VOL. XXXII NO.

2
MONDAY, FEBRUARY 3, 2014
The Rich and Stranded
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Investors Brace Themselves for Bumpy Ride
A choppy start to 2014 un-
derscores the need to play de-
fense, say market veterans.
Many portfolio managers
are shifting away from the
kinds of investments that did
exceptionally well in 2013 but
are vulnerable to large
swings. For some, that means
paring back on U.S. small-
company stocks in favor of
shares of large companies
with growing dividends. Oth-
ers are focusing on shorter-
term bonds based on expecta-
tions that rising economic
output will lead to higher in-
terest rates.
The S&P 500 index gained
30% last year, amid an im-
proving U.S. economy and ex-
ceptionally loose Federal Re-
serve policy. Even more
remarkable to many observers
was that declines in the stock
market were generally short
and shallow. Accordingly,
many investors entered 2014
expecting a slower advance
marked by rocky stretchesa
forecast that has been borne
out by a 5% decline in the
Dow Jones Industrial Average
since the beginning of the
year.
After last years big rally
in stocks, the market this year
might gain 8% to 10%, but
its going to be a hard 8% to
10%, says Robert Smith, chief
investment officer at Sage
Advisory Services, which
manages $10 billion out of
Austin, Texas. Investors are
going to have to be really
careful.
Tumult in emerging mar-
kets has been the catalyst for
the recent bout of indigestion,
along with the Feds steps to
pare back stimulus known as
quantitative easing.
When the central bank was
pumping $85 billion a month
into financial markets last
year through purchases of
bonds, extremely low interest
ratesand expectations they
would stay lowgave inves-
tors more confidence about
taking on riskier investments.
But the Fed has set plans
to trim its monthly purchases
to $65 billion and has sig-
naled that it expects further
cuts in 2014. Many investors
say the pullback is reducing
Please turn to page 20
By TomLauricella,
Kaitlyn Kiernan
and Katy Burne
In frontier markets, gains
continue........................................ 18
Angry Thais who were unable to cast votes in Sundays national election waved ballot papers in protest outside a Bangkok polling station.
Opposition activists disrupted polling in 11% of Thailands electoral districts, making it impossible to gain a final tally. Article on page 3
Fury as Thais Miss Voting Opportunity in Election Chaos
Getty Images
U.S. Widens
Probe Into
Libya Deals
The Justice Department
has joined a widening investi-
gation of banks, private-eq-
uity firms and hedge funds
that may have violated anti-
bribery laws in their dealings
with Libyas government-run
investment fund, people fa-
miliar with the matter said.
In recent months, the Jus-
tice Department has stepped
up its involvement in a joint
probe with the Securities and
Exchange Commission that
began in 2011 and initially
homed in on Goldman Sachs
Group Inc. Prosecutors could
file criminal charges against
some or all of the firms this
year, people familiar with the
matter said. The Justice De-
partments involvement hasnt
been reported previously.
Federal investigators are
examining private-equity firm
Blackstone Group LP and
hedge-fund operator Och-Ziff
Capital Management Group
LLC, along with Goldman
Sachs, Credit Suisse Group
AG, J.P. Morgan Chase & Co.
and Socit Gnrale SA,
these people said. Spokesmen
for the Justice Department
and the SEC declined to com-
ment.
Authorities are examining
investment deals made during
and after the financial crisis,
these people said. In the years
leading up to Libyas 2011 rev-
olution, Western firmsen-
couraged by the U.S. govern-
mentraced to attract
investment money from the
North African nation, which
was benefiting from oil sales
and recently had opened to
foreign investment.
Investigators are trying to
determine whether the firms
violated the Foreign Corrupt
Practices Act, the people said.
The 1977 law prohibits U.S.
companies and companies
listed on U.S. stock exchanges
from paying bribes to foreign
officials. U.S. authorities con-
sider employees of state-
owned investment funds, such
as the Libyan Investment Au-
thority, to be foreign officials.
In most FCPA cases, the
U.S. leans heavily on compa-
nies to investigate themselves
and turn over documents and
other evidence of corrupt
payments, but seldom do
prosecutors have access to
the paper trail overseas. The
toppling of the Libyan govern-
ment in 2011 provided an op-
portunity for the new regime
to dig into the conduct of for-
mer Libyan leader Moammar
Please turn to page 18
By Joe Palazzolo,
Michael Rothfeld and
Justin Baer
EUand U.S. Plan Kiev Aid Package
MUNICHThe European
Union and the U.S. are work-
ing on a plan for significant
short-term financial assis-
tance for protest-torn
Ukraine, EU foreign-policy
chief Catherine Ashton said
Sunday.
U.S. officials said the pre-
liminary discussions under
way with the EU call for the
two to provide economic
support in tandem to a tran-
sitional Ukrainian govern-
ment as it works with the In-
ternational Monetary Fund.
While the U.S.-EU aid
package would be linked to
significant economic and po-
litical reforms, it wouldn't be
conditioned to Ukraine first
signing a long term Interna-
tional Monetary Fund deal,
Baroness Ashton said. Previ-
ous offers of one-off Euro-
pean aid have had that con-
dition attached.
Baroness Ashton, who is
due to travel to Kiev again in
the next 48 hours, said the
aim of the package would be
to help Ukraine get through a
transition period during
which a broad-based interim
government could drive
through key political and
economic reforms and pre-
pare the ground for presi-
dential elections, currently
due next year.
News of the proposed aid
Please turn to page 5
BY LAURENCE NORMAN
AND ADAM ENTOUS
Inside
Among Janet Yellens
critical decisions
after taking over the
reins of the Fed is
when to start lifting
interest rates.
U.S. News....................7
The U.K.s deep current-account deficit is
worrisome despite the recovery. It could warn
of trickier days to come, writes Simon Nixon.
Europe File.......................................................... 4
Heard on the Street: The
EUs bonus quandary..........28
A tortured protest leader
describes his ordeal ............... 5
28 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
HEARDON THE STREET
Email: heard@wsj.com FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard
No Blues
On Banks
Bonuses
Set a rule for bankers and
they will eventually find a
way around it. Set a rule
about their pay and they will
redouble their efforts.
That is what the European
Union is discovering with its
plans to cap bankers bonuses.
The politicians want to keep
bonuses down to less than
twice a bank employees an-
nual salary. That, they sug-
gest, would help soften the
aggressive risk-taking culture
at banks that can ultimately
contribute to dangerous fi-
nancial instability.
But Goldman Sachs
Groupwho else?has come
up with a plan to ensure its
European workers dont miss
out.
Goldmans plan looks simi-
lar to those suggested by
other banks to get around the
bonus cap. The idea is to pay
staff allowances based on
their role in the bank. Special-
ists in pay said the allowances
could be adjusted monthly,
thus keeping the variable as-
pect of bonuses. But they
could be treated as fixed pay
for regulatory purposes, eas-
ing the effect of the cap.
The image of bankers
queuing for their monthly al-
lowances like children getting
their pocket money may cause
some chortling. But the idea
seems to have some sense,
too. For example, if a bank
has a bad year or quarter, it
would prove easier for it to
adjust costs by reducing
monthly allowances than by
reducing salaries.
But the tussle over bo-
nuses may be becoming less
relevant anyway. The reality
facing banks is that their in-
dustry is going to be structur-
ally less profitable, whether
through requirements to hold
more capital or the increased
commoditization of their
products.
Investors, meanwhile, are
looking for greater reward in
terms of higher dividend pay-
outs.
All these pressures suggest
compensation levels will have
to moderate over time.
This trend already may be
in place. Early data from five
banks in LondonGoldman,
Citigroup, Morgan Stanley,
Credit Suisse Group and
Bank of Americashow over-
all compensation for bankers
rose 7% last year, according to
benchmarking website
Emoulment.com. But pay for
top managing directors has
fallen 7%, while the ratio of
their bonuses to salary has
dropped to 123% from 140%.
It is hardly time to get the
violins out. But bankers will
have to face up to new reali-
ties, whether the EU demands
it or not.
Andrew Peaple
Red Alert on Russia Premature
A case of mistaken iden-
tity?
Russia hasnt escaped the
recent emerging-market tur-
moil. The ruble has been a
poor performer, falling some
7% against the dollar this
year. And with investors won-
dering whether the turmoil in
countries such as Turkey
could lead to wider systemic
problems, Russia presents a
potential cause for concern,
both because of its size and
turbulent history.
But Russia in some ways
doesnt match the profile of
countries in the market cross
hairs. The focus on countries
like Turkey has been due to
their large economic imbal-
ances: big current-account
and budget deficits, coupled
with unorthodox monetary
policy. These have looked vul-
nerable in light of the Federal
Reserves decision to taper its
bond purchases, causing in-
vestors to pull back from mar-
kets that have been buoyed by
global liquidity.
Russia has come a long
way since 1998, however,
when its default led to the im-
plosion of U.S.-based hedge
fund Long Term Capital Man-
agement, which reverberated
through Wall Street. Russia
ran a current-account surplus
of 1.5% of gross domestic
product in 2013 and a budget
deficit of just 0.5% of GDP.
Reserves are solid at $497
billion. And the country hasnt
been a magnet for hot-money
inflows. From mid-2009 to the
end of 2012, when emerging
markets were a favorite desti-
nation for investors, portfolio
inflows were just 1% of GDP,
according to Morgan Stanley,
versus 10% of GDP for Turkey.
Not that Russia is without
issues. Two loom large: its rel-
atively lackluster economic
prospects and unfortunately
timed push to liberalize its
foreign-exchange system.
The current-account sur-
plus has shrunk and may yet
turn into a deficit. Growth has
slowed since the global finan-
cial crisis and was just 1.5% in
2013. Despite that, inflation is
proving tricky to bring down to
target. Some Russian officials
warn the country faces stagfla-
tion. Russia remains reliant on
oil and gas revenues and it still
hasnt done enough to attract
investment that might help di-
versify its economy.
Russia also is unlucky in
that it has chosen now to in-
crease exchange-rate flexibil-
ity, with the aim of moving to
a floating-rate system by 2015.
In the long term, this is likely
to be a positive development.
But changes to the relatively
complex system, which cou-
ples a moving currency band
with interventions at preset
thresholds, may be adding to
the pressure on the ruble and
increasing volatility.
The slide in the ruble is a
double-edged sword. Depreci-
ation will increase the local-
currency value of oil revenue,
helping the budget. Yet oil and
other commodities dominate
exports. Increased demand for
other exports due to a weaker
currency wont be enough to
make a big difference.
Moreover, if the ruble con-
tinues to fall steeply, it could
cause tensions in a country
that has seen repeated painful
currency crises. In 1998, when
Russia defaulted, the ruble
lost 70% of its value against
the dollar; in 2008-2009, it
lost 55% against the dollar, ac-
cording to RBS.
The move this year in the
Russian central banks ruble
band against the euro and dol-
lar is the fastest since 2009
and may evoke memories of
those previous devaluations
for the population, notes RBS.
A big threat to the ruble could
yet lie in a surge in demand by
Russians for foreign currency.
Russias central bank, like
many emerging-market cen-
tral banks, has a tricky task.
Slow growth means it is un-
likely to want to raise rates,
but currency weakness could
prove inflationary. One option
is for the central bank to
pause in its progress toward a
free-floating ruble. If the pres-
sure increases, that might be
a handy safety valve.
Investors mindful of Rus-
sias importance to emerging
markets are right to keep a
sharp eye on its currency.
They shouldnt assume,
though, that it is destined to
repeat the problems of the
past.
Richard Barley
Amazon Isnt Just for Christmas
At Amazon.com, it is all
about the top line.
Making profits has long
taken a back seat at the e-com-
merce company to the goal of
dominating as large a share as
possible of overall consumer
spending. And investors have
been willing to give Amazon a
pass, providing it keeps push-
ing into new businesses and
increasing revenue. So Wall
Street was surprised when
Amazon reported late Thurs-
day that the rate of revenue
growth for the all-important
fourth quarter had slowed. In-
vestors sent Amazons shares
down more than 9% Friday.
The alarm may be unwar-
ranted. Amazons revenue rose
20% year over year to $25.6
billion in the quarter. That
compares with 23% growth in
the third quarter, 22% in the
second and 21% in the first.
Yet a look back at the fourth
quarter of 2012 shows a simi-
lar deceleration. Sales that
quarter rose 22% compared
with 27% in the third quarter
of 2012.
What is going on with Am-
azons fourth-quarter sales?
One explanation is that the
companys Prime subscribers
and the sizable percentage of
revenue they drive may be
changing the seasonality of
Amazons business.
Carlos Kirjner, an analyst
with Sanford C. Bernstein, esti-
mates more than half of items
shipped by Amazon go to sub-
scribers who pay for the $79-
a-year membership that comes
with free two-day shipping.
And because they tend to
spend more in categories such
as consumablespaper towels
and batteries, for example
their spending patterns may
be less seasonal than non-
Prime users. Another, less sig-
nificant, factor may be the less
seasonal revenue stream from
the Prime fee itself. This
amounts to $2.5 billion to $3
billion a year, Mr. Kirjner esti-
mates.
Commerce Department fig-
ures seem to back up the sea-
sonality argument. Sales at
nonstore retailers, a category
driven by changes in online
sales, were up 9.1% in the
fourth quarter from a year ear-
lier. That was actually a bit
better than 2012s fourth-quar-
ter gain of 8.8%.
But it also counted as the
slimmest quarterly gain of last
year. In the third quarter, non-
store sales rose 11%.
The problem: Investors
may have seen that as a pre-
lude to blowout online holiday
sales, rather than recognizing
it as a shift in online shopping
patterns.
Granted, more aggressive
discounting and promotions
from other retailers around
the holiday season also may be
affecting Amazons fourth-
quarter results. But among
competitors, the usual sus-
pects dont seem to have bene-
fited much.
Wal-Mart Stores warned
Friday that U.S. comparable-
store sales fell slightly during
the quarter. Best Buy, Sears
Holdings and Family Dollar
Stores also have reported
weak holiday sales.
Any effects of the Prime
program on sales patterns also
could diminish if Amazon de-
cides to raise its price by $20
to $40 a year, as it is consider-
ing, and people decide to quit.
But the effect of attrition on
sales might be partially offset
by higher revenue from fees.
The fourth quarter will
probably always be Amazons
biggest. But Amazon watchers
hoping to predict the com-
panys performance may have
to adjust their expectations.
Miriam Gottfried
Tisnt the Season
Amazons fourth-quarter
revenue as a percentage of
annual revenue
The Wall Street Journal
Source: FactSet
40
32
34
36
38
%
10 2009 11 12 13
Mercedes Gets
Polish in China
Mercedes-Benz may be one
of the worlds most recogniz-
able car brands, but it has had
trouble getting noticed in
China. Now, Mercedes is mov-
ing to change that.
Much will depend on how
the German brands China
partner makes use of new capi-
tal. Chinas state-owned BAIC
Motor plans later this year to
raise about $2 billion in a
Hong Kong share sale, accord-
ing to The Wall Street Journal.
Daimler, which owns the Mer-
cedes brand, manufactures and
markets luxury cars through a
joint venture with BAIC and
owns 12% of the Chinese auto
company.
Daimler has much to repair
in China. Until recently, it was
selling cars through two distri-
bution networks that competed
against each other. Its after-
sales service scored poorly in
surveys by J.D. Power, while
analysts say the cars were too
richly priced and then had to
be heavily discounted. On top
of it all, Mercedes is often
viewed as an old persons car,
unlike the more fashionable
BMW or Audi, says Macqua-
ries Janet Lewis.
Mercedes sales were essen-
tially flat in 2012 and increased
only half as fast as rivals in
2013, otherwise a blockbuster
year for Chinese autos. Its
share of the luxury market
slumped to 15.5% in 2013 from
20.3% in 2011, as Audi and
BMW tightened their grip, ac-
cording to LMC Automotive.
To change its stuffy image,
Mercedes is set to launch 13
new or refurbished models in
the next two years, including a
sedan and a compact SUV that
should attract younger con-
sumers.
BAICs IPO also will help.
The Chinese car maker will use
the share-sale proceeds to
shore up its balance sheet, says
a person familiar with the mat-
ter.
This may help BAIC put
more money into the Daimler
joint venture. That means lo-
calizing more production to
bring down costs and boost
Mercedess China margins,
which are about half those of
BMW.
The good thing about com-
ing from behind is that there is
upside for Daimler investors.
Chinas contribution to Daim-
lers overall revenue was just
9.4% in 2012. BMW generated
double that.
Even getting halfway to its
competitors exposure to China
will give Daimler investors a
better ride.
Abheek Bhattacharya
Source: ICAP The Wall Street Journal
Rubles Retreat
Performance against the
U.S. dollar
0
25
20
15
10
5
%
2013 14
Turkish lira
Russian ruble
Kremlin in Red Square, Moscow
R
e
u
t
e
r
s
With a current-account surplus and solid
reserves, Russia doesnt match the profile
of countries in the markets cross hairs.
2 | Monday, February 3, 2014
AM IM UK SW FR IT SP TK BR PL IS AE GR
THE WALL STREET JOURNAL.
PAGE TWO
Fridays jobs report could very
well show the U.S. unemployment
rate fell again in Januarythis
time perhaps in part because
federal jobless benefits have
ended.
A drop related to the expiration
of the program would likely reflect
two shifts.
Some number of jobless may
have stopped looking for work and
therefore arent counted as
unemployed. Others may have
taken jobs they would have turned
down if benefits had continued.
Several recent research papers
suggest the first shiftpeople
dropping out of the labor force
could be the more significant of
the two. Both factors could provide
fodder for policy makers debating
whether to extend the program.
Of course, the unemployment
rate could also fall because more
people find jobs, independent of
the effect of federal jobless
benefits ending.
Nearly 1.4 million people lost
payments when the federal
benefits expired on Dec. 28.
Launched in the middle of the
recession, the program paid on
average $300 a weekfor up to 47
weeksto jobless Americans who
had exhausted the roughly 26
weeks of aid most states provide.
The Labor Department estimates
there are an additional 3.6 million
people who would have qualified
for the program this year once
exhausting their state benefits.
Senate Democrats plan to bring
up a bill as early as this week to
extend the program for three
months; its prospects for becoming
law are uncertain. Even if the bill
passes the Senate, many House
Republicans are deeply skeptical of
the program.
Many economists say the end of
the federal benefits program will
drive down the unemployment rate
in coming months. The rate was
6.7% in December, and the figure
for January will be released Friday.
The average prediction of
economists surveyed by The Wall
Street Journal last month was that
the unemployment rate would fall
to 6.4% by June if the benefits
program wasnt extended,
compared with 6.6% if it was.
Some job seekers will give up
the search when they run out of
benefits, research suggests. To get
state jobless benefitsand federal
benefits when they were in
effectrecipients have to keep
applying for jobs. Some who
believe they face long odds finding
a job may figure it is still worth
the effort if they are receiving
benefits, said University of
California at Berkeley economist
Jesse Rothstein, who has studied
the issue. But if theres no
benefits attached to it, then they
just drop out, he said.
Others will find a job, perhaps
because they are more willing to
take one that pays less than they
wanted. Kristen Kippel-Gonzalez of
San Diego said she started off
looking for positions that matched
her skills and former $55,000
salary when she lost her job in
May. The longer she went without
work, the more she lowered her
sights, and when she lost her
jobless benefits at the end of
December, my whole mind-set
shifted to I guess I need to do
anything to put food on my
table, said the single mother of
two.
To be sure, others who have
lost benefits will continue to look
for work until they find something
that matches their skill set or
wage requirements, and they will
continue to be counted in the
unemployment rate.
It isnt good for the economy if
throngs of engineers take jobs as
janitors just because they need a
paycheck, said Dean Baker, co-
director of the Center for
Economic and Policy Research, a
left-leaning Washington think tank.
Part of the story of
unemployment insurance benefits
is that we want to give people a
chance to find a job that actually
uses their skills, he said.
On the other hand, Mr. Baker
said, its likely some of the long-
term unemployed cant find work
because there is no demand for
their skills. When such people take
a less desirable job, it may be
unfortunate for them but it isnt a
negative for the economy, he said.
The federal programs
expiration may take time to show
up in jobs data, especially if job
seekers hope are betting that
Congress will restore the benefits,
said BNP Paribas economist
Bricklin Dwyer. He said it took
three to four months to see
movement in North Carolina after
extended benefits were cut off in
the state in July because its
unemployment insurance program
failed to meet federal guidelines.
The Tar Heel states
unemployment rate plummeted
from 8.9% in July to 6.9% in
December, the steepest drop of any
state in that period and faster than
the national rate. Some people
found work: Employment in the
state increased 1.28% since July,
compared with just 0.21%
nationally. But plenty of others
stopped looking, sending the
states labor force participation
ratethe share of adults holding
or seeking jobsdown 0.8
percentage point to 61.2% in
December, from 62% in July. The
national participation rate fell 0.6
percentage point in that period to
62.8%.
Economists caution it is tough
to extrapolate from one states
experience to the entire U.S. labor
market, but many see it as a test
case of what might happen more
broadly.
Whether the impact of the
national programs end shows up
in Fridays figures or later, it could
muddy the already opaque waters
of the U.S. labor market.
The Dark Cloud Behind
A Falling Jobless Rate
[ The Outlook ]
BY VICTORIA MCGRANE
Source: U.S. Labor Department The Wall Street Journal
Muddled Picture
The jobless rate has been trending down in the U.S., but this is partly because of the falling labor force participation rate.
In North Carolina, federal jobless benets ended in July 2013.
Unemployment rate Labor force participation rate
68
60
62
64
66
%
07 08 09 10 11 12 13
U.S.
12
0
3
6
9
%
07 08 09 10 11 12 13
North
Carolina
North
Carolina
U.S.
62.8%
61.2%
6.7%
6.9%
July
i i i
Business & Finance
n Microsofts Satya Nadella is
on the brink of being chosen to
pilot the tech giant as it seeks
to regain ground after years of
waning influence. 15
n Samsung Electronics effort
to roll out its own smartphone
operating system is faltering as
some major wireless carriers
withdraw their support. 15
n Buoyed by strong credit
ratings and rising deposits,
Asian banks have become big-
ger global players. 15
n Three of Spains largest
banks have stronger balance
sheets in an improving domes-
tic economy but are still pay-
ing dearly for the countrys
real estate bust. 19
n Etihad is conducting the fi-
nal phase of due diligence re-
lated to the potential pur-
chase of a stake in Alitalia,
with the Abu Dhabi airline
setting a deadline of 30 days
to complete a deal. 16
n Buyout specialist KKR is set
to open its first office in Spain,
as it specialist seeks to build
on its billion-euro stake in the
country. 16
i i i
World-Wide
n The six powers negotiating
a nuclear deal with Iran will
take the time needed even if
that means going beyond the
six-month objective, the EUs
foreign-policy chief said. 9
n Hungarys left-leaning op-
position rallied against the
governments surprise decision
to have Russia expand a Hun-
garian nuclear power plant. 4
nA panel looking at changes to
Myanmars constitution says
most people who weighed in
dont want to alter the clause
that prevents Aung San Suu Kyi
from assuming the presidency. 8
n Afghanistans presidential
campaign kicked off, as the
leading contenders wooed
crowds and insurgents assassi-
nated two campaigners. 9
n Australia approved plans to
dump vast amounts of mud
and rock into oceans surround-
ing the Great Barrier Reef, pav-
ing the way for developers to
expand a coal port. 8
n At least 15 people died after
being caught in a flow of su-
perheated ash and gases on In-
donesias Mount Sinabung. 8
Whats News
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THE WALL STREET JOURNAL. Monday, February 3, 2014 | 27
OFF THE WALL
How to Stitch Together a Quilting Empire
Short Cuts, YouTube Make Jenny Doan a Star; Speedy Methods Put a Bee in Some Purists Bonnets
How many of you were saying:
NO, Nodont do that! said Mo-
nique Atkinson, a 53-year-old
quilter from Quebec. I thought it
was just hilarious!
In 2009, Al Doan and his fam-
ily decided Missouri Star could be
a serious business. They noticed
that his mothers video fans
would want to use the precise
fabric she showed in a tutorial. So
they began stocking up on those
fabrics to sell. One day, we got
eight sales in one day, Mr. Doan
recalled. We were so excited.
Almost five years later, Mis-
souri Star sells an average of
1,000 orders a day. Mr. Doan
wont divulge the companys reve-
nue, but noted the business in-
vested $750,000 last year to up-
grade its buildings, and now
employs 80 workers.
Along the way, Hamilton has
become a tourism destination for
the quilting crowd. Most days, 50
to 100 visitors arrive to meet Mrs.
Doan and members of her family
in their 5,000-square-foot main
shop.
City Administrator Dale Wal-
lace says the tourism is great, and
that maybe the town just needs to
patch up its array of amenities.
For example, we really need to
find something for the men to
do, he said of the husbands who
sometimes come in tow with their
quilting spouses. Maybe well put
in a gun shop.
For now, Hamilton Hardware,
once the location of the 500th de-
partment store in Mr. Penneys re-
tail chain, serves as a way station
for bored spouses. The quilters
dont come in, but their husbands
do, said owner Eddie Ernat. We
have some pretty neat conversa-
tions.
BY JIM CARLTON
Hamilton, Mo.
Online
>>
Watch clips from Jennys quilting
videos at WSJ.com/OffTheWall.
Jenny Doan, Missouri Star Quilting Co. star of YouTube tutorials on quilting, draws as many as a million viewers.
J
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town 105 kilometers northeast of
Kansas City, Mo., with their seven
children. We literally picked a
place in the middle of the U.S.,
she says.
Her husband landed a job as a
machinist for a local newspaper,
but by 2008 his shop had been
cut from 25 people to five. It
wasnt a question of if I lost my
job, but when, says Mr. Doan, 60.
Concerned for their parents
future, two of their grown chil-
dren, Al Doan and Sarah Gal-
braith, that year took out a
$36,000 loan to buy their
mother a professional
quilting machine. We
were thinking if we
didnt do something,
Mom is living in our
basement when she
gets old, says Mr.
Doan, 31.
To accommodate
the 3.7-meter-long ma-
chine, the younger Mr. Doan and
his sister spent $24,000 buying a
former antique store for their
mother to work in. Not long after
she got it up and running, Mrs.
Doan says, her family noticed
quilting searches were a hot topic
on the Internet.
Al said, Mom, we need to do
tutorials, she recalled. I said,
Sure. Whats a tutorial?
Their first, shot in her clut-
tered shop in February 2009,
didnt go well. Mrs. Doan tripped
on an electrical cord and broke
her leg. She still managed to gri-
mace through the video. She was
so awkward, her son says.
Subsequent efforts were bet-
ter. Mrs. Doan turned on the
charm, sometimes hamming it up.
She started an Iron Quilter
competition, mimicking the Food
Networks Iron Chef cooking
contest, with two of her daugh-
ters squaring off in samurai-style
bandannas. About 500 people
sent in pictures of entries.
In the precise craft of sewing,
Mrs. Doan isnt always the most
polished instructor, but that just
seems to add to her appeal. One
time, she was making a quilt
block but she almost cut it
wrongand she laughed and said,
T
his tiny farm town used to
be known as the home of
James Cash Penney Jr.,
founder of the namesake depart-
ment store chain. These days, it is
better known in some circles as
the home of Jenny Doan.
Those would be quilting cir-
cles. Over the past few years, Mrs.
Doan, 57 years old, has become a
veritable superstar of the craft.
Her YouTube tutorials on how to
make quilts have drawn as many
as a million viewers, some from
as far away as South Africa.
Her familys Missouri Star
Quilt Co. gets as many as 30,000
orders a month for pre-cut
patches and other quilting sup-
plies. The 5-year-old company has
become the second-largest em-
ployer in this town of 1,800, its
operations covering a patchwork
of formerly vacant downtown
buildings that include a sleep
and sew retreat hotel. Fans stop
Mrs. Doan for autographs. I can
barely go to Wal-Mart without
someone recognizing me, she
says.
The key to Mrs. Doans popu-
larity: she appeals to instant
gratification quilters. I dont
teach people how to be the best
quilter, she says. I teach them
how to do it the easiest.
Instead of the weeks or
months often required to com-
plete a quilt, Mrs. Doans method
teaches how to make one in as lit-
tle as a dayby using a variety of
pre-cut fabric patches a quilter
otherwise would have to painstak-
ingly snip out and stitch to-
gether. She also supplies
the materials to do
so. Ill show you
something that
makes it look like
you worked really
hard, she says.
That simpler pro-
cess was the appeal for
Carmen Leticia Attie, a
psychotherapist from
Mexico City, who learned to quilt
in 2010 by watching Mrs. Doans
videos. She also found Mrs.
Doans breezy style less intimidat-
ing than that of other quilting tu-
tors. She makes you feel as if it
is not only possible, but easy.
Some quilters reject the short-
cuts, saying it takes away from
the history of the craft. Tradi-
tional quilting is the historical
way to do it, said Linda Court-
ney, a shopkeeper from Stewarts-
ville, Mo., who learned quilting
from her mother.
Bonnie Browning, executive
show director of the American
Quilters Society, said interest in
quilting has been on the rise, es-
pecially people wanting to learn
via the Internet. One reason Mrs.
Doan is so successful, she said, is
she was one of the first quilters
to start making online tutorials.
Today, there are several, teaching
various approaches. You know
what, theres a place for everyone
in the quilters world, said Mrs.
Browning, whose group is based
in Paducah, Ky.
Among Americas estimated 21
million-plus quilters, Mrs. Doan is
a relative newbie. She didnt take
up the hobby until 1997, shortly
after she and her husband, Ron,
left California to move to this
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THE WALL STREET JOURNAL. Monday, February 3, 2014 | 3
NEWS
Thai Protests Disrupt National Election
BANGKOKThailands national
elections were marred by violence
over the weekend as gunshots and
explosions rang out and protesters
blocked voting stations in the capi-
tal, leading to an inconclusive poll
that has done little to resolve a deep
political stalemate.
Voting was disrupted in 11% of
electoral districts, making it impos-
sible to tally final results, said Supa-
chai Somcharoen, chairman of the
countrys Election Commission.
The question for Thailand now is
whether Prime Minister Yingluck
Shinawatras government will be
able to hold by-elections in areas
where people were unable to vote,
or whether her opponents have
bought themselves enough to time
to force her from office through po-
tential legal challenges.
Clashes between political rivals
marred the voting in parts of Bang-
kok and in southern Thailand, where
opposition to Ms. Yingluck runs
deep and antigovernment protesters
vowed to prevent the ballot from
going ahead.
The standoff turned violent on
the eve of the vote when a gunbattle
between rival factions erupted on
the streets of the capital, injuring
seven people.
More police and army troops
were deployed to help the election
go smoothly. Scores of security per-
sonnel were stationed in Ms. Ying-
lucks neighborhood in northern
Bangkok, where she cast her vote.
I want to urge people to come
out to vote to protect democracy,
she told reporters. Later, she said
that she was relieved there was no
further violence.
Tensions ran high in some parts
of Bangkok, though there was no re-
peat of the previous days gunbattle
that set the city on edge.
Demonstrators blockaded a num-
ber of polling centers and prevented
the distribution of ballot sheets, in-
cluding in the Din Daeng neighbor-
hood, where clashes between pro-
testers and police in December
resulted in two deaths.
In the morning, a group of resi-
dents marched toward the protest-
ers demanding their right to vote,
but were repelled by activists, some
of whom threw water bottles and
other objects.
I want to vote. I want to exer-
cise the rights that belong to all
Thai people, said 63-year-old
Narong Meephon. A half-baked de-
mocracy is still better than nothing
at all.
Sundays elections were among
the most contentious this pivotal
Southeast Asian country has seen.
For weeks, demonstrators led by
former deputy Prime Minister
Suthep Thaugsuban had campaigned
to stop the vote.
They want Ms. Yingluck, 46, to
step down and allow an unelected
interim government to take over
and push through reforms to check
the influence of populist leaders, es-
pecially the man many people be-
lieve controls power in Thailand,
Ms. Yinglucks elder brother Thaksin
Shinawatra, who was ousted in a
military coup in 2006.
The opposition Democrat Party
boycotted the vote and joined the
protesters in an effort to reduce
voter turnout and undermine the le-
gitimacy of the poll, which has also
illustrated deep geographical divi-
sions in the country.
In central Bangkok thousands of
people turned out to celebrate what
they viewed as the failure of the
elections and another success in
their campaign to force Ms. Ying-
luck from power. Many danced,
clapped and blew whistles as pop
groups blasted out hits such as the
theme from the Hawaii Five-O
television show.
But while the election was dis-
rupted, it isnt over yet. Pongthep
Thepkanchana, a minister in Ms.
Yinglucks office, said he had asked
the countrys independent Election
Commission to set a new date for
polls in areas where residents were
unable to vote Sunday.
Somchai Pagapasvivat, an inde-
pendent commentator and scholar,
said the government would push
hard to complete voting until a new
parliament can be formed; Thai laws
require 95% of seats to be filled
while at the moment the election
can fill 94% at most.
Elections are the only means to
give Ms. Yingluck legitimacy, Mr.
Somchai said, adding that also
means that antigovernment protest-
ers would likely try to continue
blocking tactics. The deteriorating
economy and the public will put
pressure on the government to con-
sider some kind of reform or com-
promise.
Meanwhile, legal challenges to
Ms. Yinglucks political survival are
piling up. Thailands anticorruption
agency is fast-tracking an impeach-
ment case against her for allegedly
ignoring massive losses to the state
relating to a multibillion-dollar rice
subsidy. More than 300 members of
her Pheu Thai Party also face im-
peachment trials for allegedly vio-
lating parliamentary rules when
pushing for an abortive amnesty bill
that would have enabled Mr. Thak-
sin to return to Thailand after flee-
ing the country in 2008 to escape a
corruption conviction he says was
politically motivated.
Wilawan Watcharasakwet,
Warangkana Chomchuen and
Nopparat Chaichalearmmongkol
contributed to this article.
BY JAMES HOOKWAY
Thai Prime Minister Yingluck Shinawatra prepares to cast her ballot at a polling station in Bangkok on Sunday,
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Dating in Korea Sometimes Transcends the Divide
SEOULNorth Korean women
often risk their lives to defect to the
South, crossing the heavily guarded
Chinese border on foot before be-
ginning a lengthy resettlement pro-
cess. Then comes the loneliness.
When Na Soo-yeon arrived in
Seoul in 2008 after fleeing North
Korea, she found herself alone in an
unfamiliar society where she knew
no one. To ease her solitude, she
sought a husband from South Korea
who could provide companionship
and help her adjust to life in the
South.
I just wanted a good guy who
was financially stable and could
guide me through life in South Ko-
rea. Everything is so different here,
said Ms. Na, 48 years old.
Like many North Korean women
who have defected to South Korea,
she turned to a marriage agency.
Pairing couples for marriage is a
sizable business in South Korea, and
several companies focus exclusively
on matching North Korean women
with South Korean men.
Demand for these services is
born of some unique demographics:
a majority of the more than 26,000
North Korean refugees who have
settled in South Korea are women,
while large numbers of South Ko-
rean men who live in rural areas
and work blue-collar jobs fail to find
South Korean wives.
The flow of North Korean refu-
gees has fallen sharply in the past
two years following a border crack-
down by dictator Kim Jong Un, data
from South Koreas Unification Min-
istry show. New arrivals of North
Koreans into South Korea totaled
1,516 last year, less than half as
many as in 2011.
Women from North Korea still
account for around three of every
four defectors arriving in the South.
The skew reflects the fact that it is
easier for women to go unnoticed
for days in North Korea, where most
men must report regularly at their
workplace.
The company that paired Ms. Na
with her husband is run by Hong Se-
ung-woo, who says one of his com-
panys goals is to help North Korean
women settle happily in the South.
For the North Koreans who
come here, their main goal is to
make South Korea their home. To do
that, they need to build a network
that can support them, says Mr.
Hong, who himself married a
woman from North Korea. Mr. Hong
has operated his company, Namnam
Buknyeo, since 2006 and says the
firm has orchestrated 450 marriages
in that time.
Women can register for Namnam
Buknyeos services free, while men
have to pay a fee of 3 million won
(about $2,800) for introductory
meetings with a maximum of five
women over the course of one year.
The company screens all of its male
clients, and men who are unem-
ployed, already married or disabled
arent eligible.
Some South Korean men seek
North Korean wives instead of those
from elsewhere in Asia because of
shared language and customs. Ko-
rean conventional wisdom also has
it that the most handsome Korean
men hail from the South and the
prettiest women from the North.
The name Namnam Buknyeo is an
abbreviation of the Korean expres-
sion for Southern man, northern
woman.
Mr. Hong met his wife, Ju Jeong-
ok, when she signed up for his com-
panys services shortly after settling
in South Korea in 2012. He says that
on their first date, he knew right
away that he wanted to marry her.
I was considering several women at
the time, but she was really pretty,
and seemed so kind and genuine
that I was sure I would ask her to
marry me, said Mr. Hong.
Lim Soon-hee, a researcher at
the Korea Institute for National Uni-
fication, says that a lack of familiar-
ity between South Korean men and
North Korean women can lead to
misunderstandings that cause prob-
lems during marriage.
North Korean women see South
Korean men on TV dramas and
imagine that their husbands will be
romantic and take care of them,
while South Korean men think that
North Korean women are obedient.
Once these fantasies are broken,
both parties can end up disap-
pointed and hurt, says Ms. Lim.
Na Hyang-sook, 36, who arrived
in South Korea in 2008 and found
her husband through an agency in
March, said seeking a partner
through a company was helpful as it
clarified both parties intentions at
the outset.
I think going through the
agency was better than just meeting
someone randomly, because it
meant we could begin with similar
expectations, said Na Hyang-sook.
Critics say the companies exploit
the North Korean women in the
name of profit. Lee Young-seok, di-
rector of external affairs for Citi-
zens Alliance for North Korean Hu-
man Rights, says marriage agencies
emphasize the government-allotted
benefits that North Koreans are
privy to when pitching their compa-
nies services to South Korean men.
Mr. Hong of Namnam Buknyeo
denies ever presenting the benefits
received by North Korean women as
incentives for his South Korean cli-
ents. Those companies market
North Korean women like they were
commercial goods. It is dehumaniz-
ing. They tell men that the North
Korean women are a good option
because they already have a house
and because their families are in
North Korea so they wont be bur-
dened by having to take care of
them, said Mr. Lee.
When North Korean refugees ar-
rive in South Korea, after a lengthy
interrogation and resettlement pro-
cess, they are provided by the South
Korean government with several
thousand dollars to start their lives,
along with money for housing and
vocational training.
BY STEVEN BOROWIEC
Hong Seung-woo met his wife, Ju Jeong-ok, through his own agency.
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26 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
HEARD ON
THE FIELD
SPORT
Soccers Window of Discontent
Liverpool and Juventus Fall Victim to Europes Winter Transfer Maelstrom
On Friday evening, Ian Ayre
found himself in his own personal
episode of 24minus the terror-
ists and torture but with the same
drama, uncertainty and ticking
clock.
Ayre, the managing director of
Liverpool, was at the Grand Hotel
Ukraine in Dnipropetrovsk trying to
sign Yevgen Konoplyanka, the local
soccer clubs star attacking mid-
fielder.
He had agreed to personal terms
with the player and his father, who
also acts as his agent. Now it was a
question of sealing the transfer con-
tract with his club, FC Dnipro and,
crucially, getting it done before the
January transfer windowone of
two periods of the year when Eu-
ropes clubs are free to buy and sell
playersslammed shut at 1 a.m. lo-
cal time (11 p.m. back in England).
If no deal was completed by that
witching hour, Konoplyanka would
remain at Dnipro and Ayre would
make the long trip back to Liverpool
empty-handed.
To help expedite matters, Ayre
had flown Liverpools club doctor,
Zafer Iqbal, to Dnipropetrovsk so
that he could conduct a medical ex-
amination of the player ahead of the
deadline.
What happened next depends on
who you choose to believe.
According to reports in Liver-
pool, FC Dnipros billionaire owner
Ihor Kolomoyskyi simply refused to
sign the paperwork. An equally
plausible explanation, offered in
Ukraine, is that Konoplyankas price
ballooned at the last minute, some-
thing that would not surprise an
Economics 101 class.
Having already invested time, ef-
fort and money to sign the player
and with only hours to go, it
wouldnt be a surprise if he sud-
denly became more expensive than
Liverpool thought.
Either way, the transfer wasnt
concluded. Ayre and Iqbal flew
home without their man.
Konoplyankas moveat a re-
ported $25 millionwould not have
been the biggest of the transfer win-
dow, but it epitomizes the risks and
pitfalls of what can be a frenzied
period at the end of the winter mar-
ket.
In Liverpools case, there was in-
creased pressure to act as the club
had missed out on another target,
Egyptian winger Mohammed Salah,
when rival Chelsea put in a higher
offer. Throw in the ticking clock, a
Liverpool delegation holed away in
subfreezing Dnipropetrovsk and the
usual dont-blink-first tension of a
negotiation and you begin to see
how different January deals can be
from those in the summer.
What also makes January tricky
is the glare of the cameras and pub-
lic attention. This was best exempli-
fied by the aborted swap deal that
would have seen Inter Milans Co-
lombian midfielder Fredy Guarn
join Juventus in exchange for Mon-
tenegrin forward Guarn plus a re-
ported fee of about $2 million.
In this case, both players had
agreed to terms with their new
clubs and Vuini had even under-
gone a medical with Inter. Then, on
Jan. 21, Inter owner Erick Thohir, is-
sued a statement on the clubs web-
site explaining that hed decided
not to continue negotiations be-
cause he felt that an agreement
would not be possible it did not of-
fer a clear financial or technical
benefit to the club.
Juventus managing director
Beppe Marotta responded with
withering criticism. He said he had
never seen anything like it, accused
Inter of a lack of seriousness and
said Inters club statement con-
tained false information.
Again, we may never know, but
odds are the Vuini-Guarn talks
were not helped by the fact that
they were held in the center of Mi-
lan, with TV cameras and a battal-
ion of journalists following club offi-
cials around from hotels to
restaurants to Inters headquarters,
all with round-the-clock coverage on
Italys three rival sports networks.
Inevitably, this attracted fans
lots of them. Several hundred Inter
supporters, some carrying flags and
banners, picketed outside wherever
Inter and Juventus officials were
meeting, expressing their anger at
the deal.
Meanwhile, representatives of
Inters hard-core Ultras supporters
issued a statement describing the
potential deal as the last straw in
a veiled threat to Thohir, who had
only acquired the club a few months
earlier.
You cant help but wonder
whether this mass mobilization of
media and supporters would have
occurred if this deal had been
planned in the summer, when both
Milan and Turin are virtual ghost
towns and the media often turns its
gaze in other directions.
Ideally, in terms of best prac-
tices, a club would do its negotiat-
ing before the window opens and
simply formalize the transfers once
the rules allow it. That way, every-
body benefits. The buying club is
under less pressure to conclude the
deal and gets almost an extra full
month with the new signing on
board. The selling club has more
time to find a suitable replacement.
But there are practical reasons
why this does not always happen,
not least the simple logistics of a
bunch of worldly menand they are
almost always mentrying to get
the best possible price for them-
selves, whether theyre buying, sell-
ing or representing the players.
So the alternative is to enter the
rough waters of the final days of the
winter transfer market. Where some
buying clubs are so desperate for
quick fixes, they will overpay, espe-
cially since less talent is available.
And where others find themselves
in a goldfish bowl of public scru-
tinythey make rash decisions.
It takes nerves of steel to con-
clude transfers in that kind of envi-
ronment. And, as may well be the
case with Konoplyanka and the
Guarn-Vuini trade, sometimes the
right thing to do is simply to pull
the plug and walk away.
BY GABRIELE MARCOTTI
Liverpool came away empty-handed after almost landing Dnipropetrovsks Yevgen Konoplyanka, left, seen here playing for Ukraine against France on Nov. 15.
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It takes nerves of steel to
conclude transfers in that
kind of environment.
Vettels F1 Domination
A Switch-Off for Fans
Formula Ones global television
audience fell by 50 million to 450
million viewers in 2013 due to a
non-competitive end to the drivers
championship and a switch from
the national broadcasters in China
and France, according to its annual
global media report.
Last year, Red Bulls Sebastian
Vettel won his fourth consecutive
F1 title and wrapped up the cham-
pionship three races before the end
of the season. And even in his
home country of Germany, the au-
dience fell 8.7%. (The number of
people there who watched at least
15 non-consecutive minutes of the
sport dropped to 31.3 million.)
Brazil, which is F1s biggest sin-
gle viewing market, also suffered
as the audience dropped from 85.6
million to 77.2 million.
In the report, F1 Chief Executive
Bernie Ecclestone puts the drops
down to the less-than-competitive
nature of the final few rounds but
it wasnt the only hurdle.
The report also shows that
China lost 29.8 million viewers
more than any other countrydue
to a change from state broadcaster
CCTV to a network of 13 regional
partners. The report said this was
done to ensure that Formula 1
coverage of every race and qualify-
ing session is shown live and the
change is expected to reverse the
downward viewing trend in future.
This is less likely to happen in
France where coverage switched
last year from national broadcaster
TF1 to subscription service Canal+. It
led to viewing figures falling by 16
million to 10.2 million and it is part
of F1s strategy to increasingly move
away from free-to-air television.
Pay-TV stations are often pre-
pared to pay more for sports rights
than their free-to-air rivals as they
drive subscriber numbers. In 2012
F1 began a new deal which splits
U.K. coverage between subscription
service Sky Sports and the free-to-
air BBC. Although the audience fell
in the first year, it got a 1.7% boost
in 2013 with 29.1 million viewers.
A similar trend was seen in Italy
where viewing figures rose by 2.9%
following its switch to a mix of
subscription and free-to-air broad-
casting in 2013.
Gains were also made in the
U.S. following the return of its
home Grand Prix in 2012 after a
five-year hiatus. Coverage in the
U.S. switched from Fox and the
Speed Channel to NBC Sports in
2013 fueling a rise of 1.7 million
viewers to 11.4 million.
Christian Sylt
HEARD ON
THE PITCH
Getty Images
Sebastian Vettel tests his new
Red Bull car in Jerez on Jan. 28.
4 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
market lost interest: Persistent
deficits even came to be seen as a
badge of honor, proof that the
Thatcher governments supply-
side reforms had made the U.K. a
magnet for foreign funding.
In the boom years before the
global financial crisis, the current-
account deficit remained wide,
exceeding 3% of GDP in 2006.
With hindsight, this should have
rung alarm bells that the economy
had become seriously unbalanced:
Foreign money was being sucked
into the U.K. to fund
unsustainable public- and private-
sector consumption rather than
productive investment.
After the crash, it was widely
assumed the U.K. economy would
be forced to rebalance: Any
recovery would have to be led by
exports and business investment.
Indeed, the governments 2010
budget forecast a current-account
surplus of 0.9% in 2013, driven by
a surge in exports.
So what should one make of
the latest deterioration in the
U.K.s balance of payments? The
obvious conclusion is that the U.K.
has failed to rebalance.
Other data appear to confirm
that this is the case. Although the
U.K. grew by 0.7% in the fourth
quarter of 2013, making it one of
the fastest growing major
economies, this growth has so far
been largely driven by consumer
spending, fueled by soaring house
prices and funded by a sharp fall
in the savings rate.
Although surveys show that
business confidence is high,
investment spending actually fell
5% in the year to the end of
September 2013 and the U.K.s
export performance has been
woeful, despite a 20% sterling
devaluation early in the crisis. In
contrast, other European
economies such as Germany, Spain
and Portugal have seen strong
export growth. Indeed, the
economy may be even more
unbalanced than feared, judging
by the most recent data.
Back in August, the Bank of
Englands Monetary Policy
Committee said it wouldnt raise
interest rates until unemployment
fell below 7%, something it said it
didnt expect to happen until at
least early 2016. It made this
forecast on the assumption that
growth would be driven by
improving productivity. In fact,
the unemployment rate fell to 7.1%
in December and the 7% threshold
may have been reached in
January, more than two years
earlier than the MPC thought.
That suggests that U.K.
productivity growth has actually
weakened, which may also help
explain why real wage growth has
been so dire; official statistics last
week showed the U.K. has endured
the longest and largest fall in 60
years. Without productivity
growth, the recovery risks
running out of steam as either
debt burdens get too high or the
BOE is forced to raise interest
rates to head off inflationary
pressures as the economy starts
to run out of spare capacity.
Sure, this pessimistic scenario
is neither the BOEs nor the
markets base case. Most
forecasters are still betting that
business investment will pick up,
leading to improved productivity
growth so that wages can start
rising and a more balanced
recovery take hold.
BOE Gov. Mark Carney argued
last month that the combination
of a bigger-than-expected drop in
unemployment and the fall in
inflation back to its 2% target
suggests that the nonaccelerating
inflation rate of unemployment
must be lower than the BOE
assumed last August, suggesting
current growth is sustainable and
justifying continued low interest
rates.
Similarly Ben Broadbent, a
member of the MPC, noted in a
recent speech that business
investment always tends to lag
consumer spending in U.K.
recoveries. Some economists also
question whether official data are
accurately measuring GDP and the
current account.
Even so, the U.K.s large
current-account deficit cant be
easily ignored. Economic
research shows that large deficits
tend to adjust eventually, through
some combination of slower
growth and currency
depreciation, notes Mr. Wells.
Adjustments tend to be more
disruptive if the deficit was
fuelled by consumption rather
than investment and if they are
accompanied by large fiscal
deficits.
Unfortunately the U.K. ticks
both those boxes.
That doesnt mean the U.K. is
heading for an immediate
correction. For now, the market
appears willing to give the U.K.
the benefit of the doubt,
reflecting its safe-haven status
and the reassuring presence of a
government committed to tackling
at least one of the deficits. But
amid the excitement of an
unexpectedly strong recovery, the
current-account deficit is a
warning that the U.K.s economic
model may yet require further
adjustment.
What do Ukraine, Turkey,
South Africa, Colombia and the
U.K. have in common?
The answer is they had the five
largest current-account deficits in
the world in 2013, according to
HSBC forecasts. The first three of
those countries, it
will be noted, are
in the eye of the
current emerging-
market storm.
This has centered
on economies with
double deficits
current-account and fiscal.
Their position is similar to that
of precrisis Southern Europe,
which was forced to make painful
adjustments to what are now
perceived to be unsustainable
economic models under threat of
a loss of foreign funding. South
Africa and Turkey were both
forced to raise rates last week.
Yet there is one country that
has escaped market punishment
despite running double deficits. In
the third quarter, the U.K.
recorded a current-account deficit
of 5.1% of gross domestic product,
close to a peacetime record, notes
Simon Wells, chief U.K. economist
of HSBC. For 2013 as a whole, Mr.
Wells forecasts a U.K. current-
account deficit of 3.7% and a
budget deficit of 4.7% of GDP.
The U.K. is one of only eight
countries to see its current-
account deficit widen since 2008
and its deficit has widened the
most. Put bluntly, says Mr.
Wells, the U.K.s current-account
deficit is now considerably wider
than it was in the mid-2000s
when global imbalances were the
top concern of many economists.
Should investors be worried?
Of course, the U.K. has lived with
wide current-account deficits for
decades. From the 1940s to 1970s,
when the country was operating a
fixed exchange-rate system, the
U.K. was forced into frequent
devaluations and slamming on the
policy brakes to keep the balance
of payments in check, notes Mr.
Wells.
From the 1980s onwards, with
the exchange rate floating and
capital controls abolished, the
EUROPE FILE | By Simon Nixon
EUROPE NEWS
Hungarian Opposition Protests Russia Nuclear Plan
BUDAPESTHungarys left-lean-
ing opposition rallied Sunday
against the governments surprise
decision to have Russia expand a
Hungarian nuclear power plant, the
first shots fired in its campaign to
keep Prime Minister Viktor Orban
from winning another term in April.
The nuclear deal signed in Janu-
ary by Russias President Vladimir
Putin and Mr. Orban is set to add
two 1,000 megawatt reactors to the
countrys existing 2,000 MW state-
owned nuclear power plant MVM
Paksi Atomeromu, with Russia pro-
viding a loan for Hungary to cover
the construction costs.
French, Korean and Japanese
companies had been interested in
the project before Hungary awarded
the deal to Russias Rosatom.
Running counter the wider trend
in Central Europe where most coun-
tries seek greater energy indepen-
dence from Russia, Hungary said af-
ter signing the deal that it is
enjoying an improving business re-
lationship with its former commu-
nist-era overlord.
The deal, which parliamentary
committees are set to discuss on
Monday, has faced criticism from
nongovernmental organizations, op-
position groupings and environmen-
talists, who said the cabinet had
failed to consult them before ac-
cepting the Russian offer.
Im not against the Rus-
siansand I have no hard feelings
against nuclear power, Ferenc
Gyurcsany, a former Socialist prime
minister, said Sunday
But he said he wants a conversa-
tion about an agreement that he
said would affect Hungary for the
next half a century.
When in power, Mr. Gyurcsany
favored cooperation with Russia and
signed up for the country to be part
of the South Stream gas pipeline
project through the Black Sea that
bypasses Russias traditional transit
countries, mostly Ukraine.
Prime Minister Orban, despite
repeatedly criticizing his socialist
predecessors, has said the EU
should consider mending fences
with Russia.
We must rebuild our relation-
ship with Russia on a pragmatic ba-
sis to gain access to commodities
and energy resources and to incor-
porate them fully into the European
economy, Mr. Orban said on Friday.
Slightly more than half of Hun-
garys population considers it neces-
sary to expand the nuclear plant, ac-
cording to a poll by Nezopont
Intezet published Saturday.
Speakers at the oppositions pro-
test on Sunday said they werent
against the expansion, but opposed
the way the government prepared
and signed the deal.
Polls still favor Mr. Orbans rul-
ing Fidesz party, which last month
was shown being supported by 29%
of voters, against 21%, garnered by
the left-leaning opposition parties.
BY VERONIKA GULYAS
A protester with a modified nuclear sign makes her views known on Saturday.
G
e
t
t
y
I
m
a
g
e
s
How many U.S. dollars one
pound buys
Current-account balance forecasts
as a percentage of GDP
U.K. current-account balance
as a percentage of GDP
The Wall Street Journal
$2.2
1.2
1.4
1.6
1.8
2.0
13 12 11 10 09 08 07
Paying for the Decit
While the U.K. has run current-account decits for decades ...it likely had one of the largest in the world in 2013, a potentially troubling trend
for sterling, as large decits over time can in theory depress a currency.
Sources: U.K. Ofce for National Statistics (U.K. current-account balance); International Monetary Fund (forecasts for current-account balance); WSJ Market Data Group (pound in dollars)
4
6
4
2
0
2
%
1950 60 70 80 90 2000 10
0
10
8
6
4
2
%
13 14 15
Colombia
South
Africa
Turkey
Ukraine
U.K.
U.S.
Recovery? U.K. Still Lacks Balance
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 25
BOOKS
Bobbing Boffins
At sea, four people are squashed
into a 6-foot-square cabin with a 5-
foot ceiling. They are surrounded by
plants, shells, dead birds, animals,
fish and insects waiting to be cata-
loged, sketched or painted, and
hopefully preserved. The smell is
sometimes overpowering. A botanist
and an artist share the cabin with
two naval officers. None can move
about or stand up straight. On deck,
there are more plants in pots, and
sometimes animals in cages, all get-
ting in the way of the crew who are
sailing the ship, usually in uncharted
waters, thousands of miles from
home on the other side of the globe.
The voyage lasts several years,
and for most of it the two groups
seamen versus naturalistsare ir-
reconcilable; plants disappear over-
board, animals die mysteriously,
glass containers are accidentally
smashed, and even mutiny is in the
air. Character faults on either side
are magnified, egos are bruised, and
its sheer luck if the ship and its pas-
sengers get home safely.
This is the composite picture
that emerges from historian Glyn
Williamss latest dive into the Pacific
Ocean. With Naturalists at Sea,
this chronicler of European voyages
of exploration has turned his tele-
scope to the scientific travelers, or
experimental gentlemen, as they
were known in Georgian England,
who accompanied the great 18th-
and 19th-century voyages that
mapped the Pacific. The men of sci-
ence came from across Europe: Eng-
land, Wales, Scotland, Sweden, Den-
mark, Prussia, the German statelets,
France, Italy, Spain and Russia.
The story begins in 1651 with the
birth of Englishman William Damp-
ier. He was an adventurer, a bucca-
neer, maritime gypsy, explorer and
successful author. He served, mostly
on pirate ships, around the world,
from the Caribbean to the waters
around Timor and Australias barren
west coast.
Dampier was an acute observer.
His New Voyage Round the World
(1697) was an account of the peoples
Dampier met, the landscapes he saw,
the vegetation, animals, fish and
birds at each landfall. For modern
readers his most striking observa-
tion may be his discovery of mari-
juana in 1688 on the Indonesian is-
land of Sumatra. His declaration
that he could describe the effect of
the narcotic but had never tried it
set a precedent for those who have
smoked but never inhaled. It is re-
ported of this plant, he wrote, that
if it is infused in any liquor it will
stupefy the brains of any person
that drinks thereof; but it operates
diversely, according to the constitu-
tion of the person. Some it keeps
sleepy, some merry, putting them
into a laughing fit, and others it
makes mad.
New Voyage was an important
eye into the unknown for explorers
and surveyors like James Cook and
Matthew Flinders, and botanists
such as Joseph Banks, Daniel Solan-
der and Johann Forster, who fol-
lowed him in the 18th century and,
in Flinderss case, the early 19th cen-
tury, when he circumnavigated Aus-
tralia. In 1770, Dampiers description
of Australias aborigines helped
Cook and Banks establish that they
had reached the unexplored east
coast of Australia after having found
and mapped New Zealand.
A second volume of New Voy-
age that listed tides, currents,
winds, storms and seasons was a pi-
oneering work that Mr. Williams de-
scribes as a classic of the pre-scien-
tific era. Well into the 20th century,
he says, it was being used by Brit-
ains Royal Navy in its standard Ad-
miralty Sailing Directions.
The first voyage involving pro-
fessional scientists was made by the
Russians, sponsored by their mod-
ernizing czar Peter the Great, who
was impressed with the activities of
Britains and Frances scientific soci-
eties. Shortly before Peter died in
1725 he appointed the Danish-born
Vitus Bering to lead an expedition to
determine the extent of the Asian
continent. Sailing north from the
Kamchatka Peninsula in Russias Far
East, Bering reached the strait divid-
ing Asia and America that now bears
his name. But he did not sight the
Alaskan coast. A second voyage in
1740 set sail to observe whatever
lands and peoples they came across
and to investigate the prospects for
trade. It reached America but ended
in disaster, shipwreck and the death
of Bering.
The British, French and Spanish
expeditions that came afterward fol-
lowed the same pattern. They were
voyages of scientific observation
and documentation as well as geo-
graphic discovery. And until the
round-the-world voyage of Darwins
Beagle in the 1830s, the dominant
theme of each journey seems to
have been the conflict of interest be-
tween the scientists on board and
the ships captain and crew. This
was clearly the case in the French
voyages at the time of the Revolu-
tion and into the Napoleonic era. Of-
ficers were generally from the aris-
tocracy. The scientists and
naturalists were largely republicans,
and the crews came from Brest, a
radical Jacobin stronghold. It was a
mixture primed for chaos and dis-
trust, and accounts of these battles
are a humorous entertainment in an
otherwise scholarly book.
When Charles Darwin joined the
Beagle and its supportive captain,
Robert Fitzroy, in 1831, the descrip-
tive sciencesbased on collecting,
drawing and measuring species dur-
ing short bursts ashorewere being
challenged by a new generation of
naturalists led by Alexander von
Humboldt, the Prussian geographer.
He complained that the 18th-century
expeditions never went beyond the
coast and had done little to reveal
the history of the earth.
Unlike his predecessors who ar-
gued and failed to win more time
ashore, Darwin, an admirer of Hum-
boldt, made long journeys into the
South American interior. He was on
land for three-fifths of his five-year
voyage around the world.
For Darwin, the Beagle voyage
was the most important in his life.
For readers of this book it is the fi-
nal chapter in an extraordinary and
entertaining catalog of maritime and
scientific endeavor.
Mr. Fathers is co-author, with
Andrew Higgins, of Tiananmen:
The Rape of Peking.
Mind Your Manners
How to Be a Brit
By George Mikes (1984)
George Mikes, a Hungarian jour-
nalist, was sent to London in 1938 to
report for the Budapest newspaper
Reggel. Expecting to stay for a few
weeks, he never left. Though he be-
came a British citizen, Mikes took
great pleasure in reporting the pecu-
liarities of his adopted home, and
How to Be a Brit brings together
three of his books on this subject.
Mikes is a master of the laconic yet
slippery put-down: The trouble with
tea is that originally it was quite a
good drink; An Englishman, even if
he is alone, forms an orderly queue
of one. Occasionally he is more acer-
bic: The English have no soul; they
have the understatement instead.
His most cherished pronouncement
is probably: Continental people have
sex life; the English have hot-water
bottles. Reflecting on this observa-
tion in the 1970s, he noted that the
English had lately made some prog-
ress and now possessed electric blan-
kets. I prefer his parodic take on the
sadly bygone British aversion to the
breathless superlatives of advertis-
ing: Try your luck on Bumpex fruit
juice. Most people detest it. You may
be an exception.
The Pursuit of Love
By Nancy Mitford (1945)
Is it acceptable for a picture of
your home to adorn your writing pa-
per? This is just the sort of question
that Emily Post-ish arbiters of eti-
quette like to contemplate. Nancy
Mitford provides no explicit answer
in this mercilessly funny novel, but
Uncle Matthew, an eccentric peer
based on her own father, has to be
shielded from discovering that the
playful, cultivated Lord Merlin prac-
tices this vice. In the world of Mit-
fords novels (of which The Pursuit
of Love is the best), no individuals
foibles escape ridicule, frivolity
trumps seriousness, sinners get the
better of saints, and the solution to
lifes imbroglios is always something
puerile. Her own manner is that of a
gifted child, likely at any moment to
puncture cozy domesticity with some
spiky insight. Her prose often has a
creamy fluency, but lurking within the
froth there is a sharp fin of cruelty.
Cecilia
By Fanny Burney (1782)
Fanny Burney is celebrated
mainly for her first novel, Evelina
and even that deserves to be better
known. She followed it in 1782 with
the far more ambitious Cecilia, an
attempt to depict the entire social
fabric of contemporary Britain. Bur-
ney skillfully evokes a greedy world
full of risk-takers and poseurs, rang-
ing from the frugal Mr. Briggs, whose
snuff-colored suit makes it hard to
see how dirty he is, to the cynical Mr.
Monckton, dismayed by the longevity
of his rich wife. At the heart of the
story is Cecilia Beverley, an heiress
who can keep her fortune only if her
husband agrees to take her surname.
Such details of nomenclature are par-
amount in a society obsessed with
the tangled relationship between
class, rank, money and identity. To-
ward the end of the novel a character
who is in effect Cecilias therapist ob-
serves: If to pride and prejudice you
owe your miseries, so wonderfully is
good and evil balanced, that to pride
and prejudice you will also owe their
termination. No prizes for guessing
which later author found inspiration
in Burneys long yet utterly absorb-
ing novel.
Cold Cream
By Ferdinand Mount (2008)
The first time I devoured Cold
Cream I could scarcely stop smiling,
and the same proved true on a sec-
ond reading. This apparently relaxed
yet finely crafted memoir narrates
the bumbling, genial progress of a
minor English aristocratfrom
vaguely bohemian beginnings,
through Eton and Oxford, to a career
in newspapers and a role as speech-
writer for Margaret Thatcher. Mount
mingles with the sort of people who
can say that anyone who takes a bus
after the age of thirty is a failure (a
remark often erroneously attributed
to Mrs. Thatcher) or that everyone
lives in Oakley Street once in their
lives (a reference to a tiny pocket of
Londons Chelsea where houses to-
day cost 5 million). Yet he is an out-
siderish sort of insider, expert in the
nuances of polite society and at the
same time amused by them. There
are passages in Cold Cream that
call to mind P.G. Wodehouse or Eve-
lyn Waugh, but Mount has his own
engaging and worldly-wise style.
Dont
By Oliver Bell Bunce (1883)
This curious volume, subtitled A
Manual of Mistakes and Impropri-
eties More or Less Prevalent in Con-
duct and Speech, is the one book on
my list that is directly concerned
with manners. I came across it while
researching a history of arguments
about English usage (The Language
Wars) and delighted in Bunces mix-
ture of tetchy pedantry and self-
awareness. Of the man himself I know
little: He was an American, a pub-
lisher and a journalist who also dab-
bled in writing playsone of them
performed specifically for the benefit
of the Shirt Sewers Union. Only
Dont, which appeared in 1883,
made much of an impression on the
world. Bunces character is
discernible on every page. Some of
the guidance is sensible, if perhaps
unnecessaryin a crowd, one
shouldnt carry a cane horizontally.
Some is vague: Dont be over-civil.
Some is hard to comply with: Dont
eat onions or garlic, unless you are
dining alone and intend to remain
alone some hours thereafter. And
some is just plain weird: Dont play
the concertina to excess. Bunces
mission to stamp out mistakes and
improprieties is, of course, a failure.
Telling people what not to do is a
surefire way of getting them to do it.
But Dont is one of those rare books
that charm the reader by accident.
Mr. Hitchings is an author, most
recently of Sorry! The English and
Their Manners (Farrar, Straus
and Giroux, 2013).
BY MICHAEL FATHERS
BY HENRY HITCHINGS
Naturalists at Sea
By Glyn Williams
Yale, 336 pages, 25
MR. HITCHINGSS latest book is Sorry! The English and Their Manners.
G
e
t
t
y
I
m
a
g
e
s
Experimental gentlemen
joined some of the great
18th- and 19th-century
voyages of exploration
to collect exotic flora
and fauna.
[ Five Best ]
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 5
Tale of Torture in Activist Disappearance
KIEV, UkraineUkrainian protest
leader Dmytro Bulatov said he didnt
see much of the faces of the men
who kidnapped and beat him and cut
off part of his ear last month, be-
cause they kept a bag over his head
for most of his week in captivity.
But the questions they asked, he
said, were clear: How much did the
U.S. pay him to lead protests against
the Ukrainian government? What in-
structions did he receive?
The tale of brutalities told by
Mr. Bulatov from a hospital bed in
Kiev are part of a wider narrative
threatening to turn Ukraines inter-
nal struggles into a geopolitical
struggle between Washington and
Moscow.
Opponents of President Viktor
Yanukovychs move toward closer
relations with Moscow allege a
broad pattern of violence and in-
timidation by thugs and uniformed
police. Often their captors want to
know who is paying them to pro-
testthe obvious suspects being
the U.S. and Europe, which the
Kremlin and authorities here ac-
cuse of bankrolling the unrest.
The U.S. embassy in Kiev says it
has met with politicians and activ-
ists of all ideological kinds to moni-
tor the continuing crisis. In that re-
gard, the ambassador and other
officials did meet Mr. Bulatov at the
embassy in January, and posted pic-
tures of the meeting on the embassy
website, it said.
But the embassy denies providing
any funding to protest groups such
as Mr. Bulatovs that have sprung up
during the crisis.
The Ukrainian government says
its opponents are concocting stories
of brutality to galvanize support at
home and draw sympathy from the
West. Mr. Bulatov, an activist leader
who disappeared for a week and then
reappeared with an agonizing tale of
his absence, is the latest, they say.
On the sidelines of a security
conference in Munich, Germany,
over the weekend, Ukraines foreign
minister said the story of Mr. Bula-
tov, who has been investigated for
faking his kidnapping, was not ab-
solutely true.
Physically this man is in a good
condition, the only thing he has is a
scratch on one of his cheeks, Ukrai-
nian Foreign Minister Leonid Ko-
zhara told Al Jazeera. So, lets wait
for the investigation that will reveal
specific facts.
In an interview from his Kiev
hospital bed with The Wall Street
Journal, Mr. Bulatov said he was hit
over the head by several men who
abducted him on Jan. 22 and then
took him to an undisclosed location.
He said he was then beaten and wa-
terboarded by men who, at one
point, nailed his hands to a door,
slashed him in the face and cut off
part of his right ear. His facial
wound required 12 stitches.
Throughout the ordeal, he said,
his interrogators wanted to know
more about the inner workings of his
AutoMaidan activist group, which has
operated as a sort of rapid-reaction
force for the Ukraine protest move-
ment, rushing activists to points of
confrontation and clogging traffic in
city thoroughfares. According to Mr.
Bulatov, it operated with the help of
volunteers and funds he raised
through appeals on the Internet.
But after his abduction, he said
he was interrogated by captors who
were convinced his group was a U.S.
project. They asked why I talked
with the American ambassador, they
considered me an American spy,
said Mr. Bulatov, who before his kid-
napping had met, along with other
opposition figures, with the U.S. am-
bassador in Kiev. They asked me
where the money was that the
American ambassador gave me, who
gives me orders. They asked if I was
a foreign agent.
Mr. Bulatovs tale bears similari-
ties of ordeals told by other opposi-
tion activists in Ukraine who say they
were abducted and beaten by men in
plain clothes who interrogated them
about their financial support.
The day that Mr. Bulatov was ab-
ducted, the battered body of an-
other Ukrainian opposition activist
was found in a field after he had
been abducted from a hospital by a
group of men in plain clothes. A
man who was taken with him from
the same hospital said the two of
them were tortured and interro-
gated in adjacent rooms by men
who asked about who was financing
their opposition activities.
They were both dropped in the
countryside in separate locations,
and one was able to limp to a
nearby house to contact his wife.
The other, beaten more severely,
froze to death.
On Sunday, the U.S. embassy said
a fellow opposition leader had ar-
ranged for Mr. Bulatov to be flown to
Riga, Latvia, for medical treatment.
The abduction of activists from hos-
pitals has made life precarious for
Mr. Bulatov in Kiev.
Authorities have made threats to
arrest him for inciting disorder. A
group of activists had kept a round-
the-clock vigil at his hospital room
in Kiev, not allowing a group of po-
lice, also at the hospital, to come
near him. Police issued a statement
saying they were being prevented
from properly investigating Mr. Bu-
latovs disappearance.
The U.S. embassy in Kiev, alarmed
at Mr. Bulatovs disappearance,
posted pictures and a statement of
its concern last week. The following
day he was released. Mr. Bulatovs
captors put a bag over his head again
and drove him for an hour in a car to
the Ukraine countryside near a vil-
lage where they untied his hands and
left him by the road.
Mr. Bulatov said he had difficulty
seeing because his eyes were so
swollen from being beaten. At sev-
eral houses in the village, residents
shut their curtains to him. They
were scared of me because I looked
so bad, he said.
BY ALAN CULLISON
Ukrainian protest leader Dmytro Bulatov, here in a Kiev hospital room Saturday,
says kidnappers interrogated him over U.S. involvement in financing protests.
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EUROPE NEWS
EU, U.S. Plan Kiev Aid Package
came after U.S. Secretary of State
John Kerry met with Ukrainian op-
position leaders Saturday, as Rus-
sia and the West traded barbs over
the continuing crisis in Kiev.
The meeting took place on the
sidelines of an annual Munich Se-
curity Conference, dominated Sat-
urday by the Ukraine crisis. It was
among the highest-profile sit-
downs for the opposition leaders
since large-scale antigovernment
protests started in November after
Ukrainian President Viktor Yanuk-
ovych walked away from a sweep-
ing EU economic and political deal.
Mr. Kerry also met with acting
Ukraine Foreign Minister Leonid
Kozhara, expressing grave con-
cerns about human-rights viola-
tions by authorities.
Buoyed by weeks of protests
and Mr. Yanukovychs decision to
sack his government last week, the
opposition is pressing for early
presidential elections.
In an interview with The Wall
Street Journal, Baroness Ashton
distanced herself from that call, al-
though she said it was up to
Ukraines politicians to choose
election timings.
It seems to me that what ev-
erybody wants is a period of stabil-
itymoving toward elections that
will be done freely and fairly. In
that period of stability, the econ-
omy needs to be OK, and that
means everybody needs to think
aboutwhat kind of economic sup-
port we can give, she said on the
sidelines of the Munich Security
Conference.
She said there would be differ-
ent stages of possible support, the
first of which would deal with
short-term needs.
Continued from first page The EU and U.S. are developing
a plana Ukrainian Plan, I have
suggested they call itthat looks
at what do we need to do in differ-
ent parts of the economy right now
to make things better.
Baroness Ashton said the
amount of what should be a
homegrown assistance package
hasnt yet been decided. But, she
added, the figures wont be small
because there are deficits in the
budgets and other issues that
need to be addressed.
She said that it was for
Ukraines new government to iden-
tify in detail exactly what it needed
help with but that the eventual
package might not only be money.
It may be guarantees. It may
be the prospect of investment. It
may just simply be stability for the
currency and so on, she said.
U.S. diplomats have told the op-
position also that the U.S. and EU
are preparing a package of eco-
nomic support to help rescue
Ukraine from its economic woes,
but it hinges on a peaceful resolu-
tion of the crisis through the cre-
ation of a technical government.
The message to the opposi-
tionis that through dialogue,
youre starting to get the pieces
put in place for a peaceful political
solution that gives you the chance
to take Ukraine back to the IMF
and Europe, a senior U.S. official
said. Stick with it, and we will
keep pressuring the government.
Baroness Ashton, the EUs top
diplomat, has taken on a growing
role in Ukraine crisis since Novem-
ber, when Mr. Yanukovych walked
away from a sweeping EU trade
and political deal that was years in
the making.
The next month the Ukrainian
president sealed a $15 billion-loan
deal with the Kremlin.
Baroness Ashton made a two-
day visit to Kiev for long discus-
sions with Mr. Yanukovych in De-
cember and was in Ukraine again
earlier last week, pushing for dia-
logue and urging authorities to re-
frain from the use of force. She
met key opposition leaders again in
Munich this weekend.
The foreign-policy chief said
constitutional reform will be a crit-
ical element of the new govern-
ments tasksnot least to ensure
free-and-fair elections.
She said she saw no signs that
protesters, whom the government
has accused of being violent ex-
tremists, were about to stop pres-
suring the government. I see no
reason to think right now that peo-
ple are going to say tomorrow, OK,
well, we have done that. I think
they are going to stay, she said. I
think the reality of any form of vi-
olence and intimidation is that it
makes people more determined to
peacefully protest.
In the lead-up to a key Decem-
ber summit in Lithuania where
Ukraine was supposed to sign a
sweeping EU trade and political
deal, Kiev had pressed the EU to
give it billions of euros to help it
through its economic difficulties.
The rescue hinges on a
peaceful resolution of the
crisis through the
creation of a technical
government.
24 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
BOOKS
Elf-Help Tome
The fantasy-themed vistas of on-
line games such as World of Warcraft
are commonly thought of as provid-
ing nothing more than a kind of ther-
apeutic escapism: a species of elf-
help. But if you ask players about
what they actually do in role-playing
games, and why they do it, the pic-
ture is more complicated. People pre-
tend to be wizards on the Internet
for a sense of community. Indeed,
many welcome the fact that such
games are structured like boring
jobswith much grinding, repetitive
labor required to progressbecause
at least these virtual jobs are per-
fectly fair: Unlike at the office, effort
and achievement guarantee advance-
ment. Reports one satisfied cus-
tomer: I hate the level of frustrated
progress in the real world so I play
the game and level up instead.
These are some of the fascinating
findings reported by Nick Yees The
Proteus Paradox: How Online Games
and Virtual Worlds Change UsAnd
HowThey Dont. Mr. Yee, who works
as a research scientist for the video-
game company Ubisoft, has con-
ducted large-scale surveys of players
opinions and also analyzed, big
data-style, their recorded virtual ac-
tivity. (Game worlds, he notes wryly,
provide the perfect digital panopticon
of which government surveillance
programs can only dream.) The
author has even conducted laboratory
simulations with virtual reality, whose
surprising results supply the books
title, in honor of the shape-changing
sea-god of Greek myth. If you create a
virtual world and give certain people
attractive avatars, he discovered, they
will act more confidently. They will
also like another avatar more if their
own face has been imperceptibly
blended with the others. Similar
kinds of face-morphing and doppel-
gnger techniques, Mr. Yee warns,
could in the future be used by adver-
tisers to turn a virtual environment
into what he calls, with chilling po-
etry, a persuasion chamber.
Some cybertheorists have cele-
brated online role-playing games as
a realm in which prejudice and dem-
ocratic dysfunction can be overcome
by happy experimentation with gen-
der fluidity or social structures. Mr.
Yee shows, however, that racism and
sexism are as much a problem in on-
line games as elsewhere. Indeed,
players find themselves just as emo-
tionally burdened and stressed by
the demands of managing the inter-
personal spats and rivalries of an
online guild as they would be by
managing a group at workbut
without the financial compensation.
The happier consequence of the
fact that people bring themselves,
warts and all, into the virtual world
is that love can blossom there and
lead to successful offline relation-
ships. Our characters met in North
Freeport in Everquest. His dark elf
cleric was on top of the roofs, one
young woman remembers fondly. If
a game is like a boring job, Mr. Yee
observes, then the people who meet
in one have worked together through
adversity, often over months or
years, before getting together in per-
son. In this way their relationship is
more like an office romance than a
dubiously scientific online match.
Refreshingly, while many writers
in the field are determined to be re-
lentlessly positive, Mr. Yee is critical
of the way games fail to improve on
reality. With their tens of millions of
players, they are the grandest social
experiments that have ever existed,
but their promises, he concludes, are
being subverted by, among other
things, risk-averse design companies
content to replicate what has been
commercially successful. Such loving
disappointment makes him a truer
supporter of the medium than its
Panglossian cheerleaders.
The book ends on a melancholy
note, arguing that since the boom
days of World of Warcraft and Sec-
ond Life, there has been a strange,
stagnant lull in terms of virtual
worlds. Oddly, not mentioned is the
mightily popular Minecraft, which
can be experienced as a more or less
traditional role-playing adventure
game ora fact that has already at-
tracted the participation of educa-
tors and even U.N. agenciesused as
a space for extraordinary efforts in
collaborative architecture. People
might be getting bored of being a
Tolkienesque dwarf or space cap-
tain, but that doesnt mean there are
no new roles for them to play.
Mr. Poole is the author of Who
Touched Base in My Thought
Shower?
Learning to Cook as the Romans Do
Jeannie Marshalls memoir about
cooking food and raising a son in It-
aly seems like the sort of work sure
to recount another set piece of al
fresco tables and graceful aperitifs,
while the bambini eat olives and
grapes and someones grandmother
teaches the author how to make
pastabut it doesnt, or at least
thats not the whole story. The Lost
Art of Feeding Kids may have a title
designed to squeeze the last drop of
juice from the Fast Food Nation
orange, but Ms. Marshall has pro-
duced a surprise of a book.
Predictably, we meet Ms. Mar-
shall and her son, Nico, at an out-
door food market, where, predict-
ably, hes eating sections of blood
orange given to him by a vendor
while she imagines kale for lunch,
prepared the way Carlo, the farmer
who grows many of the vegetables
we eat, told me to do it one of the
first times I bought somecooked in
water until tender, then sauted for
a few minutes in a pan with some ol-
ive oil, sliced garlic, and a little salt,
and finished off with a squeeze of
lemon. (Carlo isnt winning any
points for originality.) But the au-
thor pulls the rug out from under us
when she reveals that, even in Italy,
real food is no longer most chil-
drens everyday fare.
In a mothers group in Italy, Ms.
Marshall sees the contrast between
the English-speaking mothers and
the Italians. When Roccos mother
took the lid off the container of his
lunch, the room filled with a heady
smell of savory vegetable and herb
soup. He was excited to see it and
ate it with gusto.
The American and English ba-
bies, all of whom were being intro-
duced to single foods because of our
anxiety about food allergies,
frowned and fussed while their
moms tried to push bits of pear into
their mouths. One mother told me
she thought our method was
strange, that it was as though we
were teaching our babies not to like
food. Italian babies eat a meal
called a pappa, which consists of
brodo (a vegetable broth) with bits
of whatever is for dinner whirred
into it. Its drizzled with olive oil
and finished with parmesan cheese.
It sounds phenomenal, especially
when compared with jars of mauve
and puce pure.
When Nico starts school, the idyll
ends. Ms. Marshall realized that he
and his Italian peers were being
waved off the traditional path of
healthy food and directed toward a
new food culture, one far too similar
to the one [she] thought [shed] left
behind in North America.
Ms. Marshall finds a dishearten-
ing innocence at work in Europe,
which calls to her mind the wanton
soda-slurping of her own youth in
the 1970s. I saw a woman at the
beach pouring Coca-Cola into her
babys bottlethe baby wasnt even
walking yet. The birthday parties
they attend in Italy are soft-drink-
and-potato-chip affairs. In a delight-
ful moment of turnaround irony:
The only time we dont see these
things is at birthday parties for
American children. In fact, at one
late-spring birthday party, the
American parents who were hosting
it had laid out a bowl of fresh fava
beans in their pods with some
Pecorino Romano, fresh fruit, their
own homemade bread, cheese, ol-
ives, water, and juice.
Anyone sitting down to write a
book about food and health must
consider how to limit the topic. Will
the book deal with obesity and star-
vation? How to roast pork? Indus-
trial farming? Diabetes? Ms. Mar-
shall tries to do it all, moving from
personal narrative out into the
broader world. Her theme is that by
removing children everywhere from
access to their traditional food-
waysthe pappa of the worldwe
are making a mistake. We are not
teaching them how to eat.
When Inuit children in Canada
were assimilated into residential
schools, she notes, they were given
civilized and European food to eat,
mostly refined food and some meat,
very little of it fresh. Distanced
from their traditions, the children
forgot them. Before 1940, the Inuit
in Canadas far northern territories
didnt suffer from diabetes. Now its
a disease borne by 70 percent of the
community.
As the author grapples with this
big message, her book sometimes
loses momentum. She stops to talk
about Alice Waters: If theres anyone
left in the English-speaking world
who doesnt know that Alice Waters
wants children to eat whole foods,
its a cinch they arent reading this.
But Ms. Marshall has done enough
legwork that she discovers fresher
pastures. In 2009, Ms. Marshall at-
tended the World Summit on Food
Security in Rome, where talk con-
cerned how the world will feed ev-
eryone as the population climbs to-
ward nine billion. One delegate
pointed out that the estimates of how
much food needed to be produced as-
sumed that everyone would be eating
processed and fast foods. Theyre
eating like Americans, in other
wordsbut clich Americans, not the
actual ones Ms. Marshall knows serv-
ing homemade bread and fava beans.
Perhaps baking bread doesnt co-
incide with the harried reality of
cooking for a family. Although com-
mercials will tell you that the conve-
nience of ripping open a box of mac
and cheese for the young one is be-
yond compare, the process takes
about the same number of steps as
boiling some kale, squeezing a
lemon and pan-frying a chop. But
will your children eat it? No, not if
theyve never been introduced to it.
They would if theyd been raised
eating pappa, if the flavors were fa-
miliar to them. How to make that
happen is a much more difficult
question than what to buy at the
farmers market.
Mr. Watmans next book is
Harvest: Field Notes From a Far-
Flung Pursuit of Real Food.
BY STEVEN POOLE
BY MAX WATMAN
The Proteus Paradox
By Nick Yee
Yale, 264 pages, 20
The Lost Art of Feeding Kids
By Jeannie Marshall
Beacon Press, 228 pages, $25.95
C
o
r
b
i
s
I
m
a
g
e
s
W.O.W. An attendee at 2011s Blizzcon game convention, dressed as a night elf druid.
C
o
r
b
i
s
I
m
a
g
e
s
For good or ill, the
personas players craft
in games can influence
how they think of
themselves offline as well.
Even Italian kids no longer
eat the old way. Only the
fussy expats serve healthy
food at birthday parties.
6 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
U.S. NEWS
Delayed Oil
Pipeline Clears
Major Hurdle
WASHINGTONAn Obama ad-
ministration analysis of the Key-
stone XL pipeline said it probably
wouldnt alter the amount of oil ul-
timately removed from Canadian oil
sands, boosting the pipelines back-
ers by suggesting it would have lit-
tle impact on climate change.
The release of the long-awaited
report is one of the last steps before
the up-or-down decision by President
Barack Obama, who must juggle con-
flicting demands from supporters
heading into midterm elections.
The Keystone XL pipeline, which
would carry oil from Canadian oil
sands into the U.S. Midwest on the
way to Gulf coast refineries, has be-
come a potent symbol both for envi-
ronmentalists who say it would ac-
celerate global warming and for
unions and business leaders who see
it as a way to stoke North Americas
development as an energy-produc-
ing superpower.
The environmental analysis re-
leased Friday by the State Depart-
ment, which is responsible for as-
sessing the project, weighed in at 11
volumes. It said that approval or
denial of any one crude-oil trans-
port project, including the proposed
project, is unlikely to significantly
impact the rate of extraction in the
oil sands.
The finding that the oil would be
extracted and delivered anyway
possibly by rail if not pipelineleft
environmentalists disappointed.
I will not be satisfied with any
analysis that does not accurately
document what is really happening
on the ground when it comes to the
extraction, transport, refining and
waste disposal of dirty, filthy, tar-
sands oil, said Sen. Barbara Boxer
(D., Calif.), chairman of the Senate
environment and public works com-
mittee and a White House ally.
The report isnt the last word on
the matter. Now begins a final State
Department study to determine
whether the pipeline project is in
the nations broader interests. Eight
separate agencies have up to three
months to weigh in.
The report makes no recommen-
dations on TransCanada Corp.s per-
mit request, leaving Secretary of
State John Kerry and Mr. Obama the
space to draw their own conclusions
about whether the pipeline should
get built.
They are free to reject the pipe-
line based on this more sweeping
analysis, in which the environmental
report is but one data point. In the
next review, they will take into ac-
count a consideration that may af-
fect the presidents legacy: He has
sought to take a leading global role
in the effort to combat climate
change.
Under the executive order gov-
erning the permit review, Mr. Kerry
is empowered to make the final call.
But presidential aides have said
Mr. Obama has told them he will
make the final decision on Keystone.
Addressing Keystone at his regu-
lar press briefing, White House
spokesman Jay Carney said the re-
port didnt represent a decision but
rather another step in the process.
Mr. Obama could wait until after
the November elections, but he is
under pressure from the Canadian
government and a handful of pro-
Keystone Democratic senators not
to delay further. A few Democratic
senators who are up for re-election
this year have warned that they will
push legislation forcing a decision if
the review stretches much longer.
In a statement Friday, pro-Key-
stone Sen. Mary Landrieu (D., La.),
said, This new study underscores
what has been said all along about
the Keystone XL pipeline: Its time
to build. This single project will in-
ject billions of dollars into Louisiana
and national economies, and reduce
our dependence on oil from hostile
countries.
Republicans have also grown im-
patient with the lengthy Keystone
review process. Citing Mr. Obamas
pledge to use his executive author-
ityhis pento boost the econ-
omy, GOP lawmakers have urged
him to approve the pipeline now.
Mr. President, no more stalling,
no more excuses. Please pick up that
pen youve been talking so much
about and make this happen. Ameri-
cans need these jobs, Senate Re-
publican leader Mitch McConnell of
Kentucky said Friday.
Mr. Carney at the White House
said that there is a process that is
in place, and that must be honored.
Keystone has had a tangled his-
tory. TransCanada, which operates
oil and natural-gas pipelines, first ap-
plied for a permit in 2008. In Janu-
ary 2012, the Obama administration
rejected the application. At the time,
Mr. Obama said a deadline that had
been imposed by Congress didnt al-
low enough time to determine the
projects environmental impact.
TransCanada reapplied in May
2012, after proposing to reroute the
line to avoid an environmentally
sensitive part of Nebraska, setting
in motion the environmental report
that was just released.
Mr. Obama isnt the only leader
with his legacy at stake. Canadian
Prime Minister Stephen Harper, who
is struggling in opinion polls, has
aligned himself closely with Key-
stone. Mr. Harpers natural-re-
sources minister, Joe Oliver, said the
report made him more confident
the project will be approved.
Were very pleased with the re-
lease and being able to move to this
next stage of the process. Its been
long in getting here, said Russ
Girling, TransCanadas chief execu-
tive.
The pipeline has exposed divi-
sions within the Democratic Party
that could reverberate in the U.S.
midterm elections in November.
Labor unions see the project as
an engine for job creation. Environ-
mentalists view it as a symbol of
U.S. dependence on fossil fuels and
worry that extraction of the oil from
Canadian oil sands will release large
amounts of carbon dioxide, exacer-
bating global warming. Both groups
are pillars of the Democratic politi-
cal coalition, which is aiming for a
large turnout in November.
Dan Weiss of the liberal think
tank Center for American Progress
said the report released Friday ig-
nores evidence that Keystone would
spark greater production at Canadian
oil sands.
Its like giving up on the inter-
diction of cocaine traffic into our
country, because drugs are going to
get in anyway, Mr. Weiss said.
Chester Dawson
and Alistair MacDonald
contributed to this article.
By Peter Nicholas,
Carol E. Lee
and Alicia Mundy
CEO Russ Girling of TransCanada, which plans a pipeline to carry Canadian oil into the U.S. Midwest on the way to Gulf
B
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o
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N
e
w
s
Oil Has Been Flowing Even Without the Key Link
Improved prospects for the Key-
stone XL pipeline cheered many
parts of the North American energy
industry, but the project is no longer
as crucial to U.S. or Canadian compa-
nies as it seemed just two years ago.
TransCanada Corp.s 830,000-
barrel-a-day project has been in po-
litical limbo for years, but the de-
lays havent stopped the flow of oil.
Many in the energy industry quit
banking on the 1,200-mile line ever
being built and made arrangements
to ship North Americas rising oil
output by alternate means, includ-
ing shipments by rail.
Even without Keystone XL, Cana-
dian crude exports to the U.S. rose
more than 5% in 2013, to an average
2.6 million barrels a day, according
to the latest federal data.
If built, Keystone XL would be a
potential boon to companies pumping
oil in Canada. But Albertas oil-sands
crude production will more than dou-
ble by 2025 to 4.5 million barrels a
day, according to the Canadian Asso-
ciation of Petroleum Producers, mak-
ing Keystone only a partial solution.
A pair of proposed new and ex-
panded pipelines to Canadas Pacific
coast are being eyed as a way to tap
growing Asian demand for oil.
Railcars are increasingly carry-
ing crude out of remote inland oil
fields. Companies shipped 280 mil-
lion barrels of oil by rail during the
first nine months of 2013, nearly
double the volume in 2012 and al-
most six times the traffic in 2011,
according to the Association of
American Railroads.
Exxon Mobil Corp., a major pro-
ducer in Canadas oil sands, said
Thursday it is building a railway-
loading facility in Edmonton, Al-
berta, to enable efficient, cost-ef-
fective transportation of heavy
crude. The terminal is expected to
be complete by early next year.
ExxonMobil Canadian subsidiary
Imperial Oil Ltd. has secured nearly
400,000 barrels a day of additional
pipeline capacity out of Alberta on
proposed lines as well, including
Keystone XL. TransCanada has com-
mitments from some of the largest
operators in the oil sands, including
Canadian Natural Resources Ltd.,
Cenovus Energy Inc., Suncor En-
ergy Inc. and ConocoPhillips.
Weve seen folks asking for addi-
tional capacity, TransCanada Chief
Executive Russ Girling said.
Keystone XL still matters to re-
finers along the Gulf Coast, includ-
ing Valero Energy Corp. and Mara-
thon Petroleum Corp., which have
invested billions of dollars in recent
years to turn heavy crude like the
kind coming from Canada, which
yields a lot of diesel, into fuels for
export.
While railways have accommo-
dated much of the booming new
supply, this method of shipping has
its risks. Regulators are taking a
closer look at railcars after a string
of recent accidents, including a fiery
crash in Quebec last summer that
killed 47 people. Efforts to make
tanker cars safer could mean fewer
of them will be available in the near
term, according to Cowen & Co. ana-
lyst Sam Margolin.
Keystone is more important
now because rail is starting to meet
more regulatory attention, he said.
If built, Keystone XLs effects are
likely to be felt in Latin America. A
surge of heavy Canadian crude into
the U.S. could crowd out similar
types of oil that U.S. refiners import
from Venezuela and Mexico.
Ben Lefebvre
and Alison Sider
contributed to this article.
BY CHESTER DAWSON
AND DANIEL GILBERT
Edmonton
Houston
Cushing
Steele City
ALBERTA
MONT.
N. D.
S. D.
NEB.
KAN.
OKLA.
ILL.
MO.
TEXAS
SASK.
MANITOBA
Port Arthur
Hardisty
Patoka
C ANADA
ME X I CO
UNI T E D
STAT E S
250 miles
250 km
Decision Time
A U.S. study found the
Keystone XL project likely
wouldnt affect the amount
of oil extracted from
Canadian tar sands.
Source: TransCanada The Wall Street Journal
Extent of the Keystone
oil pipeline
Constructed Planned
Keystone XL pipeline
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 23
PERSONAL JOURNAL
The Lifestyles of the Rich and Stranded
Private Jets as Weather Workarounds; Just Dont Rent Them During Holidays or Big Sports Events
Like thousands of other travel-
ers, Debbie Grazioso found herself
stranded by bad weather, stuck in
a line of 70 people on Jan. 6 in
Florida and told by JetBlue Air-
ways that shed have to wait four
days for a seat to New York. That
meant missing a birth-
day party for her 25-
year-old twin daughters.
Sometimes emer-
gency situations require
emergency measures. Ms. Grazi-
oso and her husband, Glen Vittor,
paid $9,000 to hitch a ride with
another family on a seven-passen-
ger Cessna Citation Excel, landing
only hours after their scheduled
trip. It was well worth it. You can
never get a birthday back, she
said.
Time after time, storm after
storm, travelers have been left in
the lurch this winter. Long after
the weather clears, the impact on
airlines and their passengers per-
sists. So far this January, U.S. air-
lines have canceled more than
36,000 flightsmore than after
superstorm Sandy in 2012 and
three times as many as the last
two Januarys. Thats roughly three
million inconvenienced passen-
gers. With most flights booked
full, it can take three, four or even
five days to get rebooked.
Alternatives are limiteddriv-
ing or taking a train may take
days; other airlines are all booked
up. For those few willing to pay
the very high price, private jets
can provide a smart escape.
Terry Cooper, president of
Charter Matrix, an online direc-
tory and marketplace that lists
flights with empty seats and ar-
ranges charters, said that during
the holiday storms, his requests
doubled. Theres a lot of freedom
to corporate jets, but you pay for
that freedom, he said.
How much? A small jet with
four to six seats can cost $3,000
per hour, brokers say, putting a
2-hour flight from Florida to
New York at around $7,500. Air-
port fees and charges to reposi-
tion aircraft can raise that consid-
erably. Larger jets run $8,000 or
more per hour.
Magellan Jets, a Quincy, Mass.,
firm that handles regular custom-
ers who buy hours in bulk and
one-time on-demand charters,
says a midsize Hawker 400XP
with seating for up to eight costs
about $12,000 for a trip from
West Palm Beach, Fla., to Teter-
boro, N.J., for its members, and
$17,000 for a nonmember on a
one-time, one-way charter.
Private jets have lots of advan-
tages over airlines for getting in
the air before and after storms.
There are thousands of small air-
ports available to them. While big
airports often have more equip-
ment to keep runways open,
schedules can often get discom-
bobulated by a lack of gates, a
lack of security screeners, baggage
handlers or gate agents, or simply
the need to thin out airline sched-
ules engineered for perfect flying
conditions. That rarely impacts
secondary airports, allowing pri-
vate jets to fly when many com-
mercial flights are grounded.
And theres the bonus of not
having to stand in line for Trans-
portation Security Administration
clearance, either.
For three couples eager to get
home, sharing a plane and paying
$4,000 or $5,000 each may be
more attractive than being stuck
in a hotel away from family or
work for most of a week.
Ms. Grazioso was grounded
when JetBlue had a shortage of pi-
lots after longer rest periods were
required starting Jan. 1. She tried
to find a way to fly to Dallas and
then connect to New Jersey, or
drive to Jacksonville, Fla., and get
a flight home from there. No luck.
They looked into Amtrak
maybe flying to Washington, D.C.,
and catching a train from there.
But there were no airline seats to
Washington available. She had the
American Express platinum mem-
bers desk working on it, and her
own travel agent, who she says
usually works miracles. There
was nothing. We checked every
airline, she said.
So she began looking into pri-
vate jets. One charter company
quoted her a price of $22,000
too much, she decided. Her hus-
band called Magellan and an agent
said a clientthree people and
three dogswere flying from
West Palm Beach to White Plains,
N.Y., with some empty seats. The
client told Magellan they didnt
mind sharing and a match was
made.
We had mutual friends, it
turned out, Ms. Grazioso said. A
rented car was waiting plane-side
in White Plains and the drive
home to New Jersey took about
90 minutes.
Magellan said it flew about 30
to 40 extra flights on Jan. 5 and 6
with people stranded by the ice
storm, and had more people wait-
ing. It got to the point we were
linking clients up with each
other, said Anthony Tivnan, Ma-
gellans president. In situations
like that, the company charters to
one client for one price and lets
the passengers decide how to split
the cost.
The high season for private jets
runs from Thanksgiving through
the end of March. No week is as
busy as Super Bowl week. This
year thousands of small-jet flights
will descend on airports around
the New York region, booking spe-
cial takeoff and landing slots with
the Federal Aviation Administra-
tion because traffic is so heavy.
When the game ends, engines
start turning with a race to escape
quickly and avoid delays.
For the Super Bowl, Magellan
said a Denver-to-Teterboro flight
on a private aircraft starts at
about $25,000 round-trip and Se-
attle-to-Teterboro starts at around
$35,000 round-trip.
After slow years through the
recession, private-jet firms say
business is booming. The econ-
omy is better and airline service is
worse, said Bradley Stewart,
chief executive officer of XOJet, a
Brisbane, Calif.-based private avia-
tion firm.
Charter firms have gotten more
aggressive about posting empty
legs available to travelers at deep
discounts. Private jet charter firm
JetSuite, based in Irvine, Calif.,
lists its empty leg flights on Face-
book, for example, sometimes
with prices as low as $500 or
$1,000 for the whole airplane. A
four-seat Embraer Phenom 100
regularly costs $3,400 an hour for
members and $3,900 for nonmem-
bers, JetSuite said.
While empty-leg pricing can be
eye-catching, finding a trip where
and when you want to go can be
rare. You can set an alert on Char-
ter Matrix and get an email when
any flights that come close to a
particular route open up.
With any charter, two safety
measures are prudent: Make sure
your operator has strong safety
ratings from both Wyvern and Ar-
gus International Inc., two private
aviation safety agencies. Argus in-
cludes background checks on pi-
lots as well as rating operating
companies; Wyvern runs checks
on aircraft as well as crew train-
ing and experience.
With the New Years storm,
JetSuite flew customers out of the
Caribbean into Texas and Florida,
then on to New York once condi-
tions improved, Chief Executive
Alex Wilcox said.
XOJet positioned planes just
outside the areas expected to be
hard-hit by polar vortex storms
over the holidays, parking them in
places like Greensboro, N.C. They
were easily able to pick up pas-
sengers in Florida and get them to
New York as soon as weather con-
ditions improved.
XOJet will provide a standby
jet for good customers, Mr. Stew-
art said. The customers have air-
line tickets, but if flights get can-
celed and they have to be in Davos
or at a board meeting, a plane and
crew are waiting. If they make
their airline connection, great. If
not, we swing into action, he
said.
BY SCOTT MCCARTNEY
P
h
o
t
o
i
l
l
u
s
t
r
a
t
i
o
n
b
y
M
i
c
k
C
o
u
l
a
s
;
p
h
o
t
o
s
:
G
e
t
t
y
I
m
a
g
e
s
a
n
d
A
l
a
m
y
(
i
n
s
e
t
)
THE
MIDDLE
SEAT
Hailing an
Air Taxi
Chartering a private jet is
more complicated than
buying an airline ticket.
n Check for safety
ratings.
You want an operator
with top-level certification
from both Wyvern and
Argus International.
n Ask a friend.
Someone you know with
a jet card can speed the
process up.
n Understand the
pricing. Is it fixed or
dependent on the trip
duration? If one-way, is
there a charge for flying
the plane empty to its
next stop? Airport fees?
Catering fee?
n Ask about sharing.
Some brokers will ask
clients with available
empty seats if theyd be
willing to take on extra
people to share costs.
n Buddy up.
See a group of well-to-do
people stuck in the same
airport line? Chartering as
a group spreads the high
cost out.
Stormafter storm, travelers have been left in the
lurch this winter. Long after the weather clears, the
impact on airlines and their passengers persists.
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 7
Western States Escape
The Easts Deep Freeze
At times in January, Chicago was
colder than the South Pole, while
flowers bloomed out of season in
balmy Juneau, Alaska.
Driven by contorted bends of the
jet stream, cold snaps and snow kept
Northern and Southern states in a
deep freeze, while unusually warm
weather and record drought gripped
the far West.
The U.S. has been a country di-
vided by temperature extremes, in a
winter of record Western highs and
bone-chilling Eastern lows, federal
climate experts and private meteo-
rologists said.
A formal federal tally of Januarys
temperature trends wont be com-
pleted for weeks, but preliminary re-
gional data compiled by commercial
meteorologists suggest that the East-
ern half of the country is experienc-
ing one of its 10 coldest winters on
recordwith thousands of local re-
cords for cold already tied or broken.
By contrast, California, Alaska and
the Western U.S. are having one of
the 10 warmest winters, with several
cities setting records in January for
high temperatures.
We are talking about significant
departures from normal, said mete-
orologist Joe DAleo, chief forecaster
at Weatherbell Analytics LLC, a com-
mercial forecasting company based
in New York.
Weather experts blame it all on a
vast pool of warmwater in the North
Pacificup to seven degrees hotter
than in most years. Generating a
plume of rising hot air, it has pushed
the polar jet stream, which steers air
across the continent from west to
east, further north and then south in
a series of kinks like accordion pleats.
The same odd continental pattern of
air circulation contributed to the cold-
est U.S. winters on record in 1977 and
1979, experts said.
The jet stream has configured
itself in a way that it is positioned
to bring warm air to the West and
shots of really cold air to the East,
said Deke Arndt, chief of climate
monitoring at the National Climatic
Data Center in Asheville, N.C.
As a consequence, the Western
half of the country has been almost
as much above average as the East-
ern half has been below average. If
you average the extremes, you miss
out on how truly extraordinary the
weather this January is, said Jeff
Masters, chief meteorologist at
Weather Underground, a commer-
cial forecasting service.
The month unofficially edged out
1948 as only the 25th coldest U.S.
January, based on more than a cen-
tury of record-keeping.
The bitter cold we experienced
in January was certainly unusual
and the coldest we have seen in the
21st century, said Dr. Arndt. But
they were the kinds of temperatures
we would routinely see in two out of
three winters in the cold decades of
the 1970s and 1990s.
Even so, it has been cold enough
to drive the penguins indoors at the
National Aviary in Pittsburgh, icy
enough to freeze over much of the
Great Lakes, and snowy enough that
airlines in January canceled more
than 36,000 flights. By a preliminary
count, the month set more than a
thousand local records for snowfall.
At the same time, it was warm
and dry enough in the West that Cal-
ifornias snowpack is now at its low-
est level in 50 years, threatening the
states water supply. Temperatures in
January topped 88 degrees in Long
Beach, while Anchorage, Alaska,
notched its warmest January day on
record this past Monday, with tem-
peratures southwest of the city
reaching 62 degrees.
It is a study in extremes, Dr.
Masters said.
BY ROBERT LEE HOTZ
ActorPhilipSeymourHoffmanDeadat46
Award-winning actor Philip Sey-
mour Hoffman was found dead of
an apparent drug overdose late
Sunday morning in his New York
City apartment, authorities said.
Law-enforcement officials said a
hypodermic needle and two glass-
ine envelopes containing what is
believed to be heroin were found in
the apartment in the West Village
neighborhood of Manhattan.
The 46-year-old actor was
found unconscious in the bathroom
of his fourth floor apartment in the
Pickwick House around 11:15 a.m.
by screenwriter David Katz, who
called 911, a law-enforcement offi-
cial said. He was pronounced dead
at the scene.
Mr. Hoffman was last seen
around 8 p.m. Saturday, the official
said. He was supposed to pick up
his children Sunday morning and,
when he didnt, Mr. Katz and a
friend went to check on him, the
official said.
The New York Police Depart-
ment is investigating, and the Of-
fice of the Chief Medical Examiner
is working to determine the exact
cause of death. The accomplished
actor and director won the Acad-
emy Award for best actor for his
role as famed author Truman Ca-
pote in the 2005 film Capote. He
also had a strong following in New
Yorks theater scene, starring in
plays like 2012s Death of a Sales-
man and directing others, like
1999s In Arabia, Wed All Be
Kings. He was nominated for a
Tony Award three times.
Mr. Hoffmans breakout role,
however, was in 1997s Boogie
Nights. He also received accolades
for his roles in high-profile films
such as 1998s The Big Lebowski
and 1999s Magnolia.
Mr. Hoffman was most recently
seen in The Hunger Games: Catch-
ing Fire, the second installment in
the blockbuster Hunger Games
series from Lions Gate Entertain-
ment Corp. He was set to star in
two more installments in the fran-
chise that are scheduled for re-
lease.
Outside of the six-story building
in the West Village, fan Adam Ze-
nko, 40, placed white roses outside
the front door. The paralegal, who
lives nearby, said his favorite film
of Mr. Hoffmans was Synecdoche,
New York.
Its horrible, just horrible, he
said. I think hes the greatest ac-
tor of his generation.
Mara Gay, Alison Fox
and Erich Schwartzel
contributed to this article.
BY PERVAIZ SHALLWANI
U.S. NEWS
When toRaiseRates
TopsYellensAgenda
In three years as second-in-com-
mand at the Federal Reserve, Janet
Yellen worried continuously about
high U.S. unemployment and pushed
for policies to bring it down. After
she is sworn in as Fed chairwoman
Monday a new question will almost
immediately crowd her agenda: Why
is unemployment falling so fast and
what, if anything, should the central
bank do about it?
The jobless rate was 6.7% in De-
cember and the Labor Department
will release the January figure on
Friday. Fed officials have said since
December 2012 they wouldnt con-
sider raising short-term interest
rates from near zero until joblessnes
fell to at least 6.5%.
More recently, they have said
they will keep rates low well past
that point as they weigh other indi-
cators the labor market remains
weak. This suggests rate increases
wont be coming soon even if job-
lessness were to touch 6.5% in Fri-
days report.
Among Ms. Yellens most critical
decisions is when to start lifting in-
terest rates. If she and her col-
leagues wait too long, they could
fuel high inflation or financial bub-
bles; if they move too soon, they
could damp a recovery that is just
gaining steam.
Key to that decision is making
sense of the falling unemployment
rate. She and other Fed officials
worry it masks large pockets of
stress still plaguing the labor mar-
ket, including millions of people
who want work but arent looking
anymore and therefore are no lon-
ger counted as unemployed.
The U.S. labor market is incredi-
bly complicated and trying to sum-
marize it with one number is hard,
says David Stockton, the former
head of the Feds research division.
They got themselves into a situa-
tion where they are using the unem-
ployment rate but they see a consid-
erable number of reasons why they
believe it is not a sufficient statis-
tic.
The fast descent in the jobless
rate has caught Fed officials off
guard. A year ago they didnt see it
getting to 6.5% until 2015. As re-
cently as June, they didnt see it
reaching this point until sometime
later this year.
A rule of thumb in economics
known as Okuns Law suggests the
jobless rate should fall a half per-
centage point for every percentage
point the economy grows above its
long-run trend rate. By that rule of
thumb, the unemployment rate
shouldnt have fallen much in an un-
usually anemic economic recovery.
Instead it is down more than three
percentage points from the recent
peak.
One reason for the drop is an ex-
odus of millions of workers from the
labor force. In June 2009, when the
recovery started, 81 million Ameri-
cans said they werent in the labor
force, which means they werent
employed or actively looking for
work. In December that number hit
92 million.
People are leaving the labor
force for different reasons theyre
retiring, going back to school, join-
ing disability rolls, giving up looking
for jobs or doing other thingsre-
ducing the number of people
counted as unemployed.
The trend raises hard-to-answer
questions for the Fed. Will some of
these people come back to work
when the economy improves or have
they left permanently? Do these
shifts mean there is less slack in la-
bor marketsworkers available to
take jobsthan they realized, or is
the slack still out there, hidden in
these numbers?
Ms. Yellen and other Fed officials
equate slack with low wages and
low inflation. If it is receding more
quickly than they thought, rate in-
creases might be needed sooner
than planned. But they see many
signs that the job market is still
weak.
Nearly eight million people have
part-time jobs but want full-time
work. Another 2.4 million say they
want jobs but arent looking.
When taking into account these
people and other marginally at-
tached workers, the jobless rate is
13.1%.
Behind the numbers are people
like Mialien Mack, 40, of Atlanta,
Georgia. She was laid off in May
from her marketing job in the cor-
porate office of a convenience store
chain in Atlanta after nearly 11 years
with the company. She recently
faced the expiration of her $330 per
week of unemployment benefits,
which has shifted her thinking about
her job search.
Its making me think, should I
consider less money? In her previ-
ous jobs she had been making the
equivalent of about $25 an hour.
Now she is contemplating positions
that would pay half that.
Twelve-fifty is still not a livable
wage for an adult with a child, she
said. However, is it a foot in the
door?
BY JON HILSENRATH
AND VICTORIA MCGRANE
Sources: NOAAs National Climatic Data Center (temperature);
Weatherbell Analytics LLC (2014 estimate); staff and news reports (weather facts)
Weather Divide
Average temperature for January of each year in the contiguous 48 states
40F
20
25
30
35
60 1950 70 80 90 00 10
2014 estimate:
2.5F below average
1979: 8.54F below average
2006: 8.62F above average
Average 1895-2013:
30.63F
January was so cold in some places that:
In Chicago, it got colder than the South Pole.
In Minnesota, where temperatures dipped to -42F, it was colder than Gale
Crater on Mars, where the NASA robotic rover Curiosity is stationed.
In Chicago, Anana, the lone polar bear at the Lincoln Park Zoo, had to stay
indoors to keep warm.
In Pittsburgh at the National Aviary, the penguins huddled indoors.
All told, more than 36,000 airline ights were canceled, three times as many
as the past two Januarys.
While others had a warm spell:
In Juneau, Alaska, the
owers were blooming.
And it was so hot in Fresno,
Calif., that the China Peak
Mountain resort closed ski
runs for lack of snow.
The Wall Street Journal
Philip Seymour Hoffman in January.
E
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P
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e
s
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p
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o
A
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22 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
Major players & benchmarks
Credit derivatives
Spreads oncredit derivatives are one way the market rates
creditworthiness. Regions that are treading inroughwaters
cansee spreads swing toward the maximumand vice versa.
Indexes beloware for five-year swaps.
Markit iTraxxIndexes SPREADRANGE, in pct. pts.
Mid-spread, since most recent roll
Index: series/version in pct. pts. Mid-price Coupon Maximum Minimum Average
Europe: 20/1 0.81 100.90% 0.01% 1.04 0.69 0.82
Eur. HighVolatility: 20/1 1.19 99.14 0.01 1.61 1.01 1.24
Europe Crossover: 20/1 3.08 108.27 0.05 4.08 2.75 3.30
Asia ex-JapanIG: 20/1 1.49 97.76 0.01 1.57 1.24 1.37
Japan: 20/1 0.84 100.77 0.01 0.97 0.68 0.82
Note: Data as of January 30
Spreads
Spreads on
ve-year swaps
for corporate
debt; based on
Markit iTraxx
indexes.
In percentage points
3.00
2.00
1.00
0
1
t
Australia
t
Japan
2013
Aug. Sept. Oct. Nov.
2014
Dec. Jan.
Index roll
Source: Markit Group
Tracking
credit
markets &
dealmakers
Dow Jones Industrial Average P/E: 15
LAST: 15698.85 t149.76, or 0.94%
YEAR TO DATE: t877.81, or 5.3%
OVER 52 WEEKS s1,689.06, or 12.1%
Note: Price-to-earnings ratios are for trailing 12 months
16750
16400
16050
15700
15350
15000
1 8 15 22 29
Nov.
6 13 20 27
Dec.
3 10 17 24 31
Jan.
High
Close
Low
50day
moving average
t
StoxxEurope 50: Friday's best andworst...
Previous
close, in STOCKPERFORMANCE
Company Country Industry Volume local currency Previous session YTD 52-week
Moet Hennessy Louis Vuitt France Clothing &Accessories 3,602,950 132.15 7.88% -0.3% -4.8%
BGGrp United Kingdom Integrated Oil &Gas 15,850,938 1,022 1.34 -21.2 -8.8
Financiere Richemont Switzerland Clothing &Accessories 2,174,787 84.15 1.08 -5.2 12.4
British American Tobacco United Kingdom Tobacco 4,703,287 2,916 0.92 -9.9 -11.2
National Grid United Kingdom Multiutilities 7,861,133 789.00 0.90 0.1 14.1
Deutsche Bank Germany Banks 11,660,099 35.89 -2.79% 3.5 -6.8
Royal Dutch Shell A United Kingdom Integrated Oil &Gas 5,227,583 2,104 -2.05 -2.8 -6.1
INGGroep Netherlands Life Insurance 29,738,721 9.84 -1.70 -2.6 32.1
Standard Chartered United Kingdom Banks 8,850,345 1,240 -1.63 -8.8 -26.1
Deutsche Telekom Germany Mobile Telecommunications 18,444,098 12.00 -1.60 -3.5 34.3
...Andthe rest of Europe's blue chips
Latest,
in local STOCKPERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week
Reckitt Benckiser Grp 1,223,371 4,563 0.57% -4.8% 8.6%
United Kingdom(Nondurable Household Products)
Vodafone Group 100,553,628 226.55 0.40 -4.4 31.6
United Kingdom(Mobile Telecommunications)
Banco Bilbao Vizcaya Argn 50,413,299 8.86 0.21 -1.0 23.4
Spain (Banks)
Anheuser-Busch InBev 2,259,832 71.05 0.11 -8.0 11.2
Belgium(Brewers)
Rio Tinto 3,744,234 3,244 0.09 -4.9 -8.9
United Kingdom(General Mining)
BP PLC 22,350,013 478.00 0.02 -2.1 2.4
United Kingdom(Integrated Oil &Gas)
Roche Holding Part. Cert. 1,699,201 249.30 ... 0.0 23.8
Switzerland (Pharmaceuticals)
UBS 11,557,413 17.99 -0.11 6.3 14.0
Switzerland (Banks)
Telefon L.M. Ericsson B 16,177,505 80.00 -0.12 1.9 8.1
Sweden (Telecommunications Equipment)
Siemens 4,101,701 93.96 -0.19 -5.4 17.6
Germany (Diversified Industrials)
Nestle 5,864,260 65.80 -0.23 0.8 3.0
Switzerland (Food Products)
BASF 3,952,135 79.53 -0.25 2.6 4.9
Germany (Commodity Chemicals)
ABB 6,611,910 22.62 -0.26 -3.7 15.9
Switzerland (Industrial Machinery)
ENI 14,611,538 16.85 -0.30 -3.7 -8.9
Italy (Integrated Oil &Gas)
Lloyds Banking Group PLC 102,665,213 83.30 -0.30 5.6 61.2
United Kingdom(Banks)
Banco Santander S.A. 59,373,682 6.41 -0.31 -0.5 8.0
Spain (Banks)
Glencore Xstrata PLC 27,394,017 322.50 -0.36 3.1 -18.0
United Kingdom(General Mining)
AstraZeneca 2,037,593 3,859 -0.37 7.9 26.4
United Kingdom(Pharmaceuticals)
L'Air Liquide 1,003,382 93.20 -0.40 -9.3 -1.0
France (Commodity Chemicals)
Schneider Electric 2,066,985 59.89 -0.45 -5.5 6.8
France (Electrical Components &Equipment)
Latest,
in local STOCKPERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week
SAP 3,165,760 56.66 -0.47% -9.1% -7.0%
Germany (Software)
HSBC Hldgs 24,961,836 627.00 -0.51 -5.3 -12.5
United Kingdom(Banks)
Bayer 2,597,527 97.89 -0.56 -4.0 34.1
Germany (Specialty Chemicals)
Daimler 5,457,152 62.13 -0.59 -1.2 43.0
Germany (Automobiles)
Novartis AG 6,584,897 71.80 -0.62 0.8 15.8
Switzerland (Pharmaceuticals)
Credit Suisse Group AG 5,501,745 27.40 -0.65 0.5 2.9
Switzerland (Banks)
Unilever CVA 7,281,339 27.71 -0.68 -5.4 -7.0
Netherlands (Food Products)
Telefonica S.A. 20,444,217 11.44 -0.69 -3.3 7.1
Spain (Fixed Line Telecommunications)
AXA 9,640,827 19.50 -0.76 -3.5 43.0
France (Full Line Insurance)
Sanofi SA 3,941,726 72.80 -0.79 -5.6 1.3
France (Pharmaceuticals)
GlaxoSmithKline 7,184,583 1,564 -0.79 -2.9 8.2
United Kingdom(Pharmaceuticals)
Unilever 4,309,183 2,339 -0.81 -5.8 -8.9
United Kingdom(Food Products)
BHP Billiton 9,407,447 1,796 -0.86 -3.9 -16.8
United Kingdom(General Mining)
Tesco 16,322,182 320.35 -0.91 -4.2 -10.1
United Kingdom(Food Retailers &Wholesalers)
Allianz SE 1,998,411 123.80 -0.92 -5.0 17.3
Germany (Full Line Insurance)
Barclays 49,273,966 272.50 -0.93 0.2 -9.5
United Kingdom(Banks)
Zurich Insurance Group 731,923 261.50 -0.95 1.2 -0.1
Switzerland (Full Line Insurance)
Diageo 9,346,759 1,801 -1.07 -10.0 -4.1
United Kingdom(Distillers &Vintners)
Total 6,182,909 42.34 -1.27 -4.9 6.0
France (Integrated Oil &Gas)
BNP Paribas 5,097,672 57.45 -1.42 1.4 24.3
France (Banks)
Sources: SIX Financial Information
DJIAcomponent stocks
Volume, CHANGE
Stock Symbol in millions Latest Points Percentage
AT&T T 33.9 $33.32 0.03 0.09%
AmExpress AXP 4.7 85.02 1.60 1.85
Boeing BA 9.7 125.26 1.27 1.00
Caterpillar CAT 9.1 93.91 0.71 0.76
Chevron CVX 15.3 111.63 4.82 4.14
CiscoSys CSCO 41.5 21.91 0.07 0.30
CocaCola KO 16.0 37.82 0.35 0.92
Disney DIS 7.7 72.61 0.61 0.83
DuPont DD 5.6 61.01 0.53 0.86
ExxonMobil XOM 16.8 92.16 1.83 1.95
GenElec GE 39.8 25.13 0.37 1.45
GoldmanSachs GS 3.4 164.12 1.72 1.04
HomeDpt HD 10.5 76.85 0.08 0.10
Intel INTC 26.9 24.54 0.20 0.81
IBM IBM 5.1 176.68 0.68 0.38
JPMorgChas JPM 17.9 55.36 0.64 1.14
JohnsJohns JNJ 12.0 88.47 1.03 1.15
McDonalds MCD 5.9 94.17 0.37 0.39
Merck MRK 14.8 52.97 0.54 1.01
Microsoft MSFT 85.6 37.84 0.98 2.66
Nike B NKE 4.2 72.85 1.09 1.47
Pfizer PFE 40.6 30.40 0.42 1.36
ProctGamb PG 12.8 76.62 0.25 0.33
3M MMM 3.6 128.19 0.14 0.11
TravelersCos TRV 4.8 81.28 1.08 1.31
UnitedTech UTX 3.4 114.02 0.66 0.58
UtdHlthGp UNH 4.0 72.28 0.52 0.71
Verizon VZ 17.8 48.02 0.39 0.82
VISAClA V 6.1 215.43 5.45 2.47
WalMart WMT 10.4 74.68 0.07 0.09
Source: WSJ Market Data Group
Credit-default swaps: European companies
At itsmost basic, thepricingof credit-default swapsmeasureshowmuchabuyer hastopaytopurchase-and
howmuch a seller demands to sell-protection fromdefault on an issuer's debt. The snapshot belowgives a
sense whichway the market was moving yesterday.
Showing the biggest improvement...
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day
Nielsen 101 5 5 24
Allianz 49 1 1 5
RabobankNederland 76 2 5 10
StdCharteredBk 123 3 5 19
Alliance Leicester 94 2 4 4
Deutsche Bk 95 2 5 13
ONOFinII 153 3 48 50
RaiffeisenZentralbank
Oesterreich
84 2 6 27
CARLTONComms 138 3 3 2
Compass Gp 43 1 2 1
Andthe most deterioration
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day
CIRSpACIEIndustriali
Riunite
258 14 44 118
Portugal TelecomSGPS 349 18 47 89
Diageo 53 2 5 12
Pearson 64 3 5 13
REPSOL 123 5 22 28
Telefonica 165 6 31 45
Hellenic Telecom 331 13 57 75
Stena Aktiebolag 396 15 45 4
Portugal TelecomIntl Fin 349 12 44 85
Gecina 102 3 5 5
Source: Markit Group
BLUE CHIPS & BONDS
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Below, a look at the Dow Jones Stoxx
50, the biggest and best known
companies in Europe, including the U.K.
Europe, Middle East & Africa: Bank revenues from equity capital markets
Behind every IPO,
follow-on or
convertible equity
offering is one or
more investment
banks. At right,
investment banks
historical and
year-to-date
revenues from global
equity-capital-market
(ECM) deals
Source: Dealogic
60% 6
40 4
20 2
0 0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
nEquity capital markets nDebt capital markets (both in billions, left axis)
ECM as a percentage of total
(right axis)
t
8 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
Big Indonesian Volcano
Claims Its First Victims
JAKARTA, IndonesiaMore than
a dozen tourists and villagers were
killed after venturing too close to In-
donesias most active volcano over
the weekend, prompting authorities
to tighten a restricted-entry zone
around the mountain on Sumatra is-
land.
At least 15 people, mostly high-
school students, were killed near an
evacuated village when Mount
Sinabung erupted Saturday, officials
said. Sinabung has been erupting
daily for the past three months, but
these were the first deaths directly
related to the volcanic activity.
The national disaster-mitigation
agency said the students and several
villagers were struck by a pyroclas-
tic flow, a superheated cloud of ash
and gases that can barrel down a
mountain side at high speeds during
an ash eruption.
The flow gushed down the moun-
tain side at about 100 kilometers an
hour with a temperature of around
700 degrees Celsius, the agency said.
The students, who had ventured
near a village about three kilometers
southeast of the volcano, had been
trying to get a better view of the
eruption, said agency spokesman Su-
topo Purwo Nugroho, adding that
the students werent on an orga-
nized school trip.
Sinabungs southeastern flank
has been site of the majority of the
pyroclastic flows emanating from
the crater since the round of erup-
tions began in November.
Eruptions have forced the evacu-
ation of some 30,000 peoplemany
of them small farmerson northern
Sumatra island, blanketing the high-
lands countryside in gray ash that
has destroyed millions of dollars of
cash crops.
More than 10,000 people who
had evacuated from villages just be-
yond the mandatory evacuation
zonewhich runs five kilometers
from the peak in most placeschose
to return home last week.
Up to now, entry into the evacua-
tion zone has been permitted but
discouraged by local authorities.
But Jhonson Tarigan, spokesman
for the local relief effort, said Sun-
day police and military increased
their patrol personnel to 200 from
75 after the deaths and would now
declare the evacuation zone com-
pletely off limits. Starting today, we
installed road blocks at access roads
to the danger zone, he said. Now
nobody will be allowed to enter the
danger zone.
He also said some of the new
personnel would come from areas
beyond Kabanjahe, the headquarters
for a district of several hundred
thousand people around the volcano.
Previously the patrolling officers
knew the villagers, so they were less
stern in stopping the them from en-
tering, he said.
Tourist trips to the volcano have
been a common sight in recent
months, often led by guides who
used to take people hiking to the top
of the nearly 2,500-meter peak.
Erwin Sinaga, a local guide, said
he takes groups into the evacuation
zone two to three times a week. On
Sunday, he was planning to take
travelers from the U.S. and Taiwan
as close as four kilometers on the
roads at the base of the mountain,
until the route was closed by au-
thorities. He found another vantage
point at seven kilometers, he said.
The fatalities occurred a day af-
ter authorities allowed some 13,800
people to go back to their villages
outside the five-kilometer danger
zone. Many had fled in December
and January amid ash fall and an
uptick in pyroclastic flows further
up the mountain.
Thousands of villagers have been
living for months in mosques,
churches and event halls.
On Sunday, Hendrasto, the head
of the government volcano agency
who, like many Indonesians, goes by
one name, said Sinabungs activity
remains unchanged. The eruptions
are not expected to stop in the near
future, he said.
For locals living at a safe distance
from the volcano, Sinabung has of-
fered a nightly diversion for months.
On a recent evening in Kabanjahe,
about 200 locals braved the high-
lands chill to stand in a field about 13
kilometers from the summit, looking
up at the mountain for occasional
burst of lava. Vendors sold cheap
noodle soup to ward off the chill.
A quiet murmur went up in the
crowd when a fireball flew silently
down the side of the volcano, at that
distance little more than a drop of
red on a black hillside.
Wait awhile, one of onlookers
said. Itll happen again, bigger.
BY I MADE SENTANA
AND BEN OTTO
A rescue team passes ash-covered motorcycles Sunday in North Sumatra during operations around the village of Karo.
R
e
u
t
e
r
s
MyanmarReport
IndicatesPolitical
HurdlesforSuuKyi
YANGON, MyanmarA commit-
tee evaluating changes to Myan-
mars constitution found resistance
to opening the door for opposition
leader Aung San Suu Kyi to assume
the presidency, underscoring the
hurdles to her political ambitions.
The question mark surrounding
whether Ms. Suu Kyi will be able to
run for president is considered the
defining political issue leading up
to Myanmars general elections,
scheduled for 2015.
This initial report was produced
by a 109-member parliamentary
committee tasked with collecting
suggestions from various stakehold-
ersincluding from political parties
and the militaryon what should
be amended within the constitution.
The committee said it received
more than 28,000 letters following
its call for comment on the pro-
posed changes, drafted in 2008 by
the junta that ran Myanmar at the
time. The document, drafted by
military generals who kept Ms. Suu
Kyi under house arrest for over a
decade, includes a clause that pre-
vents anyone with foreign family
members from assuming the presi-
dency or vice-presidency. The Nobel
laureate, who was married to a
British national and has two foreign
sons, is widely revered and consid-
ered the strongest presidential can-
didate, should she be cleared to run
for the post.
But of these letters, the ones
that opposed making changes to al-
low Ms. Suu Kyi to run or dismantle
the provision that guarantees a
place in politics for Myanmars mili-
tary received more than 100,000
signatures. Conversely, only 592
signatures were in favor of scrap-
ping the section on presidential
qualifications that disqualify Ms.
Suu Kyi.
The committee will send Parlia-
ment its recommendations on
changes. It remains unclear how or
when the Parliament might act on
any constitutional changes.
The initial report, released to
Parliament on Friday, isnt binding,
nor is it a formal recommendation.
But the task of collecting sugges-
tions on potential changes for the
constitution was the first of its kind
since a nominally civilian govern-
ment took the helm in 2011 after six
decades of military rule, and is the
first temperature-taking exercise of
sentiments around these crucial
changes.
It is clear that there is resis-
tance to amending the clause [on
presidential qualifications], some-
thing Aung San Suu Kyi has been
pushing hard for, said Richard
Horsey, a Yangon-based political an-
alyst.Ms. Suu Kyi, who recently
traveled across Myanmar to Chin,
Shan and Karen states, has made
constitutional change the priority
of her party. Her calls have also re-
ceived significant backing outside
Myanmars borders, with govern-
ments including the U.S. and U.K.
Mr. Horsey, like many other ana-
lysts, had been predicting that the
military, which holds 25% of seats
in parliament, might use its veto
powers to block a change in the
constitution that would allow Ms.
Suu Kyi to run. But, he added, the
report indicates that the issue may
not even get to the stage of being
voted on in the legislature.
Any constitutional amendment
requires 75% of parliamentary votes
in agreement.
The committee will deliver a for-
mal report at an unspecified time to
a separate parliamentary panel,
providing more specific recommen-
dations and analysis on changes to
the constitution.
Representatives from Ms. Suu
Kyis National League for Democ-
racy party on Sunday dismissed the
letters, saying they reflected an or-
ganized government movement.
There were no reasons given as
to why they want to keep article
59f, only signatures, said Zaw My-
int Oo, a NLD member of parlia-
ment who sits on the committee
looking at constitutional reform.
The process has no transparency
if our party chairman, Aung San
Suu Kyi, went on similar campaigns,
we can get more signatures to
change this section.
BY SHIBANI MAHTANI
AND MYO MYO
Opposition leader Aung San Suu Kyi supporters allege a government movement.
G
e
t
t
y
I
m
a
g
e
s
Barrier Reef Dumping Plan Draws Ire
CANBERRAAustralia approved
plans to dump vast amounts of mud
and rock into oceans surrounding
the Great Barrier Reef, paving the
way for developers to expand a coal
port on the countrys eastern coast.
The government agency that
manages the reef, a designated
World Heritage site, said it would
allow as much as 3 million cubic
meters of dredged-up material from
the sea floor to be dumped.
The dredging is part of a project
to expand Abbot Point, a coal port
in Queensland state which sits adja-
cent to the park. The marine author-
itys decision is expected to facili-
tate eventually a 70% ramp-up in
coal exports from Queensland. Coal,
along with iron ore, is one of Aus-
tralias biggest exports in big de-
mand from Asian countries, includ-
ing China, the nations biggest
trading partner.
The government approved the
port expansion last year, but
charged the marine authority with
deciding where the dredged-up mud
and rock would be shifted to. Sup-
porters of the plan say it will unlock
up to 28 billion Australian dollars
(US$24.5 billion) in coal-develop-
ment projects, helping provide
much-needed jobs as a China-led
mining-investment boom cools.
Environmental campaigners,
however, criticized the Great Barrier
Reef Marine Park Authoritys deci-
sion, saying the dumping of sludge
to help make way for more ships to
access the port threatened coral and
fish around the reef, the worlds
largest living organism.
BY ROB TAYLOR
WORLD NEWS
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 21
Major stockmarket indexes Stock indexes fromaround the world, grouped by region. Showninlocal-currency terms.
PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
EUROPE Stoxx Europe 600 322.52 -0.80 -0.25% -1.7% 11.9%
Stoxx Europe 50 2853.33 -7.14 -0.25 -2.3 8.1
Euro Zone Euro Stoxx 307.33 -1.56 -0.51 -2.2 13.7
Euro Stoxx 50 3013.96 -13.34 -0.44 -3.1 11.2
Austria ATX 2559.74 -22.27 -0.86 0.5 4.9
Belgium Bel-20 2891.25 -6.72 -0.23 -1.1 12.9
Czech Republic PX 990.61 -3.82 -0.38 0.2 -2.6
Denmark OMXCopenhagen 593.18 7.05 1.20% 4.8 19.0
Finland OMXHelsinki 7030.60 -104.03 -1.46 -4.2 14.4
France CAC-40 4165.72 -14.30 -0.34 -3.0 10.4
Germany DAX 9306.48 -67.00 -0.71 -2.6 18.8
Hungary BUX 18958.24 341.56 1.83 2.1 -2.1
Ireland ISEQ 4652.30 -32.34 -0.69 2.5 30.2
Italy FTSE MIB 19418.34 6.79 0.03 2.4 12.1
Netherlands AEX 386.85 -2.76 -0.71 -3.7 8.8
Norway All-Shares 590.88 -4.74 -0.80 -2.0 13.7
Poland WIG 50831.61 414.44 0.82 -0.9 8.3
Portugal PSI 20 6696.67 -68.27 -1.01 2.1 7.1
PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
Russia RTSI 1301.02 -19.88 -1.51% -9.8 -20.1
Spain IBEX35 9920.20 -44.30 -0.44 ... 20.5
Sweden OMXStockholm 416.72 0.27 0.06% -1.6 14.0
Switzerland SMI 8191.33 -13.63 -0.17 -0.1 10.4
Turkey BIST 100 61858.21 -843.18 -1.34 -8.8 -22.9
U.K. FTSE 100 6510.44 -28.01 -0.43 -3.5 2.6
ASIA-PACIFIC DJ Asia-Pacific 140.83 0.19 0.14 -4.2 2.8
Australia SPX/ASX200 5190.00 1.90 0.04 -3.0 5.5
China Shanghai Composite 2033.08 Closed -3.9 -14.8
Hong Kong Hang Seng 22035.42 Closed -5.5 -7.1
India S&P BSE Sensex 20513.85 15.60 0.08 -3.1 3.7
Japan Nikkei Stock Average 14914.53 -92.53 -0.62 -8.5 33.3
Singapore Straits Times 3027.22 Closed -4.4 -7.8
South Korea Kospi 1941.15 Closed -3.5 -1.2
AMERICAS DJ Americas 448.93 -2.47 -0.55 -3.6 14.2
Brazil Bovespa 47638.99 394.73 0.84 -7.5 -21.1
Mexico IPC 40879.75 -128.55 -0.31 -4.3 -10.7
Note: Americas index data are as of 5:00p.m. ET. Sources: SIXFinancial Information; WSJ Market Data Group
Cross rates U.S.-dollar and euro foreign-exchange rates inglobal trading
USD GBP CHF SEK RUB NOK JPY ILS EUR DKK CDN AUD
Australia 1.1440 1.8818 1.2640 0.1748 0.0325 0.1822 0.0112 0.3252 1.5446 0.2070 1.0287 ...
Canada 1.1121 1.8293 1.2287 0.1699 0.0316 0.1771 0.0109 0.3161 1.5015 0.2012 ... 0.9721
Denmark 5.5267 9.0908 6.1060 0.8445 0.1572 0.8802 0.0540 1.5711 7.4616 ... 4.9696 4.8308
Euro 0.7407 1.2183 0.8183 0.1132 0.0211 0.1180 0.0072 0.2106 ... 0.1340 0.6660 0.6474
Israel 3.5177 5.7862 3.8864 0.5375 0.1001 0.5602 0.0344 ... 4.7492 0.6365 3.1631 3.0748
Japan 102.2755 168.2306 112.9952 15.6279 2.9090 16.2878 ... 29.0746 138.0810 18.5057 91.9650 89.3979
Norway 6.2793 10.3286 6.9374 0.9595 0.1786 ... 0.0614 1.7851 8.4776 1.1362 5.6463 5.4886
Russia 35.1579 57.8304 38.8429 5.3722 ... 5.5990 0.3438 9.9946 47.4663 6.3614 31.6136 30.7312
Sweden 6.5444 10.7647 7.2303 ... 0.1861 1.0422 0.0640 1.8604 8.8355 1.1841 5.8846 5.7204
Switzerland 0.9051 1.4888 ... 0.1383 0.0257 0.1441 0.0088 0.2573 1.2220 0.1638 0.8139 0.7912
U.K. 0.6079 ... 0.6717 0.0929 0.0173 0.0968 0.0059 0.1728 0.8208 0.1100 0.5467 0.5314
U.S. ... 1.6449 1.1048 0.1528 0.0284 0.1593 0.0098 0.2843 1.3501 0.1809 0.8992 0.8741
Source: ICAPPlc.
MSCI indexes
Developed and emerging-market regional and country indexes
fromMSCI as of January 31, 2014
Price-to- LOCAL-CURRENCY
Dividend earnings PERFORMANCE
yield ratio MSCI Index Last Daily YTD 52-wk.
2.40% 17 MSCI ACWI* 393.89 -0.21% -3.6% 15.9%
2.40 17 World(DevelopedMarkets) 1,607.46 -0.24 -3.2 20.1
2.30 17 Worldex-EMU 196.02 -0.31 -3.2 19.9
2.30 18 Worldex-UK 1,619.74 -0.31 -3.2 21.0
3.00 17 EAFE 1,847.18 0.95 -3.6 15.2
2.60 12 EmergingMarkets (EM) 936.37 0.03 -6.6 -11.3
3.20 17 EUROPE 110.36 0.27 -1.6 14.6
3.20 18 EMU 191.11 0.30 -3.3 21.6
3.10 18 Europe ex-UK 118.69 0.34 -1.3 17.6
4.10 13 Europe Value 112.61 0.54 -0.8 16.1
2.30 22 Europe Growth 104.09 -0.01 -2.4 12.9
2.30 23 Europe Small Cap 262.87 0.31 0.8 31.5
3.50 6 EMEurope 256.07 1.40 -6.8 -17.5
3.50 14 UK 1,928.51 -0.15 -3.2 10.4
3.20 17 Nordic Countries 198.74 -0.01 -1.5 15.0
3.50 5 Russia 758.99 0.35 -4.2 -1.0
2.90 18 SouthAfrica 1,084.57 -0.90 -4.7 7.3
2.90 13 ACASIAPACIFICEX-JAPAN 444.34 0.44 -5.1 -4.7
1.70 17 Japan 753.62 -2.57 -6.4 42.1
3.10 10 China 58.96 -0.46 -6.6 -6.2
1.40 17 India 791.69 -0.82 -3.1 3.6
1.00 10 Korea 562.12 0.00 -4.6 -3.1
2.80 17 Taiwan 297.55 0.00 -1.7 7.6
1.80 19 USBROADMARKET 2,051.01 -1.18 -2.6 27.6
1.40 31 USSmall Cap 3,181.01 -1.49 -1.5 35.1
3.00 16 EMLATINAMERICA 2,887.42 -0.47 -9.8 -24.0
*Twenty-four developed and 21 emerging markets Source: MSCI
S&PDowJones Indices
Price-to-
Dividend earnings PERFORMANCE(euros) PERFORMANCE(U.S.dollars)
yield* ratio* S&PDowJones Index Last Daily 52-wk. Last Daily 52-wk.
2.35%19.41 Global TSM 3113.70 -0.42% 10.7%
2.91 17.87 Global DOW 1667.27 -0.20% 14.0% 2391.51 -0.62 12.4
2.90 14.37 Global Titans 50 220.97 -0.05 10.8 222.91 -0.47 9.3
3.04 20.00 DevEurope TSM 3270.95 -0.68 11.6
2.30 20.34 DevelopedMarkets TSM 3140.32 -0.46 13.7
2.80 13.68 S&PBMI EmgMarkets 238.30 -0.01 -13.1
3.19 19.31 S&PEurope 350 1314.20 -0.27 11.6 1594.32 -0.63 10.1
3.09 22.34 S&PEuro 1303.85 -0.50 14.0 1602.99 -0.86 12.4
3.68 17.85 Europe Dow 1367.55 -0.16 10.8 1958.59 -0.74 9.1
3.33 9.09 BRIC50 360.65 0.40 -15.9 464.39 -0.02 -17.0
1.87 21.07 U.S. TSM 18810.34 -0.50 19.1
Kuwait Titans 30 -c 202.30 -0.08 1.9
Price-to-
Dividend earnings PERFORMANCE(euros) PERFORMANCE(U.S.dollars)
yield* ratio* S&PDowJones Index Last Daily 52-wk. Last Daily 52-wk.
TurkeyTitans 20 -c 628.79 -1.25% -22.8%
6.16%15.50 Global Select Div 241.63 -0.47 4.7
6.50 14.88 Asia/Pacific Select Div 276.60 0.87% -5.5% 319.22 0.29 -7.0
U.S. Select Dividend -d 1207.61 -0.25 19.1
3.13 29.06 S&PGlbNat Resources 1928.28 -0.28 -9.9 2587.71 -0.69 -11.1
2.07 19.88 Islamic Market 2642.48 -0.38 9.7
2.39 17.93 Islamic Market 100 2883.89 -0.35 11.3
Islamic Turkey -c 3843.31 -0.83 -12.1
3.15 22.28 Sustainability Europe 106.06 -0.10 10.5 157.22 -0.67 8.8
4.24 23.10 S&PGlbInfrastructure 1473.95 0.50 7.0 2248.85 0.09 5.5
1.80 14.54 Luxury 1933.15 0.99 5.4
DJ-UBSCommodity-p 111.42 -0.34 -12.1 125.91 -0.34 -11.9
*Fundamentals are based on data in U.S. dollar. Footnotes: a-in USdollar. b-dividends reinvested. c-in local currency. Note:All data as of 2 p.m.ET. Source: S&PDowJones Indices
GLOBAL MARKETS LINEUP
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Commodities Prices of futures contracts withthe most openinterest
EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia
Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange;
NYMEX: NewYork Mercantile Exchange;ICE-EU: ICE Futures Europe *Data as of January 30, 2014
ONE-DAY CHANGE Year Year
Commodity Exchange Last price Net Percentage high low
Corn (cents/bu.) CBOT 433.50 6.00 1.40% 435.50 406.25
Soybeans (cents/bu.) CBOT 1282.75 7.75 0.61 1,330.50 1,260.50
Wheat (cents/bu.) CBOT 557.25 3.75 0.68 612.75 550.00
Live cattle (cents/lb.) CME 140.575 0.050 0.04 143.200 135.375
Cocoa ($/ton) ICE-US 2,893 -19 -0.65% 2,933 2,629
Coffee (cents/lb.) ICE-US 125.55 5.55 4.63 125.95 110.20
Sugar (cents/lb.) ICE-US 15.60 0.61 4.07 16.42 14.70
Cotton (cents/lb.) ICE-US 85.87 -0.16 -0.19 88.43 82.39
Rapeseed (euro/ton) LIFFE 364.25 2.25 0.62 365 349
Cocoa (pounds/ton) LIFFE 1,844 -5 -0.27 1,865 1,676
Robusta coffee ($/ton) LIFFE 1,777 32 1.83 1,795 1,575
Copper ($/lb.) COMEX 3.1930 -0.0335 -1.04 3.4245 3.1905
Gold ($/troy oz.) COMEX 1242.60 0.10 0.01 1,280.10 1,203.70
Silver ($/troy oz.) COMEX 19.160 0.034 0.18 20.660 18.970
Aluminum($/ton)* LME 1,729.50 -24.00 -1.37 1,813.00 1,729.50
Tin ($/ton)* LME 22,125.00 -25.00 -0.11 22,475.00 21,410.00
Copper ($/ton)* LME 7,116.00 -44.00 -0.61 7,422.00 7,116.00
Lead ($/ton)* LME 2,126.00 -29.00 -1.35 2,242.00 2,119.00
Zinc ($/ton)* LME 1,977.00 -32.50 -1.62 2,090.00 1,977.00
Nickel ($/ton)* LME 13,885 -280 -1.98 14,730 13,425
Crude oil ($/bbl.) NYMEX 97.44 -0.79 -0.80 99.08 91.47
Heating oil ($/gal.) NYMEX 2.9975 -0.0300 -0.99 3.0598 2.8905
RBOBgasoline ($/gal.) NYMEX 2.6409 -0.0334 -1.25 2.8043 2.6033
Natural gas ($/mmBtu) NYMEX 4.924 -0.087 -1.74 5.4860 3.9360
Brent crude ($/bbl.) ICE-EU 105.90 -1.40 -1.30 110.79 104.75
Gas oil ($/ton) ICE-EU 905.25 -13.25 -1.44 943.75 893.75
Sources: SIX Financial Information; WSJ Market Data Group
Currencies Londonclose onJan. 31
Per In
AMERICAS Per euro In euros U.S. dollar U.S. dollars
Argentina peso-a 10.8270 0.0924 8.0195 0.1247
Brazil real 3.2596 0.3068 2.4144 0.4142
Canada dollar 1.5015 0.6660 1.1121 0.8992
Chile peso 751.26 0.001331 556.46 0.001797
Colombia peso 2725.84 0.0003669 2019.01 0.0004953
Ecuador US dollar-f 1.3501 0.7407 1 1
Mexico peso-a 18.0384 0.0554 13.3609 0.0748
Peru sol 3.8079 0.2626 2.8205 0.3546
Uruguay peso-e 29.168 0.0343 21.605 0.0463
U.S. dollar 1.3501 0.7407 1 1
Venezuela bolivar 8.57 0.116644 6.35 0.157480
ASIA-PACIFIC
Australia dollar 1.5446 0.6474 1.1440 0.8741
1-mo. forward 1.5475 0.6462 1.1462 0.8724
3-mos. forward 1.5539 0.6435 1.1510 0.8688
6-mos. forward 1.5634 0.6396 1.1580 0.8636
China yuan 8.1809 0.1222 6.0595 0.1650
Hong Kong dollar 10.4827 0.0954 7.7645 0.1288
India rupee 84.6370 0.0118 62.6900 0.0160
Indonesia rupiah 16416 0.0000609 12159 0.0000822
Japan yen 138.08 0.007242 102.28 0.009778
1-mo. forward 138.06 0.007243 102.26 0.009779
3-mos. forward 138.01 0.007246 102.22 0.009782
6-mos. forward 137.93 0.007250 102.16 0.009788
Malaysia ringgit-c 4.5210 0.2212 3.3487 0.2986
NewZealand dollar 1.6692 0.5991 1.2364 0.8088
Pakistan rupee 142.455 0.0070 105.515 0.0095
Philippines peso 61.227 0.0163 45.351 0.0221
Singapore dollar 1.7245 0.5799 1.2773 0.7829
South Korea won 1459.31 0.0006853 1080.90 0.0009252
Taiwan dollar 40.962 0.02441 30.341 0.03296
Thailand baht 44.606 0.02242 33.040 0.03027
Per In
EUROPE Per euro In euros U.S. dollar U.S. dollars
Euro zone euro 1 1 0.7407 1.3501
1-mo. forward 1.0000 1.0000 0.7407 1.3501
3-mos. forward 1.0000 1.0000 0.7407 1.3502
6-mos. forward 0.9998 1.0002 0.7405 1.3504
Czech Rep. koruna-b 27.548 0.0363 20.404 0.0490
Denmark krone 7.4616 0.1340 5.5267 0.1809
Hungary forint 311.86 0.003207 230.99 0.004329
Norway krone 8.4776 0.1180 6.2793 0.1593
Poland zloty 4.2478 0.2354 3.1463 0.3178
Russia ruble-d 47.466 0.02107 35.158 0.02844
Sweden krona 8.8355 0.1132 6.5444 0.1528
Switzerland franc 1.2220 0.8183 0.9051 1.1048
1-mo. forward 1.2217 0.8185 0.9049 1.1051
3-mos. forward 1.2210 0.8190 0.9044 1.1057
6-mos. forward 1.2197 0.8199 0.9034 1.1069
Turkey lira 3.0544 0.3274 2.2623 0.4420
U.K. pound 0.8208 1.2183 0.6079 1.6449
1-mo. forward 0.8210 1.2181 0.6081 1.6445
3-mos. forward 0.8213 1.2175 0.6084 1.6437
6-mos. forward 0.8219 1.2167 0.6088 1.6426
MIDDLE EAST/AFRICA
Bahrain dinar 0.5089 1.9649 0.3770 2.6527
Egypt pound-a 9.3964 0.1064 6.9599 0.1437
Israel shekel 4.7492 0.2106 3.5177 0.2843
Jordan dinar 0.9543 1.0479 0.7069 1.4147
Kuwait dinar 0.3814 2.6219 0.2825 3.5398
Lebanon pound 2029.12 0.0004928 1502.95 0.0006654
Saudi Arabia riyal 5.0637 0.1975 3.7507 0.2666
South Africa rand 15.0569 0.0664 11.1525 0.0897
United Arab dirham 4.9588 0.2017 3.6730 0.2723
a-floating rate b-financial c-government rate c-commercial
rate d-Russian Central Bank rate.
Source: ICAPPlc.
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 9
WORLD NEWS
Killings Mar Afghan Campaigns Start
KABULAfghanistans presiden-
tial campaign kicked off Sunday un-
der stiff security, as the leading con-
tenders wooed crowds at their first
rallies and insurgents seeking to dis-
rupt the vote killed two campaigners.
Eleven candidates are vying to
succeed Hamid Karzai, who came to
power following the U.S.-led invasion
that ousted the Taliban regime in
2001, and who is constitutionally
barred from seeking another term.
If the April 5 elections are suc-
cessful, they would mark the first
democratic transfer of power in Af-
ghanistans history. If disrupted by
the Taliban, or ended with a con-
tested result, however, the vote could
plunge the country into a new round
of bloodshed just as the U.S. ends its
12-year combat mission and foreign
aid money dries up.
Yusuf Nuristani, the chairman of
the Afghan election commission,
warned against campaigning that
could stoke Afghanistans ethnic and
sectarian tensions, and urged the
presidential hopefuls not to attack
each other. The candidates should
not add to the misery of the Afghan
people further, Mr. Nuristani said.
Though Mr. Karzai hasnt backed
any successor, three of the contend-
ers are most likely to win his en-
dorsement: former finance minister
Ashraf Ghani, former foreign minis-
ter Zalmai Rassoul, and the presi-
dents brother Qayum Karzai. The
leading opposition candidate in the
race is former foreign minister Ab-
dullah Abdullah, who came in second
in the previous presidential election,
in 2009.
On Saturday, unidentified gun-
men in the western city of Herat as-
sassinated two campaigners for Mr.
Abdullah. There was no immediate
claim of responsibility. But the Tali-
ban have vowed to disrupt the cam-
paign and the election, dismissing
the vote as illegitimate because they
say the country remains under for-
eign occupation.
It was an unforgivable crime,
Mr. Abdullah said, adding he has dis-
cussed the assassination with Mr.
Karzai. People are awakening and
are interested in the election. Unfor-
tunately, in some corners of the
country, they are not able to partici-
pate due to insecurity.
Gen. Abdul Rahim Wardak, the
U.S.-educated former defense minis-
ter who is also running for president,
said, One thing we know for sure, is
this election has been targeted.
A senior U.S. military official said
he expected the Taliban to continue
assassinating government officials
and campaign workers, and to mount
more high-profile attacks in the capi-
tal, Kabul. Helping the insurgents is
an unusually mild winter that has
cleared of snow the mountain passes
between Kabul and the Talibans ha-
vens in Pakistan, facilitating mili-
tants movements.
We joke about the snow: Give me
snow! Give me snow! the U.S. mili-
tary official said.
Underscoring the threat, the cam-
paigning began Sunday under tight
security, with armed troops manning
roadblocks at key intersections, ma-
chine guns mounted on pickup
trucks. The rallies were mostly held
indoors, at venues such as the gaudy
neon-lit wedding halls that have
mushroomed in Kabul in recent
years.
At a campaign event for Mr.
Ghani on Sunday, guards confiscated
pens, cigarettes and packets of snuff
from supporters as they passed
through metal detectors.
Like almost all candidates, Mr.
Ghani, a technocrat who holds a
Ph.D. from Columbia University and
once worked at the World Bank, has
chosen a multiethnic ticket to appeal
to a broad swath of the electorate.
While Mr. Ghani is a Pashtun, his
first vice-presidential candidate is
Uzbek leader Abdul Rashid Dostum,
a former warlord who backed Mr.
Karzai in 2009.
Our debates should be about na-
tional topics and national goals, Mr.
Ghani said at Sundays rally.
Haji Mohammad Hussein, a medi-
cal doctor from Kabul attending the
event, was yet to be convinced about
the wisdom of choosing Mr. Dostum
as Mr. Ghanis running mate. We
know him as a warlord, Mr. Hussein
said. He only understands weap-
ons.
At Mr. Abdullahs campaign rally,
tensions between various camps sup-
porting his candidacy were also on
display. Shortly before his second
vice-presidential candidate, ethnic
Hazara leader Mohammed Mohaqeq,
took to the podium, a mixed-gender
band, accompanied by a longhaired
male keyboard player on a Yamaha
performed a patriotic song, From
Bamiyan to Kandahar, Were All
Brothers.
Margherita Stancati, Sharifullah
Sahak and Ehsanullah Amiri
contributed to this article.
BY NATHAN HODGE
AND YAROSLAV TROFIMOV
Afghan security officials protect one of 11 presidential candidates, Ashraf Ghani, on Sunday in Kabul, as the campaign got under way ahead of the April 5 vote.
E
u
r
o
p
e
a
n
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r
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s
s
p
h
o
t
o
A
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y
EU Willing to Extend Difficult Iran Nuclear Talks
MUNICHThe six powers negoti-
ating a nuclear accord with Iran will
take the time they need to seal what
will be an extremely difficult ac-
cord even if that means extending
their six-month timeline, European
Union foreign-policy chief Catherine
Ashton said.
In an interview with The Wall
Street Journal on the sidelines of
the Munich Security Conference on
Sunday, Baroness Ashton, who is the
EUs chief negotiator, said a final
deal must make the international
community certain that Irans nu-
clear program is peaceful.
Iran and the six powers in No-
vember sealed an interim six-month
accord in which Iran pledged to
scale back some of its most ad-
vanced nuclear activities in ex-
change for an easing of Western
sanctions. The deal, which took af-
fect on Jan. 20, can be rolled over
after six months by mutual consent,
but Iranian and Western officials
have said they hope to seal a com-
prehensive accord within 180 days.
But everyone will say to you,
and rightly so, this is extremely dif-
ficult, she said. We have no guar-
antees in this and we will take the
time that is necessary to get this to
be the right agreement."
Privately, Western officials say
they are doubtful an accord can be
sealed by July, given the complexity
of the issues. They include an agree-
ment on whether Iran must either
stop most of its nuclear enrichment
activities, whether to physically dis-
mantle large parts of its nuclear in-
frastructure and what to do about
its planned plutonium heavy-water
reactor in Arak. Any deal also would
need to specify what enrichment
rights Tehran will have under a final
accord and how to phase out inter-
national sanctions against Iran.
Some diplomats think it could
take many months just to draw up a
draft text for serious negotiations.
Baroness Ashton is due to step down
as EU foreign-policy chief in October.
Iran says its nuclear program is
for purely civilian, energy purposes
and denies accusations it is seeking
to develop nuclear weapons. Iran is
negotiating with the so-called P5+1
groupthe five permanent members
of the United Nations Security Coun-
cil plus Germany. The first round of
talks for a final deal will take place
in Vienna on Feb. 18.
An extension of the talks could
escalate pressure in the U.S. Con-
gress for fresh Iran sanctions and
would mean the continuation of ne-
gotiations during the American mid-
term vote in November. An exten-
sion could also strengthen the hand
of hard-liners in Iran since it would
delay the broad sanctions relief the
Iranian government was relying on
to boost the economy.
Sen. Chris Murphy (D., Conn.)
said Sunday in Munich he was confi-
dent the U.S. Senate wont vote to
approve new Iran sanctions any time
soon. But he warned that if there
were signs Tehran was using the
talks to stall for time that window
will not last long.
Baroness Ashton said the main
focus of the next round of talks will
be the format and timeline for the
talks. Both she and U.S. Secretary of
State John Kerry met this weekend
in Munich with Iranian Foreign Min-
ister Javad Zarif. Mr. Zarif described
his meeting with Mr. Kerry on Sun-
day morning as good but gave no
details.
But a senior U.S. official said that
during the meeting Mr. Kerry
stressed the importance of both
sides standing by their commit-
ments and made clear the U.S. would
continue enforcing existing sanc-
tions. Iran reacted angrily in Decem-
ber when the U.S. expanded its list
of nuclear-related sanctions targets,
saying it ran against the spirit of the
November agreement.
According to the official, Mr.
Kerry also raised his concerns about
the delay in transporting chemical
weapons out of Syria, but Mr. Zarif
said he didnt have the authority to
discuss Syria.
On Saturday, Mr. Kerry urged
Russia and others to press Syria to
fulfill commitments to give up its
chemical arsenal, saying Damascus
needed to stop making excuses.
Just 4% of Syrias 530 metric
tons of most-dangerous chemicals
have been removed so far, despite a
Dec. 31, 2013, deadline for removing
all of them, according to U.S. offi-
cials.
Speaking Sunday afternoon at
the Munich conference, Mr. Zarif
said Tehran was committed to seek-
ing a final nuclear deal, saying fail-
ure would be a disaster.
What I can promise is that we
will go to those negotiations with
the political will and good faith to
reach an agreement, he said.
Iranian officials have said repeat-
edly they arent prepared to see the
countrys nuclear infrastructure dis-
mantled as part of a final deal,
whereas Israel and some members
of Congress are calling for many of
the nearly 20,000 centrifuges Iran
has to be scrapped.
BY LAURENCE NORMAN
Baroness Catherine Ashton
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20 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
Sector EquityBiotechnology
Fundsthat invest primarilyintheequitiesof companiesthat focusonbiotechnology. At
least 75% of total assets are invested in equities. Ranked on % total return (dividends
reinvested) inEuros for one year ending January 31, 2014
Leading 10Performers
FUND FUND LEGAL %Return in $US **
RATING* NAME FUNDMGM'T CO. CURR. BASE YTD 1-YR 2-YR 5-YR
3 Adamant Zurcher CHFCHE 13.94 75.97 44.07 NS
Global Biotech A Kantonalbank
4 BBBiotech Bellevue Asset CHFCHE 12.47 74.29 51.53 26.94
AGOrd Management, LLC
4 AXA AXAInvestment GBPGBR 13.00 72.44 44.29 23.66
Framlington Biotech RAcc Managers UK Ltd.
4 Franklin Franklin Templeton USDLUX 15.06 72.17 43.47 25.76
Biotechnology Disc AAcc $ Investment Funds
3 DekaLux-BioTech Deka International EURLUX 12.03 70.32 42.41 22.70
CF S.A.
3 BBBiotech B Bellevue Asset USDLUX 13.20 70.32 43.27 NS
USD Management AG
3 CS SICAV Credit Suisse USDLUX 13.00 68.63 44.91 23.27
(Lux) Eq Biotechnology B (Luxembourg) S.A.
5 SEBConcept SEBAsset EURLUX 8.55 67.40 39.29 23.94
BioTech D Management S.A.
3 UBS (Lux) EF UBS Fund USDLUX 17.81 67.36 44.84 25.44
Biotech (USD) P-acc Management (Luxembourg) S.A.
3 CCRActions CCRAsset EURFRA 15.77 67.03 41.93 19.38
Biotech A Management
NOTE: Changes in currency rates will affect performance and rankings. Source: Morningstar, Ltd
KEY: ** 2YRand 5YRperformance is annualized 1 Olivers Yard, 55-71 City Road
NA-not available due to incomplete data; London EC1Y 1HQUnited Kingdom
NS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com
Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001
MARKETS
Fund Scorecard
U.S Investors Brace
For a Bumpy Ride
demand for some assets and boost-
ing volatility, or price swings.
In January, the S&P 500 aver-
aged daily stock swings of plus or
minus 0.6%. That is an 11% increase
over the average daily move in
2013.
I expect a lot of up and down in
the first half of the year, said
Wayne Wilbanks, chief investment
officer at Wilbanks, Smith, Thomas,
which manages about $2.5 billion
out of Norfolk, Va.
In particular, Mr. Wilbanks likes
big technology companies that pay
dividends, such as Cisco Systems
Inc. and Apple Inc., and industrial
dividend payers such as Caterpillar
Inc. and Deere & Co., he said. All
four lagged behind the market last
year, leaving them less vulnerable to
declines, Mr. Wilbanks said.
Cisco Systems rose 14% last year,
about half as much as the S&P 500.
Deere rose 5.7%, Apple 5.4% and
Caterpillar 0.5%. The dividends, to-
gether with the small increases last
year in the companies share prices,
reduce the risk of steep declines in
the investments, Mr. Wilbanks said.
Deere stock hasnt gone anywhere,
but it certainly isnt going to hurt
you to hold, said Mr. Wilbanks.
Barry James, president at James
Investment Research Inc., which
manages about $5 billion in assets,
said he wouldnt be surprised to see
stocks fall as much as 20% during
the year and recover to finish
slightly higher.
Mr. James said he looks for
stocks with strong earnings, and
that return cash to shareholders
through share buybacks and divi-
dends. He likes Deere and the U.S.
energy sector, which he thinks will
benefit from continued development
of the U.S. industry for shale oil and
gas.
I feel like a football coach, he
said. Back to the fundamentals,
kids.
Investors across markets are tak-
ing a more risk-averse stance.
Investors yanked more than
$900 million from bond funds dedi-
Continued from first page cated to the risky corporate debt
known as junk bonds in the week
ended Wednesday, according to fund
tracker Lipper. That was the biggest
outflow since late August.
January had 110 high-grade cor-
porate debt issues, down from 206
a year earlier, according to data pro-
vider Dealogic, amid signs that in-
vestors are starting to demand more
compensation.
As you dismantle quantitative
easing, you dismantle a lot of the
free ride, says Sages Mr. Smith.
For Mr. Smith, whose firm has a
heavy emphasis on fixed-income
portfolios, that means a tilt away
from bond investments that are vul-
nerable to rising interest rates. The
firm is focusing on short-term bond-
holdings and high-yield bonds that
havent had as big a run as the over-
all junk-bond market, such as bonds
issued by utilities.
But in a sign of how the market
has wrong-footed many investors
this year, the yield on the 10-year
U.S. Treasury note actually has
fallen to a recent 2.7% from 3% at
the end of 2013. Many Wall Street
forecasters expect the yield to rise
to 3.5% or so this year. Prices fall
when yields rise.
Lawrence Creatura, portfolio
manager of the $500 million Feder-
ated Clover Small Value Fund, said
last years market calm allowed for
a big expansion of stock multiples,
meaning an increase in the ratio of
stock prices to earnings.
Stock multiples last year ex-
panded the most since 2009, when
the market was recovering from the
depths of the financial crisis. The
price/earnings ratio on the S&P 500
over the next 12 months rose to 15.4
from 12.6, according to FactSet.
Mr. Creatura said he is looking at
the technology sector, which he said
should see strong growth as compa-
nies upgrade internal infrastructure.
In the middle innings of an eco-
nomic cycle, earnings growth should
come from more-cyclical sectors like
technology, he said.
Dan Strumpf
contributed to this article.
Asian Banks Branch Out
build up their business in foreign
loans, company representatives said.
A spokesman for MUFG said the
bank can lend at higher rates in
markets outside Japan, bolstering
returns. For example, in 2013 the
Japanese bank was among the lend-
ers on a $14.2 billion loan to Russias
largest oil producer, state-controlled
OAO Rosneft.
By contrast, French lender So-
cit Gnrale has slipped to 18th
place in 2013 from ninth place in
2007. Embattled U.K. lender Royal
Bank of Scotland Group PLC has
fallen to eighth place from third and
Dutch bank ING Groep NV has fallen
to 20th from 13th.
RBS declined to comment. A
spokeswoman for ING said the
league table moves reflect market
conditions. A spokeswoman for So-
cit Gnrale couldnt immediately
comment.
European banks, in particular,
are still trying to deleverage, said
Derek Ovington, CLSAs head of re-
gional banks in Asia. He also said
that U.K.-listed but Asia-focused
lenders such as HSBC Holdings PLC
and Standard Chartered PLC con-
tinue to grow.
Analysis by the Bank for Interna-
tional Settlements, the central bank-
ers bank, shows that at the end of
September, Asian banks were ex-
panding their cross-border lending
such as trade finance and loans
across the region, while U.S. banks
scaled back exposure to emerging
markets and Europeans held steady.
According to the BIS, the share of
emerging-market loans for non-U.S.
and European banksled by banks
in Asia, excluding Japanrose to
12.8% at the end of September from
11.6% at the end of 2012.
But for the banks, this expansion
isnt without risk. A move by the
U.S. Federal Reserve to slow the
pace of its huge bond-buying pro-
gram, which had the side effect of
supplying Asia with cheap credit,
could slow economic growth across
Continued from page 15 the region. Investors have dumped
currencies across emerging markets
from Russia to South Africa to India
and Indonesia.
That volatility could strain those
companies exposed to market
swings and hinder their ability to re-
pay debt.
We have become a bit more cau-
tious about bank risk in emerging
Asia with the impact of Fed taper-
ing, said Mark Young, head of Asia-
Pacific financial institutions at Fitch
Ratings. Over the longer term you
could see lower ratings, he said. A
credit-rating downgrade could push
up the banks own cost of borrowing
and trigger a pullback in lending.
Chinas slowing growth is also
unnerving investors. A gauge of
manufacturing activity released in
January showed its weakest level in
six months, helping to cool demand
for commodities. Iron-ore prices
have fallen to six-month lows.
Japanese banks still are the big-
gest lenders from the region. Since
the fourth quarter of 2008, foreign
lending by Japanese banksbuoyed
by the countrys ultra-loose mone-
tary policyhas increased 34% to $3
trillion, according to an analysis by
the International Institute of Fi-
nance.
In that period Japanese lending
across emerging Asia and the Pacific
grew 95%, while lending to Latin
American and Caribbean borrowers
jumped 140%. Loans to developed
countries rose 25%.
Chinese banks are lending in part
to fuel trade and growth by domes-
tic companies. Foreign lending by
Chinas four largest banks has grown
to $378 billion since 2008, $120 bil-
lion of which was lent in 2013 alone.
We are seeing the international
loan books of the mainland Chinese
banks grow very, very quickly, but
off a small base, said CLSAs Mr.
Ovington.
The Chinese banks didnt re-
spond to requests for comment on
Thursday, the eve of Chinas Lunar
New Year holiday.
Southeast Asian banks are also
building their book, in particular on
the regional stage. Singapore-based
OCBC Bank increased its foreign
lending by 22% in the year to Sept.
30well ahead of the 11% growth in
lending in Singapore. Overseas loans
now make up 50% of the banks total
gross loans, compared with 44%
three years ago. The banks focus is
on Malaysia, Indonesia and Greater
China where margins are more at-
tractive.
Rival DBS increased its loan book
by 19% on year to Sept. 30around
55% of which came from outside Sin-
gapore. A $7 billion loan last year
for Swiss oil-and-gas company Vitol
Group SA featured DBS, according
to Dealogic data.
The key to our growth is our
ability to leverage our Asian under-
standing and connect clients across
the region, said Chng Sok Hui, chief
financial officer for DBS.
Some of the biggest financings in
2013 involved commodity and en-
ergy producers. A $17 billion credit
facility arranged for trading and
mining titan Glencore Xstrata PLC
last year included the biggest Japa-
nese lenders along with Australia &
New Zealand Banking Group Ltd.
While some Asian lenders have
long been present in global markets,
the push overseas is expected to
continue.
When the Asian banks start
growing in a new market, they go
for the whole hog, said Crdit Agri-
coles Mr. Sodhi.
Mike Cherney and Atsuko Fukase
contributed to this article.
J.P. Morgan Chase
Citigroup
Royal Bank of Scotland
Bank of America
BNP Paribas
Calyon Corporate & Investment Bank
Barclays Bank
Deutsche Bank
Socit Gnrale
ABN AMRO Bank N.V.
HSBC
Credit Suisse
ING Groep
Dresdner Bank
Goldman Sachs Group
UniCredit
Mitsubishi UFJ Financial Group
Natixis
Banco Bilbao Vizcaya Argentaria
Morgan Stanley
$1,088
1,035
696
640
614
540
521
481
464
417
382
369
355
325
313
290
281
237
232
230
J.P. Morgan Chase
Bank of America
Citigroup
Barclays Bank
Wells Fargo
Deutsche Bank
Mitsubishi UFJ Financial Group
Royal Bank of Scotland
BNP Paribas
HSBC
Morgan Stanley
Credit Suisse
RBC Capital Markets
Goldman Sachs Group
Crdit Agricole Corporate and Investment Bank
Mizuho Financial
Sumitomo Mitsui Financial Group
Socit Gnrale
UBS
ING Groep
$1,459
1,396
1,028
831
673
645
582
550
548
477
471
449
446
405
348
342
294
288
248
204
Source: Thomson Reuters The Wall Street Journal
Top 20 Global Lenders
Asian banks are climbing the ranks for global lending. In 2007, only one bank from the region made the top 20 list. In 2013,
three made the list, all from Japan.
2007 2013
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Ranked higher in 2013 Ranked lower Ranked the same New entrant to 2013 top 20 Asian lenders in bold
Bank Bank
Total amount lent,
in billions of dollars
Total amount lent,
in billions of dollars
Rank
Since the fourth quarter
of 2008, foreign lending
by Japanese banks
has increased 34%
to $3 trillion.
10 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
In Mexico, Bloody Struggle
Erupts Over Avocado Trade
T
he entrance to this remote and seem-
ingly peaceful mountain town is
marked by a statue of an avocado. But
behind the serenity is a violent criminal
gang that has made millions of dollars ex-
torting avocado farmers and packinghouse
operators while strong-arming groves from
landowners, said residents and local offi-
cials who recently began fighting back.
Four of every five avocados sold in the
U.S. originate in Tanctaros home state of
Michoacn, the only Mexican state certified
by the U.S. Department of Agriculture to ex-
port avocados, mostly the creamy, dip-
friendly Hass variety that locals here call
oro verde or green gold.
Michoacn, which last year exported
more than 500,000 tons of avocado to the
U.S., expects a $1 billion haul in 2014.
Tanctaro alone produced 157,000 tons last
year, said Jose Ayala, a local agricultural of-
ficial, more than any other municipality in
the world.
Some say the fruit was tainted. They
are blood avocados, said Raul Benitez,
a security expert at UNAM, the National
Autonomous University of Mexico in
Mexico City. They are the Mexican equiva-
lent of the conflict diamonds that are sold
from war-torn parts of Africa.
In November, a band of Tanctaro resi-
dents wielding wooden clubs and old hunt-
ing rifles joined forces with well-armed vigi-
lantes from nearby towns to run off most
members of the Knights Templar, a criminal
gang allegedly involved in extortion, kidnap-
ping, rape and homicide throughout the
state.
The people were sick and tired of the
situation, said Mayor Salvador Torres, who
is now guarded round-the-clock by federal
police because of threats. A day didnt go
by that one didnt hear about extortion, a
kidnapping, or a violent death taking place
in the municipality.
The Knights Templar grew out of a drug
cartel known as La Familia and in the past
few years moved from trafficking to extor-
tion, stealing from every facet of this rich
agricultural state, local and federal officials
said. The gang took a cut of fertilizer and
pesticide sales and charged a fee for every
box of limes and avocados packed and
trucked away. Many towns were forced to
turn over 10% of municipal budgets.
They ran off a lot of people to other
states, a local official said, and in many
cases forced owners to turn over title to
their avocado groves.
One local official estimated that the
Knights Templar, named for a medieval
group of crusading warrior monks, made
$150 million a year extorting growers and
packers, as well as selling avocados from
the 2,025 hectares they took from farmers.
Tanctaro has about 22,660 hectares of avo-
cado groves, officials said.
The criminal enterprise may have raised
prices. Despite soaring production, the
wholesale price of avocados in Mexico has
jumped 22% from a year ago, according to
government data. Mexicos Economy Minis-
ter Ildefonso Guajardo said prices rose be-
cause of fluctuations in supply and demand
and not from violence afflicting the state.
Cuauhtmoc Montero, a major avocado
grower and former federal congressman,
said he believed that extortion added 10% to
the price of avocados consumed in the U.S.
Until the vigilantes sent the gang packing,
local grove owners were taxed at a yearly
rate of about $60 an acre, he said.
Avocado packers in Tanctaro include
dozens of mom-and-pop outfits that handle
fruit not considered export quality. The
town also has large-scale packers that send
tons of the best avocados to the U.S., Eu-
rope and Asia.
The manager of one hole-in-the-wall
packinghouse said he paid the Templar gang
a tax of one cent a kilo, or about some
$2,200 a month. The largest packers alleg-
edly paid $15,000 a month, Mr. Montero
said.
Tanctaros avocado growers and towns-
people rose up in arms shortly after the
early November kidnapping of Maria Irene
Villanueva, the daughter of a local preacher
and avocado grower, residents said. The
young woman was raped and killed as her
father prepared to transfer title of his grove
to a gang capo after failing to raise a
$600,000 ransom, according to the mayor,
family relatives and two friends of the
womans father.
We believe in the Lords justice and
BY JOS DE CRDOBA
Tanctaro, Mexico
Tanctaro Mayor Salvador Torres, above left, and vigilante leader Jose Manuel Mireles, right. Four of every five avocados sold in the U.S. originate in Tanctaros home state of Michoacn.
IN DEPTH
MEXI CO
U. S.
Paci c Ocean
Gul f of
Mexi co
500 miles
500 km
Mexico
City
Tanctaro
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THE WALL STREET JOURNAL. Monday, February 3, 2014 | 19
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nARIXABSOLUTERETURNINVESTABLEINDEX
Feri Institutional Advisors, www.feri.de
ARIXComposite Gross USD OT OT GBR 12/31.00 USD1602.40 8.0 8.0 6.7
nCGPortfolioFundLtd
NAV OT OT CYM 06/07.00 GBP25839.68 5.3 10.9 9.8
Bad Loans Keep Rising
At Big Spanish Banks
MADRIDThree of Spains big-
gest banks are still paying for the
countrys real-estate bust.
In earnings released Friday, the
lendersBanco Bilbao Vizcaya Ar-
gentaria SA, Caixabank SA and
Banco Popular SAshowed signifi-
cant improvement in their capital
strength since the euro-zone finan-
cial crisis but reported rising bad
loans and falling net interest income
in the final quarter of 2013. Net in-
terest income is the difference be-
tween what banks earn from lending
and the amount they pay for depos-
its.
BBVA, Spains second-biggest
bank by market value, reported a
fourth-quarter net loss of 849 mil-
lion ($1.15 billion), compared with a
profit of 20 million a year earlier,
The latest results included a charge
related to a sale of shares in a Chi-
nese bank. Analysts had forecast a
fourth-quarter net loss of 765 mil-
lion.
BBVA said net interest income
fell in the fourth quarter to 3.8 bil-
lion from 3.9 billion a year earlier.
The lender said 6.8% of its loans
were more than 90 days overdue at
the end of 2013, up from 5.1% a year
earlier.
The bank set aside less than half
the amount it did a year earlier to
cover souring loans, making 1.2 bil-
lion in loan-loss provisions in the
fourth quarter compared with 2.7
billion a year earlier.
For the full year, the bank re-
ported net profit of 2.2 billion, up
33% from 2012.
In October, BBVA cut its stake in
China Citic Bank Corp. to just be-
low 10%, a move meant to bolster its
capital ahead of balance-sheet tests
by European authorities. The bank
said at the time the sale would trig-
ger a 2.3 billion hit to its re-
sults.The sale generated an account-
ing loss but freed up capital, giving
the bank a 9.8% capital ratio by the
end of the year under new Basel III
rules.
The results come after Spains
largest bank, Banco Santander SA,
said Thursday that fourth-quarter
net profit more than doubled as it
set aside a smaller proportion of its
earnings to cover loan losses, offset-
ting lower net interest income.
Caixabank, Spains third-largest
bank, said its rate of bad loans as a
portion of total lending in the
fourth quarter jumped to 11.66%
from 8.63% a year earlier and were
up slightly from the previous pe-
riod.
Overall, bad loans held by Span-
ish banks have continued to climb
since February 2013, representing
an all-time high of 13.1% of total
lending in November.
Caixabank said fourth-quarter
net profit fell 21% from a year ear-
lier, to 45 million. Over the full
year, net profit more than doubled
to 503 million.
Its fourth-quarter net interest
margin slipped to 1.02 billion from
1.03 billion the previous year.
Banco Popular said it swung to a
net profit of 98 million in the
fourth quarter, from a loss of 2.7
billion in the year-earlier period, af-
ter cleaning up its real-estate assets.
Still, Banco Popular also posted a
big increase in souring loans, to
14.27% in the fourth quarter from
8.98% a year earlier. Its fourth-quar-
ter net interest margin fell 3.9%, to
590.9 million, from 615 million
the previous year
In Madrid, BBVAs shares rose
0.2%, Caixabank gained 1.4% and
Banco Popular fell 2.1%.
BBVAs net profit in Spain nearly
halved in 2013, while in Mexico,
where the lender has its biggest di-
vision, it rose 6.8% year over year.
In its domestic market, bad loans
jumped to 6.4% in 2013 from 4.1%
the year before.
The rate climbs to 10.3% if
soured loans from BBVAs Spanish
real-estate unit are included, the
lender said Friday. The real-estate
division includes bad loans to real-
estate developers.
BBVA Chief Operating Officer An-
gel Cano said Friday that the bad-
loan ratio was beginning to stabi-
lize.
The worst has passed, Mr.
Cano said of the outlook for Spain.
He said BBVA was open to selling its
real-estate servicing unit.
Other Spanish banks, such as
Santander, have sold property-man-
agement units amid an uptick in in-
terest from foreign investors in
Spains distressed real-estate mar-
ket.
BY JEANNETTE NEUMANN
Data provided by:
MARKETS
nALEXANDRAINVESTMENTMANAGEMENT
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nBANCINTERNACIONAL D'ANDORRA. BANCAMORA.
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NAV OT OT CYM 06/07 GBP 25839.68 5.3 10.9 9.8
nCHARTEREDASSETMANAGEMENTPTELTD- TEL NO: 65-6835-8866
Fax No: 65-68358865, Website: www.cam.com.sg, Email: cam@cam.com.sg
CAM-GTF Limited OT OT MUS 01/24 USD 331396.07 -0.2 -20.1 -0.4
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Republikas square 2a, Riga, LV-1522, Latvia
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internet: www.dje.lu email: info@dje.luphone:+0035226925220fax:+0035226925252
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BBVAs net interest income slipped during the fourth quarter.
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THE WALL STREET JOURNAL. Monday, February 3, 2014 | 11
IN DEPTH
leave everything in his hands, said Juan
Villanueva, a cousin of the young woman.
One day he will act, and when he balances
accounts, he will balance them well.
Outraged after the discovery of the
young womans body, farmers and pickers
allied with dozens of armed vigilantes from
self-defense groups that have sprung up in
nearby towns. The farmers and vigilantes
prevailed during a November firefight in the
nearby town of Pareo that ended with the
killing of two alleged Templar gunmen, au-
thorities said.
A few days later, Jose Manuel Mireles, a
vigilante leader and doctor, exhorted resi-
dents to fight until the gangsters were
driven out of the state.
We can choose the way we will die, Dr.
Mireles told a crowd of growers and packers
in the town square, standing up, and not
tied meekly with our hands tied behind our
backs waiting to be tortured and sliced up
into little pieces like animals.
In the first days after their victory, doz-
ens of vigilantes built sandbag check points
at the entrances to town. Wearing bandan-
nas to hide their faces, local men and boys
in white T-shirts manned the posts over-
night.
About 1,000 people from outlying ham-
lets took temporary refuge in a religious
center run by the towns Catholic church,
fearing the Templars return.
Two of Tanctaros export-certified pack-
ing plants closed for nearly six weeks after
the vigilantes took over the town, and the
USDA removed its two inspectors from the
plants for safety.
Mexican and U.S. officials collaborate to
make sure exported avocados are pest- and
disease-free. Officials from the Animal and
Plant Health Inspection Service, the USDA
unit responsible for inspecting food enter-
ing the U.S., maintains employees at pack-
ing plants and conducts twice-a-year in-
spections of avocado groves.
A U.S. official said the government has
heard reports of extortion in Michoacns
avocado industry. We are in uncharted wa-
ters, the official said, regarding U.S. policy
on the matter.
The uprising in Tanctaro, which has a
population of about 30,000, followed rebel-
lions in other towns where residents tired
of the governments inability to boot the
gang.
These days, residents of Tanctaro said,
kidnapping and extortion have nearly disap-
peared. The sandbag checkpoints remain,
along with an uneasy calm. They could still
come back, whispered one packinghouse
manager.
Two weeks ago, Mexicos President En-
rique Pea Nieto appointed Alfredo Castillo,
a close political ally, to serve as his delegate
and Michoacns de facto governor, holding
the power to unilaterally take security and
economic measures. Mr. Castillo has said
the governments goal is to restore peace by
working to dismantle the gang.
Last Monday, the federal government
signed a treaty with vigilante chiefs that al-
lows members of the groups to eventually
join rural and town police. In return, the
vigilantes promised to provide a list of its
members and to register their weapons, in-
cluding those illegal to possess here.
Most vigilantes say they are loath to give
up their weapons because they have little
trust in the governments ability to disman-
tle the gang. Federal authorities and sol-
diers failed during years of fighting to do
what civilian vigilantes have done in many
places over a few months.
Since signing the agreement, the vigilan-
tes have continued their campaign, taking
control of at least two more towns.
But the Templars remain entrenched in
many parts of Michoacn, including Urua-
pan, the states largest avocado growing re-
gion after Tanctaro, and where most avo-
cado packinghouses certified for U.S. export
are located.
A few hundred meters from Tanctaros
avocado statue are the burned ruins of a
massive packinghouse. The skeletons of two
burned trailer trucks rust in the parking lot.
A second burned packinghouse is on the
other side of town, three blocks from the
towns picturesque plaza and colonial-era
church
Both packinghouses were set on fire on
the same April night last year. Residents
and local officials said they believed they
became targets after workers there didnt
participate in Templar-organized protests
against the vigilantes who first surfaced a
year ago. No one has been charged in the
fires.
The owners of the two packinghouses,
Empacadora Agroexport S.A. de C.V. and
Mevi Avocados, which both operate distri-
bution facilities in Pharr, Texas, declined to
comment.
Sergio Guerrero, the president of the As-
sociation of Avocado Producers and Export
Packers of Mexico, or APEAM, declined to
comment on the alleged extortion or the
packinghouse fires.
Many growers and packers fear retribu-
tion by the Knights Templar. Mr. Guerreros
predecessor at APEAM, Alejandro Alvarez,
was shot and wounded in his car by un-
known men two years ago. Mr. Alvarez and
his family left Mexico, growers said.
In 2009, the mayor and town council re-
signed under pressure from drug traffickers
who wanted more of the towns resources,
Mr. Montero said. Gustavo Sanchez, a
schoolteacher, became mayor and took over
administration of the town. He fired
Tanctaros 60-person police force soon af-
ter taking office. In Mexico, corrupt local
police often work closely with criminal
gangs.
A year later, Mr. Sanchez and his chief of
staff were found stoned to death, authori-
ties said. They were blindfolded and their
hands tied behind their backs.
In January, Estanislao Beltrana vigi-
lante leader nicknamed Comandante Pitufo,
or Commander Smurf, for his Santa-Claus
beardheld a meeting in the town square
to return about 260 hectares of groves to 25
families whose land had been taken.
We took the groves back from the Tem-
plars and gave them to their rightful own-
ers, said Jess Bucio, a grower, and head of
the local vigilantes. We knew who they are
and what happened to them.
The rest of the stolen acreage will even-
tually be returned to former owners, he
said.
One avocado farmer, Alfonso III Cevallos,
told how two years ago, the gang killed
three of his brothers, his father and two un-
cles, driving his family from their land. He
has since reclaimed 120 hectares of his avo-
cado groves.
Six people they took away, Mr. Cevallos
said. I would return those properties if I
could get those lives back.
J
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Online
>>
See more photos and watch a video about the
battle in Tanctaro at WSJ.com/World.
*Through October
Sources: Mexicos Ministry of Economy (exports); USDA (consumption) The Wall Street Journal
Going Green
Four of every ve avocados sold in the U.S. originate in Michoacn, the
only Mexican state certied by the U.S. Department of Agriculture to
export the creamy, dip-friendly Hass variety that local growers call oro
verde or green gold.
Tons of avocados exported
to the U.S. from Mexico
Per capita consumption
of avocados in the U.S.
500
0
100
200
300
400
thousand tons
03 05 07 09 11 13
2013: 457,567*
2.0
0
0.4
0.8
1.2
1.6
pounds a year
03 05 07 09 11
2011: 1.673
A day didnt go by that one didnt hear about
extortion, a kidnapping or a violent death taking
place in the municipality, said Mayor Torres.
Arson remains, above, and avocado packing, left.
18 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
BUSINESS & FINANCE
Frontier Markets Emerge as Big Draws
Some investors are finding ref-
uge from the recent emerging-mar-
kets turbulence in an unexpected
place: even less-developed econo-
mies.
These frontier markets are lur-
ing money managers who are will-
ing to delve into smaller markets
with more difficult trading condi-
tions in order to gain exposure to
robust economic growth.
Because they are off the beaten
path, frontier markets havent been
swept up in the selloff that has
pummeled emerging markets. Coun-
tries such as Nigeria, Pakistan and
Bangladesh didnt see much of the
cash that poured into emerging
markets after the financial crisis,
when low-interest-rate policies in
richer economies sent investors in
search of better returns in the de-
veloping world.
Instead, frontier markets have
seen a steady trickle of investment
from fund managers hoping to ride
years of rapid growth. As a result,
these economies have come through
relatively unscathed even as inves-
tors pull out of larger emerging
markets such as Turkey and South
Africa.
The MSCI Frontier Market Index
is up 1.3% this year, compared with
a 6.6% decline in the MSCI Emerging
Market Index. Last year, frontier
markets rose 16%, while emerging
markets fell 12%.
Funds that buy frontier stocks in
January drew in $244 million
through Jan. 29, the most since Oc-
tober, according to EPFR Global.
Over the same period, investors
yanked $11.6 billion from emerging-
market funds.
Frontier markets are very useful
diversifiers becausethere are fewer
links between frontier markets and
the international capital markets,
says Sean Lynch, global investment
strategist at Wells Fargo Private
Bank, a Wells Fargo & Co. unit that
manages $170 billion. We are at-
tracted by the long-term growth
prospects and the consumption-
growth story.
Mr. Lynch recently began recom-
mending that clients own stocks in
frontier markets such as Vietnam
and Nigeria.
Bets on frontier markets often
take longer to pay off. One key fac-
tor: Frontier markets are thinly
traded, meaning it usually takes lon-
ger to get out of a position than it
would in emerging or developed
markets.
Investors buying stocks in fron-
tier markets say conditions are right
for these economies to see years of
steady growth. Most have young
populations, an important factor in
the early rise of emerging markets
such as Brazil and China. Shares of
consumer-products companies, and
banks in particular, should benefit
as more people in frontier markets
make their way into the middle
class, these investors say.
Emerging markets that rely
heavily on China have suffered this
year. But frontier markets have been
less affected by the slowdown in
Chinas growth rate, partly because
growth in domestic consumption is
a more important factor in their
economies expansion.
The International Monetary Fund
predicts most large frontier markets
will grow at least 5% this year, with
Nigerias economy forecast to grow
by 7.4% and Bangladeshs by 6%.
Some emerging markets are ex-
pected to see more moderate expan-
sion, with Brazil growing at 2.5%
and Turkey by 3.5%.
If the emerging-market selloff
deepens, there will be contagion,
but over the past few years weve
seen that correlation dispersing,
says Pradipta Chakrabortty, portfo-
lio manager of Harding Loevners
$335 million frontier emerging-mar-
kets fund, which is up 2.5% since the
beginning of 2014.
To be sure, some investors say
frontier economies could succumb
to the turmoil now engulfing emerg-
ing markets. Pakistans stock market
fell last Monday, at the start of the
latest emerging-market selloff,
though the countrys KSE 100 index
is still up 5.3% this year.
I wouldnt be aggressively buy-
ing until a major selloff occurs,
says Don Scott, managing director
of Global Frontiers Management, a
money manager that specializes in
frontier markets.
Mr. Scott owns stocks in West
Africa, the Balkans and Asia.
The eye-catching performance of
frontier markets in recent years has
started to draw in a wider range of
investors. While analysts say that
has helped bolster share prices in
those countries, some regulators are
sounding a warning bell. In its an-
nual letter in early January, the Fi-
nancial Industry Regulatory Author-
ity cited a lack of liquidity as a
reason why financial advisers
should be extremely cautious about
recommending frontier-market in-
vestments to their clients.
If increased regulatory scrutiny
discourages some investors, that
eventually could limit rallies in
these markets, market experts say.
BY DAN KEELER
Karachi Stock Exchange traders under display boards in early January. Pakistans market is up 5.3% this year.
E
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U.S. Widens Its Investigation Into Deals With Libya
Sources: MSCI (indexes); EPFR Global (ows); IMF (GDP) The Wall Street Journal *Through Friday
Survivors
Money managers are still investing in less-developed frontier markets even as emerging markets sell off.
Index performance since the
beginning of 2013*
Investor ows into frontier
stock funds
GDP growth forecasts for
select countries
0
1
2
3
4
5
6
7
8%
13 14 15 13 14 15 13 14 15
Nigeria Brazil U.S.
Frontier
Markets
22%
Emerging
Markets
11%
25
20
15
10
5
0
5
10
15
20
%
14 2013
$900
0
100
200
300
400
500
600
700
800
million
14 2013
Gadhafis network, and U.S. investi-
gators have been aiding in the ef-
fort.
At the center of the probe is a
group of middlemen, known as fix-
ers, operating in the Middle East,
London and elsewhere, people famil-
iar with the matter said. The fixers
established connections between in-
vestment firms and individuals with
ties to leaders in developing mar-
kets, including those in the Gadhafi
regime, these people said.
Even the offer of an improper
payment can create legal liability
for a company under the FCPA, re-
gardless of whether the transaction
is completed.
Not all of the firms under scru-
tiny have been directly contacted by
the Justice Department, although
prosecutors and regulators are shar-
ing information, people familiar
with the matter said. Prosecutors
and regulators havent accused any
of the companies of wrongdoing.
The investigation is looking at
fixers role in arranging deals be-
tween financial firms and Libyan of-
ficials, people familiar with the mat-
ter said. The fixers acted as
placement agents, similar to those
in the U.S. who have come under
scrutiny for steering investments to
large public retirement funds. In
some cases, the sovereign-wealth-
Continued from first page fund fixers collected a finders fee,
one of the people familiar with the
matter said.
Fees paid to placement agents
can be legal or can be considered
bribes, depending on the size of the
fees and the nature of the agents
relationship with the parties to the
transaction, legal experts said.
Prosecutors are trying to deter-
mine whether the fixers funneled il-
legal payments to Libyan officials in
the Gadhafi regime on behalf of fi-
nancial firms in return for business,
according to people familiar with
the matter.
Some of the fixers had connec-
tions to at least two of Gadhafis
sonsprimarily his second son, Seif
al-Islam Gadhafi, who was most in-
volved with the sovereign-invest-
ment fund, according to people fa-
miliar with the matter. The elder
Gadhafi was killed by Libyan revolu-
tionaries after he was toppled in
2011, ending his 42-year rule over
the country. Seif al-Islam Gadhafi
was captured by rebels.
The Libyan Investment Author-
ity, the nations sovereign-wealth
fund, invested amounts up to $1 bil-
lion in funds run by all these firms
except Blackstone, according to a
2010 audit of the sovereign-wealth
fund by KPMG LLP. The Libyan
funds estimated $60 billion in as-
sets was frozen under international
sanctions after the revolution.
Around the time of the 2008 fi-
nancial crisis, Blackstone was mov-
ing toward a deal with the Libyan
fund, with conversations taking
place among lower-level executives
at the private-equity firm about
whether to hire a placement agent
to obtain a potential investment of
Libyan money, according to people
familiar with the matter. But the
discussions dropped off and no deal
was reached, these people said.
Prosecutors and regulators also
are investigating transactions in-
volving real-estate investments in
Libya, according to people familiar
with the matter. Among the deals
being scrutinized is a $120 million
hotel project in which Och-Ziff had
a stakea joint venture involving
U.K.-based InterContinental Hotels
Group as well as a Libyan developer
and the Libyan Investment Author-
ity to build a luxury hotel in Trip-
oliaccording to people familiar
with the probe.
The hotel, which was slated to
open in the Libyan capital in 2010,
would have 351 rooms and stun-
ning views across the city and wa-
terfront, according to a 2007 news
release from InterContinental, but
construction stalled as fighting
broke out in the country. It still
hasnt been completed.
The U.S. lifted sanctions against
Libya in 2004 in return for the
countrys dismantling of its nuclear-
weapons program. By 2008, as the
financial crisis set in, Western firms
were jockeying for business there.
That year, then-Secretary of State
Condoleezza Rice visited Libya and
met with Col. Gadhafi in part to im-
prove the investment climate there
for U.S. companies, she said at the
time. The government advised com-
panies on investing in Libya, and
U.S. executives went there on a gov-
ernment-sponsored trade mission in
2010.
Blackstone Chief Executive Ste-
phen Schwarzman and Carlyle
Group LP Chief Executive David
Rubenstein attended the 2008 wed-
ding in Tripoli of Mustafa Zarti, the
deputy chief of the Libyan Invest-
ment Authority. There is no indica-
tion that Messrs. Schwarzman or
Rubenstein were involved in any
transactions that are under investi-
gation. Both declined through
spokesmen to comment.
Libya was fragileone could
feel it, said Gary Garrabrant, the
former chief executive of Equity In-
ternational, a Chicago-based real-
estate investment trust founded by
Sam Zell. Equity International con-
sidered deals in Libya, including the
InterContinental project, according
to Mr. Garrabrant.
There was a layer that existed
in Libya of people that in effect con-
trolled access, he said. They were
door openers.
Ultimately, the inability of Lib-
yan officials to answer basic ques-
tions about permits, labor and con-
struction caused his firm to back
away, he said, adding that the firms
discussions never advanced beyond
that point.
We could never get comfortable
with Libya as an institutional mar-
ket, said Mr. Garrabrant, who left
Equity International to start his own
firm, Jaguar Growth Partners, last
year.
Rob Copeland
and Liz Rappaport
contributed to this article.
At the center of the probe is a group of middlemen
known as fixers operating in the Middle East,
London and elsewhere.
12 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
OPINION: REVIEW & OUTLOOK
I
ts a sign of how lackluster the U.S.
economic recovery has been that
Thursdays news of 3.2% growth in
the fourth quarter of 2013 was greeted
with cheers and relief. The economy has
now grown at 2.5% or faster for three
quarters, and the pace in the last six
months is the fastest since 2003-2004
following George W. Bushs tax cuts on
capital gains, dividends and top incomes.
The best news is that growth all came
from private spending and investment,
not the artificial high of unsustainable
government spending. The official gov-
ernment contribution to growth was a
negative 0.9% due to falling defense out-
lays and the federal budget sequester. The
national-income accounts have a bias that
treats government spending as a net con-
tributor to growth even when its wasted.
Remember how the Keynesians pre-
dicted that less spending would mean
slower overall growth? Maybe the oppo-
site is true: When government shrinks,
the private economy has more money and
room to expand.
This is not to say that the report sug-
gests the economy has reached escape ve-
locity from the post-recession status quo.
The growth was largely
due to a healthy gain in
consumer spending (a
2.3% contribution) and net
exports (1.3%), especially
goods. The export story is
especially notable because
it reflects the rising com-
petitiveness of U.S. com-
panies. Some of this is due to lower en-
ergy costs and some to the self-discipline
that has been required during the lean
years since 2008.
On the other hand, private business in-
vestment contributed only 0.6% to
growth, and housing deducted from GDP
for the first time since 2010 (minus-0.3%).
Inventories also climbed, which may re-
duce growth this year unless overall
spending and investment accelerate.
The economy will need many more
quarters of 3% or more growth to get
anywhere close to the pace of most nor-
mal expansions. Growth since the reces-
sion ended in June 2009 has been sub-
stantially slower than in
any postwar expansion.
Growth over the last 18
quarters has averaged
2.4%, compared to an aver-
age of more than 4% in the
1980s boom and a little
less than 4% in the 1990s.
Growth for all of 2013 was
merely 1.9% despite the acceleration in
the last half.
The biggest looming threats to growth
this year include Chinas slowdown as it
tries to roll back its stimulus and deal
with credit problems. Theres also the
global adjustment to Federal Reserve ta-
pering, as were seeing in emerging mar-
kets and as investors pull out of riskier
assets.
The risks from Washington are fewer
than in recent years thanks to gridlock.
The main threats are new energy regula-
tion in the name of fighting global warm-
ing, and the continuing burden of Obama-
Care on small-business costs and hiring.
Congress ought to make a run at overrid-
ing the worst energy rules under the Con-
gressional Review Act, which would at
least put Senate Democrats on record in
an election year and might cause the Ad-
ministration to modify its worst plans.
President Obama could also help by
spending political capital on his three
pro-growth ideasfreer trade, and immi-
gration and tax reform. But Senate Major-
ity Leader Harry Reid has already issued
a veto on trade, and Mr. Obama wants to
raise some corporate taxes to make up for
cutting tax rates. Meanwhile, the U.S. cor-
porate tax rate continues to be by far the
highest in the developed world, driving
capital and job creation overseas.
Washington could do more to lift
growth, but given what that crowd be-
lieves, maybe gridlock is the best we can
hope for.
A
merican diplomacy, backed by the
threat of force, is why Syrias
chemical weapons are being elimi-
nated. That was President Obama in his
State of the Union Tuesday, boasting
about what he regards as one of his signa-
ture achievements from 2013. Well, not so
fast.
On Wednesday Reuters reported how
much of Syrias chemical stockpile has
been handed over for destruction: 4.1%.
That comes to about 59 tons of chemical
weapons surrendered out of a stockpile of
1,433 tons. Oh, and thats the stockpile
that the Bashar Assad regime officially de-
clared. In September we reported that U.S.
intelligence believes the regime disclosed
only 32 of an estimated 50 chemical sites.
The Reuters dispatch is based largely
on a forthcoming report from the Organi-
zation for the Prohibition of Chemical
Weapons, which last year won a Nobel
Peace Prize and is overseeing the removal
of the Syrian weapons. All the indications
are that actually the regime has been
sort of stalling on the implementation of
the agreement, a diplomatic source told
the news agency.
Theres a nonshocker. It was predict-
able that as soon as Assad became a part-
ner in his own chemical disarmament he
would seize every opportunity to post-
pone and prevaricate. The regime now in-
sists it needs armored vehicles and com-
munications equipment to move the
weapons. Next theyll demand that the
stockpile will only be moved when it has
new tanks and attack helicopters to escort
the convoys, or perhaps when the rebels
lay down their arms.
A State Department spokesman reacted
to this with the mildest of scoldings that
the delay is increasing the cost to na-
tions for shipping and other removal ef-
forts. Shipping costs? Dont expect the
Administration to trumpet these viola-
tions at the U.N., where China and Russia
have shielded Assad, or in Congress,
which played its own role in looking away
from the dictators predations. And no-
body should expect Mr. Obama to make
good on his pledgehollow even when he
made it in Septemberto renew the
threat of military action if diplomacy
fails.
But neither should the President get
away with treating his Syrian debacle as
a victory. Americans may want to wash
their hands of the Mideasts many imbro-
glios. But one consequence of inaction is
another despot who sleeps securely in the
knowledge that a diffident superpower
will exact no price on those who gas their
own people.
F
or those Americans who havent
started preparing for retirement,
President Obama is pitching a new
starter savings account. Whether he has
the legal authority to do so is a question
congressional staff are beginning to ex-
plore.
During his State of the Union address
and then again at a Wednesday event in
Pennsylvania, President Obama hailed his
new MyRA, a type of Roth Individual
Retirement Account, which allows after-
tax dollars to grow tax-free until retire-
ment. But the money in MyRAs will only
be invested in a government bond fund.
Unlike most private options for creat-
ing a Roth IRA, the government will allow
people to open a MyRA with as little as
$25, and to contribute as little as $5 in
regular payroll deductions. Theres no rea-
son private firms couldnt offer such small
accounts, but they dont because its not
profitable to do so. Such business can cost
more to service than its worth. The MyRA
is available only to those who dont have
a retirement plan through their employer
and whose household income is less than
$191,000 each year.
Mr. Obama is promising that the re-
turns will be the same as those enjoyed by
federal workers who invest in the Govern-
ment Securities Investment Fund, known
as the G Fund and offered via the Thrift
Savings Plan. This plan, like the Roth IRA,
was created by law. But Mr. Obama says
he can create, administratively, a new plan
for non-government work-
ers that will generate the
same returns as the G
Fund. Treasury Secretary
Jack Lew adds that unlike
federal workers who invest
in the G Fund, MyRA cus-
tomers will pay no fees.
Hmmm. Regulators are
always suspicious of investment fund
marketers who understate the costs of
their services. And even funds pegged to
stock or bond indexes have some ex-
penses. Auditing, custody arrangements,
call centers and the like cost money. With
accounts as small as $25, such expenses
would represent an unusually high per-
centage of the invested funds. Clearly
someone is going to pay for all this, but
who?
If Mr. Lew is accurate in his promise of
no fees, then the money would have to
come from a congressional appropriation.
But Mr. Obama has explicitly stated that
hes creating this fund unilaterally, and he
even made a show in Pennsylvania of sign-
ing the executive order, which he then
handed to Mr. Lew.
An Administration source tells us on
background that Treasury will administer
the MyRA program using
its longstanding author-
itygranted by Con-
gressto sell securities,
such as savings bonds, and
hire financial agents.
This suggests that Mr.
Obama intends to dip into
the funds Congress appro-
priates for Treasurys fiscal services. But
these are meant to support Treasurys op-
erations to fund the government, not as
an all-purpose pot of money to achieve
White House policy goals. Under this in-
terpretation, could Mr. Obama decide at
some point to double or triple the G-Fund
returns for MyRA investors? Geniusa
new subsidy plan that doesnt need the
approval of that pesky legislature.
The part about hiring financial
agents is also intriguing and may explain
why some in the financial industry have
responded warmly to the proposal. As-
suming the White House has learned not
to try to create its own ObamaFunds web-
site, one or more private firms could re-
ceive big federal contracts.
Wed say that decorum prevents Mr.
Lew from handing the business off to his
former colleagues at Citigroup, though
with this White House you never know.
Hiring investment agents also costs
money, which under the Constitution is
supposed to come from Congress. Maybe
Messrs. Lew and Obama simply figured
they could come up with this new plan,
claim its legal to pay for it out of existing
Treasury cash, and then dare Congress
not to fund it in the future. Will they call
it the Hope and Spare Change Fund?
The investors the Administration is tar-
geting for this fund are mostly young or
poor, and it only makes sense for them if
this really is a backdoor subsidy scheme.
The G Fund, which delivered a 1.89% re-
turn in 2013, is the last vehicle young
workers with a long time horizon should
be using to build a nest egg. They need as-
set growth, which comes over a lifetime
from investing in stocks.
So maybe this new fund really is about
funding government, and recruiting a new
class of investors willing to accept low re-
turns to underwrite Washington.
Less Government, Faster Growth
Assads Chemical Charade
Baracks New Bond Fund
Private spending
and investment lift
the U.S. economy
in the fourth quarter.
How to create a new
U.S. retirement
subsidy with no
vote in Congress.
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 17
BUSINESS & FINANCE
Bitcoin Market Makes
About-Face in China
Popular Chinese bitcoin exchange
BTC China has restored a facility al-
lowing customers to purchase bit-
coin by depositing yuan into the ex-
changes corporate bank account.
The move reverses a decision in
December to halt such deposits,
which the exchange made in re-
sponse to a Dec. 5 memo from the
Peoples Bank of China warning na-
tional financial institutions not to
trade in bitcoin. Those twin devel-
opments threatened to curtail vol-
umes on BTC China, which had
grown to become the biggest bitcoin
exchange in the world, and
prompted a drop of more than 50%
in bitcoins international price over
a two-week period in December.
Reached by phone in Shanghai,
BTC China Chief Executive Bobby
Lee said the change, which was im-
plemented Thursday, was made af-
ter the company studied the central
banks memo and other rules that
raised concerns about BTCs banking
activities. The exchange determined
that it was legally permitted to ac-
cept deposits into its corporate bank
account and to transfer those funds
into customer accounts, even
though banks themselves are barred
from engaging in bitcoin businesses
and speculation.
BTC China isnt making a high-
profile announcement about the
change, however, in part because it
is taking a cautious view of future
government actions. We are defi-
nitely in compliance with the Dec. 5
memo, but the government and the
government agencies can change the
rules anytime in the future, Mr. Lee
said. So we are going to take a
wait-and-see approach.
The timing, just ahead of Fri-
days start to the Lunar New Year
holiday period, was also important,
he said. It is going to be slow in
terms of trading value, so we just
wanted to make sure the system is
running smoothly, that there is not
too much pressure and that it
doesnt pick up too much attention.
Friday also marked the central
banks deadline by which banks and
payment processors were supposed
to cease all dealings in bitcoin.
Despite the quiet relaunch, word
of the policy reversal emerged in
the U.S. trading day Thursday after
a user cited it on a Reddit forum for
bitcoin enthusiasts and a story ap-
peared on news site Coindesk.
The move appears to have given
a modest lift to the international
price for bitcoin. Late Thursday in
New York, bitcoin was quoted at
$843.60, up from a low of $816.36
around 5 a.m. New York time, ac-
cording to an index that Coindesk
compiles from three exchanges. By
Sunday afternoon in New York, the
price had climbed to $860.09.
Authorities the world over are
trying to figure out how to regulate
commerce in the currency, with the
uncertainty surrounding that pro-
cess impeding its adoption andas
with the Chinese central banks
move in Decembersometimes
weighing on its price.
BY MICHAEL J. CASEY
Bitcoin coupons were distributed to Hong Kong pedestrians on Thursday, the eve of the Lunar New Year.
A
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Samsung Struggles to Roll Out New Smartphone OS
tying together of different devices
and functionsto serve as a unified
operating system that can coordi-
nate functions on every device a
consumer owns, including a smart-
phone, refrigerator, television set
and washing machine, all of which
the company makes.
Prototype Tizen devices look and
feel similar to those running An-
droid, with which it shares a com-
mon programming code base. But
those involved in the project say the
prototypes cant be judged as final
products, and Tizens central appeal
is that it allows for more customiza-
tion of the interface by carriers and
manufacturers than are possible
with Android.
Yet industry executives and ana-
lysts say it has been difficult to get
Tizen off the ground.
NTT DoCoMo Inc., Japans big-
gest telecommunications operator
and a close partner on Tizen, had
been gearing up to announce its first
Tizen smartphone in mid-January.
Continued from page 15 But on the day DoCoMo was set to
release its device, it instead shelved
its plans.
In the U.S., Sprint Corp. joined
the Tizen Association in May 2012,
saying it welcomed the broader con-
sumer choice offered by a new oper-
ating system. But Sprint left last
year.
Spains Telefnica SA also exited
the association, which oversees de-
velopment of the operating system,
and last year released the first com-
mercially available mobile phone
running on Mozillas Firefox, an-
other upstart operating system.
Frances Orange SA, another
partner that had planned to release
its first commercial Tizen smart-
phone alongside DoCoMo, said the
speed of development at Tizen is
not as mature as we may have ex-
pected at this point.
The carrier doesnt have a Tizen
device in its current smartphone
road map, he said.
Samsung responded that it would
evaluate product offerings in Japan
and France with the mobile opera-
tors. Samsung said the company and
its partners would offer a sneak
preview of the newest Tizen de-
vices this month on the sidelines of
Mobile World Congress, an annual
exposition in Barcelona for the
global mobile industry.
Samsungs difficulty in introduc-
ing its own operating system comes
amid a series of moves that appear
to have improved an increasingly
strained relationship with Google.
While Google and Samsung continue
to talk up the strength of their part-
nership in public, the two companies
increasingly were stepping on each
others toes, pushing Samsung to ac-
celerate its efforts to develop Tizen.
Samsung and Google last week
said they had signed a wide-ranging
cross-licensing deal on technology
patents that covers the companies
existing patents, as well as those
filed over the next 10 years.
Three days later, Google said it
would sell its Motorola Mobility unit
to Lenovo for $2.9 billion, ridding it-
self of a direct competitor to Sam-
sungs Android-powered smart-
phones.
With Google we have a close re-
lationship and we will continue to
be an important strategic partner
and collaborate together, a Sam-
sung spokesman said.
Samsungs software pitch to
third-party app developers, mean-
while, has been built around two of
its biggest assets: its clout and its
hefty cash reserve of $50 billion.
To attract interest in Tizen
among third-party app developers,
Samsung in October held its first de-
velopers conference, at a hotel in
San Francisco.
Samsung and Intel also are spon-
soring a contest that will dole out
$4 million in prizes for Tizen app
developers.
But for some of the biggest, most
established app makersthe ones
most critical to Tizens success
even cash incentives havent been
enough to stir interest in the fledg-
ling platform.
Several months ago, Samsung of-
fered the developers of one of An-
droids most popular apps, which
has been downloaded more than 50
million times, more than $100,000,
to adapt its app for Tizen, according
to a top executive at the app devel-
oper.
The company, which had collabo-
rated with Samsung closely in the
past, turned the Korean company
down, concluding that Samsungs
previous track record in software
made it unlikely that Tizen could
gather an audience, the person said.
Software developers just care
about the number of mobile phones
on the market, Tizen Association
Chairman Roy Sugimura said.
Mr. Sugimura said Tizen had
about 6,000 apps as of December, a
far cry from the nearly one million
apps on Apples iOS.
Mayumi Negishi in Tokyo,
Sam Schechner in Paris,
David Romn in Madrid
and Ryan Knutson in New York
contributed to this article.
Microsofts Likely CEO Pick:
FromIndiatoCompanyInsider
communication engineering at Ma-
nipal Institute of Technology, a hill-
side campus less than 10 kilometers
away from the Arabian Sea.
I remember asking him about
whats ahead, said Ganesh Prasad,
a former classmate who said that
Mr. Nadella responded that he
wanted to get involved in marketing
at a software companynamely Mi-
crosoft. His goal was so clear at
that time.
After moving to the U.S., he
earned a masters degree in com-
puter science from the University of
Wisconsin and a masters degree in
business administration from the
University of Chicago.
Once at Microsoft, Mr. Nadella
moved every few years, working on
businesses that include Windows
and the companys popular Office
suite of PC applications programs. In
more recent years, he has helped
lead efforts that include Microsofts
Bing search engine, its SQL Server
database and a cloud service called
Azure, whose technology underpins
Microsofts own online services and
is also used to run computing opera-
tions for other companies.
Mr. Nadella, who has two daugh-
ters, said in a 2012 interview that it
was very easy for them to under-
stand what he does for a living
when he was working on Bing. The
explanations grew tougher, he said,
when he began overseeing things
like cloud services and tools for de-
velopers. Now I tell them, I work
on Windows but its not the Win-
dows you see, and that they dont
really understand, Mr. Nadella said.
Many of his speeches, indeed, are
a bit hard to follow, chock-a-block
with terms like platform and in-
frastructure and Internet scale
that characterize what Mr. Nadella
calls Microsofts cloud operating
system. But he knows how to com-
municate well with engineers, for-
mer colleagues say.
Though far from flashy, Mr. Na-
della cuts a singular figure on Micro-
softs Redmond, Wash., campus,
where khakis, jeans and T-shirts
usually rule. He often wears a stylish
sports coat and has a close-cropped
haircut and designer eyeglasses,
which may switch from tortoise shell
to sleek metal depending on the day.
Continued from page 15 At Mr. Nadellas urging, Micro-
soft in the last couple of years has
stepped up its courting of startups
in Silicon Valley. Mr. Nadella takes
regular trips to the Bay Area to
speak with venture-capital investors
and technology executives, and has
spoken before groups of Indian-born
entrepreneurs.
In a sign of bending to the
startup lifestyle, at a 2012 Azure
event in San Francisco, Mr. Nadella
and other executives moved an exec-
utive presentation to 1 p.m. from 9
a.m. to accommodate night-owl tech
workers.
Mr. Nadella also sent a personal
apology to Israeli startup Soluto af-
ter the 50-person business-software
service wrote a blog post last year
about how an Azure outage took the
company offline, said Soluto CEO
Tomer Dvir.
His eagerness to show his bosses
a high activity level backfired at
least once. In August, Mr. Nadella
recalls, he initially declined when
Mr. Ballmer sent his executive team
an email to meet in his office.
I wanted to skip it, and show
my CEO that I have more important
things to do, something that was
M&A related, Mr. Nadella said in
October. Mr. Ballmers assistant told
Mr. Nadella to reconsider.
When he and the fellow execu-
tives met in the CEOs office, Mr.
Ballmer shocked them by telling
them that he was retiring.
Some of his former colleagues
question whether Mr. Nadellaor
any insider, for that mattercan
make the kind of tough changes that
may be required to boost the per-
ception of Microsoft.
Mr. Venkatesan disagrees, argu-
ing that an outsider would likely run
into conflicts with Microsofts cor-
porate culture. He believes Mr. Na-
della understands the organization
and has shown a willingness to take
risks.
Mr. Nadella, meanwhile, has said
success should be easy to judge.
Relevance comes with innovation
and marketplace success, he said in
October. The marketplace will
speak so loudly and so clearly that it
will not be ambiguous.
Sean McLain, R. Jai Krishna,
Dhanya Thoppil and Shefali Anand
contributed to this article.
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 13
OPINION
The blood libelthe medieval
myth that Jews require the blood
of Christians, especially of chil-
dren, and routinely slaughter them
to obtain ithas been in the news
to a remarkable degree lately.
Civic leaders in the village of
Glatigny in northeastern France
last month held a ceremony offi-
cially exonerating Raphael Levy, a
Jewish livestock trader, who had
been convicted of ritually murder-
ing a Christian child, and was tor-
tured and burned at the stake for
it in 1670.
Around the same time, in the
cathedral in the city of Sandomi-
erz, Poland, an 18th-century paint-
ing entitled Mord Rytualny (Rit-
ual Murder) was shown to the
public for the first time in nearly a
decade, with the approval of the
Catholic Church and Jewish lead-
ers, to educate the public. Finally,
there is the release of a new na-
tional survey by the Center for Re-
search on Prejudice at Warsaw
University that found that 13% of
Polish respondents agreed that
Jews use Christian blood for their
ritual purposes, up 3% from the
last poll in 2009. Meanwhile, only
35% rejected the charge outright, a
decline from 49% in 2009.
Eight hundred years after its
birth in Western Europe, the blood
libel myth, though repudiated a
thousand times over, remains a
part of Western and now world
culture. The blood libel today has
its believers in Europe, but its
greatest currency is in the Middle
East. In November of 2013, Sheikh
Raad Salah, leader of the northern
branch of the Islamic Movement in
Israel, was convicted by a Jerusa-
lem court of incitement to violence
for a sermon where, among other
things, he referred to children of
Europe whose blood was mixed
into the holy bread, according to
the indictment. His comments
were widely seen as a reference to
the blood libel myth that Jews use
Christian blood to make matzo,
though Mr. Salah insisted that his
remarks were misinterpreted.
More important than direct ex-
pressions of the blood libel is the
way the myth continues to serve
as an unconscious foundation for
anti-Semitic attitudes of Jews as
bloodsuckers, exploiters and
parasites, even among those who
may shun all superstition. The
public vindication of Raphael Levy
after 344 years, then, is not
merely a well-intentioned exercise,
but an extraordinarily meaningful
one.
On September 25, 1669, Levy
was racing home to celebrate Rosh
Hashanah, the Jewish New Year. In
the deep pocket of his tunic, he
carried a traditional rams horn or
shofar that he had purchased for
the synagogue service in his home-
town of Boulay that was to begin
at sundown.
That same day, Didier Le
Moyne, the three-year-old son of a
Glatigny wheelwright, disappeared
from a forest clearing while his
mother was doing the washing at
a spring just outside of town. His
remains, torn apart by animals,
were found two months later in
the forest. Whether he was mur-
dered or simply lost his way in the
woods was never determined.
Levy had a thoroughly solid al-
ibi and there were no reliable wit-
nesses against him, yet he was ar-
rested for the boys supposed
murder. Levy refused to confess or
convert to Christianity, first under
ordinary and then under ex-
traordinary torture ordered by
the court in the provincial capital
of Metz. Weights were attached to
feet and he was hoisted from the
ground by ropes and dropped. To
withstand the torture he prayed,
crying out and invoking the name
of God that he had told the truth,
according to the court record.
Levy told the priest who accompa-
nied him to the stake: I am a Jew,
I wish to die a Jew.
Soon after the trial, a royal de-
cree from Louis XIV put an end to
ritual-murder accusations in
France. The King forbids and pro-
hibits the acceptance or belief of
any such stories, the decree read,
citing a papal bull. Indeed several
popes, beginning with Innocent IV
in 1247, had condemned the
charge. But neither papal bulls nor
the proclamations of kings and
emperors could put an end to the
blood libeland the story of the
two families in the Glatigny case
testifies to that in the most per-
sonal way.
The case of Raphael Levy lived
on in the memories of the Lem-
oine (as they came to spell the
name) and Levy families, who re-
mained near their original home-
towns for centuries. Bernadette
Lemoine, a ninth-generation rela-
tive of Didier Le Moyne, became
an amateur historian in 2001 at
the age of 90 to examine the evi-
dence about the boys death. In
1669, Didiers parents had been
among Levys most insistent ac-
cusers. In court, the father had de-
clared Levy to be a new Herod,
thirsty for [the boys] blood in or-
der to sacrifice it to the inhuman-
ity and barbarity of his syna-
gogue.
According to Bernadette Lem-
oine, her own father and her en-
tire family had believed Raphael
Levy to be guilty. But, after exam-
ining the documents in a local ar-
chive, she concluded in a report
that her family had helped commit
a monumental injustice and per-
petuated it for three centuries.
She shared her conclusions with
an 11th-generation descendant of
Raphael Levy whom she met and
befriended some years before her
death.
The unveiling of the Ritual
Murder painting in Sandomierz is
another powerful exercise in con-
fronting a painful past. The paint-
ing, which depicts Jews killing
Christians, had been covered by a
red curtain for eight years due to
its offensive content. But the Cath-
olic Church, with the support of
Jewish leaders, decided that open-
ness rather than suppression was
the most constructive path.
Mounted next to the painting is a
plaque explaining that the notion
that Jews commit ritual murder is
a falsehood and one contrary to
the essence of the Jewish religion.
To uncover it, to show it pub-
licly, Polands chief Rabbi Michael
Schudrich told Agence France-
Press, is to show [the blood libel]
for what it is: a lie.
The last Jew actually charged
with ritual murder was a brick-fac-
tory clerk, Mendel Beilis, whose
1913 trial in Kiev attracted world-
wide attention. But the memory
and message of the blood libel still
run deep. At the ceremony in
Glatigny, with descendants of
Raphael Levy present, Mayor Vic-
tor Stallone hopefully declared,
Today, we are starting from
scratch. In history though, espe-
cially in the history of the blood li-
bel, there is, unfortunately, no
such thing.
Mr. Levin is a writer and pro-
ducer at ABCs Good Morning
America and is the author of A
Child of Christian Blood: Murder
and Conspiracy in Tsarist Rus-
siaThe Beilis Blood Libel, forth-
coming from Schocken Books.
The Exoneration of Raphael Levy
BY EDMUND LEVIN
My heart aches as I stand in
the light bulb aisle of Home De-
pot, looking for an LED light to re-
place the incandescent bulbs that
went out of U.S. production at the
beginning of this month. The
saleswoman asks if I prefer a soft
white or a warm whiteas though
between the two either is less
harsh.
I wonder if the members of
Congress who passed the Energy
Independence and Security Act of
2007, which slowly outlawed the
manufacture of incandescent
bulbs, have ever sat beneath an
LED or Compact Fluorescent Light
(CFL) bulb. If they have, they will
know that it induces a sort of
drowsy numbnesssomething I
learned recently when my room-
mate brought home a set of Nano-
leaf LED bulbs with an advertised
30-year life span.
After a few minutes sitting in
his room, we both realized that
there was something almost nau-
seating about the quality of the
dull light. That the makers of Na-
noleafor any manufacturer of ef-
ficient bulbswould be deluded
enough to think that I would want
to spend the next 30 years with
their product is beyond me. And
not only are their life spans un-
bearably long, but the manufac-
turers want to charge $20 per
bulb. Over time, we are told, they
save us money. Id rather eat the
extra cost and avoid having my
living room look like an interroga-
tion cell.
Are we really meant to believe
that the ozone will close up and
the polar ice caps un-melt if we
insert these terrible light bulbs
into every socket of our homes?
On the other hand, LEDs and CFLs
are a kind of modern-day miracle:
Somehow they produce a light
that is at once harsh and very
dim. Its like seasonal affective
disorder crammed into a tiny bulb.
When I am asked if I want a
Compact Fluorescent Light, the
only thought I have is that I dont
want my light to be compact, nor
do I wish it to be florescent. I
want a light that will incandesce
across my room, filling it with a
familiar yellow surf, and remind
me that it was not with wax or
kerosene, but with incandescent
bulbs that man conquered the
night.
Humans became modern when
they could stay up at night pen-
ning documents and tinkering
with inventions, and later, watch-
ing Netflix into the small hours of
the morning. The same light that I
type beside shone on the page as
Winston Churchill composed his
famous lines, we shall fight them
on the beaches . . . we shall never
surrender, and as James Joyce
sat in his dingy foreign chamber
finishing Finnegans Wake.
With these new bulbs, we will
usher in an era of global disarray.
Political negotiations will become
rushed and aggressive as foreign
leaders rub their temples and
hurry out of the Oval Office. Every
restaurant will lose its Michelin
stars as guests complain of mi-
graines. Children will fear their
nightlights, and lovers will be
forced to romance each other
without the aid of mood lighting.
Our brows will remain forever fur-
rowed, and we will yearn for a
simpler time when bulbs cost 99
cents and didnt make us feel like
we had cataracts.
Over the past year, I have seri-
ously entertained the notion of
hoarding incandescent bulbs, and
my instinct is obviously not an un-
common one: It now seems easier
to buy a gun than it is to track
down and purchase 60 watt incan-
descent bulbs.
I imagine what will happen
when the filaments in my final in-
candescent bulbs grow weak, and I
can hardly read my notes before
me. Will I no longer be able to
write at night? Or worse, will liv-
ing with CFLs and LEDs make ev-
ery day feel like I have just spent
nine hours plastered before a
computer screen? One day, soon, I
will turn on my light and hear for
the last time the signature, explo-
sive death rattle of an incandes-
cent bulb, and Ill hold a vigil for
the light that shaped and wit-
nessed more than a century of hu-
man history. Tender is the light,
Keats might say.
In my lightless room, Ill sit for
a moment and wonder how many
more times in my life Ill watch a
bulb go out again. As I look to my
dead bulb, Ill think of the poet
again and whisper: Darkling, you
were not a piece of technology
born for death.
Mr. Aciman is a writer in New
York and the author of Twittera-
ture (Penguin, 2009).
Tender Is the Light of My Incandescents
BY ALEXANDER ACIMAN
Thorold Barker, Editor,
Europe, Middle East & Africa
Bruce Orwall, Senior Editor, Europe
Gren Manuel, Executive Editor, Europe
Terence Roth, Managing Editor, Europe
Brian M. Carney, Editorial Page Editor
Lauren Berkemeyer, Marketing
Kate Dobbin, Communications
Florence LeFevre, Institutional Sales Europe
Michael Lloyd, Institutional Sales U.K.
Jonathan Wright, Circulation Sales
Kelly Leach, Publisher
Published since 1889 by
Dow Jones & Company
2014 Dow Jones & Company. All Rights Reserved
Bracing myself for life once
the filaments in my beloved
bulbs grow weak.
The medieval myth that
Jews slaughter Christians for
their blood remains a part of
world culture today.
G
e
t
t
y
I
m
a
g
e
s
Comments? The Journal
welcomes readers responses to
all articles and editorials. It is
important to include your full
name, address and telephone
number. Please send letters to
the editor to: Letters@WSJ.com
16 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
INDEX TO BUSINESSES
Aer Lingus Group......... 16
Agricultural Bank of
China.......................... 15
Air France-KLM.............16
Air Berlin...................... 16
Air Seychelles...............16
Alitalia.......................... 16
Amazon.com................. 28
Apple...................15,16,20
Australia & New Zealand
Banking Group...........20
BAIC Motor...................28
Banco Bilbao Vizcaya
Argentaria..................19
Banco Popular...............19
Banco Santander.......... 19
Bank of America...........28
Bank of
Communications........15
BlackBerry.....................17
Blackstone Group........... 1
BSG Resources............. 16
BTC China......................17
CaixaBank..................... 19
Canadian Natural
Resources.................... 6
Carlyle Group...........16,18
Caterpillar..................... 20
Cenovus Energy..............6
China Citic Bank........... 19
Cisco Systems.............. 20
Citigroup....................... 28
Coca-Cola.......................16
Concurix........................ 15
ConocoPhillips.................6
Credit Suisse Group.. 1,28
Daimler..........................28
Darwin Airline.............. 16
DBS Group Holdings.....15
Deere.............................20
Equity International.....18
Etihad Airways.............16
European Union.............. 9
Exxon Mobil....................6
Freeport-McMoRan
Copper & Gold............15
Glencore Xstrata.......... 20
Global Frontiers
Management..............18
Goldman Sachs
Group.......................1,28
Google........................... 15
Grupo Inaer...................16
Harding Loevner........... 18
H.I.G. Capital.................16
HSBC Holdings............. 20
Imperial Oil.....................6
Industrial & Commercial
Bank of China............15
ING Groep N.V. ............. 20
Intel...............................15
InterContinental Hotels
Group..........................18
Intesa Sanpaolo............16
Jaguar Growth
Partners..................... 18
James Investment
Research.................... 20
Jet Airways (India)......16
J.P. Morgan Chase..........1
KKR............................... 16
KPMG............................ 18
Lenovo Group................15
Marathon Petroleum......6
Microsoft..................15,17
Mitsubishi UFJ Financial
Group..........................15
Mizuho Financial
Group..........................15
Nokia............................. 15
NTT DoCoMo.................17
Och-Ziff Capital
Management Group.... 1
Orange...........................17
Peoples Bank of China 17
Saba Infraestructuras.. 16
Sage Advisory Services. 1
Samsung Electronics....15
Socit Gnrale............ 1
Sprint............................ 17
Standard Chartered......20
Sumitomo Mitsui
Financial Group......... 15
Suncor Energy................ 6
Sun Microsystems........15
Telefonica......................17
TransCanada................... 6
UniCredit.......................16
Valero Energy................. 6
Verizon
Communications........15
Virgin Australia............16
Vitol Group................... 20
Wells Fargo...................18
Yum Brands.................. 16
Businesses
This index of businesses
mentioned in todays
issue of The Wall Street
Journal is intended to
include all significant
reference to companies.
First reference to the
companies appears in
bold face type in all
articles except those
on page one and the
editorial pages.
Corrections Amplifications
The first name of Jeromin Zettelmeyer, deputy chief economist of the European Bank for
Reconstruction and Development, was misspelled as Jeronmin in a front-page article in
the Friday-Sunday edition about stumbles in European currencies.
A spokesman for BSG Resources Ltd. said the mining company entered into a joint-ven-
ture agreement in Guinea with mining company Vale SA in accordance with Guineas min-
ing code and with the full knowledge and approval of the Guinean government. A Business
& Finance article in the Friday-Sunday edition about mining interests in Guinea incorrectly
summarized the spokesmans statement, omitting that BSG Resources said it acted in ac-
cordance with the countrys mining code.
An Off the Wall article Jan. 27 about unusual rsums featured a job hunters creative
rsum delivery to the New York office of One Fine Stay, a booking agency for luxury-home
stays. The article incorrectly said the rsum was delivered to the companys Los Angeles
office.
Guccis leather-goods factory in Florence, Italy, shares production processes with some
other Kering brands. An article on Gucci executives Frida Giannini and Patrizio di Marco
in the February issue of WSJ. Magazine referred to it as a research laboratory, but didnt
specify that its shared resources are restricted to the production process. In addition, com-
pany executives say they misspoke when they said Saint Laurent uses the facility; Saint
Laurent has operated independently since January 2012.
Readers can alert the London newsroom of The Wall Street Journal to any errors in news articles by emailing
wsjcontact@wsj.com or by calling +44 (0)20 7842 9901.
BUSINESS & FINANCE
KKR to Open Office in Madrid
Outpost Will Be Buyout Firms First in Spain, Where Foreign Investment Is Expanding
MADRIDKKR & Co. is set to
open its first office in Spain on
Monday, as the buyout specialist
seeks to build on its billion-euro
stake in a country that is attracting
a growing volume of investment
from abroad.
We believe that there is a lot to
do in Spain, said Jess Olmos, head
of the New York-based firms Span-
ish operations and its Europe, Mid-
dle East and Africa infrastructure
team. He said the firm is interested
in opportunities such as real estate,
infrastructure and direct lending.
Spains economy is clawing back
to meager growth after snowballing
losses on real-estate loans threat-
ened to bankrupt many of the coun-
trys lenders.
KKR will be looking to lend be-
tween $50 million to $100 million to
Spanish companies with an annual
operational cash flow of around 10
million to 15 million ($13.5 million
to $20.2 million), Mr. Olmos said.
Direct lending has grown in Spain in
recent years as bank credit has
tightened. Spanish banks have been
focusing on cleaning up their real-
estate portfolioswhich are still full
of bad loansand buffering their
capital positions ahead of this
years balance-sheet exams by Eu-
ropean authorities.
KKR says it has spent 1.2 billion
in Spain in the past three years on
investments such as minority stakes
in helicopter operator Grupo Inaer
and car-park operator Saba Infrae-
structuras.
Mr. Olmos didnt say how much
KKR plans to invest in Spain in com-
ing years. In Europe, the firm has
offices in London and Paris.
Other private-equity firms have
stepped up their presence in Spain
in recent months. Apollo Global
Management LLC bought a real-es-
tate servicing unit from Banco San-
tander SA earlier this year for 664
million. Last fall, Apollo also bought
Evo Banco, a small unit of a nation-
alized Spanish lender.
H.I.G. Capital and Carlyle Group
LP are among the private-equity
firms that have offices in Spain.
In November, The Wall Street
Journal reported that at least 15 pri-
vate-equity groups focused on Spain
and Italy were looking to raise funds
with a combined value of more than
4 billion, according to several peo-
ple familiar with the matter and
Preqin, a data provider. That is
more than the 1 billion raised since
the start of 2010.
The growing interest in Spain
means good deals are getting harder
to come by, Mr. Olmos said, but for
sure there will be more opportuni-
ties. He said he would remain
based in London and travel fre-
quently to Spain to work with a full-
time staff member in the new office
in Madrid. KKR employees, he said,
already were flying to Spain practi-
cally every week.
BY JEANNETTE NEUMANN
Etihad Sets
Deadline
To Complete
Alitalia Deal
DUBAIEtihad Airways of Abu
Dhabi is in the final phase of due dil-
igence related to the potential pur-
chase of a stake in Italian carrier Ali-
talia SpA, and has set a deadline of
30 days to complete a deal.
The airlines, which started talks
last year, said Sunday that both com-
panies would use the 30-day period
to devise a common strategy that
satisfied each party.
Any issues that may prevent the
establishment of an appropriate
business plan will have to be re-
solved to ensure the plan can be im-
plemented to move Alitalia to sus-
tainable profitability, the airlines
said in a joint statement.
The potential deal, which could
result in Etihad taking a 49% stake in
Alitalia, would increase the Abu
Dhabi airlines presence in Europe
and provide the Italian carrier with a
partner and extra funding.
Alitalia is seeking a partner after
Air France-KLM SA declined to take
part in a 300 million ($405 million)
fundraising in December. By not par-
ticipating in the rights issue, Air
France-KLMs stake in Alitalia fell to
7.1% from 25%. As part of the fund-
raising, Intesa Sanpaolo SpA and
UniCredit SpAtwo of Alitalias
largest shareholdersalso offered
200 million in fresh loans to the
company.
Negotiations with Etihad involve
government and private-sector stake-
holders, with the Italian government
eager to avoid bailing out Alitalia for
the second time in six years.
Etihad is demanding that banks
write down some of the debt the
Rome-based carrier owes, according
to a person familiar with the matter.
Alitalias net debt at the end of Sep-
tember amounted to 813 million.
If a deal is completed, it would be
Etihads eighth such investment as
the carrier pursues a strategy of buy-
ing minority stakes in other airlines.
So far, Etihad has taken stakes in Air
Berlin Inc. of Germany, Air Serbia,
Darwin Airline SA of Switzerland
and Aer Lingus of Ireland. It also
holds equity investments in Air Sey-
chelles, Virgin Australia and Jet
Airways (India) Ltd.
BY RORY JONES
According to a
survey last year,
the most powerful
foreign brand in
China wasnt Coca-
Cola, Apple or
Levisit was KFC. But consumers
there suddenly didnt find it finger-
licking good after two safety scares
related to the chicken it serves. The
companys stock performance will
hinge on how quickly it can turn
the corner and start growing sales
again.
Mondays release of fiscal
fourth-quarter results by KFC
operator Yum Brands can go a long
way toward reassuring investors. It
lowered expectations in October
after Chinese sales in September
the first month of the period being
reportedwere weaker than
expected.
Yum said the drop made it
unlikely that same-store sales for
the quarter through early
December would be positive,
reversing an earlier prediction. The
difference pointed to a low-double-
digit percentage decline in earnings
per share instead of the previous
forecast of a mid-single-digit one.
Analysts promptly lowered their
sights, but their forecast for
adjusted earnings implies a drop of
only around 5%. Unadjusted
earnings, seen at 80 cents a share,
according to FactSet, would
constitute a healthy rise versus a
year earlier.
Even if analysts werent
cautious enough, year-over-year
comparisons in China, where KFC
sales were dented by avian flu and
a food-safety scare, are about to
start looking much better. The
company said in December that it
expects earnings per share to grow
by at least 20% in 2014.
That may make this an
opportune time for investors to get
exposure to a growth company at a
reasonable price.
Yum now trades at 18.6 times
projected earnings over the next 12
months; It fetched 19.7 times in the
first half of 2012the period
preceding KFCs woes in China.
Furthermore, analysts havent
taken managements optimism on
2014 earnings fully to heart, so
todays multiple might be
artificially high.
Caution would be warranted if
there has somehow been
permanent damage to KFCs brand.
Based on market research released
by the company, though, and
extensive steps to restore trust, the
company deserves the benefit of
the doubt. It also makes a strong
case that it is far from the point of
market saturation in China. It cites
Malaysia, where density of KFCs is
about six times higher.
After an awful year, get ready to
witness poultry in motion.
Yums Shares Could Soon Become Tastier
[ Ahead of the Tape ]
BY SPENCER JAKAB
Source: the company
Wing and a Prayer
Yum Brands China system sales
growth, change from a year earlier
30
30
15
0
15
%
12 13 2011
KFCs China sales were hit by a safety scare. Outlets include this one in Beijing.
R
e
u
t
e
r
s
14 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
OPINION
It is the policy of the United
States to seek and support the
growth of democratic movements
and institutions in every nation and
culture, with the ultimate goal of
ending tyranny in our world. So
said President George W. Bush in his
second inaugural address in 2005.
The goal wasand isa noble one.
Unfortunately, neither Mr. Bushs ef-
forts nor those of his successor have
met with the success democracy ad-
vocates would wish.
In Thailand, the streets are filled
with demonstrators demanding the
replacement of an elected govern-
ment with an appointed council. In
Egypt, the largest and most impor-
tant Arab country, the 2011 revolu-
tion and much-ballyhooed transi-
tion to democracy ended in a
military coup. President Obamas
lead-from-behind approach to Libya
has ushered in anarchy, and
Pakistans transition from one dem-
ocratically elected set of powerless
and corrupt politicians to another,
widely cheered in Washington, has
had no discernible positive impact
on anything whatsoever.
A democratically elected govern-
ment in Hungary is flirting with fas-
cists. Meantime, political reforms in
Burma led to waves of religious vio-
lence against that countrys Muslim
minority. And in Ukraine, protesters
face off against a corrupt, elected
government aligned with Vladimir
Putin.
According to Freedom Houses
2014 Freedom in the World Report,
2013 was the eighth year in a row in
which freedom lost ground. Yet the
decade of freedoms retreat was also
a decade of unprecedented effort on
the part of governments and non-
profit organizations to help freedom
thrive. Between 2006 and 2012, the
U.S. government alone spent $18.6
billion on democracy promotion,
partly because of stepped up efforts
in Afghanistan and the Middle East.
This is a substantially higher rate of
spending than during the post-Cold
War years, when the former War-
saw Pact states were moving toward
democracy.
The gloomy prospects for demo-
cratic self-government in many
parts of the world should not come
as a surprise. Building democracy
took generations in much of the At-
lantic world, and most revolutions
didnt succeed in establishing stable
democratic regimes.
Some, like the Hungarians in
1848 and again in 1956, failed to
hold power and were overthrown.
Others, like the French and Russian
Revolutions, gained power only to
install dictatorships worse than the
ones they overthrew. The South
American revolutions against Spain,
like many anti-colonial movements
in the 20th century, succeeded
against the imperial powerbut
then failed to build stable, demo-
cratic governments in its place.
Egypts transition didnt fail because
Egypts democrats didnt attend
enough conferences on democracy
building. It failed because the
weight of their nations history, eco-
nomics, religion and culture was too
heavy for the relative handful of
true democrats to lift.
This should be a sobering lesson.
While breakthroughs can sometimes
occur, the construction of open,
democratic systems in many coun-
tries around the world is likely to be
slower and harder than many
thought.
This doesnt mean that democ-
racy advocates should wring their
hands and stand aside, but it does
mean they need to think about pro-
moting deeper social change over
longer periods. To become and re-
main democratic, countries need to
develop cultural values hospitable
to the rule of law, protection of pri-
vate property, transparency and
peaceful transitions of power that
are grounded in their own religious
and cultural identities. That is not,
ultimately, a process that foreigners
can orchestrate or control.
A more sustainable and effective
democracy agenda would start with
education. Helping talented young
people get access to good education
will, over time, do more to promote
democratic ideals than anything
else. This doesnt just mean offering
more students more opportunities
to study abroad. Many countries,
like Egypt, have terrible postsec-
ondary systems. Founding new
schools, helping existing ones, and
promoting partnerships between
Western and foreign institutions
can go a long way.
In many countries, the lack of ac-
cess to good English-language in-
struction at an early age is one of
the great barriers that struggling
families face. Teaching English to
large numbers of people from poor
backgrounds is ultimately a political
act: As their language skills help
them get better educations and bet-
ter jobs, internal pressure for a
fairer society will increase.
At the same time, democracy ad-
vocates can address one of the big-
gest fault lines in our allegedly flat
world: People who dont read Eng-
lish or a handful of other languages
live in a different information uni-
verse. John Locke, Edmund Burke,
Thomas Macaulay, Montesquieu,
Thomas Paine, Adam Smith, Benja-
min Franklinthe works of these
thinkers need to be well-translated
and widely available. People who
read only Urdu, Burmese, Arabic or
Punjabi need readily accessible edi-
tions (cheap print or Web-based) of
important books in their own
languages so that people beyond
elite circles have access to the ideas
and the histories that matter.
Smart people from different cul-
tural backgrounds should be com-
missioned to write introductions
and other materials that can give
readers in nondemocratic countries
the context they need to make sense
of these crucial texts. Others should
write books about how South Korea,
Taiwan, Poland and other countries
became democratic. And leading
magazines, opinion journals and
policy reports should be translated
into languages where they can be
more widely read. English may be
the worlds lingua franca, but de-
mocracy building will be grueling in
many countries until more people
have the ability to follow global
news and policy debates in their na-
tive tongues.
We cannot change the reality
that the creation of stable demo-
cratic societies in much of the world
is going to take time. It took Chris-
tian theologians hundreds of years
to reconcile democratic and liberal
ideas with traditional Christian
thought; for Muslims, too, this could
be the work of decades or genera-
tions.
The U.S. cannot control the pace
of this change. What it can do is to
ensure that as many people as pos-
sible have unfettered access to the
rich historical and intellectual liter-
ature that advocates freedom. Give
us the tools and we will finish the
job is what Winston Churchill said
to American democrats during the
dark days of World War II. Lets
make it easier for people around the
world to inform themselves about
the nature of freedom and the his-
tory of its emergence. They will fig-
ure out the rest.
Mr. Mead is a professor of foreign
affairs and humanities at Bard Col-
lege and editor at large of the
American Interest.
Edmund Burke.
U
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t
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I
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a
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e
s
A Strategy to Counter Democracys Global Retreat
BY WALTER RUSSELL MEAD
Iraq has returned to the head-
lines, with parts of Ramadi and Fal-
lujah again under al Qaeda control.
American servicemen and women
who helped liberate these cities are
understandably frustrated. Is every-
thing they accomplished in Iraq un-
raveling?
No, it is not. People have forgot-
ten the history of Saddam Husseins
Iraq: two wars against his neighbors
resulting in about a million deaths;
brutalization of his own people kill-
ing tens if not hundreds of thou-
sands; use of poison gas against
Iraqi Kurds; lifelong support for ter-
rorism; open defiance of the U.N.
Security Council. American soldiers
can be proud of their role in ending
this criminal regime and freeing the
Iraqi people from a brutal tyrant.
Syria today shows what happens
when a bloody dictator goes un-
checked. Leaving Saddam in power
would have badly undermined the
credibility of the U.N. and the U.S.
As IranSaddams mortal enemy
restarted its nuclear program after
2005, Saddam would have resusci-
tated his own, igniting a nuclear-
arms race. Saddam would likely
have intervened in the uprising
against Syrias Bashar Assad, fan-
ning the sectarian conflict that now
threatens much of the Middle East.
The removal of Saddam opened
up a very different possibility: an
Iraq in which Sunni, Shiites, Kurds,
Christians and other minorities
would work together to build a
democratic and peaceful future.
This was the goal that most Iraqis
set for themselves.
The George W. Bush administra-
tion in which I served strongly sup-
ported their effort. But we made
mistakesfor which many of us
bear responsibility that made the
effort more costly than it should
have been in lives lost, bodies bro-
ken, families disrupted and money
spent.
For example, the Bush adminis-
tration did considerable postwar
planning. But as retired Marine Gen.
John Allen, a man with deep experi-
ence in Iraq and Afghanistan, noted
at a retrospective last year, these
kinds of military operations must be
planned beginning with the post-
combat mission and working back-
ward. The Bush administration did
it the other way around.
One consequence was that in the
post-combat period the U.S. over-
emphasized the distinctions among
Shiites, Sunnis and Kurds. This un-
wittingly encouraged the very sec-
tarian tension among these groups
that al Qaeda brutally exploited to
plunge the country into near civil
war by 2005 and 2006. The war
that U.S. soldiers had won in depos-
ing Saddam was almost lost to the
terrorists.
A change in approach was
needed. Press coverage at the time
described most Americans as skep-
tical about President Bushs decision
in January 2007 to surge 30,000
more troops and switch to a popula-
tion-protection strategy. But with
dedication and innovation in execut-
ing that strategy, U.S. military per-
sonnel, diplomats and intelligence
officers joined with Iraqi forces and
militia to defeat al Qaeda by the end
of 2008. A unity government of
Sunnis, Shiites and Kurds was in
power in Baghdad. Low levels of al
Qaeda attacks continued, but they
posed little threat to Iraqs stability.
The Obama administration has
made its own mistakes in Iraq. The
political process that followed the
2010 parliamentary elections in
Iraqin which the U.S. had a major
roleproduced a government in
which many Sunnis felt underrepre-
sented. An increase in sectarian ten-
sions followed, compounded by the
Shiite-led Iraqi governments ac-
tions that were widely viewed as a
crackdown on Sunni leadership. The
failure to leave any military force in
Iraq after 2011 reduced U.S. leverage
to mitigate these sectarian splits. It
also deprived Iraqi forces of two
more years of counterterrorism
training to meet the re-emerging al
Qaeda threat.
The recent spike in al Qaeda at-
tacks in Iraq results from nearly
three years of civil war in neighbor-
ing Syria, mistakes by the Iraqi gov-
ernment, and an inadequate re-
sponse from the U.S. and its
regional allies. The Syrian civil war
attracted al Qaeda foreign fighters
who soon spilled into Iraq. The Iraqi
governments perceived crackdown
on its Sunni citizens further encour-
aged the re-emergence of al Qaeda
in Iraq. Press reports suggest that
the numbers of foreign fighters in-
volved are in the thousands, more
than were present at the height of
the Iraq War. These fighters are ap-
parently well supplied with money
and weapons.
Yet all is not lost. Americans
helped build and train an Iraqi secu-
rity force that numbers well over
500,000. Sunni tribes that rallied to
American forces in 2007-08 are re-
joining the fight against al Qaeda.
As the price of their support, they
are demanding a greater role in the
Iraqi governmenta step that
would help restore the original vi-
sion of a tolerant and inclusive Iraq.
Iraqis will determine the out-
come of this struggle, but the U.S.
can help. At the request of the Iraqi
government, the U.S. has promised
Hellfire missiles, helicopters and
other military equipment, and intel-
ligence is being shared. Congress
needs to approve the funding and
transfer of this equipment to Iraq.
The American people need to un-
derstand that their own security
now rides on this fight. This about
al Qaeda: Ultimately, Americans and
their interests, friends and territory
will be their target.
The Iraqi people can win this re-
newed fight against al Qaeda. When
they do, they will have a chance to
restart the effort they began in
2003: to build a state where Sunni,
Shiites, Kurds, Christians and other
minorities work together to build a
democratic future in a peaceful and
prosperous Iraq.
Meanwhile, the great hopes
sparked by the 2011 Arab Spring
have faded. Violence in Egypt and
elsewhere is rampant, politics are
broken and economies are in sham-
bles. What the region desperately
needs is a successful example of dis-
parate communities working to-
gether to defeat terrorists, reduce
violence, establish tolerant and in-
clusive politics, and generate jobs
and a growing economy. If it can
overcome its current challenges,
Iraq can be that example.
When it does, it will be building
on the efforts of American men and
women who served in Iraq. Debates
about the origin and conduct of the
Iraq war will go on. But Americans
who served there can be proud of
their service: toppling a brutal dic-
tator, defeating al Qaeda in Iraq in
2007-08, and giving the Iraqi people
a chance to build a nation unique in
the history of Iraq and the Middle
East. Washington and its allies must
do all they can to make sure that
this opportunity is not squandered.
Mr. Hadley was the 21st U.S. as-
sistant to the president for National
Security Affairs, serving under
George W. Bush.
Americans Can Be Proud of Iraq
BY STEPHEN J. HADLEY
A brutal dictator who
supported terrorism is gone.
Al Qaedas resurgence
doesnt change that fact.
Monday, February 3, 2014
Pound/Euro 0.8208 g 0.13% Yen/$ 102.28 g 0.54% Global Dow 2389.92 g 0.69% Gold 1240.10 g 0.17% Oil 97.49 g 0.75% 3-month Libor 0.23660 10-year Treasury 7/32 yield 2.669%
THE WALL STREET JOURNAL. europe.WSJ.com
Chinese Bitcoin Exchange Makes
An About-Face on Regulation
BUSINESS &FINANCE 17
Red Alert on Russia
Looks Premature
HEARDONTHE STREET 28
Microsofts Likely Pick for CEO
Satya Nadella recalls asking Steve
Ballmer in a management perform-
ance review how he stacked up
against greats from Microsoft
Corp.s past. The chief executive called
the question nonsense, because it
didnt focus on the future of the com-
pany.
The moment transformed Mr. Na-
dellas thinking. What drives me every
morning and what keeps me up every
night is one thing: this business is not
about longevity, its about relevance,
Mr. Nadella said in an interviewin Oc-
tober.
It is also a window into the 46-
year-old Indian immigrant and con-
summate Microsoft insider who ap-
pears on the brink of being chosen to
pilot the tech giant as it seeks to re-
verse years of waning influence.
Mr. Nadella is currently in contract
negotiations to succeed Mr. Ballmer as
chief executive, a person familiar with
the situation said. Microsofts board is
scheduled to meet early this week to
approve Mr. Nadellas contract, this
person said. It may also weigh
whether to choose a newboard chair
if co-founder and current chair Bill
Gates spends more time as an adviser
to Mr. Nadella, a request Mr. Nadella
made during his contract negotiations.
Mr. Nadella is a specialist in
some of the software giants least
sexy but most technology-intensive
businesses, including software for
server systems and what the indus-
try calls cloud computing services.
He has helped wring better numbers
from some of the companys biggest
operations, and is known for his ea-
gerness to please superiors.
But people who have worked
with Mr. Nadella say his greatest as-
set is an affable, collaborative style
that stands out at a company known
for big egos and heated arguments.
His personality and deep technical
background could help retain key
engineers or programmers that
sometimes head for the exits follow-
ing a big management change.
Its hard to find a single person
who doesnt have a nice thing to
say about him, which is rare at the
top of a company, said Ravi Ven-
katesan, former head of Microsofts
India operations. You have to be
pretty hard-driving to get there,
and hes humble, incredibly hum-
ble.
A key question is whether Mr.
Nadella is ready for a task of this
size, one that could require tough
organizational decisions that wont
be popular with some insiders.
Microsofts next CEO, among
other things, must integrate roughly
32,000 employees from the handset
business purchased from Nokia
Corp., boost the popularity of its
touch-oriented version of Windows
and match the technical cachet of ri-
vals like Google Inc. and Apple Inc.
The compliments that he is a
good collaborator, that makes him
popularbut at the same time that
could be his biggest challenge, says
Alexander Gounares, a 17-year Mi-
crosoft veteran who is now chief ex-
ecutive of a startup called Concurix
Corp. Was Steve Jobs really a great
collaborator? No.
In interviews and speeches, Mr.
Nadella has given considerable
credit to Messrs. Ballmer and Gates,
Microsofts chairman and co-
founder, for educating him about
technology and management skills
after he joined Microsoft in 1992
from Sun Microsystems.
Mr. Nadellas journey to the up-
per echelons of the tech sector be-
gan in the southern Indian city of
Hyderabad, where he attended high
school and bowled on the cricket
pitch. He studied electronics and
Please turn to page 17
By Don Clark,
Monica Langley
and Shira Ovide
Satya Nadella, seen in July, is currently in talks to succeed Steve Ballmer as CEO, a person familiar with the situation said.
M
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Samsung Struggles to Roll Out Mobile OS
SEOULAn ambitious effort by
Samsung Electronics Co. to roll out
smartphones powered by a new op-
erating system is on shaky ground.
The worlds largest smartphone
maker is investing a large amount of
resources on an operating system
called Tizen to challenge the mobile
software duopoly of Apple Inc. and
Google Inc.
But some of the worlds major
wireless carriers are beginning to
pull their support of phones slated
to run the platform.
Tizen (pronounced TAI-zen) also
has had trouble attracting large de-
velopers of applications that are in-
creasingly at the center of the user
experience. That is leaving the
fledgling platform in the hands of
tiny, relatively unknown players, like
Daniel Escobar, a 34-year-old devel-
oper in Atlanta.
The South Korean company is
supporting Mr. Escobars Maestro
music-sharing service, which has
about 30,000 subscribers, with tens
of thousands of dollars in cash in-
centives and technical support to
develop an app for Tizen.
The imperative for Samsung to
figure out a mobile software and
services strategy is critical.
Chinese smartphone makersin-
cluding a potentially strengthened
Lenovo Group Ltd. following its
planned acquisition of Googles Mo-
torola Mobility handset unit
threaten to push down handset
prices and squeeze hardware mar-
gins. That would make software and
services the industrys primary
profit engine.
Consumer needs are changing
along with the changing times,
Samsung co-Chief Executive Boo-
Keun Yoo said last month. I dont
feel you can lead the market by fo-
cusing solely on software or hard-
ware.
Samsungs best-selling smart-
phones currently run on Googles
Android operating system and come
preloaded with Google mail, map-
ping functions and mobile-ad
searches. As a result, it is the Moun-
tain View, Calif., company that is
taking a cut of every purchase made
on its app store.
If Tizen were to succeed, it
would give Samsung its own stream
of revenue from sales of third-party
apps, software and services on its
devices.
The potential is enormous. In its
most recent fiscal year, Apple gener-
ated $16 billion in sales from soft-
ware and services, including the
iTunes and App stores.
Samsung, which has been devel-
oping Tizen with help from Intel
Corp. and others, is pouring billions
of dollars a year into software devel-
opment more generally and devoting
about 60% of its 67,000 research and
development engineers to software
innovation, with plans to hire an-
other 800 engineers a year.
Samsungs longer-term aim is for
Tizennamed to evoke a Zen-like
Please turn to page 17
BY JONATHAN CHENG
Source: Gartner
The Wall Street Journal
Shifing Tides
Global smartphone operating-system
market share, by devices in use
100
0
20
40
60
80
2010 11 12 13
forecast
iOS
Android
Windows
Blackberry
Others
%
Asian Banks
Reach for
Bigger Role
In Lending
HONG KONGWhen Freeport-
McMoRan Copper & Gold Inc., the
worlds largest publicly traded cop-
per producer, arranged $7 billion in
financing last year, its roster of
lenders included the usual catalog of
European and U.S. banks. But it also
boasted the biggest list of Asian
lenders the company has ever dealt
with.
Some 21 Asian lenders joined in
on the deal, including five from Ja-
pan, nine from China and five from
across Singapore, Taiwan, India and
Indonesia, a spokesman for the com-
pany said in an emailed response to
questions. The Phoenix-based miner
is using the money to help pay for
$20 billion of acquisitions.
Asian banks have been prominent
on other high-profile deals, too. Ver-
izon Communications Inc.s $12 bil-
lion package of loans in October
linked to the buyout of its U.S. wire-
less partner included Agricultural
Bank of China Ltd., Bank of China
Ltd. and Bank of Communications
Co., among others.
Those deals reflect a push by
Asias banks into new markets
around the world. Their efforts
come at a time when Western banks
are reining in some lending as they
recover from the global financial cri-
sis.
Buoyed by strong credit ratings
and rising depositsAsian banks
largely sidestepped the 2008 finan-
cial crisisand flush with cash
linked to ultra-loose monetary policy
in the U.S. and Japan that has
poured cash into Asia, lenders from
the region led by the likes of Japans
Mitsubishi UFJ Financial Group
Inc., or MUFG, have become bigger
players as they chase higher yields
and look to diversify their business.
Asian banks are growing outside
Asia, there is just no doubt, said
Atul Sodhi, Hong Kong-based man-
aging director and head of loan syn-
dication for Asia Pacific at Crdit
Agricole and chairman of the Asia
Pacific Loan Market Association.
A spokesman for Verizon de-
clined to comment.
While the gains are nascent
MUFG, Mizuho Financial Group Inc.
and Sumitomo Mitsui Financial
Group Inc. are the only Asian banks
in the top 20 rankings of global
lenders last yearthere are signs of
Asian banks picking up business.
In 2007, MUFG was the only
Asian bank in the top 20, Thomson
Reuters data show. And since then it
has jumped to seventh from 17th.
Bank of China has moved to 29th
from 124th and Singapores DBS
Group Holdings Ltd. has edged up
to 40th place from 61st.
Both Mizuho and SMFG plan to
Please turn to page 20
BY ENDA CURRAN
14 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
OPINION
It is the policy of the United
States to seek and support the
growth of democratic movements
and institutions in every nation and
culture, with the ultimate goal of
ending tyranny in our world. So
said President George W. Bush in his
second inaugural address in 2005.
The goal wasand isa noble one.
Unfortunately, neither Mr. Bushs ef-
forts nor those of his successor have
met with the success democracy ad-
vocates would wish.
In Thailand, the streets are filled
with demonstrators demanding the
replacement of an elected govern-
ment with an appointed council. In
Egypt, the largest and most impor-
tant Arab country, the 2011 revolu-
tion and much-ballyhooed transi-
tion to democracy ended in a
military coup. President Obamas
lead-from-behind approach to Libya
has ushered in anarchy, and
Pakistans transition from one dem-
ocratically elected set of powerless
and corrupt politicians to another,
widely cheered in Washington, has
had no discernible positive impact
on anything whatsoever.
A democratically elected govern-
ment in Hungary is flirting with fas-
cists. Meantime, political reforms in
Burma led to waves of religious vio-
lence against that countrys Muslim
minority. And in Ukraine, protesters
face off against a corrupt, elected
government aligned with Vladimir
Putin.
According to Freedom Houses
2014 Freedom in the World Report,
2013 was the eighth year in a row in
which freedom lost ground. Yet the
decade of freedoms retreat was also
a decade of unprecedented effort on
the part of governments and non-
profit organizations to help freedom
thrive. Between 2006 and 2012, the
U.S. government alone spent $18.6
billion on democracy promotion,
partly because of stepped up efforts
in Afghanistan and the Middle East.
This is a substantially higher rate of
spending than during the post-Cold
War years, when the former War-
saw Pact states were moving toward
democracy.
The gloomy prospects for demo-
cratic self-government in many
parts of the world should not come
as a surprise. Building democracy
took generations in much of the At-
lantic world, and most revolutions
didnt succeed in establishing stable
democratic regimes.
Some, like the Hungarians in
1848 and again in 1956, failed to
hold power and were overthrown.
Others, like the French and Russian
Revolutions, gained power only to
install dictatorships worse than the
ones they overthrew. The South
American revolutions against Spain,
like many anti-colonial movements
in the 20th century, succeeded
against the imperial powerbut
then failed to build stable, demo-
cratic governments in its place.
Egypts transition didnt fail because
Egypts democrats didnt attend
enough conferences on democracy
building. It failed because the
weight of their nations history, eco-
nomics, religion and culture was too
heavy for the relative handful of
true democrats to lift.
This should be a sobering lesson.
While breakthroughs can sometimes
occur, the construction of open,
democratic systems in many coun-
tries around the world is likely to be
slower and harder than many
thought.
This doesnt mean that democ-
racy advocates should wring their
hands and stand aside, but it does
mean they need to think about pro-
moting deeper social change over
longer periods. To become and re-
main democratic, countries need to
develop cultural values hospitable
to the rule of law, protection of pri-
vate property, transparency and
peaceful transitions of power that
are grounded in their own religious
and cultural identities. That is not,
ultimately, a process that foreigners
can orchestrate or control.
A more sustainable and effective
democracy agenda would start with
education. Helping talented young
people get access to good education
will, over time, do more to promote
democratic ideals than anything
else. This doesnt just mean offering
more students more opportunities
to study abroad. Many countries,
like Egypt, have terrible postsec-
ondary systems. Founding new
schools, helping existing ones, and
promoting partnerships between
Western and foreign institutions
can go a long way.
In many countries, the lack of ac-
cess to good English-language in-
struction at an early age is one of
the great barriers that struggling
families face. Teaching English to
large numbers of people from poor
backgrounds is ultimately a political
act: As their language skills help
them get better educations and bet-
ter jobs, internal pressure for a
fairer society will increase.
At the same time, democracy ad-
vocates can address one of the big-
gest fault lines in our allegedly flat
world: People who dont read Eng-
lish or a handful of other languages
live in a different information uni-
verse. John Locke, Edmund Burke,
Thomas Macaulay, Montesquieu,
Thomas Paine, Adam Smith, Benja-
min Franklinthe works of these
thinkers need to be well-translated
and widely available. People who
read only Urdu, Burmese, Arabic or
Punjabi need readily accessible edi-
tions (cheap print or Web-based) of
important books in their own
languages so that people beyond
elite circles have access to the ideas
and the histories that matter.
Smart people from different cul-
tural backgrounds should be com-
missioned to write introductions
and other materials that can give
readers in nondemocratic countries
the context they need to make sense
of these crucial texts. Others should
write books about how South Korea,
Taiwan, Poland and other countries
became democratic. And leading
magazines, opinion journals and
policy reports should be translated
into languages where they can be
more widely read. English may be
the worlds lingua franca, but de-
mocracy building will be grueling in
many countries until more people
have the ability to follow global
news and policy debates in their na-
tive tongues.
We cannot change the reality
that the creation of stable demo-
cratic societies in much of the world
is going to take time. It took Chris-
tian theologians hundreds of years
to reconcile democratic and liberal
ideas with traditional Christian
thought; for Muslims, too, this could
be the work of decades or genera-
tions.
The U.S. cannot control the pace
of this change. What it can do is to
ensure that as many people as pos-
sible have unfettered access to the
rich historical and intellectual liter-
ature that advocates freedom. Give
us the tools and we will finish the
job is what Winston Churchill said
to American democrats during the
dark days of World War II. Lets
make it easier for people around the
world to inform themselves about
the nature of freedom and the his-
tory of its emergence. They will fig-
ure out the rest.
Mr. Mead is a professor of foreign
affairs and humanities at Bard Col-
lege and editor at large of the
American Interest.
Edmund Burke.
U
I
G
v
i
a
G
e
t
t
y
I
m
a
g
e
s
A Strategy to Counter Democracys Global Retreat
BY WALTER RUSSELL MEAD
Iraq has returned to the head-
lines, with parts of Ramadi and Fal-
lujah again under al Qaeda control.
American servicemen and women
who helped liberate these cities are
understandably frustrated. Is every-
thing they accomplished in Iraq un-
raveling?
No, it is not. People have forgot-
ten the history of Saddam Husseins
Iraq: two wars against his neighbors
resulting in about a million deaths;
brutalization of his own people kill-
ing tens if not hundreds of thou-
sands; use of poison gas against
Iraqi Kurds; lifelong support for ter-
rorism; open defiance of the U.N.
Security Council. American soldiers
can be proud of their role in ending
this criminal regime and freeing the
Iraqi people from a brutal tyrant.
Syria today shows what happens
when a bloody dictator goes un-
checked. Leaving Saddam in power
would have badly undermined the
credibility of the U.N. and the U.S.
As IranSaddams mortal enemy
restarted its nuclear program after
2005, Saddam would have resusci-
tated his own, igniting a nuclear-
arms race. Saddam would likely
have intervened in the uprising
against Syrias Bashar Assad, fan-
ning the sectarian conflict that now
threatens much of the Middle East.
The removal of Saddam opened
up a very different possibility: an
Iraq in which Sunni, Shiites, Kurds,
Christians and other minorities
would work together to build a
democratic and peaceful future.
This was the goal that most Iraqis
set for themselves.
The George W. Bush administra-
tion in which I served strongly sup-
ported their effort. But we made
mistakesfor which many of us
bear responsibility that made the
effort more costly than it should
have been in lives lost, bodies bro-
ken, families disrupted and money
spent.
For example, the Bush adminis-
tration did considerable postwar
planning. But as retired Marine Gen.
John Allen, a man with deep experi-
ence in Iraq and Afghanistan, noted
at a retrospective last year, these
kinds of military operations must be
planned beginning with the post-
combat mission and working back-
ward. The Bush administration did
it the other way around.
One consequence was that in the
post-combat period the U.S. over-
emphasized the distinctions among
Shiites, Sunnis and Kurds. This un-
wittingly encouraged the very sec-
tarian tension among these groups
that al Qaeda brutally exploited to
plunge the country into near civil
war by 2005 and 2006. The war
that U.S. soldiers had won in depos-
ing Saddam was almost lost to the
terrorists.
A change in approach was
needed. Press coverage at the time
described most Americans as skep-
tical about President Bushs decision
in January 2007 to surge 30,000
more troops and switch to a popula-
tion-protection strategy. But with
dedication and innovation in execut-
ing that strategy, U.S. military per-
sonnel, diplomats and intelligence
officers joined with Iraqi forces and
militia to defeat al Qaeda by the end
of 2008. A unity government of
Sunnis, Shiites and Kurds was in
power in Baghdad. Low levels of al
Qaeda attacks continued, but they
posed little threat to Iraqs stability.
The Obama administration has
made its own mistakes in Iraq. The
political process that followed the
2010 parliamentary elections in
Iraqin which the U.S. had a major
roleproduced a government in
which many Sunnis felt underrepre-
sented. An increase in sectarian ten-
sions followed, compounded by the
Shiite-led Iraqi governments ac-
tions that were widely viewed as a
crackdown on Sunni leadership. The
failure to leave any military force in
Iraq after 2011 reduced U.S. leverage
to mitigate these sectarian splits. It
also deprived Iraqi forces of two
more years of counterterrorism
training to meet the re-emerging al
Qaeda threat.
The recent spike in al Qaeda at-
tacks in Iraq results from nearly
three years of civil war in neighbor-
ing Syria, mistakes by the Iraqi gov-
ernment, and an inadequate re-
sponse from the U.S. and its
regional allies. The Syrian civil war
attracted al Qaeda foreign fighters
who soon spilled into Iraq. The Iraqi
governments perceived crackdown
on its Sunni citizens further encour-
aged the re-emergence of al Qaeda
in Iraq. Press reports suggest that
the numbers of foreign fighters in-
volved are in the thousands, more
than were present at the height of
the Iraq War. These fighters are ap-
parently well supplied with money
and weapons.
Yet all is not lost. Americans
helped build and train an Iraqi secu-
rity force that numbers well over
500,000. Sunni tribes that rallied to
American forces in 2007-08 are re-
joining the fight against al Qaeda.
As the price of their support, they
are demanding a greater role in the
Iraqi governmenta step that
would help restore the original vi-
sion of a tolerant and inclusive Iraq.
Iraqis will determine the out-
come of this struggle, but the U.S.
can help. At the request of the Iraqi
government, the U.S. has promised
Hellfire missiles, helicopters and
other military equipment, and intel-
ligence is being shared. Congress
needs to approve the funding and
transfer of this equipment to Iraq.
The American people need to un-
derstand that their own security
now rides on this fight. This about
al Qaeda: Ultimately, Americans and
their interests, friends and territory
will be their target.
The Iraqi people can win this re-
newed fight against al Qaeda. When
they do, they will have a chance to
restart the effort they began in
2003: to build a state where Sunni,
Shiites, Kurds, Christians and other
minorities work together to build a
democratic future in a peaceful and
prosperous Iraq.
Meanwhile, the great hopes
sparked by the 2011 Arab Spring
have faded. Violence in Egypt and
elsewhere is rampant, politics are
broken and economies are in sham-
bles. What the region desperately
needs is a successful example of dis-
parate communities working to-
gether to defeat terrorists, reduce
violence, establish tolerant and in-
clusive politics, and generate jobs
and a growing economy. If it can
overcome its current challenges,
Iraq can be that example.
When it does, it will be building
on the efforts of American men and
women who served in Iraq. Debates
about the origin and conduct of the
Iraq war will go on. But Americans
who served there can be proud of
their service: toppling a brutal dic-
tator, defeating al Qaeda in Iraq in
2007-08, and giving the Iraqi people
a chance to build a nation unique in
the history of Iraq and the Middle
East. Washington and its allies must
do all they can to make sure that
this opportunity is not squandered.
Mr. Hadley was the 21st U.S. as-
sistant to the president for National
Security Affairs, serving under
George W. Bush.
Americans Can Be Proud of Iraq
BY STEPHEN J. HADLEY
A brutal dictator who
supported terrorism is gone.
Al Qaedas resurgence
doesnt change that fact.
Monday, February 3, 2014
Pound/Euro 0.8208 g 0.13% Yen/$ 102.28 g 0.54% Global Dow 2389.92 g 0.69% Gold 1240.10 g 0.17% Oil 97.49 g 0.75% 3-month Libor 0.23660 10-year Treasury 7/32 yield 2.669%
THE WALL STREET JOURNAL. europe.WSJ.com
Chinese Bitcoin Exchange Makes
An About-Face on Regulation
BUSINESS &FINANCE 17
Red Alert on Russia
Looks Premature
HEARDONTHE STREET 28
Microsofts Likely Pick for CEO
Satya Nadella recalls asking Steve
Ballmer in a management perform-
ance review how he stacked up
against greats from Microsoft
Corp.s past. The chief executive called
the question nonsense, because it
didnt focus on the future of the com-
pany.
The moment transformed Mr. Na-
dellas thinking. What drives me every
morning and what keeps me up every
night is one thing: this business is not
about longevity, its about relevance,
Mr. Nadella said in an interviewin Oc-
tober.
It is also a window into the 46-
year-old Indian immigrant and con-
summate Microsoft insider who ap-
pears on the brink of being chosen to
pilot the tech giant as it seeks to re-
verse years of waning influence.
Mr. Nadella is currently in contract
negotiations to succeed Mr. Ballmer as
chief executive, a person familiar with
the situation said. Microsofts board is
scheduled to meet early this week to
approve Mr. Nadellas contract, this
person said. It may also weigh
whether to choose a newboard chair
if co-founder and current chair Bill
Gates spends more time as an adviser
to Mr. Nadella, a request Mr. Nadella
made during his contract negotiations.
Mr. Nadella is a specialist in
some of the software giants least
sexy but most technology-intensive
businesses, including software for
server systems and what the indus-
try calls cloud computing services.
He has helped wring better numbers
from some of the companys biggest
operations, and is known for his ea-
gerness to please superiors.
But people who have worked
with Mr. Nadella say his greatest as-
set is an affable, collaborative style
that stands out at a company known
for big egos and heated arguments.
His personality and deep technical
background could help retain key
engineers or programmers that
sometimes head for the exits follow-
ing a big management change.
Its hard to find a single person
who doesnt have a nice thing to
say about him, which is rare at the
top of a company, said Ravi Ven-
katesan, former head of Microsofts
India operations. You have to be
pretty hard-driving to get there,
and hes humble, incredibly hum-
ble.
A key question is whether Mr.
Nadella is ready for a task of this
size, one that could require tough
organizational decisions that wont
be popular with some insiders.
Microsofts next CEO, among
other things, must integrate roughly
32,000 employees from the handset
business purchased from Nokia
Corp., boost the popularity of its
touch-oriented version of Windows
and match the technical cachet of ri-
vals like Google Inc. and Apple Inc.
The compliments that he is a
good collaborator, that makes him
popularbut at the same time that
could be his biggest challenge, says
Alexander Gounares, a 17-year Mi-
crosoft veteran who is now chief ex-
ecutive of a startup called Concurix
Corp. Was Steve Jobs really a great
collaborator? No.
In interviews and speeches, Mr.
Nadella has given considerable
credit to Messrs. Ballmer and Gates,
Microsofts chairman and co-
founder, for educating him about
technology and management skills
after he joined Microsoft in 1992
from Sun Microsystems.
Mr. Nadellas journey to the up-
per echelons of the tech sector be-
gan in the southern Indian city of
Hyderabad, where he attended high
school and bowled on the cricket
pitch. He studied electronics and
Please turn to page 17
By Don Clark,
Monica Langley
and Shira Ovide
Satya Nadella, seen in July, is currently in talks to succeed Steve Ballmer as CEO, a person familiar with the situation said.
M
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Samsung Struggles to Roll Out Mobile OS
SEOULAn ambitious effort by
Samsung Electronics Co. to roll out
smartphones powered by a new op-
erating system is on shaky ground.
The worlds largest smartphone
maker is investing a large amount of
resources on an operating system
called Tizen to challenge the mobile
software duopoly of Apple Inc. and
Google Inc.
But some of the worlds major
wireless carriers are beginning to
pull their support of phones slated
to run the platform.
Tizen (pronounced TAI-zen) also
has had trouble attracting large de-
velopers of applications that are in-
creasingly at the center of the user
experience. That is leaving the
fledgling platform in the hands of
tiny, relatively unknown players, like
Daniel Escobar, a 34-year-old devel-
oper in Atlanta.
The South Korean company is
supporting Mr. Escobars Maestro
music-sharing service, which has
about 30,000 subscribers, with tens
of thousands of dollars in cash in-
centives and technical support to
develop an app for Tizen.
The imperative for Samsung to
figure out a mobile software and
services strategy is critical.
Chinese smartphone makersin-
cluding a potentially strengthened
Lenovo Group Ltd. following its
planned acquisition of Googles Mo-
torola Mobility handset unit
threaten to push down handset
prices and squeeze hardware mar-
gins. That would make software and
services the industrys primary
profit engine.
Consumer needs are changing
along with the changing times,
Samsung co-Chief Executive Boo-
Keun Yoo said last month. I dont
feel you can lead the market by fo-
cusing solely on software or hard-
ware.
Samsungs best-selling smart-
phones currently run on Googles
Android operating system and come
preloaded with Google mail, map-
ping functions and mobile-ad
searches. As a result, it is the Moun-
tain View, Calif., company that is
taking a cut of every purchase made
on its app store.
If Tizen were to succeed, it
would give Samsung its own stream
of revenue from sales of third-party
apps, software and services on its
devices.
The potential is enormous. In its
most recent fiscal year, Apple gener-
ated $16 billion in sales from soft-
ware and services, including the
iTunes and App stores.
Samsung, which has been devel-
oping Tizen with help from Intel
Corp. and others, is pouring billions
of dollars a year into software devel-
opment more generally and devoting
about 60% of its 67,000 research and
development engineers to software
innovation, with plans to hire an-
other 800 engineers a year.
Samsungs longer-term aim is for
Tizennamed to evoke a Zen-like
Please turn to page 17
BY JONATHAN CHENG
Source: Gartner
The Wall Street Journal
Shifing Tides
Global smartphone operating-system
market share, by devices in use
100
0
20
40
60
80
2010 11 12 13
forecast
iOS
Android
Windows
Blackberry
Others
%
Asian Banks
Reach for
Bigger Role
In Lending
HONG KONGWhen Freeport-
McMoRan Copper & Gold Inc., the
worlds largest publicly traded cop-
per producer, arranged $7 billion in
financing last year, its roster of
lenders included the usual catalog of
European and U.S. banks. But it also
boasted the biggest list of Asian
lenders the company has ever dealt
with.
Some 21 Asian lenders joined in
on the deal, including five from Ja-
pan, nine from China and five from
across Singapore, Taiwan, India and
Indonesia, a spokesman for the com-
pany said in an emailed response to
questions. The Phoenix-based miner
is using the money to help pay for
$20 billion of acquisitions.
Asian banks have been prominent
on other high-profile deals, too. Ver-
izon Communications Inc.s $12 bil-
lion package of loans in October
linked to the buyout of its U.S. wire-
less partner included Agricultural
Bank of China Ltd., Bank of China
Ltd. and Bank of Communications
Co., among others.
Those deals reflect a push by
Asias banks into new markets
around the world. Their efforts
come at a time when Western banks
are reining in some lending as they
recover from the global financial cri-
sis.
Buoyed by strong credit ratings
and rising depositsAsian banks
largely sidestepped the 2008 finan-
cial crisisand flush with cash
linked to ultra-loose monetary policy
in the U.S. and Japan that has
poured cash into Asia, lenders from
the region led by the likes of Japans
Mitsubishi UFJ Financial Group
Inc., or MUFG, have become bigger
players as they chase higher yields
and look to diversify their business.
Asian banks are growing outside
Asia, there is just no doubt, said
Atul Sodhi, Hong Kong-based man-
aging director and head of loan syn-
dication for Asia Pacific at Crdit
Agricole and chairman of the Asia
Pacific Loan Market Association.
A spokesman for Verizon de-
clined to comment.
While the gains are nascent
MUFG, Mizuho Financial Group Inc.
and Sumitomo Mitsui Financial
Group Inc. are the only Asian banks
in the top 20 rankings of global
lenders last yearthere are signs of
Asian banks picking up business.
In 2007, MUFG was the only
Asian bank in the top 20, Thomson
Reuters data show. And since then it
has jumped to seventh from 17th.
Bank of China has moved to 29th
from 124th and Singapores DBS
Group Holdings Ltd. has edged up
to 40th place from 61st.
Both Mizuho and SMFG plan to
Please turn to page 20
BY ENDA CURRAN
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 13
OPINION
The blood libelthe medieval
myth that Jews require the blood
of Christians, especially of chil-
dren, and routinely slaughter them
to obtain ithas been in the news
to a remarkable degree lately.
Civic leaders in the village of
Glatigny in northeastern France
last month held a ceremony offi-
cially exonerating Raphael Levy, a
Jewish livestock trader, who had
been convicted of ritually murder-
ing a Christian child, and was tor-
tured and burned at the stake for
it in 1670.
Around the same time, in the
cathedral in the city of Sandomi-
erz, Poland, an 18th-century paint-
ing entitled Mord Rytualny (Rit-
ual Murder) was shown to the
public for the first time in nearly a
decade, with the approval of the
Catholic Church and Jewish lead-
ers, to educate the public. Finally,
there is the release of a new na-
tional survey by the Center for Re-
search on Prejudice at Warsaw
University that found that 13% of
Polish respondents agreed that
Jews use Christian blood for their
ritual purposes, up 3% from the
last poll in 2009. Meanwhile, only
35% rejected the charge outright, a
decline from 49% in 2009.
Eight hundred years after its
birth in Western Europe, the blood
libel myth, though repudiated a
thousand times over, remains a
part of Western and now world
culture. The blood libel today has
its believers in Europe, but its
greatest currency is in the Middle
East. In November of 2013, Sheikh
Raad Salah, leader of the northern
branch of the Islamic Movement in
Israel, was convicted by a Jerusa-
lem court of incitement to violence
for a sermon where, among other
things, he referred to children of
Europe whose blood was mixed
into the holy bread, according to
the indictment. His comments
were widely seen as a reference to
the blood libel myth that Jews use
Christian blood to make matzo,
though Mr. Salah insisted that his
remarks were misinterpreted.
More important than direct ex-
pressions of the blood libel is the
way the myth continues to serve
as an unconscious foundation for
anti-Semitic attitudes of Jews as
bloodsuckers, exploiters and
parasites, even among those who
may shun all superstition. The
public vindication of Raphael Levy
after 344 years, then, is not
merely a well-intentioned exercise,
but an extraordinarily meaningful
one.
On September 25, 1669, Levy
was racing home to celebrate Rosh
Hashanah, the Jewish New Year. In
the deep pocket of his tunic, he
carried a traditional rams horn or
shofar that he had purchased for
the synagogue service in his home-
town of Boulay that was to begin
at sundown.
That same day, Didier Le
Moyne, the three-year-old son of a
Glatigny wheelwright, disappeared
from a forest clearing while his
mother was doing the washing at
a spring just outside of town. His
remains, torn apart by animals,
were found two months later in
the forest. Whether he was mur-
dered or simply lost his way in the
woods was never determined.
Levy had a thoroughly solid al-
ibi and there were no reliable wit-
nesses against him, yet he was ar-
rested for the boys supposed
murder. Levy refused to confess or
convert to Christianity, first under
ordinary and then under ex-
traordinary torture ordered by
the court in the provincial capital
of Metz. Weights were attached to
feet and he was hoisted from the
ground by ropes and dropped. To
withstand the torture he prayed,
crying out and invoking the name
of God that he had told the truth,
according to the court record.
Levy told the priest who accompa-
nied him to the stake: I am a Jew,
I wish to die a Jew.
Soon after the trial, a royal de-
cree from Louis XIV put an end to
ritual-murder accusations in
France. The King forbids and pro-
hibits the acceptance or belief of
any such stories, the decree read,
citing a papal bull. Indeed several
popes, beginning with Innocent IV
in 1247, had condemned the
charge. But neither papal bulls nor
the proclamations of kings and
emperors could put an end to the
blood libeland the story of the
two families in the Glatigny case
testifies to that in the most per-
sonal way.
The case of Raphael Levy lived
on in the memories of the Lem-
oine (as they came to spell the
name) and Levy families, who re-
mained near their original home-
towns for centuries. Bernadette
Lemoine, a ninth-generation rela-
tive of Didier Le Moyne, became
an amateur historian in 2001 at
the age of 90 to examine the evi-
dence about the boys death. In
1669, Didiers parents had been
among Levys most insistent ac-
cusers. In court, the father had de-
clared Levy to be a new Herod,
thirsty for [the boys] blood in or-
der to sacrifice it to the inhuman-
ity and barbarity of his syna-
gogue.
According to Bernadette Lem-
oine, her own father and her en-
tire family had believed Raphael
Levy to be guilty. But, after exam-
ining the documents in a local ar-
chive, she concluded in a report
that her family had helped commit
a monumental injustice and per-
petuated it for three centuries.
She shared her conclusions with
an 11th-generation descendant of
Raphael Levy whom she met and
befriended some years before her
death.
The unveiling of the Ritual
Murder painting in Sandomierz is
another powerful exercise in con-
fronting a painful past. The paint-
ing, which depicts Jews killing
Christians, had been covered by a
red curtain for eight years due to
its offensive content. But the Cath-
olic Church, with the support of
Jewish leaders, decided that open-
ness rather than suppression was
the most constructive path.
Mounted next to the painting is a
plaque explaining that the notion
that Jews commit ritual murder is
a falsehood and one contrary to
the essence of the Jewish religion.
To uncover it, to show it pub-
licly, Polands chief Rabbi Michael
Schudrich told Agence France-
Press, is to show [the blood libel]
for what it is: a lie.
The last Jew actually charged
with ritual murder was a brick-fac-
tory clerk, Mendel Beilis, whose
1913 trial in Kiev attracted world-
wide attention. But the memory
and message of the blood libel still
run deep. At the ceremony in
Glatigny, with descendants of
Raphael Levy present, Mayor Vic-
tor Stallone hopefully declared,
Today, we are starting from
scratch. In history though, espe-
cially in the history of the blood li-
bel, there is, unfortunately, no
such thing.
Mr. Levin is a writer and pro-
ducer at ABCs Good Morning
America and is the author of A
Child of Christian Blood: Murder
and Conspiracy in Tsarist Rus-
siaThe Beilis Blood Libel, forth-
coming from Schocken Books.
The Exoneration of Raphael Levy
BY EDMUND LEVIN
My heart aches as I stand in
the light bulb aisle of Home De-
pot, looking for an LED light to re-
place the incandescent bulbs that
went out of U.S. production at the
beginning of this month. The
saleswoman asks if I prefer a soft
white or a warm whiteas though
between the two either is less
harsh.
I wonder if the members of
Congress who passed the Energy
Independence and Security Act of
2007, which slowly outlawed the
manufacture of incandescent
bulbs, have ever sat beneath an
LED or Compact Fluorescent Light
(CFL) bulb. If they have, they will
know that it induces a sort of
drowsy numbnesssomething I
learned recently when my room-
mate brought home a set of Nano-
leaf LED bulbs with an advertised
30-year life span.
After a few minutes sitting in
his room, we both realized that
there was something almost nau-
seating about the quality of the
dull light. That the makers of Na-
noleafor any manufacturer of ef-
ficient bulbswould be deluded
enough to think that I would want
to spend the next 30 years with
their product is beyond me. And
not only are their life spans un-
bearably long, but the manufac-
turers want to charge $20 per
bulb. Over time, we are told, they
save us money. Id rather eat the
extra cost and avoid having my
living room look like an interroga-
tion cell.
Are we really meant to believe
that the ozone will close up and
the polar ice caps un-melt if we
insert these terrible light bulbs
into every socket of our homes?
On the other hand, LEDs and CFLs
are a kind of modern-day miracle:
Somehow they produce a light
that is at once harsh and very
dim. Its like seasonal affective
disorder crammed into a tiny bulb.
When I am asked if I want a
Compact Fluorescent Light, the
only thought I have is that I dont
want my light to be compact, nor
do I wish it to be florescent. I
want a light that will incandesce
across my room, filling it with a
familiar yellow surf, and remind
me that it was not with wax or
kerosene, but with incandescent
bulbs that man conquered the
night.
Humans became modern when
they could stay up at night pen-
ning documents and tinkering
with inventions, and later, watch-
ing Netflix into the small hours of
the morning. The same light that I
type beside shone on the page as
Winston Churchill composed his
famous lines, we shall fight them
on the beaches . . . we shall never
surrender, and as James Joyce
sat in his dingy foreign chamber
finishing Finnegans Wake.
With these new bulbs, we will
usher in an era of global disarray.
Political negotiations will become
rushed and aggressive as foreign
leaders rub their temples and
hurry out of the Oval Office. Every
restaurant will lose its Michelin
stars as guests complain of mi-
graines. Children will fear their
nightlights, and lovers will be
forced to romance each other
without the aid of mood lighting.
Our brows will remain forever fur-
rowed, and we will yearn for a
simpler time when bulbs cost 99
cents and didnt make us feel like
we had cataracts.
Over the past year, I have seri-
ously entertained the notion of
hoarding incandescent bulbs, and
my instinct is obviously not an un-
common one: It now seems easier
to buy a gun than it is to track
down and purchase 60 watt incan-
descent bulbs.
I imagine what will happen
when the filaments in my final in-
candescent bulbs grow weak, and I
can hardly read my notes before
me. Will I no longer be able to
write at night? Or worse, will liv-
ing with CFLs and LEDs make ev-
ery day feel like I have just spent
nine hours plastered before a
computer screen? One day, soon, I
will turn on my light and hear for
the last time the signature, explo-
sive death rattle of an incandes-
cent bulb, and Ill hold a vigil for
the light that shaped and wit-
nessed more than a century of hu-
man history. Tender is the light,
Keats might say.
In my lightless room, Ill sit for
a moment and wonder how many
more times in my life Ill watch a
bulb go out again. As I look to my
dead bulb, Ill think of the poet
again and whisper: Darkling, you
were not a piece of technology
born for death.
Mr. Aciman is a writer in New
York and the author of Twittera-
ture (Penguin, 2009).
Tender Is the Light of My Incandescents
BY ALEXANDER ACIMAN
Thorold Barker, Editor,
Europe, Middle East & Africa
Bruce Orwall, Senior Editor, Europe
Gren Manuel, Executive Editor, Europe
Terence Roth, Managing Editor, Europe
Brian M. Carney, Editorial Page Editor
Lauren Berkemeyer, Marketing
Kate Dobbin, Communications
Florence LeFevre, Institutional Sales Europe
Michael Lloyd, Institutional Sales U.K.
Jonathan Wright, Circulation Sales
Kelly Leach, Publisher
Published since 1889 by
Dow Jones & Company
2014 Dow Jones & Company. All Rights Reserved
Bracing myself for life once
the filaments in my beloved
bulbs grow weak.
The medieval myth that
Jews slaughter Christians for
their blood remains a part of
world culture today.
G
e
t
t
y
I
m
a
g
e
s
Comments? The Journal
welcomes readers responses to
all articles and editorials. It is
important to include your full
name, address and telephone
number. Please send letters to
the editor to: Letters@WSJ.com
16 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
INDEX TO BUSINESSES
Aer Lingus Group......... 16
Agricultural Bank of
China.......................... 15
Air France-KLM.............16
Air Berlin...................... 16
Air Seychelles...............16
Alitalia.......................... 16
Amazon.com................. 28
Apple...................15,16,20
Australia & New Zealand
Banking Group...........20
BAIC Motor...................28
Banco Bilbao Vizcaya
Argentaria..................19
Banco Popular...............19
Banco Santander.......... 19
Bank of America...........28
Bank of
Communications........15
BlackBerry.....................17
Blackstone Group........... 1
BSG Resources............. 16
BTC China......................17
CaixaBank..................... 19
Canadian Natural
Resources.................... 6
Carlyle Group...........16,18
Caterpillar..................... 20
Cenovus Energy..............6
China Citic Bank........... 19
Cisco Systems.............. 20
Citigroup....................... 28
Coca-Cola.......................16
Concurix........................ 15
ConocoPhillips.................6
Credit Suisse Group.. 1,28
Daimler..........................28
Darwin Airline.............. 16
DBS Group Holdings.....15
Deere.............................20
Equity International.....18
Etihad Airways.............16
European Union.............. 9
Exxon Mobil....................6
Freeport-McMoRan
Copper & Gold............15
Glencore Xstrata.......... 20
Global Frontiers
Management..............18
Goldman Sachs
Group.......................1,28
Google........................... 15
Grupo Inaer...................16
Harding Loevner........... 18
H.I.G. Capital.................16
HSBC Holdings............. 20
Imperial Oil.....................6
Industrial & Commercial
Bank of China............15
ING Groep N.V. ............. 20
Intel...............................15
InterContinental Hotels
Group..........................18
Intesa Sanpaolo............16
Jaguar Growth
Partners..................... 18
James Investment
Research.................... 20
Jet Airways (India)......16
J.P. Morgan Chase..........1
KKR............................... 16
KPMG............................ 18
Lenovo Group................15
Marathon Petroleum......6
Microsoft..................15,17
Mitsubishi UFJ Financial
Group..........................15
Mizuho Financial
Group..........................15
Nokia............................. 15
NTT DoCoMo.................17
Och-Ziff Capital
Management Group.... 1
Orange...........................17
Peoples Bank of China 17
Saba Infraestructuras.. 16
Sage Advisory Services. 1
Samsung Electronics....15
Socit Gnrale............ 1
Sprint............................ 17
Standard Chartered......20
Sumitomo Mitsui
Financial Group......... 15
Suncor Energy................ 6
Sun Microsystems........15
Telefonica......................17
TransCanada................... 6
UniCredit.......................16
Valero Energy................. 6
Verizon
Communications........15
Virgin Australia............16
Vitol Group................... 20
Wells Fargo...................18
Yum Brands.................. 16
Businesses
This index of businesses
mentioned in todays
issue of The Wall Street
Journal is intended to
include all significant
reference to companies.
First reference to the
companies appears in
bold face type in all
articles except those
on page one and the
editorial pages.
Corrections Amplifications
The first name of Jeromin Zettelmeyer, deputy chief economist of the European Bank for
Reconstruction and Development, was misspelled as Jeronmin in a front-page article in
the Friday-Sunday edition about stumbles in European currencies.
A spokesman for BSG Resources Ltd. said the mining company entered into a joint-ven-
ture agreement in Guinea with mining company Vale SA in accordance with Guineas min-
ing code and with the full knowledge and approval of the Guinean government. A Business
& Finance article in the Friday-Sunday edition about mining interests in Guinea incorrectly
summarized the spokesmans statement, omitting that BSG Resources said it acted in ac-
cordance with the countrys mining code.
An Off the Wall article Jan. 27 about unusual rsums featured a job hunters creative
rsum delivery to the New York office of One Fine Stay, a booking agency for luxury-home
stays. The article incorrectly said the rsum was delivered to the companys Los Angeles
office.
Guccis leather-goods factory in Florence, Italy, shares production processes with some
other Kering brands. An article on Gucci executives Frida Giannini and Patrizio di Marco
in the February issue of WSJ. Magazine referred to it as a research laboratory, but didnt
specify that its shared resources are restricted to the production process. In addition, com-
pany executives say they misspoke when they said Saint Laurent uses the facility; Saint
Laurent has operated independently since January 2012.
Readers can alert the London newsroom of The Wall Street Journal to any errors in news articles by emailing
wsjcontact@wsj.com or by calling +44 (0)20 7842 9901.
BUSINESS & FINANCE
KKR to Open Office in Madrid
Outpost Will Be Buyout Firms First in Spain, Where Foreign Investment Is Expanding
MADRIDKKR & Co. is set to
open its first office in Spain on
Monday, as the buyout specialist
seeks to build on its billion-euro
stake in a country that is attracting
a growing volume of investment
from abroad.
We believe that there is a lot to
do in Spain, said Jess Olmos, head
of the New York-based firms Span-
ish operations and its Europe, Mid-
dle East and Africa infrastructure
team. He said the firm is interested
in opportunities such as real estate,
infrastructure and direct lending.
Spains economy is clawing back
to meager growth after snowballing
losses on real-estate loans threat-
ened to bankrupt many of the coun-
trys lenders.
KKR will be looking to lend be-
tween $50 million to $100 million to
Spanish companies with an annual
operational cash flow of around 10
million to 15 million ($13.5 million
to $20.2 million), Mr. Olmos said.
Direct lending has grown in Spain in
recent years as bank credit has
tightened. Spanish banks have been
focusing on cleaning up their real-
estate portfolioswhich are still full
of bad loansand buffering their
capital positions ahead of this
years balance-sheet exams by Eu-
ropean authorities.
KKR says it has spent 1.2 billion
in Spain in the past three years on
investments such as minority stakes
in helicopter operator Grupo Inaer
and car-park operator Saba Infrae-
structuras.
Mr. Olmos didnt say how much
KKR plans to invest in Spain in com-
ing years. In Europe, the firm has
offices in London and Paris.
Other private-equity firms have
stepped up their presence in Spain
in recent months. Apollo Global
Management LLC bought a real-es-
tate servicing unit from Banco San-
tander SA earlier this year for 664
million. Last fall, Apollo also bought
Evo Banco, a small unit of a nation-
alized Spanish lender.
H.I.G. Capital and Carlyle Group
LP are among the private-equity
firms that have offices in Spain.
In November, The Wall Street
Journal reported that at least 15 pri-
vate-equity groups focused on Spain
and Italy were looking to raise funds
with a combined value of more than
4 billion, according to several peo-
ple familiar with the matter and
Preqin, a data provider. That is
more than the 1 billion raised since
the start of 2010.
The growing interest in Spain
means good deals are getting harder
to come by, Mr. Olmos said, but for
sure there will be more opportuni-
ties. He said he would remain
based in London and travel fre-
quently to Spain to work with a full-
time staff member in the new office
in Madrid. KKR employees, he said,
already were flying to Spain practi-
cally every week.
BY JEANNETTE NEUMANN
Etihad Sets
Deadline
To Complete
Alitalia Deal
DUBAIEtihad Airways of Abu
Dhabi is in the final phase of due dil-
igence related to the potential pur-
chase of a stake in Italian carrier Ali-
talia SpA, and has set a deadline of
30 days to complete a deal.
The airlines, which started talks
last year, said Sunday that both com-
panies would use the 30-day period
to devise a common strategy that
satisfied each party.
Any issues that may prevent the
establishment of an appropriate
business plan will have to be re-
solved to ensure the plan can be im-
plemented to move Alitalia to sus-
tainable profitability, the airlines
said in a joint statement.
The potential deal, which could
result in Etihad taking a 49% stake in
Alitalia, would increase the Abu
Dhabi airlines presence in Europe
and provide the Italian carrier with a
partner and extra funding.
Alitalia is seeking a partner after
Air France-KLM SA declined to take
part in a 300 million ($405 million)
fundraising in December. By not par-
ticipating in the rights issue, Air
France-KLMs stake in Alitalia fell to
7.1% from 25%. As part of the fund-
raising, Intesa Sanpaolo SpA and
UniCredit SpAtwo of Alitalias
largest shareholdersalso offered
200 million in fresh loans to the
company.
Negotiations with Etihad involve
government and private-sector stake-
holders, with the Italian government
eager to avoid bailing out Alitalia for
the second time in six years.
Etihad is demanding that banks
write down some of the debt the
Rome-based carrier owes, according
to a person familiar with the matter.
Alitalias net debt at the end of Sep-
tember amounted to 813 million.
If a deal is completed, it would be
Etihads eighth such investment as
the carrier pursues a strategy of buy-
ing minority stakes in other airlines.
So far, Etihad has taken stakes in Air
Berlin Inc. of Germany, Air Serbia,
Darwin Airline SA of Switzerland
and Aer Lingus of Ireland. It also
holds equity investments in Air Sey-
chelles, Virgin Australia and Jet
Airways (India) Ltd.
BY RORY JONES
According to a
survey last year,
the most powerful
foreign brand in
China wasnt Coca-
Cola, Apple or
Levisit was KFC. But consumers
there suddenly didnt find it finger-
licking good after two safety scares
related to the chicken it serves. The
companys stock performance will
hinge on how quickly it can turn
the corner and start growing sales
again.
Mondays release of fiscal
fourth-quarter results by KFC
operator Yum Brands can go a long
way toward reassuring investors. It
lowered expectations in October
after Chinese sales in September
the first month of the period being
reportedwere weaker than
expected.
Yum said the drop made it
unlikely that same-store sales for
the quarter through early
December would be positive,
reversing an earlier prediction. The
difference pointed to a low-double-
digit percentage decline in earnings
per share instead of the previous
forecast of a mid-single-digit one.
Analysts promptly lowered their
sights, but their forecast for
adjusted earnings implies a drop of
only around 5%. Unadjusted
earnings, seen at 80 cents a share,
according to FactSet, would
constitute a healthy rise versus a
year earlier.
Even if analysts werent
cautious enough, year-over-year
comparisons in China, where KFC
sales were dented by avian flu and
a food-safety scare, are about to
start looking much better. The
company said in December that it
expects earnings per share to grow
by at least 20% in 2014.
That may make this an
opportune time for investors to get
exposure to a growth company at a
reasonable price.
Yum now trades at 18.6 times
projected earnings over the next 12
months; It fetched 19.7 times in the
first half of 2012the period
preceding KFCs woes in China.
Furthermore, analysts havent
taken managements optimism on
2014 earnings fully to heart, so
todays multiple might be
artificially high.
Caution would be warranted if
there has somehow been
permanent damage to KFCs brand.
Based on market research released
by the company, though, and
extensive steps to restore trust, the
company deserves the benefit of
the doubt. It also makes a strong
case that it is far from the point of
market saturation in China. It cites
Malaysia, where density of KFCs is
about six times higher.
After an awful year, get ready to
witness poultry in motion.
Yums Shares Could Soon Become Tastier
[ Ahead of the Tape ]
BY SPENCER JAKAB
Source: the company
Wing and a Prayer
Yum Brands China system sales
growth, change from a year earlier
30
30
15
0
15
%
12 13 2011
KFCs China sales were hit by a safety scare. Outlets include this one in Beijing.
R
e
u
t
e
r
s
12 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
OPINION: REVIEW & OUTLOOK
I
ts a sign of how lackluster the U.S.
economic recovery has been that
Thursdays news of 3.2% growth in
the fourth quarter of 2013 was greeted
with cheers and relief. The economy has
now grown at 2.5% or faster for three
quarters, and the pace in the last six
months is the fastest since 2003-2004
following George W. Bushs tax cuts on
capital gains, dividends and top incomes.
The best news is that growth all came
from private spending and investment,
not the artificial high of unsustainable
government spending. The official gov-
ernment contribution to growth was a
negative 0.9% due to falling defense out-
lays and the federal budget sequester. The
national-income accounts have a bias that
treats government spending as a net con-
tributor to growth even when its wasted.
Remember how the Keynesians pre-
dicted that less spending would mean
slower overall growth? Maybe the oppo-
site is true: When government shrinks,
the private economy has more money and
room to expand.
This is not to say that the report sug-
gests the economy has reached escape ve-
locity from the post-recession status quo.
The growth was largely
due to a healthy gain in
consumer spending (a
2.3% contribution) and net
exports (1.3%), especially
goods. The export story is
especially notable because
it reflects the rising com-
petitiveness of U.S. com-
panies. Some of this is due to lower en-
ergy costs and some to the self-discipline
that has been required during the lean
years since 2008.
On the other hand, private business in-
vestment contributed only 0.6% to
growth, and housing deducted from GDP
for the first time since 2010 (minus-0.3%).
Inventories also climbed, which may re-
duce growth this year unless overall
spending and investment accelerate.
The economy will need many more
quarters of 3% or more growth to get
anywhere close to the pace of most nor-
mal expansions. Growth since the reces-
sion ended in June 2009 has been sub-
stantially slower than in
any postwar expansion.
Growth over the last 18
quarters has averaged
2.4%, compared to an aver-
age of more than 4% in the
1980s boom and a little
less than 4% in the 1990s.
Growth for all of 2013 was
merely 1.9% despite the acceleration in
the last half.
The biggest looming threats to growth
this year include Chinas slowdown as it
tries to roll back its stimulus and deal
with credit problems. Theres also the
global adjustment to Federal Reserve ta-
pering, as were seeing in emerging mar-
kets and as investors pull out of riskier
assets.
The risks from Washington are fewer
than in recent years thanks to gridlock.
The main threats are new energy regula-
tion in the name of fighting global warm-
ing, and the continuing burden of Obama-
Care on small-business costs and hiring.
Congress ought to make a run at overrid-
ing the worst energy rules under the Con-
gressional Review Act, which would at
least put Senate Democrats on record in
an election year and might cause the Ad-
ministration to modify its worst plans.
President Obama could also help by
spending political capital on his three
pro-growth ideasfreer trade, and immi-
gration and tax reform. But Senate Major-
ity Leader Harry Reid has already issued
a veto on trade, and Mr. Obama wants to
raise some corporate taxes to make up for
cutting tax rates. Meanwhile, the U.S. cor-
porate tax rate continues to be by far the
highest in the developed world, driving
capital and job creation overseas.
Washington could do more to lift
growth, but given what that crowd be-
lieves, maybe gridlock is the best we can
hope for.
A
merican diplomacy, backed by the
threat of force, is why Syrias
chemical weapons are being elimi-
nated. That was President Obama in his
State of the Union Tuesday, boasting
about what he regards as one of his signa-
ture achievements from 2013. Well, not so
fast.
On Wednesday Reuters reported how
much of Syrias chemical stockpile has
been handed over for destruction: 4.1%.
That comes to about 59 tons of chemical
weapons surrendered out of a stockpile of
1,433 tons. Oh, and thats the stockpile
that the Bashar Assad regime officially de-
clared. In September we reported that U.S.
intelligence believes the regime disclosed
only 32 of an estimated 50 chemical sites.
The Reuters dispatch is based largely
on a forthcoming report from the Organi-
zation for the Prohibition of Chemical
Weapons, which last year won a Nobel
Peace Prize and is overseeing the removal
of the Syrian weapons. All the indications
are that actually the regime has been
sort of stalling on the implementation of
the agreement, a diplomatic source told
the news agency.
Theres a nonshocker. It was predict-
able that as soon as Assad became a part-
ner in his own chemical disarmament he
would seize every opportunity to post-
pone and prevaricate. The regime now in-
sists it needs armored vehicles and com-
munications equipment to move the
weapons. Next theyll demand that the
stockpile will only be moved when it has
new tanks and attack helicopters to escort
the convoys, or perhaps when the rebels
lay down their arms.
A State Department spokesman reacted
to this with the mildest of scoldings that
the delay is increasing the cost to na-
tions for shipping and other removal ef-
forts. Shipping costs? Dont expect the
Administration to trumpet these viola-
tions at the U.N., where China and Russia
have shielded Assad, or in Congress,
which played its own role in looking away
from the dictators predations. And no-
body should expect Mr. Obama to make
good on his pledgehollow even when he
made it in Septemberto renew the
threat of military action if diplomacy
fails.
But neither should the President get
away with treating his Syrian debacle as
a victory. Americans may want to wash
their hands of the Mideasts many imbro-
glios. But one consequence of inaction is
another despot who sleeps securely in the
knowledge that a diffident superpower
will exact no price on those who gas their
own people.
F
or those Americans who havent
started preparing for retirement,
President Obama is pitching a new
starter savings account. Whether he has
the legal authority to do so is a question
congressional staff are beginning to ex-
plore.
During his State of the Union address
and then again at a Wednesday event in
Pennsylvania, President Obama hailed his
new MyRA, a type of Roth Individual
Retirement Account, which allows after-
tax dollars to grow tax-free until retire-
ment. But the money in MyRAs will only
be invested in a government bond fund.
Unlike most private options for creat-
ing a Roth IRA, the government will allow
people to open a MyRA with as little as
$25, and to contribute as little as $5 in
regular payroll deductions. Theres no rea-
son private firms couldnt offer such small
accounts, but they dont because its not
profitable to do so. Such business can cost
more to service than its worth. The MyRA
is available only to those who dont have
a retirement plan through their employer
and whose household income is less than
$191,000 each year.
Mr. Obama is promising that the re-
turns will be the same as those enjoyed by
federal workers who invest in the Govern-
ment Securities Investment Fund, known
as the G Fund and offered via the Thrift
Savings Plan. This plan, like the Roth IRA,
was created by law. But Mr. Obama says
he can create, administratively, a new plan
for non-government work-
ers that will generate the
same returns as the G
Fund. Treasury Secretary
Jack Lew adds that unlike
federal workers who invest
in the G Fund, MyRA cus-
tomers will pay no fees.
Hmmm. Regulators are
always suspicious of investment fund
marketers who understate the costs of
their services. And even funds pegged to
stock or bond indexes have some ex-
penses. Auditing, custody arrangements,
call centers and the like cost money. With
accounts as small as $25, such expenses
would represent an unusually high per-
centage of the invested funds. Clearly
someone is going to pay for all this, but
who?
If Mr. Lew is accurate in his promise of
no fees, then the money would have to
come from a congressional appropriation.
But Mr. Obama has explicitly stated that
hes creating this fund unilaterally, and he
even made a show in Pennsylvania of sign-
ing the executive order, which he then
handed to Mr. Lew.
An Administration source tells us on
background that Treasury will administer
the MyRA program using
its longstanding author-
itygranted by Con-
gressto sell securities,
such as savings bonds, and
hire financial agents.
This suggests that Mr.
Obama intends to dip into
the funds Congress appro-
priates for Treasurys fiscal services. But
these are meant to support Treasurys op-
erations to fund the government, not as
an all-purpose pot of money to achieve
White House policy goals. Under this in-
terpretation, could Mr. Obama decide at
some point to double or triple the G-Fund
returns for MyRA investors? Geniusa
new subsidy plan that doesnt need the
approval of that pesky legislature.
The part about hiring financial
agents is also intriguing and may explain
why some in the financial industry have
responded warmly to the proposal. As-
suming the White House has learned not
to try to create its own ObamaFunds web-
site, one or more private firms could re-
ceive big federal contracts.
Wed say that decorum prevents Mr.
Lew from handing the business off to his
former colleagues at Citigroup, though
with this White House you never know.
Hiring investment agents also costs
money, which under the Constitution is
supposed to come from Congress. Maybe
Messrs. Lew and Obama simply figured
they could come up with this new plan,
claim its legal to pay for it out of existing
Treasury cash, and then dare Congress
not to fund it in the future. Will they call
it the Hope and Spare Change Fund?
The investors the Administration is tar-
geting for this fund are mostly young or
poor, and it only makes sense for them if
this really is a backdoor subsidy scheme.
The G Fund, which delivered a 1.89% re-
turn in 2013, is the last vehicle young
workers with a long time horizon should
be using to build a nest egg. They need as-
set growth, which comes over a lifetime
from investing in stocks.
So maybe this new fund really is about
funding government, and recruiting a new
class of investors willing to accept low re-
turns to underwrite Washington.
Less Government, Faster Growth
Assads Chemical Charade
Baracks New Bond Fund
Private spending
and investment lift
the U.S. economy
in the fourth quarter.
How to create a new
U.S. retirement
subsidy with no
vote in Congress.
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 17
BUSINESS & FINANCE
Bitcoin Market Makes
About-Face in China
Popular Chinese bitcoin exchange
BTC China has restored a facility al-
lowing customers to purchase bit-
coin by depositing yuan into the ex-
changes corporate bank account.
The move reverses a decision in
December to halt such deposits,
which the exchange made in re-
sponse to a Dec. 5 memo from the
Peoples Bank of China warning na-
tional financial institutions not to
trade in bitcoin. Those twin devel-
opments threatened to curtail vol-
umes on BTC China, which had
grown to become the biggest bitcoin
exchange in the world, and
prompted a drop of more than 50%
in bitcoins international price over
a two-week period in December.
Reached by phone in Shanghai,
BTC China Chief Executive Bobby
Lee said the change, which was im-
plemented Thursday, was made af-
ter the company studied the central
banks memo and other rules that
raised concerns about BTCs banking
activities. The exchange determined
that it was legally permitted to ac-
cept deposits into its corporate bank
account and to transfer those funds
into customer accounts, even
though banks themselves are barred
from engaging in bitcoin businesses
and speculation.
BTC China isnt making a high-
profile announcement about the
change, however, in part because it
is taking a cautious view of future
government actions. We are defi-
nitely in compliance with the Dec. 5
memo, but the government and the
government agencies can change the
rules anytime in the future, Mr. Lee
said. So we are going to take a
wait-and-see approach.
The timing, just ahead of Fri-
days start to the Lunar New Year
holiday period, was also important,
he said. It is going to be slow in
terms of trading value, so we just
wanted to make sure the system is
running smoothly, that there is not
too much pressure and that it
doesnt pick up too much attention.
Friday also marked the central
banks deadline by which banks and
payment processors were supposed
to cease all dealings in bitcoin.
Despite the quiet relaunch, word
of the policy reversal emerged in
the U.S. trading day Thursday after
a user cited it on a Reddit forum for
bitcoin enthusiasts and a story ap-
peared on news site Coindesk.
The move appears to have given
a modest lift to the international
price for bitcoin. Late Thursday in
New York, bitcoin was quoted at
$843.60, up from a low of $816.36
around 5 a.m. New York time, ac-
cording to an index that Coindesk
compiles from three exchanges. By
Sunday afternoon in New York, the
price had climbed to $860.09.
Authorities the world over are
trying to figure out how to regulate
commerce in the currency, with the
uncertainty surrounding that pro-
cess impeding its adoption andas
with the Chinese central banks
move in Decembersometimes
weighing on its price.
BY MICHAEL J. CASEY
Bitcoin coupons were distributed to Hong Kong pedestrians on Thursday, the eve of the Lunar New Year.
A
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e
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r
a
n
c
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-
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r
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s
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e
/
G
e
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I
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s
Samsung Struggles to Roll Out New Smartphone OS
tying together of different devices
and functionsto serve as a unified
operating system that can coordi-
nate functions on every device a
consumer owns, including a smart-
phone, refrigerator, television set
and washing machine, all of which
the company makes.
Prototype Tizen devices look and
feel similar to those running An-
droid, with which it shares a com-
mon programming code base. But
those involved in the project say the
prototypes cant be judged as final
products, and Tizens central appeal
is that it allows for more customiza-
tion of the interface by carriers and
manufacturers than are possible
with Android.
Yet industry executives and ana-
lysts say it has been difficult to get
Tizen off the ground.
NTT DoCoMo Inc., Japans big-
gest telecommunications operator
and a close partner on Tizen, had
been gearing up to announce its first
Tizen smartphone in mid-January.
Continued from page 15 But on the day DoCoMo was set to
release its device, it instead shelved
its plans.
In the U.S., Sprint Corp. joined
the Tizen Association in May 2012,
saying it welcomed the broader con-
sumer choice offered by a new oper-
ating system. But Sprint left last
year.
Spains Telefnica SA also exited
the association, which oversees de-
velopment of the operating system,
and last year released the first com-
mercially available mobile phone
running on Mozillas Firefox, an-
other upstart operating system.
Frances Orange SA, another
partner that had planned to release
its first commercial Tizen smart-
phone alongside DoCoMo, said the
speed of development at Tizen is
not as mature as we may have ex-
pected at this point.
The carrier doesnt have a Tizen
device in its current smartphone
road map, he said.
Samsung responded that it would
evaluate product offerings in Japan
and France with the mobile opera-
tors. Samsung said the company and
its partners would offer a sneak
preview of the newest Tizen de-
vices this month on the sidelines of
Mobile World Congress, an annual
exposition in Barcelona for the
global mobile industry.
Samsungs difficulty in introduc-
ing its own operating system comes
amid a series of moves that appear
to have improved an increasingly
strained relationship with Google.
While Google and Samsung continue
to talk up the strength of their part-
nership in public, the two companies
increasingly were stepping on each
others toes, pushing Samsung to ac-
celerate its efforts to develop Tizen.
Samsung and Google last week
said they had signed a wide-ranging
cross-licensing deal on technology
patents that covers the companies
existing patents, as well as those
filed over the next 10 years.
Three days later, Google said it
would sell its Motorola Mobility unit
to Lenovo for $2.9 billion, ridding it-
self of a direct competitor to Sam-
sungs Android-powered smart-
phones.
With Google we have a close re-
lationship and we will continue to
be an important strategic partner
and collaborate together, a Sam-
sung spokesman said.
Samsungs software pitch to
third-party app developers, mean-
while, has been built around two of
its biggest assets: its clout and its
hefty cash reserve of $50 billion.
To attract interest in Tizen
among third-party app developers,
Samsung in October held its first de-
velopers conference, at a hotel in
San Francisco.
Samsung and Intel also are spon-
soring a contest that will dole out
$4 million in prizes for Tizen app
developers.
But for some of the biggest, most
established app makersthe ones
most critical to Tizens success
even cash incentives havent been
enough to stir interest in the fledg-
ling platform.
Several months ago, Samsung of-
fered the developers of one of An-
droids most popular apps, which
has been downloaded more than 50
million times, more than $100,000,
to adapt its app for Tizen, according
to a top executive at the app devel-
oper.
The company, which had collabo-
rated with Samsung closely in the
past, turned the Korean company
down, concluding that Samsungs
previous track record in software
made it unlikely that Tizen could
gather an audience, the person said.
Software developers just care
about the number of mobile phones
on the market, Tizen Association
Chairman Roy Sugimura said.
Mr. Sugimura said Tizen had
about 6,000 apps as of December, a
far cry from the nearly one million
apps on Apples iOS.
Mayumi Negishi in Tokyo,
Sam Schechner in Paris,
David Romn in Madrid
and Ryan Knutson in New York
contributed to this article.
Microsofts Likely CEO Pick:
FromIndiatoCompanyInsider
communication engineering at Ma-
nipal Institute of Technology, a hill-
side campus less than 10 kilometers
away from the Arabian Sea.
I remember asking him about
whats ahead, said Ganesh Prasad,
a former classmate who said that
Mr. Nadella responded that he
wanted to get involved in marketing
at a software companynamely Mi-
crosoft. His goal was so clear at
that time.
After moving to the U.S., he
earned a masters degree in com-
puter science from the University of
Wisconsin and a masters degree in
business administration from the
University of Chicago.
Once at Microsoft, Mr. Nadella
moved every few years, working on
businesses that include Windows
and the companys popular Office
suite of PC applications programs. In
more recent years, he has helped
lead efforts that include Microsofts
Bing search engine, its SQL Server
database and a cloud service called
Azure, whose technology underpins
Microsofts own online services and
is also used to run computing opera-
tions for other companies.
Mr. Nadella, who has two daugh-
ters, said in a 2012 interview that it
was very easy for them to under-
stand what he does for a living
when he was working on Bing. The
explanations grew tougher, he said,
when he began overseeing things
like cloud services and tools for de-
velopers. Now I tell them, I work
on Windows but its not the Win-
dows you see, and that they dont
really understand, Mr. Nadella said.
Many of his speeches, indeed, are
a bit hard to follow, chock-a-block
with terms like platform and in-
frastructure and Internet scale
that characterize what Mr. Nadella
calls Microsofts cloud operating
system. But he knows how to com-
municate well with engineers, for-
mer colleagues say.
Though far from flashy, Mr. Na-
della cuts a singular figure on Micro-
softs Redmond, Wash., campus,
where khakis, jeans and T-shirts
usually rule. He often wears a stylish
sports coat and has a close-cropped
haircut and designer eyeglasses,
which may switch from tortoise shell
to sleek metal depending on the day.
Continued from page 15 At Mr. Nadellas urging, Micro-
soft in the last couple of years has
stepped up its courting of startups
in Silicon Valley. Mr. Nadella takes
regular trips to the Bay Area to
speak with venture-capital investors
and technology executives, and has
spoken before groups of Indian-born
entrepreneurs.
In a sign of bending to the
startup lifestyle, at a 2012 Azure
event in San Francisco, Mr. Nadella
and other executives moved an exec-
utive presentation to 1 p.m. from 9
a.m. to accommodate night-owl tech
workers.
Mr. Nadella also sent a personal
apology to Israeli startup Soluto af-
ter the 50-person business-software
service wrote a blog post last year
about how an Azure outage took the
company offline, said Soluto CEO
Tomer Dvir.
His eagerness to show his bosses
a high activity level backfired at
least once. In August, Mr. Nadella
recalls, he initially declined when
Mr. Ballmer sent his executive team
an email to meet in his office.
I wanted to skip it, and show
my CEO that I have more important
things to do, something that was
M&A related, Mr. Nadella said in
October. Mr. Ballmers assistant told
Mr. Nadella to reconsider.
When he and the fellow execu-
tives met in the CEOs office, Mr.
Ballmer shocked them by telling
them that he was retiring.
Some of his former colleagues
question whether Mr. Nadellaor
any insider, for that mattercan
make the kind of tough changes that
may be required to boost the per-
ception of Microsoft.
Mr. Venkatesan disagrees, argu-
ing that an outsider would likely run
into conflicts with Microsofts cor-
porate culture. He believes Mr. Na-
della understands the organization
and has shown a willingness to take
risks.
Mr. Nadella, meanwhile, has said
success should be easy to judge.
Relevance comes with innovation
and marketplace success, he said in
October. The marketplace will
speak so loudly and so clearly that it
will not be ambiguous.
Sean McLain, R. Jai Krishna,
Dhanya Thoppil and Shefali Anand
contributed to this article.
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 11
IN DEPTH
leave everything in his hands, said Juan
Villanueva, a cousin of the young woman.
One day he will act, and when he balances
accounts, he will balance them well.
Outraged after the discovery of the
young womans body, farmers and pickers
allied with dozens of armed vigilantes from
self-defense groups that have sprung up in
nearby towns. The farmers and vigilantes
prevailed during a November firefight in the
nearby town of Pareo that ended with the
killing of two alleged Templar gunmen, au-
thorities said.
A few days later, Jose Manuel Mireles, a
vigilante leader and doctor, exhorted resi-
dents to fight until the gangsters were
driven out of the state.
We can choose the way we will die, Dr.
Mireles told a crowd of growers and packers
in the town square, standing up, and not
tied meekly with our hands tied behind our
backs waiting to be tortured and sliced up
into little pieces like animals.
In the first days after their victory, doz-
ens of vigilantes built sandbag check points
at the entrances to town. Wearing bandan-
nas to hide their faces, local men and boys
in white T-shirts manned the posts over-
night.
About 1,000 people from outlying ham-
lets took temporary refuge in a religious
center run by the towns Catholic church,
fearing the Templars return.
Two of Tanctaros export-certified pack-
ing plants closed for nearly six weeks after
the vigilantes took over the town, and the
USDA removed its two inspectors from the
plants for safety.
Mexican and U.S. officials collaborate to
make sure exported avocados are pest- and
disease-free. Officials from the Animal and
Plant Health Inspection Service, the USDA
unit responsible for inspecting food enter-
ing the U.S., maintains employees at pack-
ing plants and conducts twice-a-year in-
spections of avocado groves.
A U.S. official said the government has
heard reports of extortion in Michoacns
avocado industry. We are in uncharted wa-
ters, the official said, regarding U.S. policy
on the matter.
The uprising in Tanctaro, which has a
population of about 30,000, followed rebel-
lions in other towns where residents tired
of the governments inability to boot the
gang.
These days, residents of Tanctaro said,
kidnapping and extortion have nearly disap-
peared. The sandbag checkpoints remain,
along with an uneasy calm. They could still
come back, whispered one packinghouse
manager.
Two weeks ago, Mexicos President En-
rique Pea Nieto appointed Alfredo Castillo,
a close political ally, to serve as his delegate
and Michoacns de facto governor, holding
the power to unilaterally take security and
economic measures. Mr. Castillo has said
the governments goal is to restore peace by
working to dismantle the gang.
Last Monday, the federal government
signed a treaty with vigilante chiefs that al-
lows members of the groups to eventually
join rural and town police. In return, the
vigilantes promised to provide a list of its
members and to register their weapons, in-
cluding those illegal to possess here.
Most vigilantes say they are loath to give
up their weapons because they have little
trust in the governments ability to disman-
tle the gang. Federal authorities and sol-
diers failed during years of fighting to do
what civilian vigilantes have done in many
places over a few months.
Since signing the agreement, the vigilan-
tes have continued their campaign, taking
control of at least two more towns.
But the Templars remain entrenched in
many parts of Michoacn, including Urua-
pan, the states largest avocado growing re-
gion after Tanctaro, and where most avo-
cado packinghouses certified for U.S. export
are located.
A few hundred meters from Tanctaros
avocado statue are the burned ruins of a
massive packinghouse. The skeletons of two
burned trailer trucks rust in the parking lot.
A second burned packinghouse is on the
other side of town, three blocks from the
towns picturesque plaza and colonial-era
church
Both packinghouses were set on fire on
the same April night last year. Residents
and local officials said they believed they
became targets after workers there didnt
participate in Templar-organized protests
against the vigilantes who first surfaced a
year ago. No one has been charged in the
fires.
The owners of the two packinghouses,
Empacadora Agroexport S.A. de C.V. and
Mevi Avocados, which both operate distri-
bution facilities in Pharr, Texas, declined to
comment.
Sergio Guerrero, the president of the As-
sociation of Avocado Producers and Export
Packers of Mexico, or APEAM, declined to
comment on the alleged extortion or the
packinghouse fires.
Many growers and packers fear retribu-
tion by the Knights Templar. Mr. Guerreros
predecessor at APEAM, Alejandro Alvarez,
was shot and wounded in his car by un-
known men two years ago. Mr. Alvarez and
his family left Mexico, growers said.
In 2009, the mayor and town council re-
signed under pressure from drug traffickers
who wanted more of the towns resources,
Mr. Montero said. Gustavo Sanchez, a
schoolteacher, became mayor and took over
administration of the town. He fired
Tanctaros 60-person police force soon af-
ter taking office. In Mexico, corrupt local
police often work closely with criminal
gangs.
A year later, Mr. Sanchez and his chief of
staff were found stoned to death, authori-
ties said. They were blindfolded and their
hands tied behind their backs.
In January, Estanislao Beltrana vigi-
lante leader nicknamed Comandante Pitufo,
or Commander Smurf, for his Santa-Claus
beardheld a meeting in the town square
to return about 260 hectares of groves to 25
families whose land had been taken.
We took the groves back from the Tem-
plars and gave them to their rightful own-
ers, said Jess Bucio, a grower, and head of
the local vigilantes. We knew who they are
and what happened to them.
The rest of the stolen acreage will even-
tually be returned to former owners, he
said.
One avocado farmer, Alfonso III Cevallos,
told how two years ago, the gang killed
three of his brothers, his father and two un-
cles, driving his family from their land. He
has since reclaimed 120 hectares of his avo-
cado groves.
Six people they took away, Mr. Cevallos
said. I would return those properties if I
could get those lives back.
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Online
>>
See more photos and watch a video about the
battle in Tanctaro at WSJ.com/World.
*Through October
Sources: Mexicos Ministry of Economy (exports); USDA (consumption) The Wall Street Journal
Going Green
Four of every ve avocados sold in the U.S. originate in Michoacn, the
only Mexican state certied by the U.S. Department of Agriculture to
export the creamy, dip-friendly Hass variety that local growers call oro
verde or green gold.
Tons of avocados exported
to the U.S. from Mexico
Per capita consumption
of avocados in the U.S.
500
0
100
200
300
400
thousand tons
03 05 07 09 11 13
2013: 457,567*
2.0
0
0.4
0.8
1.2
1.6
pounds a year
03 05 07 09 11
2011: 1.673
A day didnt go by that one didnt hear about
extortion, a kidnapping or a violent death taking
place in the municipality, said Mayor Torres.
Arson remains, above, and avocado packing, left.
18 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
BUSINESS & FINANCE
Frontier Markets Emerge as Big Draws
Some investors are finding ref-
uge from the recent emerging-mar-
kets turbulence in an unexpected
place: even less-developed econo-
mies.
These frontier markets are lur-
ing money managers who are will-
ing to delve into smaller markets
with more difficult trading condi-
tions in order to gain exposure to
robust economic growth.
Because they are off the beaten
path, frontier markets havent been
swept up in the selloff that has
pummeled emerging markets. Coun-
tries such as Nigeria, Pakistan and
Bangladesh didnt see much of the
cash that poured into emerging
markets after the financial crisis,
when low-interest-rate policies in
richer economies sent investors in
search of better returns in the de-
veloping world.
Instead, frontier markets have
seen a steady trickle of investment
from fund managers hoping to ride
years of rapid growth. As a result,
these economies have come through
relatively unscathed even as inves-
tors pull out of larger emerging
markets such as Turkey and South
Africa.
The MSCI Frontier Market Index
is up 1.3% this year, compared with
a 6.6% decline in the MSCI Emerging
Market Index. Last year, frontier
markets rose 16%, while emerging
markets fell 12%.
Funds that buy frontier stocks in
January drew in $244 million
through Jan. 29, the most since Oc-
tober, according to EPFR Global.
Over the same period, investors
yanked $11.6 billion from emerging-
market funds.
Frontier markets are very useful
diversifiers becausethere are fewer
links between frontier markets and
the international capital markets,
says Sean Lynch, global investment
strategist at Wells Fargo Private
Bank, a Wells Fargo & Co. unit that
manages $170 billion. We are at-
tracted by the long-term growth
prospects and the consumption-
growth story.
Mr. Lynch recently began recom-
mending that clients own stocks in
frontier markets such as Vietnam
and Nigeria.
Bets on frontier markets often
take longer to pay off. One key fac-
tor: Frontier markets are thinly
traded, meaning it usually takes lon-
ger to get out of a position than it
would in emerging or developed
markets.
Investors buying stocks in fron-
tier markets say conditions are right
for these economies to see years of
steady growth. Most have young
populations, an important factor in
the early rise of emerging markets
such as Brazil and China. Shares of
consumer-products companies, and
banks in particular, should benefit
as more people in frontier markets
make their way into the middle
class, these investors say.
Emerging markets that rely
heavily on China have suffered this
year. But frontier markets have been
less affected by the slowdown in
Chinas growth rate, partly because
growth in domestic consumption is
a more important factor in their
economies expansion.
The International Monetary Fund
predicts most large frontier markets
will grow at least 5% this year, with
Nigerias economy forecast to grow
by 7.4% and Bangladeshs by 6%.
Some emerging markets are ex-
pected to see more moderate expan-
sion, with Brazil growing at 2.5%
and Turkey by 3.5%.
If the emerging-market selloff
deepens, there will be contagion,
but over the past few years weve
seen that correlation dispersing,
says Pradipta Chakrabortty, portfo-
lio manager of Harding Loevners
$335 million frontier emerging-mar-
kets fund, which is up 2.5% since the
beginning of 2014.
To be sure, some investors say
frontier economies could succumb
to the turmoil now engulfing emerg-
ing markets. Pakistans stock market
fell last Monday, at the start of the
latest emerging-market selloff,
though the countrys KSE 100 index
is still up 5.3% this year.
I wouldnt be aggressively buy-
ing until a major selloff occurs,
says Don Scott, managing director
of Global Frontiers Management, a
money manager that specializes in
frontier markets.
Mr. Scott owns stocks in West
Africa, the Balkans and Asia.
The eye-catching performance of
frontier markets in recent years has
started to draw in a wider range of
investors. While analysts say that
has helped bolster share prices in
those countries, some regulators are
sounding a warning bell. In its an-
nual letter in early January, the Fi-
nancial Industry Regulatory Author-
ity cited a lack of liquidity as a
reason why financial advisers
should be extremely cautious about
recommending frontier-market in-
vestments to their clients.
If increased regulatory scrutiny
discourages some investors, that
eventually could limit rallies in
these markets, market experts say.
BY DAN KEELER
Karachi Stock Exchange traders under display boards in early January. Pakistans market is up 5.3% this year.
E
u
r
o
p
e
a
n
P
r
e
s
s
p
h
o
t
o
A
g
e
n
c
y
U.S. Widens Its Investigation Into Deals With Libya
Sources: MSCI (indexes); EPFR Global (ows); IMF (GDP) The Wall Street Journal *Through Friday
Survivors
Money managers are still investing in less-developed frontier markets even as emerging markets sell off.
Index performance since the
beginning of 2013*
Investor ows into frontier
stock funds
GDP growth forecasts for
select countries
0
1
2
3
4
5
6
7
8%
13 14 15 13 14 15 13 14 15
Nigeria Brazil U.S.
Frontier
Markets
22%
Emerging
Markets
11%
25
20
15
10
5
0
5
10
15
20
%
14 2013
$900
0
100
200
300
400
500
600
700
800
million
14 2013
Gadhafis network, and U.S. investi-
gators have been aiding in the ef-
fort.
At the center of the probe is a
group of middlemen, known as fix-
ers, operating in the Middle East,
London and elsewhere, people famil-
iar with the matter said. The fixers
established connections between in-
vestment firms and individuals with
ties to leaders in developing mar-
kets, including those in the Gadhafi
regime, these people said.
Even the offer of an improper
payment can create legal liability
for a company under the FCPA, re-
gardless of whether the transaction
is completed.
Not all of the firms under scru-
tiny have been directly contacted by
the Justice Department, although
prosecutors and regulators are shar-
ing information, people familiar
with the matter said. Prosecutors
and regulators havent accused any
of the companies of wrongdoing.
The investigation is looking at
fixers role in arranging deals be-
tween financial firms and Libyan of-
ficials, people familiar with the mat-
ter said. The fixers acted as
placement agents, similar to those
in the U.S. who have come under
scrutiny for steering investments to
large public retirement funds. In
some cases, the sovereign-wealth-
Continued from first page fund fixers collected a finders fee,
one of the people familiar with the
matter said.
Fees paid to placement agents
can be legal or can be considered
bribes, depending on the size of the
fees and the nature of the agents
relationship with the parties to the
transaction, legal experts said.
Prosecutors are trying to deter-
mine whether the fixers funneled il-
legal payments to Libyan officials in
the Gadhafi regime on behalf of fi-
nancial firms in return for business,
according to people familiar with
the matter.
Some of the fixers had connec-
tions to at least two of Gadhafis
sonsprimarily his second son, Seif
al-Islam Gadhafi, who was most in-
volved with the sovereign-invest-
ment fund, according to people fa-
miliar with the matter. The elder
Gadhafi was killed by Libyan revolu-
tionaries after he was toppled in
2011, ending his 42-year rule over
the country. Seif al-Islam Gadhafi
was captured by rebels.
The Libyan Investment Author-
ity, the nations sovereign-wealth
fund, invested amounts up to $1 bil-
lion in funds run by all these firms
except Blackstone, according to a
2010 audit of the sovereign-wealth
fund by KPMG LLP. The Libyan
funds estimated $60 billion in as-
sets was frozen under international
sanctions after the revolution.
Around the time of the 2008 fi-
nancial crisis, Blackstone was mov-
ing toward a deal with the Libyan
fund, with conversations taking
place among lower-level executives
at the private-equity firm about
whether to hire a placement agent
to obtain a potential investment of
Libyan money, according to people
familiar with the matter. But the
discussions dropped off and no deal
was reached, these people said.
Prosecutors and regulators also
are investigating transactions in-
volving real-estate investments in
Libya, according to people familiar
with the matter. Among the deals
being scrutinized is a $120 million
hotel project in which Och-Ziff had
a stakea joint venture involving
U.K.-based InterContinental Hotels
Group as well as a Libyan developer
and the Libyan Investment Author-
ity to build a luxury hotel in Trip-
oliaccording to people familiar
with the probe.
The hotel, which was slated to
open in the Libyan capital in 2010,
would have 351 rooms and stun-
ning views across the city and wa-
terfront, according to a 2007 news
release from InterContinental, but
construction stalled as fighting
broke out in the country. It still
hasnt been completed.
The U.S. lifted sanctions against
Libya in 2004 in return for the
countrys dismantling of its nuclear-
weapons program. By 2008, as the
financial crisis set in, Western firms
were jockeying for business there.
That year, then-Secretary of State
Condoleezza Rice visited Libya and
met with Col. Gadhafi in part to im-
prove the investment climate there
for U.S. companies, she said at the
time. The government advised com-
panies on investing in Libya, and
U.S. executives went there on a gov-
ernment-sponsored trade mission in
2010.
Blackstone Chief Executive Ste-
phen Schwarzman and Carlyle
Group LP Chief Executive David
Rubenstein attended the 2008 wed-
ding in Tripoli of Mustafa Zarti, the
deputy chief of the Libyan Invest-
ment Authority. There is no indica-
tion that Messrs. Schwarzman or
Rubenstein were involved in any
transactions that are under investi-
gation. Both declined through
spokesmen to comment.
Libya was fragileone could
feel it, said Gary Garrabrant, the
former chief executive of Equity In-
ternational, a Chicago-based real-
estate investment trust founded by
Sam Zell. Equity International con-
sidered deals in Libya, including the
InterContinental project, according
to Mr. Garrabrant.
There was a layer that existed
in Libya of people that in effect con-
trolled access, he said. They were
door openers.
Ultimately, the inability of Lib-
yan officials to answer basic ques-
tions about permits, labor and con-
struction caused his firm to back
away, he said, adding that the firms
discussions never advanced beyond
that point.
We could never get comfortable
with Libya as an institutional mar-
ket, said Mr. Garrabrant, who left
Equity International to start his own
firm, Jaguar Growth Partners, last
year.
Rob Copeland
and Liz Rappaport
contributed to this article.
At the center of the probe is a group of middlemen
known as fixers operating in the Middle East,
London and elsewhere.
10 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
In Mexico, Bloody Struggle
Erupts Over Avocado Trade
T
he entrance to this remote and seem-
ingly peaceful mountain town is
marked by a statue of an avocado. But
behind the serenity is a violent criminal
gang that has made millions of dollars ex-
torting avocado farmers and packinghouse
operators while strong-arming groves from
landowners, said residents and local offi-
cials who recently began fighting back.
Four of every five avocados sold in the
U.S. originate in Tanctaros home state of
Michoacn, the only Mexican state certified
by the U.S. Department of Agriculture to ex-
port avocados, mostly the creamy, dip-
friendly Hass variety that locals here call
oro verde or green gold.
Michoacn, which last year exported
more than 500,000 tons of avocado to the
U.S., expects a $1 billion haul in 2014.
Tanctaro alone produced 157,000 tons last
year, said Jose Ayala, a local agricultural of-
ficial, more than any other municipality in
the world.
Some say the fruit was tainted. They
are blood avocados, said Raul Benitez,
a security expert at UNAM, the National
Autonomous University of Mexico in
Mexico City. They are the Mexican equiva-
lent of the conflict diamonds that are sold
from war-torn parts of Africa.
In November, a band of Tanctaro resi-
dents wielding wooden clubs and old hunt-
ing rifles joined forces with well-armed vigi-
lantes from nearby towns to run off most
members of the Knights Templar, a criminal
gang allegedly involved in extortion, kidnap-
ping, rape and homicide throughout the
state.
The people were sick and tired of the
situation, said Mayor Salvador Torres, who
is now guarded round-the-clock by federal
police because of threats. A day didnt go
by that one didnt hear about extortion, a
kidnapping, or a violent death taking place
in the municipality.
The Knights Templar grew out of a drug
cartel known as La Familia and in the past
few years moved from trafficking to extor-
tion, stealing from every facet of this rich
agricultural state, local and federal officials
said. The gang took a cut of fertilizer and
pesticide sales and charged a fee for every
box of limes and avocados packed and
trucked away. Many towns were forced to
turn over 10% of municipal budgets.
They ran off a lot of people to other
states, a local official said, and in many
cases forced owners to turn over title to
their avocado groves.
One local official estimated that the
Knights Templar, named for a medieval
group of crusading warrior monks, made
$150 million a year extorting growers and
packers, as well as selling avocados from
the 2,025 hectares they took from farmers.
Tanctaro has about 22,660 hectares of avo-
cado groves, officials said.
The criminal enterprise may have raised
prices. Despite soaring production, the
wholesale price of avocados in Mexico has
jumped 22% from a year ago, according to
government data. Mexicos Economy Minis-
ter Ildefonso Guajardo said prices rose be-
cause of fluctuations in supply and demand
and not from violence afflicting the state.
Cuauhtmoc Montero, a major avocado
grower and former federal congressman,
said he believed that extortion added 10% to
the price of avocados consumed in the U.S.
Until the vigilantes sent the gang packing,
local grove owners were taxed at a yearly
rate of about $60 an acre, he said.
Avocado packers in Tanctaro include
dozens of mom-and-pop outfits that handle
fruit not considered export quality. The
town also has large-scale packers that send
tons of the best avocados to the U.S., Eu-
rope and Asia.
The manager of one hole-in-the-wall
packinghouse said he paid the Templar gang
a tax of one cent a kilo, or about some
$2,200 a month. The largest packers alleg-
edly paid $15,000 a month, Mr. Montero
said.
Tanctaros avocado growers and towns-
people rose up in arms shortly after the
early November kidnapping of Maria Irene
Villanueva, the daughter of a local preacher
and avocado grower, residents said. The
young woman was raped and killed as her
father prepared to transfer title of his grove
to a gang capo after failing to raise a
$600,000 ransom, according to the mayor,
family relatives and two friends of the
womans father.
We believe in the Lords justice and
BY JOS DE CRDOBA
Tanctaro, Mexico
Tanctaro Mayor Salvador Torres, above left, and vigilante leader Jose Manuel Mireles, right. Four of every five avocados sold in the U.S. originate in Tanctaros home state of Michoacn.
IN DEPTH
MEXI CO
U. S.
Paci c Ocean
Gul f of
Mexi co
500 miles
500 km
Mexico
City
Tanctaro
MICHOACN MICHOACN
J
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J
a
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m
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f
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r
T
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W
a
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S
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THE WALL STREET JOURNAL. Monday, February 3, 2014 | 19
For information about listing your funds, please contact: Lauren Berkemeyer tel: +44 20 7572 2102; email: lauren.berkemeyer@dowjones.com
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ARIXComposite Gross USD OT OT GBR 12/31.00 USD1602.40 8.0 8.0 6.7
nCGPortfolioFundLtd
NAV OT OT CYM 06/07.00 GBP25839.68 5.3 10.9 9.8
Bad Loans Keep Rising
At Big Spanish Banks
MADRIDThree of Spains big-
gest banks are still paying for the
countrys real-estate bust.
In earnings released Friday, the
lendersBanco Bilbao Vizcaya Ar-
gentaria SA, Caixabank SA and
Banco Popular SAshowed signifi-
cant improvement in their capital
strength since the euro-zone finan-
cial crisis but reported rising bad
loans and falling net interest income
in the final quarter of 2013. Net in-
terest income is the difference be-
tween what banks earn from lending
and the amount they pay for depos-
its.
BBVA, Spains second-biggest
bank by market value, reported a
fourth-quarter net loss of 849 mil-
lion ($1.15 billion), compared with a
profit of 20 million a year earlier,
The latest results included a charge
related to a sale of shares in a Chi-
nese bank. Analysts had forecast a
fourth-quarter net loss of 765 mil-
lion.
BBVA said net interest income
fell in the fourth quarter to 3.8 bil-
lion from 3.9 billion a year earlier.
The lender said 6.8% of its loans
were more than 90 days overdue at
the end of 2013, up from 5.1% a year
earlier.
The bank set aside less than half
the amount it did a year earlier to
cover souring loans, making 1.2 bil-
lion in loan-loss provisions in the
fourth quarter compared with 2.7
billion a year earlier.
For the full year, the bank re-
ported net profit of 2.2 billion, up
33% from 2012.
In October, BBVA cut its stake in
China Citic Bank Corp. to just be-
low 10%, a move meant to bolster its
capital ahead of balance-sheet tests
by European authorities. The bank
said at the time the sale would trig-
ger a 2.3 billion hit to its re-
sults.The sale generated an account-
ing loss but freed up capital, giving
the bank a 9.8% capital ratio by the
end of the year under new Basel III
rules.
The results come after Spains
largest bank, Banco Santander SA,
said Thursday that fourth-quarter
net profit more than doubled as it
set aside a smaller proportion of its
earnings to cover loan losses, offset-
ting lower net interest income.
Caixabank, Spains third-largest
bank, said its rate of bad loans as a
portion of total lending in the
fourth quarter jumped to 11.66%
from 8.63% a year earlier and were
up slightly from the previous pe-
riod.
Overall, bad loans held by Span-
ish banks have continued to climb
since February 2013, representing
an all-time high of 13.1% of total
lending in November.
Caixabank said fourth-quarter
net profit fell 21% from a year ear-
lier, to 45 million. Over the full
year, net profit more than doubled
to 503 million.
Its fourth-quarter net interest
margin slipped to 1.02 billion from
1.03 billion the previous year.
Banco Popular said it swung to a
net profit of 98 million in the
fourth quarter, from a loss of 2.7
billion in the year-earlier period, af-
ter cleaning up its real-estate assets.
Still, Banco Popular also posted a
big increase in souring loans, to
14.27% in the fourth quarter from
8.98% a year earlier. Its fourth-quar-
ter net interest margin fell 3.9%, to
590.9 million, from 615 million
the previous year
In Madrid, BBVAs shares rose
0.2%, Caixabank gained 1.4% and
Banco Popular fell 2.1%.
BBVAs net profit in Spain nearly
halved in 2013, while in Mexico,
where the lender has its biggest di-
vision, it rose 6.8% year over year.
In its domestic market, bad loans
jumped to 6.4% in 2013 from 4.1%
the year before.
The rate climbs to 10.3% if
soured loans from BBVAs Spanish
real-estate unit are included, the
lender said Friday. The real-estate
division includes bad loans to real-
estate developers.
BBVA Chief Operating Officer An-
gel Cano said Friday that the bad-
loan ratio was beginning to stabi-
lize.
The worst has passed, Mr.
Cano said of the outlook for Spain.
He said BBVA was open to selling its
real-estate servicing unit.
Other Spanish banks, such as
Santander, have sold property-man-
agement units amid an uptick in in-
terest from foreign investors in
Spains distressed real-estate mar-
ket.
BY JEANNETTE NEUMANN
Data provided by:
MARKETS
nALEXANDRAINVESTMENTMANAGEMENT
Alexandra Convertible Bond Fund I, Ltd. (Class A) OT OT VGB 08/31 USD 2155.22 NS NS NS
nBANCINTERNACIONAL D'ANDORRA. BANCAMORA.
Avgd. Meritxell 96, Andorra la Vella. Andorra. Ph. +376.884884 www.bibm.ad
Andfs. Anglaterra UK EQ AND 11/16 GBP 8.47 2.8 3.6 14.9
Andfs. Borsa Global GL EQ AND 01/30 EUR 6.64 -0.2 9.9 6.6
Andfs. Emergents GL EQ AND 11/02 USD 14.77 -20.4 -19.2 -4.7
Andfs. Espanya EU EQ AND 01/30 EUR 15.02 6.3 37.3 21.3
Andfs. Estats Units US EQ AND 01/30 USD 20.68 -1.1 21.9 16.0
Andfs. Europa EU EQ AND 01/30 EUR 7.79 3.4 20.7 13.4
Andfs. Franca EU EQ AND 01/30 EUR 10.77 -1.6 14.9 15.2
Andfs. Japo JP EQ AND 01/30 JPY 688.74 -1.3 34.8 29.2
Andfs. Plus Dollars US BA AND 10/22 USD 9.66 2.3 3.0 6.2
Andfs. RF Dolars US BD AND 01/30 USD 12.18 0.2 -0.6 1.5
Andfs. RF Euros EU BD AND 01/30 EUR 11.66 0.0 1.2 1.8
Andorfons EU BD AND 01/30 EUR 15.73 0.4 2.8 3.0
Andorfons Alternative Premium GL EQ AND 11/30 EUR 115.41 23.3 23.0 10.9
Andorfons Mix 30 EU BA AND 01/30 EUR 10.31 0.0 4.8 3.9
Andorfons Mix 60 EU BA AND 12/19 EUR 8.96 4.4 7.1 -2.5
nCGPortfolioFundLtd
NAV OT OT CYM 06/07 GBP 25839.68 5.3 10.9 9.8
nCHARTEREDASSETMANAGEMENTPTELTD- TEL NO: 65-6835-8866
Fax No: 65-68358865, Website: www.cam.com.sg, Email: cam@cam.com.sg
CAM-GTF Limited OT OT MUS 01/24 USD 331396.07 -0.2 -20.1 -0.4
nCitadele
Republikas square 2a, Riga, LV-1522, Latvia
Citadele Eastern Europ Bal EU BD LVA 01/30 EUR 16.51 -0.4 1.0 7.0
Citadele Eastern Europ Bd EU BD LVA 01/30 USD 20.30 -0.4 1.6 7.0
Citadele Russian Eq EE EQ LVA 01/30 USD 19.75 -12.1 -16.9 -4.0
nDJEINVESTMENTS.A.
internet: www.dje.lu email: info@dje.luphone:+0035226925220fax:+0035226925252
DJE Real Estate P OT OT LUX 01/31 EUR 4.33 -0.2 -8.2 -6.8
DJE-Absolut P OT OT LUX 01/31 EUR 245.42 -2.6 3.3 8.5
DJE-Alpha Glbl P OT OT LUX 01/31 EUR 185.84 -4.4 6.2 6.4
DJE-Div&Substanz P OT OT LUX 01/31 EUR 274.44 -3.0 6.2 9.8
DJE-Gold&Resourc P OT EQ LUX 01/31 EUR 123.60 1.9 -24.2 -21.2
DJE-Renten Glbl P EU BD LUX 01/31 EUR 149.66 0.6 2.6 4.9
LuxPro-Dragon I AS EQ LUX 07/20 EUR 144.57 -8.5 5.0 7.6
LuxPro-Dragon P AS EQ LUX 07/20 EUR 140.29 -8.8 4.4 7.0
LuxTopic-Aktien Europa EU EQ LUX 01/31 EUR 19.90 -2.4 1.2 6.8
LuxTopic-Pacific OT OT LUX 01/31 EUR 19.20 -3.7 -9.6 3.5
nOTHERFUNDS
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Winton Evolution EURCls H GL OT CYM 12/31 EUR NS.00 14.0 14.0 2.2
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Winton Evolution USDCls F GL OT CYM 12/31 USD NS.00 14.6 14.6 2.4
Winton Futures EURCls C GL OT VGB 12/31 EUR 251.72 9.0 9.0 2.5
Winton Futures GBP Cls D GL OT VGB 12/31 GBP 273.97 9.3 9.3 2.8
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Winton Futures USDCls B GL OT VGB 12/31 USD 897.89 9.4 9.4 2.7
Pictet-Brazil Index-P USD OT OT LUX 01/30 USD 60.76 -11.4 -27.5 -20.1
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BBVAs net interest income slipped during the fourth quarter.
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THE WALL STREET JOURNAL. Monday, February 3, 2014 | 9
WORLD NEWS
Killings Mar Afghan Campaigns Start
KABULAfghanistans presiden-
tial campaign kicked off Sunday un-
der stiff security, as the leading con-
tenders wooed crowds at their first
rallies and insurgents seeking to dis-
rupt the vote killed two campaigners.
Eleven candidates are vying to
succeed Hamid Karzai, who came to
power following the U.S.-led invasion
that ousted the Taliban regime in
2001, and who is constitutionally
barred from seeking another term.
If the April 5 elections are suc-
cessful, they would mark the first
democratic transfer of power in Af-
ghanistans history. If disrupted by
the Taliban, or ended with a con-
tested result, however, the vote could
plunge the country into a new round
of bloodshed just as the U.S. ends its
12-year combat mission and foreign
aid money dries up.
Yusuf Nuristani, the chairman of
the Afghan election commission,
warned against campaigning that
could stoke Afghanistans ethnic and
sectarian tensions, and urged the
presidential hopefuls not to attack
each other. The candidates should
not add to the misery of the Afghan
people further, Mr. Nuristani said.
Though Mr. Karzai hasnt backed
any successor, three of the contend-
ers are most likely to win his en-
dorsement: former finance minister
Ashraf Ghani, former foreign minis-
ter Zalmai Rassoul, and the presi-
dents brother Qayum Karzai. The
leading opposition candidate in the
race is former foreign minister Ab-
dullah Abdullah, who came in second
in the previous presidential election,
in 2009.
On Saturday, unidentified gun-
men in the western city of Herat as-
sassinated two campaigners for Mr.
Abdullah. There was no immediate
claim of responsibility. But the Tali-
ban have vowed to disrupt the cam-
paign and the election, dismissing
the vote as illegitimate because they
say the country remains under for-
eign occupation.
It was an unforgivable crime,
Mr. Abdullah said, adding he has dis-
cussed the assassination with Mr.
Karzai. People are awakening and
are interested in the election. Unfor-
tunately, in some corners of the
country, they are not able to partici-
pate due to insecurity.
Gen. Abdul Rahim Wardak, the
U.S.-educated former defense minis-
ter who is also running for president,
said, One thing we know for sure, is
this election has been targeted.
A senior U.S. military official said
he expected the Taliban to continue
assassinating government officials
and campaign workers, and to mount
more high-profile attacks in the capi-
tal, Kabul. Helping the insurgents is
an unusually mild winter that has
cleared of snow the mountain passes
between Kabul and the Talibans ha-
vens in Pakistan, facilitating mili-
tants movements.
We joke about the snow: Give me
snow! Give me snow! the U.S. mili-
tary official said.
Underscoring the threat, the cam-
paigning began Sunday under tight
security, with armed troops manning
roadblocks at key intersections, ma-
chine guns mounted on pickup
trucks. The rallies were mostly held
indoors, at venues such as the gaudy
neon-lit wedding halls that have
mushroomed in Kabul in recent
years.
At a campaign event for Mr.
Ghani on Sunday, guards confiscated
pens, cigarettes and packets of snuff
from supporters as they passed
through metal detectors.
Like almost all candidates, Mr.
Ghani, a technocrat who holds a
Ph.D. from Columbia University and
once worked at the World Bank, has
chosen a multiethnic ticket to appeal
to a broad swath of the electorate.
While Mr. Ghani is a Pashtun, his
first vice-presidential candidate is
Uzbek leader Abdul Rashid Dostum,
a former warlord who backed Mr.
Karzai in 2009.
Our debates should be about na-
tional topics and national goals, Mr.
Ghani said at Sundays rally.
Haji Mohammad Hussein, a medi-
cal doctor from Kabul attending the
event, was yet to be convinced about
the wisdom of choosing Mr. Dostum
as Mr. Ghanis running mate. We
know him as a warlord, Mr. Hussein
said. He only understands weap-
ons.
At Mr. Abdullahs campaign rally,
tensions between various camps sup-
porting his candidacy were also on
display. Shortly before his second
vice-presidential candidate, ethnic
Hazara leader Mohammed Mohaqeq,
took to the podium, a mixed-gender
band, accompanied by a longhaired
male keyboard player on a Yamaha
performed a patriotic song, From
Bamiyan to Kandahar, Were All
Brothers.
Margherita Stancati, Sharifullah
Sahak and Ehsanullah Amiri
contributed to this article.
BY NATHAN HODGE
AND YAROSLAV TROFIMOV
Afghan security officials protect one of 11 presidential candidates, Ashraf Ghani, on Sunday in Kabul, as the campaign got under way ahead of the April 5 vote.
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EU Willing to Extend Difficult Iran Nuclear Talks
MUNICHThe six powers negoti-
ating a nuclear accord with Iran will
take the time they need to seal what
will be an extremely difficult ac-
cord even if that means extending
their six-month timeline, European
Union foreign-policy chief Catherine
Ashton said.
In an interview with The Wall
Street Journal on the sidelines of
the Munich Security Conference on
Sunday, Baroness Ashton, who is the
EUs chief negotiator, said a final
deal must make the international
community certain that Irans nu-
clear program is peaceful.
Iran and the six powers in No-
vember sealed an interim six-month
accord in which Iran pledged to
scale back some of its most ad-
vanced nuclear activities in ex-
change for an easing of Western
sanctions. The deal, which took af-
fect on Jan. 20, can be rolled over
after six months by mutual consent,
but Iranian and Western officials
have said they hope to seal a com-
prehensive accord within 180 days.
But everyone will say to you,
and rightly so, this is extremely dif-
ficult, she said. We have no guar-
antees in this and we will take the
time that is necessary to get this to
be the right agreement."
Privately, Western officials say
they are doubtful an accord can be
sealed by July, given the complexity
of the issues. They include an agree-
ment on whether Iran must either
stop most of its nuclear enrichment
activities, whether to physically dis-
mantle large parts of its nuclear in-
frastructure and what to do about
its planned plutonium heavy-water
reactor in Arak. Any deal also would
need to specify what enrichment
rights Tehran will have under a final
accord and how to phase out inter-
national sanctions against Iran.
Some diplomats think it could
take many months just to draw up a
draft text for serious negotiations.
Baroness Ashton is due to step down
as EU foreign-policy chief in October.
Iran says its nuclear program is
for purely civilian, energy purposes
and denies accusations it is seeking
to develop nuclear weapons. Iran is
negotiating with the so-called P5+1
groupthe five permanent members
of the United Nations Security Coun-
cil plus Germany. The first round of
talks for a final deal will take place
in Vienna on Feb. 18.
An extension of the talks could
escalate pressure in the U.S. Con-
gress for fresh Iran sanctions and
would mean the continuation of ne-
gotiations during the American mid-
term vote in November. An exten-
sion could also strengthen the hand
of hard-liners in Iran since it would
delay the broad sanctions relief the
Iranian government was relying on
to boost the economy.
Sen. Chris Murphy (D., Conn.)
said Sunday in Munich he was confi-
dent the U.S. Senate wont vote to
approve new Iran sanctions any time
soon. But he warned that if there
were signs Tehran was using the
talks to stall for time that window
will not last long.
Baroness Ashton said the main
focus of the next round of talks will
be the format and timeline for the
talks. Both she and U.S. Secretary of
State John Kerry met this weekend
in Munich with Iranian Foreign Min-
ister Javad Zarif. Mr. Zarif described
his meeting with Mr. Kerry on Sun-
day morning as good but gave no
details.
But a senior U.S. official said that
during the meeting Mr. Kerry
stressed the importance of both
sides standing by their commit-
ments and made clear the U.S. would
continue enforcing existing sanc-
tions. Iran reacted angrily in Decem-
ber when the U.S. expanded its list
of nuclear-related sanctions targets,
saying it ran against the spirit of the
November agreement.
According to the official, Mr.
Kerry also raised his concerns about
the delay in transporting chemical
weapons out of Syria, but Mr. Zarif
said he didnt have the authority to
discuss Syria.
On Saturday, Mr. Kerry urged
Russia and others to press Syria to
fulfill commitments to give up its
chemical arsenal, saying Damascus
needed to stop making excuses.
Just 4% of Syrias 530 metric
tons of most-dangerous chemicals
have been removed so far, despite a
Dec. 31, 2013, deadline for removing
all of them, according to U.S. offi-
cials.
Speaking Sunday afternoon at
the Munich conference, Mr. Zarif
said Tehran was committed to seek-
ing a final nuclear deal, saying fail-
ure would be a disaster.
What I can promise is that we
will go to those negotiations with
the political will and good faith to
reach an agreement, he said.
Iranian officials have said repeat-
edly they arent prepared to see the
countrys nuclear infrastructure dis-
mantled as part of a final deal,
whereas Israel and some members
of Congress are calling for many of
the nearly 20,000 centrifuges Iran
has to be scrapped.
BY LAURENCE NORMAN
Baroness Catherine Ashton
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20 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
Sector EquityBiotechnology
Fundsthat invest primarilyintheequitiesof companiesthat focusonbiotechnology. At
least 75% of total assets are invested in equities. Ranked on % total return (dividends
reinvested) inEuros for one year ending January 31, 2014
Leading 10Performers
FUND FUND LEGAL %Return in $US **
RATING* NAME FUNDMGM'T CO. CURR. BASE YTD 1-YR 2-YR 5-YR
3 Adamant Zurcher CHFCHE 13.94 75.97 44.07 NS
Global Biotech A Kantonalbank
4 BBBiotech Bellevue Asset CHFCHE 12.47 74.29 51.53 26.94
AGOrd Management, LLC
4 AXA AXAInvestment GBPGBR 13.00 72.44 44.29 23.66
Framlington Biotech RAcc Managers UK Ltd.
4 Franklin Franklin Templeton USDLUX 15.06 72.17 43.47 25.76
Biotechnology Disc AAcc $ Investment Funds
3 DekaLux-BioTech Deka International EURLUX 12.03 70.32 42.41 22.70
CF S.A.
3 BBBiotech B Bellevue Asset USDLUX 13.20 70.32 43.27 NS
USD Management AG
3 CS SICAV Credit Suisse USDLUX 13.00 68.63 44.91 23.27
(Lux) Eq Biotechnology B (Luxembourg) S.A.
5 SEBConcept SEBAsset EURLUX 8.55 67.40 39.29 23.94
BioTech D Management S.A.
3 UBS (Lux) EF UBS Fund USDLUX 17.81 67.36 44.84 25.44
Biotech (USD) P-acc Management (Luxembourg) S.A.
3 CCRActions CCRAsset EURFRA 15.77 67.03 41.93 19.38
Biotech A Management
NOTE: Changes in currency rates will affect performance and rankings. Source: Morningstar, Ltd
KEY: ** 2YRand 5YRperformance is annualized 1 Olivers Yard, 55-71 City Road
NA-not available due to incomplete data; London EC1Y 1HQUnited Kingdom
NS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com
Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001
MARKETS
Fund Scorecard
U.S Investors Brace
For a Bumpy Ride
demand for some assets and boost-
ing volatility, or price swings.
In January, the S&P 500 aver-
aged daily stock swings of plus or
minus 0.6%. That is an 11% increase
over the average daily move in
2013.
I expect a lot of up and down in
the first half of the year, said
Wayne Wilbanks, chief investment
officer at Wilbanks, Smith, Thomas,
which manages about $2.5 billion
out of Norfolk, Va.
In particular, Mr. Wilbanks likes
big technology companies that pay
dividends, such as Cisco Systems
Inc. and Apple Inc., and industrial
dividend payers such as Caterpillar
Inc. and Deere & Co., he said. All
four lagged behind the market last
year, leaving them less vulnerable to
declines, Mr. Wilbanks said.
Cisco Systems rose 14% last year,
about half as much as the S&P 500.
Deere rose 5.7%, Apple 5.4% and
Caterpillar 0.5%. The dividends, to-
gether with the small increases last
year in the companies share prices,
reduce the risk of steep declines in
the investments, Mr. Wilbanks said.
Deere stock hasnt gone anywhere,
but it certainly isnt going to hurt
you to hold, said Mr. Wilbanks.
Barry James, president at James
Investment Research Inc., which
manages about $5 billion in assets,
said he wouldnt be surprised to see
stocks fall as much as 20% during
the year and recover to finish
slightly higher.
Mr. James said he looks for
stocks with strong earnings, and
that return cash to shareholders
through share buybacks and divi-
dends. He likes Deere and the U.S.
energy sector, which he thinks will
benefit from continued development
of the U.S. industry for shale oil and
gas.
I feel like a football coach, he
said. Back to the fundamentals,
kids.
Investors across markets are tak-
ing a more risk-averse stance.
Investors yanked more than
$900 million from bond funds dedi-
Continued from first page cated to the risky corporate debt
known as junk bonds in the week
ended Wednesday, according to fund
tracker Lipper. That was the biggest
outflow since late August.
January had 110 high-grade cor-
porate debt issues, down from 206
a year earlier, according to data pro-
vider Dealogic, amid signs that in-
vestors are starting to demand more
compensation.
As you dismantle quantitative
easing, you dismantle a lot of the
free ride, says Sages Mr. Smith.
For Mr. Smith, whose firm has a
heavy emphasis on fixed-income
portfolios, that means a tilt away
from bond investments that are vul-
nerable to rising interest rates. The
firm is focusing on short-term bond-
holdings and high-yield bonds that
havent had as big a run as the over-
all junk-bond market, such as bonds
issued by utilities.
But in a sign of how the market
has wrong-footed many investors
this year, the yield on the 10-year
U.S. Treasury note actually has
fallen to a recent 2.7% from 3% at
the end of 2013. Many Wall Street
forecasters expect the yield to rise
to 3.5% or so this year. Prices fall
when yields rise.
Lawrence Creatura, portfolio
manager of the $500 million Feder-
ated Clover Small Value Fund, said
last years market calm allowed for
a big expansion of stock multiples,
meaning an increase in the ratio of
stock prices to earnings.
Stock multiples last year ex-
panded the most since 2009, when
the market was recovering from the
depths of the financial crisis. The
price/earnings ratio on the S&P 500
over the next 12 months rose to 15.4
from 12.6, according to FactSet.
Mr. Creatura said he is looking at
the technology sector, which he said
should see strong growth as compa-
nies upgrade internal infrastructure.
In the middle innings of an eco-
nomic cycle, earnings growth should
come from more-cyclical sectors like
technology, he said.
Dan Strumpf
contributed to this article.
Asian Banks Branch Out
build up their business in foreign
loans, company representatives said.
A spokesman for MUFG said the
bank can lend at higher rates in
markets outside Japan, bolstering
returns. For example, in 2013 the
Japanese bank was among the lend-
ers on a $14.2 billion loan to Russias
largest oil producer, state-controlled
OAO Rosneft.
By contrast, French lender So-
cit Gnrale has slipped to 18th
place in 2013 from ninth place in
2007. Embattled U.K. lender Royal
Bank of Scotland Group PLC has
fallen to eighth place from third and
Dutch bank ING Groep NV has fallen
to 20th from 13th.
RBS declined to comment. A
spokeswoman for ING said the
league table moves reflect market
conditions. A spokeswoman for So-
cit Gnrale couldnt immediately
comment.
European banks, in particular,
are still trying to deleverage, said
Derek Ovington, CLSAs head of re-
gional banks in Asia. He also said
that U.K.-listed but Asia-focused
lenders such as HSBC Holdings PLC
and Standard Chartered PLC con-
tinue to grow.
Analysis by the Bank for Interna-
tional Settlements, the central bank-
ers bank, shows that at the end of
September, Asian banks were ex-
panding their cross-border lending
such as trade finance and loans
across the region, while U.S. banks
scaled back exposure to emerging
markets and Europeans held steady.
According to the BIS, the share of
emerging-market loans for non-U.S.
and European banksled by banks
in Asia, excluding Japanrose to
12.8% at the end of September from
11.6% at the end of 2012.
But for the banks, this expansion
isnt without risk. A move by the
U.S. Federal Reserve to slow the
pace of its huge bond-buying pro-
gram, which had the side effect of
supplying Asia with cheap credit,
could slow economic growth across
Continued from page 15 the region. Investors have dumped
currencies across emerging markets
from Russia to South Africa to India
and Indonesia.
That volatility could strain those
companies exposed to market
swings and hinder their ability to re-
pay debt.
We have become a bit more cau-
tious about bank risk in emerging
Asia with the impact of Fed taper-
ing, said Mark Young, head of Asia-
Pacific financial institutions at Fitch
Ratings. Over the longer term you
could see lower ratings, he said. A
credit-rating downgrade could push
up the banks own cost of borrowing
and trigger a pullback in lending.
Chinas slowing growth is also
unnerving investors. A gauge of
manufacturing activity released in
January showed its weakest level in
six months, helping to cool demand
for commodities. Iron-ore prices
have fallen to six-month lows.
Japanese banks still are the big-
gest lenders from the region. Since
the fourth quarter of 2008, foreign
lending by Japanese banksbuoyed
by the countrys ultra-loose mone-
tary policyhas increased 34% to $3
trillion, according to an analysis by
the International Institute of Fi-
nance.
In that period Japanese lending
across emerging Asia and the Pacific
grew 95%, while lending to Latin
American and Caribbean borrowers
jumped 140%. Loans to developed
countries rose 25%.
Chinese banks are lending in part
to fuel trade and growth by domes-
tic companies. Foreign lending by
Chinas four largest banks has grown
to $378 billion since 2008, $120 bil-
lion of which was lent in 2013 alone.
We are seeing the international
loan books of the mainland Chinese
banks grow very, very quickly, but
off a small base, said CLSAs Mr.
Ovington.
The Chinese banks didnt re-
spond to requests for comment on
Thursday, the eve of Chinas Lunar
New Year holiday.
Southeast Asian banks are also
building their book, in particular on
the regional stage. Singapore-based
OCBC Bank increased its foreign
lending by 22% in the year to Sept.
30well ahead of the 11% growth in
lending in Singapore. Overseas loans
now make up 50% of the banks total
gross loans, compared with 44%
three years ago. The banks focus is
on Malaysia, Indonesia and Greater
China where margins are more at-
tractive.
Rival DBS increased its loan book
by 19% on year to Sept. 30around
55% of which came from outside Sin-
gapore. A $7 billion loan last year
for Swiss oil-and-gas company Vitol
Group SA featured DBS, according
to Dealogic data.
The key to our growth is our
ability to leverage our Asian under-
standing and connect clients across
the region, said Chng Sok Hui, chief
financial officer for DBS.
Some of the biggest financings in
2013 involved commodity and en-
ergy producers. A $17 billion credit
facility arranged for trading and
mining titan Glencore Xstrata PLC
last year included the biggest Japa-
nese lenders along with Australia &
New Zealand Banking Group Ltd.
While some Asian lenders have
long been present in global markets,
the push overseas is expected to
continue.
When the Asian banks start
growing in a new market, they go
for the whole hog, said Crdit Agri-
coles Mr. Sodhi.
Mike Cherney and Atsuko Fukase
contributed to this article.
J.P. Morgan Chase
Citigroup
Royal Bank of Scotland
Bank of America
BNP Paribas
Calyon Corporate & Investment Bank
Barclays Bank
Deutsche Bank
Socit Gnrale
ABN AMRO Bank N.V.
HSBC
Credit Suisse
ING Groep
Dresdner Bank
Goldman Sachs Group
UniCredit
Mitsubishi UFJ Financial Group
Natixis
Banco Bilbao Vizcaya Argentaria
Morgan Stanley
$1,088
1,035
696
640
614
540
521
481
464
417
382
369
355
325
313
290
281
237
232
230
J.P. Morgan Chase
Bank of America
Citigroup
Barclays Bank
Wells Fargo
Deutsche Bank
Mitsubishi UFJ Financial Group
Royal Bank of Scotland
BNP Paribas
HSBC
Morgan Stanley
Credit Suisse
RBC Capital Markets
Goldman Sachs Group
Crdit Agricole Corporate and Investment Bank
Mizuho Financial
Sumitomo Mitsui Financial Group
Socit Gnrale
UBS
ING Groep
$1,459
1,396
1,028
831
673
645
582
550
548
477
471
449
446
405
348
342
294
288
248
204
Source: Thomson Reuters The Wall Street Journal
Top 20 Global Lenders
Asian banks are climbing the ranks for global lending. In 2007, only one bank from the region made the top 20 list. In 2013,
three made the list, all from Japan.
2007 2013
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Ranked higher in 2013 Ranked lower Ranked the same New entrant to 2013 top 20 Asian lenders in bold
Bank Bank
Total amount lent,
in billions of dollars
Total amount lent,
in billions of dollars
Rank
Since the fourth quarter
of 2008, foreign lending
by Japanese banks
has increased 34%
to $3 trillion.
8 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
Big Indonesian Volcano
Claims Its First Victims
JAKARTA, IndonesiaMore than
a dozen tourists and villagers were
killed after venturing too close to In-
donesias most active volcano over
the weekend, prompting authorities
to tighten a restricted-entry zone
around the mountain on Sumatra is-
land.
At least 15 people, mostly high-
school students, were killed near an
evacuated village when Mount
Sinabung erupted Saturday, officials
said. Sinabung has been erupting
daily for the past three months, but
these were the first deaths directly
related to the volcanic activity.
The national disaster-mitigation
agency said the students and several
villagers were struck by a pyroclas-
tic flow, a superheated cloud of ash
and gases that can barrel down a
mountain side at high speeds during
an ash eruption.
The flow gushed down the moun-
tain side at about 100 kilometers an
hour with a temperature of around
700 degrees Celsius, the agency said.
The students, who had ventured
near a village about three kilometers
southeast of the volcano, had been
trying to get a better view of the
eruption, said agency spokesman Su-
topo Purwo Nugroho, adding that
the students werent on an orga-
nized school trip.
Sinabungs southeastern flank
has been site of the majority of the
pyroclastic flows emanating from
the crater since the round of erup-
tions began in November.
Eruptions have forced the evacu-
ation of some 30,000 peoplemany
of them small farmerson northern
Sumatra island, blanketing the high-
lands countryside in gray ash that
has destroyed millions of dollars of
cash crops.
More than 10,000 people who
had evacuated from villages just be-
yond the mandatory evacuation
zonewhich runs five kilometers
from the peak in most placeschose
to return home last week.
Up to now, entry into the evacua-
tion zone has been permitted but
discouraged by local authorities.
But Jhonson Tarigan, spokesman
for the local relief effort, said Sun-
day police and military increased
their patrol personnel to 200 from
75 after the deaths and would now
declare the evacuation zone com-
pletely off limits. Starting today, we
installed road blocks at access roads
to the danger zone, he said. Now
nobody will be allowed to enter the
danger zone.
He also said some of the new
personnel would come from areas
beyond Kabanjahe, the headquarters
for a district of several hundred
thousand people around the volcano.
Previously the patrolling officers
knew the villagers, so they were less
stern in stopping the them from en-
tering, he said.
Tourist trips to the volcano have
been a common sight in recent
months, often led by guides who
used to take people hiking to the top
of the nearly 2,500-meter peak.
Erwin Sinaga, a local guide, said
he takes groups into the evacuation
zone two to three times a week. On
Sunday, he was planning to take
travelers from the U.S. and Taiwan
as close as four kilometers on the
roads at the base of the mountain,
until the route was closed by au-
thorities. He found another vantage
point at seven kilometers, he said.
The fatalities occurred a day af-
ter authorities allowed some 13,800
people to go back to their villages
outside the five-kilometer danger
zone. Many had fled in December
and January amid ash fall and an
uptick in pyroclastic flows further
up the mountain.
Thousands of villagers have been
living for months in mosques,
churches and event halls.
On Sunday, Hendrasto, the head
of the government volcano agency
who, like many Indonesians, goes by
one name, said Sinabungs activity
remains unchanged. The eruptions
are not expected to stop in the near
future, he said.
For locals living at a safe distance
from the volcano, Sinabung has of-
fered a nightly diversion for months.
On a recent evening in Kabanjahe,
about 200 locals braved the high-
lands chill to stand in a field about 13
kilometers from the summit, looking
up at the mountain for occasional
burst of lava. Vendors sold cheap
noodle soup to ward off the chill.
A quiet murmur went up in the
crowd when a fireball flew silently
down the side of the volcano, at that
distance little more than a drop of
red on a black hillside.
Wait awhile, one of onlookers
said. Itll happen again, bigger.
BY I MADE SENTANA
AND BEN OTTO
A rescue team passes ash-covered motorcycles Sunday in North Sumatra during operations around the village of Karo.
R
e
u
t
e
r
s
MyanmarReport
IndicatesPolitical
HurdlesforSuuKyi
YANGON, MyanmarA commit-
tee evaluating changes to Myan-
mars constitution found resistance
to opening the door for opposition
leader Aung San Suu Kyi to assume
the presidency, underscoring the
hurdles to her political ambitions.
The question mark surrounding
whether Ms. Suu Kyi will be able to
run for president is considered the
defining political issue leading up
to Myanmars general elections,
scheduled for 2015.
This initial report was produced
by a 109-member parliamentary
committee tasked with collecting
suggestions from various stakehold-
ersincluding from political parties
and the militaryon what should
be amended within the constitution.
The committee said it received
more than 28,000 letters following
its call for comment on the pro-
posed changes, drafted in 2008 by
the junta that ran Myanmar at the
time. The document, drafted by
military generals who kept Ms. Suu
Kyi under house arrest for over a
decade, includes a clause that pre-
vents anyone with foreign family
members from assuming the presi-
dency or vice-presidency. The Nobel
laureate, who was married to a
British national and has two foreign
sons, is widely revered and consid-
ered the strongest presidential can-
didate, should she be cleared to run
for the post.
But of these letters, the ones
that opposed making changes to al-
low Ms. Suu Kyi to run or dismantle
the provision that guarantees a
place in politics for Myanmars mili-
tary received more than 100,000
signatures. Conversely, only 592
signatures were in favor of scrap-
ping the section on presidential
qualifications that disqualify Ms.
Suu Kyi.
The committee will send Parlia-
ment its recommendations on
changes. It remains unclear how or
when the Parliament might act on
any constitutional changes.
The initial report, released to
Parliament on Friday, isnt binding,
nor is it a formal recommendation.
But the task of collecting sugges-
tions on potential changes for the
constitution was the first of its kind
since a nominally civilian govern-
ment took the helm in 2011 after six
decades of military rule, and is the
first temperature-taking exercise of
sentiments around these crucial
changes.
It is clear that there is resis-
tance to amending the clause [on
presidential qualifications], some-
thing Aung San Suu Kyi has been
pushing hard for, said Richard
Horsey, a Yangon-based political an-
alyst.Ms. Suu Kyi, who recently
traveled across Myanmar to Chin,
Shan and Karen states, has made
constitutional change the priority
of her party. Her calls have also re-
ceived significant backing outside
Myanmars borders, with govern-
ments including the U.S. and U.K.
Mr. Horsey, like many other ana-
lysts, had been predicting that the
military, which holds 25% of seats
in parliament, might use its veto
powers to block a change in the
constitution that would allow Ms.
Suu Kyi to run. But, he added, the
report indicates that the issue may
not even get to the stage of being
voted on in the legislature.
Any constitutional amendment
requires 75% of parliamentary votes
in agreement.
The committee will deliver a for-
mal report at an unspecified time to
a separate parliamentary panel,
providing more specific recommen-
dations and analysis on changes to
the constitution.
Representatives from Ms. Suu
Kyis National League for Democ-
racy party on Sunday dismissed the
letters, saying they reflected an or-
ganized government movement.
There were no reasons given as
to why they want to keep article
59f, only signatures, said Zaw My-
int Oo, a NLD member of parlia-
ment who sits on the committee
looking at constitutional reform.
The process has no transparency
if our party chairman, Aung San
Suu Kyi, went on similar campaigns,
we can get more signatures to
change this section.
BY SHIBANI MAHTANI
AND MYO MYO
Opposition leader Aung San Suu Kyi supporters allege a government movement.
G
e
t
t
y
I
m
a
g
e
s
Barrier Reef Dumping Plan Draws Ire
CANBERRAAustralia approved
plans to dump vast amounts of mud
and rock into oceans surrounding
the Great Barrier Reef, paving the
way for developers to expand a coal
port on the countrys eastern coast.
The government agency that
manages the reef, a designated
World Heritage site, said it would
allow as much as 3 million cubic
meters of dredged-up material from
the sea floor to be dumped.
The dredging is part of a project
to expand Abbot Point, a coal port
in Queensland state which sits adja-
cent to the park. The marine author-
itys decision is expected to facili-
tate eventually a 70% ramp-up in
coal exports from Queensland. Coal,
along with iron ore, is one of Aus-
tralias biggest exports in big de-
mand from Asian countries, includ-
ing China, the nations biggest
trading partner.
The government approved the
port expansion last year, but
charged the marine authority with
deciding where the dredged-up mud
and rock would be shifted to. Sup-
porters of the plan say it will unlock
up to 28 billion Australian dollars
(US$24.5 billion) in coal-develop-
ment projects, helping provide
much-needed jobs as a China-led
mining-investment boom cools.
Environmental campaigners,
however, criticized the Great Barrier
Reef Marine Park Authoritys deci-
sion, saying the dumping of sludge
to help make way for more ships to
access the port threatened coral and
fish around the reef, the worlds
largest living organism.
BY ROB TAYLOR
WORLD NEWS
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 21
Major stockmarket indexes Stock indexes fromaround the world, grouped by region. Showninlocal-currency terms.
PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
EUROPE Stoxx Europe 600 322.52 -0.80 -0.25% -1.7% 11.9%
Stoxx Europe 50 2853.33 -7.14 -0.25 -2.3 8.1
Euro Zone Euro Stoxx 307.33 -1.56 -0.51 -2.2 13.7
Euro Stoxx 50 3013.96 -13.34 -0.44 -3.1 11.2
Austria ATX 2559.74 -22.27 -0.86 0.5 4.9
Belgium Bel-20 2891.25 -6.72 -0.23 -1.1 12.9
Czech Republic PX 990.61 -3.82 -0.38 0.2 -2.6
Denmark OMXCopenhagen 593.18 7.05 1.20% 4.8 19.0
Finland OMXHelsinki 7030.60 -104.03 -1.46 -4.2 14.4
France CAC-40 4165.72 -14.30 -0.34 -3.0 10.4
Germany DAX 9306.48 -67.00 -0.71 -2.6 18.8
Hungary BUX 18958.24 341.56 1.83 2.1 -2.1
Ireland ISEQ 4652.30 -32.34 -0.69 2.5 30.2
Italy FTSE MIB 19418.34 6.79 0.03 2.4 12.1
Netherlands AEX 386.85 -2.76 -0.71 -3.7 8.8
Norway All-Shares 590.88 -4.74 -0.80 -2.0 13.7
Poland WIG 50831.61 414.44 0.82 -0.9 8.3
Portugal PSI 20 6696.67 -68.27 -1.01 2.1 7.1
PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
Russia RTSI 1301.02 -19.88 -1.51% -9.8 -20.1
Spain IBEX35 9920.20 -44.30 -0.44 ... 20.5
Sweden OMXStockholm 416.72 0.27 0.06% -1.6 14.0
Switzerland SMI 8191.33 -13.63 -0.17 -0.1 10.4
Turkey BIST 100 61858.21 -843.18 -1.34 -8.8 -22.9
U.K. FTSE 100 6510.44 -28.01 -0.43 -3.5 2.6
ASIA-PACIFIC DJ Asia-Pacific 140.83 0.19 0.14 -4.2 2.8
Australia SPX/ASX200 5190.00 1.90 0.04 -3.0 5.5
China Shanghai Composite 2033.08 Closed -3.9 -14.8
Hong Kong Hang Seng 22035.42 Closed -5.5 -7.1
India S&P BSE Sensex 20513.85 15.60 0.08 -3.1 3.7
Japan Nikkei Stock Average 14914.53 -92.53 -0.62 -8.5 33.3
Singapore Straits Times 3027.22 Closed -4.4 -7.8
South Korea Kospi 1941.15 Closed -3.5 -1.2
AMERICAS DJ Americas 448.93 -2.47 -0.55 -3.6 14.2
Brazil Bovespa 47638.99 394.73 0.84 -7.5 -21.1
Mexico IPC 40879.75 -128.55 -0.31 -4.3 -10.7
Note: Americas index data are as of 5:00p.m. ET. Sources: SIXFinancial Information; WSJ Market Data Group
Cross rates U.S.-dollar and euro foreign-exchange rates inglobal trading
USD GBP CHF SEK RUB NOK JPY ILS EUR DKK CDN AUD
Australia 1.1440 1.8818 1.2640 0.1748 0.0325 0.1822 0.0112 0.3252 1.5446 0.2070 1.0287 ...
Canada 1.1121 1.8293 1.2287 0.1699 0.0316 0.1771 0.0109 0.3161 1.5015 0.2012 ... 0.9721
Denmark 5.5267 9.0908 6.1060 0.8445 0.1572 0.8802 0.0540 1.5711 7.4616 ... 4.9696 4.8308
Euro 0.7407 1.2183 0.8183 0.1132 0.0211 0.1180 0.0072 0.2106 ... 0.1340 0.6660 0.6474
Israel 3.5177 5.7862 3.8864 0.5375 0.1001 0.5602 0.0344 ... 4.7492 0.6365 3.1631 3.0748
Japan 102.2755 168.2306 112.9952 15.6279 2.9090 16.2878 ... 29.0746 138.0810 18.5057 91.9650 89.3979
Norway 6.2793 10.3286 6.9374 0.9595 0.1786 ... 0.0614 1.7851 8.4776 1.1362 5.6463 5.4886
Russia 35.1579 57.8304 38.8429 5.3722 ... 5.5990 0.3438 9.9946 47.4663 6.3614 31.6136 30.7312
Sweden 6.5444 10.7647 7.2303 ... 0.1861 1.0422 0.0640 1.8604 8.8355 1.1841 5.8846 5.7204
Switzerland 0.9051 1.4888 ... 0.1383 0.0257 0.1441 0.0088 0.2573 1.2220 0.1638 0.8139 0.7912
U.K. 0.6079 ... 0.6717 0.0929 0.0173 0.0968 0.0059 0.1728 0.8208 0.1100 0.5467 0.5314
U.S. ... 1.6449 1.1048 0.1528 0.0284 0.1593 0.0098 0.2843 1.3501 0.1809 0.8992 0.8741
Source: ICAPPlc.
MSCI indexes
Developed and emerging-market regional and country indexes
fromMSCI as of January 31, 2014
Price-to- LOCAL-CURRENCY
Dividend earnings PERFORMANCE
yield ratio MSCI Index Last Daily YTD 52-wk.
2.40% 17 MSCI ACWI* 393.89 -0.21% -3.6% 15.9%
2.40 17 World(DevelopedMarkets) 1,607.46 -0.24 -3.2 20.1
2.30 17 Worldex-EMU 196.02 -0.31 -3.2 19.9
2.30 18 Worldex-UK 1,619.74 -0.31 -3.2 21.0
3.00 17 EAFE 1,847.18 0.95 -3.6 15.2
2.60 12 EmergingMarkets (EM) 936.37 0.03 -6.6 -11.3
3.20 17 EUROPE 110.36 0.27 -1.6 14.6
3.20 18 EMU 191.11 0.30 -3.3 21.6
3.10 18 Europe ex-UK 118.69 0.34 -1.3 17.6
4.10 13 Europe Value 112.61 0.54 -0.8 16.1
2.30 22 Europe Growth 104.09 -0.01 -2.4 12.9
2.30 23 Europe Small Cap 262.87 0.31 0.8 31.5
3.50 6 EMEurope 256.07 1.40 -6.8 -17.5
3.50 14 UK 1,928.51 -0.15 -3.2 10.4
3.20 17 Nordic Countries 198.74 -0.01 -1.5 15.0
3.50 5 Russia 758.99 0.35 -4.2 -1.0
2.90 18 SouthAfrica 1,084.57 -0.90 -4.7 7.3
2.90 13 ACASIAPACIFICEX-JAPAN 444.34 0.44 -5.1 -4.7
1.70 17 Japan 753.62 -2.57 -6.4 42.1
3.10 10 China 58.96 -0.46 -6.6 -6.2
1.40 17 India 791.69 -0.82 -3.1 3.6
1.00 10 Korea 562.12 0.00 -4.6 -3.1
2.80 17 Taiwan 297.55 0.00 -1.7 7.6
1.80 19 USBROADMARKET 2,051.01 -1.18 -2.6 27.6
1.40 31 USSmall Cap 3,181.01 -1.49 -1.5 35.1
3.00 16 EMLATINAMERICA 2,887.42 -0.47 -9.8 -24.0
*Twenty-four developed and 21 emerging markets Source: MSCI
S&PDowJones Indices
Price-to-
Dividend earnings PERFORMANCE(euros) PERFORMANCE(U.S.dollars)
yield* ratio* S&PDowJones Index Last Daily 52-wk. Last Daily 52-wk.
2.35%19.41 Global TSM 3113.70 -0.42% 10.7%
2.91 17.87 Global DOW 1667.27 -0.20% 14.0% 2391.51 -0.62 12.4
2.90 14.37 Global Titans 50 220.97 -0.05 10.8 222.91 -0.47 9.3
3.04 20.00 DevEurope TSM 3270.95 -0.68 11.6
2.30 20.34 DevelopedMarkets TSM 3140.32 -0.46 13.7
2.80 13.68 S&PBMI EmgMarkets 238.30 -0.01 -13.1
3.19 19.31 S&PEurope 350 1314.20 -0.27 11.6 1594.32 -0.63 10.1
3.09 22.34 S&PEuro 1303.85 -0.50 14.0 1602.99 -0.86 12.4
3.68 17.85 Europe Dow 1367.55 -0.16 10.8 1958.59 -0.74 9.1
3.33 9.09 BRIC50 360.65 0.40 -15.9 464.39 -0.02 -17.0
1.87 21.07 U.S. TSM 18810.34 -0.50 19.1
Kuwait Titans 30 -c 202.30 -0.08 1.9
Price-to-
Dividend earnings PERFORMANCE(euros) PERFORMANCE(U.S.dollars)
yield* ratio* S&PDowJones Index Last Daily 52-wk. Last Daily 52-wk.
TurkeyTitans 20 -c 628.79 -1.25% -22.8%
6.16%15.50 Global Select Div 241.63 -0.47 4.7
6.50 14.88 Asia/Pacific Select Div 276.60 0.87% -5.5% 319.22 0.29 -7.0
U.S. Select Dividend -d 1207.61 -0.25 19.1
3.13 29.06 S&PGlbNat Resources 1928.28 -0.28 -9.9 2587.71 -0.69 -11.1
2.07 19.88 Islamic Market 2642.48 -0.38 9.7
2.39 17.93 Islamic Market 100 2883.89 -0.35 11.3
Islamic Turkey -c 3843.31 -0.83 -12.1
3.15 22.28 Sustainability Europe 106.06 -0.10 10.5 157.22 -0.67 8.8
4.24 23.10 S&PGlbInfrastructure 1473.95 0.50 7.0 2248.85 0.09 5.5
1.80 14.54 Luxury 1933.15 0.99 5.4
DJ-UBSCommodity-p 111.42 -0.34 -12.1 125.91 -0.34 -11.9
*Fundamentals are based on data in U.S. dollar. Footnotes: a-in USdollar. b-dividends reinvested. c-in local currency. Note:All data as of 2 p.m.ET. Source: S&PDowJones Indices
GLOBAL MARKETS LINEUP
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Commodities Prices of futures contracts withthe most openinterest
EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia
Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange;
NYMEX: NewYork Mercantile Exchange;ICE-EU: ICE Futures Europe *Data as of January 30, 2014
ONE-DAY CHANGE Year Year
Commodity Exchange Last price Net Percentage high low
Corn (cents/bu.) CBOT 433.50 6.00 1.40% 435.50 406.25
Soybeans (cents/bu.) CBOT 1282.75 7.75 0.61 1,330.50 1,260.50
Wheat (cents/bu.) CBOT 557.25 3.75 0.68 612.75 550.00
Live cattle (cents/lb.) CME 140.575 0.050 0.04 143.200 135.375
Cocoa ($/ton) ICE-US 2,893 -19 -0.65% 2,933 2,629
Coffee (cents/lb.) ICE-US 125.55 5.55 4.63 125.95 110.20
Sugar (cents/lb.) ICE-US 15.60 0.61 4.07 16.42 14.70
Cotton (cents/lb.) ICE-US 85.87 -0.16 -0.19 88.43 82.39
Rapeseed (euro/ton) LIFFE 364.25 2.25 0.62 365 349
Cocoa (pounds/ton) LIFFE 1,844 -5 -0.27 1,865 1,676
Robusta coffee ($/ton) LIFFE 1,777 32 1.83 1,795 1,575
Copper ($/lb.) COMEX 3.1930 -0.0335 -1.04 3.4245 3.1905
Gold ($/troy oz.) COMEX 1242.60 0.10 0.01 1,280.10 1,203.70
Silver ($/troy oz.) COMEX 19.160 0.034 0.18 20.660 18.970
Aluminum($/ton)* LME 1,729.50 -24.00 -1.37 1,813.00 1,729.50
Tin ($/ton)* LME 22,125.00 -25.00 -0.11 22,475.00 21,410.00
Copper ($/ton)* LME 7,116.00 -44.00 -0.61 7,422.00 7,116.00
Lead ($/ton)* LME 2,126.00 -29.00 -1.35 2,242.00 2,119.00
Zinc ($/ton)* LME 1,977.00 -32.50 -1.62 2,090.00 1,977.00
Nickel ($/ton)* LME 13,885 -280 -1.98 14,730 13,425
Crude oil ($/bbl.) NYMEX 97.44 -0.79 -0.80 99.08 91.47
Heating oil ($/gal.) NYMEX 2.9975 -0.0300 -0.99 3.0598 2.8905
RBOBgasoline ($/gal.) NYMEX 2.6409 -0.0334 -1.25 2.8043 2.6033
Natural gas ($/mmBtu) NYMEX 4.924 -0.087 -1.74 5.4860 3.9360
Brent crude ($/bbl.) ICE-EU 105.90 -1.40 -1.30 110.79 104.75
Gas oil ($/ton) ICE-EU 905.25 -13.25 -1.44 943.75 893.75
Sources: SIX Financial Information; WSJ Market Data Group
Currencies Londonclose onJan. 31
Per In
AMERICAS Per euro In euros U.S. dollar U.S. dollars
Argentina peso-a 10.8270 0.0924 8.0195 0.1247
Brazil real 3.2596 0.3068 2.4144 0.4142
Canada dollar 1.5015 0.6660 1.1121 0.8992
Chile peso 751.26 0.001331 556.46 0.001797
Colombia peso 2725.84 0.0003669 2019.01 0.0004953
Ecuador US dollar-f 1.3501 0.7407 1 1
Mexico peso-a 18.0384 0.0554 13.3609 0.0748
Peru sol 3.8079 0.2626 2.8205 0.3546
Uruguay peso-e 29.168 0.0343 21.605 0.0463
U.S. dollar 1.3501 0.7407 1 1
Venezuela bolivar 8.57 0.116644 6.35 0.157480
ASIA-PACIFIC
Australia dollar 1.5446 0.6474 1.1440 0.8741
1-mo. forward 1.5475 0.6462 1.1462 0.8724
3-mos. forward 1.5539 0.6435 1.1510 0.8688
6-mos. forward 1.5634 0.6396 1.1580 0.8636
China yuan 8.1809 0.1222 6.0595 0.1650
Hong Kong dollar 10.4827 0.0954 7.7645 0.1288
India rupee 84.6370 0.0118 62.6900 0.0160
Indonesia rupiah 16416 0.0000609 12159 0.0000822
Japan yen 138.08 0.007242 102.28 0.009778
1-mo. forward 138.06 0.007243 102.26 0.009779
3-mos. forward 138.01 0.007246 102.22 0.009782
6-mos. forward 137.93 0.007250 102.16 0.009788
Malaysia ringgit-c 4.5210 0.2212 3.3487 0.2986
NewZealand dollar 1.6692 0.5991 1.2364 0.8088
Pakistan rupee 142.455 0.0070 105.515 0.0095
Philippines peso 61.227 0.0163 45.351 0.0221
Singapore dollar 1.7245 0.5799 1.2773 0.7829
South Korea won 1459.31 0.0006853 1080.90 0.0009252
Taiwan dollar 40.962 0.02441 30.341 0.03296
Thailand baht 44.606 0.02242 33.040 0.03027
Per In
EUROPE Per euro In euros U.S. dollar U.S. dollars
Euro zone euro 1 1 0.7407 1.3501
1-mo. forward 1.0000 1.0000 0.7407 1.3501
3-mos. forward 1.0000 1.0000 0.7407 1.3502
6-mos. forward 0.9998 1.0002 0.7405 1.3504
Czech Rep. koruna-b 27.548 0.0363 20.404 0.0490
Denmark krone 7.4616 0.1340 5.5267 0.1809
Hungary forint 311.86 0.003207 230.99 0.004329
Norway krone 8.4776 0.1180 6.2793 0.1593
Poland zloty 4.2478 0.2354 3.1463 0.3178
Russia ruble-d 47.466 0.02107 35.158 0.02844
Sweden krona 8.8355 0.1132 6.5444 0.1528
Switzerland franc 1.2220 0.8183 0.9051 1.1048
1-mo. forward 1.2217 0.8185 0.9049 1.1051
3-mos. forward 1.2210 0.8190 0.9044 1.1057
6-mos. forward 1.2197 0.8199 0.9034 1.1069
Turkey lira 3.0544 0.3274 2.2623 0.4420
U.K. pound 0.8208 1.2183 0.6079 1.6449
1-mo. forward 0.8210 1.2181 0.6081 1.6445
3-mos. forward 0.8213 1.2175 0.6084 1.6437
6-mos. forward 0.8219 1.2167 0.6088 1.6426
MIDDLE EAST/AFRICA
Bahrain dinar 0.5089 1.9649 0.3770 2.6527
Egypt pound-a 9.3964 0.1064 6.9599 0.1437
Israel shekel 4.7492 0.2106 3.5177 0.2843
Jordan dinar 0.9543 1.0479 0.7069 1.4147
Kuwait dinar 0.3814 2.6219 0.2825 3.5398
Lebanon pound 2029.12 0.0004928 1502.95 0.0006654
Saudi Arabia riyal 5.0637 0.1975 3.7507 0.2666
South Africa rand 15.0569 0.0664 11.1525 0.0897
United Arab dirham 4.9588 0.2017 3.6730 0.2723
a-floating rate b-financial c-government rate c-commercial
rate d-Russian Central Bank rate.
Source: ICAPPlc.
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 7
Western States Escape
The Easts Deep Freeze
At times in January, Chicago was
colder than the South Pole, while
flowers bloomed out of season in
balmy Juneau, Alaska.
Driven by contorted bends of the
jet stream, cold snaps and snow kept
Northern and Southern states in a
deep freeze, while unusually warm
weather and record drought gripped
the far West.
The U.S. has been a country di-
vided by temperature extremes, in a
winter of record Western highs and
bone-chilling Eastern lows, federal
climate experts and private meteo-
rologists said.
A formal federal tally of Januarys
temperature trends wont be com-
pleted for weeks, but preliminary re-
gional data compiled by commercial
meteorologists suggest that the East-
ern half of the country is experienc-
ing one of its 10 coldest winters on
recordwith thousands of local re-
cords for cold already tied or broken.
By contrast, California, Alaska and
the Western U.S. are having one of
the 10 warmest winters, with several
cities setting records in January for
high temperatures.
We are talking about significant
departures from normal, said mete-
orologist Joe DAleo, chief forecaster
at Weatherbell Analytics LLC, a com-
mercial forecasting company based
in New York.
Weather experts blame it all on a
vast pool of warmwater in the North
Pacificup to seven degrees hotter
than in most years. Generating a
plume of rising hot air, it has pushed
the polar jet stream, which steers air
across the continent from west to
east, further north and then south in
a series of kinks like accordion pleats.
The same odd continental pattern of
air circulation contributed to the cold-
est U.S. winters on record in 1977 and
1979, experts said.
The jet stream has configured
itself in a way that it is positioned
to bring warm air to the West and
shots of really cold air to the East,
said Deke Arndt, chief of climate
monitoring at the National Climatic
Data Center in Asheville, N.C.
As a consequence, the Western
half of the country has been almost
as much above average as the East-
ern half has been below average. If
you average the extremes, you miss
out on how truly extraordinary the
weather this January is, said Jeff
Masters, chief meteorologist at
Weather Underground, a commer-
cial forecasting service.
The month unofficially edged out
1948 as only the 25th coldest U.S.
January, based on more than a cen-
tury of record-keeping.
The bitter cold we experienced
in January was certainly unusual
and the coldest we have seen in the
21st century, said Dr. Arndt. But
they were the kinds of temperatures
we would routinely see in two out of
three winters in the cold decades of
the 1970s and 1990s.
Even so, it has been cold enough
to drive the penguins indoors at the
National Aviary in Pittsburgh, icy
enough to freeze over much of the
Great Lakes, and snowy enough that
airlines in January canceled more
than 36,000 flights. By a preliminary
count, the month set more than a
thousand local records for snowfall.
At the same time, it was warm
and dry enough in the West that Cal-
ifornias snowpack is now at its low-
est level in 50 years, threatening the
states water supply. Temperatures in
January topped 88 degrees in Long
Beach, while Anchorage, Alaska,
notched its warmest January day on
record this past Monday, with tem-
peratures southwest of the city
reaching 62 degrees.
It is a study in extremes, Dr.
Masters said.
BY ROBERT LEE HOTZ
ActorPhilipSeymourHoffmanDeadat46
Award-winning actor Philip Sey-
mour Hoffman was found dead of
an apparent drug overdose late
Sunday morning in his New York
City apartment, authorities said.
Law-enforcement officials said a
hypodermic needle and two glass-
ine envelopes containing what is
believed to be heroin were found in
the apartment in the West Village
neighborhood of Manhattan.
The 46-year-old actor was
found unconscious in the bathroom
of his fourth floor apartment in the
Pickwick House around 11:15 a.m.
by screenwriter David Katz, who
called 911, a law-enforcement offi-
cial said. He was pronounced dead
at the scene.
Mr. Hoffman was last seen
around 8 p.m. Saturday, the official
said. He was supposed to pick up
his children Sunday morning and,
when he didnt, Mr. Katz and a
friend went to check on him, the
official said.
The New York Police Depart-
ment is investigating, and the Of-
fice of the Chief Medical Examiner
is working to determine the exact
cause of death. The accomplished
actor and director won the Acad-
emy Award for best actor for his
role as famed author Truman Ca-
pote in the 2005 film Capote. He
also had a strong following in New
Yorks theater scene, starring in
plays like 2012s Death of a Sales-
man and directing others, like
1999s In Arabia, Wed All Be
Kings. He was nominated for a
Tony Award three times.
Mr. Hoffmans breakout role,
however, was in 1997s Boogie
Nights. He also received accolades
for his roles in high-profile films
such as 1998s The Big Lebowski
and 1999s Magnolia.
Mr. Hoffman was most recently
seen in The Hunger Games: Catch-
ing Fire, the second installment in
the blockbuster Hunger Games
series from Lions Gate Entertain-
ment Corp. He was set to star in
two more installments in the fran-
chise that are scheduled for re-
lease.
Outside of the six-story building
in the West Village, fan Adam Ze-
nko, 40, placed white roses outside
the front door. The paralegal, who
lives nearby, said his favorite film
of Mr. Hoffmans was Synecdoche,
New York.
Its horrible, just horrible, he
said. I think hes the greatest ac-
tor of his generation.
Mara Gay, Alison Fox
and Erich Schwartzel
contributed to this article.
BY PERVAIZ SHALLWANI
U.S. NEWS
When toRaiseRates
TopsYellensAgenda
In three years as second-in-com-
mand at the Federal Reserve, Janet
Yellen worried continuously about
high U.S. unemployment and pushed
for policies to bring it down. After
she is sworn in as Fed chairwoman
Monday a new question will almost
immediately crowd her agenda: Why
is unemployment falling so fast and
what, if anything, should the central
bank do about it?
The jobless rate was 6.7% in De-
cember and the Labor Department
will release the January figure on
Friday. Fed officials have said since
December 2012 they wouldnt con-
sider raising short-term interest
rates from near zero until joblessnes
fell to at least 6.5%.
More recently, they have said
they will keep rates low well past
that point as they weigh other indi-
cators the labor market remains
weak. This suggests rate increases
wont be coming soon even if job-
lessness were to touch 6.5% in Fri-
days report.
Among Ms. Yellens most critical
decisions is when to start lifting in-
terest rates. If she and her col-
leagues wait too long, they could
fuel high inflation or financial bub-
bles; if they move too soon, they
could damp a recovery that is just
gaining steam.
Key to that decision is making
sense of the falling unemployment
rate. She and other Fed officials
worry it masks large pockets of
stress still plaguing the labor mar-
ket, including millions of people
who want work but arent looking
anymore and therefore are no lon-
ger counted as unemployed.
The U.S. labor market is incredi-
bly complicated and trying to sum-
marize it with one number is hard,
says David Stockton, the former
head of the Feds research division.
They got themselves into a situa-
tion where they are using the unem-
ployment rate but they see a consid-
erable number of reasons why they
believe it is not a sufficient statis-
tic.
The fast descent in the jobless
rate has caught Fed officials off
guard. A year ago they didnt see it
getting to 6.5% until 2015. As re-
cently as June, they didnt see it
reaching this point until sometime
later this year.
A rule of thumb in economics
known as Okuns Law suggests the
jobless rate should fall a half per-
centage point for every percentage
point the economy grows above its
long-run trend rate. By that rule of
thumb, the unemployment rate
shouldnt have fallen much in an un-
usually anemic economic recovery.
Instead it is down more than three
percentage points from the recent
peak.
One reason for the drop is an ex-
odus of millions of workers from the
labor force. In June 2009, when the
recovery started, 81 million Ameri-
cans said they werent in the labor
force, which means they werent
employed or actively looking for
work. In December that number hit
92 million.
People are leaving the labor
force for different reasons theyre
retiring, going back to school, join-
ing disability rolls, giving up looking
for jobs or doing other thingsre-
ducing the number of people
counted as unemployed.
The trend raises hard-to-answer
questions for the Fed. Will some of
these people come back to work
when the economy improves or have
they left permanently? Do these
shifts mean there is less slack in la-
bor marketsworkers available to
take jobsthan they realized, or is
the slack still out there, hidden in
these numbers?
Ms. Yellen and other Fed officials
equate slack with low wages and
low inflation. If it is receding more
quickly than they thought, rate in-
creases might be needed sooner
than planned. But they see many
signs that the job market is still
weak.
Nearly eight million people have
part-time jobs but want full-time
work. Another 2.4 million say they
want jobs but arent looking.
When taking into account these
people and other marginally at-
tached workers, the jobless rate is
13.1%.
Behind the numbers are people
like Mialien Mack, 40, of Atlanta,
Georgia. She was laid off in May
from her marketing job in the cor-
porate office of a convenience store
chain in Atlanta after nearly 11 years
with the company. She recently
faced the expiration of her $330 per
week of unemployment benefits,
which has shifted her thinking about
her job search.
Its making me think, should I
consider less money? In her previ-
ous jobs she had been making the
equivalent of about $25 an hour.
Now she is contemplating positions
that would pay half that.
Twelve-fifty is still not a livable
wage for an adult with a child, she
said. However, is it a foot in the
door?
BY JON HILSENRATH
AND VICTORIA MCGRANE
Sources: NOAAs National Climatic Data Center (temperature);
Weatherbell Analytics LLC (2014 estimate); staff and news reports (weather facts)
Weather Divide
Average temperature for January of each year in the contiguous 48 states
40F
20
25
30
35
60 1950 70 80 90 00 10
2014 estimate:
2.5F below average
1979: 8.54F below average
2006: 8.62F above average
Average 1895-2013:
30.63F
January was so cold in some places that:
In Chicago, it got colder than the South Pole.
In Minnesota, where temperatures dipped to -42F, it was colder than Gale
Crater on Mars, where the NASA robotic rover Curiosity is stationed.
In Chicago, Anana, the lone polar bear at the Lincoln Park Zoo, had to stay
indoors to keep warm.
In Pittsburgh at the National Aviary, the penguins huddled indoors.
All told, more than 36,000 airline ights were canceled, three times as many
as the past two Januarys.
While others had a warm spell:
In Juneau, Alaska, the
owers were blooming.
And it was so hot in Fresno,
Calif., that the China Peak
Mountain resort closed ski
runs for lack of snow.
The Wall Street Journal
Philip Seymour Hoffman in January.
E
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e
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22 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
Major players & benchmarks
Credit derivatives
Spreads oncredit derivatives are one way the market rates
creditworthiness. Regions that are treading inroughwaters
cansee spreads swing toward the maximumand vice versa.
Indexes beloware for five-year swaps.
Markit iTraxxIndexes SPREADRANGE, in pct. pts.
Mid-spread, since most recent roll
Index: series/version in pct. pts. Mid-price Coupon Maximum Minimum Average
Europe: 20/1 0.81 100.90% 0.01% 1.04 0.69 0.82
Eur. HighVolatility: 20/1 1.19 99.14 0.01 1.61 1.01 1.24
Europe Crossover: 20/1 3.08 108.27 0.05 4.08 2.75 3.30
Asia ex-JapanIG: 20/1 1.49 97.76 0.01 1.57 1.24 1.37
Japan: 20/1 0.84 100.77 0.01 0.97 0.68 0.82
Note: Data as of January 30
Spreads
Spreads on
ve-year swaps
for corporate
debt; based on
Markit iTraxx
indexes.
In percentage points
3.00
2.00
1.00
0
1
t
Australia
t
Japan
2013
Aug. Sept. Oct. Nov.
2014
Dec. Jan.
Index roll
Source: Markit Group
Tracking
credit
markets &
dealmakers
Dow Jones Industrial Average P/E: 15
LAST: 15698.85 t149.76, or 0.94%
YEAR TO DATE: t877.81, or 5.3%
OVER 52 WEEKS s1,689.06, or 12.1%
Note: Price-to-earnings ratios are for trailing 12 months
16750
16400
16050
15700
15350
15000
1 8 15 22 29
Nov.
6 13 20 27
Dec.
3 10 17 24 31
Jan.
High
Close
Low
50day
moving average
t
StoxxEurope 50: Friday's best andworst...
Previous
close, in STOCKPERFORMANCE
Company Country Industry Volume local currency Previous session YTD 52-week
Moet Hennessy Louis Vuitt France Clothing &Accessories 3,602,950 132.15 7.88% -0.3% -4.8%
BGGrp United Kingdom Integrated Oil &Gas 15,850,938 1,022 1.34 -21.2 -8.8
Financiere Richemont Switzerland Clothing &Accessories 2,174,787 84.15 1.08 -5.2 12.4
British American Tobacco United Kingdom Tobacco 4,703,287 2,916 0.92 -9.9 -11.2
National Grid United Kingdom Multiutilities 7,861,133 789.00 0.90 0.1 14.1
Deutsche Bank Germany Banks 11,660,099 35.89 -2.79% 3.5 -6.8
Royal Dutch Shell A United Kingdom Integrated Oil &Gas 5,227,583 2,104 -2.05 -2.8 -6.1
INGGroep Netherlands Life Insurance 29,738,721 9.84 -1.70 -2.6 32.1
Standard Chartered United Kingdom Banks 8,850,345 1,240 -1.63 -8.8 -26.1
Deutsche Telekom Germany Mobile Telecommunications 18,444,098 12.00 -1.60 -3.5 34.3
...Andthe rest of Europe's blue chips
Latest,
in local STOCKPERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week
Reckitt Benckiser Grp 1,223,371 4,563 0.57% -4.8% 8.6%
United Kingdom(Nondurable Household Products)
Vodafone Group 100,553,628 226.55 0.40 -4.4 31.6
United Kingdom(Mobile Telecommunications)
Banco Bilbao Vizcaya Argn 50,413,299 8.86 0.21 -1.0 23.4
Spain (Banks)
Anheuser-Busch InBev 2,259,832 71.05 0.11 -8.0 11.2
Belgium(Brewers)
Rio Tinto 3,744,234 3,244 0.09 -4.9 -8.9
United Kingdom(General Mining)
BP PLC 22,350,013 478.00 0.02 -2.1 2.4
United Kingdom(Integrated Oil &Gas)
Roche Holding Part. Cert. 1,699,201 249.30 ... 0.0 23.8
Switzerland (Pharmaceuticals)
UBS 11,557,413 17.99 -0.11 6.3 14.0
Switzerland (Banks)
Telefon L.M. Ericsson B 16,177,505 80.00 -0.12 1.9 8.1
Sweden (Telecommunications Equipment)
Siemens 4,101,701 93.96 -0.19 -5.4 17.6
Germany (Diversified Industrials)
Nestle 5,864,260 65.80 -0.23 0.8 3.0
Switzerland (Food Products)
BASF 3,952,135 79.53 -0.25 2.6 4.9
Germany (Commodity Chemicals)
ABB 6,611,910 22.62 -0.26 -3.7 15.9
Switzerland (Industrial Machinery)
ENI 14,611,538 16.85 -0.30 -3.7 -8.9
Italy (Integrated Oil &Gas)
Lloyds Banking Group PLC 102,665,213 83.30 -0.30 5.6 61.2
United Kingdom(Banks)
Banco Santander S.A. 59,373,682 6.41 -0.31 -0.5 8.0
Spain (Banks)
Glencore Xstrata PLC 27,394,017 322.50 -0.36 3.1 -18.0
United Kingdom(General Mining)
AstraZeneca 2,037,593 3,859 -0.37 7.9 26.4
United Kingdom(Pharmaceuticals)
L'Air Liquide 1,003,382 93.20 -0.40 -9.3 -1.0
France (Commodity Chemicals)
Schneider Electric 2,066,985 59.89 -0.45 -5.5 6.8
France (Electrical Components &Equipment)
Latest,
in local STOCKPERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week
SAP 3,165,760 56.66 -0.47% -9.1% -7.0%
Germany (Software)
HSBC Hldgs 24,961,836 627.00 -0.51 -5.3 -12.5
United Kingdom(Banks)
Bayer 2,597,527 97.89 -0.56 -4.0 34.1
Germany (Specialty Chemicals)
Daimler 5,457,152 62.13 -0.59 -1.2 43.0
Germany (Automobiles)
Novartis AG 6,584,897 71.80 -0.62 0.8 15.8
Switzerland (Pharmaceuticals)
Credit Suisse Group AG 5,501,745 27.40 -0.65 0.5 2.9
Switzerland (Banks)
Unilever CVA 7,281,339 27.71 -0.68 -5.4 -7.0
Netherlands (Food Products)
Telefonica S.A. 20,444,217 11.44 -0.69 -3.3 7.1
Spain (Fixed Line Telecommunications)
AXA 9,640,827 19.50 -0.76 -3.5 43.0
France (Full Line Insurance)
Sanofi SA 3,941,726 72.80 -0.79 -5.6 1.3
France (Pharmaceuticals)
GlaxoSmithKline 7,184,583 1,564 -0.79 -2.9 8.2
United Kingdom(Pharmaceuticals)
Unilever 4,309,183 2,339 -0.81 -5.8 -8.9
United Kingdom(Food Products)
BHP Billiton 9,407,447 1,796 -0.86 -3.9 -16.8
United Kingdom(General Mining)
Tesco 16,322,182 320.35 -0.91 -4.2 -10.1
United Kingdom(Food Retailers &Wholesalers)
Allianz SE 1,998,411 123.80 -0.92 -5.0 17.3
Germany (Full Line Insurance)
Barclays 49,273,966 272.50 -0.93 0.2 -9.5
United Kingdom(Banks)
Zurich Insurance Group 731,923 261.50 -0.95 1.2 -0.1
Switzerland (Full Line Insurance)
Diageo 9,346,759 1,801 -1.07 -10.0 -4.1
United Kingdom(Distillers &Vintners)
Total 6,182,909 42.34 -1.27 -4.9 6.0
France (Integrated Oil &Gas)
BNP Paribas 5,097,672 57.45 -1.42 1.4 24.3
France (Banks)
Sources: SIX Financial Information
DJIAcomponent stocks
Volume, CHANGE
Stock Symbol in millions Latest Points Percentage
AT&T T 33.9 $33.32 0.03 0.09%
AmExpress AXP 4.7 85.02 1.60 1.85
Boeing BA 9.7 125.26 1.27 1.00
Caterpillar CAT 9.1 93.91 0.71 0.76
Chevron CVX 15.3 111.63 4.82 4.14
CiscoSys CSCO 41.5 21.91 0.07 0.30
CocaCola KO 16.0 37.82 0.35 0.92
Disney DIS 7.7 72.61 0.61 0.83
DuPont DD 5.6 61.01 0.53 0.86
ExxonMobil XOM 16.8 92.16 1.83 1.95
GenElec GE 39.8 25.13 0.37 1.45
GoldmanSachs GS 3.4 164.12 1.72 1.04
HomeDpt HD 10.5 76.85 0.08 0.10
Intel INTC 26.9 24.54 0.20 0.81
IBM IBM 5.1 176.68 0.68 0.38
JPMorgChas JPM 17.9 55.36 0.64 1.14
JohnsJohns JNJ 12.0 88.47 1.03 1.15
McDonalds MCD 5.9 94.17 0.37 0.39
Merck MRK 14.8 52.97 0.54 1.01
Microsoft MSFT 85.6 37.84 0.98 2.66
Nike B NKE 4.2 72.85 1.09 1.47
Pfizer PFE 40.6 30.40 0.42 1.36
ProctGamb PG 12.8 76.62 0.25 0.33
3M MMM 3.6 128.19 0.14 0.11
TravelersCos TRV 4.8 81.28 1.08 1.31
UnitedTech UTX 3.4 114.02 0.66 0.58
UtdHlthGp UNH 4.0 72.28 0.52 0.71
Verizon VZ 17.8 48.02 0.39 0.82
VISAClA V 6.1 215.43 5.45 2.47
WalMart WMT 10.4 74.68 0.07 0.09
Source: WSJ Market Data Group
Credit-default swaps: European companies
At itsmost basic, thepricingof credit-default swapsmeasureshowmuchabuyer hastopaytopurchase-and
howmuch a seller demands to sell-protection fromdefault on an issuer's debt. The snapshot belowgives a
sense whichway the market was moving yesterday.
Showing the biggest improvement...
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day
Nielsen 101 5 5 24
Allianz 49 1 1 5
RabobankNederland 76 2 5 10
StdCharteredBk 123 3 5 19
Alliance Leicester 94 2 4 4
Deutsche Bk 95 2 5 13
ONOFinII 153 3 48 50
RaiffeisenZentralbank
Oesterreich
84 2 6 27
CARLTONComms 138 3 3 2
Compass Gp 43 1 2 1
Andthe most deterioration
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day
CIRSpACIEIndustriali
Riunite
258 14 44 118
Portugal TelecomSGPS 349 18 47 89
Diageo 53 2 5 12
Pearson 64 3 5 13
REPSOL 123 5 22 28
Telefonica 165 6 31 45
Hellenic Telecom 331 13 57 75
Stena Aktiebolag 396 15 45 4
Portugal TelecomIntl Fin 349 12 44 85
Gecina 102 3 5 5
Source: Markit Group
BLUE CHIPS & BONDS
WSJ.com
>>
Follow the markets throughout the day, with updated
stock quotes, news and commentary at WSJ.com.
Also, receive emails that summarize the days trading in
Europe and Asia. To sign up, go to WSJ.com/Email.
Below, a look at the Dow Jones Stoxx
50, the biggest and best known
companies in Europe, including the U.K.
Europe, Middle East & Africa: Bank revenues from equity capital markets
Behind every IPO,
follow-on or
convertible equity
offering is one or
more investment
banks. At right,
investment banks
historical and
year-to-date
revenues from global
equity-capital-market
(ECM) deals
Source: Dealogic
60% 6
40 4
20 2
0 0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
nEquity capital markets nDebt capital markets (both in billions, left axis)
ECM as a percentage of total
(right axis)
t
6 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
U.S. NEWS
Delayed Oil
Pipeline Clears
Major Hurdle
WASHINGTONAn Obama ad-
ministration analysis of the Key-
stone XL pipeline said it probably
wouldnt alter the amount of oil ul-
timately removed from Canadian oil
sands, boosting the pipelines back-
ers by suggesting it would have lit-
tle impact on climate change.
The release of the long-awaited
report is one of the last steps before
the up-or-down decision by President
Barack Obama, who must juggle con-
flicting demands from supporters
heading into midterm elections.
The Keystone XL pipeline, which
would carry oil from Canadian oil
sands into the U.S. Midwest on the
way to Gulf coast refineries, has be-
come a potent symbol both for envi-
ronmentalists who say it would ac-
celerate global warming and for
unions and business leaders who see
it as a way to stoke North Americas
development as an energy-produc-
ing superpower.
The environmental analysis re-
leased Friday by the State Depart-
ment, which is responsible for as-
sessing the project, weighed in at 11
volumes. It said that approval or
denial of any one crude-oil trans-
port project, including the proposed
project, is unlikely to significantly
impact the rate of extraction in the
oil sands.
The finding that the oil would be
extracted and delivered anyway
possibly by rail if not pipelineleft
environmentalists disappointed.
I will not be satisfied with any
analysis that does not accurately
document what is really happening
on the ground when it comes to the
extraction, transport, refining and
waste disposal of dirty, filthy, tar-
sands oil, said Sen. Barbara Boxer
(D., Calif.), chairman of the Senate
environment and public works com-
mittee and a White House ally.
The report isnt the last word on
the matter. Now begins a final State
Department study to determine
whether the pipeline project is in
the nations broader interests. Eight
separate agencies have up to three
months to weigh in.
The report makes no recommen-
dations on TransCanada Corp.s per-
mit request, leaving Secretary of
State John Kerry and Mr. Obama the
space to draw their own conclusions
about whether the pipeline should
get built.
They are free to reject the pipe-
line based on this more sweeping
analysis, in which the environmental
report is but one data point. In the
next review, they will take into ac-
count a consideration that may af-
fect the presidents legacy: He has
sought to take a leading global role
in the effort to combat climate
change.
Under the executive order gov-
erning the permit review, Mr. Kerry
is empowered to make the final call.
But presidential aides have said
Mr. Obama has told them he will
make the final decision on Keystone.
Addressing Keystone at his regu-
lar press briefing, White House
spokesman Jay Carney said the re-
port didnt represent a decision but
rather another step in the process.
Mr. Obama could wait until after
the November elections, but he is
under pressure from the Canadian
government and a handful of pro-
Keystone Democratic senators not
to delay further. A few Democratic
senators who are up for re-election
this year have warned that they will
push legislation forcing a decision if
the review stretches much longer.
In a statement Friday, pro-Key-
stone Sen. Mary Landrieu (D., La.),
said, This new study underscores
what has been said all along about
the Keystone XL pipeline: Its time
to build. This single project will in-
ject billions of dollars into Louisiana
and national economies, and reduce
our dependence on oil from hostile
countries.
Republicans have also grown im-
patient with the lengthy Keystone
review process. Citing Mr. Obamas
pledge to use his executive author-
ityhis pento boost the econ-
omy, GOP lawmakers have urged
him to approve the pipeline now.
Mr. President, no more stalling,
no more excuses. Please pick up that
pen youve been talking so much
about and make this happen. Ameri-
cans need these jobs, Senate Re-
publican leader Mitch McConnell of
Kentucky said Friday.
Mr. Carney at the White House
said that there is a process that is
in place, and that must be honored.
Keystone has had a tangled his-
tory. TransCanada, which operates
oil and natural-gas pipelines, first ap-
plied for a permit in 2008. In Janu-
ary 2012, the Obama administration
rejected the application. At the time,
Mr. Obama said a deadline that had
been imposed by Congress didnt al-
low enough time to determine the
projects environmental impact.
TransCanada reapplied in May
2012, after proposing to reroute the
line to avoid an environmentally
sensitive part of Nebraska, setting
in motion the environmental report
that was just released.
Mr. Obama isnt the only leader
with his legacy at stake. Canadian
Prime Minister Stephen Harper, who
is struggling in opinion polls, has
aligned himself closely with Key-
stone. Mr. Harpers natural-re-
sources minister, Joe Oliver, said the
report made him more confident
the project will be approved.
Were very pleased with the re-
lease and being able to move to this
next stage of the process. Its been
long in getting here, said Russ
Girling, TransCanadas chief execu-
tive.
The pipeline has exposed divi-
sions within the Democratic Party
that could reverberate in the U.S.
midterm elections in November.
Labor unions see the project as
an engine for job creation. Environ-
mentalists view it as a symbol of
U.S. dependence on fossil fuels and
worry that extraction of the oil from
Canadian oil sands will release large
amounts of carbon dioxide, exacer-
bating global warming. Both groups
are pillars of the Democratic politi-
cal coalition, which is aiming for a
large turnout in November.
Dan Weiss of the liberal think
tank Center for American Progress
said the report released Friday ig-
nores evidence that Keystone would
spark greater production at Canadian
oil sands.
Its like giving up on the inter-
diction of cocaine traffic into our
country, because drugs are going to
get in anyway, Mr. Weiss said.
Chester Dawson
and Alistair MacDonald
contributed to this article.
By Peter Nicholas,
Carol E. Lee
and Alicia Mundy
CEO Russ Girling of TransCanada, which plans a pipeline to carry Canadian oil into the U.S. Midwest on the way to Gulf
B
l
o
o
m
b
e
r
g
N
e
w
s
Oil Has Been Flowing Even Without the Key Link
Improved prospects for the Key-
stone XL pipeline cheered many
parts of the North American energy
industry, but the project is no longer
as crucial to U.S. or Canadian compa-
nies as it seemed just two years ago.
TransCanada Corp.s 830,000-
barrel-a-day project has been in po-
litical limbo for years, but the de-
lays havent stopped the flow of oil.
Many in the energy industry quit
banking on the 1,200-mile line ever
being built and made arrangements
to ship North Americas rising oil
output by alternate means, includ-
ing shipments by rail.
Even without Keystone XL, Cana-
dian crude exports to the U.S. rose
more than 5% in 2013, to an average
2.6 million barrels a day, according
to the latest federal data.
If built, Keystone XL would be a
potential boon to companies pumping
oil in Canada. But Albertas oil-sands
crude production will more than dou-
ble by 2025 to 4.5 million barrels a
day, according to the Canadian Asso-
ciation of Petroleum Producers, mak-
ing Keystone only a partial solution.
A pair of proposed new and ex-
panded pipelines to Canadas Pacific
coast are being eyed as a way to tap
growing Asian demand for oil.
Railcars are increasingly carry-
ing crude out of remote inland oil
fields. Companies shipped 280 mil-
lion barrels of oil by rail during the
first nine months of 2013, nearly
double the volume in 2012 and al-
most six times the traffic in 2011,
according to the Association of
American Railroads.
Exxon Mobil Corp., a major pro-
ducer in Canadas oil sands, said
Thursday it is building a railway-
loading facility in Edmonton, Al-
berta, to enable efficient, cost-ef-
fective transportation of heavy
crude. The terminal is expected to
be complete by early next year.
ExxonMobil Canadian subsidiary
Imperial Oil Ltd. has secured nearly
400,000 barrels a day of additional
pipeline capacity out of Alberta on
proposed lines as well, including
Keystone XL. TransCanada has com-
mitments from some of the largest
operators in the oil sands, including
Canadian Natural Resources Ltd.,
Cenovus Energy Inc., Suncor En-
ergy Inc. and ConocoPhillips.
Weve seen folks asking for addi-
tional capacity, TransCanada Chief
Executive Russ Girling said.
Keystone XL still matters to re-
finers along the Gulf Coast, includ-
ing Valero Energy Corp. and Mara-
thon Petroleum Corp., which have
invested billions of dollars in recent
years to turn heavy crude like the
kind coming from Canada, which
yields a lot of diesel, into fuels for
export.
While railways have accommo-
dated much of the booming new
supply, this method of shipping has
its risks. Regulators are taking a
closer look at railcars after a string
of recent accidents, including a fiery
crash in Quebec last summer that
killed 47 people. Efforts to make
tanker cars safer could mean fewer
of them will be available in the near
term, according to Cowen & Co. ana-
lyst Sam Margolin.
Keystone is more important
now because rail is starting to meet
more regulatory attention, he said.
If built, Keystone XLs effects are
likely to be felt in Latin America. A
surge of heavy Canadian crude into
the U.S. could crowd out similar
types of oil that U.S. refiners import
from Venezuela and Mexico.
Ben Lefebvre
and Alison Sider
contributed to this article.
BY CHESTER DAWSON
AND DANIEL GILBERT
Edmonton
Houston
Cushing
Steele City
ALBERTA
MONT.
N. D.
S. D.
NEB.
KAN.
OKLA.
ILL.
MO.
TEXAS
SASK.
MANITOBA
Port Arthur
Hardisty
Patoka
C ANADA
ME X I CO
UNI T E D
STAT E S
250 miles
250 km
Decision Time
A U.S. study found the
Keystone XL project likely
wouldnt affect the amount
of oil extracted from
Canadian tar sands.
Source: TransCanada The Wall Street Journal
Extent of the Keystone
oil pipeline
Constructed Planned
Keystone XL pipeline
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 23
PERSONAL JOURNAL
The Lifestyles of the Rich and Stranded
Private Jets as Weather Workarounds; Just Dont Rent Them During Holidays or Big Sports Events
Like thousands of other travel-
ers, Debbie Grazioso found herself
stranded by bad weather, stuck in
a line of 70 people on Jan. 6 in
Florida and told by JetBlue Air-
ways that shed have to wait four
days for a seat to New York. That
meant missing a birth-
day party for her 25-
year-old twin daughters.
Sometimes emer-
gency situations require
emergency measures. Ms. Grazi-
oso and her husband, Glen Vittor,
paid $9,000 to hitch a ride with
another family on a seven-passen-
ger Cessna Citation Excel, landing
only hours after their scheduled
trip. It was well worth it. You can
never get a birthday back, she
said.
Time after time, storm after
storm, travelers have been left in
the lurch this winter. Long after
the weather clears, the impact on
airlines and their passengers per-
sists. So far this January, U.S. air-
lines have canceled more than
36,000 flightsmore than after
superstorm Sandy in 2012 and
three times as many as the last
two Januarys. Thats roughly three
million inconvenienced passen-
gers. With most flights booked
full, it can take three, four or even
five days to get rebooked.
Alternatives are limiteddriv-
ing or taking a train may take
days; other airlines are all booked
up. For those few willing to pay
the very high price, private jets
can provide a smart escape.
Terry Cooper, president of
Charter Matrix, an online direc-
tory and marketplace that lists
flights with empty seats and ar-
ranges charters, said that during
the holiday storms, his requests
doubled. Theres a lot of freedom
to corporate jets, but you pay for
that freedom, he said.
How much? A small jet with
four to six seats can cost $3,000
per hour, brokers say, putting a
2-hour flight from Florida to
New York at around $7,500. Air-
port fees and charges to reposi-
tion aircraft can raise that consid-
erably. Larger jets run $8,000 or
more per hour.
Magellan Jets, a Quincy, Mass.,
firm that handles regular custom-
ers who buy hours in bulk and
one-time on-demand charters,
says a midsize Hawker 400XP
with seating for up to eight costs
about $12,000 for a trip from
West Palm Beach, Fla., to Teter-
boro, N.J., for its members, and
$17,000 for a nonmember on a
one-time, one-way charter.
Private jets have lots of advan-
tages over airlines for getting in
the air before and after storms.
There are thousands of small air-
ports available to them. While big
airports often have more equip-
ment to keep runways open,
schedules can often get discom-
bobulated by a lack of gates, a
lack of security screeners, baggage
handlers or gate agents, or simply
the need to thin out airline sched-
ules engineered for perfect flying
conditions. That rarely impacts
secondary airports, allowing pri-
vate jets to fly when many com-
mercial flights are grounded.
And theres the bonus of not
having to stand in line for Trans-
portation Security Administration
clearance, either.
For three couples eager to get
home, sharing a plane and paying
$4,000 or $5,000 each may be
more attractive than being stuck
in a hotel away from family or
work for most of a week.
Ms. Grazioso was grounded
when JetBlue had a shortage of pi-
lots after longer rest periods were
required starting Jan. 1. She tried
to find a way to fly to Dallas and
then connect to New Jersey, or
drive to Jacksonville, Fla., and get
a flight home from there. No luck.
They looked into Amtrak
maybe flying to Washington, D.C.,
and catching a train from there.
But there were no airline seats to
Washington available. She had the
American Express platinum mem-
bers desk working on it, and her
own travel agent, who she says
usually works miracles. There
was nothing. We checked every
airline, she said.
So she began looking into pri-
vate jets. One charter company
quoted her a price of $22,000
too much, she decided. Her hus-
band called Magellan and an agent
said a clientthree people and
three dogswere flying from
West Palm Beach to White Plains,
N.Y., with some empty seats. The
client told Magellan they didnt
mind sharing and a match was
made.
We had mutual friends, it
turned out, Ms. Grazioso said. A
rented car was waiting plane-side
in White Plains and the drive
home to New Jersey took about
90 minutes.
Magellan said it flew about 30
to 40 extra flights on Jan. 5 and 6
with people stranded by the ice
storm, and had more people wait-
ing. It got to the point we were
linking clients up with each
other, said Anthony Tivnan, Ma-
gellans president. In situations
like that, the company charters to
one client for one price and lets
the passengers decide how to split
the cost.
The high season for private jets
runs from Thanksgiving through
the end of March. No week is as
busy as Super Bowl week. This
year thousands of small-jet flights
will descend on airports around
the New York region, booking spe-
cial takeoff and landing slots with
the Federal Aviation Administra-
tion because traffic is so heavy.
When the game ends, engines
start turning with a race to escape
quickly and avoid delays.
For the Super Bowl, Magellan
said a Denver-to-Teterboro flight
on a private aircraft starts at
about $25,000 round-trip and Se-
attle-to-Teterboro starts at around
$35,000 round-trip.
After slow years through the
recession, private-jet firms say
business is booming. The econ-
omy is better and airline service is
worse, said Bradley Stewart,
chief executive officer of XOJet, a
Brisbane, Calif.-based private avia-
tion firm.
Charter firms have gotten more
aggressive about posting empty
legs available to travelers at deep
discounts. Private jet charter firm
JetSuite, based in Irvine, Calif.,
lists its empty leg flights on Face-
book, for example, sometimes
with prices as low as $500 or
$1,000 for the whole airplane. A
four-seat Embraer Phenom 100
regularly costs $3,400 an hour for
members and $3,900 for nonmem-
bers, JetSuite said.
While empty-leg pricing can be
eye-catching, finding a trip where
and when you want to go can be
rare. You can set an alert on Char-
ter Matrix and get an email when
any flights that come close to a
particular route open up.
With any charter, two safety
measures are prudent: Make sure
your operator has strong safety
ratings from both Wyvern and Ar-
gus International Inc., two private
aviation safety agencies. Argus in-
cludes background checks on pi-
lots as well as rating operating
companies; Wyvern runs checks
on aircraft as well as crew train-
ing and experience.
With the New Years storm,
JetSuite flew customers out of the
Caribbean into Texas and Florida,
then on to New York once condi-
tions improved, Chief Executive
Alex Wilcox said.
XOJet positioned planes just
outside the areas expected to be
hard-hit by polar vortex storms
over the holidays, parking them in
places like Greensboro, N.C. They
were easily able to pick up pas-
sengers in Florida and get them to
New York as soon as weather con-
ditions improved.
XOJet will provide a standby
jet for good customers, Mr. Stew-
art said. The customers have air-
line tickets, but if flights get can-
celed and they have to be in Davos
or at a board meeting, a plane and
crew are waiting. If they make
their airline connection, great. If
not, we swing into action, he
said.
BY SCOTT MCCARTNEY
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s
e
t
)
THE
MIDDLE
SEAT
Hailing an
Air Taxi
Chartering a private jet is
more complicated than
buying an airline ticket.
n Check for safety
ratings.
You want an operator
with top-level certification
from both Wyvern and
Argus International.
n Ask a friend.
Someone you know with
a jet card can speed the
process up.
n Understand the
pricing. Is it fixed or
dependent on the trip
duration? If one-way, is
there a charge for flying
the plane empty to its
next stop? Airport fees?
Catering fee?
n Ask about sharing.
Some brokers will ask
clients with available
empty seats if theyd be
willing to take on extra
people to share costs.
n Buddy up.
See a group of well-to-do
people stuck in the same
airport line? Chartering as
a group spreads the high
cost out.
Stormafter storm, travelers have been left in the
lurch this winter. Long after the weather clears, the
impact on airlines and their passengers persists.
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 5
Tale of Torture in Activist Disappearance
KIEV, UkraineUkrainian protest
leader Dmytro Bulatov said he didnt
see much of the faces of the men
who kidnapped and beat him and cut
off part of his ear last month, be-
cause they kept a bag over his head
for most of his week in captivity.
But the questions they asked, he
said, were clear: How much did the
U.S. pay him to lead protests against
the Ukrainian government? What in-
structions did he receive?
The tale of brutalities told by
Mr. Bulatov from a hospital bed in
Kiev are part of a wider narrative
threatening to turn Ukraines inter-
nal struggles into a geopolitical
struggle between Washington and
Moscow.
Opponents of President Viktor
Yanukovychs move toward closer
relations with Moscow allege a
broad pattern of violence and in-
timidation by thugs and uniformed
police. Often their captors want to
know who is paying them to pro-
testthe obvious suspects being
the U.S. and Europe, which the
Kremlin and authorities here ac-
cuse of bankrolling the unrest.
The U.S. embassy in Kiev says it
has met with politicians and activ-
ists of all ideological kinds to moni-
tor the continuing crisis. In that re-
gard, the ambassador and other
officials did meet Mr. Bulatov at the
embassy in January, and posted pic-
tures of the meeting on the embassy
website, it said.
But the embassy denies providing
any funding to protest groups such
as Mr. Bulatovs that have sprung up
during the crisis.
The Ukrainian government says
its opponents are concocting stories
of brutality to galvanize support at
home and draw sympathy from the
West. Mr. Bulatov, an activist leader
who disappeared for a week and then
reappeared with an agonizing tale of
his absence, is the latest, they say.
On the sidelines of a security
conference in Munich, Germany,
over the weekend, Ukraines foreign
minister said the story of Mr. Bula-
tov, who has been investigated for
faking his kidnapping, was not ab-
solutely true.
Physically this man is in a good
condition, the only thing he has is a
scratch on one of his cheeks, Ukrai-
nian Foreign Minister Leonid Ko-
zhara told Al Jazeera. So, lets wait
for the investigation that will reveal
specific facts.
In an interview from his Kiev
hospital bed with The Wall Street
Journal, Mr. Bulatov said he was hit
over the head by several men who
abducted him on Jan. 22 and then
took him to an undisclosed location.
He said he was then beaten and wa-
terboarded by men who, at one
point, nailed his hands to a door,
slashed him in the face and cut off
part of his right ear. His facial
wound required 12 stitches.
Throughout the ordeal, he said,
his interrogators wanted to know
more about the inner workings of his
AutoMaidan activist group, which has
operated as a sort of rapid-reaction
force for the Ukraine protest move-
ment, rushing activists to points of
confrontation and clogging traffic in
city thoroughfares. According to Mr.
Bulatov, it operated with the help of
volunteers and funds he raised
through appeals on the Internet.
But after his abduction, he said
he was interrogated by captors who
were convinced his group was a U.S.
project. They asked why I talked
with the American ambassador, they
considered me an American spy,
said Mr. Bulatov, who before his kid-
napping had met, along with other
opposition figures, with the U.S. am-
bassador in Kiev. They asked me
where the money was that the
American ambassador gave me, who
gives me orders. They asked if I was
a foreign agent.
Mr. Bulatovs tale bears similari-
ties of ordeals told by other opposi-
tion activists in Ukraine who say they
were abducted and beaten by men in
plain clothes who interrogated them
about their financial support.
The day that Mr. Bulatov was ab-
ducted, the battered body of an-
other Ukrainian opposition activist
was found in a field after he had
been abducted from a hospital by a
group of men in plain clothes. A
man who was taken with him from
the same hospital said the two of
them were tortured and interro-
gated in adjacent rooms by men
who asked about who was financing
their opposition activities.
They were both dropped in the
countryside in separate locations,
and one was able to limp to a
nearby house to contact his wife.
The other, beaten more severely,
froze to death.
On Sunday, the U.S. embassy said
a fellow opposition leader had ar-
ranged for Mr. Bulatov to be flown to
Riga, Latvia, for medical treatment.
The abduction of activists from hos-
pitals has made life precarious for
Mr. Bulatov in Kiev.
Authorities have made threats to
arrest him for inciting disorder. A
group of activists had kept a round-
the-clock vigil at his hospital room
in Kiev, not allowing a group of po-
lice, also at the hospital, to come
near him. Police issued a statement
saying they were being prevented
from properly investigating Mr. Bu-
latovs disappearance.
The U.S. embassy in Kiev, alarmed
at Mr. Bulatovs disappearance,
posted pictures and a statement of
its concern last week. The following
day he was released. Mr. Bulatovs
captors put a bag over his head again
and drove him for an hour in a car to
the Ukraine countryside near a vil-
lage where they untied his hands and
left him by the road.
Mr. Bulatov said he had difficulty
seeing because his eyes were so
swollen from being beaten. At sev-
eral houses in the village, residents
shut their curtains to him. They
were scared of me because I looked
so bad, he said.
BY ALAN CULLISON
Ukrainian protest leader Dmytro Bulatov, here in a Kiev hospital room Saturday,
says kidnappers interrogated him over U.S. involvement in financing protests.
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EUROPE NEWS
EU, U.S. Plan Kiev Aid Package
came after U.S. Secretary of State
John Kerry met with Ukrainian op-
position leaders Saturday, as Rus-
sia and the West traded barbs over
the continuing crisis in Kiev.
The meeting took place on the
sidelines of an annual Munich Se-
curity Conference, dominated Sat-
urday by the Ukraine crisis. It was
among the highest-profile sit-
downs for the opposition leaders
since large-scale antigovernment
protests started in November after
Ukrainian President Viktor Yanuk-
ovych walked away from a sweep-
ing EU economic and political deal.
Mr. Kerry also met with acting
Ukraine Foreign Minister Leonid
Kozhara, expressing grave con-
cerns about human-rights viola-
tions by authorities.
Buoyed by weeks of protests
and Mr. Yanukovychs decision to
sack his government last week, the
opposition is pressing for early
presidential elections.
In an interview with The Wall
Street Journal, Baroness Ashton
distanced herself from that call, al-
though she said it was up to
Ukraines politicians to choose
election timings.
It seems to me that what ev-
erybody wants is a period of stabil-
itymoving toward elections that
will be done freely and fairly. In
that period of stability, the econ-
omy needs to be OK, and that
means everybody needs to think
aboutwhat kind of economic sup-
port we can give, she said on the
sidelines of the Munich Security
Conference.
She said there would be differ-
ent stages of possible support, the
first of which would deal with
short-term needs.
Continued from first page The EU and U.S. are developing
a plana Ukrainian Plan, I have
suggested they call itthat looks
at what do we need to do in differ-
ent parts of the economy right now
to make things better.
Baroness Ashton said the
amount of what should be a
homegrown assistance package
hasnt yet been decided. But, she
added, the figures wont be small
because there are deficits in the
budgets and other issues that
need to be addressed.
She said that it was for
Ukraines new government to iden-
tify in detail exactly what it needed
help with but that the eventual
package might not only be money.
It may be guarantees. It may
be the prospect of investment. It
may just simply be stability for the
currency and so on, she said.
U.S. diplomats have told the op-
position also that the U.S. and EU
are preparing a package of eco-
nomic support to help rescue
Ukraine from its economic woes,
but it hinges on a peaceful resolu-
tion of the crisis through the cre-
ation of a technical government.
The message to the opposi-
tionis that through dialogue,
youre starting to get the pieces
put in place for a peaceful political
solution that gives you the chance
to take Ukraine back to the IMF
and Europe, a senior U.S. official
said. Stick with it, and we will
keep pressuring the government.
Baroness Ashton, the EUs top
diplomat, has taken on a growing
role in Ukraine crisis since Novem-
ber, when Mr. Yanukovych walked
away from a sweeping EU trade
and political deal that was years in
the making.
The next month the Ukrainian
president sealed a $15 billion-loan
deal with the Kremlin.
Baroness Ashton made a two-
day visit to Kiev for long discus-
sions with Mr. Yanukovych in De-
cember and was in Ukraine again
earlier last week, pushing for dia-
logue and urging authorities to re-
frain from the use of force. She
met key opposition leaders again in
Munich this weekend.
The foreign-policy chief said
constitutional reform will be a crit-
ical element of the new govern-
ments tasksnot least to ensure
free-and-fair elections.
She said she saw no signs that
protesters, whom the government
has accused of being violent ex-
tremists, were about to stop pres-
suring the government. I see no
reason to think right now that peo-
ple are going to say tomorrow, OK,
well, we have done that. I think
they are going to stay, she said. I
think the reality of any form of vi-
olence and intimidation is that it
makes people more determined to
peacefully protest.
In the lead-up to a key Decem-
ber summit in Lithuania where
Ukraine was supposed to sign a
sweeping EU trade and political
deal, Kiev had pressed the EU to
give it billions of euros to help it
through its economic difficulties.
The rescue hinges on a
peaceful resolution of the
crisis through the
creation of a technical
government.
24 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
BOOKS
Elf-Help Tome
The fantasy-themed vistas of on-
line games such as World of Warcraft
are commonly thought of as provid-
ing nothing more than a kind of ther-
apeutic escapism: a species of elf-
help. But if you ask players about
what they actually do in role-playing
games, and why they do it, the pic-
ture is more complicated. People pre-
tend to be wizards on the Internet
for a sense of community. Indeed,
many welcome the fact that such
games are structured like boring
jobswith much grinding, repetitive
labor required to progressbecause
at least these virtual jobs are per-
fectly fair: Unlike at the office, effort
and achievement guarantee advance-
ment. Reports one satisfied cus-
tomer: I hate the level of frustrated
progress in the real world so I play
the game and level up instead.
These are some of the fascinating
findings reported by Nick Yees The
Proteus Paradox: How Online Games
and Virtual Worlds Change UsAnd
HowThey Dont. Mr. Yee, who works
as a research scientist for the video-
game company Ubisoft, has con-
ducted large-scale surveys of players
opinions and also analyzed, big
data-style, their recorded virtual ac-
tivity. (Game worlds, he notes wryly,
provide the perfect digital panopticon
of which government surveillance
programs can only dream.) The
author has even conducted laboratory
simulations with virtual reality, whose
surprising results supply the books
title, in honor of the shape-changing
sea-god of Greek myth. If you create a
virtual world and give certain people
attractive avatars, he discovered, they
will act more confidently. They will
also like another avatar more if their
own face has been imperceptibly
blended with the others. Similar
kinds of face-morphing and doppel-
gnger techniques, Mr. Yee warns,
could in the future be used by adver-
tisers to turn a virtual environment
into what he calls, with chilling po-
etry, a persuasion chamber.
Some cybertheorists have cele-
brated online role-playing games as
a realm in which prejudice and dem-
ocratic dysfunction can be overcome
by happy experimentation with gen-
der fluidity or social structures. Mr.
Yee shows, however, that racism and
sexism are as much a problem in on-
line games as elsewhere. Indeed,
players find themselves just as emo-
tionally burdened and stressed by
the demands of managing the inter-
personal spats and rivalries of an
online guild as they would be by
managing a group at workbut
without the financial compensation.
The happier consequence of the
fact that people bring themselves,
warts and all, into the virtual world
is that love can blossom there and
lead to successful offline relation-
ships. Our characters met in North
Freeport in Everquest. His dark elf
cleric was on top of the roofs, one
young woman remembers fondly. If
a game is like a boring job, Mr. Yee
observes, then the people who meet
in one have worked together through
adversity, often over months or
years, before getting together in per-
son. In this way their relationship is
more like an office romance than a
dubiously scientific online match.
Refreshingly, while many writers
in the field are determined to be re-
lentlessly positive, Mr. Yee is critical
of the way games fail to improve on
reality. With their tens of millions of
players, they are the grandest social
experiments that have ever existed,
but their promises, he concludes, are
being subverted by, among other
things, risk-averse design companies
content to replicate what has been
commercially successful. Such loving
disappointment makes him a truer
supporter of the medium than its
Panglossian cheerleaders.
The book ends on a melancholy
note, arguing that since the boom
days of World of Warcraft and Sec-
ond Life, there has been a strange,
stagnant lull in terms of virtual
worlds. Oddly, not mentioned is the
mightily popular Minecraft, which
can be experienced as a more or less
traditional role-playing adventure
game ora fact that has already at-
tracted the participation of educa-
tors and even U.N. agenciesused as
a space for extraordinary efforts in
collaborative architecture. People
might be getting bored of being a
Tolkienesque dwarf or space cap-
tain, but that doesnt mean there are
no new roles for them to play.
Mr. Poole is the author of Who
Touched Base in My Thought
Shower?
Learning to Cook as the Romans Do
Jeannie Marshalls memoir about
cooking food and raising a son in It-
aly seems like the sort of work sure
to recount another set piece of al
fresco tables and graceful aperitifs,
while the bambini eat olives and
grapes and someones grandmother
teaches the author how to make
pastabut it doesnt, or at least
thats not the whole story. The Lost
Art of Feeding Kids may have a title
designed to squeeze the last drop of
juice from the Fast Food Nation
orange, but Ms. Marshall has pro-
duced a surprise of a book.
Predictably, we meet Ms. Mar-
shall and her son, Nico, at an out-
door food market, where, predict-
ably, hes eating sections of blood
orange given to him by a vendor
while she imagines kale for lunch,
prepared the way Carlo, the farmer
who grows many of the vegetables
we eat, told me to do it one of the
first times I bought somecooked in
water until tender, then sauted for
a few minutes in a pan with some ol-
ive oil, sliced garlic, and a little salt,
and finished off with a squeeze of
lemon. (Carlo isnt winning any
points for originality.) But the au-
thor pulls the rug out from under us
when she reveals that, even in Italy,
real food is no longer most chil-
drens everyday fare.
In a mothers group in Italy, Ms.
Marshall sees the contrast between
the English-speaking mothers and
the Italians. When Roccos mother
took the lid off the container of his
lunch, the room filled with a heady
smell of savory vegetable and herb
soup. He was excited to see it and
ate it with gusto.
The American and English ba-
bies, all of whom were being intro-
duced to single foods because of our
anxiety about food allergies,
frowned and fussed while their
moms tried to push bits of pear into
their mouths. One mother told me
she thought our method was
strange, that it was as though we
were teaching our babies not to like
food. Italian babies eat a meal
called a pappa, which consists of
brodo (a vegetable broth) with bits
of whatever is for dinner whirred
into it. Its drizzled with olive oil
and finished with parmesan cheese.
It sounds phenomenal, especially
when compared with jars of mauve
and puce pure.
When Nico starts school, the idyll
ends. Ms. Marshall realized that he
and his Italian peers were being
waved off the traditional path of
healthy food and directed toward a
new food culture, one far too similar
to the one [she] thought [shed] left
behind in North America.
Ms. Marshall finds a dishearten-
ing innocence at work in Europe,
which calls to her mind the wanton
soda-slurping of her own youth in
the 1970s. I saw a woman at the
beach pouring Coca-Cola into her
babys bottlethe baby wasnt even
walking yet. The birthday parties
they attend in Italy are soft-drink-
and-potato-chip affairs. In a delight-
ful moment of turnaround irony:
The only time we dont see these
things is at birthday parties for
American children. In fact, at one
late-spring birthday party, the
American parents who were hosting
it had laid out a bowl of fresh fava
beans in their pods with some
Pecorino Romano, fresh fruit, their
own homemade bread, cheese, ol-
ives, water, and juice.
Anyone sitting down to write a
book about food and health must
consider how to limit the topic. Will
the book deal with obesity and star-
vation? How to roast pork? Indus-
trial farming? Diabetes? Ms. Mar-
shall tries to do it all, moving from
personal narrative out into the
broader world. Her theme is that by
removing children everywhere from
access to their traditional food-
waysthe pappa of the worldwe
are making a mistake. We are not
teaching them how to eat.
When Inuit children in Canada
were assimilated into residential
schools, she notes, they were given
civilized and European food to eat,
mostly refined food and some meat,
very little of it fresh. Distanced
from their traditions, the children
forgot them. Before 1940, the Inuit
in Canadas far northern territories
didnt suffer from diabetes. Now its
a disease borne by 70 percent of the
community.
As the author grapples with this
big message, her book sometimes
loses momentum. She stops to talk
about Alice Waters: If theres anyone
left in the English-speaking world
who doesnt know that Alice Waters
wants children to eat whole foods,
its a cinch they arent reading this.
But Ms. Marshall has done enough
legwork that she discovers fresher
pastures. In 2009, Ms. Marshall at-
tended the World Summit on Food
Security in Rome, where talk con-
cerned how the world will feed ev-
eryone as the population climbs to-
ward nine billion. One delegate
pointed out that the estimates of how
much food needed to be produced as-
sumed that everyone would be eating
processed and fast foods. Theyre
eating like Americans, in other
wordsbut clich Americans, not the
actual ones Ms. Marshall knows serv-
ing homemade bread and fava beans.
Perhaps baking bread doesnt co-
incide with the harried reality of
cooking for a family. Although com-
mercials will tell you that the conve-
nience of ripping open a box of mac
and cheese for the young one is be-
yond compare, the process takes
about the same number of steps as
boiling some kale, squeezing a
lemon and pan-frying a chop. But
will your children eat it? No, not if
theyve never been introduced to it.
They would if theyd been raised
eating pappa, if the flavors were fa-
miliar to them. How to make that
happen is a much more difficult
question than what to buy at the
farmers market.
Mr. Watmans next book is
Harvest: Field Notes From a Far-
Flung Pursuit of Real Food.
BY STEVEN POOLE
BY MAX WATMAN
The Proteus Paradox
By Nick Yee
Yale, 264 pages, 20
The Lost Art of Feeding Kids
By Jeannie Marshall
Beacon Press, 228 pages, $25.95
C
o
r
b
i
s
I
m
a
g
e
s
W.O.W. An attendee at 2011s Blizzcon game convention, dressed as a night elf druid.
C
o
r
b
i
s
I
m
a
g
e
s
For good or ill, the
personas players craft
in games can influence
how they think of
themselves offline as well.
Even Italian kids no longer
eat the old way. Only the
fussy expats serve healthy
food at birthday parties.
4 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
market lost interest: Persistent
deficits even came to be seen as a
badge of honor, proof that the
Thatcher governments supply-
side reforms had made the U.K. a
magnet for foreign funding.
In the boom years before the
global financial crisis, the current-
account deficit remained wide,
exceeding 3% of GDP in 2006.
With hindsight, this should have
rung alarm bells that the economy
had become seriously unbalanced:
Foreign money was being sucked
into the U.K. to fund
unsustainable public- and private-
sector consumption rather than
productive investment.
After the crash, it was widely
assumed the U.K. economy would
be forced to rebalance: Any
recovery would have to be led by
exports and business investment.
Indeed, the governments 2010
budget forecast a current-account
surplus of 0.9% in 2013, driven by
a surge in exports.
So what should one make of
the latest deterioration in the
U.K.s balance of payments? The
obvious conclusion is that the U.K.
has failed to rebalance.
Other data appear to confirm
that this is the case. Although the
U.K. grew by 0.7% in the fourth
quarter of 2013, making it one of
the fastest growing major
economies, this growth has so far
been largely driven by consumer
spending, fueled by soaring house
prices and funded by a sharp fall
in the savings rate.
Although surveys show that
business confidence is high,
investment spending actually fell
5% in the year to the end of
September 2013 and the U.K.s
export performance has been
woeful, despite a 20% sterling
devaluation early in the crisis. In
contrast, other European
economies such as Germany, Spain
and Portugal have seen strong
export growth. Indeed, the
economy may be even more
unbalanced than feared, judging
by the most recent data.
Back in August, the Bank of
Englands Monetary Policy
Committee said it wouldnt raise
interest rates until unemployment
fell below 7%, something it said it
didnt expect to happen until at
least early 2016. It made this
forecast on the assumption that
growth would be driven by
improving productivity. In fact,
the unemployment rate fell to 7.1%
in December and the 7% threshold
may have been reached in
January, more than two years
earlier than the MPC thought.
That suggests that U.K.
productivity growth has actually
weakened, which may also help
explain why real wage growth has
been so dire; official statistics last
week showed the U.K. has endured
the longest and largest fall in 60
years. Without productivity
growth, the recovery risks
running out of steam as either
debt burdens get too high or the
BOE is forced to raise interest
rates to head off inflationary
pressures as the economy starts
to run out of spare capacity.
Sure, this pessimistic scenario
is neither the BOEs nor the
markets base case. Most
forecasters are still betting that
business investment will pick up,
leading to improved productivity
growth so that wages can start
rising and a more balanced
recovery take hold.
BOE Gov. Mark Carney argued
last month that the combination
of a bigger-than-expected drop in
unemployment and the fall in
inflation back to its 2% target
suggests that the nonaccelerating
inflation rate of unemployment
must be lower than the BOE
assumed last August, suggesting
current growth is sustainable and
justifying continued low interest
rates.
Similarly Ben Broadbent, a
member of the MPC, noted in a
recent speech that business
investment always tends to lag
consumer spending in U.K.
recoveries. Some economists also
question whether official data are
accurately measuring GDP and the
current account.
Even so, the U.K.s large
current-account deficit cant be
easily ignored. Economic
research shows that large deficits
tend to adjust eventually, through
some combination of slower
growth and currency
depreciation, notes Mr. Wells.
Adjustments tend to be more
disruptive if the deficit was
fuelled by consumption rather
than investment and if they are
accompanied by large fiscal
deficits.
Unfortunately the U.K. ticks
both those boxes.
That doesnt mean the U.K. is
heading for an immediate
correction. For now, the market
appears willing to give the U.K.
the benefit of the doubt,
reflecting its safe-haven status
and the reassuring presence of a
government committed to tackling
at least one of the deficits. But
amid the excitement of an
unexpectedly strong recovery, the
current-account deficit is a
warning that the U.K.s economic
model may yet require further
adjustment.
What do Ukraine, Turkey,
South Africa, Colombia and the
U.K. have in common?
The answer is they had the five
largest current-account deficits in
the world in 2013, according to
HSBC forecasts. The first three of
those countries, it
will be noted, are
in the eye of the
current emerging-
market storm.
This has centered
on economies with
double deficits
current-account and fiscal.
Their position is similar to that
of precrisis Southern Europe,
which was forced to make painful
adjustments to what are now
perceived to be unsustainable
economic models under threat of
a loss of foreign funding. South
Africa and Turkey were both
forced to raise rates last week.
Yet there is one country that
has escaped market punishment
despite running double deficits. In
the third quarter, the U.K.
recorded a current-account deficit
of 5.1% of gross domestic product,
close to a peacetime record, notes
Simon Wells, chief U.K. economist
of HSBC. For 2013 as a whole, Mr.
Wells forecasts a U.K. current-
account deficit of 3.7% and a
budget deficit of 4.7% of GDP.
The U.K. is one of only eight
countries to see its current-
account deficit widen since 2008
and its deficit has widened the
most. Put bluntly, says Mr.
Wells, the U.K.s current-account
deficit is now considerably wider
than it was in the mid-2000s
when global imbalances were the
top concern of many economists.
Should investors be worried?
Of course, the U.K. has lived with
wide current-account deficits for
decades. From the 1940s to 1970s,
when the country was operating a
fixed exchange-rate system, the
U.K. was forced into frequent
devaluations and slamming on the
policy brakes to keep the balance
of payments in check, notes Mr.
Wells.
From the 1980s onwards, with
the exchange rate floating and
capital controls abolished, the
EUROPE FILE | By Simon Nixon
EUROPE NEWS
Hungarian Opposition Protests Russia Nuclear Plan
BUDAPESTHungarys left-lean-
ing opposition rallied Sunday
against the governments surprise
decision to have Russia expand a
Hungarian nuclear power plant, the
first shots fired in its campaign to
keep Prime Minister Viktor Orban
from winning another term in April.
The nuclear deal signed in Janu-
ary by Russias President Vladimir
Putin and Mr. Orban is set to add
two 1,000 megawatt reactors to the
countrys existing 2,000 MW state-
owned nuclear power plant MVM
Paksi Atomeromu, with Russia pro-
viding a loan for Hungary to cover
the construction costs.
French, Korean and Japanese
companies had been interested in
the project before Hungary awarded
the deal to Russias Rosatom.
Running counter the wider trend
in Central Europe where most coun-
tries seek greater energy indepen-
dence from Russia, Hungary said af-
ter signing the deal that it is
enjoying an improving business re-
lationship with its former commu-
nist-era overlord.
The deal, which parliamentary
committees are set to discuss on
Monday, has faced criticism from
nongovernmental organizations, op-
position groupings and environmen-
talists, who said the cabinet had
failed to consult them before ac-
cepting the Russian offer.
Im not against the Rus-
siansand I have no hard feelings
against nuclear power, Ferenc
Gyurcsany, a former Socialist prime
minister, said Sunday
But he said he wants a conversa-
tion about an agreement that he
said would affect Hungary for the
next half a century.
When in power, Mr. Gyurcsany
favored cooperation with Russia and
signed up for the country to be part
of the South Stream gas pipeline
project through the Black Sea that
bypasses Russias traditional transit
countries, mostly Ukraine.
Prime Minister Orban, despite
repeatedly criticizing his socialist
predecessors, has said the EU
should consider mending fences
with Russia.
We must rebuild our relation-
ship with Russia on a pragmatic ba-
sis to gain access to commodities
and energy resources and to incor-
porate them fully into the European
economy, Mr. Orban said on Friday.
Slightly more than half of Hun-
garys population considers it neces-
sary to expand the nuclear plant, ac-
cording to a poll by Nezopont
Intezet published Saturday.
Speakers at the oppositions pro-
test on Sunday said they werent
against the expansion, but opposed
the way the government prepared
and signed the deal.
Polls still favor Mr. Orbans rul-
ing Fidesz party, which last month
was shown being supported by 29%
of voters, against 21%, garnered by
the left-leaning opposition parties.
BY VERONIKA GULYAS
A protester with a modified nuclear sign makes her views known on Saturday.
G
e
t
t
y
I
m
a
g
e
s
How many U.S. dollars one
pound buys
Current-account balance forecasts
as a percentage of GDP
U.K. current-account balance
as a percentage of GDP
The Wall Street Journal
$2.2
1.2
1.4
1.6
1.8
2.0
13 12 11 10 09 08 07
Paying for the Decit
While the U.K. has run current-account decits for decades ...it likely had one of the largest in the world in 2013, a potentially troubling trend
for sterling, as large decits over time can in theory depress a currency.
Sources: U.K. Ofce for National Statistics (U.K. current-account balance); International Monetary Fund (forecasts for current-account balance); WSJ Market Data Group (pound in dollars)
4
6
4
2
0
2
%
1950 60 70 80 90 2000 10
0
10
8
6
4
2
%
13 14 15
Colombia
South
Africa
Turkey
Ukraine
U.K.
U.S.
Recovery? U.K. Still Lacks Balance
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 25
BOOKS
Bobbing Boffins
At sea, four people are squashed
into a 6-foot-square cabin with a 5-
foot ceiling. They are surrounded by
plants, shells, dead birds, animals,
fish and insects waiting to be cata-
loged, sketched or painted, and
hopefully preserved. The smell is
sometimes overpowering. A botanist
and an artist share the cabin with
two naval officers. None can move
about or stand up straight. On deck,
there are more plants in pots, and
sometimes animals in cages, all get-
ting in the way of the crew who are
sailing the ship, usually in uncharted
waters, thousands of miles from
home on the other side of the globe.
The voyage lasts several years,
and for most of it the two groups
seamen versus naturalistsare ir-
reconcilable; plants disappear over-
board, animals die mysteriously,
glass containers are accidentally
smashed, and even mutiny is in the
air. Character faults on either side
are magnified, egos are bruised, and
its sheer luck if the ship and its pas-
sengers get home safely.
This is the composite picture
that emerges from historian Glyn
Williamss latest dive into the Pacific
Ocean. With Naturalists at Sea,
this chronicler of European voyages
of exploration has turned his tele-
scope to the scientific travelers, or
experimental gentlemen, as they
were known in Georgian England,
who accompanied the great 18th-
and 19th-century voyages that
mapped the Pacific. The men of sci-
ence came from across Europe: Eng-
land, Wales, Scotland, Sweden, Den-
mark, Prussia, the German statelets,
France, Italy, Spain and Russia.
The story begins in 1651 with the
birth of Englishman William Damp-
ier. He was an adventurer, a bucca-
neer, maritime gypsy, explorer and
successful author. He served, mostly
on pirate ships, around the world,
from the Caribbean to the waters
around Timor and Australias barren
west coast.
Dampier was an acute observer.
His New Voyage Round the World
(1697) was an account of the peoples
Dampier met, the landscapes he saw,
the vegetation, animals, fish and
birds at each landfall. For modern
readers his most striking observa-
tion may be his discovery of mari-
juana in 1688 on the Indonesian is-
land of Sumatra. His declaration
that he could describe the effect of
the narcotic but had never tried it
set a precedent for those who have
smoked but never inhaled. It is re-
ported of this plant, he wrote, that
if it is infused in any liquor it will
stupefy the brains of any person
that drinks thereof; but it operates
diversely, according to the constitu-
tion of the person. Some it keeps
sleepy, some merry, putting them
into a laughing fit, and others it
makes mad.
New Voyage was an important
eye into the unknown for explorers
and surveyors like James Cook and
Matthew Flinders, and botanists
such as Joseph Banks, Daniel Solan-
der and Johann Forster, who fol-
lowed him in the 18th century and,
in Flinderss case, the early 19th cen-
tury, when he circumnavigated Aus-
tralia. In 1770, Dampiers description
of Australias aborigines helped
Cook and Banks establish that they
had reached the unexplored east
coast of Australia after having found
and mapped New Zealand.
A second volume of New Voy-
age that listed tides, currents,
winds, storms and seasons was a pi-
oneering work that Mr. Williams de-
scribes as a classic of the pre-scien-
tific era. Well into the 20th century,
he says, it was being used by Brit-
ains Royal Navy in its standard Ad-
miralty Sailing Directions.
The first voyage involving pro-
fessional scientists was made by the
Russians, sponsored by their mod-
ernizing czar Peter the Great, who
was impressed with the activities of
Britains and Frances scientific soci-
eties. Shortly before Peter died in
1725 he appointed the Danish-born
Vitus Bering to lead an expedition to
determine the extent of the Asian
continent. Sailing north from the
Kamchatka Peninsula in Russias Far
East, Bering reached the strait divid-
ing Asia and America that now bears
his name. But he did not sight the
Alaskan coast. A second voyage in
1740 set sail to observe whatever
lands and peoples they came across
and to investigate the prospects for
trade. It reached America but ended
in disaster, shipwreck and the death
of Bering.
The British, French and Spanish
expeditions that came afterward fol-
lowed the same pattern. They were
voyages of scientific observation
and documentation as well as geo-
graphic discovery. And until the
round-the-world voyage of Darwins
Beagle in the 1830s, the dominant
theme of each journey seems to
have been the conflict of interest be-
tween the scientists on board and
the ships captain and crew. This
was clearly the case in the French
voyages at the time of the Revolu-
tion and into the Napoleonic era. Of-
ficers were generally from the aris-
tocracy. The scientists and
naturalists were largely republicans,
and the crews came from Brest, a
radical Jacobin stronghold. It was a
mixture primed for chaos and dis-
trust, and accounts of these battles
are a humorous entertainment in an
otherwise scholarly book.
When Charles Darwin joined the
Beagle and its supportive captain,
Robert Fitzroy, in 1831, the descrip-
tive sciencesbased on collecting,
drawing and measuring species dur-
ing short bursts ashorewere being
challenged by a new generation of
naturalists led by Alexander von
Humboldt, the Prussian geographer.
He complained that the 18th-century
expeditions never went beyond the
coast and had done little to reveal
the history of the earth.
Unlike his predecessors who ar-
gued and failed to win more time
ashore, Darwin, an admirer of Hum-
boldt, made long journeys into the
South American interior. He was on
land for three-fifths of his five-year
voyage around the world.
For Darwin, the Beagle voyage
was the most important in his life.
For readers of this book it is the fi-
nal chapter in an extraordinary and
entertaining catalog of maritime and
scientific endeavor.
Mr. Fathers is co-author, with
Andrew Higgins, of Tiananmen:
The Rape of Peking.
Mind Your Manners
How to Be a Brit
By George Mikes (1984)
George Mikes, a Hungarian jour-
nalist, was sent to London in 1938 to
report for the Budapest newspaper
Reggel. Expecting to stay for a few
weeks, he never left. Though he be-
came a British citizen, Mikes took
great pleasure in reporting the pecu-
liarities of his adopted home, and
How to Be a Brit brings together
three of his books on this subject.
Mikes is a master of the laconic yet
slippery put-down: The trouble with
tea is that originally it was quite a
good drink; An Englishman, even if
he is alone, forms an orderly queue
of one. Occasionally he is more acer-
bic: The English have no soul; they
have the understatement instead.
His most cherished pronouncement
is probably: Continental people have
sex life; the English have hot-water
bottles. Reflecting on this observa-
tion in the 1970s, he noted that the
English had lately made some prog-
ress and now possessed electric blan-
kets. I prefer his parodic take on the
sadly bygone British aversion to the
breathless superlatives of advertis-
ing: Try your luck on Bumpex fruit
juice. Most people detest it. You may
be an exception.
The Pursuit of Love
By Nancy Mitford (1945)
Is it acceptable for a picture of
your home to adorn your writing pa-
per? This is just the sort of question
that Emily Post-ish arbiters of eti-
quette like to contemplate. Nancy
Mitford provides no explicit answer
in this mercilessly funny novel, but
Uncle Matthew, an eccentric peer
based on her own father, has to be
shielded from discovering that the
playful, cultivated Lord Merlin prac-
tices this vice. In the world of Mit-
fords novels (of which The Pursuit
of Love is the best), no individuals
foibles escape ridicule, frivolity
trumps seriousness, sinners get the
better of saints, and the solution to
lifes imbroglios is always something
puerile. Her own manner is that of a
gifted child, likely at any moment to
puncture cozy domesticity with some
spiky insight. Her prose often has a
creamy fluency, but lurking within the
froth there is a sharp fin of cruelty.
Cecilia
By Fanny Burney (1782)
Fanny Burney is celebrated
mainly for her first novel, Evelina
and even that deserves to be better
known. She followed it in 1782 with
the far more ambitious Cecilia, an
attempt to depict the entire social
fabric of contemporary Britain. Bur-
ney skillfully evokes a greedy world
full of risk-takers and poseurs, rang-
ing from the frugal Mr. Briggs, whose
snuff-colored suit makes it hard to
see how dirty he is, to the cynical Mr.
Monckton, dismayed by the longevity
of his rich wife. At the heart of the
story is Cecilia Beverley, an heiress
who can keep her fortune only if her
husband agrees to take her surname.
Such details of nomenclature are par-
amount in a society obsessed with
the tangled relationship between
class, rank, money and identity. To-
ward the end of the novel a character
who is in effect Cecilias therapist ob-
serves: If to pride and prejudice you
owe your miseries, so wonderfully is
good and evil balanced, that to pride
and prejudice you will also owe their
termination. No prizes for guessing
which later author found inspiration
in Burneys long yet utterly absorb-
ing novel.
Cold Cream
By Ferdinand Mount (2008)
The first time I devoured Cold
Cream I could scarcely stop smiling,
and the same proved true on a sec-
ond reading. This apparently relaxed
yet finely crafted memoir narrates
the bumbling, genial progress of a
minor English aristocratfrom
vaguely bohemian beginnings,
through Eton and Oxford, to a career
in newspapers and a role as speech-
writer for Margaret Thatcher. Mount
mingles with the sort of people who
can say that anyone who takes a bus
after the age of thirty is a failure (a
remark often erroneously attributed
to Mrs. Thatcher) or that everyone
lives in Oakley Street once in their
lives (a reference to a tiny pocket of
Londons Chelsea where houses to-
day cost 5 million). Yet he is an out-
siderish sort of insider, expert in the
nuances of polite society and at the
same time amused by them. There
are passages in Cold Cream that
call to mind P.G. Wodehouse or Eve-
lyn Waugh, but Mount has his own
engaging and worldly-wise style.
Dont
By Oliver Bell Bunce (1883)
This curious volume, subtitled A
Manual of Mistakes and Impropri-
eties More or Less Prevalent in Con-
duct and Speech, is the one book on
my list that is directly concerned
with manners. I came across it while
researching a history of arguments
about English usage (The Language
Wars) and delighted in Bunces mix-
ture of tetchy pedantry and self-
awareness. Of the man himself I know
little: He was an American, a pub-
lisher and a journalist who also dab-
bled in writing playsone of them
performed specifically for the benefit
of the Shirt Sewers Union. Only
Dont, which appeared in 1883,
made much of an impression on the
world. Bunces character is
discernible on every page. Some of
the guidance is sensible, if perhaps
unnecessaryin a crowd, one
shouldnt carry a cane horizontally.
Some is vague: Dont be over-civil.
Some is hard to comply with: Dont
eat onions or garlic, unless you are
dining alone and intend to remain
alone some hours thereafter. And
some is just plain weird: Dont play
the concertina to excess. Bunces
mission to stamp out mistakes and
improprieties is, of course, a failure.
Telling people what not to do is a
surefire way of getting them to do it.
But Dont is one of those rare books
that charm the reader by accident.
Mr. Hitchings is an author, most
recently of Sorry! The English and
Their Manners (Farrar, Straus
and Giroux, 2013).
BY MICHAEL FATHERS
BY HENRY HITCHINGS
Naturalists at Sea
By Glyn Williams
Yale, 336 pages, 25
MR. HITCHINGSS latest book is Sorry! The English and Their Manners.
G
e
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t
y
I
m
a
g
e
s
Experimental gentlemen
joined some of the great
18th- and 19th-century
voyages of exploration
to collect exotic flora
and fauna.
[ Five Best ]
THE WALL STREET JOURNAL. Monday, February 3, 2014 | 3
NEWS
Thai Protests Disrupt National Election
BANGKOKThailands national
elections were marred by violence
over the weekend as gunshots and
explosions rang out and protesters
blocked voting stations in the capi-
tal, leading to an inconclusive poll
that has done little to resolve a deep
political stalemate.
Voting was disrupted in 11% of
electoral districts, making it impos-
sible to tally final results, said Supa-
chai Somcharoen, chairman of the
countrys Election Commission.
The question for Thailand now is
whether Prime Minister Yingluck
Shinawatras government will be
able to hold by-elections in areas
where people were unable to vote,
or whether her opponents have
bought themselves enough to time
to force her from office through po-
tential legal challenges.
Clashes between political rivals
marred the voting in parts of Bang-
kok and in southern Thailand, where
opposition to Ms. Yingluck runs
deep and antigovernment protesters
vowed to prevent the ballot from
going ahead.
The standoff turned violent on
the eve of the vote when a gunbattle
between rival factions erupted on
the streets of the capital, injuring
seven people.
More police and army troops
were deployed to help the election
go smoothly. Scores of security per-
sonnel were stationed in Ms. Ying-
lucks neighborhood in northern
Bangkok, where she cast her vote.
I want to urge people to come
out to vote to protect democracy,
she told reporters. Later, she said
that she was relieved there was no
further violence.
Tensions ran high in some parts
of Bangkok, though there was no re-
peat of the previous days gunbattle
that set the city on edge.
Demonstrators blockaded a num-
ber of polling centers and prevented
the distribution of ballot sheets, in-
cluding in the Din Daeng neighbor-
hood, where clashes between pro-
testers and police in December
resulted in two deaths.
In the morning, a group of resi-
dents marched toward the protest-
ers demanding their right to vote,
but were repelled by activists, some
of whom threw water bottles and
other objects.
I want to vote. I want to exer-
cise the rights that belong to all
Thai people, said 63-year-old
Narong Meephon. A half-baked de-
mocracy is still better than nothing
at all.
Sundays elections were among
the most contentious this pivotal
Southeast Asian country has seen.
For weeks, demonstrators led by
former deputy Prime Minister
Suthep Thaugsuban had campaigned
to stop the vote.
They want Ms. Yingluck, 46, to
step down and allow an unelected
interim government to take over
and push through reforms to check
the influence of populist leaders, es-
pecially the man many people be-
lieve controls power in Thailand,
Ms. Yinglucks elder brother Thaksin
Shinawatra, who was ousted in a
military coup in 2006.
The opposition Democrat Party
boycotted the vote and joined the
protesters in an effort to reduce
voter turnout and undermine the le-
gitimacy of the poll, which has also
illustrated deep geographical divi-
sions in the country.
In central Bangkok thousands of
people turned out to celebrate what
they viewed as the failure of the
elections and another success in
their campaign to force Ms. Ying-
luck from power. Many danced,
clapped and blew whistles as pop
groups blasted out hits such as the
theme from the Hawaii Five-O
television show.
But while the election was dis-
rupted, it isnt over yet. Pongthep
Thepkanchana, a minister in Ms.
Yinglucks office, said he had asked
the countrys independent Election
Commission to set a new date for
polls in areas where residents were
unable to vote Sunday.
Somchai Pagapasvivat, an inde-
pendent commentator and scholar,
said the government would push
hard to complete voting until a new
parliament can be formed; Thai laws
require 95% of seats to be filled
while at the moment the election
can fill 94% at most.
Elections are the only means to
give Ms. Yingluck legitimacy, Mr.
Somchai said, adding that also
means that antigovernment protest-
ers would likely try to continue
blocking tactics. The deteriorating
economy and the public will put
pressure on the government to con-
sider some kind of reform or com-
promise.
Meanwhile, legal challenges to
Ms. Yinglucks political survival are
piling up. Thailands anticorruption
agency is fast-tracking an impeach-
ment case against her for allegedly
ignoring massive losses to the state
relating to a multibillion-dollar rice
subsidy. More than 300 members of
her Pheu Thai Party also face im-
peachment trials for allegedly vio-
lating parliamentary rules when
pushing for an abortive amnesty bill
that would have enabled Mr. Thak-
sin to return to Thailand after flee-
ing the country in 2008 to escape a
corruption conviction he says was
politically motivated.
Wilawan Watcharasakwet,
Warangkana Chomchuen and
Nopparat Chaichalearmmongkol
contributed to this article.
BY JAMES HOOKWAY
Thai Prime Minister Yingluck Shinawatra prepares to cast her ballot at a polling station in Bangkok on Sunday,
A
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s
Dating in Korea Sometimes Transcends the Divide
SEOULNorth Korean women
often risk their lives to defect to the
South, crossing the heavily guarded
Chinese border on foot before be-
ginning a lengthy resettlement pro-
cess. Then comes the loneliness.
When Na Soo-yeon arrived in
Seoul in 2008 after fleeing North
Korea, she found herself alone in an
unfamiliar society where she knew
no one. To ease her solitude, she
sought a husband from South Korea
who could provide companionship
and help her adjust to life in the
South.
I just wanted a good guy who
was financially stable and could
guide me through life in South Ko-
rea. Everything is so different here,
said Ms. Na, 48 years old.
Like many North Korean women
who have defected to South Korea,
she turned to a marriage agency.
Pairing couples for marriage is a
sizable business in South Korea, and
several companies focus exclusively
on matching North Korean women
with South Korean men.
Demand for these services is
born of some unique demographics:
a majority of the more than 26,000
North Korean refugees who have
settled in South Korea are women,
while large numbers of South Ko-
rean men who live in rural areas
and work blue-collar jobs fail to find
South Korean wives.
The flow of North Korean refu-
gees has fallen sharply in the past
two years following a border crack-
down by dictator Kim Jong Un, data
from South Koreas Unification Min-
istry show. New arrivals of North
Koreans into South Korea totaled
1,516 last year, less than half as
many as in 2011.
Women from North Korea still
account for around three of every
four defectors arriving in the South.
The skew reflects the fact that it is
easier for women to go unnoticed
for days in North Korea, where most
men must report regularly at their
workplace.
The company that paired Ms. Na
with her husband is run by Hong Se-
ung-woo, who says one of his com-
panys goals is to help North Korean
women settle happily in the South.
For the North Koreans who
come here, their main goal is to
make South Korea their home. To do
that, they need to build a network
that can support them, says Mr.
Hong, who himself married a
woman from North Korea. Mr. Hong
has operated his company, Namnam
Buknyeo, since 2006 and says the
firm has orchestrated 450 marriages
in that time.
Women can register for Namnam
Buknyeos services free, while men
have to pay a fee of 3 million won
(about $2,800) for introductory
meetings with a maximum of five
women over the course of one year.
The company screens all of its male
clients, and men who are unem-
ployed, already married or disabled
arent eligible.
Some South Korean men seek
North Korean wives instead of those
from elsewhere in Asia because of
shared language and customs. Ko-
rean conventional wisdom also has
it that the most handsome Korean
men hail from the South and the
prettiest women from the North.
The name Namnam Buknyeo is an
abbreviation of the Korean expres-
sion for Southern man, northern
woman.
Mr. Hong met his wife, Ju Jeong-
ok, when she signed up for his com-
panys services shortly after settling
in South Korea in 2012. He says that
on their first date, he knew right
away that he wanted to marry her.
I was considering several women at
the time, but she was really pretty,
and seemed so kind and genuine
that I was sure I would ask her to
marry me, said Mr. Hong.
Lim Soon-hee, a researcher at
the Korea Institute for National Uni-
fication, says that a lack of familiar-
ity between South Korean men and
North Korean women can lead to
misunderstandings that cause prob-
lems during marriage.
North Korean women see South
Korean men on TV dramas and
imagine that their husbands will be
romantic and take care of them,
while South Korean men think that
North Korean women are obedient.
Once these fantasies are broken,
both parties can end up disap-
pointed and hurt, says Ms. Lim.
Na Hyang-sook, 36, who arrived
in South Korea in 2008 and found
her husband through an agency in
March, said seeking a partner
through a company was helpful as it
clarified both parties intentions at
the outset.
I think going through the
agency was better than just meeting
someone randomly, because it
meant we could begin with similar
expectations, said Na Hyang-sook.
Critics say the companies exploit
the North Korean women in the
name of profit. Lee Young-seok, di-
rector of external affairs for Citi-
zens Alliance for North Korean Hu-
man Rights, says marriage agencies
emphasize the government-allotted
benefits that North Koreans are
privy to when pitching their compa-
nies services to South Korean men.
Mr. Hong of Namnam Buknyeo
denies ever presenting the benefits
received by North Korean women as
incentives for his South Korean cli-
ents. Those companies market
North Korean women like they were
commercial goods. It is dehumaniz-
ing. They tell men that the North
Korean women are a good option
because they already have a house
and because their families are in
North Korea so they wont be bur-
dened by having to take care of
them, said Mr. Lee.
When North Korean refugees ar-
rive in South Korea, after a lengthy
interrogation and resettlement pro-
cess, they are provided by the South
Korean government with several
thousand dollars to start their lives,
along with money for housing and
vocational training.
BY STEVEN BOROWIEC
Hong Seung-woo met his wife, Ju Jeong-ok, through his own agency.
M
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26 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
HEARD ON
THE FIELD
SPORT
Soccers Window of Discontent
Liverpool and Juventus Fall Victim to Europes Winter Transfer Maelstrom
On Friday evening, Ian Ayre
found himself in his own personal
episode of 24minus the terror-
ists and torture but with the same
drama, uncertainty and ticking
clock.
Ayre, the managing director of
Liverpool, was at the Grand Hotel
Ukraine in Dnipropetrovsk trying to
sign Yevgen Konoplyanka, the local
soccer clubs star attacking mid-
fielder.
He had agreed to personal terms
with the player and his father, who
also acts as his agent. Now it was a
question of sealing the transfer con-
tract with his club, FC Dnipro and,
crucially, getting it done before the
January transfer windowone of
two periods of the year when Eu-
ropes clubs are free to buy and sell
playersslammed shut at 1 a.m. lo-
cal time (11 p.m. back in England).
If no deal was completed by that
witching hour, Konoplyanka would
remain at Dnipro and Ayre would
make the long trip back to Liverpool
empty-handed.
To help expedite matters, Ayre
had flown Liverpools club doctor,
Zafer Iqbal, to Dnipropetrovsk so
that he could conduct a medical ex-
amination of the player ahead of the
deadline.
What happened next depends on
who you choose to believe.
According to reports in Liver-
pool, FC Dnipros billionaire owner
Ihor Kolomoyskyi simply refused to
sign the paperwork. An equally
plausible explanation, offered in
Ukraine, is that Konoplyankas price
ballooned at the last minute, some-
thing that would not surprise an
Economics 101 class.
Having already invested time, ef-
fort and money to sign the player
and with only hours to go, it
wouldnt be a surprise if he sud-
denly became more expensive than
Liverpool thought.
Either way, the transfer wasnt
concluded. Ayre and Iqbal flew
home without their man.
Konoplyankas moveat a re-
ported $25 millionwould not have
been the biggest of the transfer win-
dow, but it epitomizes the risks and
pitfalls of what can be a frenzied
period at the end of the winter mar-
ket.
In Liverpools case, there was in-
creased pressure to act as the club
had missed out on another target,
Egyptian winger Mohammed Salah,
when rival Chelsea put in a higher
offer. Throw in the ticking clock, a
Liverpool delegation holed away in
subfreezing Dnipropetrovsk and the
usual dont-blink-first tension of a
negotiation and you begin to see
how different January deals can be
from those in the summer.
What also makes January tricky
is the glare of the cameras and pub-
lic attention. This was best exempli-
fied by the aborted swap deal that
would have seen Inter Milans Co-
lombian midfielder Fredy Guarn
join Juventus in exchange for Mon-
tenegrin forward Guarn plus a re-
ported fee of about $2 million.
In this case, both players had
agreed to terms with their new
clubs and Vuini had even under-
gone a medical with Inter. Then, on
Jan. 21, Inter owner Erick Thohir, is-
sued a statement on the clubs web-
site explaining that hed decided
not to continue negotiations be-
cause he felt that an agreement
would not be possible it did not of-
fer a clear financial or technical
benefit to the club.
Juventus managing director
Beppe Marotta responded with
withering criticism. He said he had
never seen anything like it, accused
Inter of a lack of seriousness and
said Inters club statement con-
tained false information.
Again, we may never know, but
odds are the Vuini-Guarn talks
were not helped by the fact that
they were held in the center of Mi-
lan, with TV cameras and a battal-
ion of journalists following club offi-
cials around from hotels to
restaurants to Inters headquarters,
all with round-the-clock coverage on
Italys three rival sports networks.
Inevitably, this attracted fans
lots of them. Several hundred Inter
supporters, some carrying flags and
banners, picketed outside wherever
Inter and Juventus officials were
meeting, expressing their anger at
the deal.
Meanwhile, representatives of
Inters hard-core Ultras supporters
issued a statement describing the
potential deal as the last straw in
a veiled threat to Thohir, who had
only acquired the club a few months
earlier.
You cant help but wonder
whether this mass mobilization of
media and supporters would have
occurred if this deal had been
planned in the summer, when both
Milan and Turin are virtual ghost
towns and the media often turns its
gaze in other directions.
Ideally, in terms of best prac-
tices, a club would do its negotiat-
ing before the window opens and
simply formalize the transfers once
the rules allow it. That way, every-
body benefits. The buying club is
under less pressure to conclude the
deal and gets almost an extra full
month with the new signing on
board. The selling club has more
time to find a suitable replacement.
But there are practical reasons
why this does not always happen,
not least the simple logistics of a
bunch of worldly menand they are
almost always mentrying to get
the best possible price for them-
selves, whether theyre buying, sell-
ing or representing the players.
So the alternative is to enter the
rough waters of the final days of the
winter transfer market. Where some
buying clubs are so desperate for
quick fixes, they will overpay, espe-
cially since less talent is available.
And where others find themselves
in a goldfish bowl of public scru-
tinythey make rash decisions.
It takes nerves of steel to con-
clude transfers in that kind of envi-
ronment. And, as may well be the
case with Konoplyanka and the
Guarn-Vuini trade, sometimes the
right thing to do is simply to pull
the plug and walk away.
BY GABRIELE MARCOTTI
Liverpool came away empty-handed after almost landing Dnipropetrovsks Yevgen Konoplyanka, left, seen here playing for Ukraine against France on Nov. 15.
A
g
e
n
c
e
F
r
a
n
c
e
-
P
r
e
s
s
e
/
G
e
t
t
y
I
m
a
g
e
s
It takes nerves of steel to
conclude transfers in that
kind of environment.
Vettels F1 Domination
A Switch-Off for Fans
Formula Ones global television
audience fell by 50 million to 450
million viewers in 2013 due to a
non-competitive end to the drivers
championship and a switch from
the national broadcasters in China
and France, according to its annual
global media report.
Last year, Red Bulls Sebastian
Vettel won his fourth consecutive
F1 title and wrapped up the cham-
pionship three races before the end
of the season. And even in his
home country of Germany, the au-
dience fell 8.7%. (The number of
people there who watched at least
15 non-consecutive minutes of the
sport dropped to 31.3 million.)
Brazil, which is F1s biggest sin-
gle viewing market, also suffered
as the audience dropped from 85.6
million to 77.2 million.
In the report, F1 Chief Executive
Bernie Ecclestone puts the drops
down to the less-than-competitive
nature of the final few rounds but
it wasnt the only hurdle.
The report also shows that
China lost 29.8 million viewers
more than any other countrydue
to a change from state broadcaster
CCTV to a network of 13 regional
partners. The report said this was
done to ensure that Formula 1
coverage of every race and qualify-
ing session is shown live and the
change is expected to reverse the
downward viewing trend in future.
This is less likely to happen in
France where coverage switched
last year from national broadcaster
TF1 to subscription service Canal+. It
led to viewing figures falling by 16
million to 10.2 million and it is part
of F1s strategy to increasingly move
away from free-to-air television.
Pay-TV stations are often pre-
pared to pay more for sports rights
than their free-to-air rivals as they
drive subscriber numbers. In 2012
F1 began a new deal which splits
U.K. coverage between subscription
service Sky Sports and the free-to-
air BBC. Although the audience fell
in the first year, it got a 1.7% boost
in 2013 with 29.1 million viewers.
A similar trend was seen in Italy
where viewing figures rose by 2.9%
following its switch to a mix of
subscription and free-to-air broad-
casting in 2013.
Gains were also made in the
U.S. following the return of its
home Grand Prix in 2012 after a
five-year hiatus. Coverage in the
U.S. switched from Fox and the
Speed Channel to NBC Sports in
2013 fueling a rise of 1.7 million
viewers to 11.4 million.
Christian Sylt
HEARD ON
THE PITCH
Getty Images
Sebastian Vettel tests his new
Red Bull car in Jerez on Jan. 28.
2 | Monday, February 3, 2014
AM IM UK SW FR IT SP TK BR PL IS AE GR
THE WALL STREET JOURNAL.
PAGE TWO
Fridays jobs report could very
well show the U.S. unemployment
rate fell again in Januarythis
time perhaps in part because
federal jobless benefits have
ended.
A drop related to the expiration
of the program would likely reflect
two shifts.
Some number of jobless may
have stopped looking for work and
therefore arent counted as
unemployed. Others may have
taken jobs they would have turned
down if benefits had continued.
Several recent research papers
suggest the first shiftpeople
dropping out of the labor force
could be the more significant of
the two. Both factors could provide
fodder for policy makers debating
whether to extend the program.
Of course, the unemployment
rate could also fall because more
people find jobs, independent of
the effect of federal jobless
benefits ending.
Nearly 1.4 million people lost
payments when the federal
benefits expired on Dec. 28.
Launched in the middle of the
recession, the program paid on
average $300 a weekfor up to 47
weeksto jobless Americans who
had exhausted the roughly 26
weeks of aid most states provide.
The Labor Department estimates
there are an additional 3.6 million
people who would have qualified
for the program this year once
exhausting their state benefits.
Senate Democrats plan to bring
up a bill as early as this week to
extend the program for three
months; its prospects for becoming
law are uncertain. Even if the bill
passes the Senate, many House
Republicans are deeply skeptical of
the program.
Many economists say the end of
the federal benefits program will
drive down the unemployment rate
in coming months. The rate was
6.7% in December, and the figure
for January will be released Friday.
The average prediction of
economists surveyed by The Wall
Street Journal last month was that
the unemployment rate would fall
to 6.4% by June if the benefits
program wasnt extended,
compared with 6.6% if it was.
Some job seekers will give up
the search when they run out of
benefits, research suggests. To get
state jobless benefitsand federal
benefits when they were in
effectrecipients have to keep
applying for jobs. Some who
believe they face long odds finding
a job may figure it is still worth
the effort if they are receiving
benefits, said University of
California at Berkeley economist
Jesse Rothstein, who has studied
the issue. But if theres no
benefits attached to it, then they
just drop out, he said.
Others will find a job, perhaps
because they are more willing to
take one that pays less than they
wanted. Kristen Kippel-Gonzalez of
San Diego said she started off
looking for positions that matched
her skills and former $55,000
salary when she lost her job in
May. The longer she went without
work, the more she lowered her
sights, and when she lost her
jobless benefits at the end of
December, my whole mind-set
shifted to I guess I need to do
anything to put food on my
table, said the single mother of
two.
To be sure, others who have
lost benefits will continue to look
for work until they find something
that matches their skill set or
wage requirements, and they will
continue to be counted in the
unemployment rate.
It isnt good for the economy if
throngs of engineers take jobs as
janitors just because they need a
paycheck, said Dean Baker, co-
director of the Center for
Economic and Policy Research, a
left-leaning Washington think tank.
Part of the story of
unemployment insurance benefits
is that we want to give people a
chance to find a job that actually
uses their skills, he said.
On the other hand, Mr. Baker
said, its likely some of the long-
term unemployed cant find work
because there is no demand for
their skills. When such people take
a less desirable job, it may be
unfortunate for them but it isnt a
negative for the economy, he said.
The federal programs
expiration may take time to show
up in jobs data, especially if job
seekers hope are betting that
Congress will restore the benefits,
said BNP Paribas economist
Bricklin Dwyer. He said it took
three to four months to see
movement in North Carolina after
extended benefits were cut off in
the state in July because its
unemployment insurance program
failed to meet federal guidelines.
The Tar Heel states
unemployment rate plummeted
from 8.9% in July to 6.9% in
December, the steepest drop of any
state in that period and faster than
the national rate. Some people
found work: Employment in the
state increased 1.28% since July,
compared with just 0.21%
nationally. But plenty of others
stopped looking, sending the
states labor force participation
ratethe share of adults holding
or seeking jobsdown 0.8
percentage point to 61.2% in
December, from 62% in July. The
national participation rate fell 0.6
percentage point in that period to
62.8%.
Economists caution it is tough
to extrapolate from one states
experience to the entire U.S. labor
market, but many see it as a test
case of what might happen more
broadly.
Whether the impact of the
national programs end shows up
in Fridays figures or later, it could
muddy the already opaque waters
of the U.S. labor market.
The Dark Cloud Behind
A Falling Jobless Rate
[ The Outlook ]
BY VICTORIA MCGRANE
Source: U.S. Labor Department The Wall Street Journal
Muddled Picture
The jobless rate has been trending down in the U.S., but this is partly because of the falling labor force participation rate.
In North Carolina, federal jobless benets ended in July 2013.
Unemployment rate Labor force participation rate
68
60
62
64
66
%
07 08 09 10 11 12 13
U.S.
12
0
3
6
9
%
07 08 09 10 11 12 13
North
Carolina
North
Carolina
U.S.
62.8%
61.2%
6.7%
6.9%
July
i i i
Business & Finance
n Microsofts Satya Nadella is
on the brink of being chosen to
pilot the tech giant as it seeks
to regain ground after years of
waning influence. 15
n Samsung Electronics effort
to roll out its own smartphone
operating system is faltering as
some major wireless carriers
withdraw their support. 15
n Buoyed by strong credit
ratings and rising deposits,
Asian banks have become big-
ger global players. 15
n Three of Spains largest
banks have stronger balance
sheets in an improving domes-
tic economy but are still pay-
ing dearly for the countrys
real estate bust. 19
n Etihad is conducting the fi-
nal phase of due diligence re-
lated to the potential pur-
chase of a stake in Alitalia,
with the Abu Dhabi airline
setting a deadline of 30 days
to complete a deal. 16
n Buyout specialist KKR is set
to open its first office in Spain,
as it specialist seeks to build
on its billion-euro stake in the
country. 16
i i i
World-Wide
n The six powers negotiating
a nuclear deal with Iran will
take the time needed even if
that means going beyond the
six-month objective, the EUs
foreign-policy chief said. 9
n Hungarys left-leaning op-
position rallied against the
governments surprise decision
to have Russia expand a Hun-
garian nuclear power plant. 4
nA panel looking at changes to
Myanmars constitution says
most people who weighed in
dont want to alter the clause
that prevents Aung San Suu Kyi
from assuming the presidency. 8
n Afghanistans presidential
campaign kicked off, as the
leading contenders wooed
crowds and insurgents assassi-
nated two campaigners. 9
n Australia approved plans to
dump vast amounts of mud
and rock into oceans surround-
ing the Great Barrier Reef, pav-
ing the way for developers to
expand a coal port. 8
n At least 15 people died after
being caught in a flow of su-
perheated ash and gases on In-
donesias Mount Sinabung. 8
Whats News
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Some job seekers will
give up when benefits run
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THE WALL STREET JOURNAL. Monday, February 3, 2014 | 27
OFF THE WALL
How to Stitch Together a Quilting Empire
Short Cuts, YouTube Make Jenny Doan a Star; Speedy Methods Put a Bee in Some Purists Bonnets
How many of you were saying:
NO, Nodont do that! said Mo-
nique Atkinson, a 53-year-old
quilter from Quebec. I thought it
was just hilarious!
In 2009, Al Doan and his fam-
ily decided Missouri Star could be
a serious business. They noticed
that his mothers video fans
would want to use the precise
fabric she showed in a tutorial. So
they began stocking up on those
fabrics to sell. One day, we got
eight sales in one day, Mr. Doan
recalled. We were so excited.
Almost five years later, Mis-
souri Star sells an average of
1,000 orders a day. Mr. Doan
wont divulge the companys reve-
nue, but noted the business in-
vested $750,000 last year to up-
grade its buildings, and now
employs 80 workers.
Along the way, Hamilton has
become a tourism destination for
the quilting crowd. Most days, 50
to 100 visitors arrive to meet Mrs.
Doan and members of her family
in their 5,000-square-foot main
shop.
City Administrator Dale Wal-
lace says the tourism is great, and
that maybe the town just needs to
patch up its array of amenities.
For example, we really need to
find something for the men to
do, he said of the husbands who
sometimes come in tow with their
quilting spouses. Maybe well put
in a gun shop.
For now, Hamilton Hardware,
once the location of the 500th de-
partment store in Mr. Penneys re-
tail chain, serves as a way station
for bored spouses. The quilters
dont come in, but their husbands
do, said owner Eddie Ernat. We
have some pretty neat conversa-
tions.
BY JIM CARLTON
Hamilton, Mo.
Online
>>
Watch clips from Jennys quilting
videos at WSJ.com/OffTheWall.
Jenny Doan, Missouri Star Quilting Co. star of YouTube tutorials on quilting, draws as many as a million viewers.
J
i
m
C
a
r
l
t
o
n
/
T
h
e
W
a
l
l
S
t
r
e
e
t
J
o
u
r
n
a
l
town 105 kilometers northeast of
Kansas City, Mo., with their seven
children. We literally picked a
place in the middle of the U.S.,
she says.
Her husband landed a job as a
machinist for a local newspaper,
but by 2008 his shop had been
cut from 25 people to five. It
wasnt a question of if I lost my
job, but when, says Mr. Doan, 60.
Concerned for their parents
future, two of their grown chil-
dren, Al Doan and Sarah Gal-
braith, that year took out a
$36,000 loan to buy their
mother a professional
quilting machine. We
were thinking if we
didnt do something,
Mom is living in our
basement when she
gets old, says Mr.
Doan, 31.
To accommodate
the 3.7-meter-long ma-
chine, the younger Mr. Doan and
his sister spent $24,000 buying a
former antique store for their
mother to work in. Not long after
she got it up and running, Mrs.
Doan says, her family noticed
quilting searches were a hot topic
on the Internet.
Al said, Mom, we need to do
tutorials, she recalled. I said,
Sure. Whats a tutorial?
Their first, shot in her clut-
tered shop in February 2009,
didnt go well. Mrs. Doan tripped
on an electrical cord and broke
her leg. She still managed to gri-
mace through the video. She was
so awkward, her son says.
Subsequent efforts were bet-
ter. Mrs. Doan turned on the
charm, sometimes hamming it up.
She started an Iron Quilter
competition, mimicking the Food
Networks Iron Chef cooking
contest, with two of her daugh-
ters squaring off in samurai-style
bandannas. About 500 people
sent in pictures of entries.
In the precise craft of sewing,
Mrs. Doan isnt always the most
polished instructor, but that just
seems to add to her appeal. One
time, she was making a quilt
block but she almost cut it
wrongand she laughed and said,
T
his tiny farm town used to
be known as the home of
James Cash Penney Jr.,
founder of the namesake depart-
ment store chain. These days, it is
better known in some circles as
the home of Jenny Doan.
Those would be quilting cir-
cles. Over the past few years, Mrs.
Doan, 57 years old, has become a
veritable superstar of the craft.
Her YouTube tutorials on how to
make quilts have drawn as many
as a million viewers, some from
as far away as South Africa.
Her familys Missouri Star
Quilt Co. gets as many as 30,000
orders a month for pre-cut
patches and other quilting sup-
plies. The 5-year-old company has
become the second-largest em-
ployer in this town of 1,800, its
operations covering a patchwork
of formerly vacant downtown
buildings that include a sleep
and sew retreat hotel. Fans stop
Mrs. Doan for autographs. I can
barely go to Wal-Mart without
someone recognizing me, she
says.
The key to Mrs. Doans popu-
larity: she appeals to instant
gratification quilters. I dont
teach people how to be the best
quilter, she says. I teach them
how to do it the easiest.
Instead of the weeks or
months often required to com-
plete a quilt, Mrs. Doans method
teaches how to make one in as lit-
tle as a dayby using a variety of
pre-cut fabric patches a quilter
otherwise would have to painstak-
ingly snip out and stitch to-
gether. She also supplies
the materials to do
so. Ill show you
something that
makes it look like
you worked really
hard, she says.
That simpler pro-
cess was the appeal for
Carmen Leticia Attie, a
psychotherapist from
Mexico City, who learned to quilt
in 2010 by watching Mrs. Doans
videos. She also found Mrs.
Doans breezy style less intimidat-
ing than that of other quilting tu-
tors. She makes you feel as if it
is not only possible, but easy.
Some quilters reject the short-
cuts, saying it takes away from
the history of the craft. Tradi-
tional quilting is the historical
way to do it, said Linda Court-
ney, a shopkeeper from Stewarts-
ville, Mo., who learned quilting
from her mother.
Bonnie Browning, executive
show director of the American
Quilters Society, said interest in
quilting has been on the rise, es-
pecially people wanting to learn
via the Internet. One reason Mrs.
Doan is so successful, she said, is
she was one of the first quilters
to start making online tutorials.
Today, there are several, teaching
various approaches. You know
what, theres a place for everyone
in the quilters world, said Mrs.
Browning, whose group is based
in Paducah, Ky.
Among Americas estimated 21
million-plus quilters, Mrs. Doan is
a relative newbie. She didnt take
up the hobby until 1997, shortly
after she and her husband, Ron,
left California to move to this
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The Rich and Stranded
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Investors Brace Themselves for Bumpy Ride
A choppy start to 2014 un-
derscores the need to play de-
fense, say market veterans.
Many portfolio managers
are shifting away from the
kinds of investments that did
exceptionally well in 2013 but
are vulnerable to large
swings. For some, that means
paring back on U.S. small-
company stocks in favor of
shares of large companies
with growing dividends. Oth-
ers are focusing on shorter-
term bonds based on expecta-
tions that rising economic
output will lead to higher in-
terest rates.
The S&P 500 index gained
30% last year, amid an im-
proving U.S. economy and ex-
ceptionally loose Federal Re-
serve policy. Even more
remarkable to many observers
was that declines in the stock
market were generally short
and shallow. Accordingly,
many investors entered 2014
expecting a slower advance
marked by rocky stretchesa
forecast that has been borne
out by a 5% decline in the
Dow Jones Industrial Average
since the beginning of the
year.
After last years big rally
in stocks, the market this year
might gain 8% to 10%, but
its going to be a hard 8% to
10%, says Robert Smith, chief
investment officer at Sage
Advisory Services, which
manages $10 billion out of
Austin, Texas. Investors are
going to have to be really
careful.
Tumult in emerging mar-
kets has been the catalyst for
the recent bout of indigestion,
along with the Feds steps to
pare back stimulus known as
quantitative easing.
When the central bank was
pumping $85 billion a month
into financial markets last
year through purchases of
bonds, extremely low interest
ratesand expectations they
would stay lowgave inves-
tors more confidence about
taking on riskier investments.
But the Fed has set plans
to trim its monthly purchases
to $65 billion and has sig-
naled that it expects further
cuts in 2014. Many investors
say the pullback is reducing
Please turn to page 20
By TomLauricella,
Kaitlyn Kiernan
and Katy Burne
In frontier markets, gains
continue........................................ 18
Angry Thais who were unable to cast votes in Sundays national election waved ballot papers in protest outside a Bangkok polling station.
Opposition activists disrupted polling in 11% of Thailands electoral districts, making it impossible to gain a final tally. Article on page 3
Fury as Thais Miss Voting Opportunity in Election Chaos
Getty Images
U.S. Widens
Probe Into
Libya Deals
The Justice Department
has joined a widening investi-
gation of banks, private-eq-
uity firms and hedge funds
that may have violated anti-
bribery laws in their dealings
with Libyas government-run
investment fund, people fa-
miliar with the matter said.
In recent months, the Jus-
tice Department has stepped
up its involvement in a joint
probe with the Securities and
Exchange Commission that
began in 2011 and initially
homed in on Goldman Sachs
Group Inc. Prosecutors could
file criminal charges against
some or all of the firms this
year, people familiar with the
matter said. The Justice De-
partments involvement hasnt
been reported previously.
Federal investigators are
examining private-equity firm
Blackstone Group LP and
hedge-fund operator Och-Ziff
Capital Management Group
LLC, along with Goldman
Sachs, Credit Suisse Group
AG, J.P. Morgan Chase & Co.
and Socit Gnrale SA,
these people said. Spokesmen
for the Justice Department
and the SEC declined to com-
ment.
Authorities are examining
investment deals made during
and after the financial crisis,
these people said. In the years
leading up to Libyas 2011 rev-
olution, Western firmsen-
couraged by the U.S. govern-
mentraced to attract
investment money from the
North African nation, which
was benefiting from oil sales
and recently had opened to
foreign investment.
Investigators are trying to
determine whether the firms
violated the Foreign Corrupt
Practices Act, the people said.
The 1977 law prohibits U.S.
companies and companies
listed on U.S. stock exchanges
from paying bribes to foreign
officials. U.S. authorities con-
sider employees of state-
owned investment funds, such
as the Libyan Investment Au-
thority, to be foreign officials.
In most FCPA cases, the
U.S. leans heavily on compa-
nies to investigate themselves
and turn over documents and
other evidence of corrupt
payments, but seldom do
prosecutors have access to
the paper trail overseas. The
toppling of the Libyan govern-
ment in 2011 provided an op-
portunity for the new regime
to dig into the conduct of for-
mer Libyan leader Moammar
Please turn to page 18
By Joe Palazzolo,
Michael Rothfeld and
Justin Baer
EUand U.S. Plan Kiev Aid Package
MUNICHThe European
Union and the U.S. are work-
ing on a plan for significant
short-term financial assis-
tance for protest-torn
Ukraine, EU foreign-policy
chief Catherine Ashton said
Sunday.
U.S. officials said the pre-
liminary discussions under
way with the EU call for the
two to provide economic
support in tandem to a tran-
sitional Ukrainian govern-
ment as it works with the In-
ternational Monetary Fund.
While the U.S.-EU aid
package would be linked to
significant economic and po-
litical reforms, it wouldn't be
conditioned to Ukraine first
signing a long term Interna-
tional Monetary Fund deal,
Baroness Ashton said. Previ-
ous offers of one-off Euro-
pean aid have had that con-
dition attached.
Baroness Ashton, who is
due to travel to Kiev again in
the next 48 hours, said the
aim of the package would be
to help Ukraine get through a
transition period during
which a broad-based interim
government could drive
through key political and
economic reforms and pre-
pare the ground for presi-
dential elections, currently
due next year.
News of the proposed aid
Please turn to page 5
BY LAURENCE NORMAN
AND ADAM ENTOUS
Inside
Among Janet Yellens
critical decisions
after taking over the
reins of the Fed is
when to start lifting
interest rates.
U.S. News....................7
The U.K.s deep current-account deficit is
worrisome despite the recovery. It could warn
of trickier days to come, writes Simon Nixon.
Europe File.......................................................... 4
Heard on the Street: The
EUs bonus quandary..........28
A tortured protest leader
describes his ordeal ............... 5
28 | Monday, February 3, 2014 THE WALL STREET JOURNAL.
HEARDON THE STREET
Email: heard@wsj.com FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard
No Blues
On Banks
Bonuses
Set a rule for bankers and
they will eventually find a
way around it. Set a rule
about their pay and they will
redouble their efforts.
That is what the European
Union is discovering with its
plans to cap bankers bonuses.
The politicians want to keep
bonuses down to less than
twice a bank employees an-
nual salary. That, they sug-
gest, would help soften the
aggressive risk-taking culture
at banks that can ultimately
contribute to dangerous fi-
nancial instability.
But Goldman Sachs
Groupwho else?has come
up with a plan to ensure its
European workers dont miss
out.
Goldmans plan looks simi-
lar to those suggested by
other banks to get around the
bonus cap. The idea is to pay
staff allowances based on
their role in the bank. Special-
ists in pay said the allowances
could be adjusted monthly,
thus keeping the variable as-
pect of bonuses. But they
could be treated as fixed pay
for regulatory purposes, eas-
ing the effect of the cap.
The image of bankers
queuing for their monthly al-
lowances like children getting
their pocket money may cause
some chortling. But the idea
seems to have some sense,
too. For example, if a bank
has a bad year or quarter, it
would prove easier for it to
adjust costs by reducing
monthly allowances than by
reducing salaries.
But the tussle over bo-
nuses may be becoming less
relevant anyway. The reality
facing banks is that their in-
dustry is going to be structur-
ally less profitable, whether
through requirements to hold
more capital or the increased
commoditization of their
products.
Investors, meanwhile, are
looking for greater reward in
terms of higher dividend pay-
outs.
All these pressures suggest
compensation levels will have
to moderate over time.
This trend already may be
in place. Early data from five
banks in LondonGoldman,
Citigroup, Morgan Stanley,
Credit Suisse Group and
Bank of Americashow over-
all compensation for bankers
rose 7% last year, according to
benchmarking website
Emoulment.com. But pay for
top managing directors has
fallen 7%, while the ratio of
their bonuses to salary has
dropped to 123% from 140%.
It is hardly time to get the
violins out. But bankers will
have to face up to new reali-
ties, whether the EU demands
it or not.
Andrew Peaple
Red Alert on Russia Premature
A case of mistaken iden-
tity?
Russia hasnt escaped the
recent emerging-market tur-
moil. The ruble has been a
poor performer, falling some
7% against the dollar this
year. And with investors won-
dering whether the turmoil in
countries such as Turkey
could lead to wider systemic
problems, Russia presents a
potential cause for concern,
both because of its size and
turbulent history.
But Russia in some ways
doesnt match the profile of
countries in the market cross
hairs. The focus on countries
like Turkey has been due to
their large economic imbal-
ances: big current-account
and budget deficits, coupled
with unorthodox monetary
policy. These have looked vul-
nerable in light of the Federal
Reserves decision to taper its
bond purchases, causing in-
vestors to pull back from mar-
kets that have been buoyed by
global liquidity.
Russia has come a long
way since 1998, however,
when its default led to the im-
plosion of U.S.-based hedge
fund Long Term Capital Man-
agement, which reverberated
through Wall Street. Russia
ran a current-account surplus
of 1.5% of gross domestic
product in 2013 and a budget
deficit of just 0.5% of GDP.
Reserves are solid at $497
billion. And the country hasnt
been a magnet for hot-money
inflows. From mid-2009 to the
end of 2012, when emerging
markets were a favorite desti-
nation for investors, portfolio
inflows were just 1% of GDP,
according to Morgan Stanley,
versus 10% of GDP for Turkey.
Not that Russia is without
issues. Two loom large: its rel-
atively lackluster economic
prospects and unfortunately
timed push to liberalize its
foreign-exchange system.
The current-account sur-
plus has shrunk and may yet
turn into a deficit. Growth has
slowed since the global finan-
cial crisis and was just 1.5% in
2013. Despite that, inflation is
proving tricky to bring down to
target. Some Russian officials
warn the country faces stagfla-
tion. Russia remains reliant on
oil and gas revenues and it still
hasnt done enough to attract
investment that might help di-
versify its economy.
Russia also is unlucky in
that it has chosen now to in-
crease exchange-rate flexibil-
ity, with the aim of moving to
a floating-rate system by 2015.
In the long term, this is likely
to be a positive development.
But changes to the relatively
complex system, which cou-
ples a moving currency band
with interventions at preset
thresholds, may be adding to
the pressure on the ruble and
increasing volatility.
The slide in the ruble is a
double-edged sword. Depreci-
ation will increase the local-
currency value of oil revenue,
helping the budget. Yet oil and
other commodities dominate
exports. Increased demand for
other exports due to a weaker
currency wont be enough to
make a big difference.
Moreover, if the ruble con-
tinues to fall steeply, it could
cause tensions in a country
that has seen repeated painful
currency crises. In 1998, when
Russia defaulted, the ruble
lost 70% of its value against
the dollar; in 2008-2009, it
lost 55% against the dollar, ac-
cording to RBS.
The move this year in the
Russian central banks ruble
band against the euro and dol-
lar is the fastest since 2009
and may evoke memories of
those previous devaluations
for the population, notes RBS.
A big threat to the ruble could
yet lie in a surge in demand by
Russians for foreign currency.
Russias central bank, like
many emerging-market cen-
tral banks, has a tricky task.
Slow growth means it is un-
likely to want to raise rates,
but currency weakness could
prove inflationary. One option
is for the central bank to
pause in its progress toward a
free-floating ruble. If the pres-
sure increases, that might be
a handy safety valve.
Investors mindful of Rus-
sias importance to emerging
markets are right to keep a
sharp eye on its currency.
They shouldnt assume,
though, that it is destined to
repeat the problems of the
past.
Richard Barley
Amazon Isnt Just for Christmas
At Amazon.com, it is all
about the top line.
Making profits has long
taken a back seat at the e-com-
merce company to the goal of
dominating as large a share as
possible of overall consumer
spending. And investors have
been willing to give Amazon a
pass, providing it keeps push-
ing into new businesses and
increasing revenue. So Wall
Street was surprised when
Amazon reported late Thurs-
day that the rate of revenue
growth for the all-important
fourth quarter had slowed. In-
vestors sent Amazons shares
down more than 9% Friday.
The alarm may be unwar-
ranted. Amazons revenue rose
20% year over year to $25.6
billion in the quarter. That
compares with 23% growth in
the third quarter, 22% in the
second and 21% in the first.
Yet a look back at the fourth
quarter of 2012 shows a simi-
lar deceleration. Sales that
quarter rose 22% compared
with 27% in the third quarter
of 2012.
What is going on with Am-
azons fourth-quarter sales?
One explanation is that the
companys Prime subscribers
and the sizable percentage of
revenue they drive may be
changing the seasonality of
Amazons business.
Carlos Kirjner, an analyst
with Sanford C. Bernstein, esti-
mates more than half of items
shipped by Amazon go to sub-
scribers who pay for the $79-
a-year membership that comes
with free two-day shipping.
And because they tend to
spend more in categories such
as consumablespaper towels
and batteries, for example
their spending patterns may
be less seasonal than non-
Prime users. Another, less sig-
nificant, factor may be the less
seasonal revenue stream from
the Prime fee itself. This
amounts to $2.5 billion to $3
billion a year, Mr. Kirjner esti-
mates.
Commerce Department fig-
ures seem to back up the sea-
sonality argument. Sales at
nonstore retailers, a category
driven by changes in online
sales, were up 9.1% in the
fourth quarter from a year ear-
lier. That was actually a bit
better than 2012s fourth-quar-
ter gain of 8.8%.
But it also counted as the
slimmest quarterly gain of last
year. In the third quarter, non-
store sales rose 11%.
The problem: Investors
may have seen that as a pre-
lude to blowout online holiday
sales, rather than recognizing
it as a shift in online shopping
patterns.
Granted, more aggressive
discounting and promotions
from other retailers around
the holiday season also may be
affecting Amazons fourth-
quarter results. But among
competitors, the usual sus-
pects dont seem to have bene-
fited much.
Wal-Mart Stores warned
Friday that U.S. comparable-
store sales fell slightly during
the quarter. Best Buy, Sears
Holdings and Family Dollar
Stores also have reported
weak holiday sales.
Any effects of the Prime
program on sales patterns also
could diminish if Amazon de-
cides to raise its price by $20
to $40 a year, as it is consider-
ing, and people decide to quit.
But the effect of attrition on
sales might be partially offset
by higher revenue from fees.
The fourth quarter will
probably always be Amazons
biggest. But Amazon watchers
hoping to predict the com-
panys performance may have
to adjust their expectations.
Miriam Gottfried
Tisnt the Season
Amazons fourth-quarter
revenue as a percentage of
annual revenue
The Wall Street Journal
Source: FactSet
40
32
34
36
38
%
10 2009 11 12 13
Mercedes Gets
Polish in China
Mercedes-Benz may be one
of the worlds most recogniz-
able car brands, but it has had
trouble getting noticed in
China. Now, Mercedes is mov-
ing to change that.
Much will depend on how
the German brands China
partner makes use of new capi-
tal. Chinas state-owned BAIC
Motor plans later this year to
raise about $2 billion in a
Hong Kong share sale, accord-
ing to The Wall Street Journal.
Daimler, which owns the Mer-
cedes brand, manufactures and
markets luxury cars through a
joint venture with BAIC and
owns 12% of the Chinese auto
company.
Daimler has much to repair
in China. Until recently, it was
selling cars through two distri-
bution networks that competed
against each other. Its after-
sales service scored poorly in
surveys by J.D. Power, while
analysts say the cars were too
richly priced and then had to
be heavily discounted. On top
of it all, Mercedes is often
viewed as an old persons car,
unlike the more fashionable
BMW or Audi, says Macqua-
ries Janet Lewis.
Mercedes sales were essen-
tially flat in 2012 and increased
only half as fast as rivals in
2013, otherwise a blockbuster
year for Chinese autos. Its
share of the luxury market
slumped to 15.5% in 2013 from
20.3% in 2011, as Audi and
BMW tightened their grip, ac-
cording to LMC Automotive.
To change its stuffy image,
Mercedes is set to launch 13
new or refurbished models in
the next two years, including a
sedan and a compact SUV that
should attract younger con-
sumers.
BAICs IPO also will help.
The Chinese car maker will use
the share-sale proceeds to
shore up its balance sheet, says
a person familiar with the mat-
ter.
This may help BAIC put
more money into the Daimler
joint venture. That means lo-
calizing more production to
bring down costs and boost
Mercedess China margins,
which are about half those of
BMW.
The good thing about com-
ing from behind is that there is
upside for Daimler investors.
Chinas contribution to Daim-
lers overall revenue was just
9.4% in 2012. BMW generated
double that.
Even getting halfway to its
competitors exposure to China
will give Daimler investors a
better ride.
Abheek Bhattacharya
Source: ICAP The Wall Street Journal
Rubles Retreat
Performance against the
U.S. dollar
0
25
20
15
10
5
%
2013 14
Turkish lira
Russian ruble
Kremlin in Red Square, Moscow
R
e
u
t
e
r
s
With a current-account surplus and solid
reserves, Russia doesnt match the profile
of countries in the markets cross hairs.