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FRIDAY - MONDAY, DECEMBER 23 - 26, 2016 ~ VOL. XLI NO. 82 As of 12 p.m. ET DJIA 19892.42 g 0.25%

What’s News Business & Finance

A

Singapore court handed a 30-month prison sentence to a former private banker with ties to a figure at the center of alleged multibillion-dollar misappropriations at 1MDB. B7 U.S. investigators are trying to determine whether Goldman had reason to suspect that money it helped the Malaysian fund raise was misused. A1 A $45 million corporate default in China is leaving 13,000 investors wondering if they will be repaid. A1

NIKKEI 19427.67 g 0.09%

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EURO 1.0442 À 0.16%

Authorities intensify search for Tunisian wanted in deadly attack

BY RUTH BENDER AND VALENTINA POP

B E R L I N — I nv e s t i ga to r s found the fingerprints of a Tunisian terrorism suspect in the truck that rammed through a Berlin Christmas market, Germany’s top security official said on Thursday, expressing confidence that he was the perpetrator of the attack.

Searches took place in sev-

eral German states overnight for Anis Amri, a 24-year-old Tunisian migrant authorities previously investigated for suspected terror ties and unsuccessfully tried to deport, but police hadn’t been able to find him.

“We can tell you that we have further indications that the suspect was, with a high degree of certainty, the perpetrator,” Interior Minister Thomas de Maizière said after visiting the federal criminal office with Chancellor Angela Merkel.

He said prints were found of the suspect in the driver’s cab. Officials had earlier cau-

tioned that they weren’t certain that Mr. Amri had committed the crime.

The revelation that the asylum seeker had been able to remain in Germany despite efforts to expel him has stoked criticism over the country’s immigration policy and security, piling pressure on Ms. Merkel’s government.

New details emerged showing authorities detained the suspect briefly this summer in southwest Germany as they tried to deport him, but released him after only a day.

German officials also

alerted the U.S. to Mr. Amri in June, a senior U.S. official said. U.S. authorities then added his name to a terrorism watch list. German officials in November provided additional information and U.S. officials decided to put Mr. Amir’s name on the no-fly list, an indication they believed he posed a more significant threat than they previously thought, the official said.

Ms. Merkel said authorities were working at full speed to find the man. Federal police have issued a rare international wanted notice for the

All Revved Up for the Holiday Season

JAIPAL SINGH/EUROPEAN PRESSPHOTO AGENCY

By Rory Jones in Tel Aviv and Farnaz Fassihi at the United Nations

ROLLING REINDEER: People dressed as Santa Claus take part in a procession in Jammu, the winter capital of the Jammu-Kashmir state in India.

World-Wide

The U.N. Security Council postponed a vote on a resolution criticizing Jewish settlement construction in the West Bank. A1 Japan’s cabinet approved an increase in military spending for a fifth successive year to meet accelerating threats from North Korea and China. A3 The U.S. Navy said an American underwater drone that had been in China’s hands for five days would be examined for any tampering. A3 The evacuation of the last remaining civilians and fighters from a rebel-held enclave in eastern Aleppo was nearly complete. A3

On a yacht moored at Saint-Tropez, Malaysian Prime Minister Najib Razak talked business with Abu Dhabi’s crown prince. Included in the horseBy Justin Baer, Tom Wright and Ken Brown shoe of chairs set up for the July 2013 gathering was a partner from Goldman Sachs Group Inc. The bank earned its place through years of cultivating Mr. Najib and a

1MDB was used by the prime minister as a political slush fund and by associates of his to buy more than $1 billion of real estate, art and other luxuries from London to Beverly Hills, Calif.

Among all the firms touched by the scandal, which include banks around the world, Goldman holds a unique position for its closeness to 1MDB and the principals.

When the Malaysian fund, which Please see 1MDB page A6 Former banker sentenced............................ B7

China Default Hits Online Investors

BY JAMES T. AREDDY SHANGHAI—A $45 million corporate default in China this month is leaving 13,000 investors wondering whether they will be repaid and online powerhouse Ant Financial Services Group fielding uncomfortable questions about the quality of the investments on its platforms.

The fallout from a default

by Cosun Group illustrates the complexity of business relationships in the country’s

booming but largely unregulated financial-technology sector, which has channeled massive amounts of cash from individuals’ savings into loans to businesses.

Cosun, which makes mobile phones and was founded by Chinese telecommunications tycoon Wu Ruilin, this month issued notices that it would default on high-yield debt products that had been sold online two years earlier to ordinary investors through Ant, Please see ANT page A2

China: RMB28.00; Hong Kong: HK$23.00; Indonesia: Rp25,000 (incl PPN); Japan: Yen620 (incl JCT); Korea: Won4,000; Malaysia: RM7.50; Singapore: S$5.00 (incl GST) KDN PP 9315/10/2012 (031275); MCI (P) NO. 073/10/2016; SK. MENPEN R.I. NO: 01/ SK/MENPEN/SCJJ/1998 TGL. 4 SEPT 1998

Russia Mourns Slain Envoy SOLEMN: Russian President Vladimir Putin, left, paid his respects in Moscow to Andrey Karlov, Russia’s ambassador to Turkey who was shot dead Monday in Ankara. Fethullah Gulen, a U.S.-based cleric whom Turkey has blamed, denied that his movement was behind it.

Everyone Unmute! It’s the Virtual Office Christmas Party

INSIDE

Markets...................... B8 Off Duty.............. W1-8 Opinion.............. A10-11 Technology............... B3 U.S. News.................. A5 Weather................... A12 World News....... A2-4

s Copyright 2016 Dow Jones & Company. All Rights Reserved

state investment fund he founded.

Goldman had raised $6.5 billion for the fund and earned nearly $600 million in fees, making the Malaysian client among its most lucrative.

Mr. Najib lavished praise on Goldman, said people familiar with the meeting.

“Do you see any other bankers on this boat?” one recalls him saying.

Today Mr. Najib and the state fund, 1Malaysia Development Bhd., or 1MDB, are at the center of what investigators consider one of the largest financial frauds in history. Investigators have said

i

i

i

Telecommuters belly up to webcams to join festivities

BALLAST POINT BREWING AND SPIRITS

CONTENTS Books....................... A7-9 Business News... B2-4 Crossword.............. A12 Heard on Street.... B8 Life & Arts............. A12 Mansion............ W9-14

Bank courted Malaysian state entity now at heart of global embezzlement probes

After a draft of the resolution was circulated by Egyptian diplomats late Wednesday, Israel and Mr. Trump urged the Obama administration to veto it, but diplomats at the U.N. said the matter wouldn’t be coming to a vote Thursday.

“As the United States has long maintained, peace between the Israelis and the Palestinians will only come through direct negotiations between the parties, and not through the imposition of terms by the United Nations,” Mr. Trump said in a statement issued in Palm Beach, Fla., by his transition team.

“This puts Israel in a very poor negotiating position and is extremely unfair to all Israelis,” he added.

Western diplomats said Egypt postponed the vote.

“This is a resolution that the Egyptians spearheaded and introduced, only to shelve it under Israeli pressure,” one of the diplomats said. “The vote has been postponed, potentially indefinitely.”

The wording of the draft resolution closely reflects the Please see ISRAEL page A4

ALEXEI NIKOLSKY/SPUTNIK/AGENCE FRANCE-PRESSE/GETTY IMAGES

Trump named a skeptic of trade with China to a new trade council and tapped Icahn to serve as special adviser on overhauling federal regulations. A5 The president-elect said he was appointing Kellyanne Conway to be counselor to the president, putting his close adviser into a key White House. A5

GOLDMAN’S 1MDB TIES RUN DEEP

ALICE WHITBY FOR THE WSJ

Investigators found the fingerprints of a Tunisian terrorism suspect in the truck that rammed through a Berlin Christmas market, Germany’s top security official said. A1 German authorities are facing mounting criticism for failing to neutralize the man suspected in Monday’s attack. A4

Berlin stumbles in terror fight, critics say....................... A4

A potential collision between the Obama administration and the incoming team of President-elect Donald Trump was avoided when the United Nations Security Council postponed a vote on a resolution criticizing Jewish settlement construction in the West Bank.

Airbus joined Boeing in completing a multibilliondollar plane deal with Iran’s state air carrier. B1

Alibaba has been put back on a U.S. agency’s list of global marketplaces known for counterfeit goods. B3

suspect, who arrived in Germany last year after time in an Italian prison.

In Germany, police raids took place in the western state of North Rhine-Westphalia, where Mr. Amri initially lived after arriving from Italy and had contacts with local extremist groups, and in Berlin, where he had been living since February, security officials said. There were no arrests.

Mr. Amri, who according to Please see TRUCK page A4

Sensitive U.N. Vote On Israel Postponed

Baidu is planning an IPO of its video-streaming site iQiyi.com that could value the unit at as much as $5 billion. B1

Unionized pilots at Korean Air Lines went on strike for the first time in 11 years, disrupting some flights on major Asian and Middle Eastern routes. B4

DLR ¥117.59 À 0.03%

Suspect’s Prints Found in Truck

Apple and Nokia filed competing lawsuits over intellectual property used in the iPhone and other Apple products. B3

China’s Anhui Xinke New Materials scrapped its bid to buy the independent filmmaker behind such award-winning movies as “The Hurt Locker.” B2

ASIA EDITION

THE UNITED STATES OF CRAFT BREWING

LONDON’S LUXE RENTALS ARE ON THE RISE

OFF DUTY, W1

MANSION, W9

BY LAURA MECKLER The digital age that transformed the commute from highway to home staircase and office attire from pants to pajamas is doing a number on the traditional holiday office party.

If there’s anything that sings “Feliz Navidad,” after all, it’s a festive set of PowerPoint slides.

That’s how Brent Bystedt kicked off things at Ken Blanchard Cos.’ annual “virtual office party.”

About 15 people on his team bellied up to their webcams one

Friday morning this PowerPoint brain month from homes in teaser that challenged states such as Califorpartyers to guess a nia, Virginia and Illiholiday song from nois, he said. Their clues such as: “Do you faces were arrayed on perceive the same lonone another’s screens gitudinal pressure in a “Brady Bunch”that stimulates my austyle grid. ditory sense organs?”

Others assembled (Answer: “Do you in a headquarters hear what I hear?”)

Virtual conference room at They also played party guest the Escondido, Calif., “What’s in the cup?” firm, which offers manage- Participants chose a cup from ment and leadership training. home and held it up to their Please see PARTY page A6 Festivities began with a

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A2 | Friday - Monday, December 23 - 26, 2016

THE WALL STREET JOURNAL.

WORLD NEWS

Violence Bolsters Erdogan’s Power Play were dismissed from their jobs. Thousands were detained because of suspected links with the putschists.

“I don’t think they will get what they want from the referendum. After the military coup attempt he pulled off a political coup, which created millions of victims,” said Pervin Buldan, deputy speaker of the Turkish parliament and a lawmaker from the pro-Kurdish HDP.

MIDDLE EAST CROSSROADS YAROSLAV TROFIMOV

M

DEPO PHOTOS/ZUMA PRESS

ANKARA—Turkey is moving toward a referendum that if approved would give President Recep Tayyip Erdogan near absolute power— and every new terrorist attack is likely to increase his chances of winning the vote.

This nation of nearly 80 million people, a member of the North Atlantic Treaty Organization, is targeted by Kurdish separatists and radical Islamists alike. Over just the past two weeks, it witnessed two major bombings, in Istanbul and the central city of Kayseri, and the assassination of the Russian ambassador in the capital, Ankara.

Mr. Erdogan, whose party has governed Turkey since 2002, has repeatedly argued that a strong executive presidency is needed to navigate these dangerous times. If he wins the referendum that is tentatively planned for June, he could stay in office until as late as 2029, with virtually all checks and balances on his authority removed.

“If he wins, he will become a dictator,” warned Kemal Kilicdaroglu, the head of Turkey’s biggest opposition party, CHP. “Erdogan didn’t come to power because he

Turkish President Recep Tayyip Erdogan speaking at the opening of a tunnel connecting the European and Asian shores of Istanbul. wants to rule the state. He came to power because he wants to be the state.”

state and Kurdish militants weeks later, however, rallied voters around Mr. Erdogan.

The president, who refused to preside over a coalition government and portrayed himself as a bulwark against terrorism, called snap elections in November 2015 and regained a comfortable majority for AKP. “Terror attacks will unify the political right, Turkey’s major electoral constituency,” said Soner Cagaptay, head of the Turkish program at the Washington Institute for Near East Policy.

U

nder the proposed constitutional amendments, the prime minister’s post would be abolished and many powers currently held by parliament transferred to the presidency.

Mr. Erdogan’s Justice and Development Party, or AKP, has failed to win an election outright only once. That was in June 2015, when the rise of a pro-Kurdish opposition party deprived AKP of a parliamentary majority for the first time in 13 years.

The collapse of the ceasefire between the Turkish

T

he Istanbul and Kayseri attacks, each of which killed dozens, have been claimed by mili-

tants linked to the Kurdistan Workers’ Party, or PKK, which is considered a terrorist organization by both Ankara and Washington. After the Kayseri blast, mobs attacked the offices of the country’s main pro-Kurdish political party, the Peoples’ Democratic Party, or HDP. The party, whose key leaders were detained on charges of supporting terrorism last month, has condemned the bombings.

With the country on edge, some opinion polls already show growing support for the constitutional changes demanded by Mr. Erdogan. A majority of more than 50% is needed for the referendum to pass. It isn’t clear, how-

ever, to what extent voters are providing honest responses to pollsters amid the current state of emergency.

Even among AKP voters, between 15% and 30% currently oppose the presidential system, according to Ibrahim Uslu, head of the Anar polling and consultancy firm that advised the ruling party for more than a decade.

Mr. Erdogan’s political enemies hope that the “no” side in the planned referendum will also be fueled by a backlash against the purges that began after the failed July coup attempt against him. An estimated 125,000 Turks—from schoolteachers to police officers to judges—

r. Erdogan’s allies laugh at predictions of a referendum defeat. “You know well that our president will win the referendum,” said AKP lawmaker Mehmet Metiner. “We believe our president will have the support of over 60%. What we are really curious about is whether, after that, they will keep calling dictator a president who garners over 60% of popular support.”

While AKP controls the absolute majority of seats in the Turkish parliament, it is 14 short of the 330 votes needed to pass the constitutional changes, which would then be submitted to a referendum. AKP expects to receive support on the amendments from the nationalist MHP party, whose leader, Devlet Bahceli, could become a vice president in exchange.

Mr. Erdogan’s allies argue that Turkey can’t afford the risk of future elections producing unstable coalition governments when the entire region is facing turmoil.

“In these lands, if you need to survive, you need to have a very strong system,” said his senior adviser Reha Denemec.

Dentsu Revises Policies After ‘Death by Overwork’

BY ALEXANDER MARTIN

TOKYO—Japanese advertising giant Dentsu Inc. said it would switch off all office lights at 10 p.m. and order employees to take vacations regularly, responding to an employee suicide that triggered a government criminal probe.

The steps were part of an eight-point plan Dentsu disclosed Thursday to improve its work environment and came amid a broader discussion in Japan about curbing the extreme work ethic that

ANT

The criminal probe continues and no charges have been filed.

Dentsu said the steps announced Thursday would “redefine the corporate culture” to ensure better conditions for employees.

In recent weeks, it has lowered maximum overtime hours and said it would remove from company materials 10 principles encouraging hard work devised by a former president, Hideo Yoshida.

These principles, written in 1951 and previously featured

multibillion-dollar initial public offering. Analysts consider Alipay the starting point for Ant to profit on money-market funds, peer-to-peer loans, wealth-management products, insurance and personal credit scores, all available via apps at the flick of a finger.

Yet since many of the thousands of investment offerings featured on Ant’s apps are developed by outside parties, this month’s default suddenly puts the financial firm in a position similar to the one Alibaba faces in building consumer trust on its online bazaar Taobao, which depends on outside merchants and this week was put back on a U.S. agency’s list of marketplaces known for fake goods.

Following the default, Ant says it is pressing various parties to repay investors, and has vowed to cover the legal bills for investors who decide to sue. But Ant doesn’t consider itself responsible for repayment since the products were developed by third parties.

“It’s a platform,” said Ant spokeswoman Miranda Shek in describing the company’s role. However, she said, the

Ant’s Alipay app. Ant is the world’s most valuable fintech company.

in notebooks issued to employees, include one that tells employees never to give up on a task. “Don’t let go, even if you are killed,” it said.

In Thursday’s announcement, Dentsu added more measures and said it would maintain a policy that it had already introduced on an ad hoc basis of switching off all office lights between 10 p.m. and 5 a.m., forcing employees to leave during those hours.

It said it would prohibit people from working overtime at home and require all em-

Fintech Links A debt default by Cosun Group illustrates how loose affiliations across China's fintech sector complicate assigning responsibility.

COSUN GROUP SEEKS MONEY Guangdong Equity uity Exchange CREATES DEBT PRODUCT

Zheshang Property & Casualty Insurance Co. Insurer GUARANTEES DEBT PRODUCT ONLINE OFFERING VIA Zhao Cai Bao Ant Financial’s platform

INVESTORS BUY Using Alipay service on their phones Source: staff reports

ANTHONY KWAN/BLOOMBERG NEWS

Continued from Page One a financial supermarket linked to Alibaba Group Holding Ltd. that also handles the e-commerce giant’s online payments.

At issue is a debt-issuance program under which Huizhou, Guangdong-based Cosun raised $166 million online through Ant. At least four firms involved in the program are trading accusations about responsibility to investors, according to their statements and an investor contract reviewed by The Wall Street Journal.

The two defaulting Cosun entities, which use the group’s Chinese name Qiaoxing, issued identical one-sentence statements citing “recent tight liquidity.” A spokesman for Mr. Wu couldn’t be reached and he didn’t respond to calls to his mobile phone.

Market enthusiasm about Ant, which runs China’s leading payment service Alipay, has made it the world’s most valuable and high-profile financial-technology company, and a strong contender for a

has permeated many corporate offices.

On Christmas Day in 2015, a 24-year-old woman working for Dentsu jumped to her death from a company dormitory after logging more than 100 hours of overtime in the month leading up to her death. The suicide was recognized by labor officials as a case of karoshi—a Japanese term for death by overwork— and led inspectors to search Dentsu’s offices in October to check whether illegal labor practices were prevalent.

firm will try to protect investors’ rights: “We understand that to a lot of investors there is Ant Financial’s reputation attached to it.”

Loose corporate affiliations link businesses across China’s fintech industry, making it hard to determine who bears responsibility when there is a problem, industry executives say.

Cosun’s bond-related investments, for instance, were created by a financial-product factory called Guangdong Equity Exchange, distributed to small-time investors around China through Ant’s online platform Zhao Cai Bao and guaranteed by Hangzhoubased Zheshang Property & Casualty Insurance Co., according to statements from the businesses.

In statements, Guangdong Equity Exchange has said it expects the insurer to cover investor losses. The insurer says it needs more information.

If Ant gets as big as some analysts expect, tie-ins are likely to multiply. Deutsche Bank, which in a September report valued Ant Financial at $67 billion, described its payment services as an “on ramp connecting consumers and

THE WALL STREET JOURNAL.

merchants with a growing host of financial services.” Citing similar expectations in an October report, CLSA analysts put Ant’s value at $70 billion, and possibly $100 billion in two years.

Cosun’s defaults coincided with a rout in China’s bond market following the U.S. Federal Reserve’s Dec. 14 interestrate increase, which deepened

ployees to take at least five days off every half-year.

Prime Minister Shinzo Abe has ordered a review of work practices, trying to make it easier for people who are taking care of children or elderly relatives to hold regular jobs.

That often runs counter to a corporate culture that stresses long hours and absolute devotion to the company.

Nearly 23% of Japanese corporations reported some employees were working more than 80 hours of overtime a month, according to a govern-

ment white paper on karoshi released in October. It said that of the roughly 24,000 suicides reported in Japan last year, 2,159 could be linked to workplace issues.

Labor experts say overwork is entrenched in many companies and Dentsu isn’t a special case. Toshihiro Matsumoto, a labor consultant, said Thursday that Dentsu’s response was a step forward, but he voiced skepticism whether it would lead to a long-term overhaul of its workaholic culture.

market concerns in China that more companies face financial hardship. By mid-December, China had recorded at least 55 corporate bond defaults, up from 24 in 2015, according to Wind Information.

Cosun’s intentions for the $166 million it was raising aren’t clear, though at least one contract says the company intended to invest in 4G telecom technology. Mr. Wu, Cosun’s founder, is a veteran of China’s telecom industry who has taken companies public in the U.S. and Hong Kong. He has appeared on lists of the country’s richest individuals.

The two-year Cosun issues that came due Dec. 15 required a minimum investment of about $1,450 and were supposed to yield 7.3% annually, nearly twice as much as investors could have made in a twoyear bank deposit.

The bonds were sold on Ant’s platform for third-party wealth-management products, Zhao Cai Bao, which has handled more than $85 billion in investments since it was launched in April 2014. Ant

says the platform suffered only one previous default, related to a company damaged by a massive explosion in August 2015 in Tianjin. In that case, the product insurer quickly reimbursed investors.

The Zhao Cai Bao app is embedded in Ant’s payment service Alipay. Its opening page features a photo of a kayaker and a tagline that translates roughly as “Stable and Strong Yield—No Fear of Turbulent Water.”

—Yifan Xie contributed to this article.

CORRECTIONS AMPLIFICATIONS Swatch Group isn’t among the Swiss watchmakers that have bought back slow-moving inventories from retailers. A Heard on the Street article on Wednesday about the Swiss watch industry incorrectly reported that it was.

“We are in a historic period that’s about redefining the debate,” Baruch Gordon, the director of development at Bet El Institutions, said in an interview. “The debate is no longer about a Palestinian state—yes or no—but freedom and equality for Arabs to what extent.”

A World News article on Thursday about fundraising for a West Bank settlement by David Friedman, President-elect Donald Trump’s choice for ambassador to Israel, misquoted Mr. Gordon as saying, “The debate is no longer about the Palestinians.”

Adm. Harry Harris is commander of the U.S. Pacific Command. A World News article Wednesday about China’s actions in the South China Sea erroneously gave his title as commander of the U.S. Pacific Fleet.

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

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Friday - Monday, December 23 - 26, 2016 | A3

THE WALL STREET JOURNAL.

WORLD NEWS

Wary Japan Raises Military Spending Pressure rises as China makes territorial challenges to Japaneseadministered islands

Firepower Annual defense spending* Share of GDP North Korea†

BY ALASTAIR GALE AND CHIEKO TSUNEOKA

$3.4-$9.5

U.S.

3.3

596

South Korea

2.6

36.4

China

1.9

214.8

Japan

1.0

40.9

*Estimate for 2015 except North Korea †Estimated annual spending from 2002 to 2012 Sources: U.S. State Department (North Korea); Stockholm International Peace Institute

THE WALL STREET JOURNAL.

KIM KYUNG-HOON/REUTERS

TOKYO—Japan’s cabinet approved an increase in military spending for a fifth successive year—including funds for missile-defense upgrades and new advanced submarines—to meet accelerating threats from North Korea and China.

The pressure on Japan has risen to increase military spending over the past few years as China has made territorial challenges to Japaneseadministered islands and North Korea has stepped up missileand nuclear-weapons development. Four North Korean missiles landed close to the northern coast of Japan this year.

“The security environment surrounding Japan is becoming ever more severe,” Defense Minister Tomomi Inada said in a press briefing this week.

The defense budget for the year beginning in April is up 1.4% to a record ¥5.1 trillion ($44 billion) and is all but certain to gain parliamentary approval.

Even with recent increases, spending on defense in Japan has remained at around 1% of gross domestic product for more than two decades, one of the lowest levels among major global powers.

In comparison, China spends nearly 2% of its GDP on defense and more than five times the dollar amount compared with Japan, according to data compiled by the Stockholm International Peace Research Institute.

The U.S. is the biggest international spender on defense, at about 3% of GDP, or nearly $600 billion in 2015.

15%-24%

In billions

Japan Ground Self-Defense Force personnel marched in a parade in Asaka, Japan, on Oct. 23.

Japan’s military spending became an issue in during the U.S. presidential election campaign when Donald Trump called for U.S. allies to pay more for American military support. The U.S. has about 54,000 military personnel stationed in Japan and is required to help defend the country under a bilateral defense treaty.

Increases in military spending are controversial in Japan because of the country’s pacifist constitution, which was imposed by the U.S. after World War II, but is strongly

supported by many Japanese.

Under President Barack Obama, the U.S. has pushed Japan to play a more active role in regional defense, and Parliament loosened restrictions on Japan’s so-called SelfDefense Forces at the urging of Prime Minister Shinzo Abe. The latest defense budget includes about ¥65 billion for missile-defense measures, including funds to complete the co-development with the U.S. of a ship-based missile interception system.

This year, North Korea held

missile defense upgrades, including the possible introduction of an advanced U.S. missile shield known as Terminal High-Altitude Area Defense. South Korea plans to deploy a Thaad battery next year, a move opposed by China because its radar system extends into Chinese territory.

The Japanese defense budget also includes ¥73 billion for a new type of submarine with improved sonar, in an escalation of maritime defense as China challenges Tokyo’s sovereignty over a group of uninhabited is-

its first successful tests of missiles fired from a mobile carrier and a submarine, which are harder to detect before launch. North Korea has said it would target U.S. bases in Asia if faced with attack, including installations on the Japanese island of Okinawa.

Among dozens of test-firings of missiles by Pyongyang this year, four landed about 150 miles from the coast of northern Japan, the closest since North Korean missiles flew over Japan in 1998 and 2009.

Japan is also studying other

lands in the East China Sea. In June, a Chinese warship entered waters around the disputed islands for the first time.

The addition of new submarines will help check China’s advances in the area, said retired Japanese Vice Adm. Toshiyuki Ito. “Japan’s grand strategy is deterrence against China. It seeks to constantly show China of the high costs of missteps in order to prevent war,” said Mr. Ito, now a professor at the Kanazawa Institute of Technology.

Japan currently has 17 diesel-electric submarines and plans to increase the fleet to 22 by around 2021. China’s submarine fleet consists of around 60 vessels, including nuclear-powered craft that can travel very long distances at high speeds.

Japan also plans to add eight new coast guard ships to a 14ship fleet to defend the East China Sea islands.

In addition to new hardware, the budget sharply increases defense research to ¥11 billion from ¥600 million yen in the current fiscal year.

Last year, Mr. Abe called on scientists to help boost Japan’s defenses, which was opposed by some academics.

A Christmas Tree Grows—and Grows—in Sri Lanka Former cricket star goes to bat for record display of harmony, as a cardinal gets in the spirit; down to the chicken wire

COLOMBO, Sri Lanka—For weeks, some 1,000 workers— most of them Buddhists— have raced to erect what they hope will be the world’s tallest artificial Christmas tree.

Like this island, which is no stranger to ethnic and religious strife, the mission has traversed a minefield of conflict.

Launched with great fanfare in August near the main beach in this tropical city, the project was derailed when Sri Lanka’s senior most Catholic authority criticized it as a “wasteful expenditure.” That sparked a frenzied social-media debate.

An intervention by the country’s prime minister was needed to get it back on track.

By Thursday, with days to go before Christmas, the tree was about 200 feet high, seemingly already big enough to break the current Guinness world record for an artificial tree of 180.4 feet tall, built last year in Guangzhou, China.

The tree’s main advocate, a former cricket star and now prominent politician, hopes it

ERANGA JAYAWARDENA/ASSOCIATED PRESS

BY UDITHA JAYASINGHE

Sri Lankan port workers carry steel rods for the tree, which now stands around 200 feet tall. can be a symbol of peaceful cooperation among ethnic and religious groups in a nation still recovering from a 27-year-long civil war.

“We wanted to bring Sri Lankans together again, show them what we can accomplish when we work together,” said the poli-

tician, Arjuna Ranatunga, a 53-year-old Buddhist member of Parliament whose constituency is made up mostly of members of Sri Lanka’s small Catholic community. “I told them that we must take the record or there is no point.”

Mr. Ranatunga knows something about such mo-

ments, as well as how fleeting they can be. He led the country’s cricket squad to victory in the 1996 World Cup Championship. The match took place at the height of an insurgency led by Tamilspeaking guerrillas against the Sinhalese-speaking, mostly Buddhist majority.

The government declared a temporary cease-fire, which brought Sri Lankans of all types dancing into the streets together.

Mr. Ranatunga, who is also the minister of ports, said he was approached with the tree idea in early August by a group of mostly Buddhist workers from the staterun Sri Lanka Ports Authority.

The workers saw a Christmas tree as a festive symbol and sufficiently secular for all faiths to rally behind during a holiday season that is critical to Sri Lanka’s tourism industry, he said.

Christmas décor isn’t unusual in Sri Lanka, though only around 7% of the country’s 20 million people are Christian.

One of the workers, W.H. Nanayakkara, a crane driver in the Colombo port who is Buddhist, designed the tree to rise to 325 feet. The plan required 30 tons of steel and hundreds of yards of chicken wire. It would be decked out in bells, stars and doves made of more than one million pine cones painted silver and gold. The trunk is made

of wooden planks recycled by saw mills. Local companies agreed to donate most of the materials.

In early December, the head of Sri Lanka’s Catholic Church, Cardinal Malcolm Ranjith, made his pronouncement, saying the $200,000 cost of donated materials would be better spent on the poor. Mr. Ranatunga halted work in deference to the cardinal.

Then social media took over. On Twitter and Facebook, commentators from Sri Lanka and beyond debated the value of the tree, and the project to build it.

Prime Minister Ranil Wickremesinghe, who has made reconciliation a theme of his administration, stepped in.

He talked with the cardinal, and afterward said he had secured the cleric’s consent for the tree to go forward.

A representative for the Guinness World Records said the organization is processing a request to verify the tree as a record. Prime Minister Wickremesinghe plans to light the tree on Christmas Eve.

WORLD WATCH CHINA

AFGHANISTAN

Beijing Holds Tongue U.S. to Probe Drone On Trump Trade Aide For Any Tampering

Mediators Urge End To Political Crisis

Police Shoot and Kill 3 Taliban Militants

Beijing issued a measured response to Donald Trump’s naming of a China trade skeptic to oversee American trade and industrial policy, as it weighed how to approach the U.S. president-elect’s threats of a confrontation over trade.

“China like every other country is closely watching the policy direction the U.S. is going to take,” a Foreign Ministry spokeswoman said. “Cooperation is the only right choice for both sides.”

Mr. Trump named Peter Navarro on Wednesday to head the National Trade Council, a newly created White House office. Mr. Navarro, a Trump campaign adviser and University of California professor, has argued that China’s accession to the World Trade Organization in 2001 halved American economic growth and cost it 70,000 manufacturing jobs.

—Mark Magnier

Mediators urged Congo’s president and opposition parties to reach an agreement before Christmas on a peaceful settlement to the country’s political crisis, saying dozens of people have been killed this week amid protests over President Joseph Kabila’s stay in power.

“Enough is enough,” Msgr.

Marcel Utembi, one of the Catholic Church mediators, said Wednesday. “A solution must be found as soon as possible by all political actors, but in particular by the government in order to reassure the Congolese people.”

Mr. Kabila’s mandate ended this week and he is constitutionally barred from seeking another term, but a court has ruled that he can remain in power until new elections, which have been indefinitely delayed.

—Associated Press

Police gunned down three Taliban militants who had stormed the Kabul home of a prominent lawmaker, triggering an all-night battle with security forces that killed at least eight people, officials said.

Security forces managed to rescue Mir Wali Khan from his house in western Kabul after the militants attacked late Wednesday. But two of his young grandchildren were killed in the attack, along with other relatives and security guards.

Mr. Khan, who represents Helmand province, and his wife were among the six other people wounded. The province is largely Taliban-controlled.

Afghan security forces also rescued 18 people from nearby buildings during the nine-hour battle, the interior ministry said.

—Ehsanullah Amiri

The U.S. Navy said an American underwater drone that had been in China’s hands for five days would be examined for any tampering, but appeared intact, as U.S. officials tried to fathom Beijing’s motives for the incident in the South China Sea. Photographs released by the U.S. naval forces in the Pacific show the “ocean glider” drone being loaded onto the USS Mustin, a guided-missile destroyer, following a handover from the Chinese ship.

“The ocean glider was intact when it was retrieved but at this time I can’t speculate on the condition until our experts fully inspect and assess it,” U.S. Pacific Fleet spokesman Lt. Cmdr. Matt Knight told The Wall Street Journal.

China says its personnel hadn’t identified the drone when they picked it up because they thought it posed a safety risk.

—Jeremy Page

PPI VIA ZUMA WIRE

CONGO

CHINA

IN THE RED: Awami National Party supporters in Peshawar, Pakistan, mark the fourth anniversary of their leader’s death.

SYRIA

Aleppo Evacuation Nears Conclusion The evacuation of the last remaining civilians and fighters from a rebel-held enclave in eastern Aleppo was nearly complete on Thursday, the Red Cross and Syrian state TV said, as

more gunmen and civilians braved freezing temperatures to leave.

The departures of about 30,000 fighters and civilians pave the way for President Bashar al-Assad to assume full control after more than four years of fighting over Syria’s largest city.

—Associated Press

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WORLD NEWS

Berlin Stumbles in Terror Fight, Critics Say Lag in identifying truck attack suspect adds to concerns that German security falls short

BERLIN—German authorities are facing mounting criticism for failing to neutralize the man suspected in Monday’s truck attack, a petty criminal who had long been on the radar of security services.

A cascade of mishaps before and since the attack—and parallels with another case two months ago—raise concerns that Germany’s intelligence and law-enforcement systems, as well as its methods for vetting migrants, may not be up to the challenge posed by the terrorists now threatening Europe.

“They had intelligence, prisoners who told them Islamic State wanted to mount attacks in London, Paris and Berlin.

But still they thought they are protected, despite all attempts,” said Claude Moniquet, a Brussels-based counterterrorism expert and former French intelligence agent. “An attack can happen in any country, but they weren’t prepared.”

To be sure, German authori-

MICHAEL SOHN/ASSOCIATED PRESS

BY VALENTINA POP AND RUTH BENDER

People lighted candles on Wednesday near the Berlin Christmas market where 12 people were killed on Monday in a truck attack. ties have dismantled numerous terror plots this year, and countries reputed for their tough terror laws, such as France, have suffered devastating attacks.

Several laws passed in Germany this year have extended the remit of intelligence agencies. The government on Wednesday approved a bill allowing the use of video surveillance in public places, a move

already in train before Monday’s attack. But this week’s events suggest Germany isn’t adequately prepared for countering the terrorist threat.

Anis Amri, the Tunisian man now being sought as the perpetrator of Monday’s deadly truck attack, landed on the intelligence services’ radar soon after arriving in Germany from Italy last year for his ties to a radical

Islamic preacher and suspected Islamic State contacts. German officials said his asylum claim was rejected and blamed Tunisia for not issuing documents enabling his deportation.

“Ultimately this was on Germany’s watch; they were supposed to monitor him and they didn’t,” Mr. Moniquet said.

Successive mishaps in a separate case suggest the

flaws in Germany’s antiterror effort run through the entire length of its security apparatus, from its long underfunded domestic intelligence to its police work and prison system.

In October, a police SWAT team stormed a flat in the eastern city of Chemnitz in search of Jaber Albakr, a man suspected of planning a suicide bomb attack on a Berlin

Polish Trucker’s Death Brings Tragedy Home

ISRAEL Continued from Page One views of the peace-negotiating group known as the Middle East Quartet, which issued a report in August calling settlement construction an obstacle to peace and urging its end.

The Quartet is composed of the U.N., the U.S., Russia and the European Union.

The U.S. vetoed a similar resolution against the settlements in 2011, but with Barack Obama in the final weeks of his presidency, Palestinian officials have brought the measure forward again hoping the president will break with precedent and not order a U.S. veto or abstention.

The draft resolution wording closely reflects the views of the Middle East Quartet.

In Mr. Obama’s final year in office, the White House has considered ways to revive Israeli-Palestinian peace talks, and in recent months has considered supporting a resolution, according to White House officials.

The draft resolution,

viewed by The Wall Street Journal, calls on the Palestinians and the Israelis to vehemently condemn acts of terrorism and on U.N. member nations to distinguish, “in their relevant dealings, between the territory of the state of Israel and the [Palestinian] territories.”

Israeli Prime Minister Benjamin Netanyahu tweeted overnight that the measure was “anti-Israel” and said the U.S. should veto the resolution. His cabinet ministers also admonished the U.S. to continue its longstanding policy of vetoing resolutions perceived to be biased against Israel.

“Later on today the U.N. Security Council is going to convene to condemn, and perhaps worse, hurt Israel for living here,” said Naftali Bennett, leader of the pro-settlement Jewish Home party, before the vote was postponed.

The embassies of the U.S. and Egypt in Tel Aviv didn’t respond to requests to comment Thursday.

Palestinian officials in West Bank city of Ramallah, the seat of the Palestinian Authority, declined to comment on the draft resolution, referring questions to their representatives at the U.N., who weren’t immediately available to comment.

For the Palestinians, a Security Council resolution con-

Continued from Page One Tunisian officials turned 24 on Thursday, arrived in Germany last year after making his way to Italy from Tunisia in 2011, officials said. That year he was arrested and imprisoned for four years after being involved in a fire set to a migrant detention center on the Italian island of Lampedusa.

Once he was released, Italian authorities tried to send him back to his home country, but Tunisia wouldn’t accept him, according to an Italian official.

In Germany, authorities were unable to deport him despite suspicions that the suspect had

links to Islamist extremism because he lacked documentation proving he was from Tunisia.

Mr. Amri was detained for a day in late July but released again as Tunisia refused to take him back, a spokesman for the justice ministry in the state of Baden-Württemberg said.

His papers were checked by police at a bus stop in the city of Friedrichshafen on July 30 and police then took him into custody when his name appeared on a list of migrants denied asylum and set to be sent back to their home country.

North Rhine-Westphalia had flagged him and said he should be taken into custody, but “the next day they said ‘set him free’ because he couldn’t be sent back to Tuni-

sia within the next three months” because authorities there were contesting his Tunisian citizenship, said spokesman Steffen Tanneberger.

According to German law, migrants who are denied asylum can’t be held in custody if there is no prospect to deport them within three months. Arrests on security grounds can be made, but are part of different procedures that hadn’t been demanded by the state of North Rhine-Westphalia, he added.

Officials said Germany finally received the new papers from Tunisian authorities necessary to deport him on Wednesday—two days after the Christmas market attack.

Mr. Amri’s residence permit was discovered in the cab of

demning the settlements as the Obama administration winds down has become more urgent with Mr. Trump’s nomination of David Friedman as U.S. ambassador to Israel and indications that he supports moving the U.S. Embassy in Israel from Tel Aviv to Jerusalem.

That step is opposed by the Palestinians, who want part of

Jerusalem as the capital of a future Palestinian state.

Mr. Friedman has helped raise millions of dollars for prominent West Bank settlement Beit El, to which he and his family have longstanding connections.

Beit El has also received donations from Mr. Trump’s personal foundation and the family of his son-in-law Jared

Kushner.

The U.S. has repeatedly condemned Israeli settlement construction in the West Bank, land Israel captured from Jordan in the 1967 Arab-Israeli war. Israel disputes that the settlements are an obstacle to peace and instead blames Palestinians’ refusal to accept a Jewish state in the region.

Last week, Israel’s govern-

ment agreed to relocate Jewish settlers from the West Bank outpost of Amona, which is built on Palestinian land, to another part of the territory, avoiding a potentially violent confrontation but underscoring state support for settlements.

—Damian Paletta and Carol E. Lee contributed to this article.

German police took part in a raid at a house in Dortmund on Thursday during the hunt for the suspect.

TRUCK

BAZ RATNER/REUTERS

WARSAW—Lukasz Urban was so meticulous about the Swedish-made semitrailer truck he drove that his colleagues called him “The Inspector.”

When its owner saw erratic movements on its GPS data, he could pinpoint just when something went amiss in Berlin.

A highway veteran with a reputation for reliability, Mr. Urban arrived Monday morning—a day earlier than scheduled— with his delivery: 25 tons of square steel tubes he had transported to a Thyssenkrupp AG unit warehouse in an industrial neighborhood in the German capital from Italy. He planned to return to his wife and 17-yearold son in their Polish village near the German border, said the truck’s owner, Ariel Zurawski.

Instead, the depot’s schedule required the driver to come back the next day. Hours after he left the site, his truck began lurching forward and backward, an indication the 37-year-old trucker—later found shot, beaten and stabbed inside—was no longer in control of the vehicle that would plow through a Christmas market that night.

“Lukasz was massacred. I barely recognized him” in police photos, said Mr. Zurawski, a cousin who later reviewed the

truck’s GPS data. He said he believes Mr. Urban—a powerfully built 6-foot-tall, 260-pound man—would “fight to the end” to save his vehicle.

Mr. Urban’s death has made him a national figure as an attack that seemed distant again claims a Polish life. At least four Polish citizens have died in terrorist attacks this year, including two slain when a carjacker in Nice, France, drove a truck into a crowd of revelers in July.

Another 61-year-old woman died in a bombing at the Brussels airport. Some Poles have suggested Mr. Urban receive a posthumous presidential medal.

The specifics of Mr. Urban’s movements after he was turned away from the warehouse aren’t entirely clear.

It appears Mr. Urban parked nearby and set out to grab lunch. One of the last pictures taken from his phone showed the trucker at a kebab shop.

By 3:45 p.m., his truck began to shudder and move in jerking motions—as if a beginner had taken the wheel, said Mr. Zurawski, who gave the GPS data to police. Police initially said the trucker remained alive for hours.

Mr. Zurawski isn’t sure: “If alive, what would he be doing?“ he said. “They must have killed him, violently on the spot.”

—Andrea Thomas in Berlin contributed to this article.

the semitrailer Tuesday, the day after it rammed into a Berlin Christmas market, leaving 12 dead and dozens injured.

Authorities had missed a chance to launch their manhunt earlier. On Tuesday, prosecutors released an initial suspect detained just after Monday evening’s attack after determining he was the wrong man.

A German security official said he had connections to a fundamentalist Muslim preacher, known as Abu Walaa, whom German police took into custody in November for allegedly leading a network recruiting fighters for Islamic State.

Shortly after starting a probe into Mr. Amri’s activities in the spring, Berlin prosecutors won court authority to monitor his communications and observe his movements.

But months of surveillance failed to reveal any evidence to back up the security agencies’ tip, the Berlin general prosecutor’s office said on Wednesday.

Instead, the surveillance, which ended in September, found Mr. Amri active as a small-time drug dealer in Berlin’s Kreuzberg neighborhood.

Tunisia’s Foreign Ministry had no immediate comment on the claim that the country initially refused to accept Mr. Amri, but said it was looking into the matter. Mr. Amri was a fugitive after a conviction for armed robbery, the country’s Interior Ministry said.

—Shane Harris in Washington contributed to this article.

STEPHAN SCHÜTZE/DPA/ZUMA PRESS

BY MARTIN M. SOBCZYK AND DREW HINSHAW

airport. He managed to flee on foot, partly because the officers’ equipment was too heavy for them to catch up, security officials said at the time.

Mr. Albakr was later caught in Leipzig—not by police but by Syrian refugees who restrained him and handed him over.

When the prison’s psychologist finally interviewed him, she decided Mr. Albakr wasn’t a suicide risk. Two days after he was detained, Mr. Albakr’s lifeless body was found hanged in his cell.

Chancellor Angela Merkel has promised to crack down on rejected asylum applicants and pledged that 2015’s largescale influx of asylum applicants wouldn’t be repeated.

But many critics, including in Ms. Merkel’s own party, have called for a tougher line, and her allies fear she will lose voters to an upstart anti-immigrant party when she runs for a fourth term next year.

“There are numerous refugees nationwide who we do not know where they come from, and there is the potential for uncertainty,” Klaus Bouillon, the interior minister of the state of Saarland and a member of Ms. Merkel’s Christian Democrats, told a German newspaper.

—Andrea Thomas in Berlin and Julian E. Barnes in Brussels contributed to this article.

A Jewish man covered in a prayer shawl, prayed this month in the unauthorized Jewish settler outpost of Amona in the West Bank.

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U.S. NEWS

Appointee Has Taken Aim at China Trump Names Peter Navarro, picked to head new National Trade Council, is skeptic on benefits of trade

Donald Trump selected two key figures for his economic team, both of whom could jolt Washington’s approach to trade and regulation.

The president-elect announced the creation of a new National Trade Council inside the White House to facilitate industrial policy and named an ardent skeptic of trade with China, economist Peter Navarro, to head it.

He also tapped billionaire investor Carl Icahn to serve as special adviser on overhauling federal regulations, a job with sweeping implications given Mr. Trump’s campaign promise to remove 90% of federal rules that affect American jobs.

The announcements offer clues about how Mr. Trump will attempt to flesh out his distinct economic agenda that fuses traditional GOP principles of lower taxes and regulation with a more populist approach on trade, immigration and manufacturing.

Businesses and markets have generally applauded Mr. Trump’s steps on the former but are warier about fights he could pick with U.S. executives or foreign governments over trade and overseas business deals. It is unclear how the new trade council will complement—or duplicate—existing White House agencies.

The corporate world is carefully monitoring the presi-

ANDREW HARRER/BLOOMBERG NEWS

By Nick Timiraos, David Benoit and Damian Paletta

Peter Navarro, named as an adviser to Donald Trump, spoke to reporters in September in New York. dent-elect’s willingness to intervene directly with certain companies, particularly those in the manufacturing sector.

Mr. Trump on Wednesday met at his club in Palm Beach, Fla., with the chief executives of Boeing Co. and Lockheed Martin Corp. to discuss in part ways to lower the costs of building a new Air Force One plane for the president-elect and future jet fighters.

One question is whether the new trade and regulatory posts will be vested with real power or whether they are symbolic appointments.

Mr. Icahn’s new regulatory post isn’t an official government job, and he won’t draw a salary or have to give up his current business dealings. Yet the role Mr. Trump gave him on Wednesday could broaden his influence in Washington and elsewhere.

“What Trump is trying to achieve is to show business in a lot of this country they aren’t going to be ruined by absurd regulation by bureaucrats,” Mr. Icahn said in an interview.

Mr. Icahn was an early backer of Mr. Trump and urged him to support efforts to let U.S. corporations bring home offshore cash.

Mr. Navarro, a professor at the University of California, Irvine, who served as a top campaign adviser, is the first economist selected by Mr. Trump for a senior White House job.

The National Economic Council, which will be led by Goldman Sachs Chief Operating Officer Gary Cohn, currently handles economic-policy deliberations that cut across multiple agencies, and the National Security Council, to be led by retired Lt. Gen.

Michael Flynn, manages international economic policy. Mr. Trump selected another Goldman Sachs veteran, Steven Mnuchin, to be his Treasury secretary.

Mr. Navarro’s appointment suggests the incoming administration’s trade strategy is continuing to evolve. He “has presciently documented the harms inflicted by globalism on American workers and laid out a path forward to restore our middle class,” Mr. Trump said in a statement.

Mr. Trump has promised to withdraw the U.S.’s pledge to join the Trans-Pacific Partnership, a trade agreement with Japan and other Pacific Rim nations that Congress has yet to ratify, and he has called for the U.S. to renegotiate the North American Free Trade Agreement with Canada and Mexico.

But it is with China, which isn’t a party to either agreement, where Mr. Navarro has taken his harshest tone.

He has written several books with provocative titles, including “The Coming China Wars” in 2008 and “Death by China: Confronting the Dragon—A Global Call to Action” in 2011. He struck up a correspondence with Mr. Trump several years ago after he saw an interview in which the businessman spoke approvingly of Mr. Navarro’s China analysis.

“What we share in common is a deeper understanding of the key structural problem facing the U.S. economy, and it’s the trade issue,” said Mr. Navarro in an interview before last month’s election.

Labor groups have long complained about U.S. trade agreements and are likely to support Mr. Trump’s efforts to adjust policy in ways that bolster domestic manufacturing and curb imports.

Mainstream economists have taken a dim view of recent articles by Messrs. Navarro and Ross that characterize U.S. trade deficits as a drag on growth, which economists say present a flawed and confused view of elementary economic principles.

“Peter Navarro, a friend, is just wrong,” Lawrence Kudlow, the CNBC commentator who advised Mr. Trump earlier this year on taxes, posted on Twitter before the election. Trade deficits, he added, simply reflect capital inflows and not forgone economic gains.

Mr. Kudlow is a leading candidate to head the White House Council of Economic Advisers.

—William Mauldin contributed to this article.

Conway as Counselor

BY DAMIAN PALETTA WASHINGTON—Presidentelect Donald Trump said he was appointing Kellyanne Conway to be counselor to the president, putting his close adviser into a key White House role where she could have input on virtually any decision.

Ms. Conway joined the Trump campaign when it was struggling to find a consistent message in August and helped focus the strategy in the final three months. She was the first female campaign manager to lead a successful presidential run.

“She is a tireless and tenacious advocate of my agenda and has amazing insights on how to effectively communicate our message,” Mr. Trump said in a statement Thursday.

White House counselors are often influential, but their input varies based on their chemistry with presidents.

They can have input on domestic or foreign policy.

In the final months of the campaign, Ms. Conway made numerous media and public appearances, helping hone Mr. Trump’s message as Election Day neared. She has made a career in polling and as a political consultant.

After the election, she remained an integral part of Mr. Trump’s transition team. Not all of her advice remains private, however. She publicly blasted former Massachusetts Gov. Mitt Romney as Mr. Trump was considering him to be the nominee for secretary of state.

U.S. Tax Revamp Faces Hurdle in WTO Homicides Rise in 16 Of 20 Largest Cities T

he flaws in the U.S. corporate tax are legion: It encourages debt, outsourcing and tax avoidance while punishing investment.

House Republicans may have found a way to solve all of this. Their ambitious plan, besides revamping individual taxes, would replace the current corporate tax with a tax on cash flow that exempts exports while taxing imports.

It faces the usual hurdles of any tax overhaul: losers, in this case importers, who won’t go quietly, and a potential increase in the budget CAPITAL deficit. It also ACCOUNT faces one unGREG IP usual obstacle.

Even though it’s economically similar to, and probably better than, the value-added taxes many other countries use, it may be illegal under World Trade Organization rules. An international clash over taxes is something the world can ill afford with protectionist sentiment already running high.

The current U.S. corporate tax rate, at 35%, is the developed world’s highest and is charged on profits earned abroad when they are repatriated (minus foreign tax paid). This incentivizes companies to rearrange their operations to book profit in low-tax countries like Ireland and avoid repatriating them.

An alternative “territorial” system wouldn’t tax foreign profits, but that also encourages outsourcing to low-tax countries since operations there won’t incur U.S. taxes.

Changing Tax Takes

Over time, advanced countries have come to rely more on valueadded taxes and less on corporate taxes; the U.S. is an exception.

Share of all taxes that OECD central/federal governments collected from the VAT and corporate income tax

G7 countries’ shares of tax that come from VAT and corporate income tax in 2015

35% France

30 25

VAT share of total taxes

Japan

15

U.K.

10 Corporate income tax as share of total taxes 5

Italy

’05

’10

Source: OECD

Under the House plan, companies could expense all capital investments immediately instead of over time, but no longer expense net interest, removing the current bias of debt over equity financing and old over new investment. A 20% tax rate would be applied to revenue minus costs such as labor and parts. Exports wouldn’t count toward revenue, while imports wouldn’t count toward costs.

In theory, this “border adjustability” sweeps away the distortions that encourage firms to slash their tax bills to almost nothing by shifting profits and operations around the world, while other businesses pay the full rate.

“It became clear we needed border adjustability to eliminate all the incentives for companies to move jobs, innovation and head-

U.S.

31.9

4.0

9.3 8.5 14.3 14.7

Canada

0 2000

14.0

Germany

20

42.5%

0

28.4 24.0 27.9 25.1

14.5

THE WALL STREET JOURNAL.

quarters overseas,” Rep. Kevin Brady, chairman of the House Ways and Means Committee, said in an interview.

The controversy is over whether border adjustability discriminates against trade partners. Legally, it depends.

The VAT—which is like a consumption tax—is also border-adjustable. A Mexican-made car sold in Mexico carries VAT, as does an imported car. Mexico rebates the VAT when that car is exported to the U.S. The U.S. could slap its own VAT on it, so long as it does the same to American-made cars.

The problem is that while other countries finance a growing share of public services with a VAT, the U.S. relies on income and payroll taxes, which aren’t rebated on exports. In effect, the U.S.-made car shoulders costs that its Mexican-made

competitor doesn’t. The cash flow tax solves that problem.

It would penalize imports but not if foreign countries adopt it, much as the discriminatory effect of a VAT would disappear if the U.S. had one.

E

conomically, it shouldn’t matter. A trade deficit occurs when a country consumes more than it produces; a tax change won’t eliminate the deficit unless consumption patterns also change. In theory, the dollar should rise to eliminate any tax-driven disadvantage for imports. A 2012 International Monetary Fund study found that outside the eurozone, a shift from payroll to value-added taxes had no impact on trade balances.

This might disappoint President-elect Donald Trump, who wants a lower trade deficit. Not Mr. Brady: “Our focus is on economic growth; trade deficits aren’t always an indicator of that.”

Indeed, the House plan can raise gross domestic product by reducing both the incentive to move activity overseas and the after-tax cost of capital, boosting capital-intensive industries such as manufacturing. This raises workers’ productivity and wages, some of which will be spent on foreign products, for example French wine or Mexican vacations. The result: higher exports and imports, but not necessarily a smaller trade deficit.

Mr. Brady says since the tax shares many features of a consumption tax, it should be WTO-compliant.

BY SCOTT CALVERT AND SHIBANI MAHTANI

Homicides rose in most big American cities in 2016, continuing a worrisome trend for police and criminologists that began last year, even as murder rates in most cities are nowhere near the levels of two decades ago.

Sixteen of the 20 largest police departments reported a year-over-year rise in homicides as of mid-December, a Wall Street Journal survey found. Some notched minor increases, while Chicago has experienced one of the most dramatic jumps, with more than 720 murders—up 56%

from 2015.

Chicago’s homicide count, greater than the considerably larger cities of Los Angeles and New York combined, marks a grim tally not seen since the violent drug wars of the 1990s. In Chicago, police have seized more than 8,000 illegal guns this year.

Nationally, 37 of the 65 largest police agencies, including ones in San Antonio, Las Vegas and Memphis, Tenn., reported year-over-year homicide increases as of Sept. 30, the Major Cities Chiefs Association said. In 2015, 44 departments reported increases, many for the first time in years.

On the Rise Change in reported homicides for the 20 largest police departments 2015-2016 (through Dec. 11) San Antonio Chicago Phoenix* Suffolk County, N.Y. Memphis, Tenn.

Dallas* Las Vegas San Francisco Honolulu Detroit* Boston Los Angeles Nassau County, N.Y. Houston Miami-Dade Philadelphia New York Milwaukee Baltimore Washington, D.C. –25%

2014-2015

0%

25%

50%

75%

Notes: No 2014-2015 data available for Las Vegas *2016 data through Nov. 30 Source: cities’ police departments THE WALL STREET JOURNAL.

U.S. WATCH ECONOMY

GDP Rose at Faster 3.5% Pace in Quarter The U.S. economy expanded faster than previously estimated in the third quarter. Gross domestic product, a broad measure of the goods and services produced across the economy, rose at an inflation- and seasonally adjusted annual rate of 3.5%, the Commerce Department said.

The rate was revised up from last month’s 3.2% estimate, and is the strongest quarterly pace

of growth in two years.

Growth accelerated from a 1.4% advance in the second quarter and a 0.8% increase in the first three months of the year.

The latest data showed stronger consumer spending on services and better business investment in buildings and intellectual property.

The economy has grown at about a 2% pace since the recession ended in 2009, marking the slowest average rate of any expansion since at least 1949.

—Eric Morath and Jeffrey Sparshot

ECONOMY

November Spending Slowed, Incomes Flat Household spending slowed in November and incomes were flat, signs that recent economic momentum may have eased during the month that included the presidential election.

Personal consumption, which measures how much Americans spent on everything from groceries to airfare, rose 0.2% in November from a month earlier, the Commerce Department said on

Thursday. Incomes were essentially unchanged in November from October. Spending for October was revised higher to a 0.4% gain from an initial estimate of up 0.3%. Incomes in October advanced 0.5% versus a previous reading of up 0.6%.

Consumer spending accounts for about two-thirds of total output in the U.S. and household outlays have been the main driver of economic growth throughout much of the expansion.

—Eric Morath and Jeffrey Sparshot

MILITARY AFFAIRS

Navy Reverses Course on Job Titles The U.S. Navy once again will let enlisted sailors use traditional job rating titles, according to an official announcement that represents an about-face by top leaders who wanted to scrap a system as old as the Navy itself but who faced pushback from sailors world-wide.

Traditionally, an enlisted sailor’s title has consisted of both an occupational rating and

a pay rate—for instance, Electrician’s Mate First Class or Culinary Specialist First Class.

In September, Navy officials announced a new system that would give those sailors—and all others with the same pay rate— the same title: Petty Officer First Class.

Wednesday’s policy reversal

by Chief of Naval Operations, Adm. John Richardson, came after conversations with sailors throughout the Navy who complained about the decision.

—Ben Kesling and Gordon Lubold

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A6 | Friday - Monday, December 23 - 26, 2016

FROM PAGE ONE

Continued from Page One webcams. Co-workers guessed what they were drinking. (Answer: coffee, tea, cocoa or water, in most cases.)

Participants appeared onscreen in Christmas hats and sweaters and gave tours of their home decorations using laptop cameras. Headquarters had sent the telecommuters cookies so no one would feel left out.

The mood, Mr. Bystedt said, was “well, festive.”

In 2015, about three million employees in America worked at least half-time from home, not including the self-employed, according to census data analyzed by consulting firm Global Workplace Analytics.

Some of those telecommuters yearn for a bit of traditional workplace togetherness, including holiday office cheer.

Employers are obliging with virtual parties.

Typically, participants join via webcam, often during the workday. Some team leaders send gifts for everyone to open at once.

Lisette Sutherland, who manages a global all-remote team for Happy Melly, which helps companies develop techniques to keep workers happy, began hosting virtual parties three years ago.

“On a virtual team, you have to make do with what you can,” said Ms. Sutherland, who lives in the Netherlands.

This year, she challenged workers to finish a sentence:

LISETTE SUTHERLAND

PARTY

Participants in a virtual holiday party this year at the company Happy Melly played games, including one involving their shoes “When I dance, I look like…”

Responses included “…like a mix between John Travolta and a really weird pole dancer,” by Sam Mednick, who joined the virtual party from Barcelona.

Another responded: “…like a socially awkward robot.”

The event, attended by eight people, included a virtual dance party set to Wham! singing: “Last Christmas, I gave you my heart.” All were encouraged to dance in front of their cameras.

“Everybody participates.

That doesn’t mean everyone

stands up to dance,” said Jennifer Riggins, a London-based Happy Melly worker who has logged on in the past. “People will wiggle at their desks.”

Alcohol helps, she said. “How festive they get depends on which time zone they’re in—10 a.m. may not be the best time.”

At this year’s event, the Happy Melly partyers went on to discuss 2016 business highlights and goals for 2017. The party, officially scheduled for an hour, petered out after about 45 minutes.

Hassan Osman, a Cisco Systems manager and author of the book, “Influencing Virtual Teams,” said virtual parties are often unsuccessful and can be downright “sad.”

“It’s kind of like being in front of your computer and eating while watching other people eat,” he said, adding that employers would be better off rebranding the exercise as a team-building event.

Mr. Osman recalled a virtual party while at a startup a few years ago. Only about five of the

15 remote workers participated.

Once logged on, they discovered there wasn’t much to do. “That just added to the sadness.”

Kelly King decided to throw a virtual party this year that at least tasted like a real one.

She manages a team of about 300 online health and fitness coaches for a company named Beachbody.

She encouraged participants to consume their favorite drinks and snacks in front of their webcams. She also organized a secret-Santa exchange, with

workers mailing one another gifts to be opened on-screen.

At last year’s online party, Beachbody trainer Michele Funk donned a reindeer-antler headband while others wore Christmas-themed shirts and sweaters. All poured themselves a glass of wine or, in Ms. Funk’s case, a low-calorie vodka and club soda. They paid for their own drinks.

The party plan at G&A Partners, a human-resources-outsourcing company, is to link Houston headquarters with offices in Texas, Minnesota and Utah and with solo employees.

G&A will offer a hashtag for posting photos on Instagram and a “mingling station” where headquarters employees can talk to people over the computer, said Bonnie Scherry, its human-resources manager.

She said someone can say, “I’d like to talk to Susie Q and say, ‘Hey, I wanted to wish you a merry Christmas’ or talk about a project they had been working on or something like that.”

G&A plans its event for January. “We’ll get better participation and more excitement,” Ms. Scherry said, “because it’s not during the holiday season.”

Moses Medina, who works for G&A from Chicago, said he is looking forward to the virtual party. Likewise, to his department’s holiday lunch at a real live restaurant, in which colleagues will place him at the table—on the phone.

The phone will be propped up, beaming in Mr. Medina on its display. With technology, he said, “you can be there during special moments.”

IN DEPTH

Investigators ask if Goldman had reason to suspect the misuse of 1MDB funds. source of his wealth, the bank continued to interact with him on 1MDB business, according to people familiar with events in several countries and investigations of those events. This article is based on interviews with a wide range of these people as well as on documents that include U.S. asset-seizure lawsuits filed in July.

Goldman has consistently said it did nothing wrong and had no way of knowing there might be fraud surrounding 1MDB. The bank has said its main role was raising money it thought would be used for the stated purposes. “We have found no evidence showing any involvement by Jho Low in the 1MDB bond transactions,” the firm said.

Mr. Low has denied any wrongdoing, as has Mr. Najib, and the prime minister has been cleared by the country’s attorney general. The 1MDB fund has denied it did anything wrong and pledged cooperation with investigations. Probes of the fund’s missing billions are under way in several countries.

Central to Goldman’s 1MDB dealings was Mr. Leissner, 47

CURTIS MEANS/ACE PICTURES/ZUMA PRESS

Continued from Page One Swiss investigators have labeled a Ponzi scheme, ran into roadblocks in its quest to raise cash, Goldman helped keep the money flowing through bond sales.

U.S. Justice Department investigators are trying to determine whether Goldman had reason to suspect that money it helped 1MDB raise was misused and, if so, whether the bank was obligated to report any concerns to authorities. The Federal Reserve, the Securities and Exchange Commission and New York state’s Department of Financial Services also are examining some of the bank’s actions, as are Singapore authorities, according to people familiar with the situation.

One point authorities are focusing on is Goldman’s relationship with Jho Low, a Malaysian financier and Najib confidant whom investigators place at the center of the scandal. Tim Leissner, formerly Goldman’s chairman for Southeast Asia, dealt for several years with Mr. Low. Investigators believe Mr. Low made key decisions at 1MDB, despite holding no official position there, and received hundreds of millions of dollars taken from the fund starting in 2009.

Although Goldman turned down Mr. Low as a private client, on concerns about the

Key Introduction Mr. Low, who had Middle East ties, introduced people from Goldman and 1MDB to officials of an Abu Dhabi sovereignwealth fund, International Petroleum Investment Co., or IPIC. Mr. Low was someone Goldman had twice declined to let open a private account, because of compliance concerns.

The bank also declined to serve as an adviser on deals done by Mr. Low’s family investment arm, said people familiar with the matter.

In the 1MDB matter, some at Goldman seemed confused about Mr. Low’s role. Mr. Leissner assured them Mr. Low played no part on the bond deal.

Executives at Goldman were aware, however, that Mr. Low had made the introductions in Abu Dhabi. One managing director described him as “the 1MDB Operator or intermediary in Malaysia” in a March 2012 email cited by the Justice Department in lawsuits seeking the forfeiture of assets allegedly bought with misappropriated money.

The Malaysian fund received a guarantee of its bonds from IPIC, which declined comment.

Goldman then got the bonds issued quickly by agreeing to take them onto its own balance sheet, for later sale to investors.

The bank has said the risk it assumed in doing things this way justified a high fee. According to the Justice Department assetforfeiture suits, the bank charged 1MDB $192.5 million, or about 11% of the bond issue. The fee on a deal like that would typically be about $1 million.

Goldman was able to sell the bonds quickly, limiting its risk.

DEBBY WONG/CORBIS

1MDB

years old, an outgoing German who was skilled at getting close to Asian businessmen, according to former colleagues. Some referred to Mr. Leissner, who is married to fashion designer Kimora Lee Simmons, as Dr. Tim, for a doctorate he had from now-defunct Somerset University in Britain.

Mr. Leissner met Mr. Low in 2009. That year, Mr. Low persuaded one of Malaysia’s states to establish an oil-wealth fund, to which Goldman became an adviser. The fund evolved into 1MDB when the prime minister gave it the broader goal of spurring economic development.

Mr. Leissner in 2010 recommended a Goldman internship for the daughter of a close aide to the prime minister, according to Goldman employees. Shortly after she started work in Singapore, 1MDB hired Goldman to review a possible acquisition.

By 2012, 1MDB was struggling with debt. Mr. Leissner advised the fund on a bid to buy some power plants that would provide cash flow.

To make the deal, 1MDB needed to raise $1.75 billion, but it didn’t have a credit rating.

Goldman suggested the fund find an entity with strong credit to guarantee the issue.

Tim Leissner, at top with his wife, Kimora Lee Simmons, was the Southeast Asia chairman for Goldman and dealt with Jho Low, bottom, who is implicated in a scandal at Malaysia’s 1MDB fund.

Later in 2012, 1MDB sought to raise another $1.75 billion to buy more power plants. Goldman and IPIC played the same roles as before.

Both deals were approved by five Goldman committees that vet transactions posing financial or legal risk. In doing business with 1MDB, Goldman officials drew reassurance from its status as a state fund with the imprimatur of the Malaysian government and support of the prime minister.

Goldman’s fee for the second bond deal totaled about $114 million, according to the U.S. lawsuits. David Ryan, then the bank’s Asia president, questioned why Goldman didn’t lower the fees more, since it had been able to unload the first batch of bonds so easily.

His objections were overruled by Goldman officials including President Gary Cohn, according to people familiar with the matter.

While Goldman worked on the bond deal, the firm appointed a strong defender of the 1MDB business to a post above Mr. Ryan in Asia.

Mr. Ryan, who had been con-

sidered a rising star, left the bank the next year. He didn’t respond to requests for comment.

Mr. Cohn is now Presidentelect Donald Trump’s pick as his top economic adviser. Through the firm, Mr. Cohn declined to comment.

Much of the money raised by this second 1MDB bond sale was siphoned off into a series of offshore shell companies, investigators have alleged.

In early 2013, Mr. Leissner and Michael Evans, who was a Goldman vice chairman, met with Mr. Najib at the World Economic Forum in Davos, Switzerland. Mr. Najib said 1MDB planned a joint venture with Abu Dhabi to build a financial center in Kuala Lumpur and wanted to sell $3 billion more of bonds.

At the time, Mr. Najib faced a tough re-election fight, and concerns that he might be tapping 1MDB for money to help him win were discussed openly within Goldman.

Mr. Leissner commented to a colleague in early 2013 that he knew 1MDB was operating partly as a political slush fund, according to the now-

former colleague.

A friend of Mr. Leissner described hearing the same thing from Mr. Leissner about a year later and added that Mr. Leissner also said he was worried some 1MDB money was being stolen for personal enrichment.

A person familiar with Mr. Leissner’s thinking said he didn’t hold those views or voice them, calling the notion “revisionist history.”

Proceeds from a $3 billion bond issue would typically go into a major international bank, but 1MDB wanted them deposited into a small Swiss private bank called BSI SA. Outside counsel at Linklaters law firm alerted Goldman that the bond proceeds were headed to a private bank.

Goldman compliance executives approved the destination, in part because Goldman had done business with BSI in the past and had lined up global financial firms as correspondent and clearing banks.

BSI compliance officials, however, also questioned why the 1MDB bond proceeds were being sent to their bank, given its small size and its focus as a manager of wealthy people’s money, said an ex-BSI banker.

To assuage concerns, Mr. Low asked Goldman bankers including Mr. Leissner to meet BSI’s compliance staff, according to the ex-BSI banker. The banker said BSI management later cited the attendance of a senior Goldman executive at this meeting, held in a Singapore Chinese restaurant, to overcome the compliance department’s concerns.

BSI declined to comment.

After Goldman wired the $3 billion to 1MDB’s account at BSI, more than a third of it immediately was sent into a web of offshore funds, before ending up in an entity controlled by a Low associate, according to the U.S. Justice Department asset-forfeiture suits.

Singapore later charged three BSI executives with crimes linked to their dealings with 1MDB. Two pleaded guilty to forgery and failing to report suspicious transactions. The third was convicted on Wednesday of attempting to pervert the course of justice and is fighting charges that include money laundering.

Goldman bankers continued to court 1MDB business. Asia Chairman Mr. Evans was among guests who dined with Mr. Najib after the July 2013 meeting aboard the yacht at Saint-Tropez. About two months later, Mr. Najib, in New York for a United Nations assembly, headlined a meeting that Goldman Chief Executive Lloyd Blankfein hosted for clients.

Mr. Leissner won praise at partner meetings for the business he brought in. During a late-2014 meeting focused on growth markets, Mr. Blankfein said, “Look at what Tim and Andrea [Vella, who structured the 1MDB bond deals] did in Malaysia.” He added, “We have to do more of that.”

Mr. Leissner earned more than $10 million a year at the height of the dealings with 1MDB, former Goldman executives said.

Mr. Leissner also did a personal business deal with Jasmine Loo, a former 1MDB official and associate of Mr. Low. Mr. Leissner received several hundred thousand dollars from Ms. Loo, to be co-invested with him. Mr. Leissner didn’t report her investment to Goldman, as required by the firm, said one person familiar with the matter. Ms. Loo couldn’t be reached for comment.

The unraveling Goldman’s relationship with 1MDB began unraveling in 2014 when the cash-strapped fund sought a $1 billion loan from the bank. Goldman declined when 1MDB officials wouldn’t share information confirming the existence of the proposed collateral.

News of 1MDB’s debt struggles spread in 2015, with press reports linking Mr. Low to the fund’s problems. Pablo Salame, co-head of Goldman’s securities division, rejected an internal suggestion that the firm’s involvement in the mess could be blamed on the bankers and traders closest to 1MDB. Those people didn’t work alone, said Mr. Salame, who was recently named a vice chairman. “Goldman Sachs did these deals,” he said.

In June of 2015, Mr. Leissner wrote to Banque Havilland, a small Luxembourg private bank, vouching for Mr. Low, who wanted to open an account there. The letter said Goldman had done due diligence on Mr. Low and found no issues.

Banque Havilland didn’t respond to requests for comment.

Goldman compliance executives learned of this in a January 2016 email search. The firm confronted Mr. Leissner about the letter, which violated its policies, and he resigned the next day.

Goldman refused to give Mr. Leissner some of his deferred compensation. The sides are negotiating the matter.

This month, Singapore’s Monetary Authority cited the letter in saying it planned to bar Mr. Leissner from doing business in the city-state for a decade. Mr. Leissner’s lawyer said his client has been invited by Singapore authorities to respond and plans to do so.

The Justice Department has classified Mr. Leissner as a “subject” of its Goldman inquiry, meaning someone whose “conduct is within the scope of a grand jury investigation” but who isn’t considered a target, people familiar with the matter said.

His attorney, Marc S. Harris, said, “Throughout his professional life, Mr. Leissner has conducted himself with integrity, dedication and with high ethical standards and we believe the various ongoing investigations will support these facts.”

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Friday - Monday, December 23 - 26, 2016 | A7

BOOKS

‘We’re the favorite lads / Of girls in the picture ads / We’d like to tell you who / We kissed last night but we can’t be cads.’ —Irving Berlin

Blue Bloods and Greenbacks In Pursuit of Privilege

By Clifton Hood Columbia, 488 pages, $40

I WAS ASKED ONCE by a descendant of Elizabeth Schuyler’s if I was one of the “Hamilton” Hamiltons. I told her I didn’t know.

“Well, if you were, I suppose you’d know,” she replied.

It was a characteristic flick of the paw of a certain class, a class examined in “In Pursuit of Privilege: A History of New York City’s Upper Class and the Making of a Metropolis” by Clifton Hood, a professor of history at Hobart and William Smith Colleges.

It is a group most familiar to us recently from the wrong end: discussions of “the 1%” or movements like Occupy Wall Street.

But Mr. Hood makes a claim that might well have unsettled his subjects, that they are in fact, like African-Americans, gays and lesbians, and women before them, an important factor in American life that is insufficiently studied and understood.

And unlike the many histories of the turn-of-the-century’s Gilded Age—during which New York City’s upper class reigned in both its own mind and the public’s—Mr. Hood’s book sets out to tell the whole story, from prerevolutionary 18thcentury Manhattan to the 21st-century Hamptons.

“In Pursuit of Privilege,” appropriately, is a wealth of information. And its primary-source materials—diaries, letters, memoirs, minutes, period fictions—are a true pleasure.

But Mr. Hood, whose previous book is a history of building New York’s subway, seems to be building a subway at times, not driving the light phaeton with a spirited pair that his subject deserves.

Unadorned social history can have a kind of perfect delectability, like ripe fruit on a plate, and the book has its share. James De Lancey’s death notice in 1760—De Lancey was acting colonial governor of the Province of New York—reads “like a modern résumé,” writes Mr. Hood: heritage, education, trajectory of career in civic service, character, intellect, record of accomplishment, and omission. Not included was the fact that De Lancey was from a merchant family.

Though moneymaking was central to New York’s distinction as a city, merchants were admitted but not accepted by society. Even John Jacob Astor, America’s first perceptible millionaire, bloodied his forehead trying, unsuccessfully, to open its

GETTY IMAGES

BY WILLIAM L. HAMILTON

A SWELL CITY John Hertz and Helen Hertz (son and daughter of the founder of the rental-car company) walking with their friend Richard Busvine (at right) on Park Avenue, Easter Sunday, 1933. locked drawing-room doors. Commerce was quick and green-spirited, not blue-blooded, or landed, like gentry. Working was not an occupation suitable to a gentleman.

Mr. Hood also includes an anecdote from the Rev. Manasseh Cutler, a rural Massachusetts minister traveling in New York, about a dinner in 1787 given by William Duer, secretary of the Board of the Treasury, which might be a scene from Thackeray: “Colonel Duer’s wife was known as ‘Lady Kitty,’ having inherited that made-up title upon the death of her father, the self-styled Lord Stirling of New Jersey.”

But the gossip is generally dry, and without the sharp humor, false deprecation or powerful observation that the upper class themselves can bring to it. Too much missing here are the voices of those who have labored dedicatedly for more than 250 years to define and embody what it is to be different, better, elite and aristocratic.

“If there are three people on an island, one of them will say he got there first,” Fleur Cowles Meyer told Cleveland Amory, a conversation he included in “Who Killed Society?” his 1960 history of America’s upper class. Meyer, a writer, editor, hostess on both sides of the Atlantic and veteran of four marriages, explained

that the next man on the island would go to the top of the hill and build a big house. The last man would climb a tree and corner the market on coconuts. Thus, she concluded, you had the keys to society— family, prominence and money.

What Mr. Hood does share with Amory and his well-placed informants is the implicit agreement that defining the upper class, at its truest, is a question of knowing what it used to be and isn’t anymore—“a backward glance,” as Edith Wharton called her autobiography.

Mr. Hood’s story of New York City’s upper class is one of evolution, of a species adapting, repeatedly finding higher and higher ground upon which to stand and from which to command and tightly exclude—creating “a kind of cousins’ world,” as he puts it—but also selectively admitting, and mixing blood with, the self-made barbarians before being toppled. Society understood, as only it could, that irrelevance was its greatest enemy.

With the birth of unbelievably large, influential fortunes in the 19th century—those of the Vanderbilts, the Goulds, the Morgans et al.—the traditional elite, as Mr. Hood nicely puts it, had become the passengers in a precarious wicker basket sway-

ing beneath an enormous economic hot-air balloon.

“In Pursuit of Privilege” is at its best as metropolitan history, assiduously researched, reminding us not only of New York’s astonishing ac-

‘If there are three people on an island, one of them will say he got there first.’ complishments but also of its inglorious past. Here is the atmosphere of decidedly undemocratic royalism that attended Washington’s inauguration and residence in lower Manhattan after the Revolution; the ugly belligerence against Lincoln’s antislavery platform and the lack of interest in funding the Civil War; the Draft Riots of 1863, in which 119 people were killed in a four-day conflagration of anti-black sentiment; and the foul enduring policies behind some of the city’s most prestigious establishments, like the legendary men’s clubs, resistant to admitting prosperous German-Americans, aka Jews.

But, as his subtitle suggests, Mr. Hood also makes a strong case for a dynamic upper class being indispens-

able to the creation of New York’s most crucial institutions—the Metropolitan Museum of Art, the Metropolitan Opera, the New York Public Library—and civic monuments like Grand Central Terminal. (Donald L. Miller’s 2014 “Supreme City” is excellent too on Manhattan’s transformational entrepreneurship in the 1920s.)

As a social historian, Mr. Hood is less satisfying. His survey of the 20th century—the rise of the corporate class and its meritocracy, the affluent hierarchies of the suburbs, the distinctions and preoccupations of the upper-middle class (prep schools, country clubs) and the uncomfortable fit of the counterculture in the 1960s—is sociological and a little dull to the touch.

Inevitably, from the 19th century on, there is insurmountable competition to his narrative from the leading literary stylists of the day: William Dean Howells, Henry James, Wharton, F. Scott Fitzgerald, John Cheever, Truman Capote, Tom Wolfe.

Nothing taps the crystal with a knife and rings it like Howells’s observation that “inequality is as dear to the American heart as liberty itself.” And nobody is likely to kill themselves over the revelations within, as the socialite Ann Woodward did upon the publication, in the 1970s, of chapters from Capote’s unfinished roman à clef “Answered Prayers.”

The strangest lapse in “In Pursuit of Privilege”—it amounts to something of a sinkhole—is its refusal to engage the phenomenon of “cafe society” and celebrity, which is pretty much where we’re at right now.

In 1921, Maury Henry Biddle Paul, the first “Cholly Knickerbocker,” a popular pseudonymous gossip columnist, published two lists of prominent names—“Old Guard” and “Café”—in wry imitation of Ward McAllister’s “Four Hundred” of 1888. “Old Guard”: Mrs. Goodhue Livingston. “Cafe”: Laura Corrigan, an ex-waitress from Chicago who secretly married a steel heir from Cleveland after expeditiously dumping her current husband, then got shut out of the right circles in the United States and so became a brilliant hostess in London and then Paris. Maury Paul saw her sit down to dinner in a restaurant one night with Joseph E. Widener, Whitney Warren Jr. and others and dubbed the alliance “Cafe Society” in the next morning’s paper.

For all its ambitious sweep, nothing in Mr. Hood’s 488 pages can begin to explain the Kardashians. But then, perhaps nothing can. And wisely, he didn’t try.

Mr. Hamilton is a journalist in New York.

COCKTAILS: WAYNE CURTIS

Make Mine a Double, Please modern gins both notable and obscure, from Beefeater’s classic London Dry to St. George’s Botanivore, with tasting notes on their output. I found it hard to stay put while reading; I constantly wanted to leap up and strike out for a liquor store to test my new knowledge.

A lesser-known spirits category is amaro—which simply means “bitter” in Italian and includes such revered products as Campari and Aperol.

They are typically sipped neat in Eu-

Discover the spritz, the joys of amaro and some hip, new gins. rope, but craft cocktail bartenders over here love the way they add complexity and depth to mixed drinks.

Brad Thomas Parsons’s “Amaro: The Spirited World of Bittersweet, Herbal Liqueurs” (Ten Speed, 269 pages, $26) serves as an Alice-like rabbit hole allowing full immersion in the world of amaro, starting a swift tour of bars and brands before lingering on a slew of recipes—like the Letters of Marque, made with the artichoke-based amaro Cynar, Trinidadian rum, dry curaçao and Galliano —that put their edgy, appealing flavors to good use.

Another strategy for coping with the rigors of the year is to simply imagine yourself in another world.

One appealing parallel universe is featured in “Smuggler’s Cove: Exotic Cocktails, Rum, and the Cult of

Talia Baiocchi and Leslie Pariseau’s “Spritz: Italy’s Most Iconic Aperitivo Cocktail, With Recipes” (Ten Speed, 165 pages, $18.99) is a compact volume that touches deftly on drink history and throws in a dash of travelogue. But it is built around the recipes, which suggest that with just a few building blocks ingenuity can flow and flavors blossom.

Added bonus: The book includes recipes for continental snacks of the artichoke-olive-andcured meat variety, to further allow you to feel as if you’re at a cafe table out in the Campanian sun.

But perhaps it’s best to end this year on a quieter, more reflective note, and there’s TAROCCO SPRITZ Inspired by the Sicilian blood orange. actually a cocktail book for that— Trader Vic’s and Don the Beach- Sasha Petraske’s understated and imcomber) and offers more than 100 pressive “Regarding Cocktails” recipes, ranging from the classics (Phaidon, 251 pages, $29.95). It’s a (Mai Tai, Navy Grog) to more mod- book Petraske, the founder of the piern riffs, like the Cates’ own Chad- oneering Manhattan cocktail bar burn, made with rum, port, pear li- Milk & Honey, was compiling when queur and chocolate bitters. Bring he died suddenly last year at the age your own tiny parasol. of 42. The gaps have been filled in by An alternative holiday might take his widow, Georgette Moger-Peyou to the sidewalk cafes of Italy, traske, and a community of likewhere you can enjoy the austere minded bartender friends. drink known as the spritz—essenThe book is filled with a low-key tially a mix of potable bitters (see joy and embraces a no-nonsense, “Amaro,” above) and some bubbly. non-splashy approach to drink-makTiki” (Ten Speed, 352 pages, $30)

by Martin and Rebecca Cate. The Cates own and operate an extraordinary re-imagining of a midcentury tiki bar: Smuggler’s Cove in San Francisco. Their colorfully illustrated book covers the rise, apotheosis and aesthetics of tiki culture (think:

TEN SPEED PRESS

IF EVER A YEAR called for a stiff drink, it’s the one drawing fitfully, haltingly, thankfully to a close. Fortunately, publishers have our back with a slew of commendable books on spirits and cocktails to help us slouch across the finish line.

One might start with the palatecleansing long view and a return to the American republic’s early days.

“In so many ways, America is a bar,” writes the distilling entrepreneur Steven Grasse in “Colonial Spirits: A Toast to Our Drunken History” (Abrams Image, 215 pages, $24.95): “open to everyone, available to whoever can afford it, and apparently quite difficult to get kicked out of.”

His book is a collection of short takes and long recipes, most of which explore what colonists were drinking in the 18th century, which includes punch, shandy and a drink called “cock ale,” a restorative made of chicken stock, sherry and beer. I have not made the cock ale, nor do I intend to ever make the cock ale. Still, reading about it was diverting. The book is also dotted with wonderfully wry retro line drawings by Reverend Michael Alan.

“The Curious Bartender’s Gin Palace” (Ryland Peters & Small, 223 pages, $21.95) by Tristan Stephenson is a dive into that spirit’s fathomless deep end. The British bartender-author offers detail without tedium—he divides the extensive information about gin’s history and production into easily consumable, shot-sized chapters of a page or two (“The Rise of the Gin Palace,” “How Genever Is Made”). The bulk of the book is devoted to a survey of

ing, focusing chiefly on adaptations of classic cocktails with few ingredients, such as the martini, daiquiri and sour. Each featured drink is paired with an austere graphic on the opposite page, composed of a pattern of glyphs representing the ratio of various ingredients. The key printed on the accompanying bookmark contains some 120 wee symbols, from absinthe and Demerara rum to ginger beer and white peach purée. I suppose with enough memorization, one might know at a glance what the drink would taste like, much like a trained musician can hear a melody by glancing at sheet music. In any event, it’s calming to just contemplate the graphic.

The book concludes with brief, introspective essays about Petraske.

He was famous—and sometimes mocked—for the rules he cast in bronze on the bathroom doors at his bar. These included “No name dropping” and, for women, “If a man you don’t know speaks to you, please lift your chin slightly and ignore him.”

He also subscribed to more general rules of living, which invariably revolved around civility. On the subway: “No man should ever sit before every woman who wishes to rest has been offered a seat.” “Regarding Cocktails” is as much about human connection as it is about jiggers and bitters. And Petraske’s sort of civility seems something we all could use more of in the new year. Well, that and a stiff drink.

Mr. Curtis is the author of “And a Bottle of Rum: A History of the New World in Ten Cocktails.”

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THE WALL STREET JOURNAL.

A8 | Friday - Monday, December 23 - 26, 2016

BOOKS ‘War is the greatest plague that can afflict humanity, it destroys religion, it destroys states, it destroys families. Any scourge is preferable to it.’ —Martin Luther

Weathering the Storm It is difficult to do full justice to the richness and range of sources that Mr. Fritzsche has unearthed.

The book is very much a history from below, providing glimpses of the reality, but it reflects the way that many ordinary people experience catastrophe then and now. The disheartening truth at the heart of this account is how easily and swiftly people can shed their conventional humanity, both the active perpetrators of atrocity and the millions who kept their heads down, said nothing and waited. Mr. Fritzsche does not labor this point by comparing the situation with those

An Iron Wind

By Peter Fritzsche Basic, 356 pages, $29.99

BY RICHARD OVERY

For most Europeans the Jewish disaster was one of many, and not one they would take risks to avert.

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PETER FRITZSCHE HAS taken the title of his study of popular opinion under the heel of Hitler’s Reich from an inscription on the Stalingrad war memorial dedicated to Soviet soldiers, who indeed faced an iron wind as German forces swept across the steppe. It is an apt metaphor for the terrible storm of suffering that the European war unleashed. A few brave civilians leaned into the wind; most turned their backs or scuttled for shelter. Few understood well where the wind had come from, or when it would abate, or why it uprooted so much around them. They waited, Mr. Fritzsche claims, in the hope of better weather.

From this opening metaphor, Mr. Fritzsche unsfurls a profoundly significant exploration of how Europeans—both Germans and those under German occupation—struggled to make sense of the conflict by giving it some shape or meaning, or by simply accepting in the end that it made no sense. He reminds us that information, particularly in the context of this total war, was rationed by the regime; people relied on gossip or rumor or extrapolation to flesh out the wider picture (aided by the hundreds of thousands who secretly listened to banned BBC broadcasts). But in the end the view from the ground up was always partial, a fragment of a truth, not the whole truth.

Propaganda clearly had its limits, because the diarists, letter writers, novelists and chroniclers who fill Mr. Fritzsche’s absorbing pages pursued the quest for meaning regardless of what they were told to believe. Looking back at the war, historians all too often assume that public opinion more or less reflected the narrative shape they give to it.

But “public opinion” is an elusive, constantly shifting set of attitudes and prejudices. It is unhelpful concept in the context of this war because the public was denied access to so much that was going on at the political and military level. Guesswork, fantasy, dread, frustration, hope all jostled together in the minds of those trying to grasp where they were in the midst of war, and it is that widespread uncertainty and pervasive anxiety that form a major thread linking together the different communities that Mr. Fritzsche examines.

The most thought-provoking and disturbing conclusion that he arrives at is just how swiftly under

1942 Applying a patch required to be worn by Jews in German-occupied Paris. conditions of persistent crisis Europeans were prepared to abandon their commitment to a normative morality and to ignore, justify or endorse the persecutions and victimization that the German imperial authorities indulged in. Fear of what that regime might do, a strong commitment to self-preservation, or simply a sense that things were tough enough without sticking a neck out for other people inhibited probably the majority of those in Germany and the new German empire from contesting the daily excesses, in particular the victimization of the Jews.

Though Mr. Fritzsche’s exploration of a fractured perception of the war—captured in the title of his last chapter, “Broken Words”—focuses on many areas of experience, the book returns again and again to the effort by Jews and non-Jews to make

sense of the fundamental irrationality of the Jewish persecution and the incomprehensible consequences for those who were its victims. It is clear how many turned away, though they did so for a variety of reasons, not least because they felt victimized themselves by bombing, by reprisals, by hunger and so on. For many Europeans the Jewish disaster was one among many, and not one for which they were much inclined to run risks themselves.

More interesting here is Mr. Fritzsche’s focus on the Jews’ perception of what was happening to them. In a strikingly original chapter he explores the question of where God stood in people’s accounts of wartime excesses. Mr. Fritzsche shows just how confused Jewish opinion was about why God had abandoned them or whether indeed he was simply testing Jewish faith in survival

and would, as some diarists hoped, perform a sudden miracle. From the depths of despair some even hoped that the disaster presaged the coming of the Messiah. For others, the persecution marked the point at which they lost all faith in the existence of God. For the Germans, on the other hand, God played an equally ambiguous role. Some German Christians thought that God must be on their side, handing out the early victories; when the going got tough, they hoped that God would in the end produce a miracle for the Germans.

Others found their faith challenged, unsurprisingly, by the disasters meted out by the Germans and to the Germans. Still others, their faith collapsed under Hitler, adopted the morality of the jungle—“Devour them or you will be devoured,” as the soldiers’ saying went.

that came after, but the collapse of community, the betrayal of neighbors, and the indifference to the consequences for others are just as evident in the former Yugoslavia or in present-day Syria.

Above all, the changing face of Europe, not only as a result of Brexit but chiefly as a result of the threat of terrorism and the migrant crisis, is throwing up new political forces on the extreme right, ushering in fresh intolerances, creating new ways of seeing “them” and “us.” This book might serve as a warning, but it is unlikely that those who ought to heed it would understand. Implicit in Mr. Fritzsche’s humane account is his sense that people ought to have behaved differently, but the sad truth is that under the pressure of social intolerance, a coercive state and personal fears for the future, people behave more or less as he describes. He cites a 1941 comment by a French novelist about the lessons of the war going on around him: “Man, what is he really? The bitchiest of creatures!

The most vile and the most deceitful and the most cruel.”

It may be hard to disagree after reading the catalog of bad faith and inhumanity that blew in with the iron wind, but it is still worth recalling the thousands who did not succumb to the new weather and bravely confronted it. They may also have known only partially what was going on, or had to make difficult guesses about the durability of the German empire, but they did not let the wind overwhelm them. There are not enough of them in Mr. Fritzsche’s book, but they were there.

Mr. Overy’s books include “The Bombing War: Europe 1939-1945.”

HISTORICAL FICTION: ALLAN MASSIE

An American Patrick O’Brian the Mediterranean to teach the pirates respect for American power and the law of the sea.

We follow 14-year-old Bliven Putnam, a midshipman on the USS Enterprise. Sam Bandy, another tyro midshipman, is his colleague and at first his rival. Bliven is a New Englander, a farmer’s boy, Sam a Southerner, son of a rich slave-owner. Terrible experience will bind them together but not before they have fought each other. Their relationship

(having been hastily promoted to lieutenants) are put on half-pay due to political reluctance to spend money on the Navy. This allows Mr. Haley to explore the social and moral divisions in the young Republic, especially when Sam visits the Putnam home in Connecticut and Bliven falls in love, with Clarity

comedy when Ferdinand, the Bourbon King of the Two Sicilies, is on the scene. Visits to the Muslim rulers are vividly, sometimes horrifyingly, described. All this is part of Bliven’s moral education.

What he and Sam learn is often disturbing. At one royal court, the interpreter is an African with the ac-

Two midshipmen sail with the U.S. mission to confront the Barbary pirates off North Africa. will, one assumes, develop over subsequent volumes of what promises to be an absorbing series of novels. Suffice to say now that both are admirable young men, brave, high-principled Americans.

Mr. Haley’s research has been so completely absorbed as to be unobtrusive. He has mastered the politics of the period and the business of sailing a ship. He is good at action: The battles are gripping and horrible. He doesn’t pretend that life on a ship-ofwar was anything but harsh and brutal. You understand why Dr. Johnson thought that being on a ship was like being in prison, only worse.

There is much charm and humor, as well, such as an interlude after the first campaign when the two

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A LONG TIME AGO I was puzzled by the anthem sung by the U.S. Marines.

“From the halls of Montezuma” made sense to me, but how and when had the American Navy and Marines found themselves engaged in the Mediterranean on “the shores of Tripoli”? Well, anyone as ignorant as I was then will have the answer to the puzzle splendidly provided to them by “The Shores of Tripoli” (Putnam, 448 pages, $26), James L. Haley’s novel of the Barbary War in the early years of the 19h century.

It’s the best sort of historical novel, one in which history and fiction are joined in the happiest of marriages: The history is thoroughly researched, the fiction inventive, the style at once easygoing and rapid.

Mr. Haley quickly establishes the historical setting. For centuries the Barbary pirates, seamen from the Arab and Berber provinces of North Africa (all nominally part of the Ottoman Empire) preyed upon merchant shipping in the Mediterranean, disrupting trade and enslaving Christian prisoners. These practices were justified by the belief that it was the duty of the Muslim faithful to plunder and enslave all those who had not acknowledged the Prophet. To avert such inconveniences, countries made treaties with the Muslim rulers and paid tribute. It was, in short, a protection racket. But as Kipling wrote, “once you start paying the Dane-geld, you never get rid of the Dane.” The demand is ratcheted up, the squeeze tightened, until it becomes intolerable. And so President Jefferson sends a naval squadron to

OLD IRONSIDES The rigging of the USS Constitution.

Marsh, a beautiful young Puritan and fervent hater of slavery.

The two young men, by now lieutenants, are recalled to service on the USS Constitution, the flagship of a larger fleet commanded by Commodore Edward Preble. This new campaign represents a more determined attempt to impress the Muslim rulers with the reality of American power.

There follows intense diplomatic activity, squabbles with the Royal Navy (Preble hates the English), and more

cent of the Southern states, an escaped slave; he is still legally a slave in North Africa, but a privileged one here. He will play a significant role in the denouement of the story, inspired

by Bliven’s expression of the American creed that “all men deserve a chance to make their own way. That every life is important.”

Bliven also takes part in a brilliantly described amphibious maneuver involving Marines and native allies in a grueling march across the

Libyan desert as they attempt to assault the stronghold of Derna. Here too the hero learns much about himself: He has aged in the three years since he went to sea, Mr. Haley writes: “He beheld himself harder and sharper—‘tempered’ was the word he settled on. Yet the time passed was so brief that he could remember something like innocence, or callowness, and he was not so changed that he did not look back on that time with warmth.”

In his treatment of Muslim rulers—and Muslims in general—Mr. Haley stays very much in period.

There is no, or very little, pretense toward 21st-century correctness.

They are cruel, treacherous and mostly untrustworthy, even if sometimes impressive. And they are seen through the eyes of what would now be condemned as Western imperialists. It would be poor history to present them otherwise. In the clash of civilizations, Mr. Haley is at one with Kipling and John Buchan.

This is a marvelous and richly enjoyable novel, and the intended series to follow promises to do for the American Navy and the Marines what C.S. Forester and Patrick O’Brian did for the Royal Navy. It is that good. The relationship between Bliven and Sam has naturally not yet acquired the emotional and intellectual complexity of that between O’Brian’s Aubrey and Maturin, but we can look forward to that developing. Meanwhile this is a book that, like so much of the best fiction, makes you both think and feel. More, please.

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THE WALL STREET JOURNAL.

Friday - Monday, December 23 - 26, 2016 | A9

BOOKS ‘Very slender differences will sometimes part those whom long reciprocation of civility or beneficence has united.’ —Samuel Johnson

A Friendship Lost in Translation The Feud

By Alex Beam Pantheon, 201 pages, $26.95

VERLAINE SHOT RIMBAUD. Tolstoy challenged Turgenev to a duel. Hemingway considered Fitzgerald a whiner, and Coleridge belittled Wordsworth as “no poet.” But no literary feud has been quite as literary, or as graceless, as the one that erupted in 1965 between Edmund Wilson and Vladimir Nabokov. The critic and the novelist went from calling each other “Bunny” and “Volodya” to calling each other “repellent” (Bunny on Volodya) and “Philistine” (Volodya on Bunny).

As Alex Beam explains in “The Feud,” his elegant and intimate account of the rise and fall of the Wilson-Nabokov friendship, it all began with Pushkin. It all ended with Pushkin too, when Wilson publicly attacked Nabokov’s eccentric translation of Pushkin’s “Eugene Onegin” (1832), a novel in verse form whose plot, incidentally, includes a love affair and a duel.

All friendships are unequal, but some are more unequal than others.

In May 1940, as the Germans advanced across France, Nabokov and his family boarded one of the last ships to leave Le Havre for New York.

Stanford had obtained a visa for him to teach Russian literature at a summer school. Nabokov had written novels in Russian that had been translated into German, but he had yet to publish one in English. Few Americans had heard of him. The famous Edmund Wilson was not among them.

At the time, Wilson was first consul of the American republic of letters, with ambitions to become its emperor. The publication in September 1940 of “To the Finland Station,” his apologia for socialist revolution, confirmed him as H.L. Mencken’s successor in interpreting alien ideas from foreign languages. When Nabokov’s cousin Nicolas told Wilson that the prodigious Vladimir was “in dire financial straits” and needed a miracle, Wilson was delighted to oblige.

In the summer of 1940, Wilson initiated one of the great literary correspondences of the 20th century.

Nabokov, raised by aristocratic Russian liberals, had grown up speaking French and English. Wilson, the socialist from Red Bank, N.J., had grown to love Russian, the language of Turgenev, Tolstoy and Trotsky.

Their early letters overflow with a shared delight for letters and language. Soon, the two were working on translating a “little tragedy” by Pushkin, the 1830 play “Mozart and Salieri.” “It is quite perfect now,” Nabokov wrote to Wilson in 1941, after the New Republic had published their translation. “You have played your Mozart to my Salieri.”

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BY DOMINIC GREEN

BUNNY AND VOLODYA Edmund Wilson and Vladimir Nabokov.

Enchanted, Wilson directed Nabokov toward the editors of the Atlantic, the New Yorker and Harper’s Bazaar, and to James Laughlin, the publisher of New Directions, who brought out Nabokov’s first novel in English, “The Real Life of Sebastian Knight.”

In late 1940, Nabokov secured work at Wellesley College and moved his family to Cambridge, Mass., close to Wilson’s home on Cape Cod. Volodya and Véra socialized regularly with Bunny and his wife at the time, Mary McCarthy. Who else in America was sure that Nabokov, as Wilson told the editor Robert Linscott, would soon write “one of the great contemporary novels”? For whom else, Mr. Beam asks, could Wilson compose “a bilingual limerick, alluding to butterfly genitalia”?

If they were a scintillating literary match, they were an antagonistic political one. Wilson loved the idea of the Russian Revolution deeply enough to have praised Stalin after visiting the Soviet Union in 1935. He included Lenin on a list of the best Russian stylists, but left out Chekhov. Nabokov had lost his home, wealth and language to the Revolution. Soviet life, Nabokov said, was “a pail of milk of human kindness with a dead rat at the bottom.”

Wilson certainly had a tin ear for politics, but Nabokov was deaf to the modulations of friendship. When Wilson wrote a Russian verse mocking Tolstoy’s peasant affectations, Nabokov described it in his diary as “a lame little epigram” in “hopelessly bad” Russian. “Once and for all,” he wrote to Wilson at a later date as they sparred over poetic grammar, “you should tell yourself that in these questions of prosody—no matter what the language involved—you are wrong, and I am right, always.”

What unites, divides. In 1946, Wilson ventured into Nabokov’s terri-

tory with the novel “Memoirs of Hecate County.” The sex scenes inspired William Randolph Hearst and Catholic organizations to campaign for a ban. Sales rose accordingly. Nabokov, who had supported himself in Berlin as a tennis teacher, delivered a splendid backhand. The novel was “wonderful,” he wrote to Wilson in March 1946, but he had derived no prurient pleasure from the sex scenes: “I should have as soon tried to open a sardine can with my penis.”

In 1947, Nabokov confided that he was working on another of his alarmingly numerous stories “about a man who liked little girls.” Distracted by teaching and annotating his “Onegin,” Nabokov would not complete “Lolita” until 1954. Wilson read only the first half of the manuscript. “I don’t think the subject can stand this extended treatment,” he wrote to Nabokov in the summer of 1954. “Nasty subjects may make fine books, but I don’t feel you have got away with this.”

How wrong he was. When Putnam issued the American edition in 1958, “Lolita” sold 100,000 hardcover copies in three weeks. “Lolita” became the classic that Wilson had predicted.

“Every time a friend succeeds,” Gore Vidal admitted, “something inside me dies.” After “Lolita,” Nabokov become the Mozart in the relationship.

Wilson acknowledged that the “rampancy” of “Lolita” had “opened the door to other wantons,” like “Hecate County,” which was reissued in 1959.

Nabokov decamped to the Montreux Palace Hotel on Lake Geneva to entertain offers from Hollywood and work on “Onegin.” The friendship continued, but now Volodya had the upper hand. Bunny seethed in private.

They met for the last time in January 1964 at the Montreux Palace. The weather was “grim,” Mr. Beam writes, and there was “too much drinking.”

And then came “Onegin.”

The significance of “Onegin” in Russian culture may be understood as akin to the equation Byron multiplied

by Shakespeare to the power of Dickens. Pushkin, Mr. Beam writes, “created his own metrical system, the ‘Onegin stanza.’ ” Its rhythm is “unyielding,” its rhyme scheme elaborate, with a complex pattern (ababccddeffegg) overlaid with a “defined inter-

Nabokov called Wilson’s Russian ‘hopelessly bad.’

Wilson judged Nabokov's translation of Pushkin to be ‘hardly English.’ play” of one-syllable “masculine” and two-syllable “feminine” endings. The effect is “strikingly beautiful.”

In 1944 Nabokov had experimented with Onegin stanzas when he and Wilson had been conspiring on a jointly written book on Russian literature—translations by Volodya, commentary by Bunny. By 1955 Nabokov had decided that it was “impossible” to fit Pushkin’s meter and rhyme scheme into readable English. His “Onegin” would be a “trot,” preserving “absolute literal sense” and the iambic beat of the Russian, but dropping the rhyme scheme and adding “copious footnotes.” Along the way, Volodya also dropped the idea of collaborating with Bunny.

Nabokov’s translation is indigestible. When it came out, Wilson stabbed his friend in the front. Nabokov’s language was “uneven,” “banal” and recondite, he wrote in the New York Review of Books in 1965. Why use “rememorating” for “remembering,” or “sapajou” for “monkey”? The critical notes were “tedious and inter-

minable,” and often “snide and silly.”

Sometimes, Nabokov’s English was “hardly English” at all: “The past of dwell is dwelt, not dwelled.”

Nabokov fired back in the Review.

He had long suffered his friend’s “hopeless infatuation with the Russian language,” his “mistakes of pronunciation, grammar and interpretation,” and his inability to scan Russian verse. When Wilson read “Onegin” aloud in Russian, he rendered Pushkin’s rhythm as “a kind of spastic anapest with a lot of jaw-twisting haws and rather endearing little barks.”

Wilson was foolish for attacking Nabokov on his Russian turf, but Nabokov’s translation was hard to defend. The critics piled on. Robert Lowell, who had no Russian, decided that Nabokov’s project was “a spoof,” and Wilson was “nine-tenths unanswerable and right in his criticism.” Robert Graves, an expert at eccentric translation, though not from Russian, praised Nabokov as a “precisian” in both Russian and English, but agreed with Wilson about Nabokov’s obscurantist vocabulary.

Anthony Burgess, who had turned his little Russian into the “nadsat” of “A Clockwork Orange,” called Nabokov’s work “the very perfection of scholarship.” The Harvard polymath Alexander Gerschenkron, who knew Pushkin by heart and disliked Nabokov wholeheartedly, listed all the reasons why it was not.

Mr. Beam, a Boston Globe columnist and erstwhile chief of Business Week’s Moscow bureau, endorses Gerschenkron’s reading. Nabokov’s “Onegin,” Gerschenkron wrote, was “fascinating and exasperating.” It “should be studied,” but it “cannot be read.”

Bunny died in 1972, Volodya in 1977. Each spent his last years waiting for a Nobel Prize that never came. Nabokov, on hearing from the desk clerk at the Montreux Palace that he had a call from Stockholm, braced himself for the good news, but found himself talking to a graduate student asking for help with her thesis. Wilson once “eagerly tore open a thick envelope mailed from Stockholm, only to discover a crank letter alerting him to a world conspiracy of sex-changing assassins who communicated via ESP.” The joke was on Bunny and Volodya: In a little tragedy from Pushkin, the lovers of language had fallen out over words.

The Russians have a word for it: “Poshlost.” Nabokov, who preferred the punning translation “poshlust,” explained in a discussion of Gogol that it mixes “the obviously trashy” with “the falsely important, the falsely beautiful, the falsely clever.” There is no English analogue for poshlost’s bitter brew of pretension, vulgarity and pettiness. It was better, Nabokov concluded, to leave it in Russian.

Mr. Green, a fellow of the Royal Historical Society, teaches politics at Boston College.

Spiking the Punch With Sprezzatura

By Leonardo Lucarelli Other Press, 298 pages, $25.95

BY MOIRA HODGSON

‘THE DIFFERENCE between a chef and a sociopath? I don’t believe there is one,” declares Leonardo Lucarelli in his book about two decades of cooking in restaurant kitchens across Italy.

The bad-boy chef memoir might as well have its own section in bookstores and “Mincemeat” places itself squarely in a tradition personified

by Anthony Bourdain: The cover has a picture of three knives on its cover, their blade tips stabbed into a cutting board. The author guarantees you’ll stir up his sociopathic side if you mess with these prized possessions. “If you want me to stop treating you nicely, then use one of my knives on a ceramic plate,” he writes. “If you want me to kick you out of the kitchen, use it on the stainless steel pass.” But despite some occasional chest-thumping, Mr. Lucarelli is also a hilariously funny writer. He reminds me of an Alberto Sordi character in a comic film as he buzzes around on a Honda 250 (this is Italy, after all), takes capoeira classes and organizes samba parties.

He concocts insane dishes such as chocolate and eggplant strudel. And at the end of a long shift, he cele-

brates the freedom to “drink like a fish, heat up cocaine in the microwave on porcelain dessert plates . . . and maybe enjoy the favors of a waitress or barman.”

Food had been Mr. Lucarelli’s passion ever since he was a teenager.

(He was born in India in 1977 to hippies who returned to Italy in 1981 and, with a second child on the way, moved into an old schoolhouse in Umbria).

The author’s father was a painter. After he died of leukemia at 40 years old, Mr. Lucarelli writes that his mother was often out late in the evenings, so he would invite friends over and cook for them. “An empty house and knowing how to cook meant there was an astonishing chance I might just learn what sex was all about,” he writes.

He gives his first girlfriend a homemade loaf of bread (his fourth attempt) “wrapped in a napkin with the four corners tied together like something out of a Mickey Mouse comic strip.” She receives it in polite silence and they eat a few chunks as they stand in the village square. “A bit more salt maybe?” is her only comment.

As an anthropology student at college in Rome, Mr. Lucarelli tenderly cooks rice and chicken for his cat and throws “fantastic” dinner parties for

his cash-strapped friends. To get the food, he wears a Walkman to the supermarket, volume turned to maximum but without a cassette. That’s because he’s discovered (he doesn’t say how) that when he passes by the cash registers if the white noise

capoeira enthusiasts on a riverboat moored on the Tiber. “I had one wooden cutting board, all the wrong knives, no scars on my hands, and nowhere near enough experience to organize a function this size, so it all seemed pretty easy,” he writes. The kitchen was a cramped, grimy space with peeling metal walls and a rickety stove. There was only one pot in which he was supposed to boil 44 pounds of orecchiette to order. Of course, the pasta clumped together, and the plates took so long to come out that a quarter of the guests demanded a refund.

Some of us might have chosen another career path. But the next morning when an acquaintance called Mr. Lucarelli out of the blue offering him a job in a restaurant outside Rome called the Verve he seized it without a second thought. He goes on to cook in 15 restaurants around the country, in Lazio, Tuscany, Emilia Romagna, Veneto and Trentino. Two of them have a Michelin star.

His book reads like a picaresque novel as he roams from kitchen to kitchen, encountering thick-necked mobsters, lustful waitresses and cheating bosses. His description of an encounter with a pastry chef he meets at a party in Rome is delivered in typical deadpan humor. “Seeing Sara use GETTY IMAGES

Mincemeat

changes from “zzzzz to zzZZZZzz” it means the shoplifting alarm is on.

When it’s off one day his haul includes French cheeses, Scottona beef, Venezuelan chocolate and Barolo.

Mr. Lucarelli was 19 when he got his first restaurant job: as a waiter at a restaurant in Rome. Two weeks later, the sous chef quit in the middle of service. “I cracked open the black door that led to the kitchen, stuck my head in, and piped up, ‘I know how to cook a little.’ That evening I crossed the threshold into the kitchen.”

The following year he agrees to cook dinner, single-handed, for 250

a credit card to scrape the ketamine off the bottom of a frying pan after it has just crystallized makes it exceedingly hard for me to imagine her putting the finishing touches on a SaintHonoré,” he writes.

And there’s a stomach-churning description of what a chef does when a boss demands a beef fillet

An aspiring chef’s life: cooking for your cat and throwing dinner parties for cash-strapped friends. with myrtle sauce at 1 a.m., after the kitchen has packed up. Mr. Lucarelli cooks the beef perfectly, then asks some of the staff to help him put the finishing touches in the sauce. He spits phlegm into the middle of the pan. The others follow suit as he swirls in a touch of butter.

“Never cross a chef,” he writes.

“He always has the upper hand.

There’s no way you can win against the person who has the power to decide what you put in your mouth.” Something to think about next time you send a plate of food back to the kitchen.

Ms. Hodgson is the author of “It Seemed Like a Good Idea at the Time: My Adventures in Life and Food.”

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THE WALL STREET JOURNAL.

A10 | Friday - Monday, December 23 - 26, 2016

OPINION REVIEW & OUTLOOK

I

India’s Bizarre War on Cash

ndian Finance Minister Arun Jaitley says and used against you.” Cashlessness would be “India has to move towards the cashless so- a gift to every overzealous prosecutor, Russian ciety.” Cashless society? India? Last hacker and real or aspiring tyrant. month’s demonetization conIt would also hurt regular Delhi’s planners double people in their interactions tinues to wreak economic havoc, and now defenders are each other. “Cash is emdown on their ‘cashless with arguing it will pay off longpowerment: Ask the young society’ blunder. term by promoting digitalwife who saves spare cash payment systems that increase from her alcoholic husband,” efficiency and transparency.

Mr. Varma notes, “or the old But why should Indians believe that officials ex- mother who stuffs spare notes under her matercising arbitrary power over their cash will tress for years because it gives her a sense of keep their hands off a system that monitors ev- autonomy.” ery transaction?

Cash is precious even if you’re not a tax cheat, In a cashless society the state has far greater drug dealer or terrorist. In Germany, where means to harm the public, both through inept memories of communism and Nazism help citipolicies and abuses of power. Recent weeks have zens prize anonymity, some 80% of transactions been bad enough, starting with the shock an- are in cash. The U.S. figure is 32%. In Japan and nouncement that 85% of Indian currency in cir- Switzerland savers hoard cash to avoid punitive culation was no longer legal tender and would negative interest rates on deposits. This is an enhave to be exchanged at banks for new bills not tirely reasonable response to runaway monetary yet printed. As citizens idle in long bank lines policy, but it annoys Keynesians like Harvard’s and businesses fold without liquidity, officials Kenneth Rogoff and Citigroup’s Willem Buiter, are issuing contradictory directives about the who want cash limited so central banks can new cash regime. Now these same officials want squeeze savers with impunity. a digital record of every exchange.

Sweden may be the best model for cashlessIndia already has a too-powerful bureau- ness, as only 2% of transactions use cash. But cracy that imposes punishing licensing, labor, Sweden has low corruption in government, retax and other regulations on businesses, stifling liable legal protections, high social trust and entrepreneurship and innovation. This is a ma- advanced financial and technological infrajor reason an estimated 95% of all transactions structure. India has none of that, but it does use cash and some 45% of the economy is “in- have government officials with radical plans formal” or off the books. When it’s prohibitively to reshape a society in which half of the popuexpensive to comply with every regulation, lation (some 600 million) doesn’t even have a businesses that are otherwise legitimate stay bank account. underground. In the absence of sweeping deIndians would benefit from access to digital regulation, going digital and cashless would finance, which can cut transaction costs, make strengthen bureaucrats to be even more intru- credit more affordable and channel state aid disive, aggressive and burdensome. rectly to citizens, bypassing sticky-fingered buThere’s also the loss of financial privacy. As reaucrats. The government can help by liberalizjournalist Amit Varma writes in the Times of In- ing financial regulation and improving teledia, “If you buy AIDS medication or a porn maga- communications infrastructure. But it should zine or book a hotel room for a romantic alliance, also respect citizens who want to keep at least this information can be accessed by the govern- some cash. Imposing a “cashless society” is antiment—or any hacker with the requisite skills— thetical to economic liberty.

T

Taiwan Fails the Uber Test

aiwan wants to build an “Asian Silicon to the desk of President Tsai Ing-wen last week, Valley” in the city of Taoyuan, outside appears intended to drive Uber off the island.

Taipei, but don’t count on hailing an “The amount left me stunned,” said one driver Uber to get there. Taiwanese at a press conference orgaA bad sign for an island nized by Uber. “Did we commit leaders have escalated their assault on the ride-sharing or arson?” Even drunk that needs innovation murder app by moving to authorize drivers, he added, are fined and foreign investment. only NT$90,000 ($2,811). fines up to $780,000 on Uber drivers. These would be the That’s 0.3% of what Uber drivsteepest anti-Uber fines in the ers would face. world, a grim sign that Taiwan’s unions and “Resistance to Uber by the Taiwan regulacartels are determined to block the moderniza- tors has exceeded that of their counterparts in tion of its economy. other Asia-Pacific markets like the Philippines, Uber launched in Taiwan in 2013 and says it Singapore, Australia and even China,” analyst has more than one million riders and 10,000 Matthew Fulco wrote this month for the Ameridrivers on its local service. These are “mothers, can Chamber of Commerce in Taipei. That’s an fathers, retirees, professionals, and the other- especially dubious distinction for Taiwan when wise unemployed who have come to rely on the incomes have been stagnant for two decades economic opportunities Uber has created,” the and the island desperately needs more foreign company says. investment and expanded trade ties to reduce Naturally, incumbent taxi firms don’t like the its economic dependence on China. competition. So they’ve pushed the government Taiwan certainly isn’t alone in failing the to hound Uber with fines and taxes, treating it Uber test, as regulators from Texas to France as an illegal taxi operator rather than an inno- and South Korea have harassed the firm to vator that connects drivers and passengers. “To protect local cartels. But Taiwan may have the make us fit under the current rules is like hav- most at stake. It profits a government little to ing a librarian regulate Amazon,” Uber execu- talk of new Silicon Valleys or to appoint a “digtive Damian Kassabgi says. ital minister,” as Taipei did this year, if it Taipei seems uninterested in accommodation. won’t welcome consumer-friendly service proIts latest proposed fine, which lawmakers sent viders like Uber.

T

Michelle’s Trump Despair

Obama’s ‘Permanent’ Drilling Freeze

he White House is attempting to over- “available for expeditious and orderly developload the bandwidth of its successor ment.” The power to lock is also the power to unwith a surge of new regulation, and the lock. Bill Clinton used Ocsla to withdraw 300 latest is a ban on oil drilling in million offshore acres from an He claims his latest much of the Arctic and Atlanarea that was already a desigtic. This rule even purports to nated marine sanctuary, but executive order can’t be “permanent,” unchangeGeorge W. Bush reinstated be repealed—ever. able by any future U.S. Presiabout 50 million. dent for all time. We’ll see So ponder the spectacle of about that, but in the meana President claiming his writ time spare us the liberal panic about Donald will last “indefinitely,” as Mr. Obama’s executive Trump’s supposed authoritarianism. order puts it. No policy decisions are engraved The last-gasp executive action prohibits fed- in stone as if through holy stenography, and eral offshore drilling and mineral leases on some they’re definitely not beyond democratic con3.8 million acres from Virginia to Maine and 115 sent on the basis of a 63-year-old law. In a statemillion acres off the coast of Alaska, including ment, Oregon Senator Jeff Merkley applauded some of the world’s great untapped repositories Mr. Obama for “implementing” sections of the of hydrocarbons. President Obama rolled out the Democrat’s “Keep It In the Ground Act.” Why rule in concert with Canadian Prime Minister even have a Congress?

Justin Trudeau, and the greens are cheering that The environmental lobby has moved on from still more fossil-fuel regions will be walled off reducing carbon demand—via subsidies for from exploration. electric cars and solar panels—to opposing any For years federal regulators have obstructed carbon energy, and this is the opposition Mr. oil production on already-leased lands. Royal Trump will confront. Restarting drilling would Dutch Shell holds the sole drilling permit in be a productive start for U.S. energy security Alaska and in 2015 suspended operations in the and competitiveness.

Chukchi and Beaufort seas despite $7 billion of In the Arctic in particular, oil-and-gas resunk investment. So in a sense the new rule is serves are beneath relatively shallow waters and merely truth in advertising. obtainable with technology proven safe in the But the press corps is rushing to euphemize field. Developing these resources could offset Mr. Obama’s “creative” interpretation of a the expected long-term decline of energy pro“rarely used” provision of the 1953 Outer Conti- duction in the lower 48 in the 2030s and 2040s, nental Shelf Lands Act. Ocsla allows that the and realistically the process needs to start now.

President “may, from time to time, withdraw Russia is also aggressively expanding explorafrom disposition any of the unleased lands of the tion wells in the Arctic’s Kara and Pechora seas Outer Continental Shelf.” Because the law does and adding to its polar navy. not explicitly give the President the power to unMeantime, Mr. Obama told National Public withdraw lands, the White House touts the rule Radio this week that “my suggestion to the Presas a forever condition. In other words, this is Mr. ident-elect is, you know, going through the legisObama’s typically illegal M.O. lative process is always better” than executive Congress passed Ocsla, as the law’s preamble fiat, “in part because it’s harder to undo.” Perstates, in order to make the “vital national re- haps he ought to take his own advice instead of source reserve” that is the continental shelf issuing “permanent” commands.

WONDER LAND

By Daniel Henninger

Amid all the sentiments, ideas and stress that enwrap the Christmas season, one idea abides: hope. On Christmas Day, in every church the world over, whether a cathedral or the shell of an ancient chapel in Iraq, congregants will sit down to hear a homily

on hope.

This being postelection America in 2016, it is fitting that a dispute should break out the past week between Donald Trump and Michelle Obama over hope.

In an interview on CBS, Oprah Winfrey asked the First Lady if she thought her husband had achieved the “hope” that his presidency was “all about.”

Mrs. Obama replied, “Yes, I do. Because we feel the difference now.” She went on: “See, now we are feeling what not having hope feels like, you know. Hope is necessary. It is a necessary concept. . . . What do you give your kids if you can’t give them hope?”

Donald Trump seemed taken aback

by Mrs. Obama’s comment. At his thank-you rally in Alabama, Mr. Trump replied, “Michelle Obama said yesterday that there’s no hope.” The crowd booed. But Mr. Trump didn’t saddle up to ride the crowd’s emotions.

He insisted that “we have tremendous hope, and we have tremendous promise and tremendous potential.”

Then he came back to Mrs. Obama: “I actually think she made that statement not meaning it the way it came out. I really do.”

In the spirit of the season, let us set aside whether Mrs. Obama believes the country is in despair over the Trump presidency. Still, a serious issue sits inside these comments, which is the role and reality of hope in politics.

Every politician since ancient Athens has run on hope to win office and power.

In 2008, Barack Obama’s “Hope and Change” was a brilliant slogan for his historic campaign and an apt summary of why most people cast votes in any democracy.

No one will better Bill Clinton’s 1992 campaign commercial, which opens with the image of a train station called Hope: “I was born in a little town called Hope, Arkansas.”

Given hope’s roots in Bethlehem, it’s no coincidence that so many sky’s-thelimit politicians turn messianic.

Hillary Clinton, who considers herself the spiritual heir of Franklin and Eleanor Roosevelt’s politics, is no doubt shattered that those once-potent ideas, which are also Mr. Obama’s ideas, failed her this year.

Michelle Obama and other Democrats disconsolate since the election about the loss of hope in American politics leave the impression they believe that giving people the rhetoric of hope, lifting them with words, is more

important than delivering results, which some might call change.

For example, when Mrs. Clinton promised free public-college tuition, Democrats seemed to think this sort of inchoate, grandiose promise would somehow strike voters as “offering hope,” and that this impassioned commitment alone—to hope—should be enough to validate their politics. But it doesn’t, not anymore.

Once past the voting, politics is about public policies, whose real-world effects either sustain or diminish hope. Hope is the helium-filled balloon of politics. Governing in office is the gravity that pulls it back to earth.

Post-Trump, Democrats are engaged in a pedestrian fight over who gets control of their party. More interesting is the evident political challenge to liberalism’s belief in large public bureaucracies as dispensers of hope.

Trump out-hoped liberals who thought they owned the idea of political hope.

Is the current welfare system still about hope? ObamaCare, as symbol and actuality, may be the apogee of modern liberalism’s politics of hope as mostly messaging.

Donald Trump, promiser of “a beautiful wall,” out-hoped the progressives who thought they owned it. Voters concluded that an ideology-free businessman would turn hope into change better than yet another bearer of liberal orthodoxy.

Among the reasons for Mr. Trump’s win is the corrosive state of the nation’s culture, from the opioid crisis to political correctness. The notion that Donald Trump might help rehabilitate the culture would strike many as laughable.

Maybe so. But Donald Trump seems to have been genuinely moved by the opioid crisis he discovered in New Hampshire and elsewhere. That kind of exposure is another argument for the 50-state Electoral College.

Our electoral system, up and running since 1789, forces candidates to meet people living in a large, regionally complex country. Running for president may attract self-inflated personalities, but there is only one person looking into the faces of and listening to uncounted pleas on the campaign trail—from Iowans, Floridians, Ohioans, Mainers—and that is the candidate.

That system made Donald Trump spend more time than most of us will in some of the most dispirited places in white, black and brown America. I won’t go so far as to say Donald Trump will become Saul on the road to Damascus. But those in despair or grim doubt over the 45th president should not underestimate the effects an American presidential campaign had on his understanding of what hope means now in the United States.

Write henninger@wsj.com.

LETTERS TO THE EDITOR

Land-Rich Farmers Still Struggle to Survive James Bovard is correct in several of his observations relating to the Agricultural Department’s outdated farm-subsidy programs, but off the mark when it comes to the affluence of the U.S. farmer (“Living Off the Fat of Washington,” op-ed, Dec. 13). My father was the owner of a 500-acre farm in northern Iowa and made the point numerous times that farmers would prefer the government stay out of farming and let the free market dictate prices. But, he added, the government wouldn’t do that because the American public wants cheap food.

As Mr. Bovard is certainly aware, the net worth of a farmer is largely tied up in farmland. The latest valuation of our farm places the land value at more than $3 million. Our return on that investment is less than 2.5%, less than the annual dividends of many corporations.

Net worth doesn’t equal affluence.

WILLIAM FOLKERTS Clive, Iowa Even though many family farmers are rich on paper, many struggle to put food on the table and often rely on offfarm income to meet household expenses. The farmer is the only businessperson who buys his inputs at retail and sells at wholesale, all the while hoping (and praying) for good weather to grow his crops for sale or to feed his livestock.

Mr. Bovard doesn’t mention that the farm bill allocates 79% of its money to food stamps, while about 4.6% is allocated to commodity programs and 9.4% to crop insurance subsidies (direct or indirect farmer payments). Most family farms rely on crop insurance to cover the high cost of growing crops in the event of a major crop failure, which most couldn’t fully absorb on their own.

The farm program attempts to stabilize the agricultural industry to ensure a safe, ample and table-affordable food (and fiber) supply, along with conserving the land. To that end, it generally is successful.

BRIAN DEMATIO Alger, Mich.

If President-elect Donald Trump isn’t concerned about re-election four years from now, then he may actually do as he said he would and drain the swamp. Most people agree there is government fat to be trimmed (except of course from their own particular portions), therefore a proper swamp draining would cause Mr. Trump to make enemies with all walks of life, Democrats and Republicans alike.

The irony of it all would be that it may actually cause Mr. Trump’s reelection in 2020.

PERRY HILBURN Erie, Pa. Mr. Bovard seems to have no idea of the investment required to farm today, not to mention the continual gamble with the weather and prices. A new combine that may be used only one or two weeks a year costs more than $300,000.

Concerning commodity prices and ensuing future farm bankruptcies, be prepared for another unfortunate mid-1980s type of purge. For instance, during the worst part of the Dust Bowl/Great Depression, our main local crop of winter wheat in 1934 was worth only 45 cents a bushel.

To be comparable in buying power, today that would be $8.13 a bushel. I sold my 2016 wheat last month for $3.12 a bushel but, after various elevator deductions, my net per bushel was a mere $2.78.

Subsidies are the only hope of all too many American farmers to be able to stay in business. You do like to eat, don’t you?

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THE WALL STREET JOURNAL.

Friday - Monday, December 23 - 26, 2016 | A11

OPINION

By Sol Trujillo

W

hen President Ronald Reagan nominated Lauro Cavazos in 1988 as the first Latino to serve in a presidential cabinet, he made history.

Today, President-elect Donald Trump is on the verge of making history too. With 16 cabinet-level officials and more than two dozen administration appointments announced, he is on track to appoint the first cabinet without a Latino in more than 28 years. For a president-elect who ran on restoring

Trump’s cabinet could be the first in 28 years not to have a Hispanic member. economic growth, ignoring U.S. Latinos makes little sense. Latinos are driving American economic growth, and they are at the core of what I call America’s New Mainstream Economy.

I encourage Mr. Trump and his advisers to read a new report by economist Jeffrey Eisenach, “Making America Rich Again: The Latino Effect on Economic Growth.” The study shatters myths associated with the U.S. Latino community and documents a growing segment of the U.S. population that is better educated, more employed, more entrepreneurial and more engaged than many understand.

Most Americans know that the Latino population in the U.S. is growing fast, but what is less understood is that it has become a major source of entrepreneurs. Latino youth—the workforce of the future—are graduating at higher rates and are more connected online than other segments of the population.

The overwhelming majority speak English and were born in the U.S. Consider these findings in Mr. Eisenach’s study: • Latinos are driving new business creation. The number of Latino-owned business grew 46% from 2007 to 2012, compared with a decline of more than 2% for non-Latino businesses. There are now more than four million Latinoowned business in the U.S. If not for Latinos, the U.S. would have fewer businesses today than it did in 2007.

• Those businesses are hiring. Head count in Latino-owned businesses increased 22% from 2007 to 2012, against a 2% drop in hiring over the same period for non-Latino businesses.

• Latino incomes are rising fast. Latinos were responsible for 29% of real income growth in the U.S. from 2005 to 2015, with the number of Latino households earning incomes of more than $150,000 growing 194%.

Those numbers are real and they are unambiguous. Latinos are driving job growth, income growth and newbusiness formation. According to Mr. Eisenach’s report, if U.S. Latino consumers were a country, they would represent the world’s 14th largest economy and that economy would be

GETTY IMAGES

The Latino Drivers of U.S. Economic Growth

Ronald Reagan with the first Hispanic U.S. cabinet member, Education Secretary Lauro Cavazos. growing faster than India’s or China’s.

That is one important part of the New Mainstream Economy story.

The story gets even better. Today, with more than 56 million living in the U.S., Latinos comprise some 17% of the nation’s population. But the median age for Latinos is 28 years old—nine years younger than the overall U.S. population—and Latinos are increasingly well-educated. The share of Latino high-school seniors enrolling in college immediately following graduation jumped 20 percentage points in the 12 years from 2000 to 2012—to 69% from 49%. This

now outpaces enrollment rates of white (67%) and black (63%) nonHispanic high-school graduates.

Latinos are also early adopters of that other great driver of U.S. economic growth—technology. Latinos are more likely to use cellphones and smartphones than the general population, just as they are more likely to use online shopping tools and be early adopters of new technology. Latino-driven economic growth is a reality today that will be even more powerful tomorrow.

I am a lifelong businessman. I have run global, large-cap companies, and I

have run startups. In all those roles, my instinct has been to look for growth opportunities and to seize them. The New Mainstream Economy represents America’s growth opportunity—and the Latino community is at its core.

The Trump administration must understand this economic reality if it is going to succeed in restoring the kind of growth that will bring prosperity to all Americans. Less regulation and lower taxes are effective recipes for a stronger growth climate for U.S. corporations and for small- and medium-size businesses. Improved access to capital for small- and medium-size businesses is also paramount. Diversity of experience and perspective is always a strength both for a business and for a nation-state.

Those who have been appointed or who will be nominated should seek advice, counsel and information regarding this New Mainstream Economy from those who live it. There are many influential, experienced and knowledgeable Latinos who can offer such advice.

The president-elect prides himself on being a winner and a builder. If he wants to build a winning economy, he cannot simply replicate successful pro-business strategies of the past.

He must boost the powerful engines of today’s New Mainstream Economy—a task that requires tapping the expertise of the Latino community.

Mr. Trujillo is chairman of Trujillo Group Investments and former CEO of U.S. West, Orange and Telstra.

Trump’s Opportunity: Saving Coptic Christians

By Samuel Tadros

I

slamic State’s local affiliate in Sinai claimed credit for the bombing of St. Peter and St. Paul’s Church in Cairo earlier this month. The group couldn’t have chosen a more symbolic target. Erected in 1911, St. Peter’s was an architectural marvel built and decorated by Italian architects and mosaic artists.

It stood for a cosmopolitan Egypt that welcomed thousands of foreigners as its rulers sought to make it the Paris of the East. It captured the dreams and pains of the BoutrosGhali family, which rose to power and financed the church’s construction after being emancipated from the shackles of dhimmitude. It represents what is now a bygone era.

Twenty-five worshipers, mostly women, died in the St. Peter’s blast.

It is part of an ominous trend.

Twenty Copts were killed by their neighbors during the 2000 New Year massacre in El Kosheh village. The Dec. 31, 2010, bombing of a church in Alexandria left 23 dead. The 2013 burning of more than 50 churches by Muslim Brotherhood demonstrators

was the worst violence on Coptic churches since the 14th century. And the February 2015 beheading of 20 Coptic workers by Islamic State on the shores of Libya was the most horrifying incident for Copts in memory.

Persecution has never been alien to the Copts. Roman and Byzantine emperors, along with Arab and Turkish caliphs and rulers, have each claimed their share of Coptic blood. A church that stood as one of the pillars of Christianity in late antiquity was reduced to a small minority struggling for survival. Even during Egypt’s proto-liberal age (1923-1952), the Copts weren’t spared incitement and attacks.

Egypt’s generals were no better, but one thing had changed—the possibility of emigration. The slow flow of Coptic emigrants from Egypt in the 1950s has turned into a tsunami.

Based on my research, I estimate that more than one million Copts have found new permanent homes in the West, where their more than 500 churches now flourish.

The Egyptian revolution of 2011 accelerated the process. The security vacuum, the empowering of Islamists in villages, and the Muslim Brother-

hood’s rise to the presidency pointed to the coming doom. At their moment of desperation, many Copts placed their hopes, like those of other nonIslamist Egyptians, in army general Abdel Fattah Al Sisi. Those hopes were misplaced.

Egypt’s minorities, long persecuted, are counting on the U.S. president to defend religious freedom.

President Sisi may be personally sympathetic to the Copts, but his government has done little to protect them. Deadly bombings capture the world’s attention for a moment, but daily life for Copts in Egypt is a struggle. Discrimination is rampant— from government appointments to soccer teams.

Mob attacks on churches and homes occur frequently and are increasing, and security forces fail to prevent them. Anti-Copt attackers escape punishment as the government

forces Copts into reconciliation sessions that sidestep the legal process and often reward the mob by acquiescence to their demands. A new law for building churches that every Egyptian ruler since Hosni Mubarak has promised was passed by Parliament this year, but the law retains the role of state security in the approval process and ties approval of churches to the size of the community in the area.

Donald Trump is enjoying phenomenal support among Copts and other Middle East minorities after eight years of Obama-administration neglect. The president-elect may be uniquely positioned to deliver in Egypt. He praised President Sisi on the campaign trail. The Egyptian leader is one of two heads of state that Mr. Trump met during the presidential election, and he was the first to congratulate the president-elect.

Egypt faces enormous security and economic challenges and is desperate for U.S. assistance. Persecution of Copts should be among the top issues on Mr. Trump’s Egypt agenda.

If President Sisi is serious about viewing all Egyptians equally regardless of their religion, concrete steps

must be taken. Police need to protect Copts from mob attacks and bring their attackers to justice. The practice of reconciliation sessions that has created a culture of impunity must end. The law for building churches should be revised to give Copts true freedom to build churches.

A serious antidiscrimination law needs to be passed. President Sisi needs to offer his Coptic citizens more than a mere visit to their cathedral on Christmas Eve. The wave of Coptic emigration is a testament to their plight in their ancient homeland, but it is also Egypt’s loss. Jews, Greeks, Italians and Levantines contributed to Egypt’s modernization, but President Gamal Abdel Nasser forced their emigration.

If the Copts continue leaving, Egypt will be a much bleaker country.

As the Coptic-American intellectual Maged Atiya put it, “Egypt needs the Copts more than they need it.”

Mr. Tadros is a senior fellow at the Hudson Institute’s Center for Religious Freedom and a distinguished visiting fellow in Middle Eastern Studies at Stanford’s Hoover Institution.

Greece’s New Year of Living Dangerously

By Yannis Palaiologos

I

f last year was the year of upheaval and survival for Alexis Tsipras, this year has been the year of the slow grind. As we near the end of 2016, Mr. Tsipras finds himself squeezed—by Germany and the International Monetary Fund, by Turkey and the refugee crisis, by his false promises and collapsing popularity— to the point of political extinction.

The pace of decline in the Greek prime minister’s fortunes is remarkable. Coming into the final quarter of the year, the government appeared to have a narrative and a plan. In early October it put the finishing touches on the first review of its third bailout program—albeit a year later than initially expected. Mr. Tsipras and his economic team then set the ambitious target of finalizing the second review by the Dec. 5 meeting of the eurozone finance ministers. This would have cleared the way for the European Central Bank to buy Greek government bonds under its quantitative-easing program, sending a strong signal of confidence to investors.

There were warning signs, of course, that all would not go smoothly.

Mr. Tsipras’s government ministers continued, for instance, to obstruct central planks of the bailout program, especially the privatization of stateowned assets. But doubters were told to ignore the noise. A cabinet reshuffle in early November, sidelining some members of this internal resistance, was an encouraging sign.

Meanwhile, negotiations progressed slowly. Further labor-market deregulation remained a sticky point.

Demands by the IMF for €4.5 billion ($4.68 billion) in new spending cuts or tax increases for 2019, to be passed now, were rightly rejected as politically impossible.

The Dec. 5 eurozone meeting came and went without a staff-level agreement. Greece’s eurozone partners declared their commitment to implementing short-term measures of debt relief, which would reduce Greece’s debt by 21.8 percentage points of gross domestic product by 2060. But it was a flimsy carrot to the heavy stick of further austerity measures.

On Dec. 8, in a move that caught creditors by surprise, Mr. Tsipras announced that his government would be distributing any excess primary fiscal surplus above the program’s

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0.5%-of-GDP target to the 1.6 million pensioners receiving monthly pensions of €850 or less. He also announced a freeze on the consumption-tax increase for those islands that had been disproportionately burdened by the refugee crisis.

One can quibble about the prime minister’s claim to be targeting spending on those most vulnerable.

None of the money is going to Greece’s long-term unemployed, who make up 74% of the total unemployed population. Less than 2% of those receive the paltry long-term unemployment benefit. Pensioners, of course, are a much better organized voting bloc.

But the real issue is that with his announcement Mr. Tsipras derailed the strategy he was supposedly following. As the European Stability Mechanism, the European Commission and—most vehemently—the German finance ministry rushed to note, Athens was violating the terms of the bailout agreement. Greece is allowed to spend its excess primary surplus, but only after that surplus has been confirmed by Eurostat in April. Even then, the extra spending is limited to 40% of the additional

surplus. The government must also consult with creditors about how the money is spent.

In response, Greece’s partners last week temporarily froze even their modest measures of debt relief,

Tsipras is antagonizing creditors again, setting the stage for a new bailout showdown and an election. prompting Mr. Tsipras to adopt a tactic ominously reminiscent of the turbulent days of 2015—speaking in different tongues at home and abroad.

He has been touring Greece proclaiming his government’s right to spend its surplus however it sees fit and berating the center-right New Democracy opposition as lackeys to Germany’s finance minister, Wolfgang Schäuble. Meanwhile, Mr. Tsipras’s finance minister has been apologizing to Greece’s European partners for the lack of consultation and has offered to pledge in writing to the one-off nature of the spending package.

The expectation now is that the second review originally targeted for Dec. 5 could take months to complete, delaying any ECB decision on QE and casting a cloud over the Greek economy’s prospects. Private-sector economists were already skeptical of the forecasts—shared by the Greek government and its creditors—for GDP growth close to 3% in 2017. This skepticism has now been redoubled.

Did Mr. Tsipras have a strategic plan when he announced his Christmas gifts? Has he decided to call an early election, salvage what he can (he is very unlikely to win) and try to come back stronger in a few years?

The country’s recent referendum revealed Mr. Tsipras to be a man who lacks a long-term strategy. When pressed on all sides, he seeks to regain the initiative. But now he finds himself even more tightly constrained than before. Even if this wasn’t his plan, an early election is now more likely as an outcome.

Mr. Palaiologos is a journalist at the Kathimerini newspaper. The second edition of his book “The Thirteenth Labour of Hercules” was published in July (Portobello Books).

Notable & Quotable: You Voted for Who?!

From a Dec. 19 post on “The Grumpy Economist,” the blog of economist John H. Cochrane, a senior fellow at Stanford’s Hoover Institution: I have learned some deep lessons from this election and especially its aftermath. Like most policy-wonk types I supposed that people care about policies, and about results, and vote accordingly. And are amenable to sensible discussion about policy, and sensible negotiation. If you’re reading this blog, you probably fall in the same bubble. Most political analysis I’ve seen in economics runs the same way—we line voters up by policy preferences and then analyze voting systems.

What has become very clear to me since the election is a fact prob-

ably blindingly obvious to real students of politics—that’s not at all how it works. Most people vote by cultural affinity, brand, values, and a sense of personal identity. To the extent policy matters at all, it’s part of the buzzwords, propaganda and tag lines thrown back and forth. These things are related to where you live and who you interact with on a regular basis, which is why geographic polarization is such a problem—and why measures like the electoral college, which push our democracy to have more even representation of tribal and partisan alignments and identities are so important.

I live in a little Democratic bubble here in Palo Alto. Since the election, it is just remarkable how uni-

versally in public conversation, people assume that it would be impossible for anyone in earshot to sympathize with Republicans, let alone (heavens) actually be one or to have supported Mr. Trump. Going to book events with my wife, for example, the prelude to talking about the latest young adult fiction is moaning and groaning about how terrible this all is. Waiters at restaurants commiserate. It is simply beyond possibility that the person they’re talking to, obviously a somewhat normal rational moral and caring person, not wearing a white sheet, could not feel the same way.

I have traveled to a few Republican bubbles too, where people speak with similar certitude that there are no dissenting opinions around.

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A12 | Friday - Monday, December 23 - 26, 2016

LIFE & ARTS FILM REVIEW | Joe Morgenstern

Torturous Tests of Faith IN THE FILMMAKING world a passion project can be prompted by anything from cherished books first read in childhood to obscure oddities that no one wanted to finance. Martin Scorsese’s “Silence” redefines the category. It’s a film that Mr. Scorsese has wanted to make for almost three decades, and passion is its subject—the spiritual passion of two Portuguese Jesuit missionaries who travel to Japan in the 17th century to find their mentor, a priest believed to be an apostate, and living as a Japanese with a Japanese wife. This is filmmaking as an act of devotion, and exploration—not just of the nature of faith but of faith’s obverse, abject doubt. The production is physically beautiful, and evokes the beauties of classic Japanese films, but the substance makes few concessions to conventional notions of entertainment.

What the missionaries endure at the hands of their Japanese tormentors—torture, isolation and more torture—is almost unendurably violent, and, at a running time of 161 minutes, punishingly repetitive.

The film is based on the novel of the same name by Shusaku Endo; Jay Cocks and the director wrote the screenplay. Andrew Garfield and Adam Driver are the missionaries, Rodrigues and Garrpe.

Their performances are obviously not meant to be entertaining, and never venture into so much as the outskirts of enjoyable. But they’re notable, all the same, for their intensity and focus—two modern movie stars giving themselves over entirely to roles that require steadfast self-effacement. (Liam Neeson is Ferreira, the mentor they seek.)

And though “Silence” is obviously not a genre film in the usual sense, the story functions as a search, or trackdown, if you will, through fascinating territory—and across land- and seascapes photographed with quiet elegance by

PARAMOUNT/EVERETT COLLECTION

Martin Scorsese’s film follows two Portuguese Jesuit missionaries who travel to Japan in the 17th century

Andrew Garfield and Shinya Tsukamoto in Martin Scorsese’s ‘Silence’ Rodrigo Prieto. The feudal Japan that the missionaries discover is a savage place where Christianity is seen as something akin to the plague, an alien infestation to be stamped out wherever it’s discovered, and always by the same methods—threats of death, backed up by pitiless torture, that force Christians into public displays of apostasy. And the Christianity that

Rodrigues and Garrpe discover is, as Mr. Scorsese portrays it, a reenactment of the origins of the faith, with secret gatherings of congregants in caves.

For the Japanese faithful, the missionaries’ arrival brings fresh hope, but it also brings anguish for all concerned once the priests are discovered and captured by the forces of a local inquisitor. (He’s

Weather -15 -10 -5 0 5 10 15 20 25 30 35

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PRESIDENTIAL SUITE | By Matt Gaffney The answer to this week’s contest crossword is a position at the White House.

20 Affleck flick 21 Ancient Italian 23 •Ramones classic 27 “Already taken Across care of!”

1 Thin nails 28 Piece of silver?

6 Five-star Bradley 29 Charge 10 Israeli author Oz 30 Regarding 14 Snake that’s writing Portuguese for 35 Fussing “snake” 36 •“Very well 15 Candy in a done!” cylindrical 38 Road reversal, in package slang 16 Seamster 39 Conditions Strauss 17 •They’re chewed 41 Talk with your hands by the Quechua 42 Soothe 19 Hot and dry

43 Ludicrous to behold 45 •Hit the detonator 50 It’s entered via the Bab-elMandeb 51 Column type with scrolls at the top 52 Yearn (for) 53 •Impudent fellow 58 For whom a day of the week is named 59 Arch shape 60 Roman district with a famed fountain

Email your answer—in the subject line—to crosswordcontest@wsj. com by 11:59 p.m. Eastern Time Sunday, Dec. 25. A solver selected at random will win a WSJ mug. Last week’s winner: Laurie Dings, Cotuit, MA. Complete contest rules at WSJ.com/Puzzles. (No purchase necessary.

Void where prohibited. U.S. residents 18 and over only.)

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City Amsterdam Anchorage Athens Atlanta Baghdad Baltimore Bangkok Beijing Berlin Bogota Boise Boston Brussels Buenos Aires Cairo Calgary Caracas Charlotte Chicago Dallas Denver Detroit Dubai Dublin Edinburgh Frankfurt

City Geneva Hanoi Havana Hong Kong Honolulu Houston Istanbul Jakarta Johannesburg Kansas City Las Vegas Lima London Los Angeles Madrid Manila Melbourne Mexico City Miami Milan Minneapolis Monterrey Montreal Moscow Mumbai Nashville New Delhi New Orleans New York City Omaha Orlando

Today Hi Lo W 6 1 pc 26 18 s 29 18 s 22 19 c 27 22 pc 24 18 c 9 3 sh 32 25 c 31 16 t 4 -2 i 13 8 s 26 19 pc 12 5 c 16 10 sh 13 2 pc 31 25 s 31 17 s 22 7 s 28 23 pc 8 0 pc 1 -4 sn 23 13 pc 1 -2 c -2 -3 sn 33 18 pc 13 9 pc 24 9 c 20 15 pc 8 3 s 4 -7 sn 27 17 pc

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COVERAGE YOU TRUST. INSIGHT YOU NEED. INSIGHTS YOU NEED FOR THE FIRST 100 DAYS Become a member today: US $1 for 2 months. subscribe.wsj.com/member © 2016 Dow Jones & Co., Inc. All rights reserved. 6DJ4683

tize. Thus does “Silence“ become a chronicle of a crisis of faith, as well as a test of its audience’s willingness to stay connected and involved. I’ve tried to keep myself out of this review as much as possible until now, but I must say it’s a test I failed. For all the respect that Mr. Scorsese’s film demands, and deserves, I couldn’t wait for “Silence” to be over.

The WSJ Daily Crossword | Edited by Mike Shenk

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

Seoul

played slyly and, dare I say it, entertainingly, by Issei Ogata, a veteran Japanese actor, writer and comedian with what appears to be an irrepressible sense of showmanship.) Rodrigues and Garrpe are tortured, too, hideously and graphically, and further tortured by the knowledge that innocent members of their flock will die unless the priests themselves aposta-

800 901 216

PUZZLE CONTEST

61 Result of a schism, often 62 Kings and queens 63 Mystery award Down 1 Email option, for short 2 Milne joey 3 “Scandal” network 4 Police tactic 5 Solution from an optometrist 6 Maker of the Genius Pro 8000 electric toothbrush 7 Picture 8 Bitter bottleful 9 “The Day Dream” painter 10 Mobile location 11 Have coming 12 Of the flock 13 Went along (with) 18 “My word!”

22 Result of a double fault at deuce 23 Worshipers of the sun god Inti 24 Arlo’s dad 25 Williams of “Happy Days” 26 Trane played them

30 Against the clock 31 Barely make 32 One of the Mario Bros.

33 Understanding, in metaphor 34 “Fiddler on the Roof” role 36 Steaming mad 37 Get canned 40 Course taken last 41 Phone insertion 43 “Vogue” editor Wintour 44 Jeanne d’Arc, e.g.

45 They’re grilled in Green Bay 46 Mexican milk 47 Improvised 48 Chopped 49 Symbols of oppression 54 Period of history 55 Mastermind piece 56 Green of “Miss Peregrine’s Home for Peculiar Children” 57 Title for Rod Stewart, as of 2016

Previous Puzzle’s Solution L O N D O N A L M S M A N

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TECHNOLOGY: CHINESE RIDE-HAILING RULES THREATEN DIDI’S MIGRANT DRIVERS B3

BUSINESS & FINANCE

© 2016 Dow Jones & Company. All Rights Reserved.

Yen vs. Dollar 117.5860 À 0.03%

Hang Seng 21636.20 g 0.80%

Friday - Monday, December 23 - 26, 2016 | B1

THE WALL STREET JOURNAL.

Gold 1130.60 g 0.04%

WTI crude 52.98 À 0.93%

10-Year JGB yield 0.052%

10-Year Treasury yield 2.553%

Baidu Plans Streaming-Site IPO DA QING/IMAGINECHINA/ASSOCIATED PRESS

Offering under consideration for next year could value iQiyi at up to $5 billion

BY ALEC MACFARLANE AND RICK CAREW HONG KONG—Chinese internet giant Baidu Inc. is planning an initial public offering of its video-streaming site iQiyi.com that could value the unit at up to $5 billion, according to people familiar with the matter.

Baidu is considering listing iQiyi in either Hong Kong or the U.S. next year, the people said. The company is planning to issue a convertible bond or similar instrument to raise funds from investors before the IPO, the people said, but the size and timing of that fundraising hasn’t been set.

An iQiyi app display. The IPO is expected to raise about $1 billion.

IQiyi is expected to raise about $1 billion through the IPO, according to one of the people, but the exact amount remains fluid and terms could change as the company negotiates with prospective investors.

IQiyi said at its annual marketing conference in Shanghai in October that it planned to in-

vest as much as 10 billion yuan ($1.4 billion) to buy and produce content in the coming year.

A spokeswoman for iQiyi declined to comment.

The plans come after an aborted attempt by the Chinese search giant’s chief executive, Robin Li, to buy the unit earlier this year for $2.3 billion.

While Baidu’s shareholders have pushed the search giant’s management to improve the profitability of its video and ondemand units, many considered Mr. Li’s bid a low-ball offer.

The IPO, which is expected to value iQiyi at between $4 billion and $5 billion, is likely to be seen as a better deal for Baidu shareholders than the buyout bid in February by a consortium led by Mr. Li, which also included iQiyi founder and CEO Yu Gong. Some investors criticized it as a sweetheart deal for Mr. Li to profit at the expense of Baidu’s investors, and it was dropped in July after the two sides failed to reach an agreement on the deal structure and purchase price.

Those investors included New York hedge fund and Baidu investor Acacia Partners LLC, which wrote an open letter to Mr. Li criticizing the low sale price. Acacia said

the offer valued iQiyi at $2.8 billion compared with a $4.8 billion valuation for Youku Tudou, the rival video platform that Chinese e-commerce giant Alibaba Group Holding Ltd. bought in 2015.

Shanghai market-research firm 86Research values iQiyi at $5.8 billion. The firm values a rival business run by Chinese internet behemoth Tencent Holdings Ltd. at $7.4 billion, and Youku at $4.7 billion.

Live streaming has seen rapid revenue growth in Asia, particularly in China, where it is forecast to become a $5 billion market by the end of 2017, according to data-analytics firm App Annie.

IQiyi, which was founded in 2010, said in June that the number of paid subscribers to its streaming service had surpassed 20 million, up from 10 million in December 2015 and five million in May 2015.

Traditional motorized rickshaws sit idle in New Delhi during a July protest by taxi unions against Uber and local ride-share rival Ola.

Uber Taps Novice Drivers in India

BY NEWLEY PURNELL NEW DELHI—How do you train a million new Uber drivers in a country where most people have never driven a car, tapped on a smartphone or used an online map?

Uber Technologies Inc. faces that daunting task as it tries to avoid its fate in China, where it decided this year to sell its business to homegrown champion Didi Chuxing Technology Co. The $68 billion San Francisco startup has plenty of cash and cutting-edge technology to bring to its battle in India. Also, the country hasn’t thrown up the kind of regulatory hurdles that have hindered Uber’s growth in other

regions. So the company’s ability to find and teach new drivers could decide whether Uber can dominate this fastgrowing market.

Along with other U.S. tech firms like Amazon.com Inc., Apple Inc., Facebook Inc. and Netflix Inc., Uber is betting big on the South Asian nation while dealing with the unique challenges of reaching its more than 1.2 billion people.

Uber is intent on outdoing its Indian rival, ANI Technologies Pvt.’s Ola, in recruiting and retaining competent drivers. Ola, which was valued at $5 billion as of last year, has more than 550,000 drivers and aims to have five million within the next five years.

Uber has about 400,000

Mandal, who lives in New Delhi.

Prospective drivers arrive by the hundreds at an Uber office in a strip mall in a New Delhi suburb. Many of the men, wearing T-shirts, baggy pants and sandals, look bewildered as Uber employees check their licenses and other documents and quickly sit them down in classrooms.

There they are told they must wear clean clothes— preferably long-sleeved shirts and matching pants— and switch from sandals to shoes, which must be kept on at all times.

They learn how to use the Uber app—tap to accept a fare, touch a button to switch to Please see UBER page B2

drivers on its platform in India, and wants to add one million in the next two years.

While mobilizing an army of drivers is crucial, it is particularly tough in a country where less than 5% of households own cars and few potential drivers understand English or how to use an app.

To win in India, the world’s most valuable startup has to recruit more people like Sikandar Mandal, a 39-year-old former rice farmer with an 8th-grade education. Thanks to Uber he got his first smartphone and discovered YouTube, WhatsApp and Google Maps.

“Uber taught us to speak politely, dress well and follow the traffic rules,” said Mr.

Iran Jet Purchases Will Test Trump Policy

BY ROBERT WALL LONDON—European plane maker Airbus Group SE joined Boeing Co. in completing a multibillion-dollar plane deal with Iran’s state air carrier, creating another big test of how the incoming Trump administration will respond to the West’s accelerating economic opening with the Islamic Republic.

Airbus, the world’s No. 2 plane maker after Boeing, said Thursday it had completed an agreement—first announced in January—to sell 100 planes to Iran Air. The contract is valued at more than $18 billion based on list price, which doesn’t include sometimes-big discounts.

Airbus said it would start delivering planes early next year.

The agreement comes hard on the heels of Boeing’s deal to sell Iran 80 jets for $16.6 billion, based on list price. The two contracts are far and away the most valuable com-

FABRIZIO BENSCH/REUTERS

If it wasn’t clear already, the people that Presidentelect Donald Trump is slotting for his administration have emphasized that he aims to be extremely shareholder friendly. The question facing investors is what sort of value to place on that friendship.

Never before has a U.S. president stocked his cabinet with as many businessmen as Mr. Trump is aiming to.

While putting up a Goldman Sachs Group alum like Steven Mnuchin for Treasury secretary counts as almost status quo, tapping Exxon Mobil Chief ExecuHEARD ON tive Rex TilTHE STREET lerson for JUSTIN secretary of LAHART state and fast-food chain executive Andy Puzder as labor secretary shows how highly Mr. Trump values business experience—and how focused he is on reshaping the regulatory environment in businesses’ favor.

Investors have certainly taken notice, as the Dow Jones Industrial Average’s move toward 20000 shows.

Maybe the most telling aspect of the rally is the 32% gain in the shares of Goldman Sachs, which accounts for 408 of the Dow’s 1,608point gain since Election Day. A little of that might be a response to how many Goldman alums will be wandering around the West Wing—not just Mr. Mnuchin, but also Goldman No. 2 Gary Cohn (who got the nod to head the National Economic Council), former Goldman banker Steve Bannon (who will be Mr. Trump’s chief strategist and senior counselor). And Carl Icahn, a potential poacher-turned-gamekeeper who will help overhaul regulation.

More broadly, it reflects a belief that the new team in the White House will treat financial firms with an easier touch than President Barack Obama. Mr. Trump’s vow to dismantle DoddFrank seems likely to go unfulfilled, but in surrounding himself with so many Wall Streeters the message seems to be that the 2010 financial-overhaul law will be lightly enforced.

Mr. Tillerson’s nomination, and the picks of former Texas Governor Rick Perry for energy secretary and Oklahoma Attorney General Scott Pruitt to head the Environmental Protection Agency signal a far friendlier regulatory environment for the energy sector. Strategas Research Partners estimates that there are $48 billion in Please see HEARD page B2

SAURABH DAS/ASSOCIATED PRESS

Trump Isn’t A Cure-All For Stocks

Airbus completed a deal to sell 100 airliners to Iran on Thursday. mercial agreements between Western companies and Iran since the completion of a nuclear pact between the U.S. and other world powers and Tehran. In exchange for Iran’s curbing its nuclear program, the international community agreed to lift many of the sanctions that have isolated Iran economically for years.

Since then, many Western

firms have scrambled to assess opportunities, and a few have made commitments with Iranian counterparts in industries that include energy and auto manufacturing. Commercial aviation has been a particular priority for Iran, which has struggled to modernize its aging fleet of mostly Boeing jets, bought before the 1979 Iranian Revolution.

Uncertainty about the future

of these commercial inroads has grown since the election of Donald Trump. On the campaign trail, Mr. Trump said he opposed the Iran nuclear deal.

Critics in the U.S. Congress have said they would try to unwind the Boeing deal, in particular.

Boeing announced its own sale to Iran earlier this month at an awkward time for the company. Mr. Trump recently had questioned the cost of Boeing’s contract to build the next version of Air Force One, the presidential jet. Mr. Trump hasn’t commented publicly on Boeing’s contract with Iran and he and his team haven’t detailed their position on the nuclear deal with Iran since the election.

Even though it is a European company, Airbus is vulnerable to any big shift in U.S. policy toward Iran. Airbus requires U.S. approval for the sales because its jets include Please see IRAN page B2

Anglo To Scale Back Its SalePlan

BY SCOTT PATTERSON AND ALEXANDRA WEXLER A year after Anglo American PLC announced one of the most dramatic corporate downsizing efforts ever, the company is dialing back its plan to sell off two-thirds of its mines and shed over half its workers, a person familiar with those plans said.

Though Anglo found its cost-cutting plans tangled in South African politics, the delay has helped the company take advantage of a rebound in commodity prices during the second half of this year—especially in coal and iron-ore— that have turned some moneylosing mines into cash cows, making it harder to justify their sale.

While Anglo may still look to divest a number of its lowmargin mines, the pressure to dispose of a vast chunk of its assets has eased.

After commodity prices plunged last year, Anglo unveiled what it called a “radical” turnaround plan to sell as many as 29 mining assets and an accompanying 85,000 workers over the next several years.

So far, it has sold only nine of those mines and hasn’t met the $3 billion to $4 billion target for asset sales that its Chief Executive Mark Cutifani set at the start of this year.

The dialed-back divestment plan highlights how the sharp rebound in commodity prices this year has altered the fortunes of the mining industry.

Glencore PLC, which last year seemed on the verge of imploding, recently said it had finished raising cash to stabilize its balance sheet and then announced a big investment in Russian oil giant PAO Rosneft.

Other big miners, including Rio Tinto PLC and BHP Billiton, have seen sharp increases in their stock prices.

In 2015, Anglo was among the worst-suffering companies in the global mining industry, which had been racked by almost three years of slumping prices, and was teetering under $12.9 billion of net debt.

Anglo posted $5.6 billion in losses that year.

Now, its share price is up nearly 300% in 2016, and it is raking in cash from its coal operations—businesses it had planned to sell.

The price of metallurgical coal, which is used in steelmaking, has risen four times this year. Iron-ore prices are up 99% on the back of stimulus provided by the Chinese government and cutbacks in production in China, which consumes about 40% of the world’s raw materials.

Some analysts have called on Anglo to use money from rising cash flows to pay down its debt instead of selling assets to raise funds. Analysts expect the company to post positive cash flows in 2016, a sharp reversal from a cash outflow of $982 million last year, according to FactSet. Anglo continues to hold discussions with potential buyers.

Please see ANGLO page B2

INSIDE

INSURERS COOL TO SMARTHOME GADGETS MARKETS, B8

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B2 | Friday - Monday, December 23 - 26, 2016

THE WALL STREET JOURNAL.

INDEX TO BUSINESSES

BUSINESS NEWS

These indexes cite notable references to most parent companies and businesspeople in today’s edition. Articles on regional page inserts aren’t cited in these indexes.

A

G

Alibaba Group..A2,B3,B4

Gap .............................. B8

N

Altice...........................B3

Glencore ...................... B1

Nokia Technologies.....B3

Anglo American.....B1,B2

Goldman Sachs Group...................A1,B1

O

H

1Malaysia Development ............ A1

Hyundai Motor............B4

1MDB .......................... A1

ANI Technologies........B1 Ant Financial Services Group ........................ A1 Apple...........................B3

B Baidu ........................... B1

I

R

International Petroleum Investment...............A6

Ralph Lauren...............B8 Rio Tinto ..................... B1

iQiyi.com ..................... B1

Banque Havilland ....... A6

J

BHP Billiton................B1

J.C. Penney..................B8

BSI...............................B7

K

S Samsung Electronics..B4 Stuart Weitzman Holdings....................B4 Suning Commerce Group.........................B5

C

KKR..............................B5

Coach...........................B4

Kumba Iron Ore..........B2

Cosun...........................A1

L

T

L'Oreal.........................B4

Taobao.com ................. B3

LVMH Moet Hennessy Louis Vuitton............B4

Thyssenkrupp..............A4

D Dentsu.........................A2 Didi Chuxing Technology...........B1,B3

E

M Macy's.........................B8

Eskom Holdings..........B2 Exxon Mobil................B1

Michael Kors Holdings....................B4

Swatch Group.............A2

U Uber Technologies.B1,B3

V Voltage Pictures.........B2

INDEX TO PEOPLE B Bittner, Maximilian .... B4

C Carroll, Lewis..............B4 Chartier, Nicolas.........B2 Cutifani, Mark.............B1

D Drahi, Patrick..............B3

E-F Evans, Michael............B3

François Villeroy de Galhau.......................B5 Franz, Andrew ........... W7

J

Malone, John .............. B3

P Praet, Peter.................B5 Pradzinski, Bob...........B4

Jenkins, Isabelle.........B5

R

L-M

Rahnasto, Ilka.............B5

Leissner, Tim..............A6 Low, Jho......................A6 Álvarez, José, Antonio.....................B5

FOCUS FEATURES/EVERETT COLLECTION

Anhui Xinke New Materials...................B2

Midnight InvestmentsB2

V

Xinke said it canceled its offer to take over Voltage Pictures, the independent filmmaker behind such films as ‘Dallas Buyers Club.’

Metals Firm Ends Film Deal Xinke drops bid for Hollywood filmmaker, saying it can’t satisfy Chinese regulator

Vevers, Stuart ............ B4

Z Zuchowski, Dave.........B4

A Chinese metals manufacturer ended its unexpected foray into Hollywood, scrapping its bid to buy the independent filmmaker behind the awardwinning movies “The Hurt

ANINDITO MUKHERJEE/REUTERS

By Wayne Ma in Beijing and Kane Wu in Hong Kong

Uber Technologies’ offices in the New Delhi area in April.

UBER Continued from the prior page Google maps navigation, click to get someone on the phone if they get confused. Most of the drivers have dealt only in cash, so they have to learn about online banking in order to quickly check if their pay has arrived.

And since credit cards aren’t widespread, Uber last year began letting riders pay in cash, a global first.

Uber’s lending arm, Xchange Leasing, has a desk set up to offer drivers leases on vehicles for a few hundred dollars a month. India’s lead-

India is second only to the U.S. in the number of trips Uber completes. ing auto makers also have salespeople on hand to offer deals on new cars, which in In India can be had for under $5,000. Some drivers have built up small fleets of vehicles, sharing them with other Uber drivers for a cut of their proceeds.

A Vodafone booth in the Uber office can provide new recruits with an affordable data plan.

“We were spending over $1 billion a year in China, so it helps us to divert some of that investment and money to India,” Uber India President Amit Jain said.

Most of the drivers have never even sent an email, but those who can absorb Uber’s crash course often earn 50% more than in their previous jobs. Recruits are warned that if they can’t master the system, they will be weeded

out by the company’s fivestar rating system.

At first Uber tapped the obvious pool of Indians driving taxis, buses and autorickshaws. It then started enlisting private drivers working for companies and families. Now, Uber is having to recruit among folks who have never driven professionally.

India is second only to the U.S. in the number of trips Uber completes, and makes up about 12% of its rides globally. Its India staff has grown from just a handful a few years ago to some 600 employees, again second only to the U.S. Uber’s main competition, Ola, launched in 2011, two years before the U.S. firm’s arrival, and has raised about $900 million from the likes of Japan’s SoftBank Corp. and others—including Didi. Uber may have deeper pockets but the Indian leader has more drivers and regular customers, said Ola’s chief operating officer, Pranay Jivrajka. “It’s not about the money you can burn,” he said.

Ola, which operates in 102 cities compared with Uber’s 29, has a better sense of what local consumers and potential drivers want, said Mr. Jivrajka. The Indian company says it is a more effective recruiter because it draws on referrals from its larger pool of drivers. In addition to classroom training, Ola gives fresh recruits new smartphones.

Uber needs to survive and thrive in India to show investors that it can succeed not only in developed countries but also big emerging markets.

“We are not profitable in India,” Mr. Jain said. “We will continue to invest to grow the market.”

—Krishna Pokharel and Karan Deep Singh contributed to this article.

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Locker” and “Dallas Buyers Club,” saying it couldn’t satisfy a Chinese regulator.

Shanghai-listed Anhui Xinke New Materials Co., which prepares copper and other metals for use in electronics and auto industries, said Wednesday in a regulatory filing that it canceled its at least 2.4 billion yuan (US$345.6 million) offer for a controlling stake in Midnight Investments LP, a company whose main asset is Los Angeles-based film-financing, production and distribution company Voltage Pictures LLC.

ANGLO Continued from the prior page It successfully sold a few of its assets before the commodity surge, much of which came in the second half of 2016.

In April, it agreed to sell its Brazilian niobium and phosphates businesses to China Molybdenum for $1.5 billion.

But the company is finding it hard to set a price on its assets of late. Anglo was on the verge of selling some prized coal assets in Australia this summer, but then the price of coal surged in a matter of days, prompting Mr. Cutifani to pull back on the deal, a person familiar with the matter said.

Not all buyers are convinced the commodity upturn will last, the person said, and that has made many prospective buyers reluctant to pay the higher prices Anglo is asking for.

“Mark will be looking at me and say, ’Is that the right price for what you are selling?’” said Norman Mbazima, deputy chairman of Anglo American South Africa, in an interview.

Despite their misgivings,

IRAN Continued from the prior page many American parts and technology that are subject to American export controls. It received that approval from the U.S. Office of Foreign Assets Control earlier this year.

Farhad Parvaresh, head of Iran Air, said in an interview that Airbus “probably” would finance some of the first planes to be delivered. Airbus didn’t disclose financing details. Iran has said it would finance a chunk of the two plane orders domestically and rely on foreign financing for the rest.

Airbus is expected to deliver its planes to Iran Air much faster than Boeing. That could set up the Airbus deal as an early test of how Mr. Trump responds. Mr. Parvaresh said he expected three to four Airbus planes by March.

One person familiar with the situation said at least one

Xinke announced the deal in November but said in filings to the Shanghai Stock Exchange that the U.S. film company didn’t provide additional information requested by the Chinese regulator.

Xinke referred questions to an executive who wasn’t available for comment.

Neither Nicolas Chartier, founder of Voltage, nor a lawyer who represented Voltage’s parent companies in the transaction immediately replied to emailed requests for comment.

The collapse of the deal comes as Beijing clamps down on Chinese companies seeking to invest overseas, part of a push to stem the rising flow of money out of the country.

New measures circulated in late November include greater scrutiny of Chinese companies investing in foreign entities that aren’t closely related to the investor’s core business.

A few weeks after Xinke disclosed its offer for Voltage, the stock exchange in Shanghai sent a letter to the metal maker asking for additional information about the U.S. filmmaker, according to Xinke’s

regulatory filings.

The letter asked for more details about Voltage’s business structure, assets, management team and films.

In the letter, the Chinese regulator noted discrepancies in Voltage’s net profit and cash flow, and asked Xinke to provide opinions from financial advisers and accountants to explain them.

Regulators also asked Xinke to justify its valuation of Voltage, based on Voltage’s historical transactions, if any. Xinke had offered to purchase an 80% stake in the company for at least 2.4 billion yuan.

After the deal was canceled Wednesday, the Chinese regulator asked Xinke whether there were additional reasons for the termination, such as issues related to “foreign investment or foreign-exchange policy.”

It isn’t clear whether Xinke has responded to the letter. In a transcript of an investor question-and-answer session posted Thursday, the company said it wasn’t sure whether it would attempt another investment in Hollywood but said it would

“there’s certainly no lessening of pressure because of the price of commodities,” Mr. Mbazima added, referring specifically to Anglo’s operation in South Africa.

Another complicating factor for Anglo is South Africa, where the company had planned to sell as many as 13 of its 23 mining operations.

Anglo is targeting coal mines there, some of which have low profit margins, as well as aging iron-ore operations, which are held in separately listed, majority-owned unit Kumba Iron Ore. Despite their many ties, the South African government and Anglo have had a strained relationship.

The South African government has made it clear that Anglo should sell to homegrown companies or groups, but few enterprises in the country can afford to buy Anglo’s assets.

The government also has made it difficult for Anglo to cut workers at unproductive mines. South African government officials didn’t respond to requests for comment.

“When you have to cut costs, it’s not easy, when you have a government that isn’t

being helpful and doesn’t appear to like you; you feel a bit lonely, isolated,” said Ian Woodley, an analyst for Old Mutual Equities in Cape Town.

Anglo recently has been involved in a price dispute with the state-run power company, which buys some of its coal used in energy production from the mining company. Eskom Holdings SOC accused Anglo of overcharging for coal; Anglo has responded by saying it charged a fair market price.

The Public Investment Corp., South Africa’s state-run pension fund, has been pushing Mr. Cutifani to spin off Anglo’s assets as a package that includes some coveted platinum mines, a move the CEO has resisted.

The pension fund wields influence as the largest shareholder in Anglo American, Kumba, and Anglo American Platinum, a majority-owned unit of Anglo listed in Johannesburg.

The pension-fund manager declined to comment beyond an August statement saying it was talking with Anglo about finding the “best ways of maximizing value for all the stakeholders.”

plane could arrive before Mr. Trump’s Jan. 20 inauguration.

In announcing its deal earlier this month, Boeing said booking the Iran Air sales in its official order book was still subject to “contingencies.” That caution is common with deals involving state-owned airlines. They can include final approvals from governments, and often are linked to potential financing arrangements, said people familiar with the sales process.

On Thursday Boeing said it hadn’t yet included its Iran order in that tally.

Iranian officials said earlier this week they would seek repayment with interest on any money they paid for the Boeing jets if Washington interfered with the order.

For Boeing and Airbus, the Iranian purchases are a big help. After years of record orders by airlines for the newest planes, global appetite has been ebbing. Airbus booked only 410 net orders in the first 11 months of the year, com-

pared with 1,007 for the same period last year. Boeing’s 468 plane orders through Dec. 13 also trail last year’s figures.

Airbus said the 100 planes would include 46 single-aisle A320 planes and 38 A330 and 16 A350 long-haul planes.

The two orders will go a long way toward upgrading Iran Air’s fleet, one of the oldest in the world due to sanctions. Still, absorbing those new aircraft creates other challenges. Sanctions have left the country with an antiquated airport and air-trafficmanagement infrastructure.

Airbus said Thursday that as part of the deal it would provide pilot training and other help to upgrade Iran’s infrastructure.

Fabrice Brégier, who heads Airbus’s commercial planemaking unit, called the package “a significant first step in the overall modernization of Iran’s commercial-aviation sector.”

—Aresu Eqbali in Tehran contributed to this article.

continue its push into the entertainment industry.

Xinke, which booked a firsthalf loss of 60 million yuan (US$8.6 million), has little experience in film, though it bought a Chinese production company last year.

Xinke, based in eastern Anhui province, had said it hoped the Voltage acquisition would help propel it into the global film and TV industry, as well as bolster its bottom line. The company’s shares have been suspended since Aug. 8 ahead of announcements related to major transactions.

Xinke said Wednesday in a separate filing that after scrapping the deal, it would invest about 194 million Hong Kong dollars (US$25 million) for a minority stake in a Hong Kong film-and-TV production company controlled by Hong Kong actor and producer Raymond Wong. The new deal has already attracted regulatory scrutiny, with the Shanghai exchange asking in a letter dated Wednesday whether it was “consistent with China’s foreign-investment and foreign-exchange regulations.”

HEARD Continued from the prior page U.S. private fossil-fuel energy projects that have languished as a result of climate-change concerns.

Presumably, much of that money will be unleashed by the Trump White House.

Mr. Puzder as labor secretary suggests the incoming administration will oppose efforts to raise the federal minimum wage, will reverse the Obama administration’s expansion of workers’ overtime eligibility, and will push back against workplace regulations. That would be particularly beneficial for companies in lowwage industries, such as restaurants.

But while Mr. Trump’s business-friendly cabinet ought to help out the bottom lines at many companies, it will only help so much. The strength of the economy and the level of short- and longterm interest rates are what matter most for financial companies. Oil prices, which are set by global markets, are the major issue for energy companies. And labor costs are dictated by the supply of available workers—the less slack there is in the job market, the more companies have to pay the

The most telling aspect of the rally is the gain in Goldman Sachs’s shares. employees they need. And then Mr. Trump’s campaign rhetoric could hurt as well, either because limiting immigration drives up wages or because abandoning his populist agenda hurts his political clout.

The danger for investors is that in their enthusiasm for the regulatory environment Mr. Trump’s administration is heralding, they aren’t paying enough attention to the things that really matter.

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TECHNOLOGY

Company questioned whether the move was influenced by current political climate. bring significant pressure to Washington’s international negotiations and interactions with companies, and U.S. lawmakers frequently cite the markets enumerated on the list.

Taobao was removed from the list in 2012, as the USTR cited improvements the company had made in monitoring counterfeit goods. Last year, however, the agency warned it had grown “increasingly concerned” about counterfeits and would be looking to see if Alibaba was taking steps to address that issue.

In its new report, the USTR alleges attempts to flag infringement to Alibaba are “refused inconsistently” and requests to take items off the site are denied without guidance on how to get results. Some messages aren’t translated from Chinese, and there are other issues with communication.

The agency added that while Alibaba has initiated a program aimed at helping with this, it remains out of reach for a number of brands because of the difficulty of eligibility.

“While recent steps set positive expectations for the future, current levels of reported counterfeiting and piracy are unacceptably high,” the agency said.

Trade groups earlier this year called for Alibaba to be added back to the list, saying they were making the request because “an enormous amount of counterfeits” remain on the e-commerce company’s sites.

Alibaba said at the time sales of counterfeits damage its business as much as it hurts brands.

The American Apparel & Footwear Association, one of the organizations that had called for that action, commended the decision on Wednesday.

“Today’s action shines a renewed spotlight on the considerable concerns we and others continue to see on Alibaba platforms,” said Chief Executive Rick Helfenbein. He added the group would work with its members, the government and Alibaba “to seek sustained improvements that lead to the permanent removal of counterfeits from these online platforms.”

—William Mauldin contributed to this article.

BY EVA DOU BEIJING—New Chinese rules on ride-hailing apps are expected to force many of Didi Chuxing Technology Co.’s Beijing and Shanghai drivers off the road by declaring that they must be local residents.

This skirmish in the global battle between transport regulators and ride-hailing apps is distinctly Chinese, centering on a household registration document called a hukou that stipulates where all Chinese citizens are allowed to live and work. Many drivers aren’t officially registered in the cities in which they work; in October, Didi said that less than 2.4% of its drivers in Shanghai were locals.

The rules are expected to dim growth prospects for a sector dominated by Beijingbased Didi, which struck a deal in August to acquire Uber Technologies Inc.’s China unit.

The ride-hailing hukou rule is typical of the blunt instruments China often resorts to for regulating urban life. Beijing traffic authorities told China’s official Xinhua News Agency on Wednesday that keeping migrant workers out of the ride-hailing driver pool

A Didi driver in Beijing last year. Under a new rule, only official city residents qualify for the work. was necessary to limit traffic, environmental problems and other “urban diseases.”

In many Western countries, a ban against migrant drivers would be seen as discriminatory. But the residency rule for ride-hailing drivers in Beijing and Shanghai is in line with other Chinese regulations: Only residents with local hukou can drive traditional taxis in those cities. Influxes of migrant workers have been more tightly controlled in Beijing and Shanghai—China’s politi-

cal and financial capitals— than elsewhere in the country.

Guangzhou issued looser ride-hailing rules on Thursday that allow some migrant workers with special residence permits to work as drivers, along with residents with local hukou.

As in the U.S., China’s ridehailing sector is controversial among regulators, but popular with investors. Didi’s investor list includes Apple Inc. and China’s three internet giants, Alibaba Group Holding Ltd.,

Tencent Holdings Ltd. and Baidu Inc. More than 6 million passengers use Didi and Uber in China each day.

Didi, which had sharply criticized a draft of the rules in October, saying that it would kill millions of jobs for drivers, on Wednesday issued a more conciliatory statement, praising the government for taking some of its suggestions in discussions before the rules were finalized.

Beijing added a five-month grace period for existing driv-

ers to comply, and Shanghai allowed some smaller cars to operate that it previously planned to exclude.

“We are encouraged by improvements in new local rideshare rules published in Beijing and Shanghai,” Didi said on Wednesday. “Compared to the first proposed drafts, these rules are a significant step toward a more sensible and liberal framework.”

Shanghai’s internet regulator, meanwhile, remained in combative mode. In a scathing attack through its WeChat social media account on Thursday morning, it alluded to Didi’s October complaint without naming the company, essentially saying it was running an illegal taxi business.

“In their lofty boasting, they say it’s a ‘sharing economy’ of unused cars and parttime drivers,” the post from the Shanghai branch of the Cyberspace Administration of China said. “But as soon as there is regulation, it’s exposed that it is ‘taxi-like’ in reality. If they’re really parttime drivers, where does this talk of job losses come from?!”

A Didi spokeswoman said in response that the company’s statements about job creation encompassed both part-time and full-time drivers. She said that China’s national leaders support the “sharing economy.”

—Yang Jie contributed to this article.

Nokia, Apple Do Battle Again Over Patents

BY TRIPP MICKLE AND MATTHIAS VERBERGT Apple Inc. and Nokia Corp. have reignited a dispute over mobile-device patents, directing lawsuits at each other.

The suits filed this week mark the second time in the past seven years the companies have squared off over patents. In 2011, Apple settled a two-year patent case with Nokia and agreed to pay licensing royalties for use of some Nokia patents in iPhones.

In a suit Apple filed Tuesday in the U.S. District Court for the Northern District of California, the Cupertino, Calif.-

based company argues Nokia excluded some patents from that agreement and transferred them to third-party companies “to be used for extorting excessive royalties” from Apple. It asked the court to award damages and rule that Nokia breached its contract.

On Wednesday, Nokia said it filed complaints in Germany and the U.S., alleging that Apple products infringed on 32 Nokia patents covering technologies such as display, antenna and video coding.

On Thursday, Nokia said it had filed additional complaints, bringing the total to 40 patents that it says Apple had violated.

The Finnish company, once a dominant cellphone maker, said it now has filed actions in 11 countries in total.

Ilkka Rahnasto, Nokia’s head of patent business, said in a statement the company negotiated several years with Apple to reach an agreement on the use of 32 patents before deciding it would take action “to defend [its] rights.”

An Apple spokesman said the company has always been willing to pay a fair price for patents covering the technology in its products. “Unfortunately, Nokia has refused to license their patents on a fair basis and is now using the tac-

tics of a patent troll to attempt to extort money from Apple,” he said.

In the previous patent dispute, Nokia was able to secure a favorable settlement worth an estimated $720 million from Apple.

Florian Mueller, an independent intellectual-property analyst, said any impact from the new case on Apple’s business likely would be limited because it would be difficult for Nokia to get an injunction against Apple’s iPhones in Germany or the U.S. Nokia abandoned mobile-device manufacturing in 2014, when it sold its mobile-phone

business to Microsoft Corp. for €5.44 billion ($5.86 billion) to focus on network equipment.

But Nokia’s patents still cover technology used in many smartphones and tablets.

As sales of networking equipment are in decline world-wide due to lower spending by mobile-service providers, Nokia increasingly is dependent on its highly profitable patent business. Last year, revenue from Nokia Technologies, the business unit that holds the company’s patent portfolio, amounted to €1.02 billion, or 8% of its total sales.

—Joshua Jamerson contributed to this article.

Altice to Sell Belgium, Luxembourg Assets

BY NICK KOSTOV

A Waymo driverless car. Honda is considering testing some Waymo technology in its own vehicles.

HondaTalksWithGoogleSpinoff

BY TIM HIGGINS AND JACK NICAS Waymo, the recently renamed Google self-driving car project, is in talks to collaborate with its second big auto partner.

Honda Motor Co. said Wednesday it is discussing testing Waymo’s self-driving technology in some of its vehicles, in what would be a major partnership between a traditional auto maker and Silicon Valley.

Under the proposed partnership, the companies would test Waymo’s sensors, computers and software in Honda’s vehicles. Initially, the Japanese auto maker’s vehicles likely would join Waymo’s fleet of test cars rather than be offered for sale.

Negotiations are in “midstage,” according to a person familiar with the talks.

Waymo, a unit of Google parent company Alphabet Inc., has 58 self-driving cars on U.S. roads and is set to add another 100 vans made by Fiat Chrysler Automobiles NV early next year. The two companies un-

veiled their agreement in May. Waymo’s apparent strategy is to join with those auto makers with more-limited research budgets.

Executives at Honda and Fiat Chrysler have said their companies can’t afford to invest as much in self-driving technology as heavyweight competitors such as General Motors Co., Ford Motor Co. and Toyota Motor Corp.

“Waymo should be a onestop shop for Honda” in selfdriving technology, Dave Sullivan, an analyst for AutoPacific, said in an email. “This could free up resources at Honda.”

Honda has said it plans to sell cars that have limited selfdriving capabilities around 2020. Honda signaled on Wednesday that a partnership with Waymo could give its vehicles fully self-driving capability.

The talks come amid a race between Silicon Valley and traditional auto makers to dominate self-driving technology.

Tech companies like Waymo and Uber Technologies Inc. have moved forward aggressively.

Some car companies have responded by developing their own systems, while others are joining with tech firms. Volvo Cars Corp., for instance, is partnering with Uber.

For Waymo, the collaboration could help it gain momentum as a supplier of self-driving technology. The Alphabet unit is competing with companies including longtime auto supplier Delphi Automotive PLC, which also wants to provide the brains for autonomous vehicles.

Waymo was spun out as a stand-alone business unit earlier this month, signaling the company’s effort to commercialize the technology it has been developing since 2009.

Tech companies and auto makers are racing to roll out self-driving vehicles as advances in artificial intelligence and vehicle electrification are bringing to life the long-held dream of cars that can drive themselves.

Hurdles still remain, however, including making sure the technology can handle all the complexities of real-world driving.

PARIS—After an acquisition binge that made his company a major player in the U.S. and Europe, French mogul Patrick Drahi is doing something he usually avoids: selling assets.

Mr. Drahi’s telecommunications group, Altice NV, said Thursday it would sell its Belgium and Luxembourg business to Telenet Group BVBA, the Belgian unit of U.S. cable magnate John Malone’s Liberty Global PLC, in a transaction that values the assets at €400 million ($417 million).

The sale marks the first time that Mr. Drahi, who founded Altice, has opted for a disposal and highlights a new strategy of focusing on his larger assets. Previously, Mr. Drahi had only sold assets when forced to by regulators— for example in Portugal, when he bought the country’s former telecom monopoly.

Altice says it wants to have the most, or second-most customers, in each of the countries where it operates. In 2015, the company lost out to Liberty Global PLC in the €1.3 billion bidding war for Base, Belgium’s third-biggest mobile operator, leaving it with no clear path into the top two in the country.

Thursday’s deal allows Altice to focus more time and resources on its push in the U.S., where it became the No. 4 cable operator in June after merging regional operator Suddenlink with New Yorkbased Cablevision.

In December, the company said it was considering an initial public offering of a minority interest in its U.S. operation to raise money to expand.

Increasing equity would also ease pressure on a company that has about €50 billion in long-term debt.

Mr. Drahi, who has cited Mr. Malone as an influence, acquired his Belgium and Luxembourg assets in 2003 for €82

million as part of a shopping spree in which he also bought cable operators in France and Israel. The business, which Mr. Drahi rebranded SFR Belgium in recent months, reported 2015 earnings before interest, taxes, depreciation and amortization of €51 million, on revenue of €75 million.

The sale of Altice’s Belgium and Luxembourg business will be subject to review by Belgian authorities. The business has 110,000 cable customers, according to Altice’s website.

Altice shares fell 0.4% in early afternoon trading Thursday.

GEOFFROY VAN DER HASSELT/AFP/GETTY IMAGES

Alibaba Group Holding Ltd. has been put back on a U.S. agency’s list of global marketplaces known for counterfeit and pirated goods.

The U.S. Trade Representative’s annual list, released Wednesday, highlights physical and online markets “notorious” for fakes. It specifically mentions Alibaba’s flea-market-like shopping platform Taobao, which hadn’t made the list in years, citing rights holders’ complaints regarding obstacles to removing counterfeit items from the site.

“The Taobao.com e-commerce platform is an important concern due to the large volume of allegedly counterfeit and pirated goods available and the challenges right holders experience in removing and preventing illicit sales and offers of such goods,” the agency said.

Alibaba said it was disappointed by the decision, and questioned whether it might have been influenced by the current political climate.

“We are far more effective and advanced in [intellectual property rights] protection than when the USTR took us off the list four years ago,” Michael Evans, president of Alibaba Group, said in a statement. “The decision ignores the real work Alibaba has done to protect IP rights holders and assist law enforcement to bring counterfeiters to justice.”

The notorious markets list names and shames companies and countries that allegedly don’t take steps to stop counterfeiters, but it doesn’t set official U.S. policy. The prominence of the list, however, can

Residency stipulation means many migrants face loss of job in Beijing and Shanghai

HOW HWEE YOUNG/EUROPEAN PRESSPHOTO AGENCY

BY LAURA STEVENS

Rule Change Thwarts Didi Drivers

ERIC RISBERG/ASSOCIATED PRESS

U.S. Hits Alibaba Over Fake Goods

WSJ.com/Tech

Patrick Drahi, founder of Altice

Big Spender Altice revenue has jumped in recent years but debt has also increased sharply.

Revenue Net Debt

€50 billion 40 30 20 10 0 2013

’14

’15

’16*

*Expected Source: the company; FactSet (2016 revenue)

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B4 | Friday - Monday, December 23 - 26, 2016

BUSINESS NEWS

Korean Air Pilots Strike SEOUL—Unionized pilots at Korean Air Lines Co. went on strike Thursday for the first time in 11 years, disrupting some flights on the airline’s major Asian and Middle Eastern routes.

The pilots entered the 10day strike after talks with management broke down, following nearly a year of wage negotiations.

“A strike is not our end goal. But the company’s proposal for a pay raise is too little for us to accept,” a union leader said.

Over the next 10 days, the strike is expected to lead to the cancellation of as many as 150 passenger and cargo flights on the carrier’s domestic and international routes, including to Hong Kong, Dubai and Tokyo, according to the

transport ministry.

Korean Air said disruptions will be limited and that more than 90% of flights scheduled for the next 10 days will be unaffected.

“We’re diverting passengers on the affected flights to other routes to their destinations.

We will also make sure no year-end cargo are delayed,” a company spokesman said.

A complete work stoppage by pilots is prohibited under Korean law.

Airlines are categorized as one of the country’s critical industries, meaning that at least 80% of a company’s international flight operations and half of local flights must be maintained even during strikes. Korean Air accounts for about 40% of the country’s international flight operations.

The strike comes as more

Korean pilots are moving to China, where demand for aviators is outpacing supply and airlines are luring experienced pilots from overseas with competitive compensation packages.

In 2015, more than 120 pilots left Korean Air—seven times the number for the year before, according to the company, with nearly half moving to China.

The flood of departing Korean pilots has prompted greater demand for higher wages among those who stay.

Korean Air’s union, of which about two-thirds of the carrier’s 2,700 pilots are members, has threatened to strike since February, demanding a 29% pay raise instead of the 1.9% increase proposed by the company.

The union is open to fresh talks with the company, but if

no wage deal is reached by the end of December, the pilot strike would be extended for another 10 days, a union leader said.

A spokesman for Korean Air said the pilots’ demands are unacceptable, as the wage gap between pilots and other staff is already wide.

The strike marks the carrier’s first labor action since 2005, when a four-day pilot strike resulted in a loss of 67 billion won ($56 million) from canceled flights and other service disruptions.

That action spurred the government to order pilots back to work amid concerns over damage to the economy and passenger inconvenience.

As air-route networks rapidly expand to serve Asia’s burgeoning middle classes, the region is forecast to need

YONHAP NEWS/NEWSCOM/ZUMA PRESS

BY IN-SOO NAM

Hyundai’s Top U.S. Executive Is Leaving

BY ADRIENNE ROBERTS

turned off by the proliferation of fabric bags with its “C” logo.

The launch in 2010 of an eponymous line by Reed Krakoff, who at the time was the company’s creative director, exacerbated the problems, said previous and current executives. Mr. Frankfort blamed Mr. Krakoff for taking his eye off the Coach brand, according to people who know them both. Mr. Krakoff was frustrated by the CEO’s unwillingness to scale back promotions, these people said.

“Everything comes to an end,” Mr. Krakoff, who left in 2013, said recently. Mr. Frankfort, who left a year later, declined to comment.

Meanwhile, Michael Kors was gaining steam, propelled by the celebrity of its name-

sake designer, who had become a household name from his stint as a judge on the TV show “Project Runway.”

Mr. Luis and other Coach executives contend that Michael Kors also borrowed the company’s store design and even used some of the same factories as Coach.

“Thanks for the playbook,” Kors CEO John Idol told Mr. Frankfort, according to a person familiar with the conversations. A Kors spokeswoman declined to comment.

Michael Kors, however, had something that Coach didn’t: a full head-to-toe look, selling clothing and shoes.

Enter Mr. Vevers, a 43-yearold Briton who previously worked for LVMH Moët Hen-

nessy Louis Vuitton. Since he was hired in 2013, Mr. Vevers has added about 30 new designers to the 80-person team to help Coach make the transition to a full fashion house.

Mr. Luis has curtailed discounts and remodeled stores, moves that helped the company upgrade its image. Coach now holds two online flash sales a month, down from about 12.

The pullback resulted in $300 million in lost sales, but it helped reposition the brand. As a result, handbags and accessories priced at more than $400 accounted for 50% of Coach’s sales in the most recent quarter, up from 30% last year.

Asked whether a slowdown in Kors’s sales is further helping Coach, Mr. Luis responded with his own question. “If we had done nothing would Coach be better today?” he asked.

“The answer is, no.”

British Designer Is Transforming Coach

landed him the job in 2013.

It is all part of what Mr. Vevers calls his “optimistic, outsider’s view of America.”

Growing up in Doncaster, part of England’s industrial north, Mr. Vevers, said he learned about fashion by going to nightclubs.

After high-school graduation, he landed at Calvin Klein and moved on to a series of European labels that included Louis Vuitton, Mulberry and Loewe.

When Mr. Vevers joined Coach, the company was in a funk. He was given a mandate to reinvent the brand and turn it from a leather manufacturer into a fashion house.

Mr. Vevers has demonstrated a knack for taking Coach’s symbols and using

them in unexpected ways. For instance, putting a turnlock clasp—introduced in the 1960s— on a chunky, shearling lined boot.

“He’s been successful at rebranding Coach,” said Stefano Tonchi, the editor of W magazine. “You say Coach today and you identify not just with a bag, but with a wardrobe.”

Mr. Vevers works from an office on Manhattan’s West Side, which has a custom-designed couch in his favorite color—pink.

The designer said he was discouraged from favoring the color when he was younger.

“But,” he added, “I have thrown off the shackles.”

—Suzanne Kapner

Hyundai Motor Co.’s top U.S. sales executive is leaving the company after the Korean auto maker failed to meet expectations in the world’s most profitable auto market.

Dave Zuchowski headed the car company’s American unit for nearly three years and U.S. market share was flat over that period.

The departure comes as Hyundai launches a new “Genesis” luxury brand and races to add more sport-utility models to its lineup to better meet consumer tastes.

Hyundai has been a fixture in the U.S. market for years, growing from a relatively unknown foreign name to a brand with increasingly capable products. Once criticized for quality problems that forced the company to offer long warranties, the auto maker has won acclaim for product durability and initial customer satisfaction.

Dealers have praised Mr. Zuchowski for trying to help the company become more responsive to U.S. market trends. As fuel prices have fallen, buyers have flocked to heavier pickups and sport-utility vehicles—not a traditional strong suit for Hyundai.

The executive, however, couldn’t deliver the type of growth bosses in Korea wanted. The brand continues to rely too heavily on lowmargin sales to fleet buyers, including rental cars, that erode reputation and hurt resale values.

“Hyundai in the U.S. is falling short of objectives set by Korea,” said Adam Kraushaar, chairman of the Hyundai National Dealer Council. “Somebody has to pay the price. The buck stops with him.”

Mr. Kraushaar said as a result of the discrepancy between Hyundai’s small-car offerings and U.S. consumer tastes, “the fleet mix is out of control, which has an impact on residuals, then used-car values and then new-car values. [Hyundai] needs to get that equation under control.”

Since Mr. Zuchowski took over in January 2014, Hyundai’s market share has remained steady at about 4.4%, increasing slightly to 4.5% in November, according to AutoData Corp.

Gerald Flannery, Hyundai’s general counsel in the U.S, will succeed Mr. Zuchowski for now. Hyundai has started a search for a permanent replacement.

“We appreciate Dave’s decade of service to Hyundai, especially his leadership as president and CEO, which has made us a stronger organization,” Mr. Flannery said in a statement. “I look forward to working closely with our dealers, affiliates, senior management and our talented and hardworking employees across the country to realize Hyundai’s full potential.”

A spokesman declined to comment further on the departure.

Mr. Zuchowski couldn’t be reached for comment.

Mr. Zuchowski’s departure comes about 15 months after the leave-taking of another high-level sales executive, Bob Pradzinski, from the brand.

of 32 cents, better than the 28 cents analysts surveyed by Thomson Reuters had expected for the period.

Micron is the last remaining U.S. supplier of a widely used type of chip called dynamic random access memory, or DRAM, a key component in personal computers. It also has become a major maker of chips known as NAND flash memory, used to store data in smartphones and other devices.

For the latest quarter, DRAM sales volumes climbed 18%, while NAND rose 26%. The company also noted a 5% increase in DRAM average selling prices.

The PC industry has struggled with declining demand for several years because of issues that include a shift in consumer spending to smartphones. But

recently there have been signs of improving demand.

World-wide PC shipments by all suppliers in the third quarter were ahead of projections, even though they declined 3.9%, according to market watcher International Data Corp.

Micron reported a profit for its first quarter ended Dec. 1 of $180 million, or 16 cents a share, down from $206 million, or 19 cents a share, in the year-earlier period. Revenue increased 19% to $3.97 billion.

Excluding certain items, the company posted an adjusted profit of 32 cents a share, up from a profit of 29 cents a year ago. Analysts polled by Thomson Reuters had forecast profit of 28 cents a share on $3.98 billion in revenue.

—Ezequiel Minaya

Pilots protesting in Seoul.

226,000 new pilots in the next 20 years—more than Europe, North America and Africa combined, according to aircraft manufacturer Boeing Co. Asiana Airlines Inc., Korean Air’s domestic rival, lost 61 pilots to Chinese and other airlines in 2015, double the number for the prior year.

Coach Designs Makeover Beyond Bags

BY SUZANNE KAPNER

Fashion Comeback Coach has been closing stores and cutting back on discounts, after being eclipsed by rival Michael Kors.

Annual revenue* $6 billion 5 RICHARD B. LEVINE/LEVINE ROBERTS/NEWSCOM/ZUMA PRESS

It was a simple test. The slides showed photos of mall stores with the names obscured.

Which was a Coach store?

Which was Michael Kors?

A roomful of people gathered in New York City two years ago couldn’t tell the difference. The truth is most shoppers probably couldn’t either. But this wasn’t a focus group. They were Coach Inc.’s own employees.

The pioneer of selling luxury handbags at affordable prices had been beaten at its own game by Michael Kors Holdings Ltd., which aped Coach’s store designs, prices and even used the same factories to make its goods.

In the latest fiscal year, Michael Kors’s revenue reached $4.7 billion, eclipsing Coach’s $4.5 billion. Three years ago, Kors had less than half the sales.

“We did not innovate quickly enough, did not invest enough in differentiating ourselves from the new competition that was in some ways taking our playbook, Victor Luis, Coach’s chief executive, said in an interview.

Manhattan-based Coach paid the price with three years of declining sales, but it is starting to turn the corner. Its sales are up 2% at existing North American stores in the October quarter. Global sales at existing Michael Kors stores fell 5.4% in the same period.

“Coach has made great strides in becoming more fashion relevant,” said Oliver Chen, a Cowen & Co. analyst.

Coach brought in a new executive creative director, Stuart Vevers, who launched a highend collection this year that includes $2,700 shearling coats, $900 sweaters and $800 bags, well above the $300 to $400 range of its regular handbags.

And Coach is on the hunt for acquisitions following its purchase last year of the shoe company Stuart Weitzman Holdings LLC. Coach also has closed a third of its North American full-priced stores, pulled out of 250 department stores and scaled back online discounts, part of a bigger effort to reduce promotions. But not everyone is convinced Coach’s problems are fixed.

Sales are growing slowly and profits, at $461 million in the most recent fiscal year, remain well below 2013 levels, when the company earned $1 billion. Coach’s North American outlet stores, which analysts estimate account for

4

Coach

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Among other things, CEO Victor Luis has remodeled stores to help Coach upgrade its image. about two-thirds of the region’s retail revenue, continue to struggle with heavy discounting and sluggish sales.

Moreover, after binging on handbags in recent years, women appear to be taking a breather. The global market, estimated at $24.3 billion by Euromonitor International, is barely growing. “What we see is consumers looking for innovation,” Mr. Luis said.

Coach’s shares are up 8% this year, closing Wednesday at $35.66, but remain well below their all-time high of $79.03 reached in March 2012.

Founded in 1941, Coach became known for its sturdy handbags, created from a type of cowhide used to make baseball gloves that becomes more supple over time. Lew Frankfort, who served as CEO for nearly two decades starting in 1995, hit on a novel idea of selling luxury at affordable prices. The strategy drew derision from European rivals, who dubbed Coach the “McDonald’s of luxury.” But it opened the brand to an untapped market.

By 2013, Coach’s global sales had grown to $5 billion, from $550 million in 2000, the year it went public. Under the surface, though, the brand was under strain. It became reliant on online flash sales, in which consumers could purchase discounted bags for a limited time.

Moreover, the company was overly dependent on logo bags.

“Those huge C’s really cheapened the brand,” said Amy McDonald, a 38-year-old marketing executive, who was

Michael Kors

Stuart Vevers is shifting the company into a fashion house Stuart Vevers knew little about baseball when Coach Inc. approached him about becoming the brand’s executive creative director.

But the 43-year-old British designer was intrigued that Coach’s handbags were made from a type of cowhide used in baseball gloves. So he learned about the sport, and extended the baseball reference to apparel—making a Varsity jacket for a sample collection that

BUSINESS WATCH TEVA PHARMACEUTICAL

Drugmaker Settles Corruption Probe Teva Pharmaceutical Industries Ltd. agreed to pay $519 million to settle U.S. charges that it violated U.S. foreign-bribery law in its operations in Ukraine, Mexico and Russia.

The Israeli company, which is the world’s largest maker of generics, had set aside $520 million last quarter for a possible settlement. As part of the settlement, U.S. prosecutors said Teva will pay the largest criminal fine imposed by the U.S. government against a pharmaceutical firm for violating the Foreign Corrupt Practices Act. The law bars the use of bribes against foreign officials to

get or receive business.

Erez Vigodman, president and chief executive of Teva, in a statement said the conduct that led to the investigation ended years ago, calling the behavior “regrettable and unacceptable.”

Teva entered into a deferred prosecution agreement that charges the company with violating the antibribery provisions of the FCPA, and it agreed to pay a $283.2 million criminal fine, continue to cooperate with a U.S. investigation and to retain a compliance monitor.

The Russian subsidiary pleaded guilty. The parent company also agreed to pay $236 million in disgorgement and interest to the U.S. Securities and Exchange Commission.

—Samuel Rubenfeld and Austen Hufford

LAZADA GROUP

E-Commerce Firm Wants More Brands Alibaba Group Holding Ltd.backed e-commerce platform Lazada Group plans to attract more brands to open storefronts on its website and roll out television shopping as competition in Southeast Asia intensifies.

Founded in 2012, Lazada is accelerating its shift to a model that attracts international brands and small regional merchants, Maximilian Bittner, Lazada’s chief executive, said in a recent interview.

That would make Lazada’s business model more similar to Alibaba’s Tmall. The Singaporebased online retailer, acquired by Alibaba in April for $1 billion, in-

tends to monetize this storefront strategy in the future by selling prime home-page banner space to these merchants, he said.

Lazada, which operates more than 500 such storefronts for brands including Samsung Electronics Co. and L’Oréal SA now, expects to grow this number as much as three times in 2017, the company said.

—Liza Lin MICRON

Chip Supplier’s Sales Rise 19% on Demand Micron Technology Inc. posted better-than-expected profit for its fiscal first quarter, boosted by climbing demand.

The company showed adjusted profit on a per-share basis

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Friday - Monday, December 23 - 26, 2016 | B5

FINANCE & MARKETS

Paucity of Bank Mergers Hampers Europe

BY MAX COLCHESTER AND JEANNETTE NEUMANN

The number of European banks being bought by other European lenders 50 MARLENE AWAAD/BLOOMBERG NEWS

The push to create a closerknit European banking system is struggling to overcome a basic hurdle: Lenders aren’t merging.

Within Europe there were 15 deals to merge or acquire stakes in other banks this year, according to data provider Dealogic, the lowest tally in five years. Uncertainty over incoming banking rules, regulators’ wariness of agreeing to mergers between weak lenders, and doubts over the political future of the eurozone are weighing on deals, bankers said.

For European authorities, this is a problem. The trading bloc needs consolidation to forge more profitable banks that can pump capital across European borders to where credit is most in demand, officials said. Mergers are also a quick way to mop up sickly lenders in countries such as Italy that have too many banks.

“The development of panEuropean banks, alongside strong local banks serving local markets, must be part of the financial landscape of

vinced. Greater progress needs to be made on transferring oversight of the bloc’s banks from national authorities to the European Union level, said Santander Chief Executive José Antonio Álvarez at the end of October.

For instance, a eurozonewide deposit-protection system isn’t in place. Regulators also force bigger banks to hold more capital on account of the risk they pose to the financial system. “That could also be a deterrent” to mergers between large lenders, Santander’s Mr. Álvarez said.

Banks also face uncertainty over how they measure the riskiness of assets. Set by the Basel Committee and expected to be completed in January, these new rules could force European banks to thicken their capital buffers by billions of euros, analysts said.

Deals within countries might pick up next year as banks are finally cajoled into consolidating, said Isabelle Jenkins, a partner at PricewaterhouseCoopers LLP. “A number of players are not economically viable and they are in a ‘buy or be bought’ space,”

No Deal

40 30 20 10

ECB chief economist Peter Praet says the Continent needs both pan-European lenders alongside strong local banks. monetary union,” European Central Bank top economist Peter Praet said recently.

But European banks aren’t cooperating. UniCredit SpA, Italy’s largest bank by assets, recently said it sold off a chunk of its bank in Poland and played down chances of it acquiring domestic rivals. Late last year, Banco Santander SA further expanded in Portugal by buying a small bank there, but its executives are ruling out pushing into markets where it doesn’t already have a

presence. Preliminary talks to merge two struggling lenders in Germany, Deutsche Bank AG, the country’s largest by assets, and Commerzbank AG, broke down this summer.

Authorities are trying to craft a eurozone banking market governed by a single set of rules. A big cross-border deal would vindicate their efforts.

“Obviously it’s not our decision. But we have to create the conditions for that,” France’s central-bank governor, François Villeroy de Galhau, said

0 2011 ’12

’13

’14

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THE WALL STREET JOURNAL.

recently. The hope is that panEuropean banks could also break the “doom loop” in which banks’ fates are closely tied to their domestic economy. The ECB has conducted a series of bank balance-sheet checks to persuade investors, and bankers, of the sector’s overall health.

Bank executives aren’t con-

she said. There are more than 5,000 banks in the eurozone.

While banking markets in Spain and Greece have consolidated over recent years, there are still too many lenders in Germany and Italy.

Sluggish profitability has been a barrier to cross-border mergers, particularly for retail banks. Obvious cost savings, such as closing branches and merging back-office functions, are harder to come by when entering new markets. And low valuations are deterring sellers.

There are some exceptions to this cross-border deal drought. In 2015, Spain’s Banco de Sabadell SA bought small British bank TSB on the premise that it could build and operate a more efficient tech platform.

The bank’s management settled on a deal with ECB supervisors: The Spanish bank could buy TSB if it then sold €1.6 billion ($1.67 billion) of shares to maintain its capital cushion, according to people familiar with the matter. Bank executives have said Sabadell isn’t planning more acquisitions soon.

BY RYAN DEZEMBER AND HEATHER GILLERS

KKR & Co. is shopping its stake in ventures that provide water services to two U.S. cities, a test of whether Wall Street has found a way to profitably invest in public works when President-elect Donald Trump has promised to steer private money to aging infrastructure.

KKR and partner Suez SA, the French company formed to build the Egyptian canal of the same name, in recent years struck deals to pay off public debt and assume responsibility for operating and repairing municipal water systems in Bayonne, N.J., and Middletown, Pa. In exchange, they are due decades of payments from billing the systems’ customers.

Now KKR is seeking a buyer for its 90% interest in the water pacts, according to people familiar with the matter. The firm, best known for its takeovers of public companies, invested roughly $175 million in the ventures and has committed more than $200 million for repairs and maintenance over the course of the agreements, 40 years in the case of Bayonne and 50 years in Middletown.

The firm is pitching the water deals to long-term inves-

tors seeking steady returns, such as insurance companies and pensions, the people said.

Suez plans to keep its minority stake and continue operating both systems, they said.

A profitable sale would help validate the structure that KKR and its partners crafted to invest in municipal utilities as Wall Street has raised more cash than ever to invest in public works.

Investors committed a record of $57.5 billion to private infrastructure funds this year, according to data provider Preqin, pushing to more than $140 billion the amount of ready-to-invest cash in such funds.

Water and sewage systems have been singled out by politicians, civil engineers and government agencies as particularly in need of investment. The Environmental Protection Agency has said that more than $655 billion is needed to repair and expand U.S. water and sewage systems over the next two decades.

Mr. Trump has proposed $1 trillion of new infrastructure spending that relies on private investment, proposing tax breaks to draw investors to spend on roads, pipelines and ports.

But deals of this kind come with a special set of chal-

lenges for Wall Street. Relationships with the counterparties and customers are often tenuous and can quickly turn contentious, especially because such deals usually outlast the political administrations that make them.

Carlyle Group LP earlier this year sold a package of three western water systems to Canada’s Algonquin Power & Utilities Corp. for $250 million, more than twice what the Washington, D.C., firm paid for them. Yet that profit came at the expense of bruising public relations and court battles.

Three years after Carlyle purchased the water systems, Missoula, Mont., successfully sued under eminent domain laws to take back the system operating there, claiming Carlyle skimped on upkeep and repairs while enriching itself.

Missoula is now waiting for a judge to tell it how to take over the system and how much it would have to pay Algonquin for the system. A court determined last year that Missoula should pay $88.6 million, though that could rise if legal fees and other expenses are added.

Apple Valley, Calif., has filed its own eminent domain suit to wrest control of another of the three water systems Algonquin bought from

Senate Democrats Put Heat On Wells

KKR’s deal with Bayonne, N.J., included $157 million commitment to maintain the water system.

Carlyle. Officials from the city east of Los Angeles say rates have risen too much under private ownership. “Our only recourse is to condemn the water company,” said Apple Valley Mayor Scott Nassif.

Algonquin and Carlyle have defended their management of the systems.

It took KKR two years to negotiate terms and win approval from state regulators to lease the system from Bayonne, which sits across the Hudson River from New York City. The deal involved an upfront payment of $150 million, used mostly to pay down debt, and a commitment to spend $157 million maintain-

ing the system over the next four decades.

Tim Boyle, who heads the city’s utilities department, said the city’s current leadership, which took office two years into the deal, was initially skeptical. But they warmed to the pact once they considered improvements that were being made, such as the repair of a leaky water main that runs beneath the Passaic River and installation of equipment that enables workers to clear storm-water outflows without climbing into the sewers.

A contractual cap on KKR’s profit helped, too. “They are not free to gouge away at the ratepayers,” Mr. Boyle said.

The investors are guaranteed minimum revenue for the life of the deal. This year’s revenue is about $27 million before operating and capital expenses and is set to rise about 4% annually. If the utility doesn’t produce enough revenue, rates could be increased above the roughly 3.5% outlined in the deal. That happened last year when projections that proved too optimistic and unexpected repairs necessitated a 13.25% increase, or about $12 for the average monthly bill.

If revenue rises above projections, the extra cash is to be banked away to limit future rate increases.

INTERNATIONAL INVESTMENT FUNDS

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BY EMILY GLAZER

Democrats on the Senate Banking Committee demanded Wells Fargo & Co.’s board respond to questions the bank has yet to answer related to its sales practices scandal, according to a letter reviewed by The Wall Street Journal.

The senators asked the board for more information about its continuing independent investigation of the alleged fraud that caused the bank to pay a $185 million settlement in September over opening as many as 2.1 million accounts using fictitious or unauthorized customer information.

The senators in this latest letter also asked the board for a timeline of when its members learned of the questionable sales tactics, actions the board took to address the problem and reasons why it didn’t investigate sooner, according to the letter. It asked for answers to its 10 questions

by Jan. 7.

“Continued failure to answer questions—especially basic questions—about the causes and consequences of the fraud that Wells Fargo permitted for many years does

RYAN DEZEMBER/THE WALL STREET JOURNAL

KKR Sale to Test Demand For Infrastructure Deals

Sen. Sherrod Brown wants answers from Wells Fargo directors. nothing to restore the trust of Wells Fargo’s customers and shareholders, many of whom are our constituents,” according to the letter.

Wells Fargo’s board in late September announced its independent investigation alongside moves to rescind a collective $61 million in pay from now-former Chief Executive John Stumpf and former retail banking head Carrie Tolstedt.

The board’s independent directors “will take such other actions as they collectively deem appropriate,” according to a statement at the time.

The bank neither admitted nor denied the allegations in the settlement Sept. 8.

The 10 Democratic senators, led by ranking member Sen. Sherrod Brown (D., Ohio), submitted 58 questions to Wells Fargo management on Sept.

29 that they said weren't answered by Mr. Stumpf in two congressional hearings.

The bank responded on Nov. 15, but cited the board’s continuing independent investigation as a reason why it

couldn’t fully answer some questions.

A bank spokeswoman at the time said Wells Fargo will continue to be responsive to lawmakers.

A bank spokeswoman didn’t have immediate comment Thursday, and a spokesman for the board couldn’t immediately be reached for comment.

She added in the earlier statement that the bank has “work under way to fix identified problems and resolve the sales practices issue,” including management changes, eliminating sales goals and refunding affected customers.

The bank also offered a detailed breakdown of states and employees affected by the scandal.

In addition to Sen. Brown, the latest letter was jointly submitted by Sens. Jack Reed (D., R.I.), Bob Menendez (D., N.J.), Jon Tester (D., Mont.), Mark Warner (D., Va.), Jeff Merkley (D., Ore.), Elizabeth Warren (D., Mass.), Heidi Heitkamp (D., N.D.) and Joe Donnelly (D., Ind.).

FUND NAME

Data as shown is for information purposes only. No offer is being made by Morningstar, Ltd. or this publication. Funds shown aren’t registered with the U.S. Securities and Exchange Commission and aren’t available for sale to United States citizens and/or residents except as noted. Prices are in local currencies.

All performance figures are calculated using the most recent prices available.

FUND NAME

NAV GF AT LB DATE CR

NAV

—%RETURN— YTD 12-MO 2-YR

n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866 Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg CAM-GTF Limited

OT OT MUS 12/16 USD 292947.14

4.6

7.6

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n Website: Https://Www.Valuepartners-Group.Com/ Tel: (852) 2143 0688 China A-Share Fund Cls A AUD H OT China A-Share Fund Cls A AUD UnH OT China A-Share Fund Cls A CAD H OT China A-Share Fund Cls A EUR H OT China A-Share Fund Cls A EUR UnH OT China A-Share Fund Cls A GBP H OT China A-Share Fund Cls A GBP UnH OT China A-Share Fund Cls A HKD H OT China A-Share Fund Cls A HKD UnH OT China A-Share Fund Cls A NZD H OT China A-Share Fund Cls A NZD UnH OT China A-Share Fund Cls A RMB (CNH) OT China A-Share Fund Cls A USD OT China A-Share Fund Cls A USD H OT China Greenchip-A Units AS China Greenchip-A Units AUD H AS China Greenchip-A Units CAD H AS China Greenchip-A Units NZD H AS China Greenchip-A Units USD AS China Greenchip-A2 QDIs Units AS GC Hi Yield Inc - Cls A MDIs GBP H OT GC Hi Yield Inc-Cls A MDIs AUD H OT GC Hi Yield Inc-Cls A MDIs CAD H OT GC Hi Yield Inc-Cls A MDIs NZD H OT GC Hi Yield Inc-Cls P HKD Acc sh OT GC Hi Yield Inc-Cls P HKD MDIs sh OT GC Hi Yield Inc-Cls P MDIs SGD H OT GC Hi Yield Inc-Cls P USD Acc sh OT GC Hi Yield Inc-Cls P USD MDIs sh OT GC Hi Yield Inc-ClsA MDIs EUR H OT Hi-Div Stk Cls A RMB H Acc OT Hi-Div Stk Cls A RMB UnH Acc OT Hi-Div Stk Cls A1 OT Hi-Div Stk Cls A2 AUD H MDIs OT Hi-Div Stk Cls A2 CAD H MDIs OT Hi-Div Stk Cls A2 GBP H MDIs OT Hi-Div Stk Cls A2 HKD MDIs OT Hi-Div Stk Cls A2 MDIs OT Hi-Div Stk Cls A2 NZD H MDIs OT Hi-Div Stk Cls A2 RMB H MDIs OT Hi-Div Stk Cls A2 RMB UnH MDIs OT Intel-China Converg Fund-A AUD H AS Intel-China Converg Fund-A CAD H AS Intel-China Converg Fund-A NZD H AS Intel-China Converg Fund-A Units AS Intel-Chinese Mainland Foc Fund AS VP Classic-A Units AS VP Classic-B Units AS

OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG EQ CYM EQ CYM EQ CYM EQ CYM EQ CYM EQ CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT CYM OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG OT HKG EQ CYM EQ CYM EQ CYM EQ CYM EQ CYM EQ HKG EQ HKG

12/21 AUD 12/21 AUD 12/21 CAD 12/21 EUR 12/21 EUR 12/21 GBP 12/21 GBP 12/21 HKD 12/21 HKD 12/21 NZD 12/21 NZD 12/21 CNH 12/21 USD 12/21 USD 12/21 HKD 12/21 AUD 12/21 CAD 12/21 NZD 12/21 USD 12/21 HKD 12/21 GBP 12/21 AUD 12/21 CAD 12/21 NZD 12/21 HKD 12/21 HKD 12/21 SGD 12/21 USD 12/21 USD 12/21 EUR 12/21 CNH 12/21 CNH 12/21 USD 12/21 AUD 12/21 CAD 12/21 GBP 12/21 HKD 12/21 USD 12/21 NZD 12/21 CNH 12/21 CNH 12/21 AUD 12/21 CAD 12/21 NZD 12/21 USD 12/21 USD 12/21 USD 12/21 USD

11.79 10.96 10.93 11.51 11.74 11.53 13.43 11.67 11.23 11.60 10.07 12.56 11.20 11.63 50.85 8.58 8.36 8.81 8.41 9.27 9.61 9.17 9.22 9.48 14.08 9.07 9.96 14.18 9.12 10.03 9.97 12.16 71.39 8.78 8.85 8.29 9.05 9.93 8.97 8.56 9.12 8.64 10.01 10.13 130.87 36.70 254.66 114.63

-7.0 -9.4 -8.3 -9.2 NS -5.9 8.1 -8.3 -10.0 -6.9 -11.0 -5.1 -10.2 -7.7 -4.0 -3.5 -4.6 -2.5 -4.1 -3.9 15.0 16.9 15.4 17.6 15.9 15.9 15.8 15.7 15.6 14.0 1.6 4.4 -0.7 -0.3 -1.7 -2.4 -0.5 -0.7 0.0 1.5 4.8 -8.1 NS NS -10.5 -11.2 -3.2 -3.6

-9.5 -13.5 -10.8 -12.1 NS -8.6 5.6 -10.8 -12.5 -9.4 -14.9 -7.6 -12.6 -10.2 -3.7 -3.2 -4.3 -2.2 -3.8 -3.6 15.4 17.4 16.0 18.1 16.4 16.3 16.4 16.2 16.1 14.4 2.3 4.9 -0.3 0.0 -1.4 -2.0 -0.1 -0.3 0.5 2.1 5.5 -9.0 NS NS -10.4 -10.0 -3.1 -3.6

3.0 NS 2.2 2.1 NS 1.6 14.6 2.2 0.9 2.1 NS 5.4 1.0 2.2 -7.1 -7.4 -8.6 -6.3 -7.8 -7.0 NS 12.5 10.8 13.5 10.9 10.9 11.1 10.8 10.8 NS 1.2 3.7 -1.5 -0.9 -2.3 NS -1.5 -1.5 0.1 1.0 3.9 NS NS NS -3.3 -2.9 -0.2 -0.7

NAV GF AT LB DATE CR

VP Classic-C Units VP Classic-C Units AUD H VP Classic-C Units CAD H VP Classic-C Units HKD H VP Classic-C Units NZD H VP Classic-C Units RMB VP Classic-C Units RMB H VP Multi-Asset Fund Cls A HKD VP Multi-Asset Fund Cls A USD VP Taiwan Fund

AS AS AS AS AS AS AS OT OT AS

EQ HKG EQ HKG EQ HKG EQ HKG EQ HKG EQ HKG EQ HKG OT HKG OT HKG EQ CYM

12/21 USD 12/21 AUD 12/21 CAD 12/21 HKD 12/21 NZD 12/21 CNH 12/21 CNH 12/21 HKD 12/21 USD 12/21 USD

NAV

—%RETURN— YTD 12-MO 2-YR 14.45 11.95 11.59 9.85 12.06 10.38 9.64 9.63 9.77 16.80

-3.7 -2.5 -3.3 -4.0 -2.7 1.8 -1.5 NS -0.5 16.6

-3.6 -2.5 -3.2 -3.9 -2.6 2.1 -1.2 NS -0.5 17.7

-0.7 0.5 -0.3 NS 1.5 NS NS NS NS 5.4

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B6 | Friday - Monday, December 23 - 26, 2016

MARKETS DIGEST Nikkei 225 Index

STOXX 600 Index

S&P 500 Index

Year-to-date 19427.67 t 16.82, or 0.09% s 2.07% 52-wk high/low 19494.53 14952.02 High, low, open and close for each trading day of the past three months. All-time high 38915.87 12/29/89

359.82 t 0.74, or 0.21% High, low, open and close for each trading day of the past three months.

Data as of 12 p.m. New York time Last

2257.14 t 8.04, or 0.35% High, low, open and close for each trading day of the past three months.

Year-to-date t 1.64% 52-wk high/low 369.68 303.58 All-time high 414.06 4/15/15

Year ago

Trailing P/E ratio * 24.98 22.95 P/E estimate * 19.06 17.47 Dividend yield 2.07 2.14 All-time high: 2271.72, 12/13/16

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

19200

370

2260

18600

360

2230

18000

350

2200

17400

340

2170

16800

330

2140

16200

320

Session high UP Close

t

DOWN Session open

Open

t

Close

65-day moving average

Session low

65-day moving average

65-day moving average

2110

Bars measure the point change from session's open 15600 Sept.

Oct.

Nov.

310

Dec.

Sept.

International Stock Indexes Region/Country Index

World

The Global Dow MSCI EAFE MSCI EM USD

Close

Latest NetChg

2533.61 1673.30 841.22

–8.62 –0.78 –9.95

–0.34 –0.05 –1.17

2033.03 1471.88 691.21 433.38 37046.07 11531.22 39924.09 2730.24

% chg

52-Week Range Close

Low

DJ Americas Sao Paulo Bovespa S&P/TSX Comp IPC All-Share Santiago IPSA

543.44 –2.39 56942.97 –703.55 15318.08 12.19 44623.99 –359.04 3214.01 –10.03

–0.44 –1.22

U.S.

DJIA Nasdaq Composite S&P 500 CBOE Volatility

19892.42 –49.54 5437.11 –34.32 2257.14 –8.04 11.55 0.28

–0.25 –0.63 –0.35

15450.56 4209.76 1810.10 10.93 2.48

Stoxx Europe 600 Stoxx Europe 50 France CAC 40 Germany DAX Israel Tel Aviv Italy FTSE MIB Netherlands AEX Russia RTS Index Spain IBEX 35 Switzerland Swiss Market South Africa Johannesburg All Share Turkey BIST 100 U.K. FTSE 100

359.82 –0.74 3000.87 –5.15 4834.63 0.81 11456.10 –12.54 1463.47 3.27 19121.26 –94.33 482.47 –0.74 1125.80 –15.08 9333.60 –38.10 8237.98 4.53 49833.77 –330.15 77404.74 –214.73 7063.68 22.26

–0.21 –0.17

303.58 2556.96 3892.46 8699.29 1372.23 15017.42 378.53 607.14 7579.80 7425.05 45975.78 68230.47 5499.51

Asia-Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand

1415.98 –6.40 5643.90 30.40 3139.56 2.13 21636.20 –173.60 25979.60 –262.78 5042.87 –68.52 19427.67 –16.82 1623.20 –6.39 6851.87 49.11 46699.78 –293.53 6587.17 –99.19 2882.04 –19.66 2035.73 –2.23 9118.75 –85.51 1504.12 –4.45

DJ Asia-Pacific TSM S&P/ASX 200 Shanghai Composite Hang Seng S&P BSE Sensex Jakarta Composite Nikkei Stock Avg Kuala Lumpur Composite S&P/NZX 50 KSE 100 PSEi Straits Times Kospi Weighted SET

Nov.

Data as of 12 p.m. New York time

Americas Brazil Canada Mexico Chile

EMEA

Oct.

0.08 –0.80 –0.31

0.02 –0.11 0.22 –0.49 –0.15 –1.32 –0.41 0.06 –0.66 –0.28 0.32 0.54 0.07 –0.80 –1.00 –1.34 –0.09 –0.39 0.72 –0.62 –1.48 –0.68 –0.11 –0.93 –0.29

•

• •

•

• •

YTD % chg

Coupon

548.56 11.5 65291.06 31.4 15414.57 17.7 48956.06 3.8 3490.53 9.2

• 19987.63 • 5489.47 • 2277.53

• • •

• • •

•

•

•

• • • • •

•

•

•

• • • • •

–1.6 –3.2 4.3 6.6 1535.96 –4.3 21705.71 –10.7 484.21 9.2 1170.51 48.7 9724.90 –2.2 8908.50 –6.6 54704.22 –1.7 86931.34 7.9 7129.83 13.2 1499.93 1.9 5643.90 6.6 3627.91 –11.3 24099.70 –1.3 29045.28 –0.5 5472.32 9.8 19494.53 2.1 1727.99 –4.1 7571.11 8.3 47210.06 42.3 8102.30 –5.2 2960.78 –0.02 2068.72 3.8 9392.68 9.4 1552.64 16.8

Commodities

20%

Yen

Europe

s

10

Euro s

0 –10

s

WSJ Dollar index

–20 2016 US$vs, YTDchg Thu in US$ per US$ (%)

Country/currency

Americas Argentina peso-a 0.0635 15.7545 21.8 Brazil real 0.3017 3.3142 –16.3 Canada dollar 0.7419 1.3480 –2.6 Chile peso 0.001481 675.30 –4.7 Colombia peso 0.0003347 2987.39 –5.9 Ecuador US dollar-f 1 1 unch Mexico peso-a 0.0483 20.7081 20.4 Peru sol 0.2941 3.4000 –0.4 Uruguay peso-e 0.0351 28.510 –4.7 Venezuela bolivar 0.100050 10.00 58.5

Asia-Pacific 0.7212 1.3866 0.1439 6.9503

Australia dollar China yuan

1.0 7.0

Key Rates

Country/currency Hong Kong dollar India rupee Indonesia rupiah Japan yen Kazakhstan tenge Macau pataca Malaysia ringgit-c New Zealand dollar Pakistan rupee Philippines peso Singapore dollar South Korea won Sri Lanka rupee Taiwan dollar Thailand baht

Cur Stock 0.75611% 0.99706 1.31600 1.68789

0.42190% 0.60310 0.82730 1.14750

Euro Libor One month Three month Six month One year

-0.38000% -0.33500 -0.22657 -0.08557

-0.20429% -0.12714 -0.03786 0.05929

Euribor One month Three month Six month One year

-0.36900% -0.31600 -0.21600 -0.08200

-0.20100% -0.13100 -0.04000 0.06000

-0.03357% -0.00693 0.01993 0.12943 Offer

0.05000% 0.07714 0.11443 0.22286 Bid

0.8500% 1.1000 1.3000 1.6500 Latest

0.7500% 1.0000 1.2000 1.5500 52 wks ago

3.75% 2.70 1.475 5.00

3.50% 2.70 1.475 5.00

0.00% 0.25 0.50 1.50 1.25 0.50 2.50

0.05% 0.50 0.50 2.00 1.00 0.25 2.25

Overnight repurchase rates U.S. 0.52% Euro zone n.a.

0.34% n.a.

Prime rates U.S. Canada Japan Hong Kong Policy rates ECB Britain Switzerland Australia U.S. discount Fed-funds target Call money

7.7620 67.8686 13463 117.59 333.54 7.9731 4.4755 1.4480 104.825 49.782 1.4485 1205.52 149.62 32.193 36.050

52 wks ago

Libor One month Three month Six month One year

Eurodollars One month Three month Six month One year

0.1288 0.0147 0.0000743 0.008504 0.002998 0.1254 0.2234 0.6906 0.0095 0.0201 0.6904 0.0008295 0.0066836 0.03106 0.02774

0.1 2.5 –2.7 –2.3 –1.5 –0.4 4.0 –1.1 –0.1 6.2 2.1 2.5 3.7 –2.2 0.1

2.6525 0.0533 0.2623 3.2660 2.5980 0.2746 0.2666 0.0712

0.3770 –0.03 18.7451 139.4 3.8126 –2.1 0.3062 0.9 0.3849 –0.01 3.642 –0.03 3.7512 –0.1 14.0535 –9.2

Close Net Chg % Chg YTD % Chg

WSJ Dollar Index

93.33

0.09 0.09

3.50

1.894 2.844 -0.705 0.585 -0.692 0.731 -0.790 0.259 -0.137 1.852 -0.182 0.052 -0.736 0.399 0.169 3.786 -0.253 1.402 -0.610 0.651 0.072 1.230 1.188 2.547

70.6 29.7 -189.3 -196.2 -188.1 -181.6 -197.8 -228.8 -132.5 -69.5 -137.1 -249.5 -192.4 -214.8 -101.9 123.9 -144.1 -114.6 -179.8 -189.6 -111.6 -131.8 ... ...

CBOT CBOT CBOT CME ICE-US ICE-US ICE-US ICE-US ICE-EU COMEX COMEX COMEX LME LME LME LME LME LME TCE

Palm oil (MYR/mt) MDEX NYMEX Crude oil ($/bbl.)

NY Harbor ULSD ($/gal.) NYMEX RBOB gasoline ($/gal.) NYMEX Natural gas ($/mmBtu) NYMEX Brent crude ($/bbl.) ICE-EU ICE-EU Gas oil ($/ton)

Spread Over Treasurys, in basis points Previous Month Ago Year ago

63.4 37.0 -174.3 -169.1 -175.3 -159.9 -183.4 -209.1 -107.1 -28.5 -125.5 -228.3 -181.8 -192.8 -68.9 130.4 -125.1 -78.6 -178.8 -184.0 -94.8 -107.5 ... ...

68.8 29.7 -189.5 -199.0 -186.5 -184.6 -198.0 -229.3 -135.5 -71.7 -137.2 -247.6 -192.0 -215.7 -101.7 121.6 -146.4 -117.8 -182.4 -187.6 -110.9 -129.2 ... ...

Previous

Yield Month ago

1.880 2.836 -0.703 0.548 -0.673 0.693 -0.788 0.246 -0.163 1.822 -0.180 0.063 -0.728 0.382 0.175 3.754 -0.272 1.361 -0.632 0.663 0.083 1.246 1.192 2.539

1.729 2.683 -0.649 0.622 -0.659 0.714 -0.740 0.222 0.023 2.027 -0.161 0.030 -0.724 0.385 0.406 3.617 -0.156 1.527 -0.694 0.473 0.146 1.238 1.094 2.313

104.4 50.4 -129.3 -131.0 -126.6 -128.5 -132.1 -163.5 -84.1 -58.9 -102.5 -196.2 -134.3 -147.7 -84.3 27.8 -85.2 -43.6 -142.1 -121.4 -34.7 -35.9 ... ...

346.75 1011.25 397.75 116.675 2,185 141.55 18.23 70.03 2081.00

-0.50 -5.75 -1.75 0.450 -94 -3.00 0.03 -0.10 -32.00

2.5020 1131.60 15.925 1,721.00 20,905.00 5,519.00 2,190.00 2,624.00 10,960.00 264.80

0.0050 -1.60 -0.054 5.50 -70.00 19.00 -9.00 -12.00 -65.00 -6.20

3070.00 52.92 1.6801 1.6165 3.526 55.75 491.50

-44.00 0.43 0.0194 -0.0037 -0.001 0.53 1.00

Sources: WSJ Market Data Group, SIX Financial Information, Tullett

Sym

Last

AIAGroup AstellasPharma AustNZBk BHP BankofChina CKHutchison CNOOC CSL Canon CentralJapanRwy ChinaConstructnBk ChinaLifeInsurance ChinaMobile ChinaPetro&Chem CmwlthBkAust EastJapanRailway Fanuc Hitachi Hon Hai Precisn HondaMotor HyundaiMtr Ind&Comml JapanTobacco KDDI Mitsubishi MitsubishiElectric MitsubishiUFJFin Mitsui Mizuho Fin NTTDoCoMo NatAustBnk NipponTeleg NissanMotor Panasonic PingAnInsofChina RelianceIndsGDR SamsungElectronics Seven&I Hldgs SoftBankGroup Sony Sumitomo Mitsui SunHngKaiPrp TaiwanSemiMfg

1299 4503 ANZ BHP 3988 0001 0883 CSL 7751 9022 0939 2628 0941 0386 CBA 9020 6954 6501 2317 7267 005380 1398 2914 9433 8058 6503 8306 8031 8411 9437 NAB 9432 7201 6752 2318 RIGD 005930 3382 9984 6758 8316 0016 2330

44.10 1622.00 30.72 25.14 3.36 88.75 9.69 98.19 3434.00 19545 5.45 20.05 80.90 5.58 82.69 10385 20115 640.80 82.80 3570.00 142000 4.49 3924.00 3021.00 2589.00 1647.00 745.30 1659.00 217.20 2730.00 30.80 4983.00 1212.00 1237.50 38.60 31.15 1809000 4546.00 7914.00 3342.00 4603.00 97.90 179.00

0.11 -0.61 1.39 -0.12 -0.59 0.97 -2.12 -0.62 0.23 -0.53 -1.27 -1.72 -1.04 -1.41 0.73 0.63 -0.32 -0.53 -0.60 1.22 -1.05 -1.54 0.38 0.23 0.50 0.09 -0.49 -0.30 -0.91 0.44 0.79 0.89 0.87 -0.28 -1.53 0.65 0.22 -0.72 ...

0.18 -0.69 -0.51 -0.56

2.021 2.741 -0.316 0.928 -0.289 0.953 -0.344 0.602 0.136 1.648 -0.048 0.276 -0.366 0.761 0.134 2.516 0.126 1.802 -0.444 1.023 0.630 1.879 0.977 2.238

12 p.m. New York time

-0.14% -0.57 -0.44 0.39% -4.12 -2.08 0.16 -0.14 -1.51 0.20 -0.14 -0.34 0.32 -0.33 0.35 -0.41 -0.46 -0.59 2.29 -1.41 0.82 1.17 -0.23 -0.03 0.96 0.20

Year low

453.25 1,135.50 569.00 124.400 3,186 179.55 24.10 78.00 2,207.00

325.00 875.75 393.00 97.800 2,144 121.80 13.48 55.79 1,469.00

2.7530 1,387.10 21.065 1,779.00 21,750.00 5,950.00 2,475.00 2,911.00 11,770.00 n.a.

1.9780 1,076.60 14.260 1,451.50 13,225.00 4,320.50 1,598.00 1,467.00 7,750.00 n.a.

3,202.00 55.44 1.7230 1.6290 3.7030 58.53 507.00

2,204.00 35.10 1.0860 1.0122 2.4680 35.13 325.00

Cross rates

London close on Dec 22

Australia

USD 1.3866

GBP 1.7044

CHF 1.3524

JPY 0.0118

HKD 0.1787

EUR 1.4478

CDN 1.0289

AUD ...

Canada

1.3480

1.6569

1.3144

0.0115

0.1737

Euro

0.9577

1.1773

0.9340

0.0081

0.1234

1.4073

...

0.9720

...

0.7105

Hong Kong

7.7620

9.5416

7.5703

0.0660

0.6905

...

8.1053

5.7583

5.5971 84.8000

117.5860

144.5500

114.6700

...

15.1490

122.7700

87.2400

Switzerland

1.0254

1.2604

...

0.0087

0.1321

1.0707

0.7608

0.7395

U.K.

0.8135

...

0.7934

0.0069

0.1048

0.8495

0.6035

0.5866

U.S.

...

1.2293

0.9752

0.0085

0.1288

1.0442

0.7419

0.7212

Japan

Source: Tullett Prebon

Sources: Tullett Prebon, WSJ Market Data Group

12 p.m. New York time

% YTD% Chg Chg

Asia Titans HK$ ¥ AU$ AU$ HK$ HK$ HK$ AU$ ¥ ¥ HK$ HK$ HK$ HK$ AU$ ¥ ¥ ¥ TW$ ¥ KRW HK$ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ AU$ ¥ ¥ ¥ HK$ $ KRW ¥ ¥ ¥ ¥ HK$ TW$

Year ago

Sources: SIX Financial Information; WSJ Market Data Group

Middle East/Africa Bahrain dinar Egypt pound-a Israel shekel Kuwait dinar Oman sul rial Qatar rial Saudi Arabia riyal South Africa rand

Latest

Top Stock Listings Latest

Yen Libor One month Three month Six month One year

US$vs, YTDchg Thu in US$ per US$ (%)

Bulgaria lev 0.5346 1.8707 3.9 Croatia kuna 0.1386 7.214 2.9 Euro zone euro 1.0442 0.9577 4.0 Czech Rep. koruna-b 0.0386 25.879 4.0 Denmark krone 0.1405 7.1197 3.6 Hungary forint 0.003361 297.56 2.4 Iceland krona 0.008813 113.47 –12.8 Norway krone 0.1148 8.7103 –1.5 Poland zloty 0.2362 4.2337 7.9 Russia ruble-d 0.01639 61.000 –15.2 Sweden krona 0.1087 9.2027 9.0 Switzerland franc 0.9752 1.0254 2.3 Turkey lira 0.2846 3.5131 20.4 Ukraine hryvnia 0.0382 26.1975 9.2 U.K. pound 1.2293 0.8135 19.9

Dec.

Prices of futures contracts with the most open interest

Copper ($/lb.)

Gold ($/troy oz.)

Silver ($/troy oz.)

Aluminum ($/mt)* Tin ($/mt)* Copper ($/mt)* Lead ($/mt)* Zinc ($/mt)* Nickel ($/mt)* Rubber (Y.01/ton)

US$vs, YTDchg Thu in US$ per US$ (%)

Country/currency

Yield

Corn (cents/bu.)

Soybeans (cents/bu.)

Wheat (cents/bu.)

Live cattle (cents/lb.)

Cocoa ($/ton) Coffee (cents/lb.)

Sugar (cents/lb.)

Cotton (cents/lb.)

Robusta coffee ($/ton)

London close on Dec. 22

Yen, euro vs. dollar; dollar vs. major U.S. trading partners

Nov.

EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange; NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 12/21/2016 Year One-Day Change Commodity Exchange Last price Net Percentage high

Source: SIX Financial Information;WSJ Market Data Group

Currencies

Country/ Maturity, in years

3.250 Australia 2 4.750 10 1.250 Belgium 2 1.000 10 1.000 France 2 0.250 10 0.000 Germany 2 0.000 10 0.250 Italy 2 1.250 10 0.100 Japan 2 0.100 10 4.000 Netherlands 2 0.500 10 4.450 Portugal 2 2.875 10 0.250 Spain 2 1.300 10 4.250 Sweden 2 1.000 10 1.250 U.K. 2 2.000 10 1.000 U.S. 2 2.000 10

• 369.68 • 3139.28 • 4856.96 • 11479.88

• •

Oct.

Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year and 10-year government bonds around the world. Data as of 12 p.m. ET

14.2 8.6 10.4 32.09 –36.6

•

Sept.

Global government bonds

2570.92 8.4 1956.39 –2.5 1044.05 5.9

•

•

1188.42 4765.30 2655.66 18319.58 22951.83 4414.13 14952.02 1600.92 5933.96 30564.50 6084.28 2532.70 1835.28 7664.01 1224.83

–0.45

High

2080

Dec.

-5.36 -6.32 9.99 40.76 -2.89 -14.99 20.07 -6.76 -6.56 -9.51 2.64 -20.12 -7.54 18.98 -3.32 -9.30 -4.58 -7.33 104.95 -8.70 -4.70 -4.06 -12.23 -4.22 27.66 28.42 -1.56 14.77 -10.80 9.90 1.99 3.04 -5.28 -0.24 -10.02 1.80 43.57 -18.09 28.91 11.33 -0.07 4.43 25.17

Cur Stock

Sym

Last

¥ HK$ ¥ ¥ AU$ AU$ AU$

TakedaPharm TencentHoldings TokioMarineHldg ToyotaMtr Wesfarmers WestpacBanking Woolworths

4502 0700 8766 7203 WES WBC WOW

4827.00 181.50 4913.00 7090.00 42.41 32.68 23.98

CHF € € € € € £ € € £ € € £ € £ £ € € £ € £ £ € £ € € £ € £ CHF CHF DKK £ £ £ CHF

ABB ASMLHolding AXA AirLiquide Allianz AnheuserBuschInBev AstraZeneca BASF BNP Paribas BT Group BancoBilVizAr BancoSantander Barclays Bayer BP BritishAmTob Daimler DeutscheTelekom Diageo ENI GlaxoSmithKline HSBC Hldgs INGGroep ImperialBrands IntesaSanpaolo LVMHMoetHennessy LloydsBankingGroup LOreal NationalGrid Nestle Novartis NovoNordiskB Prudential ReckittBenckiser RioTinto RocheHldgctf

Stoxx 50 ABBN ASML CS AI ALV ABI AZN BAS BNP BT.A BBVA SAN BARC BAYN BP. BATS DAI DTE DGE ENI GSK HSBA INGA IMB ISP MC LLOY OR NG. NESN NOVN NOVO-B PRU RB. RIO ROG

21.61 105.45 24.07 105.05 157.30 98.80 4342.50 87.81 61.58 370.95 6.44 4.95 227.00 98.80 503.00 4546.50 70.91 16.07 2084.50 15.17 1544.50 655.20 13.65 3501.00 2.43 179.75 64.00 171.50 933.50 73.15 73.85 254.30 1604.00 6815.00 3081.00 231.90

% YTD% Chg Chg Cur Stock 0.44 -20.41 £ -0.38 18.86 € -1.66 4.27 € -0.45 -5.32 € 0.81 1.92 € 0.62 -2.62 CHF 1.52 -2.12 € € CHF € -0.05 20.32 £ -0.24 27.74 € 0.29 -4.62 £ -0.19 1.35 CHF -0.25 -3.82 -0.44 -13.64 0.70 -5.94 $ 0.23 24.17 $ 0.60 17.90 $ -0.08 -21.36 $ -0.17 -2.46 $ -0.42 9.73 $ -0.77 3.70 $ 0.10 -14.68 $ 1.26 42.09 $ -0.31 20.56 $ -0.48 -8.60 $ ... -2.78 $ -0.07 12.28 $ ...

9.93 $ 1.08 12.49 $ -0.05 22.19 $ 0.18 34.60 $ -0.17 -2.38 $ -0.82 -21.31 $ 0.08 24.05 $ -0.44 -12.41 $ 0.56 10.43 $ -0.13 -0.43 $ 0.27 -1.88 $ 0.20 -14.92 $ 0.32 -36.41 $ 0.69 4.77 $ 1.05 8.50 $ -0.98 55.65 $ -0.56 -16.10 $

RoyDtchShell A SAP Sanofi SchneiderElectric Siemens Syngenta Telefonica Total UBSGroup Unilever Unilever Vinci VodafoneGroup ZurichInsurance

Sym

Last

RDSA SAP SAN SU SIE SYNN TEF FP UBSG UNA ULVR DG VOD ZURN

2213.50 82.30 76.08 65.22 115.00 409.00 8.72 48.19 16.32 39.08 3261.50 64.28 199.75 280.50

% YTD% Chg Chg 0.73 45.05 -0.25 12.16 1.17 -3.21 -0.37 24.09 0.39 27.95 -0.17 4.26 -1.23 -13.93 1.25 21.52 -0.91 -16.39 0.01 -2.57 0.85 11.45 0.09 8.69 0.08 -9.62 0.21 8.55

DJIA AmericanExpress Apple Boeing Caterpillar Chevron CiscoSystems Coca-Cola Disney DuPont ExxonMobil GeneralElec GoldmanSachs HomeDepot Intel IBM JPMorganChase J&J McDonalds Merck Microsoft Nike Pfizer Procter&Gamble 3M Travelers UnitedTech UnitedHealth Visa Verizon Wal-Mart

AXP AAPL BA CAT CVX CSCO KO DIS DD XOM GE GS HD INTC IBM JPM JNJ MCD MRK MSFT NKE PFE PG MMM TRV UTX UNH V VZ WMT

74.64 115.79 156.99 93.92 118.58 30.38 41.42 105.09 74.93 90.71 31.79 240.40 135.81 36.91 167.24 86.54 115.04 123.64 59.96 63.49 52.31 32.40 84.45 178.62 122.01 109.78 160.97 77.39 53.50 69.77

-0.90 7.32 -1.08 10.00 -0.31 8.58 0.11 38.20 0.57 31.81 -0.13 11.88 -0.36 -3.58 -0.45 0.01 -0.70 12.51 0.48 16.37 -0.30 2.07 -0.43 33.39 -0.75 2.69 -0.18 7.16 -0.05 21.52 -0.24 31.06 -0.23 11.99 0.37 4.66 0.89 13.52 -0.08 14.44 0.02 -16.30 ...

0.37 0.20 6.35 0.11 18.57 -0.46 8.11 -0.64 14.27 -0.22 36.83 -0.96 -0.21 0.99 15.74 -2.06 13.82

Asia Titans 50 Last: 141.12 t 0.34, or 0.24%

YTD s 3.6%

High Close Low

23 30 7 Oct.

155 150 145 140 135 130

50–day moving average t

14

21

28

4 Nov.

11

18

25

2 9 Dec.

16

Stoxx 50 Last: 3000.87 t 5.15, or 0.17%

YTD t 3.2% 3000 2940 2880 2820 2760 2700

23 30 7 Oct.

14

21

28

4 Nov.

11

18

25

2 9 Dec.

16

Dow Jones Industrial Average

P/E: 22

Last: 19892.42 t 49.54, or 0.25%

YTD s 14.2% 19700 19150 18600 18050 17500

23 30 7 Oct.

14

21

28

4 Nov.

11

18 25

Note: Price-to-earnings ratios are for trailing 12 months Sources: WSJ Market Data Group; Birinyi Associates

2 9 Dec.

16

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THE WALL STREET JOURNAL.

Friday - Monday, December 23 - 26, 2016 | B7

FINANCE & MARKETS

BY P.R. VENKAT

BY ESE ERHERIENE Asian shares were a mixed bag on Thursday, as market volumes thinned out in the run-up to the Christmas holidays, while trading was rangebound with many investors sitting on THURSDAY’S the sideMARKETS lines.

J a p a n ’s Nikkei Stock Average closed down 0.1%, pulling back after hitting a fresh high for the year in the previous session.

Elsewhere, the Shanghai Composite Index edged up 0.1%, Australia’s S&P/ASX 200 ended up 0.5%, Korea’s Kospi closed 0.1% lower and the Hang Seng Index in Hong Kong was down 0.8%.

“There is very little driving sentiment,” said Alex Furber, a sales trader at CMC Markets.

“The story in the run-up to Christmas is just going to be that trading volumes are thin.”

Many major markets in Asia will close on Monday (and a few on Tuesday as well) to observe Christmas, though Japan, China and South Korea will remain open.

Japan is closed Friday for a different public holiday.

In the U.S., stocks lost ground, also in quiet trading.

The Dow Jones Industrial Average was down 44 points, or 0.2%, at 19898 in midday trading. The S&P 500 declined 0.3% and the Nasdaq Composite lost 0.6%.

“With just two sessions until the Christmas break, few traders want to open new positions,” said Lee Wild, a stockbroker at Interactive Investor.

Still, the Dow industrials were on course to have their best December since 2010, when they rose 5.2%. The blue-chip index is up around 4% this month, better than in December 2015, when it dropped 1.7%, and December

Range-Bound Asian markets traded in tight ranges ahead of the Christmas holidays.

South Korea's Kospi index 2045 2040 2035 Intraday Thursday five-minute intervals

2030 9 a.m.

12 p.m.

3

Source: Thomson Reuters

THE WALL STREET JOURNAL.

2014, when it fell less than 0.1%.

In Japan, declines in financial stocks weighed on the index, as the sector continued to pull back from recent gains, which were brought on by Donald Trump’s election as U.S. president.

Among individual shares, Mitsubishi UFJ Financial ended down 0.5%, Sumitomo Mitsui Financial shed 0.7% and Mizuho Financial slipped 0.9%.

Major auto manufacturers were Japan’s biggest gainers, as the yen weakened slightly against the U.S. dollar. A weaker yen typically lifts exporters’ earnings by making their products more price competitive abroad as well as increasing the value of profits when overseas earnings are converted back into yen.

Nissan Motor closed up 0.9%, Mazda Motor added 0.6% and Honda Motor ended 1.2% higher.

Broadly, the mood was muted as investors started their long weekends early, said Takashi Hiroki, chief strategist at Monex Securities in Tokyo.

The Nikkei held within a tight 100-point range, the S&P/ ASX 200 moved within a 40point range, and the Kospi traded within a nine-point range.

A Singapore court on Thursday handed a 30-month prison sentence to a former private banker with ties to a figure at the center of alleged multibillion-dollar misappropriations at Malaysian state fund 1MDB, the strictest punishment handed out to date as a result of the city-state’s probe of the fund’s finances.

Yeo Jiawei, 33 years old, a former wealth manager at the local branch of Swiss bank BSI SA, had been convicted a day earlier on four charges of attempting to obstruct the course of justice. Mr. Yeo had fought all the charges against him.

A lawyer for Mr. Yeo said his client is considering appealing his conviction and has two weeks to do so.

During the trial, a witness testified that Mr. Yeo went to work with or for Malaysian financier Low Taek Jho, known as Jho Low, who global investigators of 1MDB finances say was at the center of the alleged misappropriations at 1Malaysia Development Bhd. Singapore investigators have called Mr. Low a “key person of interest” in their investigation of the fund.

A lawyer for Mr. Low declined to comment on Thursday. Mr. Low has denied any wrongdoing in his dealings related to 1MDB. 1MDB couldn’t be immediately reached but has previously denied any wrongdoing and pledged cooperation with any lawful investigation.

Mr. Yeo is the third former BSI banker to be given a prison sentence in Singapore in the past two months. Earlier, two former colleagues pleaded guilty to charges of forgery and failing to report suspicious transactions.

Investigators in at least five countries are probing the finances of the Malaysian stateinvestment fund, set up to foster development, in response to allegations that billions of dollars have gone missing.

Banker Sentenced FABRICE COFFRINI/AGENCE FRANCE-PRESSE/GETTY IMAGES

Asia Stocks Drift Former In Preholiday Trade

Yeo Jiawei, an ex-banker for Swiss lender BSI with ties to a central figure in the 1MDB probe, was sentenced to 30 months in prison by a Singapore court. Two former colleagues had plead guilty.

Swiss investigators say they believe that as much as $4 billion was misappropriated from the fund through several banks, including BSI. BSI declined to comment Thursday but has said in the past it was cooperating with authorities and taking steps to improve compliance.

Mr. Yeo has been in custody since April 16, and his sentence will take into account time served.

During its submissions on Thursday, the prosecution asked for a three-year sentence for Mr. Yeo and said that he was one of a number of people being investigated in the “most complex, sophisticated and largest” moneylaundering case Singapore’s white-collar police department had ever been involved in.

Mr. Yeo’s lawyer was seeking a sentence of no more than two months, saying the court should consider him a “firsttime offender” and that no other conviction had been made relating to other charges.

Mr. Yeo, whose trial began at the end of October, separately faces trial next year for seven other charges relating

to cheating, money laundering and forgery, allegedly committed during his time at BSI. His lawyer has previously said he will contest all the charges.

The latest sentence by the Singapore court is the strictest punishment given so far by the city-state as a result of its investigation of the finances of 1MDB. Singapore is the only country that has secured convictions related to the alleged misappropriations at the fund.

Two former colleagues, Yak Yew Chee and Yvonne Seah, had earlier pleaded guilty in court.

In November, Mr. Yak was handed an 18-week prison sentence and a fine on charges that included forgery and failing to report suspicious transactions. Ms. Seah was sentenced last week to two weeks of imprisonment and a fine on similar charges.

The U.S. Department of Justice has launched a civil case to seize assets connected to the investigations, while Singapore’s banking regulator has closed two private banks operating in Singapore and fined three other financial institutions for their roles in pro-

cessing transactions on behalf of the Malaysian fund.

1MDB is a state fund set up

by Malaysian Prime Minister Najib Razak in 2009 that raised as much as $13 billion with a public mandate to promote the country’s economic growth.

Mr. Najib has also denied any wrongdoing and pledged cooperation with any lawful investigation. The Malaysian attorney general has said the prime minister acted legally.

Mr. Yeo’s one-time boss Kevin Swampillai testified in court that Mr. Yeo went to work for Mr. Low after leaving BSI’s Singapore unit in 2014.

He said his former subordinate at one point talked to him about traveling with Mr. Low on his private jet.

During his defense, Mr. Yeo had said earlier in court that Mr. Low was seen at BSI as the “gatekeeper” to the 1MDB business and a key adviser, even though he didn’t hold a formal position at the fund.

Mr. Yeo had also said that his interactions with Mr. Low had been facilitated by others at BSI. —Gaurav Raghuvanshi contributed to this article.

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B8 | Friday - Monday, December 23 - 26, 2016

THE WALL STREET JOURNAL.

MARKETS

Insurers Cool to Smart-Home Gadgets Connected security devices proliferate but policy premiums aren’t coming down

The use of internet-connected systems that aim to improve home safety is increasingly common, and sales are expected to more than quadruple in the next four years.

Estimated number of shipments of smart-home devices

BY NICOLE FRIEDMAN

Email: heard@wsj.com

OVERHEARD When doing business abroad, it helps to know some pertinent local phrases.

So, here are a couple that investors in Italy might find useful right now.

“Tanto paga sempre Pantalone!”

Literally: “So Trousers always pays!”

Sound funny? Well, it is, in a fatalist sort of way.

Pantalone is the name of a common character in a type of comedy theater that started in northern Italy in the 15th century and spread through Europe.

As Banca Monte dei Paschi di Siena awaits a government-backed rescue, there will be plenty of Italian taxpayers who feel like they are being thrust into Pantalone’s role.

The character of Pantalone was usually old, rich and gullible.

He is the butt of every joke or trick and the one who always ends up paying for everyone else.

“Fuoco di paglia” translates as “fire of straw” but is like the English phrase “flash in the pan.”

Basically, it is a short-lived event with no substance or fuel to keep the flames burning.

Italian bank stocks are having one of their best months since 2009, having rallied strongly since early December’s referendum defeat threw Italian politics into disarray.

The concern, however, is that this has been driven primarily by hedge funds that had been wagering against banks taking their profits by purchasing stocks they had sold short.

Just because these people have decided the worst has passed for now, that doesn’t mean Italy and its banks are on a firm recovery footing yet.

This apparent passion may quickly cool.

Less than 1.9 million

79 million*

40 million

2010 Device category

AMERICAN FAMILY INSURANCE

Americans are snapping up millions of new security cameras and smoke detectors connected to their Wi-Fi networks. But insurers aren’t yet persuaded the devices will make homes any safer.

The average cost of insuring a home was expected to rise this year despite the gadgets that are intended to prevent billions of dollars in damage and loss. The $84.9 billion U.S. home-insurance industry is resisting widespread price reductions because insurers say little data exists to show the devices can improve security or prompt homeowners to be more active in securing their homes.

The home-insurance industry could see billions in revenue evaporate if the new technology dramatically improves home safety over time, potentially outpacing the costs insurers would save from paying out less in claims.

Some consumers say internet-connected devices make them feel more safe and that insurance companies should encourage their use.

“The insurance companies should provide an incentive,” said Tony Bacon, who outfitted his four-bedroom Chatham, N.J., home with internetconnected security cameras, thermostats and lights. Only his security-alarm system qualifies for an insurance reduction.

For some years, insurance companies have lowered home premiums for homeowners that use basic security devices. The question is whether the internet-con-

360 million*

Getting Smart

2015

2016

Features

Estimated price range

Motion sensors/ security cameras

Stream video to mobile device

Smoke and carbon monoxide detectors

Alert homeowners to low batteries

Water leak detectors

Find leaks, shut off water

American Family Insurance in Wisconsin installed scores of devices in a house to train adjusters. nected versions of this equipment will be even more effective than their analog counterparts.

Internet-connected devices include those that alert homeowners when their smoke-detector batteries run low, route doorbell-mounted video to their phones and detect leaky water pipes.

Technology-research firm ABI Research expects 360 million shipments of so-called smart-home devices in 2020, up from 79 million shipments this year and 40 million last year.

Some home insurers are offering small discounts for such devices while they test their effectiveness, but the reductions aren’t yet big enough to reduce average premiums. The average U.S. home premium is forecast to rise to $1,293 this year, up 5.5% from 2015 and up 61% from 2006, according to trade group Insurance Information Institute.

A 2014 study from Morgan Stanley and Boston Consult-

security systems because it is easier to verify that they are installed and working properly.

Other insurers say they are encouraging consumers to buy connected-home products, especially if the homeowners agree to share data with the insurance companies.

Boston-based Liberty Mutual Insurance offers discounts in 38 states for customers that use connected security devices or smoke alarms. If the customers allow Liberty Mutual to verify that the devices are working correctly, they can get a larger price cut.

American Family Insurance in Madison, Wis., is discounting the cost of Ring Video Doorbells, which have motion sensors, cameras and microphones that allow users to remotely see and speak to visitors. It also is offering to reimburse the insurance deductibles of customers with the doorbells who are burglarized. Those deductibles usually amount to between

The push to gather more data from homeowners follows similar efforts by autoinsurance providers. For about a decade, auto insurers have been installing devices to monitor how far people drive and how often they slam on the brakes—and using that information to adjust pricing.

Drivers can get discounts of as much as 30% if they agree to use the tools. Auto premiums have continued to rise on average in recent years, as increased driving and more distractions have led to more accidents.

Experts say it could take years to amass enough data about smart-home devices to offer equivalent home-insurance savings.

State Farm, the nation’s largest home insurer, provides a 15% reduction attached to certain internet-connected home-security systems, said Dar Hakimi, director of innovation. Mr. Hakimi said such devices are preferable to traditional smoke detectors or

$25–$500

$60–$200

$30–$1,600

*Projections Sources: ABI Research (shipments); retailer listings (prices)

ing Group estimated that smart-home devices could cut potential losses by 40% to 60% and reduce premiums globally by between $32 billion and $47 billion over the next 10 years. Global home-insurance premiums were $160.8 billion in 2013, the study estimates.

Connected-home technology “changes the underlying need to have insurance,” said Sean O’Neill, a partner at consultant Bain & Co. “If you take down severity and frequency of losses, that is basically what premium dollars support. So the question is, at some point do premium dollars fall significantly,” he said.

Analysts say home insurance can’t be replaced completely because houses are still vulnerable to storms and other natural events. One in every 30 insured homes has a property-damage claim due to wind or hail each year, according to the Insurance Information Institute.

$0

Even the full-price stalwarts cave in to discounts the week before Christmas, and those that have been cutting prices slash even more.

At high-end boutique Polo Ralph Lauren, everything was 30% off on Dec. 20 when Heard on the Street collected the latest round of data for its holiday retail pricing experiment.

We are monitoring five items at each of the four stores—Macy’s, J.C. Penney, Ralph Lauren and Gap—to try to get a sense of whether retailers’ low inventory heading into the fourth quarter is actually helping them avoid discounting.

The most significant shift was at Ralph Lauren, where an inexpensive scarf had been the only discounted item in our basket.

This week, the whole store was on sale, showing the lengths to which retailers will go to sell off their merchandise before even steeper post-Christmas promotions eat away at margins.

The retailer’s discounting strategy may have been working at the store we visited on Manhattan’s Fifth Avenue.

The red down parka and the black faux fur hat we have been following were already sold out there.

Both are still available online—the parka at 26% off and the hat at full price. The scarf, which had already been marked down to $54.99 from the original $78, was $34.49.

Perhaps most significant, the leather pants, which had

None

1%–29%

In-store changes from original prices 30%–39%

40%–49%

50%–70%

Sold out

Nov. 29 Dec. 6 Dec. 13 Dec. 20 Wavy cable-knit sweater Pendleton fringe scarf 2-in-1 hooded parka Camo slim-fit utility pants† Crazy stripe utility tote

-30 % -40 -30

-40% -70 -40 -40

-58 % -70 -40 -40

-50 -50

Lee curvy-fit pants J.C. PENNEY* Isotoner gloves with SmarTouch

-30

Liz Claiborne puffer vest St. John's Bay cable-knit sweater Dearfoams memory foam slippers

-50 -44 -43

-30 -50 -50 -44 -43

-30 -50 -50 -50 -43

-30 -50 -50 -50 -70

Michael Kors ‘Selma’ satchel Calvin Klein striped lace-up sweater Tommy Hilfiger ‘Graham’ corduroy pants Burberry emerald check cashmere scarf Fossil Q Wander stainless steel smartwatch

-25

GAP

MACY'S

RALPH Red down parka with faux fur hood LAUREN Black faux fur hat Black leather straight pant Rib-knit ragg scarf Waffle-knit cashmere sweater

-13

-50 -30 -30

-25 -30

-25

-30

-58%

-28 -25

-30

-52 -51 -30

*Additional 25% off all items with coupon on Dec. 6 †Buy one, get one at 50% off on Nov. 29 Source: the retailers THE WALL STREET JOURNAL.

been selling for full price at $998 since our experiment began, were marked down with a sticker to $689.99.

Take another 30% off that, and a savvy Christmas shopper could have bought them for $482.99 that day.

A sticker typically means a markdown is set in stone.

Even after the 30%-off sale ends, those pants won't go back to full price.

The discounts show the lengths to which retailers will go to sell off their merchandise.

Stickers also were coming out at some of the other retailers where we hadn’t seen them before.

A pair of memory foam slippers at J.C. Penney, which had previously been marked down with a sign to $15.99 from the original $28, was stickered at $8.39 this week.

At Macy’s, the few remaining examples of the Michael Kors handbag we were following bore stickers marking them down to $298 from the original $398. They had been selling at full price the previous week.

That was noteworthy because the bag had swung from 50% off to full price the previous week, a change that Macy’s had attributed to the ability to sell at higher prices when supply is tight.

This week’s discount suggests the department-store retailer didn’t have that much pricing power. The Fossil smartwatch also was discounted by 25% this week after regaining full price last week, but the discount was done via a sign as opposed to a sticker.

Of course, a sticker isn’t the only sign that price cutting is getting serious.

There were no stickers at Gap, but all men’s and women’s clothes not already on sale were selling for 50% off. Last week, the discount was 40%.

—Miriam Gottfried

1,000 1,500

$600 and $800, American Family said.

A study that Ring worked on with the Los Angeles Police Department suggests the doorbells reduce crime, but more comprehensive data will take years to gather, said Jamie Siminoff, Ring’s founder.

“Insurance needs 10 years of data,” he said. “You don’t know what happens until you wait.”

American Family has installed more than 100 connected devices in a one-bedroom house that it uses as a training center for claims adjusters. A few employees also test products in their own homes to determine which ones could qualify for discounts in the future.

But so far only a few, including Ring, have passed the test. Some devices, like indoor cameras, were judged a bad fit for American Family due to privacy concerns, said Ryan Rist, the company’s innovation director. Others didn’t work as well as advertised.

FINANCIAL ANALYSIS & COMMENTARY

Price Check

500

THE WALL STREET JOURNAL.

HEARD ON THE STREET Retailers Lose Will Ahead of Holidays

2020

WSJ.com/Heard

Euro-Dollar Parity Is About the Buck Three, two, one, $1.00?

That is the countdown that the market is watching as the euro, which at $1.044 is close to a 14-year low, approaches parity with the U.S. dollar.

The source of concern for investors should be the dollar, not the euro, however.

The fresh impetus that took the euro to its lowest level for 2016 in December came from the U.S. Federal Reserve, rather than from European developments. The Federal Reserve’s outlook for 2017, which suggested three interest-rate increases, pushed up two-year Treasury yields to their highest level since 2009. That in turn pushed the gap between two-year U.S. and German yields north of two percentage points, adding to the dollar’s allure.

The Fed’s shift has had the effect of making the European Central Bank look more dovish.

While there was some concern in the immediate aftermath of December’s European Central Bank meeting about the central bank’s decision to slow the pace of bond purchases next year to €60 billion ($62.76 billion) a month from €80 billion, the reality is that eurozone monetary policy is staying extremely loose.

For once, the dynamic that the ECB has been anticipating for at least a couple of years—tighter policy in the U.S. set against looser policy in Europe—is playing out.

And for now, at least, the euro is still benefiting when risk appetite softens in global markets—a sign, too, that this move is more about dollar strength and less about fears for the euro.

That is because the euro, thanks to European Central

Bank policy, has become a funding currency: It can be borrowed cheaply and the proceeds can be used to invest abroad.

When markets pull back, that lifts the euro.

A weaker euro should in this environment act as a buffer for the eurozone economy, helping exports and growth. A bigger concern is a rapidly strengthening dollar that causes new worries to emerge about global growth.

There are already signs of strain in Chinese markets, and emerging markets are always at risk when the dollar rises. In the approach to the holiday season, investors have taken less note of this than they might otherwise have done.

This dynamic could change, of course. The euro so far hasn’t particularly suffered due to political developments in Europe, but next year’s heavy electoral calendar will pose a challenge.

The run-up to the French elections, in particular, is likely to focus investor attention on the many economic problems Europe still faces.

The euro may yet travel the road to parity based on bad news from Europe. For now, however, the dollar is in the driver’s seat.

—Richard Barley

Buck Boosted Performance of U.S. dollar against the euro 5% 0 –5 –10 J F M A MJ J A S O N D Source: FactSet

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Dan Neil gives his neighbors thrill rides in the Audi R8 V10

Our watch columnist hands out prizes for the best timepieces of 2016

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STYLE

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FASHION

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DESIGN

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DECORATING

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ADVENTURE

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Friday - Monday, December 23 - 26, 2016 |W1

F. MARTIN RAMIN/THE WALL STREET JOURNAL; ILLUSTRATION BY MIKEY BURTON

This Beer Is My Beer

Once, a few mega-brands ruled the American beer landscape. Now, offerings from smaller breweries are so vast and varied it’s hard to know where to begin. Here’s your road map to the major regional styles, plus 21 top craft brews that deliver an intriguing taste of place

BY WILLIAM BOSTWICK ON ALBUQUERQUE’S industrial northern fringe, down a side street flanked by autoparts stores, I found the wellspring of American beer. I’d been traveling; I was parched.

What I discovered rewrote my understanding of American beer.

The brewery was La Cumbre, the beer was a Scotch ale. A traditional Scottish beer, served on cask, 5,000 miles from Edinburgh? It was a taste of how deliciously unpredictable American craft brewing has become.

What is American beer? That depends on where you’re drinking. Sure, you can still find a familiar red-and-white can in any corner store, and rest assured it’ll taste identical no matter where you buy it. But on a recent beerfocused road trip, I traced the outlines of a number of distinct and diverse regional styles: the New England IPA, the Southern saison, the Great Lakes gose, the Rocky Mountain lager, the Cascadian fruited sour, the Southwestern Scotch and the SoCal session. Some new, some traditional, many growing from particular local customs and conditions.

I discovered there’s more and better beer in America than ever before. As craft brewing has downsized, it has regionalized.

Brewers big and small can source ingredients from anywhere. And styles born of necessity or the geopolitical jockeying of another place and age—Scottish beers made with little or no hops, for example, flying in the face of English brewing practice—are providing inspiration for experimentation stateside. Your neighborhood nanobrewery might serve locally, but brew with an international palette: hops from Australia, grain from the Czech Republic, yeast from Germany and water chemically treated to taste like Belgium’s.

At the same time, many new craft breweries are using their nimble size to play with local flavors; small batches let you experiment more freely with rare or low-yield crops. Many champions of this locavore movement brew in the Northwest, using homegrown fruits to produce the region’s proliferating sour beers, and in the South, following on the recent renaissance of Southern cuisine and its focus on local flavors. “The number of ingredients that find their way into the beers we make here is endless,” said Todd Boera, farmer-turned-

brewer in charge of Fonta Flora brewery in Morganton, N.C. Saisons—dry, easy-drinking farmhouse beers built on a hearty grab bag of grains and often fermented with wild yeast, spices or fruits— are a perfect canvas on which to paint with local plant life. At Fonta Flora, drinkers routinely find at least half a dozen on tap. But they rarely see the same one twice, and could never find them outside the region.

“We’re not making these beers year-round, because we’re waiting for certain ingredients to be harvested again,” Mr. Boera said. “It creates a lot of excitement.” Right now he’s excited about Bloody Butcher corn, a hard-to-find heritage grain. “It’s dry and earthy and has that nice, grainy aroma. The kernels are a gorgeous red like giant pomegranate seeds,” he said. “Plus, people just love the name.” Bloody Butcher is a crowd pleaser and saisons a Southern staple. “You might have a Bud-Lightdrinkin’ good ol’ boy next to the world’s biggest beer geek, both drinking saisons,” said Mr. Boera.

Many factors led to the formation of this new archipelago of American beer styles. The Please turn to page W2

[ INSIDE ]

BRANCH DRESSING A bright bouquet inspired by a solemn work of art W7

MAC TRICK This deft twist on the comfort classic unites a trio of cheeses W3

ALPS WANTED Need a cappuccino break? Seek out a ski safari in Italy’s Dolomite Mountains W6

20 ODD QUESTIONS... ...with auto-world provocateur Jeremy Clarkson W5

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*

THE WALL STREET JOURNAL.

EATING & DRINKING

UNITED STATES OF CRAFT BREWING

TAP BOOM At Ballast Point’s Miramar brewery in San Diego, visitors can sample SoCal-style session beers.

HOME BREWS: THE BEST OF AMERICA’S REGIONAL BEER STYLES

Small-scale brewers are driven by friendly one-upmanship and the feedback loop of local tastes.

New England’s IPAs have a decidedly secessionist pedigree. While the reigning kings of IPA are brewed in the West Coast style, sticky with bitter resin from Northwest-grown hops, New England’s upstarts, often brewed with milder hops from the South Seas, are “smooth, really aromatic with pineapple and mango, and super cloudy with hop particulates,” said Josh Christie, Portland, Maine, beer writer and co-owner of Print: A Bookstore.

The origins of the New England IPA style are just as murky. “A bunch of places came up with it at the same time,” Mr. Christie said. But signs point to Bissell Brothers in Portland, Maine, and Treehouse in Monson, Mass., as pioneers.

The style spread, fueled as much by brewery competition as the local penchant for aggressive uniqueness.

This is, after all, the land of Walden, Woodstock and wicked-local slang. “I think a strong part of New England [identity] is wanting to forge your own path,” Mr. Christie said. “We’re not going to keep brewing English or West Coast IPAs. We’re going to do our own thing.”

Meanwhile, Southern California’s waters, once roil-

ing with hop bombs, have calmed. Inspired by British brews suited for afternoons at the pub, SoCal brewers have embraced session beers—relatively low-alcohol brews designed for drinking in quantity—that keep all the hop flavor without the boozy bite. Easy Jack from Firestone Walker in Paso Robles, Calif.— sweet as orange blossom and just as delicate—carries the flag. Even San Diego’s Stone Brewing, whose beer once snarled, “You’re not worthy,” now offers Go To IPA, lighter, accessible and eager to please.

Sessionable, lower-alcohol brews rule the Rockies as well (now that Colorado’s drinkers can find headier indulgences in other, newly legal forms). In the town of Durango, Patagonia-clad après-sportsters discuss trout size, mountain bike trails and Telemark technique over grain-forward continental lagers. Two Great American Beer Festival medal winners in the category (Carver’s Lightner Creek and Ska’s Mexican Logger) come from this tiny town.

Farther south, red rye and toasted barley give dark Southwestern IPAs a cracker-crunch. Albuquerque beer writer Christopher Jackson calls his blog Dark Side Brew Crew. Is the name a nod to the local passion for the Stygian side of the beer world? Turns out he’s just a heavy metal fan who likes stouts. But on the whole, Mr. Jackson said, “we do like big, bold flavors here in New Mexico. Beers that stand up to the green chilis.” And for that, a Scotch ale is perfect.

Brewed with rich dark malts but fermented long and cool for a lighter body, “it’s a bridge beer between a lager and a stout, malt-forward but without the weight.” In other words, strong enough to balance a Hatch Valley hot pepper, mild enough to actually enjoy in the heat.

When I tasted La Cumbre’s Caber Tosser, served from a hand-pulled cask in Albuquerque, it was creamy, soft and slightly smoky— dark but light, strong but smooth, utterly distinctive but also recognizably of its region. American beer may be all over the place these days, but you can use the regional styles laid out here to navigate this new landscape. Let the recommendations at right be your jumping-off point.

New England IPA

Cascadian Sour

Off Color Troublesome

Alchemist Heady Topper

Cascade Kriek

(Illinois; 4.3% ABV) A sprinkle of coriander adds a complex zest to this Chicago sour, serrating its sharp edge with notes of spice and citrus.

(Vermont; 8% ABV) Brewed in tiny batches, sold in humble silver cans, jagged with raw-orange-oil hop flavor, this much-coveted IPA is a favorite of beer nerds.

Destihl Wild Sour Series Here Gose Nothin’

Maine Beer Lunch

(Illinois; 5% ABV) Tart and tannic like a lime wedge with an almost sticky, resinous sourness that lingers.

Rhinegeist Peach Dodo (Ohio; 4% ABV) A subtle brew with the barest hints of tip-of-thetongue acid bite, sweet fruit and a pleasantly creamy finish.

(Maine; 7% ABV) Soft on the palate but bursting bright on the nose with strawberry, pineapple and banana, like a sweet spoonful of tropical sorbet.

Lawson’s Finest Liquids Sip of Sunshine (Vermont; 8% ABV) A fitting name for this blindingly fresh beer, whose cloudy looks belie the clear, sharp acidity of ripe papaya.

(Oregon; 8.2% ABV) Fans hoard rare vintages of this vanilla-sweet, balsamic-biting, barrel-aged beer from the pioneers of Pacific sours. It changes every year with the cherry crop.

Sante Adairius Rustic Ales West Ashley (California; 7.3% ABV) This sour has a creamy-sweet body, like fruit-on-the-bottom yogurt, from a months-long rest in Pinot barrels stuffed with apricots.

Logsdon Farmhouse Ales Peche ´n Brett (Oregon; 10% ABV) Wild yeast and farm-fresh peaches—a half a pound per gallon—give a fuzzy, floral dryness with wisps of fruit like an orchard on the breeze.

HEADY SOUTH The crisp Saison at Blackberry Farm in Tennessee.

Southern Saison Blackberry Farm Saison (Tennessee; 6% ABV) Rich with the nicely prickling sweetness of peach fur, this saison finishes clean, crisp and slightly spiced with grassy hops.

FullSteam Lucky Straw (North Carolina; 5.5% ABV) These staunch boosters of southern foodways use a North-Carolina-grown wheatrye hybrid called triticale and resinous experimental hops in this strong and sticky pale.

Cigar City Guava Grove (Florida; 8% ABV) A secondary fermentation with pink guava puree gives a balancing sweetness to this tart, Tampa-brewed saison.

Southwest Scotch

Rocky Mountain Lager

SoCal Session

Bosque Scotia

Carver Lightner Creek Lager

Stone Go To IPA

(New Mexico; 7.8% ABV) Richer, smoother and less biting than most, with a satisfying crunch like the buttery crust of cinnamon toast.

Bow and Arrow Crossed Arrows (New Mexico; 7.2% ABV) A twisted take from this brand-new Albuquerque brewery: honey-sweet, light and dry, a Scotch ale with a saison’s heart or a pale ale in a kilt.

(Colorado; 4.4% ABV) The snappy, crisp and slightly sweet German-style beer from these Durango upstarts is practically synonymous with lager in this mountain town.

Ska Mexican Logger (Colorado; 5.2% ABV) With two Great American Beer Festival medals in as many years, Ska sets the standard for Rocky Mountain lagers: pleasantly gritty, like beach sand in the air.

Four Peaks Kilt Lifter

Oskar Blues Beerito

(Arizona; 6% ABV) From fiery Phoenix, a burntred brew rich with toasty malt and just the right balance of tannic, roasted coffee and sweet caramel syrup.

(Colorado; 4% ABV) Local Colorado-grown Troubadour barley gives this Lyonsmade beer the earthy chew of good corn masa, like a handmade tortilla.

(California; 4.8% ABV) A chilled and cheery crowdpleaser of yellow peach and cantaloupe from the folks who defined the bitter-er-than-thou West-Coast IPA style.

Ballast Point Even Keel (California; 3.8% ABV) Spritzing with citrus and a touch of lemongrass, this beer is light as sea spray and smooth as beach glass, with a heftier body than other sessions.

Firestone Walker Easy Jack (California; 4.5% ABV) The British-inspired barrel-aging specialists at this brewery freshen up this fruit-basket of a beer with brightly tropical hops from Australia and New Zealand.

F. MARTIN RAMIN/THE WALL STREET JOURNAL (BEER); BALLAST POINT BREWING AND SPIRITS (TASTING ROOM); BEALL + THOMAS PHOTOGRAPHY (BLACKBERRY FARM)

Continued from page W1 most obvious: peer pressure. Small-scale brewers are driven by friendly oneupmanship and the reinforcing feedback loop of local tastes. “We can brew whatever we want,” said Bryant Goulding, vice president and co-founder of Cincinnati’s Rhinegeist. “But you want to reference your peers, pay homage to them and, yeah—beat them. It’s competitive but cooperative.” So if one Great Lakes brewery makes a damn good gose (a slightly sour, slightly salty German wheat style), another will surely follow. Mr. Goulding mentioned Destihl, from Chicago. That brewery’s take on the style, called Here Gose Nothin’, is puckering tart; Rhinegeist’s has a meringue-like softness. Both are hits.

Great Lakes Gose

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THE WALL STREET JOURNAL.

Friday - Monday, December 23 - 26, 2016 | W3

EATING & DRINKING BREAKFAST 2.0

Roll a Double Burrito or Frankie?

Either way, that’s breakfast all wrapped up

FOR A FEW YEARS now, “authenticity” has been the culinary watchword—or bludgeon, depending on how you look at it. The truth is, sometimes I crave the kind of unfashionable cooking that requires no trips to specialty shops or anxiety over proper technique. That’s the beauty of the breakfast burrito.

There’s no “right” way to make it and, by extension, no wrong one.

This dish was born, according to reliable accounts, at the restaurant Tia Sophia’s in Sante Fe, New Mexico, but swiftly became the stuff of diners, food trucks and fast food chains across the land. Fill it with sausage or bacon; potatoes or peppers; scrambled eggs or tofu; cheddar or no cheese at all. Whatever blows your hair back.

I favor crisp-fried potatoes and onions mixed with a soft scramble of sausage, eggs and cheese—currently Monterey Jack is in heavy rotation—topped off with salsa for a little sinus-clearing kick. You can scare up all those ingredients at any supermarket and have a comforting breakfast in hand in half an hour.

A similarly easygoing and adaptable morning meal is the “Breakfast Frankie,” a riff on a classic Mumbai street food served by chef Anita Jaisinghani at her Pondicheri restaurants in Houston and New York.

“I grew up in the Indian state of Gujarat and spent all my summers in Mumbai, so I got to know Frankies,” said Ms. Jaisinghani. Cheap and portable, a typical Frankie consists of roti flatbread washed with egg and filled with vegetables or meat.

When Ms. Jaisinghani opened her Houston cafe, in addition to serving Frankies with traditional fillings like chicken, paneer cheese, mushrooms and dal, she wanted to make a breakfast version. For this, she spoons coriander chutney over warm roti—both made from scratch at Pondicheri, though home cooks can buy them pre-made—then fills the wrapper with a piquant egg-veggie scramble fragrant with ginger.

You might not find anything exactly like it on the streets of Mumbai. But with its large helpings of spinach, red pepper and celery, this breakfast version provides a simple and flavorful way to coax vegetables into your morning routine.

...OR MODERATELY MUMBAI? A riff on a street snack meant for morning meals, the breakfast Frankie is stuffed with a healthy helping of vegetables.

SORT OF SOUTHWEST... Full of scrambled eggs, sausage and crisp-fried potatoes, this breakfast burrito is both classic and completely customizable.

Breakfast Burritos

Breakfast Frankies

TOTAL TIME: 35 minutes SERVES: 4 4 (10-inch) flour tortillas ¼ cup canola oil 1 onion, sliced 4 Yukon Gold potatoes, peeled and

diced into ½-inch cubes Salt and freshly ground black pepper ½ pound breakfast sausage, casings

1. Preheat oven to 350 degrees. Wrap tortillas in foil and put in oven to warm, 15-20 minutes.

2. Meanwhile, heat oil in a large skillet over medium-high heat until shimmering, 2-3 minutes. Add onions and potatoes to pan and spread out in a single layer. Season with salt and pepper.

Cook, stirring occasionally, until browned and tender, about 15 minutes.

3. Add sausage to a medium skillet over medium heat. Sauté, breaking up meat with a spatula, until meat is

BRYAN GARDNER FOR THE WALL STREET JOURNAL, FOOD STYLING BY HEATHER MELDROM, PROP STYLING BY ALEX BRANNIAN

BY ELIZABETH G. DUNN

removed 8 large eggs 2/ 3 cup grated Monterey Jack cheese ½ cup salsa

cooked through, about 5 minutes.

Pour off any excess fat. Add eggs to pan, then season with salt and pepper. Reduce heat to medium-low.

Cook, stirring constantly, until eggs are soft scrambled, about 5 minutes.

Turn off flame and sprinkle cheese evenly over eggs.

4. Drizzle salsa across each tortilla.

Spoon egg and sausage mixture on top, followed by potatoes. Wrap and serve immediately with an additional dollop of salsa.

TOTAL TIME: 30 minutes SERVES: 6 6 roti flatbreads 3 tablespoons olive oil 1 teaspoon black mustard seeds 2 scallions, white and light green parts only, finely chopped 1 stalk celery, cut into ½-inch dice

1 small red bell pepper, cored and diced 1 tablespoon grated ginger (from a 3-inch piece) 6 large eggs 1 teaspoon ajwain seeds (available at Kalustyans.com and

1. Preheat oven to 350 degrees. Wrap stack of rotis in foil and warm in oven, 15 minutes.

2. Meanwhile, heat olive oil in a medium saucepan over medium heat until shimmering. Add mustard seeds to pan. As soon as seeds start to pop, add scallions to pan. Cook until softened, 2 minutes. Add celery, bell peppers and ginger to pan and cook until

Indian markets) ½ teaspoon ground black pepper ½ teaspoon kosher salt ½ cup chopped cilantro 4 cups chopped spinach leaves ½ cup jarred coriander chutney

soft yet bright in color, 3-5 minutes.

3. In a bowl, lightly whisk eggs with ajwain, black pepper, salt and cilantro.

Add egg mixture and spinach to pan.

Cook until eggs are soft scrambled, 2-3 minutes.

4. Drizzle chutney over each roti, and top with filling. Wrap and serve.

–Adapted from Anita Jaisinghani of Pondicheri, New York

Macaroni Au Gratin

The Chef: Ashley Christensen Her Restaurants: Poole’s Diner, Beasley’s, Bridge Club, Chuck’s, Death & Taxes, Fox Liquor Bar, Joule Coffee & Table, all in Raleigh, N.C.

What she’s known for: Breathing new life into Poole’s, a Raleigh institution.

Comfort food cooked with skill and an added dash of indulgence.

POOLE’S DINER is at once the thirdoldest restaurant in Raleigh, N.C., and one of the hottest. “It opened as a pie shop in the 1940s, and in the early ’50s it became a luncheonette,” said chef Ashley Christensen, who reopened Poole’s 9 years ago last week. “After we bought it I stood in the space and knew exactly how I wanted the food to make people feel: welcomed and comforted.”

Ms. Christensen’s beloved macaroni au gratin, her first Slow Food Fast recipe, is mac and cheese dialed up to 11. Made with cheddar, Grana Padano, Jarlsberg and plenty of cream, it’s topped with more cheese and finished under the broiler. “When you break through the

brown sizzling cap, you get a super gooey, creamy texture beneath,” Ms. Christensen said.

Sometimes she sets an egg yolk on top of the noodles before adding the final layer of cheese. “You want it buried so it comes out hot and liquid, like the center of a poached egg,” she said.

With small but significant touches like this, Ms. Christensen shows that you really can improve on a classic. “American diner food provides various access points, and we take advantage of that by pulling dishes apart and putting them back together so they end up being way more than their descriptions,” she said. “We sweat every detail.” —Kitty Greenwald

TOTAL TIME: 25 minutes SERVES: 4 as a side dish, 2 as a main Kosher salt 1 1/2 cups (6 ounces) dry elbow macaroni 1 teaspoon vegetable oil

2 ounces Grana Padano, grated 2 ounces Jarlsberg, grated

1. Preheat broiler and set a rack just below flame. Bring a medium saucepan of salted water to a boil over high heat. Add macaroni and cook until just shy of al dente, about 5 minutes. Drain pasta and toss with oil. (There should be about 3 cups of cooked pasta.) Set aside to cool. Wipe saucepan clean.

2. In a large bowl, combine cheeses. Pour cream into cleaned saucepan, season with salt and set over high heat. Simmer cream until it begins to foam, 3-5 minutes. Stir in noodles, return to a simmer and stir in half

6 ounces white cheddar, grated 21/2 cups heavy cream 1 egg yolk, optional

the cheese mixture, a handful at a time, waiting until cheese melts before adding more. Season with salt to taste.

3. Transfer mixture to a 9-inch oven-proof skillet or baking dish. If including egg yolk, create a shallow well in pasta’s center and gently slip yolk in. Moving quickly to prevent over cooking, carefully and evenly spread remaining cheese over entire dish. Transfer to broiler and broil until cheese melts and browns in spots, about 3 minutes. Remove from oven and let rest 5 minutes before serving.

MELT METHOD This take on the classic mac includes three different cheeses. An egg yolk cooked on top makes it even more luscious.

BRYAN GARDNER FOR THE WALL STREET JOURNAL, FOOD STYLING BY JAMIE KIMM, PROP STYING BY RYAN REINECK; ILLUSTRATION BY MICHAEL HOEWELER

SLOW FOOD FAST: SATISFYING AND SEASONAL FOOD IN ABOUT 30 MINUTES

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THE WALL STREET JOURNAL.

W4 | Friday - Monday, December 23 - 26, 2016

OFF DUTY THE WATCH MAN: HOROLOGICAL EXPERT MICHAEL CLERIZO ANSWERS YOUR TIMELY QUESTIONS

Critic’s Choice: The Best Timepieces of 2016 Q

The year is almost over, so let’s cut to the chase—what do you think were the best watches of 2016?

That’s not easy to answer. If you count smart and quartz models, thousands of watches, with very different functions and purposes, entered the market in 2016. How do you compare sports watches, which typically feature chronographs, with time-only dress watches?

In making my picks, I relied on highly subjective criteria. For instance, I personally like watches that exemplify their brands’ strengths. Design also matters to me. I awarded almost as many points for efficiently executed legibility as I did for visual harmony, both in the dial and case, and the movement. And with that, below are my top three choices, in no special order, plus a few honorable mentions.

Rolex Oyster Perpetual Air- King This year’s Rolex Air-King was a surprise. Launched in the late 1940s as a homage to aviation, the model was discontinued in 2014; no one expected it to return so soon.

The new Air-King’s case is a tweaked version of the stalwart Oyster Perpetual case (which debuted in 1926), with sharper edges and more pronounced curves. At 40 mm, it’s the largest Air-King ever.

What blew me away, however, is the dial. Like a classic military dial, it’s black and the numerals are a bold, luminous white. A 3, 6 and 9 indicate hours, but the other numerals mark off minutes in increments of five, because minutes mat-

HONORABLE MENTIONS // FIVE MORE TICKERS THAT STOOD OUT IN 2016

BLUE RIBBON SPECIALS From left: Kalpa XL Hebdomadaire Anniversaire Watch, $65,000, Parmigiani Fleurier, 786615-9656; Oyster Perpetual Air-King Watch, $6,200, rolex.com; L.U.C GMT One Watch, $9,500, chopard.com

ter in the military-watch tradition.

Priced at a relatively reasonable $6,200, the new Air-King— megabrand watch design done right—is meant to entice younger buyers.

Chopard L.U.C GMT One I travel a lot so I like watches that display the time in two time zones: home and away. Knowing

Vacheron Constantin Overseas Chronograph // Its chronograph took five years to develop. $28,900, vacheron-constantin.com

at a glance what time it is for my wife means I can avoid calling her from the road at some ungodly hour. GMT (Greenwich Mean Time) watches feature an extra hand that indicates the time in a second time zone on a 24-hour dial. It’s a practical complication (as such extras are called), but many brands add it to dials that are already too cluttered with

Breguet Classique 7147 // Old meets new: classic pocket watch design in a wristwatch. $21,000, Breguet, 646-692-6869

other complications.

Chopard breezed by these pitfalls with the cleanly designed dial of its L.U.C GMT One. The numerals are highly legible and the date window is neatly tucked up at 6 o’clock.

Chopard has also made knowing when it’s nighttime at home simple by setting off the numerals 19 to 6 (7 p.m. to 6 a.m.) on

Seiko Presage Chronograph // A superb selfwinding movement, plus a beautiful dial. $2,300, Seiko, 786-360-6895

THE SWISS ARMY KNIFE OF SKINCARE A new wave of moisturizers called ‘everything balms’ claims to do it all

2

3 1

4

5

SOOTHE SAYERS // THE LOWDOWN ON FIVE HARDWORKING BEAUTY BALMS 1 Sea Worthy Worried about the safety of nibbling off your lip balm?

This all-purpose salve contains edible algae to protect against the elements, so no fears on that front. Unscented and housed in a no-frills, minimalist tube, it also works for everything from chapped lips to unruly brows.

Marine Salve, $20, makebeauty.com

2 One-Pot Wonder Here’s hoping you’ll never need the burn-healing properties this old-school cream provides. Spiked with Tamanu oil, an antibacterial that speeds skin repair, it’s also engineered to boost hydration and even calm blemishes. No wonder Marilyn Monroe was a fan. Phormula 3-9 Repair Balm, $255, ernolaszlo.com

3 Baby Love This handy push-up stick, made with olive oil, shea oil and beeswax, takes up very little space in your makeup bag but works for lips as well as cuticles, elbows and split ends. The all-natural moisturizer was originally formulated by founder Paola Lamorticella for her son’s sensitive skin.

Balm Stick No. 1 $28, olioeosso.com

4 Hipster Fixer-Upper This slim tube can work on rough patches anywhere on the body. Its 20-something fans particularly love to slather it from cheek to chin—both to protect dry skin and to create that borderline smeary, ultra-dewy finish, either under or over makeup.

Balm Dotcom Universal Skin Salve, $12, glossier.com

5 Classic Beauty Unveiled over a dozen years ago, this luxurious petal pink French import, created by beauty virtuoso Terry de Gunzburg, was conceived as a lip balm but quickly migrated south to cracked cuticles, where it’s been soothing ever since. Its light rose scent is pleasing, not cloying.

By Terry Baume de Rose, $60, barneys.com

Parmigiani Fleurier Kalpa XL Hebdomadaire Anniversaire In the watch world, “luxury” is an overused and abused adjective no one bothers to define. Here’s an attempt: A luxury watch has wellthought-out design; tastefully presented precious materials; is relatively rare and likely to last for many decades. A prime example is Parmigiani Fleurier’s Kalpa XL Hebdomadaire Anniversaire.

Let’s start with the stainlesssteel case. Its “tonneau” shape (French for barrel) is roughly rectangular with curved sides.

Parmigiani beefed up the basic tonneau by adding prominent, architectural lugs that contrast with its soft curves.

The dial is black gold, the result of a painstaking process that turns yellow gold black. It’s decorated with a type of hand engraving known as guilloché. The wavy pattern echoes the case’s curves.

Reinforcing the curvilinear theme, the power-reserve indicator at 12 o’clock is a semicircle; and both the rose-gold numerals and the date aperture at 6 o’clock are curved. The hands in contrast are straight and angular. The watch reflects an obsessive approach to design.

Inside the Hebdomadaire is a rose-gold Parmigiani movement, elaborately decorated and on show beneath a sapphire crystal case back. Only ten of these watches will be produced. In my opinion, they’re well worth the price tag of $65,000.

Rado HyperChrome Ultra Light // A Swiss watch imbued with Japanese minimalism. $2,850, store.us.rado.com

E

Andersen Genève Tempus Terrae // Efficiently gives the hour for 24 time zones simultaneously. Highly collectible. $46,800, andersen-geneve.ch

BY DANA WOOD

VERYTHING BALMS purport to do nearly everything well: hydrate chapped lips, soothe cracked cuticles, soften rough heels and act as a barrier against harsh winter winds. It’s surprising they don’t also babysit.

Model-turned-cosmetics-maven Josie Maran, who created her all-natural Argan Balm seven years ago, uses it to moisturize her face, particularly during the colder months, but she knows of people who work it into their hair to create an artfully mussed look as well as pregnant women who rub it on their bellies to ward off stretch marks.

“Balm” is an old term signifying a rich, emollient treatment for very dry skin, said Ron Robinson, a cosmetic chemist and founder of online beauty community BeautyStat. Back in the day, said Marla Malcolm Beck, co-founder and CEO of beauty retailer Bluemercury, European and American pharmacies frequently crafted their own custom balms. “They were for much more than just hydration,” she noted. “If you burned yourself, they helped with that.”

The new range of multitasking balms builds on that idea. Glossier’s Balm Dotcom wittily encourages women to use it “on lips, on cuticles, on elbows, on your friends.” The pricey and silky Phormula 3-9 Repair Balm

by Erno Laszlo discreetly advises you to apply it to the face and neck as well as “other troubled areas.” New York beauty brand Make suggests that its jellylike Marine Salve can help with everything from chafing and burns to flyaway hair.

Dermatologists caution that the concept of the “everything balm” isn’t carte blanche to use any moisturizing product anywhere— unless it’s specifically formulated for that. “I wouldn’t use a lip balm on the face. It may clog the pores,” said New York dermatologist Debra Jaliman. “And I wouldn’t use a face balm on the lips. Lip skin is very sensitive and can easily get irritated.”

Dr. Jaliman is also wary of petrolatum— used in Balm Dotcom and Phormula 3-9— even though it’s approved by the FDA. “It contains polycyclic aromatic hydrocarbons, which some studies link to cancer,” she said.

“I like coconut oil, Shea butter, cocoa butter, beeswax, glycerin, vitamin E. They are all extremely moisturizing and good ingredients to look for in a balm.”

JOSHUA SCOTT FOR THE WALL STREET JOURNAL, STYLING BY JILL TELESNICKI

A

F. MARTIN RAMIN/THE WALL STREET JOURNAL, STYLING BY ANNE CARDENAS (TOP)

the 24-hour dial in orange.

If you choose to get the L.U.C GMT One in rose gold, the price is $19,200, but the stainless steel version is well-priced for a watch of this caliber, at $9,500.

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THE WALL STREET JOURNAL.

Friday - Monday, December 23 - 26, 2016 | W5

ADVENTURE & TRAVEL Jeremy Clarkson

THE MADCAP MOTORIST Clockwise from left: Jeremy Clarkson in Barbados; the Aston Martin DB 11; an IWC Pilot’s Watch Chronograph ‘Top Gun,’ similar to Mr. Clarkson’s; a ‘billy bag’ from Billingham; Chile’s Atacama Desert; ‘The Marsh Arabs,’ one of Mr. Clarkson’s favorite travel books.

Inset, below: Giraffes in Botswana.

The peripatetic petrolhead and host of ‘The Grand Tour’ on touring cars, a sheikh’s extreme hospitality and the world’s worst airport HE’S RUNNING OUT of planet. By his own estimation, Jeremy Clarkson—the 56year-old British author, provocateur and co-host of “The Grand Tour,” a globespanning new car show on Amazon Prime—has been to all but six countries. For anyone who has seen the series, the boast is plausible enough. On “The Grand Tour,” much as they did on the BBC’s “Top Gear,” Mr. Clarkson and fellow hosts James May and Richard Hammond travel widely, reviewing, constructing, and sometimes destroying cars under ludicrous circumstances. Filming locations include California, South Africa, Morocco, the Netherlands and the Jordanian desert, where the trio visited a Special Forces training base and tested an Audi S8 Plus while simulating a hostage rescue (of a stand-in for the Queen, no less).

While “The Grand Tour” is catnip for gearheads, Mr. Clarkson asserts that location sometimes outshines locomotion, making the program “as much a travel show” as a car one. In a coming episode, for example, he pilots an Alfa Romeo Giulia Quadrifoglio (“a truly magnificent car”) through a Welsh landscape so scene-stealing he imagines viewers saying, “Get that stupid car out of the way and let’s have a look at where you are.” We recently chatted with Mr. Clarkson, who also writes a weekly car column for The Sunday Times (owned by News Corp, parent company of The Wall Street Journal), about his obsessions and predilections.

The greatest touring car is: the Aston Martin DB 11. It even has a button on the steering wheel called GT Mode for actual Grand Touring. Push it and it settles the car down and it all becomes relaxing. It’s by far the best Aston Martin I’ve driven, ever.

erything in it. It’s got a universal adapter, phone charger and a tablet for watching movies. I must have 50 currencies in there, so I can buy a cup of coffee almost anywhere the plane lands. I don’t have to think. I just bring my bag.

One of my favorite cities in the world is: Damascus [in Syria], a truly great city.

You can’t go there now. There was a brief window in the history of mankind when you could pretty much travel the world.

The best road-trip is in: Botswana in winter [summer in the U.S.]. Just start at the border with Zimbabwe and head for Namibia. You’d be driving along and suddenly, “There’s a giraffe!” The best part—and this is as good as it gets—is that there are people who pitch you tents with four-poster beds and Egyptian cotton sheets. Then you eat freshly baked bread while watching the sun go down over the African bush.

I think a great road is: organic. It follows the contours of the land. A great road follows sheep tracks, effectively. The sheep set the tracks, then the man walked there, then the horses came. Nobody would ever call a freeway a great road.

I don’t travel without: my billy bag that I know has ev-

I love: a good bar. The Thompson Hotel in Nashville has an astonish-

ingly good rooftop bar, full of young, intelligent, good-looking people.

One of the strangest souvenirs I have is: a tile from Saddam Hussein’s bathroom, which I chiseled off the wall.

The world’s most underrated destination is: Chile. Everybody should go to Chile. All of it. The Atacama, the Altiplano, through Santiago and all the way down to Tierra del Fuego. There isn’t a bad molecule in Chile.

I am desperate to go to: Zimbabwe. I was never able to when I worked for the BBC because the BBC is banned there. So I’m very much looking forward to going.

The greatest hospitality I’ve ever experienced came: courtesy of the Rainbow Sheikh, Hamad bin Hamdan Al Nahyan, in the United Arab Emirates. I took my children to meet him for lunch. He had laid out every con-

ceivable foodstuff—from Kentucky Fried Chicken and McDonald’s to an entire goat, with everything in between. “I did not know what your children would want” he said. And then, after lunch, he said: “Would you like to go skiing? We’ll go skiing on the sand dunes.” He said to my daughter, “Do you drive?” and she’s only 12 years old. And I was drawing breath to say, “No, she can’t” but before I could, she said, “Yes, I can.” And he gave her a pink Jeep Wrangler so that she could go skiing in the desert. Now, that’s hospitality.

Driving in Italy is: always joyful. It’s a racetrack. If you overtake an Italian, you’ve offended him, and he’s going to get you back.

I like watches because: I like to know the time because I am the world’s most punctual human being.

A book that inspired me to travel is: Wilfred Thesiger’s “The Marsh Arabs.” It made me want to go down to southern Iraq. His descriptions were just fantastic.

The worst airport in the world is: Atlanta’s. I hate the color of the carpets. Purple and brown? They need to do something about those carpets.

A terrible place you should go visit is: Archangel [Arkhangelsk], at the tip of Russia. The town is appalling, as unpleasant a place as I’ve ever been.

Yet, right in the middle of it, there’s this perfectly tended graveyard for British and Commonwealth soldiers who were killed there. It’s very moving.

I have a sixth sense about: danger. I always sense when there’s trouble afoot. That can be quite useful when you feel that you’re causing a problem.

—Edited from an interview

by Matthew Kronsberg

CHRISTOPHER LANE/GETTY IMAGES (CLARKSON); ASTON MARTIN (CAR); JOSE LUIS STEPHENS/GETTY IMAGES (VOLCANO); JOSHUA SCOTT FOR THE WALL STREET JOURNAL (BOOK); GETTY IMAGES (GIRAFFES)

20 ODD QUESTIONS

BY JAMES STURZ

LAVA WILL FIND A WAY Hawaii’s feistiest volcano is putting on its best spectacle in years. Three strategies to catch the fireworks

HOT WATER The Lava Ocean Tours catamaran off the coast of Hawaii Volcanoes National Park in September 2016.

BY FOOT Hawaii Forest & Trail runs guided walks for up to 12 people to the ocean entry several times each week. A van picks up guests from the island’s main hotel areas then parks outside the former Royal Gardens neighborhood, which was decimated by three decades of lava. It’s a 4plus mile hike from there along a crushed lava gravel path—without any shade—to the sea cliffs where you can see the lava flowing 100 feet below.

Our guide, highly knowledgeable and well equipped, passed out walking sticks, energy bars, water bottles and protective gloves to safeguard us for the climb across the hardened lava’s razor

LAVA OCEAN TOURS; ILLUSTRATIONS BY KERRY HYNDMAN

OLD FAITHFUL MAY have its devotees, but I prefer my natural phenomena with a little less predictability. So I’ll leave the geysers to others, and stick to ogling Kilauea, one of Earth’s most active volcanoes. Largely contained within the boundaries of Hawaii Volcanoes National Park, on the Big Island, Kilauea has been erupting almost continuously since 1983, covering some 55 square miles and sometimes changing routes. In August 2013, its mercurial lava stopped flowing to the ocean and nearly destroyed the town of Pahoa instead.

But this past summer, after a threeyear hiatus, the lava reached the ocean again, forging a new 6.8-mile route down the volcano’s slope, over trees and paths. Exiting the earth at 2,100-degrees Fahrenheit, the fiery river pours into the Pacific in a display of oozes and hisses before becoming new land.

Months later, it’s still the best entertainment in the state—and much less cheesy than your average resort luau. But you can’t just drive up to this particular show: You’ll need to hike in or take in the spectacle by sea or air. To find out which approach delivers the biggest bang for the buck, I tried all three.

edges. Once we entered the national park, we passed signs warning about the risks of dehydration, flying rocks, burns, methane explosions and acid fumes. Not a single hiker was swayed, including hundreds who weren’t part of our group and cyclists who bumped past us on rented mountain bikes. At the end of the trail, we donned our gloves and climbed across a silvery expanse of brittle lava, with a mist of volcanic gases rising from vents by our feet. From a stable cliff, we watched molten lava gush out of the rock face below and into the water, like thick bright-orange paint.

Time: Up to 12 hours, including an hour of lava-gazing and dinner at a Ken’s House of Pancakes in Hilo. Cost: From $179 a person.

Verdict: The most informative and aerobic option. hawaii-forest.com

BY BOAT Lava Ocean Tours launches its 49-passenger catamaran six times a day, from a surfer beach in Pahoa, a 40-minute ride to the flow. Once we were on board, captain and owner Shane Turpin welcomed us with these warm words: “One person gets sick on every trip, and we’re not turning back. It’s just two hours—you’ll get through it. Or look at it like this: This is the most beautiful place in the world you’ll ever puke.”

As the boat ramped up to 30 knots, its aluminum hull bounced against the waves and a family of five squealed happily every time we banged down. But even with my ears ringing, our arrival

was breathtaking. A lava haze engulfed us, as if we were sailing through a sea of dry ice. We watched as chunks of lava tumbled off the cliff. Basketball-size hunks bobbed in the water, like flaming black icebergs, about 60 feet from us.

Since 1983, more than 500 acres of new land have been added to Hawaii. As the lava pours and crashes into the water, it creates a mix of black sand and rubble. Before we turned back, a mate lowered a fire bucket into the ocean and heaved it on board so that we could touch the water—it felt like toasty bathwater with dime-size mineral salts.

Time: Two hours. Cost: From $180 a person. Verdict: Easily the most touristy of the three, and yet the most rewarding because of the vantage point. seelava.com

BY AIR Seasoned lava-watchers say the best viewing is at sunrise. So one morning I drove to Hilo International Airport to board a Paradise Helicopters four-seater at 4:30 a.m. The helicopter, a MD 500, doesn’t have doors. “We take them off, just like with a Jeep,” explained former Marine pilot Robert Mitchell, “except this Jeep flies.”

I’ve never buckled a safety belt as carefully as I did that one. Then the rotors started, and wind whipped around us during our ascent to 1,500 feet. Ten minutes later, we arrived at the southeastern coast of the island as the sun was rising, an orange the same hue as

the lava spreading across the sky. We swooped down to 500 feet. The multiple blazing flows resembled veins, and all around them was pahoehoe, a type of viscous lava that looks like scar tissue. As we whirred closer to the ocean, we noticed the cliff was riven with burning waterfalls, and then balls of fire plummeted into the sea, with steam and a sulfurous aroma reaching my nose. This visit was shorter than the others—just 20 minutes. Flying back to Hilo, we headed past Kilauea’s Puu Oo crater, ground zero for the flow, and peered inside at its fiery lava lake. Too soon, we were back on the ground.

Time: 45 minutes from liftoff to landing. Cost: $282 a person.

Verdict: Thrilling but fleeting, like a quick shot of adrenaline. paradisecopters.com

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W6 | Friday - Monday, December 23 - 26, 2016

THE WALL STREET JOURNAL.

OFF DUTY

La Dolce Dolomites

POLE POSITION Equipment temporarily parked by skiers who stopped for a midday meal at Rifugio Santa Croce, beside the pilgrimage site of Santa Croce Church.

BY ROGER TOLL

T

HE TERRACE OF Rifugio Pomedes, a chalet perched on a ridge in Italy’s Dolomite Mountains, was buzzing with chatter. Waiters squeezed past wooden tables ferrying plates of ravioli and tagliolini, spaetzle and goulash, dried meats and cheeses and many bottles of wine. Above the crowded terrace rose the 10,643-foot summit of Tofana di Mezzo, the highest in the crown of peaks that encircles the picturesque town of Cortina d’Ampezzo (also known as Cortina).

It was my second day in the Dolomites, and my guide, Marika Favé, a former Italian ski team racer, had just led me down two fast runs on Cortina’s downhill course.

We joined four Italian skiers, who offered us space at one of the picnic tables. I ordered pappardelle with venison and a glass of local red wine. “It isn’t like skiing in North America, is it?” said one of my tablemates after I said I was visiting from New Mexico. No, it isn’t.

Skiing in the Italian Alps usually means leisurely lunches and a conviviality with strangers you don’t often find at U.S. resorts. “A big part of our ski day,” he continued, “is sitting in an old shepherd’s hut like this one, eating, drinking and soaking up the beauty of the mountains.”

The Dolomites, a two-hour drive north of Venice near the Austrian border, are known for ski safaris—in which you ski from one alpine inn to the next, spending each night at a different location. The range encompasses the world’s largest expanse of ski terrain that’s covered under one lift pass, an area of roughly 1,200 square miles, 12 ski valleys, 450 ski lifts, 750 miles of groomed ski trails and endless off-piste skiing, not to mention, about 45 villages, 100 rifugios (rustic mountain inns) and 13 Michelin-starred restaurants.

How does a first-time visitor make the most of the territory when you’re this spoiled for choice? You can either fall into the rabbit

hole of web research or turn to an expert. I chose the latter and contacted local guiding company Dolomite Mountains. The company rganized every step of a four-day ski journey through the mountains for me and a friend, including stays at three rifugios. They also provided daily guides and arranged to have our bags shuttled from rifugio to rifugio.

After a first night at the Cristallo, Cortina’s most fashionable hotel, I skied Cortina’s slopes with Marika before she led us to Rifugio Averau, sitting on an 8,000foot pass 6 miles outside of town, where we’d spend the second night. By the time we arrived, at 5 p.m., a blizzard obliterated visibility.

If Marika hadn’t been with us, I doubt we would’ve found the building. Owner Sandro Siorpaes and his daughter, Margot, greeted us in the bar/dining room, designed in the typical Tyrolean style with wooden beams and knotty pine walls. Much of Tyrol, for a long time the southernmost region of the Habsburg Empire, was ceded to Italy following World War I. Traveling through the Dolomites today, you occasionally cross the old border, finding yourself jerked between Austrian and Italian cultures. I never knew if my next dinner would be sauerkraut and apple strudel or pappardelle and ricotta dumplings— truth be told, I was happy either way.

After saying goodbye to Marika (another guide would meet us the following day) and eating a superb meal of ravioli and flank steak at Rifugio Averau, I chatted with Mr. Siorpaes who showed me photos of his family’s first hotel, built in 1890 on a mountain slope above Cortina.

The next day, Dolomite Mountains sent a car to drive us, after the passes were cleared, to our next stop, San Pellegrino. Our driver, Americo, spent 90 minutes negotiating three steep, winding passes while explaining the fraught history and multicultural mosaic of the Dolomites.

“Now we are entering a Germanic area,” he said as we descended into another valley. Americo dropped us off in San Pellegrino, where a snow-

RUN FOR SHELTER Santa Croce Church, a 6,709-foot mountain sanctuary.

ROGER TOLL FOR THE WALL STREET JOURNAL

In the Italian Alps, a local outfitter customizes a cushy inn-to-inn ski trip

mobile came to pick us up and take us to Rifugio Fuciade, set amid fields of snow.

After skiing all the next day, we boarded a funicular in the town of Ortisei for a trip up the mountainside and walked a half mile to Rifugio Resciesa, our skis slung over our shoulders. Owner Andrea Holzknecht, blonde, pigtailed and wearing a traditional dirndl, looked the picture of a Tyrolean—all that was missing was a cow and a field of wildflowers. My Spartan corner room, with twin beds and thick duvets, offered a 180-degree view, from the saw-toothed ridgeline of the Sassolungo peaks to the cliffs of the plateaulike Sella massif.

Just when I was starting to think about this part of the Italian Alps as Tyrolean, Simon Holzknecht, Andrea’s husband, told me about the Ladins. “You may think of us as German-speaking Italians, but we are Ladin first, like all our ancestors,” he said as he poured us a grappa following a dinner of barley soup and goulash. Most Dolomite natives are Ladin, a mountain people who still speak a language first adapted from Latin 1,500 years ago. “Austrian or Italian, it’s just nationality,” said Mr. Holzknecht. “What we are is Ladin.”

Clouds scudded across the sky like frigates under sail as we set out with our next guide, Massimo Laurencig, a mountain climber and skier.

Scattered sunlight washed the slopes below Rifugio Resciesa, empty but for us, as we raced down to Ortisei in 2 inches of fresh snow.

We skied hard, chasing Massimo’s yellow parka through a web of trail junctions, lifts and villages, with pit stops for a glass of wine, a coffee and lunch— an exhilarating last day of our ski tour.

The next morning, before boarding a bus to Venice, we skied on our own in Val Badia, stopping at Santa Croce Church, a 15th-century chapel to which worshipers make a pilgrimage every summer. I imagine it’s nice then too, but I might opt for an annual winter pilgrimage instead.

COTTAGE INDUSTRY From top: Breakfast at Rifugio Fuciade; Rifugio Resciesa, a 30-minute walk from the top of the funicular in Ortisei.

THE LOWDOWN // SAFARI SKIING IN ITALY’S DOLOMITE MOUNTAINS Getting There From Venice’s airport or Mestre Train Station, the Cortina Express provides comfortable two- to three-hour bus trips several times a day to Cortina and other Dolomite towns (cortinaexpress.it). Outfitter Dolomite Mountains also organizes chauffeured trips (dolomitemountains.com).

Staying There In Cortina d’Ampezzo, Hotel Cristallo,

which hosted 1960s jet-setters Sophia Loren, Audrey Hepburn, David Niven and the like, continues to be the town’s best accommodations (from about $384 a night, cristallo.it). We spent our last night in the stylish town of San Cassiano, at the luxurious Hotel Rosa Alpina, a splurge we felt we deserved. The hotel is home to two-star Michelin restaurant, St. Hubertus (dou-

bles from about $550 a night, rosalpina.it).

Skiing There Dolomite Mountains plans customized ski tours and hikes (in summer), with or without guides.

Costs vary widely depending on lodging and meals and whether you want a guide or a self-directed tour. My four-day, threenight guided ski tour cost about $2,900.

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THE WALL STREET JOURNAL.

Friday - Monday, December 23 - 26, 2016 | W7

OFF DUTY HOUSE TOUR

To Beat the Bland How an architecture and design team gave an NYC condo with zero character the friendly, organic quality of an older home Airy Stair

BY CATHERINE ROMANO DEVELOPERS RARELY GIVE new condominium interiors a lot of thought, said New York architect Andrew Franz: “They’re just these rooms waiting for some vocabulary and identity to be given to them.” He and his team did just that with this Manhattan apartment, transforming it from an architectural tabula rasa to a space with the same level of character as a prewar building. Neither he nor the clients were interested in adding details, such as window casings and crown moldings, that emulate more classic architecture, a reflex move that many new-condo buyers make.

Instead, the couple asked that the duplex’s design indulge the husband’s love of the outdoors by introducing as much natural wood as possible and stylistically blending the interior with the landscaped, rather astounding 2,600-foot terrace that came with this 17thfloor aerie.

The firm introduced beautiful materials but in ways that celebrated their fundamental character rather than manipulating them into complex, artificial forms. Wood remains live-edged with a low sheen that shows off the grain; silk wallpaper is unpatterned; sheer wool curtains a solid color. “The rich material palette gives a sense of a more civilized and refined space,” said Mr. Franz. The lack of ornamentation keeps the interior modern “but with the caliber of finish of a historic building.”

Here, how the strategy played out in four of the home’s rooms.

Going With the Grain

Hall in the Family

Positioned immediately opposite the dining room and visible to diners, the kitchen needed to be an extension of the wood-worshipping living space, explained Mr. Franz.

The back cabinet wall of ash was brushed to bring out the grain, then finished with opaque lacquer so it reads more like paneling than cabinetry. The island, made of wood from the same tree as the stairs, also retains a live edge. Carved finger grooves are more organic drawer pulls than hardware would be.

This second-floor entrance leads to three bedrooms and a mudroom. As the only windowless space in the home, “this was one of the few places we could introduce something that was itself the event without a competing view,” said Mr. Franz. Hence, the Schumacher Chiang Mai Dragon wallpaper. The antique Persian rug of camel-hair and wool boasts enough color to keep up with the walls but is bordered in a beige that aligns with carpets visible through four adjacent doorways. The vintage Stilnovo light fixture that’s flush-mounted to the ceiling issues rays of light through its perforated metal, a subtle display that lets the wallpaper shine. Family members limit digital screen time, so a custom-built walnut charging station serves as a drop-off for their devices. The 14-year-old son’s room, more visible than the others, got a slightly nicer treatment than did the other children’s rooms. He lucked out with a vintage Arne Jacobsen Egg Chair and ottoman and silk-alpaca carpeting.

ALBERT VECERKA/ESTO

From Box to Bedroom Personable materials and round shapes help transform a mundane file-drawer of a bedroom (three walls and a window) into a space with a charismatic sense of place, said Mr. Franz.

Circular mirrors, an artfully blobby Ligne Roset lounge chair and the strong daisy print of the Duralee curtain panels take the edge off the rectangularity of the desk. Not only does the variegated grass-cloth wallpaper give the bland room character, it hides blemishes better than painted Sheetrock does.

“You take a picture nail out and you can’t even find the hole,” noted Mr. Franz.

FLOWER SCHOOL

THE RED BOUQUET OF COURAGE Fruit-laden Ilex branches ally with roses in floral designer Lindsey Taylor’s year-end riff on a moody, monochromatic work of art by Salvatore Scarpitta WHEN IN DOUBT or flummoxed by choice, I turn to my go-to flower-arrangement solution: monochrome. Disparate flora can produce a decisive, chic bouquet if united in shades of a single color.

That approach was the natural choice when it came to this month’s inspiration artwork, a one-color piece by Italian-American artist Salvatore Scarpitta (1919-2007) that’s currently part of a show at New York’s Luxembourg & Dayan Gallery. When his art studies in Italy were interrupted by WWII, Scarpitta served as a U.S. Navy sailor—one of the “monuments men” who rescued art stolen by the Nazis. His battle experience informed his art, including pieces known as “bandage paintings,” wide strips of cloth wrapped around stretcher bars to create shadows and texture. These works speak of both wounds and healing, themes that seemed right for a floral arrangement marking the end of a conflictfilled year. The color of 1960’s “Mailbox” also seemed appropriate for a “festive” bouquet, though red is not normally my first choice for garden or cut flowers.

I started with a red-glazed ceramic vase from New York artist Donna Green, then filled it with glossy red Ilex-berry branches, tiny matte red rose hips and deep red spray roses in various stages of openness. By using the last two elements sparingly in an asymmetrical cluster, I was able to form peaks and shadowy valleys like those the

THE INSPIRATION Ilex-berry branches, tiny matte rose hips and spray roses (right) mimic the one-color topography of Salvatore Scarpitta’s 1960 ‘Mailbox’ (above).

Donna Green Red Earthenware Vase, similar works available at McClain Gallery, 713-520-9988 eye travels across in Scarpitta’s piece. The confident monochromatic approach might be a simple mood shifter, welcome at this time of year.

THE ARRANGEMENT

STEPHEN KENT JOHNSON FOR THE WALL STREET JOURNAL, FLORAL STYLING BY LINDSEY TAYLOR, PROP STYLING BY CARLA GONZALES-HART (ARRANGEMENT); ANDREW ROMER, COURTESY LUXEMBOURG & DAYAN, NEW YORK, © STELLA ALBA CARTAINO (INSPIRATION)

Smack in the middle of this Manhattan apartment’s living and dining spaces sits the stairway, an element that could easily have blocked the view to the expansive terrace.

The material of choice: slices of oldgrowth black walnut from Oregon, their organic live edges intact to distract from the room’s rigid geometry. The answer to making the steps “a feature but not an obstacle,” said architect Andrew Franz, was forgoing risers between the heavy treads and using 1/8inch bronze cable instead of traditional balusters. The loftlike space takes its color cues from the wood for a cohesive, warm and low-contrast palette of browns, rusts and corals. “Generally, high-contrast reads more modern,” said Mr. Franz. The fireplace is constructed of green onyx in simple slabs, another example of resisting the urge to over-manipulate materials. “On its own, it sings.”

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W8 | Friday - Monday, December 23 - 26, 2016

OFF DUTY RUMBLE SEAT: DAN NEIL

Audi R8 V10: I’m Dreaming of a Loud Christmas BRING IN ’DA NOISE The 2017 Audi R8 V10 Plus is one of the few remaining supercars with an unabashedly thrumming, aspirated engine.

AUDI

ROMULAN HIGH Command dispatched a 2017 Audi R8 V10 Plus to my house for the week leading up to Christmas, much of which I spent giving rides to gobsmacked children.

These have been occasions to observe younger human fauna, relatively naive of automotive design and engineering, at the moment when they first feel the effect of a really fast car. Ho ho ho.

My childhood memories include a neighbor who built his 1970 Dodge Charger into an 11-second quartermile car and then took me for a testand-tune session—no helmet, and secured by a single lap belt in a vinyl bucket seat. My career attests to the fact that I never got over it.

Ben, a high-school kid in the neighborhood, folded his lanky self into the Audi’s passenger seat and was promptly rendered simpleminded, repeating for a good, oh, five minutes: “This car is badass” and “Oh my God, this is awesome” and “Thank you.”

The track-ready V10 Plus model has unusual kwan with millennials, I’ve learned, thanks to its placement in “Forza Horizon 3” for Xbox One. Ben is recovering nicely, by the way.

For car guys, the Audi R8 is a familiar face, the first edition appearing in the U.S. in 2008. While thoroughly updated, the secondgeneration R8’s song remains the same: a mid-engined luxury performance coupe/spyder, sophisticated in form and technical in substance (magnetic dampers, carbon-ceramic brakes, virtualized instrumentation); built on a mixed-material space frame, with aluminum and composite skin; and starring—as in opera star—the naturally aspirated V-10 engine, paired with a 7-speed dualclutch gearbox and all-wheel drive churning gun-cart wheels.

This car looks like what Freud warned your mother about: a demiurge, the kiss of spark, a sled of desire, an aero-erotic apparatus.

Mercy.

And yet earthlings might be surprised to learn that the R8 stands as a fairly reasoned and seasoned choice in mid-engine, six-figure supercars. They come in flashier plumage than this—the R8’s mechanical cousin is the Lamborghini Huracán—but I say, leave the flesh-

2017 AUDI R8 V10 PLUS COUPE QUATTRO S TRONIC Price, as tested: $199,925 Powertrain: Naturally aspirated, direct-injected mid-mounted 5.2-liter 90-degree V-10, with variable valve timing; seven-speed, dual-clutch automatic transaxle; permanent all-wheel drive; and cylinder on demand Power/torque: 610 hp at 7,800

rpm/398 lb-ft at 6,500 rpm Length/weight: 174.3 inches/3,627 pounds Wheelbase: 104.3 inches 0-60 mph: 2.6 seconds Top speed: 205 mph EPA fuel economy: 15/22/17 mpg, city/highway/combined Luggage capacity: 4 cubic feet

peddlers their whips. The R8 is a sports car for Bauhaus enthusiasts, graduates of summer programs in Romance languages, men who cook in aprons.

Over the years, the R8 has shown a lot of range, from mild to wild, from coupe to canvas-topped spyder.

The base R8 coupe—at $162,900 MSRP, Audi’s most expensive offering—represents nothing but a deadsexy all-weather GT with V-10 power, and at those prices you would hope so.

Our test car, the R8 V10 Plus ($199,925, as tested), was not nearly so sensible. What you have back there, kids, is the beast-master: a 5.2-liter, 90-degree V-10 engine, with direct injection, dry-sump lubrication (for lower center of gravity), two-score valves, mostly aluminum outside and forged everything inside. It makes peak torque (398 lbft) at a stratospheric 6,500 rpm and max power (610 hp) at 7,800 rpm, and as it does so emits a shimmering, revelatory sound, like the revving of a dentist’s hand-piece in the mouth of God. Got a problem with raccoons in your trash? One shout from the Plus will send them scurrying for the hills, holding their ears with their adorable hands. “BWaaaahhh, BuBWaaaahh!”

But hark those heralds, carefully.

With acceleration of 0-60 mph in 2.6 seconds—the seat hitting you in the back like an upholstered shovel—the V10 Plus’s joyful noise comes at some risk. Topping out in 2nd gear could land you right in the pokey— bonus points if you are stopped with your neighbor’s kid in the car.

The sound of an automobile is a complex, multilayered phenomenon, and Christmas is no time to be didactic. But what gives the V10 Plus its distinctive thrum, its trill, its thrill, is the very thing that makes it a coveted anachronism: It is naturally aspirated. Most performance cars, even mainline Porsches and Ferraris, now use turbocharging or supercharging (forced induction) in the interests of fuel efficiency.

The Audi breathes air at the same pressure as you and I, if we could inhale nearly 5,000 gallons a minute and fart like an air-raid siren.

Forced induction is an almost perfect technology. Modern turbos have practically defeated turbo lag, which is a throttle-response latency caused by the turbine’s own inertia.

Turbo units are now practically bulletproof, requiring no unusual servicing or care in most cars.

Combined with other kinds of olumetric control (variable valve timing or individual throttle bodies) turbos can virtually eliminate the torque “curve” and instead produce maximum twist at nearly any rpm.

In engine control, turbos are a mighty sword.

And if all the world were a dynamometer behind shatterproof glass, turbo would crush naturally aspirated, every time. But turbocharged engines sound to gearheads what Miller Lite tastes like to Brooklyn beer snobs. So instead of making the top-shelf R8 a bit more efficient, or even a bit quicker—both fool’s errands—the R8 team has elected to cultivate less discreet charms: They made it louder.

At least I think it’s louder. At full

chat, the volume and diamondchainsaw tone tend to blur the senses together. In any event, the V10 Plus’s aural impact will knock your ears on their butts.

It’s all been arranged. From the R8’s side scoops to the 20 trembling intake valves, atmosphere travels a hectic, musically charmed course, with eddies of throbbing resonances built in along the way, the most pleasing of which are piped into the cabin with a special sound tube. The intake plumbing feeds the dual plenums, like aluminum lungs atop the

The R8 is a car for Bauhaus enthusiasts, graduates of summer programs in Romance languages, men who cook in aprons. engine, that distribute air charge to the two throttle bodies.

It’s the gathering, wavering resonance set up among these chirping throats, that sinusoidal radiance, which makes me want to rub up against a tree like a bear.

Safe to say, the neighborhood kids had never heard anything quite so nuts. It’s one thing to strap into the couch downstairs for a Forza lapping session; another to sit with the dragon in the small of your back, clawing to get through the bulkhead.

I can’t promise how long Audi will keep the big V10 around, but for these kids it will always be the sound of Christmas past.

THE VOGUE FOR ‘ROGUE’

EXCEPT FOR HALLOWEEN, a “Star Wars” premiere is one of the few occasions when it’s socially acceptable for adults to play dress up. Last week, self-styled Jedis and Sith lords of all ages turned out in force to see the “Star Wars” spinoff “Rogue One.” But how should aficionados who aren’t willing to don a cape express their Jedi pride?

Here’s an option: Columbia Sportswear’s trio of limited-edition “Rogue One” jackets, which pay homage to the film’s raffish rebels in a way style-conscious fans can countenance.

“There’s a lot of replica product out there for the ‘Star Wars’ movies, and it’s very much costume-based,” said Debra Criss, Columbia’s director of apparel design. With the “Rogue One” line, Ms. Criss and her team sought to capture the intergalactic élan of the film’s heroine, Jyn Erso (played by Felicity Jones), while leveraging the company’s 78 years of outerwear expertise. This translates into pieces that forgo honking Imperial emblems and instead embrace pragmatic details, like ultra-toasty down and seam-sealed waterproof linings. Yoda proud would be.

The collection’s women’s zip-up is the spitting image of the dusty brown jacket Erso wears in the new film, right down to

the integrated quilted vest that’s layered overtop (though in the case of the Columbia jacket, the insulated vest provides warmth rather than assistance blocking blaster shots).

Then there is the burly storm-ready puffer inspired by the coat of Erso’s righthand man, Captain Cassian Andor (Diego Luna). With a faux-fur hood, leather-like accents around the pockets, and a tiny Rebel Alliance sleeve patch, this coat could easily be one of those ubiquitous Canada Goose parkas, if Canada were a galaxy far, far away. With a thermal-reflective liner, it’s just the thing to don during dark winter days when a walk to the office feels like a trudge across the glaciers of the ice planet Hoth.

And should your mortal enemy be rainfall, the Rogue One line can help, too, with an Imperial-inspired raincoat, black as Vader’s armor. This seam-sealed jacket is capped off with subtle crests at the shoulders and glowering green zippers down the front.

The line is available in select stores and online, but Cassian Andor’s parka has already sold out. To acquire that article, you must embark on a hero’s journey of your own to the land of eBay. May the force be with you. —Jacob Gallagher

F. MARTIN RAMIN/THE WALL STREET JOURNAL, STYLING BY ANNE CARDENAS (JACKETS); GETTY IMAGES (MILKY WAY)

Far more stylish (and practical) than a matted Chewbacca costume, these jackets let fans of the new ‘Star Wars’ spinoff show their pride

‘ONE’ PIECES Clockwise from left: Captain Cassian Andor Rebel Parka, $500, Jyn Erso Rebel Jacket, $400, Imperial Death Trooper Jacket, $450, columbia.com

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Friday - Monday, December 23 - 26, 2016 |W9

A Home for High-Tech Homework

FROM TOP: JESSE NEIDER FOR THE WALL STREET JOURNAL; MEI-CHUN JAU FOR THE WALL STREET JOURNAL

As school assignments go digital, more parents are building dedicated, gadgetfriendly spaces where they can monitor children’s activities; a USB plug for everyone.

CHARGE IT The study area in the New Canaan, Conn., home of Jennifer and Robert Sechan. Electronic outlets run along the wall and underneath the built-in walnut desk, with under-cabinet lighting for visibility. Holes in the desk help to hide the wires. Melissa Powell, below, in the study room of her Dallas home with two of her children—Carter, 7, in the red shirt, and Caden, 9, in the green shirt.

BY CECILIE ROHWEDDER IN OUR DIGITAL AGE, finding a place for children to do their homework can be a tough assignment.

Forget the kitchen table. Kitchens, which now often function as gathering, entertaining and play spaces, are getting busier, making it hard to do focused schoolwork. The dining table, the other usual standby, often can’t serve the demands of numerous electronic devices.

The result is increasing demand for a dedicated homework area. It must be close enough

for parents to keep an eye on things, but far enough to minimize distraction. It also needs lots of plugs and wiring for electronics without looking like a space lab.

The percentage of middle- and high-school students using technology for homework more than doubled between 2011 and 2015, according to research by Project Tomorrow, an education nonprofit organization based in Irvine, Calif. Of students between grades 6 and 12, 87% use the internet at home for school assignments.

Given the myriad opportunities the internet offers for distraction—or worse—more parents Please turn to page W10

A NEW LEASE ON LUXE LONDON

HOUSE OF THE DAY

wsj.com/houseoftheday

High-end rentals are on the rise as potential buyers and sellers alike take a wait-and-see approach to the market.

HALSTEAD PROPERTY HUDSON VALLEY

Italy A renovated farmhouse in the Umbrian hills

SOUTH KENSINGTON The posh neighborhoods of prime London, such as Belsize Park, Chelsea and South Kensington, above, are luring upscale renters to their quiet streets, as well as to their pubs, restaurants, cafes and shops.

KNIGHT FRANK SINGAPORE

United States A lakeside home in upstate New York ALICE WHITBY FOR THE WALL STREET JOURNAL

EMILY PREHEIM DUPRE feels like she is throwing away $8,000 a month.

That is what the 40-yearold American expat pays to rent a 2,000-square-foot, three-bedroom apartment with her husband and two daughters in the prime London neighborhood of Belsize Park.

Dr. DuPre, a clinical psychologist, and her husband, a banker, wanted to buy a home, but after viewing 50 properties since early 2015, they have been unable or unwilling to sign for a single place. A $2.8 million offer the couple made on a threebedroom, 1,600-square foot home last year fell through when they were “gazumped,” a British term for being outbid late in the deal.

“We’ve got the money in the bank. It’s not like we’re broke,” says Dr. DuPre, who is originally from Dallas. “It’s just that it doesn’t make sense for us right now in this predicament.”

Luxury rentals in prime central London are on the Please turn to page W14

KNIGHT FRANK

BY CHARLIE WELLS AND ART PATNAUDE

Singapore A duplex penthouse in the heart of the city

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THE WALL STREET JOURNAL.

W10 | Friday - Monday, December 23 - 26, 2016

MANSION

A HOME FOR HIGH-TECH HOMEWORK

Continued from page W9 want children using their devices in the home’s public spaces. Plus, there is the general trend of greater parental involvement in schoolwork. “Younger parents want to be more involved in their children’s educational process at home,” says Julie Evans, Project Tomorrow’s Chief Executive.

Sometimes the children’s work takes precedence. Scott and Melissa Powell’s six-bedroom, 5,200square-foot house in Dallas has no home office. Instead, there is a bright, contemporary study room for their four young children in a wing behind the kitchen area.

They were planning ahead: Currently only 9-year-old Caden, the oldest, does schoolwork on one of four installed desktops. Each workstation has two electrical outlets above and two below, as well as its own data line and USB plug. The room also has a Wi-Fi booster.

Sometimes Mr. Powell, owner of a home design and construction business called New Leaf Custom Homes, uses the area for his own work, but he and his wife said they preferred this to a home office they wouldn't use every day.

The Powells paid $1.1 million to build their Midcentury Modern house on an undeveloped lot they bought for $450,000 in the city’s White Rock Valley neighborhood.

In the children’s workspace, the main expense was cabinetry, which cost around $5,000, says Mr. Powell, 37. The floor is polished concrete for resilience and easy cleaning. “A lot of the time, they are leaving a mess in there,” he says.

For Connecticut mother Jennifer Sechan, getting away from the mess was one reason that she and her husband, Robert, created a homework space when they renovated and enlarged their New Canaan home for $2 million in 2012.

“We used to have a desk in the kitchen but I have four kids, so the kitchen was always cluttered,” says Ms. Sechan, 47. Now the study area, located off the family room and designed by Portland, Ore.-based interior designer Garrison Hullinger, is her favorite room in the house. “This room has

ANDREA RUGG/JACQUELINE FORTIER DESIGN

BOB STEFKO FOR THE WALL STREET JOURNAL (4)

FORM AND FUNCTION Daisy Glazier, 13, and brother Clay, 12, in the children’s work area as parents, Leslie and Josh Glazier, lounge in the background, above; Daisy in the playroom, below right. The Glaziers created the area, below, as part of a yearlong, $1.5 million renovation of their Chicago home. ‘The space has run through different stages as the kids have gotten older,’ Ms. Glazier says.

KEEPING THEM CLOSE Thalia Bell with dog Auggie in the study space of her Minnesota home. Mom Daniela Bell says she likes to have her daughter close by. enough drawers and cabinets to keep the clutter out of sight. And it keeps the kids close by, so I can monitor what they are doing.”

With four children in three different schools, each with its own set of directories, class lists and permission slips, Ms. Sechan set up a basket for each child’s paperwork and individual, colored boxes for documents, such as passports, birth certificate and health re-

cords. Electronic outlets run along the wall and underneath the builtin walnut desk, with under-cabinet lighting for visibility. Holes in the desk help to hide the wires.

The Sechans’ children, ages 11 to 17, bring laptops to and from school but often prefer the bigger screens of their home desktops.

From there, they log onto the school websites. Ms. Sechan’s only regret: no built-in charging stations

for iPhones and iPads, as plugs and cables have a way of disappearing.

It cost around $40,000 to create the children’s study, not counting the addition to the six-bedroom house that now measures 11,100 square feet. As part of a renovation four years ago, the Sechans added a basement and fashioned a new family room, kitchen, mudroom and homework room.

The children use the space to

read and lounge, meet with tutors and manage college applications. In the morning, Mrs. Sechan pays bills there. The study keeps most of this activity out of the kitchen—and the home office of Mr. Sechan, a wealth manager in nearby Stamford, Conn.

Creating an environment conducive to studying, home builders say, increasingly comes up as a goal when families configure a new house. “Having power at

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THE WALL STREET JOURNAL.

Friday - Monday, December 23 - 26, 2016 | W11

MANSION

JESSE NEIDER FOR THE WALL STREET JOURNAL (4)

KEEPING IT TOGETHER Storage and organization were top priorities in creating the study area in the Connecticut home of Jennifer and Robert Sechan. Daughter Meghan, 12, reading on a bench, above left; a breakfast nook occasionally used for school work, above middle; each child has a basket for their paperwork, and colored boxes for documents, above right; a computer area, below.

MEI-CHUN JAU FOR THE WALL STREET JOURNAL (3)

FAMILY FIRST Scott and Melissa Powell with Caden, in the green shirt, Carter, in the red shirt, and Avery in the study room, above; Caden at the computer, below left; Avery in the living room, below right. The family’s Dallas home has no home office—instead they built the study room for their four young children.

these homework stations is essential for all the gadgets kids have, in addition to doing homework on the computer,” says Wayne Yamano, senior vice president of strategic operations and marketing at Scottsdale, Ariz.-based home builder Meritage Homes.

In high-end houses, a space reserved for homework usually doesn't replace the home office, says Mr. Hullinger, the interior de-

signer. The extra workspace is unlikely to negatively affect a property’s resale value because it can be used for household management or work from home, he adds.

In Daniela Bell and Eric Foster’s 2,800-square-foot Victorian home in a historic neighborhood of St. Paul, Minn., the homework area is next to the kitchen stove. When the couple bought the three-bedroom house, with bay windows

and a turret, for $190,000 in 2012, interior architect Jacqueline Fortier suggested they widen a nook in the kitchen wall to create a space for daughter, Thalia, now in the second grade, to draw and do school projects. The alcove has a soapstone table and wooden benches with integrated storage drawers. Magnetic paint on the walls allows Thalia to display artwork and photos.

Ms. Bell, a teacher of health and fitness classes, and Mr. Foster, a 44-year-old restaurant owner, like having their only daughter close by when they cook, so “she doesn’t feel like she’s exiled to the attic,” says Ms. Bell, 43. Last month, Thalia used the space to write a family recipe into her school art book. In October, she researched a report on nocturnal animals there.

The defined nook keeps her sup-

plies from taking over the kitchen.

And unless the dog wants to play, the 8-year-old isn't distracted by activity around her.

Tim and Nicola Duffin chose their 3,850-square-foot house in the Austin, Texas area because the floor plan, by Meritage Homes, included two offices. The couple, who moved into the $518,000 home in August and own two hair salons, work from home a lot.

While Mr. Duffin, who also works for a local technology company, uses the home office, Mrs. Duffin, 46, has claimed the satellite office near the laundry room.

For 11-year-old Kayla and 6-yearold Roman, the Duffins converted one of the home’s five bedrooms into a study. It has a large desk, as well as a dry-erase board, a world map and a telescope. They also added fun touches like candy in glass jars and a chaise, where Roman likes to watch movies.

Roman, a first-grader, doesn’t have much homework yet, but the Duffins encourage Kayla to use the study because it is less distracting than their busy kitchen. Because the upstairs room is harder to supervise, they check on her regularly. “Occasionally, I sneak up to check that she is doing her schoolwork,” says Mr. Duffin, 45.

As children grow, homework spaces can evolve. Chicago residents Leslie and Josh Glazier created a children’s work area after they bought their six-bedroom home in Lincoln Park for $1.9 million in 2007. As part of a yearlong, $1.5 million renovation that followed, they built a light-filled basement area equipped with a long, white desk and bookshelves built into white walls. The Glaziers installed desktop computers and a cork board for art projects.

Their older sons, Alex and Matt, now 23 and 21, did homework on the desktops, while their younger siblings, Daisy and Clay, used the space for art and sewing. Now 13 and 12, Daisy and Clay have laptops and often study in their rooms. For them, the basement is a social space. Ms. Glazier, a 51year-old real-estate agent, uses the area to create photo albums, spreading pictures across the desk.

“The space has run through different stages as the kids have gotten older,” she says. “It’s used for different things now.”

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W12 | Friday - Monday, December 23 - 26, 2016

THE WALL STREET JOURNAL.

MANSION PRIVATE PROPERTIES | CANDACE TAYLOR

San Francisco Penthouse Sells for $13 Million San Francisco’s Millennium Tower, the ultraluxury building that has been beset by reports that it is sinking and tilting, has posted a big sale: the late venture capitalist Tom Perkins’s penthouse has traded hands for $13 million.

The buyer was Craig Ramsey, a tech-industry veteran who worked at Oracle. Mr. Ramsey, who in 2012 paid $4.3 million for a different unit on a lower floor, said he felt the purchase price was “very reasonable� and “well below what the market was nine months ago.�

Mr. Ramsey, 70, added that after speaking with engineers and lawyers, he feels confident that the building will soon be repaired. “I felt the possibility of the building not being habitable was extremely low,� he said, adding: “I’m willing to take whatever risk there is to benefit from a depressed environment.�

Mr. Ramsey said he plans to move into the penthouse this week, and will use the other unit to accommodate family members.

David Waitrovich, Mr. Perkins’s longtime financial adviser, said while “it’s not the optimal situation� for selling an apartment, the Perkins family is “very pleased� with the sale.

“We’re glad to see that [Mr. Ramsey] and his family are going to use it,� he said.

In August, residents filed a lawsuit stating that the South of Market building was tilting,

had lost at least 16 inches in height since its completion and was expected to sink another 8 to 15 inches. Several other lawsuits have been filed as well.

A spokesperson for the de-

veloper, Mission Street Development, said when the building was completed and during the sales process it had “settled within predicted, safe ranges,� and that further settling was

SOUTHERN CALIFORNIA RANCH SEEKS $16 MILLION

caused by construction and excavation of the nearby Transbay Transit Center.

According to Gregg Lynn of Sotheby’s International Realty, who had been quietly marketing

CLOCKWISE FROM TOP: JACOB ELLIOTT; LLUSION (2, RENDERINGS); KNIGHT FRANK; ENGEL & VĂ–LKERS; SAM CHEN (2)

home of the owner, surgeon Stuart Jamieson, who grew up on a 2.5-million acre cattle ranch in Rhodesia (now Zimbabwe). For guests, there’s a log cabin spanning about 4,000 square feet, with a deck on three sides and views of the nearby mountains.

There is also a four-bedroom caretaker’s cottage, a stable with eight stalls for horses and a helicopter hangar.

Roughly 15 cattle plus chickens, turkeys, goats and llamas are

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included in the asking price.

Dr. Jamieson, who is known for heart and lung transplants, is Dean of Cardiovascular Affairs at the University of California, San Diego. A licensed helicopter pilot, Dr. Jamieson, 69, said he often travels by helicopter to the ranch from the San Diego area, where he lives and works.

Dr. Jamieson said he is selling because he needs a much larger ranch to continue with

See more photos of notable homes at WSJ.com/Mansion.

Email: privateproperties@wsj.com

A $40 MILLION MIAMI BEACH PENTHOUSE In Miami Beach, a penthouse that will boast four swimming pools and two outdoor kitchens is coming to market with a $40 million price tag, according to developer Lionheart Capital.

The eight-bedroom, roughly 12,300-square-foot spread will be on the eighth floor of the under-construction Ritz-Carlton Residences, Miami Beach. With views of the Miami skyline, Biscayne Bay and the ocean, the unit will also have a library and a wine-tasting room. Outside there will be nearly 13,000 square feet of outdoor space, including two larger swimming pools, two smaller plunge pools, two hot tubs and the two summer kitchens.

Purchasers who prefer to design their own layout can buy the unit as raw space for $37 million, said Lionheart CEO Ophir Sternberg. Another option is to split the space into two penthouses: Penthouse 1 is asking $17 million and Penthouse 12 is priced at $20 million. Another three penthouses are also coming to market asking $11 million and up, said

A cattle ranch in Southern California with its own chapel, three-bedroom “log cabin� and two helipads is going on the market for $16 million.

Located about 60 miles east of San Diego outside the village of Santa Ysabel, the 560-acre property contains a two-bedroom, roughly 4,000-squarefoot main house overlooking a pond. Surrounded by verandas and decorated with taxidermied African animals, the house was built to resemble the childhood

Mr. Perkins’s penthouse, few units in the Millennium Tower have sold since the bad news broke.

Mr. Lynn added the penthouse likely would have garnered a higher price if it wasn’t for the negative headlines, noting that he sold a condo in another building with less impressive views (albeit larger) for $28 million in 2011. Still, “I think this will mark a turning point in optimism for the building,� Mr. Lynn said. The homeowners association didn’t respond to a request for comment.

Mr. Perkins, the venture capitalist, bought the 60th-floor Grand Penthouse for $9.4 million in 2009 and spent more than two years and roughly another $9 million building it out.

With two bedrooms and an office, the penthouse has roughly 5,000 of interior square feet plus a terrace, and views of the Golden Gate Bridge, the Bay Bridge, the Transamerica Pyramid and other landmarks. Mr. Perkins died in June at age 84.

Philip Gutman of Douglas Elliman Development Marketing, who is overseeing sales at the building. Lionheart’s Mr. Sternberg said Penthouse 1 and Penthouse 12 are being offered both separately and as a combination because they are “already fairly large by themselves� and as a way to “maintain some flexibility� for buyers. A rendering of a unit is seen here.

Miami has seen a slowdown in condo sales in recent months. Mr. Sternberg said he is happy with the pace of sales at the building, which he called “very steady.�

his experiments in cattle breeding.

To do that, he said will look to join with cattle breeders in Africa or South America.

Many affluent San Diego residents have second homes in the area, said listing agents Eric Iantorno and Brett Dickinson of Pacific Sotheby’s International Realty. Mr. Iantorno said he is listing a 640-acre ranch a few miles away for $12.95 million.

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Friday - Monday, December 23 - 26, 2016 | W13

MANSION HOUSE CALL | FANNIE FLAGG

Where a Southern Comic Found Her Voice The ‘Fried Green Tomatoes’ author, born into a family of film projectionists, wrote plays as a kid; memories of sleeping in the living room listening to couples on their walks home

I grew up in the balcony of movie theaters in Birmingham, Ala. My father was a projectionist, as was my grandfather. I loved film and quickly became theatrical. The movies exposed me to the outside world. becoming an actor and writer. He wrote little plays and was artistic.

My mother, Marion, was very pretty and ladylike. She didn’t have the theatrical drive that my father and I shared. She was quiet and wanted to stay home. I was more like my father.

I had dyslexia when I was young and couldn’t spell. In school, I was embarrassed about it.

To compensate, I acted silly. I guess it was a way to let people know what was going on inside me.

I left Birmingham by entering the Miss Alabama Pageant. Down South, you went into pageants at 16 and kept going.

I did these crazy comedy sketches and won cash prizes. After high school, I won a scholarship to the Pittsburgh Playhouse. But because of my Southern accent, the teachers felt I would never get work, so I eventually headed home.

My timing was good. The summer I returned to Birmingham, the woman who appeared on TV’s “Morning Show” was leaving. My mother pushed me to audition. I got the job, and after a few weeks, a woman came up to me in a department store and asked for my autograph. Wow, I thought, TV is better than the theater.

Eventually I quit my job and went to New York and sold comic material to a theatrical revue at Upstairs at the Downstairs on

ANDREW SOUTHAM (PORTRAIT); FANNIE FLAGG (2, HISTORICALS)

In the fifth grade I wrote a play called “The Whoopee Girls,” a comedy about two friends living above New York’s Copacabana nightclub.

But when my teacher read it, she called my mother: “We’re kind of concerned about your daughter.

The play she wrote has the word ‘martini’ 21 times.”

Birmingham was more sophisticated than most people realized. There were lots of stage and movie theaters, and the city had a symphony and a ballet company.

My family lived in a one-bedroom apartment on the second floor of a three-story redbrick apartment building along a main thoroughfare. My parents had the bedroom so I slept on the living-room couch next to the window. At night, I could hear people walking by as they returned home from dates. It was romantic.

But I felt transient. I think it was a combination of being an only child and not having a bedroom or a house. As such, I liked looking at houses and longed to be inside one of them.

My creative side was processed through actress Ginger Rogers. She was brassy, cute, funny and a wisecracker. I admired everything about her. In all of my books, I mention Ginger someplace as a good-luck piece.

My father, Bill, was hilarious and had ambitions. He dreamed of

LAUGH TRACK Fannie Flagg in a publicity portrait, above, and in the first grade at St. Clement’s in Birmingham, left. Right, the street where she lived.

West 56th Street. An actress was hired to perform my material, but days into rehearsals she dropped out. The director called me to be in the show.

On opening night, Alan Funt of TV’s “Candid Camera” was in the audience. He hired me as a writer.

I had been in New York just two weeks.

The first idea I pitched featured a truck driver stuck in traffic. The gag would be the expression on other drivers’ faces as they came to help and saw a woman behind the wheel. I was the truck driver.

To show you how much times have changed, another episode featured me as an airplane pilot. We filmed it at New York’s LaGuardia Airport. I was introduced to passengers as the pilot. Many wouldn’t board the plane, including the flight attendants.

From there, I became a regular on TV game shows, including “The Match Game.” My Southern accent led to movie and TV roles, and I never stopped writing.

Today, I live in Santa Barbara, Calif. I moved here in the mid-1970s. My first house was near the beach, but too much fog lingered in the mornings, so I moved up the hill.

My home now is a two-bedroom Midcentury Modern that looks as if it belongs in Palm Springs. It’s along a golf course, though I don’t play golf. I just love to sit by my pool and watch the golfers go by and listen to them say awful things when they miss the ball.

—As told to Marc Myers Fannie Flagg, 72, is an actress, comedian and author who has appeared in nine films, including “Five Easy Pieces” and “Grease.”

Her nine novels include “Fried Green Tomatoes at the Whistle Stop Cafe” and, most recently, “The Whole Town’s Talking” (Random House).

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W14 | Friday - Monday, December 23 - 26, 2016

THE WALL STREET JOURNAL.

MANSION

ALICE WHITBY FOR THE WALL STREET JOURNAL (8)

A NEW LEASE ON LUXE LONDON

BELSIZE PARK Emily Preheim DuPre in her home, top, which she rents for $8,000 a month while continuing to look for a property to buy. Dr. DuPre, an American expat, lives in the 2,000-square-foot, three-bedroom apartment in Belsize Park, above left and center, with her husband and two daughters. Above right, some of the restaurants that fill their lively neighborhood.

Continued from page W9 rise. Falling home prices in the past year have prompted many would-be buyers to postpone purchases in hopes of getting a better deal. And some are reluctant to commit to a purchase in the face of high real-estate taxes and uncertainty following Britain’s vote to exit from the European Union.

Meanwhile, homeowners in posh neighborhoods such as Chelsea and Mayfair also are taking a wait-andsee approach, in many cases deciding to rent out their homes rather than sell in a softening market.

Estate agents Knight Frank said rental agreements were up 23% in the three months to November, compared with same period in 2015, though the firm declined to disclose the number of leases it brokered. With the number of homes available outstripping demand, it is “a tenant’s market,” says Tom Bill, head of residential research at Knight Frank.

Oscar Creixell visited between 30 and 40 homes around South Kensington and Chelsea in his search for a two- or three-bedroom luxury apartment. Working with a $1.8 million budget, the 29-year-old director at a recycling company in the U.K., says he made two offers. Both fell through after the Brexit vote.

People “were saying they were very serious about selling, but what I found, really, is that a lot of the people who owned these places are actually wealthy enough that they can afford not to sell” until the market is more stable, says Mr. Creixell, a Barcelona native.

Mr. Creixell has decided to rent a three-story house in South Kensington instead. He pays $3,100 a month. He says he has soured on the London market and plans to continue renting for the foreseeable future.

Recent revisions to the U.K.’s transaction tax, or stamp duty, have posed a particular problem for expats looking to buy in London. In late 2014, the cost of buying homes valued at more than £937,000 went up on a sliding scale, rising to a 12% tax on the portion of a sale over £1.5 million.

In April, an additional 3% was tacked on to the sale price of homes for foreign buyers or for those renting out their properties.

For people posted to London for work—who might be staying only a few years—these changes mean that buying a home now makes less financial sense, says Jo Eccles,

managing director at broker Sourcing Property. Many of her clients have chosen to rent instead.

“If you’re only here for three years, you won’t have enough capital appreciation to wipe out stamp duty,” she says.

Dr. DuPre has calculated that stamp duty on the kind of property her family would want to purchase would be comparable to paying three years of rent—on top of the price of the property, she says.

The couple continues to scour real-estate listings in London. But while they wait, they have made some additions to their rental property to make it feel more like a permanent home, including setting up a trampoline and swing set in the backyard for their daughters.

Interior designers in London say such moves to customize rental homes are increasingly common among London residents. Annabella Nassetti, who creates modern interiors with an emphasis on maximizing space in city apartments, says high-end renters are spending more on rugs, tapestries and art for properties they can’t change structurally because of their leases.

And renting is increasingly looking like a good deal. An influx of properties on the market has helped push rents down about 5% since their most recent peak in mid-2015, says Mr. Bill of Knight Frank.

The increase in inventory is the result of the falling prices of homes in central London—6% on average in 2016, according to Knight Frank—which has encouraged homeowners to wait for a market rebound before listing their properties.

In May, Lennox Investment Management, which runs a fund that invests in prime central London real estate, was preparing to sell two houses and two condominiums valued together at about $74 million. The fund had an eight-year lifespan due to end in June.

But given the weak sales market, “our investors said if you think you can rent these out, great, we’d rather do that,” says Rupert Bradstock, investment partner at Lennox.

Mr. Bradstock says that since putting the homes on the rental market in September, all have been leased for as much as $16,700 a week. “If you don’t believe the market is roaring ahead, which it’s not,” he says, “then it can make a lot of financial sense to rent.”

NO DEAL Clockwise from above: Oscar Creixell, 29, a native of Barcelona, decided to rent in South Kensington after offers to buy fell through; the dining area of his home; a local street; an ice rink and the Natural History Museum.