse willing to pick up the slackand should other expense sharing beadjusted as a result?

Other insuranceSeparate marital finances may

make life and long-term-care insur-ance more necessary.

Mr. Moeller says he works with acouple who are 12 years apart in age.They were concerned that if the hus-band needed long-term care, thewife would be burdened financiallyand emotionally. It might also de-plete her personal assets and se-verely diminish the inheritance shehoped to leave to her children froma previous marriage. So the husbanddecided to buy long-term-care insur-ance to help protect her in the eventhe had an extended need for care.

Many advisers and clients assumelife insurance won’t be needed in re-tirement, but it may be necessary tohelp a surviving spouse pay bills.Ideally, the couple would have pur-chased a permanent life policy at a

younger age so the cash outlaywouldn’t be as steep, Mr. Moellersays, but adds that even in retire-ment it may be advisable to buy per-manent life or term insurance.

He offers the hypothetical exam-ple of a couple splitting the mort-gage evenly. If the husband’s assetsare all earmarked for his childrenfrom a previous marriage, the wifemight need the life-insurance moneyto pay her share of the bills once thehusband is no longer contributing.

Mr. Moeller calls this the “survi-vor-income stress test” and saysmany couples fail to consider howthe death of a spouse would affecttheir ability to pay their share of theexpenses.

Travel patternsWith more free time in retirement,

one spouse might prefer to be fre-quently on the go, while the other ismore of a homebody. Couples need toconsider how they are going to divvyup the expenses as changes occur,says Tony D’Amico, chief executiveand senior wealth adviser at FidatoWealth LLC, a registered investmentadviser in Strongsville, Ohio.

He recalls a couple where eachspouse had children from prior mar-riages. They started retirement bysplitting their travel budget 50/50.But the wife had more grandchil-dren, and they found themselvestraveling to visit her family morefrequently. The solution, Mr. D’Amicosays, was for her to cover the cost oftheir airfare, and for him to paytheir dining-out expenses.

When couples are creative, theycan often find compromises that suitboth spouses. Mr. D’Amico gives an-other example of a retired couplewho had been married for more than30 years. In his working years, thehusband frequently traveled interna-tionally and he wanted to spend hisretirement hunting, fishing andcamping. His wife, however, had ahankering to travel internationally,but didn’t have the resources.

Their resolution: He footed thebill for her once-a-year trip to an in-ternational destination. He alsobought a camper so they could taketrips together and do some of thethings he enjoyed.

Ms. Munk is a writer in West Or-ange, N.J. Email [email protected].

ForRetirees, Divided FinancesGet TrickySeparate financial accounts work for many couples. But maybe not in retirement.

BY CHERYL WINOKUR MUNK

BY DAN WEIL

Sharing bank accounts Sharing credit cardsSharing money

Source: TD Love & Money survey, July 2017 THEWALL STREET JOURNAL.

Yours, Mine and OursApproach to sharing money among couples age 55 and older

Combineeverything

62%Each

has own30%

9%

One sharedaccount65%

Shared and personalSeparate accounts

16%

20%

Onesharedcard52%

Shared and personal

14%

Separatecards34%

Keep it separate

A $250,000 gift from Ripon College graduate Kyle Greene,who competed with the school’s cycling team (above), and hisfamily helped keep the program from shutting down.

RIPONCO

LLEG

E

Targeted GivingAverage amount of donations for a school's restricted currentoperations, by purpose

Generous AlumniAverage giving by alumni per school

AVG. AMOUNT PCT. OF TOTALGIVEN AVG. AMOUNT

Academic divisions $1,002,212 25.9%

Athletics 922,080 23.8

Other purposes 777,399 20.1

Student financial aid 600,586 15.5

Research 290,002 7.5

Operation/maint. of phys. plant 124,313 3.2

Public service/extension 62,961 1.6

Faculty/staff compensation 52,458 1.4

Libraries 43,625 1.1

Note: Based on responses from 645 schools Percentages may not equal 100% due to rounding

Source: Council for Aid to Education THEWALL STREET JOURNAL.

Note: Based on responses from 688 schools *Present value

AVG. AMOUNT PCT. OF TOTALGIVEN AVG. AMOUNT

Endowment income (restricted) $3,696,934 35.0%

Current operations (restricted) 3,664,873 34.5

Property, building equipment 1,586,413 14.9

Current operations (unrestricted) 1,128,051 10.6

Newly established deferred gifts* 336,746 3.2

Endowment income (unrestricted) 212,729 2.0

Loan funds 388 0.0

EXPERTS' VOICESBENJAMIN HARRIS

RetirementInsurance ProductsAre Disappearing.That’s Dangerous.The market for retirement in-surance products is slowlyand silently disappearing.From annuities to long-term-care insurance to employer-provided health insurance,insurance products are be-coming less available andless popular.

Older Americans shouldbe worried.

First, insurance marketsdon’t work as well when theythin out. In theory, the firstconsumers to leave a markettend to be those least likelyto benefit. This new compo-sition drives down profitsand drives up prices—even-tually leaving nothing but thehighest-risk buyers purchas-ing very expensive plans.

The second problem is itplaces the bulk of the retire-ment security burden onpublic plans. A paring backof Social Security and Medi-care would severely upendAmerican retirement.—Dr. Harris is a visiting associ-ate professor at the KelloggSchool of Management and wasthe chief economist to Vice Pres-ident Joe Biden.

The Experts are industry andthought leaders who write ontopics of their expertise. You canread this full blog post andothers atWSJ.com/Experts.

THEWALL STREET JOURNAL. Monday, June 11, 2018 | R5


Four years ago, Jenna Spesardwas working at a movie studio inLos Angeles and felt like she wason a treadmill. “I had an over-whelming amount of debt, be-longings and no money to pursuemy dreams,” she says.

She quit her job and, with herthen-boyfriend, built a 165-square-foot home. The idea wasto hitch the tiny house to a pickuptruck, travel around the countryand chronicle it through a blog,tinyhousegiantjourney.com.

Since 2014, Ms. Spesard hasdriven more than 25,000 mileswith her tiny home in tow. Shehas also managed to earn a de-cent income from her blogthrough advertising and productpromotion, among other things.

Now, the 32-year-old wants tosave more money while continuingher wanderlust lifestyle. Shewould like to be debt-free within ayear, set aside $6,000 for threemonths of international travel(sans the tiny house) and startsaving for a down payment for apiece of property near Seattle.

Her projected income for 2018is $52,000 to $62,000. She saysthe tiny house is worth about$50,000. Other assets include: anIRA with $4,200, a Roth IRA with

$9,100, a savings account with$1,000, a personal checking accountwith $4,300 and a business checkingaccount with $1,700.

“I try to put 8% to 10% of myearnings into my retirement,” she says.

She has a little less than $9,000of debt. About a third is from stu-dent loans with a 5.5.% interest rate.The rest carries no interest: WhenMs. Spesard broke up with her boy-friend and ex-partner, she assumedhis share of the house and is payinghim back over time.

She pays about $905 monthly instudent loans and $200 to her ex.Once the student debt is paid off, sheplans to devote $1,100 to paying offher ex. Other monthly expenses in-clude: $190 for health and dental in-surance, $400 for groceries, $500for restaurants and entertainment,$100 for car insurance and gas, $60for cellphone, $75 for home insur-ance, and $450 for business ex-penses. She also lives part-time witha new boyfriend and pays $200 to-ward expenses at his house.

ADVICE FROM A PRO: Nathan Barba-koff, a financial adviser at Bleakley Fi-nancial Group, in Fairfield, N.J., saysMs. Spesard’s goals are well withinreach, but she needs to track her cashflow carefully.First, she should review her expen-

ditures to make sure all expenses areincluded in her monthly budget. Based

on her monthly income and expenses,Mr. Barbakoff believes there could beas much as $600 of additional cashflow that isn’t being counted.If that is the case, he suggests set-

ting aside $500 of that monthly foran emergency fund and $100 fortravel. (Since Ms. Spesard’s incomefluctuates, she can save more in themonths she earns more and viceversa, he says.) “She really needs tobe disciplined about spending.”If Ms. Spesard sticks to her sched-

ule, she can pay off the student loanand the tiny house by March, Mr. Bar-bakoff says. By June, she should haveabout $6,000 in emergency savings.That, combined with her existing$5,000 in savings, would give her anemergency fund of $11,000, or a littlemore than five months of living ex-penses, he says. At that point, shecould take the $500 that had been

going into the emergency fund and setit aside for travel. The $1,100 that hadbeen going toward debt could be usedto start saving for the property.Ms. Spesard should currently be in-

vesting in her Roth. But once she hasan adequate emergency fund, sheshould switch to the traditional IRAand take the tax deduction to increaseher cash flow, he says. At that point,she may want to boost her IRA contri-butions to the maximum of $5,500.Mr. Barbakoff also suggests that

Ms. Spesard consult an accountant tomake sure she’s properly accountingfor all of her business expenses andtaking the maximum amount of taxdeductions. “If she is missing a deduc-tion, that might have a big impact onher cash flow right away.”

Ms. Ward is a writer in Mendham,N.J. Email her at [email protected].

THE GAME PLAN

TRAVELS INATINYHOUSE

Jenna Spesard earns an income from blogging about her tiny-house travels.

NABIL

KAUSAL-HAYES

BY LISAWARD

EXPERTS' VOICESMADDY DYCHTWALD

The LifetimeGender Pay Gap

Age Wave, together withMerrill Lynch, analyzed howan 18-cent gender pay gapadds up over the course of awoman’s life.

Take male and femaletwins with the same level ofintelligence and drive, school-ing and career. According tothe Bureau of Labor Statis-tics, if both work full time atmedian wages with nobreaks until retirement, theman will earn $411,000 morethan the woman. That’s thelifetime pay gap.—Ms. Dychtwald is an authorand co-founder of Age Wave.

The Experts are industry andthought leaders who write ontopics of their expertise. You canread this full blog post andothers atWSJ.com/Experts.

ARNOLD SCHWARZENEGGER has had one of the most impressive—and oddball—careers in popular culture, from two terms as governorof California to four (going on five) turns as sci-fi icon the Terminator.The financial bets he has placed have been just as diverse. Some have

been high profile, like his ownership position inPlanet Hollywood. Others have flown under theradar.

In 1970, for instance, when he was a youngAustrian expat with enormous biceps, he read

that an airport for supersonic aircraft was being planned for the Mo-jave Desert. So, he spent $15,000 on 10 acres of land that had neitherclean water nor electricity.

But soon after he bought the land, supersonic flight was bannedover the U.S., and the airport never materialized.

Still, Mr. Schwarzenegger says his best and worst bets have hadless to do with writing checks and more to do with investing his timeand effort in getting ahead—as well as having a clear vision of whathe wanted to achieve and preparing for a job.

BEST BET

MOVING TO AMERICA

INVESTMENTRelentless training as a bodybuilder

GAINSMillions of dollars, movies,the governorship of California

By the time Mr. Schwarzenegger was 15, hismom charged him rent to live at home. After see-ing videos of the U.S.—“the Golden Gate Bridge,Empire State Building, the huge highways, the bigCadillacs with the big wings in the back”—hedidn’t just want to leave his parents’ house, hewanted to leave his home country, Austria.

Mr. Schwarzenegger decided that his ticket toAmerica would be through bodybuilding. He beganto train. He joined the Austrian army and contin-ued training, his sights always set on moving toAmerica. After he won the Mr. Universe competi-tion in 1967—at 20, the youngest champion—hegot an invitation from Joe Weider, one of the god-fathers of the sport, to train in the U.S.

“Coming to America opened up all the doorsthat I didn’t even think about,” he says. “Mymovie career happened, and then my political ca-reer, and the money, the millions that I made, itgoes on and on and on. Everything that I have ac-complished in life is because of America.”

THE TAKEAWAY: Mr. Schwarzenegger says hemade it to America because he had a vision. Fromthe time he was a teenager, he could visualizehimself onstage winning Mr. Universe and usinghis success as an entrée to a life in America.

“The No. 1 lesson of being successful is havinga vision,” he says. “Because when you have a vi-sion of where you want to go in life and what youwant to be, then it is just a matter of doing thework to get there.”

As he diversified his professional goals—whether it was being an investor or governor—Mr. Schwarzenegger says he employed the sameprinciple. It is one the things he tries to instill inyoung people today.

“They don’t know what they want to do whenthey get out of college, they don’t know what todo when they get out of high school, what kind ofwork should they do. Should they go intern some-where? There is no goal.”

WORST BET

‘HERCULES IN NEW YORK’

INVESTMENTTime and cultural cachet

LOSSESFuture jobs and cultural cachet

As a child, Mr. Schwarzenegger looked up tomen like Steve Reeves and Reg Park, bodybuilderswho parlayed their muscles into film roles like“Hercules Unchained” and “Hercules and the Cap-tive Women,” respectively. So, when Mr. Weidercalled him in 1969 and asked him if he wanted togo for the title role in the film “Hercules in NewYork,” he went for it.

Mr. Schwarzenegger hardly spoke English, soMr. Weider instructed him not to talk during themeeting with the producer. (Mr. Weider told himMr. Schwarzenegger was “a German Shakespear-ean actor.”) Mr. Schwarzenegger got the job buthad to talk to make the film. It didn’t go well.

“I just said [the lines], but there was no emo-tion there because I didn’t even know what I wassaying,” he says. “I didn’t have any acting train-ing, and even though the director complimentedme, I knew I was kind of in a bit over my head.”

The performance was so bad that his lines hadto be overdubbed. His phone stopped ringing. “Itreally took me back with my career of becomingan actor for several years because I didn’t get anoffer or anything,” Mr. Schwarzenegger says.

THE TAKEAWAY: “You have to find the sweetspot between having courage and being confi-dent,” he says, “but also knowing that you’re deepinto it and you’re not ready for something.”

Mr. Schwarzenegger says he got so caught upin his initial success as a bodybuilder that hedidn’t slow down and take care of the basics be-fore he capitalized on opportunities. But hedoesn’t think of the experience as a total loss.Looking back, it taught him an important lesson.

“We learn not only just from our success, butwe learn actually more from our failures,” he says.“I really learned to never do anything that you’renot really prepped, overly prepped for. Just like inbodybuilding, don’t go in the competition if youhaven’t done the reps. The same is with anythingelse. Don’t do it if you haven’t done the reps or ifyou didn’t put the mileage behind it.”

Schwarzenegger RecallsThe Good and the Bad

BY CHRISKORNELIS

Mr. Kornelis is a writer in Seattle. Email him at [email protected].

Arnold Schwarzenegger says having a vision has been key to his success.

BEST BET/WORST BET

CARLO

SALVAREZ/G

ETT

YIM

AGES

Four Generationsof Plot TwistsHe’s got a gift for gymnastics. She’s got her eye ona little start-up in the Valley. And he wants to retireearly. How do you create a wealth plan that reflectsall the complexity of a modern family? Start with aFinancial Advisor who knows how to bring familiestogether around both shared and personal goals.

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and local tax deductions, taxpayersshould be mindful that federal lawcontrols the proper characterizationof payments for federal income taxpurposes,” the IRS said recently.

� Key factors in New York:Lawyers say clients often assumethe only thing that matters is howmuch time they spend in a high-taxstate. That’s typically very importantbut not the only factor in at leastseveral states, such as New Yorkand California.

Lawyers say New York state typi-cally focuses on five “primary” fac-tors in determining “domicile.” Thatincludes time spent in New Yorkcompared with other places. It alsoincludes “active business involve-ment,” such as “active participationin a New York trade, business, occu-pation or profession and/or substan-tial investment in, and managementof, any New York closely held busi-ness such as a sole proprietorship,partnership, limited liability companyand corporation.”

� Other factors: These includethe address on your federal income-tax return, bank statements, andbills such as utilities and creditcards. Also focus on such items asyour driver’s license, country-clubmemberships, vehicle and voter reg-istrations, and hunting, fishing orgun licenses.

� Superb record-keeping: Thisis absolutely essential, says Mr.Klein. “Residency audits—some ofthe most intrusive audits imagin-able—are becoming more and morecommon,” he wrote in a 2014 essay.

� Consider appealing: If youdisagree with a state agency’s finaldecision, consider going to court.Some taxpayers have scored notablevictories.

� Get expert help: Beware ofthe do-it-yourself approach. If thedollar amounts are significant andthe issues even slightly murky, hirea trusted expert.

And before hiring a moving van,remember this: “Nobody knowswhether the current law will con-tinue in effect after 2025—or evenuntil 2025,” says Ms. Perri.

For some people, saving taxes underthe new law could be a moving ex-perience.

Among the biggest changes is aprovision limiting deductions forstate and local taxes to $10,000 ayear ($5,000 for a married personfiling a separate return), startingthis year and scheduled to expire atthe end of 2025. Also, the standarddeduction amounts rose sharply.

The changes have created agreater incentive for many taxpayersliving in high-tax areas, including NewYork City, California, New Jersey andConnecticut, to consider becoming taxrefugees. This includes upper-incometaxpayers who have more than onehome and want to claim a home in alower-tax area as the one that countsfor tax purposes. It also includessome taxpayers who are consideringfleeing entirely from a high-tax area.

Moving for tax reasons isn’t new.But the new law “has unquestion-ably led increasing numbers of peo-ple to consider moving,” says KerryO’Rourke Perri, a partner in the pri-vate-clients group at the law firmWhite & Case LLP. That’s especiallyso among taxpayers in high-tax ar-eas thinking about selling a busi-ness, or large amounts of securities,in the not-too-distant future.

“There’s a real interest in thistopic because of the new federal leg-islation. We have clients where thetax savings run in the millions,” saysMark S. Klein, chairman of HodgsonRuss LLP, and a co-author of the2018 edition of “New York Residencyand Allocation Audit Handbook.”

Warning: This isn’t as simple asit may sound. What may seem like aclear-cut change in your home fortax purposes may strike state-taxauditors as a tax dodge. Rules andaudit policies can vary by state, andmany misconceptions have sprungup, says Sidney Kess, senior consul-

Mr. Herman is a writer in New YorkCity. He was formerly The WallStreet Journal’s Tax Reportcolumnist. Send us your commentsand tax questions [email protected].

TAXES | TOM HERMAN

Moving and theTaxLawIf you’re thinking of changing your residencebecause of new deduction limits, read this first

tant at Citrin Cooperman and ofcounsel to Kostelanetz & Fink.

Here are a few thoughts and rec-ommendations from lawyers andother tax professionals:

� New limits: Some people as-sume the new $10,000 limit appliesto each taxpayer, which would be$20,000 for married couples filingjointly. Wrong. The cap is $10,000whether you’re single or if you’re fil-ing a joint return ($5,000 if marriedand filing separately), says MarkLuscombe, principal analyst at Wolt-ers Kluwer Tax & Accounting.

� IRS pushback: Some stateshave taken legislative action, or areconsidering steps, designed to com-bat the impact of the new limits.But the Treasury Department andthe Internal Revenue Service plan topropose regulations likely to be apowerful counterattack. “Despitethese state efforts to circumvent thenew statutory limitation on state

Shrinking Tax BreakBecause of the new tax law, manyfewer taxpayers will benefit from stateand local tax (SALT) deductions.

Source: Congress’s Joint Committee on Taxationstaff estimates


More Take-Home PayStates that don't have an income tax

* New Hampshire and Tennessee generally taxdividend and interest income.

Source: The Tax Foundation

n Alaskan Floridan Nevadan NewHampshire*

nWyomingn South Dakotan Tennessee*n TexasnWashington

Tax savings forfilers claimingSALT deductions

2017 2018

42.3 mil. 16.6 mil.

$109.4 bil. $20.3 bil.

Returns bene-fiting from SALTdeductions

TheHiddenSocial RiskOfUsingPaymentAppsThey allow people to pay others in exact amounts.And that can make them seem petty.

beyond money. In another experi-ment, we gave online daters infor-mation on potential matches andasked them who they would mostwant to date.

For example, we told them thatone potential match had respondedto a friend’s request for help withmoving by offering two hours ofassistance, while another had of-fered precisely an hour and 56 min-utes. A total of 62% of would-bedaters indicated interest in thematch who had offered two hoursof help, while 45% were interestedin the match who had offered 1hour and 56 minutes.

But it wasn’t just about shortinga friend four minutes. We added athird potential match who had of-

fered a friend twohours and four min-utes of help. Eventhough this candidatewas objectively themost generous, only44% of would-be dat-ers were interested,because this personwas perceived as petty.

Pettiness plays outin existing romanticrelationships as well.Are you dating, or

have you ever dated, someone whokeeps strict tabs on who paid forwhat when out for dinner, or tracksgrocery bills down to the last cent?

According to a survey we con-ducted with people in romantic re-lationships, those dating someonewho behaves this way were lesssatisfied and less committed. Notonly were they more likely to thinkthat they would break up in thenear future, they also felt theywould be less upset about it. That’sa pretty steep price to pay for pre-cision.

Dr. Kim is an assistant professorat the University of VirginiaDarden School of Business. Dr.Norton is a professor at HarvardBusiness School. Ting Zhang, apostdoctoral research scholar atColumbia Business School, con-tributed to this article. Emailthem at [email protected].

ONLINE EXCHANGES of moneyamong friends and family are agreat convenience. But users face ahidden risk: Paying someone ex-actly what you owe them coulddamage your relationship.

Back in the 20th century, if youpaid for a shared meal that cost$20.04, your friend technicallyowed you $10.02. Rather than forceyour friend to fish around for twopennies, however, you might havebeen happy to accept a $10 bill and“call it even.”

That kind of rounding, up ordown, is no longer necessary withthe rise of money-ex-change apps. We cannow transfer exactamounts owed in amatter of seconds. Infact, when we asked agroup of people withVenmo accounts todetail their most re-cent transactions, wefound that more thanhalf of the transac-tions between friendsand family includedprecise amounts, like a payment ofexactly $27.31 for a shared meal.

Here’s the problem with being soprecise: In a series of experiments,we have discovered that makingsuch exact payments can signal un-likable pettiness.

We asked people to evaluate twoimaginary individuals based onpast online transactions with afriend: One person had sent threeprecise payments (for example,$9.99, $34.95 and $20.06), whilethe other had sent three roundpayments ($10, $35 and $20). Eventhough the total amount exchangedwas the same, 81% of the people weasked said they would rather be-friend the person who had paidround amounts. They told us thatwhen precise numbers are in-volved, the payment feels imper-sonal—too much like a businesstransaction.

Such precision pettiness extends

BY TAMI KIMANDMICHAEL NORTON

When precisenumbers areinvolved,payments feelimpersonal—like a businesstransaction.

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