VOL. XXXI NO. 152

WEDNESDAY, SEPTEMBER 4, 2013

Seven Deadly Sins of InvestingIN DEPTH 10-11

Pound/Euro 0.8468 g 0.28% Yen/$ ¥99.43 À 0.08% Global Dow 2207.73 À 0.44% Gold 1412.00 À 1.14% Oil 108.54 À 0.83% 3-month Libor 0.25950 10-year Treasury g 29/32 yield 2.852%

EUROPE EDITION

WSJ.com

$1.75 (C/V) - KES 250 - NAI 375 - £1.70

Roaming Charges

Source: FactSetPhoto: Getty Images

€60

0

10

20

30

40

50

’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

Microsoft CEO Steve Ballmer holds a Nokia Lumia 920 smartphone during aWindows Phone 8 launch event in October 2012.

Tuesday’s close€3.97

up 34%

Nokia's share price reflects its struggles in a changingmarketplace (weekly data)

€60

0

10

20

30

40

50

’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

Tuesday’s close€3.97

up 34%

Record closeJune 20, 2000€64.88

Support Grows forU.S. Strike on Syria

WASHINGTON—Top law-makers from both partiesemerged from a meetingTuesday with President Ba-rack Obama saying they willsupport military action inSyria to deter the future use

of chemical weapons, pushingthe U.S. closer to militarystrikes against the regime ofPresident Bashar al-Assad.

House Speaker John Boeh-ner (R., Ohio) said after themeeting that only the U.S. hasthe capability to stop Mr. As-sad and warn others about theuse of chemical weapons.

“This is something that theUnited States as a country

needs to do—I’m going to sup-port the president’s call foraction,” Mr. Boehner said.

He added, “I believe mycolleagues should support thiscall for action. We have ene-mies around the world thatneed to understand that we’renot going to tolerate this typeof behavior. We also have al-lies around the world and al-lies in the region who alsoneed to know that Americawill be there and stand upwhen it’s necessary.”

The president and otheradministration officials metwith 16 key lawmakers at theWhite House to make the casefor congressional authoriza-tion of military action against

Please turn to page 8

Friction at Zurich BuiltIn Months Before Death

Long-simmering frictionbetween the chairman andchief financial officer of Zu-rich Insurance Group AG es-calated this summer as thetwo tussled over how to ex-plain the company’s disap-pointing progress towardmeeting certain business tar-gets, according to companyofficials familiar with the sit-uation.

The sometimes-heated ex-changes between Josef Acker-mann, who became chairmanin 2012, and CFO Pierre Wau-thier didn’t strike Zurich offi-cials as problematic. Then,last week, Mr. Wauthier com-mitted suicide at his lakeside

home outside Zurich.He left a typed note blam-

ing Mr. Ackermann for creat-ing an unbearable, pressure-cooker working environment,and for treating colleaguesdisrespectfully, according topeople familiar with the note,which hasn’t been released.

Mr. Ackermann, a hard-charging former investmentbanker who became Zurich’schairman after a long careeras the chief executive ofDeutsche Bank AG, abruptlyresigned.

Clearly distraught, he toldstunned board members lastWednesday that his positionas chairman had become un-tenable, according to peoplefamiliar with the events. Thenhe insisted on releasing a

public statement that saidsome people held him respon-sible for Mr. Wauthier’sdeath—an allegation he re-jected.

The extraordinary eventshave left their mark on allparties. They have stained theprofessional reputation of Mr.Ackermann, one of Europe’smost prominent financiers,and shaken investor confi-dence in Zurich, one of theworld’s largest insurancecompanies.

Despite the suicide note,Mr. Wauthier’s broader stateof mind remains unclear. Nei-ther the directors nor otheremployees had detectedwarning signs about Mr. Wau-thier, company officials say.

Please turn to page 20

BY DAVID ENRICHAND ANDREW MORSE

By Jared A.Favole, ColleenMcCain Nelson

and Patrick O’Connor

Microsoft Makes Call: NokiaMicrosoft Corp. made a

case Tuesday for its $7 billiondeal to acquire Nokia Corp.’sstruggling cellphone unit, atransaction that solidifies thesoftware giant’s position as adistant No. 3 in the smart-phone market.

But the initial reaction wasmixed at best, given the longodds both companies face incatching to market leaderslike Apple Inc., Google Inc.and Samsung Electronics Co.Microsoft’s stock sank 6% inmidday trading.

The deal comes on theheels of Microsoft’s an-nouncement that Chief Execu-tive Steve Ballmer will retireas soon as a successor isfound. The company’s laggingposition in mobile is one ofthe most serious threats Mr.Ballmer’s successor will needto tackle.

For Nokia, the onetimeleader of the mobile-phonebusiness, the deal is a capitu-lation to the harsh realities ofits deteriorating position—asign that management con-cluded it is unable to take onrivals like Apple and Samsungon its own.

The companies said lateMonday that Microsoft willpay €3.79 billion ($5 billion)

to buy “substantially all” ofthe Nokia business, which in-cludes its smartphone opera-tions. The Redmond, Wash.,company will also pay €1.65billion to license Nokia’s pat-

ents, the companies said,bringing the deal to €5.44 bil-lion, or $7.18 billion.

As part of the deal forNokia’s devices-and-servicesbusiness, Microsoft will bring

aboard 32,000 Nokia employ-ees including CEO StephenElop, who is believed to beamong the contenders for Mr.Ballmer’s job.

Nokia was already Micro-

soft’s closest partner insmartphones, with the ailingFinnish company one of thebiggest supporters of Micro-soft’s phone software.

During a conference call

Tuesday morning, Mr. Ballmersaid the companies were look-ing ahead to negotiations in2014 about ways to modifythe partnership they struck in2011. But they concluded thatan outright acquisition by Mi-crosoft was the best way for-ward.

“It’s quite complicated, butwe have been talking for awhile about where we wantedto go,” Mr. Ballmer said. “Wethink we have made excellent,excellent progress with thepartnership and yet we alsoknow we have a long way togo and felt in balance that to-gether this is the best ap-proach for both companies’shareholders.”

Mr. Elop has been hackingcosts out of Nokia in the threeyears since the Finnish com-pany agreed to tether itselfexclusively to Microsoft’sWindows Phone operatingsystem. But while Mr. Elophas promised that Nokia’s op-erating expenditures for itsphone business will be cut tohalf the 2010 levels by theend of this year, analysts sayNokia’s phone sales havefallen even faster.

Please turn to page 17

BY SHIRA OVIDEAND SVEN GRUNDBERG

More coverage in Business &Finance................................... 16, 17

Heard on the Street: Weaksignal by Microsoft, Nokia 28

‘Club Med’ cashes in astourists avoid NorthAfrica hot spotsEurope News.............4

It’s good to talk: Youngsales teams rely toomuch on technologyPersonal Journal....25

Try to unwind—bythrowing an axOff the Wall ............ 27

Inside

Related news and opinion onpages 3, 8, 9, 13, 14

28 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

HEARDON THE STREETEmail: heard@wsj.com FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard

VodafoneHoldersCollaredBy Terms

Before Vodafone share-holders haul home their win-nings from the Verizon Wire-less deal, they should bewarea potential hole in theirmoney bag.

When Vodafone gets $130billion from Verizon Commu-nications for its 45% stake inVerizon Wireless early nextyear, the U.K. firm plans topay its shareholders a specialdistribution. Some $23.9 bil-lion of that will be cash, withthe other part coming in Veri-zon Communications shares—valued at $60.2 billion basedon Friday’s close.

Normally, the value of theshares would move up ordown with the market beforeany deal closes. But in rarecases, a buyer uses a so-calledcollar to keep the value of thedeal steady. It works like this:The number of shares declinesif the buyer’s stock goes up, orincreases if the stock goesdown. The collar almost al-ways applies within a certainrange of share prices, with theupper and lower limits equi-distant from the most recentprice, says Mark Kelly of Ol-ivetree Financial Group.

But Verizon has negotiateda collar that works to its ad-vantage. The key is that whilethe collar’s maximum is $51 ashare, the minimum is $47—just below Friday’s closingprice of $47.38. That meansthe collar only protectedVodafone shareholders againsta 38-cent drop in Verizonshares at the deal’s announce-ment. If the stock fell below$47, the number of shareswouldn’t change and the valueof the payment would fall.

In contrast, if Verizon’sstock rises, the number ofshares will decline until thestock surpasses $51. As a re-sult, shareholders would missout on a potential 7.6% rise inVerizon shares from $47.38 to$51, which equals $4.6 billion,or six pence (9.3 cents) a share,for Vodafone shareholders.

Things already lookedworse in midday trading Tues-day, when Verizon was tradingbelow $46. That meant thecollar gave Vodafone share-holders no protection fromany decline in Verizon sharesand prevented them from par-ticipating in any rise between$47 and $51.

The collar is troubling forVodafone shareholders be-cause Verizon’s stock spentonly a few weeks of this yearabove $51. The stock is down15% from its high in April.With competition from U.S. ri-vals Sprint and T-Mobile heat-ing up, the collar may leaveVodafone shareholders in asweat. —John Jannarone

Weak Signal by Microsoft, NokiaSteve Ballmer couldn’t

leave his successor without asmartphone strategy. That isthe real reason he had to buya chunk of Nokia. Meanwhile,Microsoft’s retiring chief ex-ecutive also brings in a logicalcandidate to replace himself.

But the deal also is essen-tially an admission of Micro-soft’s weakness.

In buying Nokia’s devicesand services segment for $7.2billion, Microsoft joins Appleand Google as smartphonesoftware makers that also de-sign their own hardware.

Yet it seems the main rea-son for the deal is that, with-out more financial firepower,Nokia never could hope tocompete. And with their stra-tegic partnership deal set toexpire in 2014, and Nokiastruggling to justify continuedinvestment in handsets, Mi-crosoft was facing a dilemma.Were Nokia to dial back itsmobile ambitions, Microsoftwould lose the toehold it hasin the smartphone market:More than 80% of Windowssmartphones sold are de-signed by Nokia.

Microsoft says it will grab15% of the smartphone marketby 2018, claiming this meansthe assets it is buying areworth double what it is pay-ing.

But that would represent ahuge increase in marketshare. In the year throughJune, Google’s Android oper-ating system powered 75% ofsmartphones world-wide,with Apple’s iOS grabbing afurther 17% share, accordingto Strategy Analytics.

Microsoft’s WindowsPhone operating system hadjust 3% market share—the av-erage since 2010, despite de-cent sales of Nokia’s Lumialine of devices. It is hard tosee that rising fivefold givenhow badly Microsoft lags be-hind Google and Apple in at-tracting developers to makethe apps that are critical to

attracting buyers of smart-phones. In the personal-com-puting world, a huge amountof Windows-compatible soft-ware helped Microsoft estab-lish its dominance. But in thesmartphone world, softwaredevelopers are struggling al-ready to make apps for bothAndroid and iOS.

In trying to solve thischicken/egg problem—need-ing market share to attractdevelopers but needing devel-opers to build market share—Microsoft can deploy its gi-gantic financial resources. Butit will take more than market-ing muscle to get real trac-tion.

Besides a lack of developersupport, Microsoft suffersfrom what Neil Mawston ofStrategy Analytics calls thecompany’s own “glacier-like”pace of development. In high-end smartphones, for in-stance, Mr. Mawston pointsout that Microsoft hasn’t beenable to deliver software thatworks with the fastest mobilechips, unlike Android. At thelow end, it hasn’t been able toreduce costs in order to com-pete: Some Android deviceswholesale for just $35, whilethe cheapest Windows Phonedevice is around $110.

The Nokia deal also fur-ther complicates Microsoft’sbusiness model. Historically,Microsoft relied on outsidehardware makers to deliverits highly profitable softwarein their machines. Now, in ad-dition to designing its owntablet, it will be designing itsown smartphones. And thislatest deal comes in additionto Microsoft’s planned debtinvestment in PC maker Dell.

Add all this up, and Len-ovo, for one, must be reas-sessing its strategic relation-ship with Microsoft,considering it makes its owntablets and smartphones be-sides being the biggest PCmaker by market share.

Indeed, to build market

share in smartphones, Micro-soft likely needs other hard-ware makers to push Win-dows Phone as well. But whywould they commit resourcesto an operating system forwhich they would have to paya license fee and where theywould be competing directlywith Microsoft? Sure, Googlenow has Motorola Mobility inits stable, but at least hard-ware partners don’t have topay for Android.

Set against Microsoft’s $61billion net cash, the deal is atleast pretty small. Moreover,as part of the deal, Microsoftrefugee and current NokiaCEO Stephen Elop will rejointhe company. He was incharge of Microsoft’s mostprofitable product, Officesoftware, before taking thereins at Nokia. He instantlybecomes the front-runner tosucceed the retiring Mr.Ballmer.

But these are fringe bene-fits. This deal both compli-cates and further dilutes Mi-crosoft’s highly profitable,software-based businessmodel.

The added twist is that,despite this, Microsoft’s weakposition in mobile meant ithad little choice but to do itanyway.

—Rolfe Winkler

Nokia’s Investors Need AnswersWhen Stephen Elop lik-

ened Nokia to a burning oilrig in early 2011, investorsdidn’t expect this would behow he would damp theflames: The chief executivehas cast off what was oncethe world’s most valuablehandset vendor and hoppedinto a Microsoft lifeboat.

Nokia agreed late Mondayto sell its devices-and-servicesdivision to its Windows Phonepartner Microsoft for €3.79billion ($5 billion). And Mr.Elop and other senior person-nel will move to Microsoft aspart of the deal. The sharesjumped 34%. But this ishardly a victory for Nokia.

The partnership has fallenfar short of both sides’ expec-tations. The aim was forNokia to move its 34% shareof the smartphone market in2010 to the Windows Phonesoperating system, which had a4.2% share.

Instead, Nokia ditched itsown operating system buttook almost a year to get aWindows Phone device tomarket, costing it valuablesales. By the end of June thisyear, Nokia’s share of theglobal smartphone marketwas a paltry 3%, according toGartner.

Nokia had some negotiat-ing leverage. It could have runthe phone business for cash,rather than the market-sharetargets and volumes that Mi-

crosoft needs to make itsstrategy in the cellphone busi-ness work.

But the price still reflectsthe unit’s woes. At 0.4 timessales, the deal values Nokia’sbusiness just above strugglinghandset makers HTC andBlackBerry. Google paid onetimes sales for Motorola Mo-bility last year. But Microsoft,unlike Google, won’t get holdof its target’s valuable pat-ents. And most analysts val-ued Nokia’s devices divisionat zero.

Nokia must hope investorswill focus on the promise of astronger company. Nokia willhave almost €8 billion in netcash and should be more prof-itable with pro forma 12% op-erating-profit margins, com-

pared with 4% at the end ofJune.

Yet the company isn’thelping shareholders look tothe future by not saying howit intends to use the cash. Re-storing its investment-gradecredit rating, the companyconcedes, is important. Cus-tomers of the telecom-equip-ment business Nokia Solu-tions & Networks demand abusiness partner with a solidbalance sheet considering thelong-term nature of con-tracts.

Equally, if NSN is to beNokia’s core business, it mightsee an opportunity for furtherconsolidation: NSN still is rel-atively small next to Ericssonin an industry where scale iseverything. Rival Alcatel-Lu-cent’s shares rose 9.2% Tues-day.

But shedding further as-sets is also an option Nokiashould consider.

The Finnish company’smapping business HERE is arare, independent competitorto the likes of Google Mapsand TomTom. But it haswasted away in the Nokia sta-ble tethered to WindowsPhone.

Nokia’s board may feel ithas time to consider its nextmoves.

But once the smoke hascleared, investors will rightlydemand answers.

—Renée Schultes

Fight to the FinnishNokia’s share price

The Wall Street JournalSource: Thomson Reuters Datastream

€10

0

2

4

6

8

'11'10 '12 '13

Tuesday:€3.97

Algeta InvestorsGet All Fired Up

Biotechnology stocks arehot property. Amgen’s $10.4billion deal to buy oncology-drug maker Onyx Pharma-ceuticals last week fueled en-thusiasm around the sector,up 40% over the past 12months. Investors should bewary of getting singed.

Take Algeta: Shares in theNorwegian biotech firm are upabout 70% over the past year.

Some fervor around thecompany is justified. U.S. reg-ulators in May approved Al-geta’s first-of-its-kind cancerdrug Xofigo. This uses alpharadiation to attack bone me-tastases related to prostatecancer in a targeted way. Notonly did U.S. approval comeearly, regulators gave Xofigothe nod in a broader range ofcases than expected. And Al-geta has a heavyweight part-ner: Germany’s Bayer.

But Xofigo’s launch couldbe a slow burn. Clinics mustbe licensed to provide thetherapy. Algeta this week said320 U.S. clinics are ready tosee patients. There may beother logistical hurdles re-lated to Medicare reimburse-ment and getting physiciansfrom different specialties likeoncology and radiology towork together. An alternative

to chemotherapy is welcome,but a radiopharmaceuticalmay take time to get tractionwith doctors and patients.

The stock appears pricedfor flawless commercial exe-cution. Amgen paid 11 timesOnyx’s forecast 2014 sales,while Algeta trades at morethan 20 times.

Uncertainty abounds,though. For 2015, the top endof analysts’ revenue forecastsfor Algeta is approaching threetimes the lowest estimate,based on FactSet. That reflectsthe broad range of possibleoutcomes for Xofigo. What’smore, the company’s currentvaluation already implies Xo-figo reaching more than $1.2billion in peak sales in prostatecancer, Deutsche Bank notes.

Getting beyond that re-quires Bayer winning approvalto use Xofigo in earlier-stagepatients, in combination withhormone therapies and inother types of cancer. Most ofthose trials have yet to begin.And Algeta’s pipeline pros-pect—a promising method forattaching an alpha emitter toa cancer-seeking antibody—isin the early stages.

Even successful, innovativebiotechs can get too hot tohandle. —Helen Thomas

Source: Strategy AnalyticsThe Wall Street Journal

Windows PainMarket share for smartphoneoperating systems, world-wide

Nokia Oyj Lumia 1020 handset

80

010203040506070

%

20132012

Android

Apple iOS

Microsoft

Bloomberg

New

s

2 | Wednesday, September 4, 2013 AM IM UK SW FR IT SP TK BR PL IS AE GR THEWALL STREET JOURNAL.

PAGE TWO

i i iBusiness & Finance

n New registrations data fromEurope’s biggest car markets showthat a near six-year slump in salesstill hasn’t leveled off. 15

n Asian stocks and currencies areclawing back some of their hugelosses from the recent exodus ofcapital from emerging markets. 15

n Few projects are as importantto the future of Stockholm’s hous-ing market as the plan to reinventthe Royal Seaport. 15

n Nokia’s decision to sell itshandset business to MicrosoftCorp. closes the latest chapter inits 148-year history of reinventingitself amid crisis. 16

n Nokia’s proposed $7 billiondeal to sell its cellphone businessleaves behind 56,000 employeesand a set of businesses focusedmainly on making network equip-ment for cellphone operators. 16

n Nokia chief Stephen Elop isback at Microsoft to help shapethe legacy of the software giant’slongtime boss, Steve Ballmer, andpotentially take his job. 17

n One of London’s newest sky-scrapers has been reflecting an in-tense beam of sunlight onto pe-destrians and traffic, forcingdevelopers to fix the problem. 18

n Standard & Poor’s says in acourt filing that a lawsuit filed bythe Justice Department was in“retaliation” for stripping the U.S.of its triple-A credit rating. 20

n The Verizon Wireless Pact isexpected to generate $500 millionor more in total fees for advisersand those performing other func-tions to facilitate it. 21

n Bank of America is selling itsremaining stake in China Con-struction Bank for up to $1.5 bil-lion, marking the end of an era forWall Street banks that invested intop Chinese banks. 22

i i iWorld-Wide

nWhat had been shaping up tobe a routine meeting of worldleaders now poses one of thefiercest tests yet of Obama’s lead-ership on the world stage. 3

n Some G-20 leaders are hopingto find a way to steady the sud-denly shaky fortunes of emerging-market economies. 3

n Tourists have been flockingthis year to the euro zone’s south-ern vacation spots, boostingstruggling economies. 4

n Tour de France cyclists livelonger than the general populationand die from heart-related ail-ments less often, damping con-cerns that extreme exercise in-creases cardiovascular risks. 4

n An unusual monetary policymix that Denmark introduced todefend the country’s fixed ex-change rate is helping to shield itfrom market turbulence, the coun-try’s central-bank governor said. 5

n The last session of the Germanparliament turned into a face-offbetween chancellor candidates. 5

n Some borrowers in the U.S.who have gone through a foreclo-sure, bankruptcy or other adverseevent are eligible to receive a newmortgage backed by the FHA afterwaiting as little as one year. 6

n A growing body of economicresearch suggests that the longerthe unemployed remain on thesidelines, the less likely they willbe to work again. 7

n Syrian rebels are still waitingfor U.S. weapons, three months af-ter President Obama authorizedthe CIA to arm moderate fightersbattling the Assad regime. 8

n One of Syria’s top diplomatscalled for dialogue with the U.S.—while threatening retaliation—asWashington weighs militarystrikes against his country. 9

What’s News—

Readers’ Choices

1. Microsoft to Acquire NokiaMobile Business2. A Guide to the Perfect Nap3. Opinion: The Politics of theObama Delay on Syria4. U.S. Still Hasn’t Armed SyrianRebels5. Opinion: Stephens—The RobertTaft Republicans Return6. Religious Dorms Sprout Up7. Syria Prepares for U.S. Attack8. Israel Says It Held Joint MissileTest With U.S.9. Opinion: Eliot A. Cohen—TheStakes on the Syria Vote10. Opinion: California’s Union-Sponsored War on Farmers

Microsoft Buys Nokiaeurope.wsj.com

‘This is definitelymajor news forNokia, Nokiaemployees andFinland.’Nokia Chairman Risto Siilasmaa saidafter the Microsoft acquisition.

IFA Berlin

Latest news and analysisfrom the Berlin consumerelectronics show.europe.wsj.com/tech

Best of the Blogs

Soccer moms and dadsmay soon be driving instyle. British sports-carmaker Jaguar revealed asketch that hints at howits new C-X17 conceptvehicle will look–and theimage looks a lot like anSUV.View online today atblogs.wsj.com/speakeasy

ONLINE TODAY

French President François Hollande speaks with students as he visits the school Michelet for the start of the school year,in Denain, northern France, on Tuesday.

AssociatedPress

SUBSCRIBETODAY

Advertising Sales worldwide through Dow JonesInternational. Frankfurt: 49 69 29725 390;London: +44 20 7573 4060; Paris: 331 40 17 17 01.Printed in Belgium by Concentra Media N.V.Printed in Germany by Dogan Media Group / Hür-riyet A.S. Branch Germany. Printed in Switzerlandby Zehnder Print AGWil. Printed in the UnitedKingdom by Newsprinters (Broxbourne) Limited,Great Cambridge Road, Waltham Cross, EN8 8DY.Printed in Italy by Telestampa Centro Italia s.r.l.Printed in Spain by Bermont S.A. Printed in Israelby Jerusalem Post Group. Printed in Turkey byDunya Super Veb Ofset A.S. Printed in Poland byPolskapresse Printing Division.Registered as a newspaper at the Post Office.Trademarks appearing herein are used under licensefrom Dow Jones & Co. ©2013 Dow Jones & Com-pany. All rights reserved. Editeur responsable. TracyCorrigan M-17936-2003. Registered address:Avenue Cortenbergh 60, 1040 Brussels, Belgium

THE WALL STREET JOURNAL EUROPE(ISSN 0921-99)222 Grays Inn Road, London, WC1X 8HB

FOR ISSUES RELATED TO SERVICE:CALL +44 (0) 20 3426 1313EMAIL subs.wsje@dowjones.comWEB service.wsje.com

CALL +44 (0) 20 3426 1313VISIT wsjeuropesubs.com/wsje

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 27

OFF THE WALL

Try to Unwind by Throwing an AxToronto League Allows the Corporate Crowd to Bury Hatchets; Finding Your Inner Viking

It didn’t take James Watson longto get back into form after atwo-year absence from his regu-

lar Tuesday night league.“I’ve got my swing down” again,

he says.He’s not swinging a softball bat

or a golf club. Instead, Mr. Watson,owner of an events-planning con-sulting firm, hurls freshly sharp-ened axes at targets in a warehousein an industrial park here.

Toronto’s Backyard Axe Throw-ing League, or BATL, was bornseven years ago in the backyard of34-year-old Matt Wilson, after aweekend of throwing axes at treesat a friend’s lakeside cottage. It isnow a 128-member, four-nights-a-week league.

The core die-hard ax hurlerscompete under names like “Arm,”“Diamond” and “Killface.” Theykeep meticulous statistics and trackone another’s career scoring.

“Everybody on earth lovesthrowing an ax. They just don’tknow it yet,” says founder Mr. Wil-son, a former bartender withgroomed mutton chops and lots oftattoos. “Once you throw one andsink it in there, you’re hooked.”

Mr. Wilson, who now runs hisax-throwing operation full time,says he has had to cap membershipas he finishes an expansion into anew space. Until then, there is awaiting list to throw at his 140-square-meter space. He says thebusiness is profitable but declinedto be specific.

Key to the league’s success arethe six or more private events itbooks each week.

FreshBooks, which providesWeb-based accounting software,has held several company events atMr. Wilson’s warehouse.

“I didn’t come last year becauseI thought, ‘Over my dead body,’ ”says Jaclyn Tanner, a support spe-cialist at the firm. But at a recentevent, she found her inner Viking—sinking axes into a wooden bull’s-eye at the end of one of the cen-ter’s throwing “lanes.” By the endof the day, she had made it into thetop eight of the round-robin tour-nament.

The art of ax throwing is a sta-ple of Viking-themed re-enact-ments, Renaissance fairs and lum-berjack expositions andcompetitions. But Toronto’s leagueis arming bankers, attorneys andother white-collar professionals.

Video and motion-graphics edi-tor Meika Henry says BATL hashelped her out professionally. “I’vedone so much networking,” shesays, filing her ax during a recent

league night.A three-hour event costs 40 Ca-

nadian dollars a person, or aboutUS$38, with a minimum of 10 peo-ple required. League fees arearound C$120 for an eight-weeksession. Throwers must be at least18 years old.

The league’s popularity hascome with its share of headwinds.It was forced to move indoors twoyears ago after weekly noise com-plaints, Mr. Wilson says. He says heinitially hung tarp around the out-door area, but the police keptshowing up when axes started fly-ing.

Getting insurance wasn’t easy;one agent required six emergencystaff on site at all times as a condi-tion of coverage. Mr. Wilson sayshe has found more “reasonable” in-surance since then.

He says the league has loggedjust two minor incidents requiringa stitch or two. Staffers are quickto prevent throwers from wander-ing through the warehouse withaxes in hand. Hunks of wood areplaced throughout the space to sinkaxes not in play.

“We promote a responsible at-mosphere,” says Mr. Wilson, whocirculates the room on leaguenights. He has been known to askthrowers acting erratically to leaveor take a break.

Taylor Battista, a regular BATLmember, persuaded his employersat FreshBooks to start holdingteam-building events at theleague’s warehouse two years ago.

“Throwing axes at things is themost satisfying feeling,” Mr. Bat-tista says.

On a recent afternoon, heavy-metal music blasted and a group ofabout two dozen FreshBooks em-ployees started to warm up. Ax-throwing neophytes paired up withBATL staff to go over the basics.

The axes are standard yardhatchets, with a 680-gram headand a 38-centimeter wooden han-dle.

Three key elements to considerwhen throwing an ax: the grip; thestance; and when to let go.

Throwers line up along each offour, 4½-meter lanes, painted in vi-brant colors, ending in standardbull’s-eye targets on wood planks.

To hit its mark and sink into thetarget, the ax needs to make onefull rotation in the air. That re-quires throwers to move forwardor back a step or two, dependingon their size and strength.

Opponents play one-on-one andthrow three rounds of five axes.Throwers must win two out ofthree rounds to win a match. Scor-ing depends on where the ax lands:five points for a bull’s-eye, threefor the middle ring and one for theouter ring.

Play is structured like a mix oftennis, archery and darts—but afew unique elements have come inover the years.

To settle contested shots,throwers call for the “device”—acaliper, or high-precision measur-ing tool. And then there is the“clutch” shot. If players hit one oftwo small green dots on the tar-gets, they rack up seven points.

The crowd-pleaser, though, isthe “big ax,” brought out to settletie matches. It is twice the size of ahatchet and thrown nearly doublethe distance.

Mr. Wilson is set to open a new,

740-square-meter location closer toToronto’s downtown center in Jan-uary. The site will quadruple thenumber of ax throwing lanes to 16,offering more space for leagues,drop-ins and events.

Mr. Wilson says he will be care-ful not to sideline more hard-coreax-throwers in the expansion. Atightknit, competitive group oftradespeople and professionals,they have helped develop an intri-cate system for compiling leaguestatistics.

On regular nights, league mem-bers who aren’t throwing keepscore for matches under way, track-ing wins, losses, perfect games,perfect matches and more. Statis-tics are posted weekly on theleague’s website, and a smartphoneapplication for scoring and trackingcareer statistics is in the works.

Trevor Welsh, a pastry chef andchocolatier who started in theleague’s early days, is one such ax-throwing die-hard.

“There are so many rivalries,”he says, “and so much trash talk-ing.”

BY JUDY MCKINNONToronto

Backyard Axe Throwing League founder Matt Wilson at the group’s warehouse.

Judy

McKinno

n/Th

eWallS

treetJournal(2)

Watch a Video>>Scan this code to seea video about ax-throwing or watchit atWSJ.com/OffTheWall.

Axes at Toronto’s throwing league.

HigH FinancetoHigH FasHionThe most influential business leaders to today’s trendsetters.

Celebrate Off Duty in StyleRead the Off Duty lifestyle section in theEurope edition of The Wall Street Journalevery Friday.

©2013 Dow Jones & Company, Inc. All rights reserved. 3DJ1024

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 3

NEWS

Obama’s Trials on World StageWhat had been shaping up to be

a routine meeting of world leadersnow poses one of the fiercest testsyet of President Barack Obama’sleadership on the world stage, com-ing off his surprise decision to delaya U.S. military strike in Syria.

Mr. Obama will arrive in Russiaon Thursday for a Group of 20meeting that will be dominated bydebate over a Syrian war that tookan unexpected twist over the week-end when the president said hewould seek a vote in Congress be-fore striking the regime of PresidentBashar al-Assad in response to al-leged chemical-arms attacks.

Some allies have voiced dismayover Mr. Obama’s announcement,while foes of the U.S. ridiculed himfor failing to enforce his own “redline” on the use of chemical weap-ons.

That dynamic could lead to someawkward moments as Mr. Obamatries to round up partners for a mil-itary strike in Syria while reassuringallies like Japan, South Korea andSaudi Arabia, who may be wonder-ing about the American president’sresolve to back them up during anycrisis. France remains the lone Eu-ropean country willing to carry outmilitary strikes as part of a possiblecoalition with Washington.

“That was the unfortunate thingabout the president’s announce-ment,” said Steven Pifer, a seniorfellow at the Brookings Institution.“The signal to many is going to behesitance and indecision. If he wasgoing to ask Congress, it would havemade sense to bring Congress intothe game a week ago.”

Hosting the summit is RussianPresident Vladimir Putin, whosesupport for the Assad regime hashardened a rift with the U.S.

Mr. Obama will try to reasserthis leadership on the world stage,making the case that any U.S. mili-tary reprisals will have greater con-stitutional authority if backed by avote in the U.S. Congress.

“We’re making a political argu-ment that the country’s strongerwhen these things are done withCongress’s support,” a senior Obamaadministration official said. “That’sthe preferred course of action.”

An aide to an Israeli cabinet min-ister said many officials worried af-ter Mr. Obama’s announcement thatWashington might not be preparedto enforce similar warnings to Iranover its nuclear program. Prime Min-ister Benjamin Netanyahu has askedcabinet ministers not to speak outagainst the U.S. president, fearing itcould harm ties between the twoleaders, the aide said. Israel isn’t aG-20 member.

Mr. Obama’s itinerary at onetime included a stop in Moscow tomeet with Mr. Putin, but differencesover Syria were among reasons Mr.Obama canceled those plans. Thetwo also were at odds over Russia’sdecision to give asylum to NationalSecurity Agency leaker EdwardSnowden.

The war of words between theKremlin and the White House overSyria has shown no signs of abating.On Monday, Russian Foreign Minis-ter Sergei Lavrov dismissed U.S. evi-dence of the Assad regime’s allegedchemical-weapons use. Speakingduring a public appearance, Mr. Lav-rov said there was “nothing con-crete” in the information the U.S.has shown Russia on the use of suchweapons by the Syrian government.

No informal meetings betweenMessers. Obama and Putin are

scheduled during the two-day sum-mit in St. Petersburg, an Obama ad-ministration official said.

Mr. Obama also faces a difficultchallenge back home. He mustround up the votes in Congress toauthorize the strike. Complicatingthat effort, he will be out of thecountry from Tuesday through Fri-day. If he fails and if other domesticpriorities such as an immigrationoverhaul remain stuck in Congress,he runs the risk of looking like alame duck.

“If by Christmas Congress rejectsthe intervention in Syria and he’snot able to do some deals on domes-tic affairs with Congress, he’ll be avery weakened president,” saidDouglas Brinkley, a Rice Universityprofessor and presidential historian.“So he has a very fluid and impor-tant three months ahead of him.”

Other countries attending thesummit meeting in St. Petersburghope to use the forum to end theSyrian crisis. On Tuesday, FrenchPresident François Hollande andGerman President Joachim Gaucksought to rally public and diplo-matic support ahead of the summit.The two seized on a joint news con-

ference in Paris to call for actionagainst Syria.

“When chemical massacre oc-curs…there must be a response,” Mr.Hollande said.

“We find it unacceptable that adictator can act with impunity andbreak such a taboo,” Mr. Gauck said,calling on world leaders to “find anappropriate response.”

Many of France and Germany’sEuropean allies are divided overwhat course of action to take inSyria. France has called for strikesin tandem with the U.S. while Italyhas called for a U.N. resolution be-fore any military action is takenagainst the regime.

Mr. Hollande said Europeancountries planned to meet on thesidelines of the G-20 summit to dis-cuss Syria and broaden support forstriking the regime.

Mr. Gauck reiterated that Ger-many is pushing for an “interna-tional agreement” on Syria, and henoted that Berlin has refrained fromtaking a harder line against the As-sad regime for “historical reasons,”an apparent reference to Germany’sWorld War II legacy. However, hesaid, Germany and France “are abso-lutely on the same page.”

Officials from Turkey, which hasin recent days called for militarystrikes with a goal of regime changein Damascus, have said Ankarawould lobby its allies on Syria at themeeting, but weren’t hopeful of adiplomatic breakthrough.

“We won’t allow the importantG-20 agenda items to be overshad-owed but we will take the opportu-nity to discuss our views on Syria

with our allies,” said a Turkish for-eign ministry spokesman.

Turkish Prime Minister RecepTayyip Erdogan, who will lead hiscountry’s delegation, heads to thesummit as one of the world leaders’most hawkish voices on Syria.

Energy-dependent Turkey’sstrong commercial ties with Russia,the world’s largest gas supplier,have been strained by the Syrianconflict, as Ankara’s regional ambi-tions have expanded into regionswhere Moscow is sensitive to itswaning influence.

Analysts stress that the coun-tries have thus far been able toavert a full-blown diplomatic crisisbecause of the crucial commercialand strategic relationship betweenMoscow and Ankara.

Turkish officials are concernedthat the country’s 565-mile longborder with Syria could be vulnera-ble to a retaliatory attack from Da-mascus if a U.S.-led strike againstMr. Assad’s government occurs. Tur-key has in recent days moved to for-tify the border with heavy armorand moved its troops to a height-ened state of alert.

Supporters of military actionagainst the Assad regime seem un-likely to get much support from theArab League after Saudi Arabia, apassionate advocate of tough inter-national action, struggled on Sundayto assemble an Arab coalition thatwould give the U.S. political backingfor airstrikes.

—Carol E. Lee, Stacy Meichtry,Anton Troianovski, Charles

Levinson, Joe Parkinson and PaulSonne contributed to this article.

BY PETER NICHOLAS

Two women are stopped outside the Swedish Parliament in Stockholm ahead of Barack Obama’s visit on Wednesday.

AssociatedPress

Emerging MarketsSeek Attention atG-20 Summit Too

Leaders from the Group of 20economies have been preoccupiedby Syria ahead of their summit thisweek, but some are hoping to find away to steady the suddenly shakyfortunes of emerging markets.

In recent years, most of the eco-nomic threats tackled by the G-20have stemmed from large flows ofcapital from developed countries todeveloping ones. But now that flowhas begun to reverse, posing newchallenges to the global recovery.

The turnaround has acceleratedin recent weeks as investors antici-pate an end to the U.S. Federal Re-serve’s period of extraordinary mon-etary stimulus this year. The resulthas been sharp falls in developing-country currencies.

The Organization for EconomicCooperation and Developmentwarned that an already subdued re-covery in global economic growthcould be weakened further if theoutflow of capital from developingeconomies intensifies.

Some leaders are hoping thatthe issue can still be addressed,even if the meetings in St. Peters-burg on Thursday and Friday aredominated by the crisis surroundingthe alleged use of chemical weap-ons in Syria’s civil war.

For instance, a person familiarwith Brazilian President Dilma Rous-seff’s thinking said she hopes thesummit will produce agreement onways to ease the impact of the an-ticipated change in Fed policy.

Brazilian officials say they havethe backing of other developingcountries in seeking moves to ad-dress recent currency volatility, al-though they are unclear aboutwhich among the G-20 memberswill be offering support.

In particular, they want the Fedto improve the way it communi-cates its intentions to reduce mar-ket swings.

With the U.S. government focus-ing on efforts to boost support forits approach to Syria, those devel-oping economies may be left frus-trated. But even without Syria, theU.S. would have been unlikely tomake major concessions, econo-mists say.

“Other than a vague commit-ment to take into account the ef-fects of its monetary policy onother countries, the Fed is in prac-tice likely to make no concessionsto developments elsewhere,” saidCapital Economics, a London-basedresearch firm.

In recent months, German offi-cials have pushed G-20 nations toagree to hard targets for reducingdebt after the current deficit-cuttingagreement expires in 2016. But theeffort ran into strong U.S. opposi-tion when finance ministers met inJuly, with Treasury Department offi-cials insisting that the priority hadto be boosting jobs and growth asopposed to reducing debt.

A U.S. administration official saidan overriding U.S. goal at the sum-mit is persuading other nations thatthey need to help boost demandworld-wide. Global demand is “im-proving,” but “remains weak,” theofficial said.

Beyond that, the U.S. wants tomake progress toward another goal:cracking down on tax evasion.

That issue was front-and-centerat a separate meeting of the Groupof Eight nations in Northern Irelandin June.

—Paul Hannonand Paulo Trevisani.

Mr. Obama will make thecase that U.S. militaryreprisals will havegreater authority ifbacked by Congress.

26 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

HEARD ONTHE FIELD

SPORT

Time for Zimbabwe to Cough UpRejoining InternationalCricketWon’tMeanMuchUnlessPlayersCanMakeaLiving

Zimbabwean cricketing history,it seems, repeats itself first as farce,and then as farce again, with just atinge of tragedy thrown in. As Zim-babwe started the first of its two-Test home series against PakistanTuesday, the national board finds it-self millions of dollars in debt, itsplayers haven’t been paid even thenugatory sums they’re due, playerstrikes have been and still are beingthreatened, and the debilitatingplayer drain that has long bedeviledthe country continues apace.

If this all sounds wearily famil-iar, it is because this is the exactsame laundry list of problems thathave affected Zimbabwean cricketfor the best part of a decade. Thecountry might have been rehabili-tated back into Test cricket back inAugust 2011 after a six-year hiatus,and it might deliver the odd encour-aging performance, such as its re-cent win in the first One-Day Inter-national against Pakistan, but thesame issues rear their heads be-cause the reasons behind them—andparticularly the people behindthem—have never gone away.

Zimbabwe continued throughoutits self-imposed Test exile to be afull member of the InternationalCricket Council—the status given tothe Test-playing nations, of whichthere are only 10—and to enjoy thegenerous financial support that goeswith it. Despite that, ZimbabweCricket is $18 million in debt, do-mestic competitions barely splutteralong, and the players—the board’smost important employees—haven’treceived their salaries recently.

In protest, the players have re-cently threatened to boycott boththe final ODI and the first Test be-

fore agreeing to play on, at onepoint refusing to train. Two players,leg-spinner Graeme Cremer andbatsman Sean Williams, have madethemselves unavailable as a result ofthe current dispute. Endless negoti-ations with ZC have been led by fivesenior players, including currentcaptain Brendan Taylor and formercaptains Prosper Utseya and EltonChigumbura; the Zimbabwe playersare also talking about setting up aunion to represent their interests,including their demands for mean-ingful match fees.

The one critical thing that hasn’thappened yet is the board actuallypaying them, and until it does sothe dispute is just going to rumbleon. ZC is now saying it will pony upbefore the second Test, which startson Sept. 10, something the playersare currently having to take ontrust. Even if it does so, history sug-gests that it won’t be long beforethe problem occurs again.

Even when the players do getpaid, they don’t get much. Back inApril this year, a number of non-contracted players threatened not tosign the cricketing equivalent of azero-hours contract, offering them afew dollars a day, plus match fees ifthey were lucky, to play for theircountry.

These aren't the conditions un-der which professional internationalsportsmen expect to toil, particu-larly when they can earn moremoney playing club cricket overseas.That is precisely what the team’sbest bowler, 24-year-old Kyle Jarvis,has recently chosen to do, takingemployment with domestic teams inEngland and New Zealand becauseplaying for his country doesn’t guar-antee him a stable livelihood.

But he is only the latest in a long

line of players to do something sim-ilar—batsman Craig Ervine did so inApril. Indeed you could make sev-eral fine international sides fromthe players lost to Zimbabwe in thisway over the past decade. In factyou can almost test the health ofZimbabwe cricket by looking at therate of defections.

It was at its height just beforethe crisis in the middle of the previ-ous decade that resulted in theteam’s withdrawal from Tests. Be-fore that sorry period began, a teamfilled with stars—such as fast-bowl-ing all-rounder Heath Streak and

wicketkeeper-batsman Andy Flower,whose average of 51.54 from 63Tests puts him in the highest cate-gory—had been in the process of es-tablishing itself at cricket’s top ta-ble. What brought it down werearguments over the way the boardmanaged its players and in particu-lar the way it paid them, resultingin a mass player exodus and a once-strong team reduced to abominablealso-rans.

The recent ODI victory showsthat the talent is still there today.There was some useful seam bowl-ing up front throughout the three-match series, particularly from Ti-nashe Panyangara and TendaiChatara although, in the absence ofJarvis, the team’s bowling lacksdepth and struggled in the latterhalf of each innings. The batting is

likewise full of promise, but isoverly reliant on Taylor and the on-form Hamilton Masakadza.

But it doesn’t matter how muchtalent the team has. As if the play-ers’ constant uncertainty abouttheir own futures, particularly fi-nancial, weren’t enough, the team’schances are also hampered by thechronically inadequate amount ofinternational cricket it plays. It istrapped in a vicious circle: BecauseZimbabwe isn’t very good, no onewants to play against it, so itschances of making money from se-ries against marquee sides are slim.

For all those reasons, the hometeam’s chances in the Test series ofpulling off an upset similar to itslone ODI victory are equally slim; agreat performance or two can swinga limited-overs game, but over fivedays the stronger team overall willusually triumph. And there is nodoubt which team that is: A collec-tion of demoralized players, wran-gling with their employers overmoney, seeing a continual trickle oftheir colleagues head away to lessstressful and better remuneratedpastures, simply don’t have the fire-power to overcome an experiencedPakistan side. Pakistan is fourth inthe world and boasts a consistentbatting lineup and probably theworld’s best spinner in Saeed Ajmal.

The Zimbabwe players face manyof the same problems as their pre-decessors, and probably as theirsuccessors too. The talent is therebut money and structure aren’t—those things are the board’s respon-sibility, and the Zimbabwe boardunder the current management hasfailed to deliver them for almost adecade now. The solution, if Zimba-bwean cricket wants to move for-ward, would appear to be obvious.

BY RICHARD LORD

Zimbabwe bowler Tendai Chatara in action on the opening day of the first Test against Pakistan at the Harare Sports Club on Tuesday.

AgenceFrance-Presse

Chances of making moneyfrom series againstmarquee sides are slim.

Nadal Returns for SpainIn Davis Cup Playoff

Rafael Nadal will play in the Da-vis Cup for Spain next week forthe first time since winning the2011 final.

He will team with Tommy Ro-bredo, Fernando Verdasco andMarc Lopez for the World Groupplayoff against Ukraine at Madrid’sCaja Magica from Sept. 13.

Nadal last played for Spain inDecember 2011, when he won thefourth and final point of the DavisCup final against Argentina inSeville, earning Spain its fifth title.Nadal’s absence has been due inpart to a knee injury that sidelinedhim for seven months last season.

Spain captain Alex Corretja saidTuesday it will be a pleasure tohave Nadal back as he alwaysspreads “vitality and optimism” tohis teammates.

The defending champion CzechRepublic will be represented byTomas Berdych and RadekStepanek, who will team up for thefirst time this year in next week’ssemifinal against Argentina.

—Associated Press

Saudi Prince Buys IntoLowly English Club

A Saudi Arabian prince has be-come the joint owner of Englishsoccer club Sheffield United.

Prince Abdullah bin Mosaad binAbdulaziz Al Saud has bought halfof the third-tier club from KevinMcCabe and will become co-chair-man.

The 47-year-old prince, who is agrandson of Saudi Arabia’s founder,King Abdulaziz, says he’s investingin “a sensibly-organized, family andcommunity club with a great his-tory and heritage.”

Financial details were not dis-closed by the northern English club,which was founded in 1889. —A.P.

Blatter Doubtful OverBale Record Transfer

FIFA President Sepp Blatterdoubts whether Gareth Bale wasworth a world-record €100 million($132 million).

Real Madrid made the Welshwinger the most expensive foot-baller in history when he wassigned on Sunday from Tottenham.

Blatter said on Tuesday, “if aplayer is the value of that, I doubt,I doubt, but I cannot stop this.”

The transfer fee was at oddswith the economic hardships inSpain, which has been in recessionfor much of the past four years.

Blatter said “when you say thecountry is a poor country or in-debted, but in football you alwaysfind money... this is the marketand we cannot intervene in thismarket.” —A.P.

HEARD ONTHE PITCH

Agence France-Presse/Getty Images

FIFA’s Sepp Blatter on Tuesday

4 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

EUROPE NEWS

Study EasesFear OverExercise,Heart Health

AMSTERDAM—Cycling does thebody good.

New data from Tour de Francecyclists finds that those athletes livean average of six years longer thantheir counterparts in the generalpopulation and die from heart-re-lated ailments less often, dampingconcerns that extreme, intense exer-cise increases the likelihood of deathfrom cardiovascular causes.

The new study, presented Tues-day at an Amsterdam meeting of theEuropean Society of Cardiology, ex-amined 786 French cyclists whocompeted in the Tour de Francefrom 1947 to 2012 and the cause ofdeath for those who died.

The data also give limited reas-surance that doping with “Epo”(erythropoietin) doesn’t appear todramatically increase the risk ofheart attack or early death amongelite cyclists—at least in the nearterm.

The findings offer “good proofthat sports—even if the sport isvery, very intensive—among healthypeople, without any heart disease, isstill beneficial,” said Eloi Marijon,one of the study authors and a car-diologist at the European GeorgesPompidou Hospital and Paris Des-cartes University.

The results “laid to rest” con-cerns over exercise intensity withcycling, though the results don’tnecessarily generalize to marathonrunning, said Donna Arnett, chairof epidemiology at the Universityof Alabama at Birmingham andpast president of the AmericanHeart Association, who led the ses-sion at which the data were pre-sented.

Cardiovascular concerns abouthigh-intensity exercise stemmedfrom a small number of studies onmarathon runners. Measurementtools including advanced imagingfound some detrimental signs on theheart immediately after races,prompting some doctors to worrythat there may be drawbacks to suchextreme exercise.

But those findings were likelynormal wear and tear that occursduring strenuous physical activitythat pushes muscles and sends agreater volume of blood coursingthrough the heart, said Alfred Bove,professor emeritus at Temple Uni-versity in Philadelphia and a formerpresident of the American College ofCardiology, who wasn’t involved inTuesday’s study.

Because the use of Epo wasthought to be common among cy-clists in the Tour de France in the1990s, researchers expected that ifEpo was linked to heart attacks, theywould see an uptick in the numberof deaths among riders in the past20 years as compared with competi-tors in previous decades, accordingto Dr. Marijon.

Instead, they observed no differ-ence in the rate of death by decade,suggesting that “probably there isno strong or immediate associationwith doping” and heart attack, saidDr. Marijon. He urged caution in in-terpreting the results and said thatmore research is needed over a lon-ger period of a time.

The study also was published onTuesday in the European HeartJournal.

BY SHIRLEY S. WANG

Sun, Sand Help Lift ‘Club Med’The Russians came, and they

saved hotelier Gustavo Cabedo’stourist season.

Spanish visitors to his Tryp PortCambrils hotel, down the coast fromBarcelona, had dwindled in recentyears as the economy slumped. Buta rush of Russian and French tour-ists put off by turmoil in Egypt—andlured to Spain by falling prices—haspicked up the slack, lifting occu-pancy in the 156-room hotel nearthe beach above 90% this summer.

The growth in international tour-ism “has been vital,” said Mr.Cabedo, the hotel’s general manager.“I don’t wish anyone harm, butproblems in North Africa have beengood for Spain.”

Tourists have been flocking thisyear to the euro zone’s “Club Med”vacation spots, boosting strugglingeconomies. Foreign visits to Spainsince January have set a record,while Greece and Portugal are en-joying banner years.

International tourist arrivals inSouthern Europe grew 6% in thefirst half of the year over the sameperiod of 2012, a percentage pointabove the global increase, accordingto the U.N. World Tourism Organiza-tion.

In the previous decade, relativestability and new hotel developmenthelped Egypt and other North Afri-can countries compete for touristsseeking sun, sand and cultural at-tractions, industry analysts say.

But falling prices in the euro-zone periphery—hotel rates in Spainare down around 10% since 2008,according to official statistics—andthe continuing political upheavalthat began in the Arab Spring of2011 has made the Mediterranean’snorthern shores look more attrac-tive.

Cruise-ship operators are addingsix Greek ports to their routes thisyear and next as they cancelplanned port calls in Egypt. TheFinnish tour operator Finnmatkatcanceled trips to Egypt for more

than 20,000 people this coming win-ter, offering to route them to Spain’sCanary Islands and elsewhere.

The tourist boom underscoreshow economic restructuring is help-ing Southern European countries re-gain international competitiveness.

In Greece, labor-market changeshave helped cut payrolls—which ac-count for about 40% of a hotel’s op-erating costs—pushing down aver-age wage bills by a fifth. That hastranslated into an average 8% reduc-tion in hotel rates in the last year,according to industry sources.

In Portugal, where the AtlanticAlgarve region entices hordes ofBritish visitors, prices for hotels andother services declined while spend-ing by foreign tourists rose 8.2%, to€3.7 billion ($4.9 billion), in the firsthalf of the year over the same pe-riod in 2012.

To be sure, tourist spending istoo small on its own to end South-ern Europe’s recession or sustain arecovery.

Still, it could make the recessionshallower than forecast for this yearand hasten a return to growth, saidSara Baliña, a partner at Madrid-based economic analysis firmAnalistas Financieros Internaciona-les SA. It is “an important stabiliz-ing factor” for Southern Europeaneconomies, she said.

A peace dividend of sorts is lift-ing Greece’s tourist industry. Fearsof an abrupt Greek exit from theeuro zone have receded in the pastyear. The violent antiausterity pro-tests that rocked Athens at the startof the crisis and frightened awaywould-be visitors have petered out.

Carsten Palvig, a 62-year-oldDanish information technology de-veloper, a frequent visitor for morethan three decades, said Greece’sturmoil kept him away for the pastfew years “but we thought we wouldtry it again this year.”

He spoke as his companion pho-tographed the 19th century neoclas-sical buildings that line the alley-ways of Athens’s Plaka touristquarter. “You can’t really see anysign of the crisis here.”

A few steps away, MargaretSmith perused tourist shops be-neath the Acropolis. The-49 year-oldreal estate agent from Virginia hadorganized a 10-day trip with half adozen friends to Crete and theGreek capital.

“Who doesn’t want to come toGreece anyway?” she said. “But thelow prices were an extra induce-ment.”

The Greek government has overthe past few years eased visa re-strictions for various countries, in-cluding traditional rival Turkey,

helping to draw new visitors.Tourist arrivals and spending in

Greece are surpassing even the opti-mistic forecasts at the start of theyear. The latest data suggests that arecord 17.5 million visitors willspend €11.5 billion this year, indus-try sources said.

In Spain, regional and centralgovernments also have been tryingto attract tourists from beyond theusual sources—Britain, Germany andFrance—by, for example, sendingdelegations to tourism fairs in Rus-sia. Visits from Nordic countries andRussia through July of this yeargrew 18% and 31%, respectively, overthe same period in 2012.

In Cambrils, a fishing port with30,000 permanent residents, foreigntourist overnight stays since Janu-ary hit a record despite a 20-per-centage-point decline in Spanish vis-its. Russian nationals accounted for13% of July occupancy this year,compared with nearly none in 2009,according to the local tourismboard.

Businesses are hiring Russianspeakers. The Michelin-starred CanBosch Restaurant offers a Russian-language menu. Cyrillic script cov-ers signs for bicycle rentals and atice cream shops.

The Tryp Port Cambrils hotelstarted buying more watermelon afew years ago after the staff noticedEastern European guests gobblingup the fruit at buffet tables. Mr.Cabedo said his average revenue perroom has declined 7% since 2009, inpart because he´s offering morepromotions.

Vladimir Ovtchinnikoff, a touristfrom Moscow who sells tractorparts, said safety concerns aboutEgypt influenced his family’s deci-sion to vacation in Spain. He praisedthe wide beaches, which workerstidy each morning. He marveled atthe cleanliness of the water, despitethe proximity of large ships and achemical plant.

“I see tankers in the sea, but nooil fumes in the water,” he said. “Itis unbelievable for me.”

—Patricia Kowsmannand Liis Kangsepp

contributed to this article.

By Ilan Brat in Cambrils,Spain, and AlkmanGranitsas in Athens

A sailboat at port recently at Cambrils, a town in northeastern Spain. Europe’s southern rim is attracting more foreign tourists this year even as locals stay home.

SarahTenn

antforTh

eWallS

treetJournal

Visitors WelcomeA rise in tourism could help bolster troubled Mediterranean economies.

*Includes jobs indirectly supported by tourism industry; Note: for 2012

Source: World Travel & Tourism Council

TOURISM’S TOTALCONTRIBUTION TO GDP

SHARE OF ALL JOBSSUPPORTED BY TOURISM*

Portugal

Greece

Spain

Tunisia

Egypt

Italy

Turkey

18.5%

18.3

15.5

13.7

13.3

11.7

8.3

15.9%

16.4

15.2

15.1

15.1

10.3

10.9

The Wall Street Journal

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 25

PERSONAL JOURNAL

See the Phone? Try Picking It UpYounger Employees Love Email but Often Hate the Telephone, With Effects on the Bottom Line

Patty Baxter realized there wasa problem. In her 20 years atMetro Guide Publishing in Halifax,Nova Scotia, the office usuallyhummed with sales calls. Now, itwas quiet.

Advertising sales were downand Ms. Baxter identified a reason:Her sales staff, all under age 35,were emailing clients with theirpitches, not calling them on thephone.

Younger workers may havemastered technologies that someof their older colleagues havebarely heard of, such as photo andvideo sharing apps Instagram andVine, but some bosses wish they’dlearn a more traditional skill: pick-ing up the phone.

While millennials—usually de-fined as people born between 1981and the early 2000s—are rarelyfar from their smartphones, theygrew up with a wider array ofcommunication tools, such as tex-ting and online chatting, and havedifferent expectations for how andwhen they’d like to be reached. Inthe workplace, some managers sayavoiding the phone in favor ofemail can hurt business, hindercreativity and delay projects.

Stephanie Shih, 27, says phonecalls are an interruption. Thebrand marketing manager at Pa-perless Post, a New York-basedcompany that designs online andpaper stationery, doesn’t have awork phone. Nor do the majorityof her co-workers. The companysays that not having individualphone lines in open-plan areasprotects people from unwantedcalls, which can interrupt conver-sations.

Besides, says Ms. Shih, phonesseem “outdated.” She takes sched-uled work calls once or twice aweek. “Even my dentist’s officetexts me because they know phonecalls can be burdensome,” shewrote in an email.

Kevin Castle, a 32-year-oldchief technology officer at Tech-

nossus, an Irvine, Calif.-basedbusiness-software company, saysunplanned calls are such an an-noyance that he usually unplugshis desk phone and stashes it in acabinet. Calling someone withoutemailing first can make it seem asthough you’re prioritizing yourneeds over theirs, Mr. Castle says.Technossus’s staff relies mainly onemail to communicate, whichhelps bridge the time differencebetween the company’s offices inthe U.S. and India, he says. Heuses Microsoft Lync for instantmessaging and video conferencing.Phone calls are his last resort.

But email won’t cut it in pro-fessions like sales, where personalrapport matters, says Ms. Baxter,age 49. “You’re not selling ifyou’re just asking a question andgetting an answer back,” she says.

In August, a member of hersales team misunderstood anemail from a client and antici-

pated a sale that didn’t happen—amistake Ms. Baxter says couldhave been avoided had the em-ployee called the client to beginwith.

Since May, she’s had Mary JaneCopps, a phone-use consultant inHalifax, Novia Scotia, spend twodays a week at the office helpingnudge her staff onto the phone.Now, employees keep track of howthey contact clients and follow ascript when leaving voice mail.

Ms. Copps’s training includesrole playing that simulates salescalls to help with what she calls“phone phobia.” “For many people,it’s a lack of confidence thatthey’ll be able to say the rightwords in the right order in theright amount of time,” she says.

Ms. Copps, 55, whose website isthephonelady.com, charges $1,800for a full-day workshop. She beganworking as a phone consultant in2003 at the encouragement of a

friend. She was skeptical at firstas she thought phone skills werejust common sense.

Jason Nazar, a 34-year-oldSanta Monica, Calif.-based tech-nology entrepreneur, says his com-pany has missed out on potentialhires because his 20-somethingemployees schedule interviews byemail, rather than phoning appli-cants, which can take longer. “Ifyou can do something morequickly and more efficiently by us-ing older technology, then do it,”said Mr. Nazar, who is chief execu-tive of Docstoc, a service thathelps small businesses managedocuments online.

While data traffic on mobilephones nearly doubled, to 1.468trillion megabytes, between De-cember 2011 and December 2012,the number of minutes spent talk-ing during that period increasedby less than 1%, from 2.296 trillionto 2.30 trillion, according to CTIA,

a wireless-communications tradegroup.

Businesses aren’t giving up onthe phone yet. The number ofdesktop phones shipped to busi-nesses grew by 4.5% from 2011 to2012, according to Richard Cos-tello, an analyst at the market-re-search firm International DataCorp. Many new phones allowworkers to receive calls, texts, in-stant messages, transcribed voicemails and more all in one systemand access the phone systemthrough their work computers.

Dana Brownlee, a corporatetrainer based in Atlanta, says theissue of phone aversion frequentlycomes up in her project-manage-ment training sessions. One of herclients, a manager at a large utilitycompany, recently had to teach hisyoung employee what a dial tonewas and explain that desktopphones don’t require you to press“Send.”

BY ANITA HOFSCHNEIDER

Metro Guide Publishing is encouraging young sales staff to use the phone more for business deals. Above, sales project managers review department strategies.

DeanCa

savechia

forTh

eWallS

treetJournal

When Your Home Is Your Office, Separation MattersNot long ago, we had an unex-

pected guest for dinner: my job.Well, to be honest, it wasn’t all

that unexpected. My job pops infairly frequently at the dinner hour.And although it doesn’t eat anyfood, there’s no question that it’s in-trusive, disruptive—and annoys myhusband greatly.

“I’m just going to take this onecall,” I told Clay that night, gettingup from the table. Cue the eye rollfrom Clay, as he continued to qui-etly chew his chicken.

“It’s from the West Coast,” Icountered, as if that somehow madea difference. As I headed upstairs tothe home office, I called back: “I’llmake it quick.”

In many ways, of course, the lux-ury of a home office is the workingparent’s brass ring. I am extraordi-narily blessed to have the option ofworking from home when I am nottraveling. It gives me the flexibilityto pop down into the basement andtoss the wet laundry into the dryeror take a few minutes to welcome

my daughter home from school inthe afternoon or catch up on herday in between calls. It is a privi-lege, and one that I am grateful tohave.

But that privilege comes with aprice.

Clay has long griped about thedownside of working from home.Yes, he appreciates the flexibilitythat a home office affords our fam-ily, and loves having me around. Buthe often feels that I allow the officepart to seep too much into ourhome life—emotionally and physi-cally. He gets annoyed when workkeeps me from fully engaging infamily activities. And he sometimesis irritated when I bring my laptopdownstairs to work from the chaiselongue, getting in his way as he goesabout doing the daily housework.

To me, the frustration of a homeoffice is that, basically, you’re per-petually in the office. You step outof your office door right into therest of the house, and sometimesthe work doesn’t get the messagethat it shouldn’t come along. Too of-ten, it follows me around like a clerk

hawking perfume at a department-store cosmetics counter. My familyends up losing my attention; I’mthere, but I’m not there. And itmeans I can’t fully enjoy the plea-sure of family events as well. Workalways seems to beckon, just a fewfeet away.

Part of the problem, of course, isthat I have a lot of work to do. Butface it: So do most people. The big-ger part is that I often feel com-pelled to make sure that I am con-sistently available so no one at themother ship in New York thinks thatI’m slacking off (which, if my bossesare reading this, I’m not).

I also feel that it isn’t fair to askone of my team members who workin the office to take on a particu-larly late-breaking story, when mostof them have a 30-to-45 minutecommute to get home.

But I hit my wall one night notlong ago, as I put our 7-year-old tobed.

“When I grow up, I’m going to berich,” she said to me sleepily. “Thenyou won’t have to work so much.”

As I thought about it more, I re-

alized that I have been the architectof my own problems. It has been fartoo easy to justify quickly checkingone’s email or spending an extrahour or two to work on a project inthe office when the office is only afew feet away. I need to try to setbetter boundaries between my worklife and home life.

Much of the challenge lies inlearning when to turn things off. Af-ter chatting with a few others whowork from home, I have decided tomake a few simple (I hope) changes.

First, barring an emergency or aparticularly important story ordeadline, I am setting a strict eve-ning cutoff time for responding towork-related emails or calls.

I realize that it’s probably some-thing I should have done a long timeago. If it isn’t absolutely pressing,my horse and carriage turns backinto a pumpkin by 7 p.m., and I’mcalling it a night. I realize that I maynot be able to hit that goal everyday, but at this point, I’m not doingit at all, so I’m going to try my best.

Also, I plan to restrict work pa-pers and other work-related materi-

als to the home office. Too often, re-search reports or copies of ourpublications seep into the livingroom, our bedroom or the kitchen.If it isn’t there, I can’t read it.

At the end of each workday, Ialso plan to spend 10 to 15 minutesjust organizing my desk and pullingtogether a to-do list for the follow-ing morning.

By doing so, I hope that I canbring a sense of closure to my daybut also feel more relaxed and orga-nized about my game plan for thenext day.

One friend also suggested that Ispend a few weeks documenting myhours and what I do each day. If Istep away for an extra hour or 30minutes to tackle a personal task,then I should make sure I add thattime back into the end of the day orlater in the week.

“You’ll get a better sense of howmuch time you actually spend work-ing,” she said.

It may not be easy, but with afew small changes I think I can do abetter job of keeping work in the of-fice, where it belongs.

BY LAURA KREUTZER

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 5

Denmark’s Top BankerExtols Rates Policy

COPENHAGEN—Denmark’s cen-tral-bank governor said the adoptionof negative interest rates a year agoat the height of Europe’s debt crisishas kept the krone steady even amidrenewed turbulence on currencymarkets.

In an interview with The WallStreet Journal, Nationalbank Gover-nor Lars Rohde said the bank’s deci-sion to cut its deposit rate to belowzero has helped defend the krone’sfixed exchange rate at little cost tothe country’s banks.

The krone has remained stablewithin its narrow peg against theeuro in recent months, while curren-cies ranging from the Brazilian realto the Indian rupee and the Norwe-gian krone have seen sharp movesas investors ready for the U.S. Fed-eral Reserve to gradually ease itsmonetary stimulus.

Nationalbank’s decision put itamong a select few to adopt nega-tive interest rates, and its relativelysuccessful defense of the currencysuggests such a policy can be pur-sued without creating unforeseenconsequences for banks.

“The good news is that [the neg-ative rate] has had an impact on thecurrency market,” Mr. Rohde said.“It has been a very efficient tool toavoid unwarranted capital inflows.”

In July 2012, with the euro crisisdeepening, investors were scram-bling to sell euros and buy Danishkroner, then seen by investors asless risky because of Denmark’s rela-tively strong public finances. Thekrone had strengthened over theprevious six months and National-bank cut interest rates to sap inves-tor enthusiasm for the currency.

When the deposit rate reachedzero, and with the krone still rising,the bank cut the rate to minus 0.2%before later raising it in January tominus 0.1%, where it has stayedsince.

As a deposit rate below zero re-quires banks to pay to park depositsover a certain size with the centralbank, it should theoretically drivedown the desirability of krone-basedassets. Sweden’s Riksbank, whichpushed its deposit rate below zeroduring the financial crisis, is one ofthe few other central banks to havepursued a similar policy.

More than a year on, the krone islittle changed against the euro. Theeuro currently trades at about 7.461kroner, compared with its 2012 highof 7.4311 kroner in mid-June. Nation-albank hasn’t intervened in currencymarkets since January, unlike thecentral bank of New Zealand, an-other steady, small economy, whichhad to sell its currency over recentmonths to cool appreciation.

Mr. Rohde said the central bank’sdecision to cut the deposit rate tobelow zero was a sign of how highlyNationalbank valued its euro peg.

The central bank, which unlikemost major central banks doesn’thave an inflation target, has a statedaim of keeping the euro within2.25% of 7.46038 kroner, a range itset upon the euro’s introduction in1999. It changes interest rates andbuys and sells kroner to stay withinthis band.

“We will do whatever it takes toprotect the peg,” Mr. Rohde said.“The one and only role for Danishmonetary policy today is to securethe peg.”

Denmark is unusual in Europe inbinding its currency to the euro, asit has no immediate plans to join thecurrency area. Other countries witha similar peg, such as Latvia andLithuania, are in the process of join-ing the euro zone.

Having a currency peg offers alevel of stability for Denmark’s ex-porters, which struggled during theeuro zone’s debt crisis but fared bet-ter in the second quarter this year.The central bank’s commitment tothe peg also helps anchor inflationexpectations, Mr. Rohde said.

“Everyone knows the rules of thegame,” he said.

Mr. Rohde acknowledged the lim-its of his bank’s use of a negativerate, as below a certain rate banksand depositors have an incentive toswitch into cash rather than pay thecentral bank to hold its deposits.

“We have not come near thoselimits,” Mr. Rohde said.

Nationalbank says moving thedeposit rate below zero hasn’t im-posed large costs on banks.

The impact of the negative rateon banks’ profitability is about 200million kroner ($35 million) a year,according to the central bank’s cal-culations.

The biggest bank, Danske BankAS, posted profits of around 2 bil-lion kroner in the second quarteralone.

These practical lessons of whathappens in a subzero rate environ-ment will be closely watched byother central banks in case they oneday need to do something similar.The European Central Bank, theBank of England and the Fed allhave rates close to zero to helpstimulate struggling economies.

Mr. Rohde didn’t comment onwhether he had received calls fromcolleagues elsewhere asking for ad-vice. But as the Nationalbankdoesn’t have an inflation target, andthe monetary regimes of the majorcentral banks are so different, it isdifficult to estimate how such a pol-icy would fare in other countries.

Mr. Rohde said he felt that thebanks were probably now “out ofthe woods” after a series of Parlia-ment-sponsored support packages.Danish banks suffered during theeconomic downturn that followedthe financial crisis in 2008, as agri-cultural and commercial propertydevelopment projects turned sour.

The governor said economic in-dicators point to “modest but posi-tive” economic growth this year andgrowth of between 1.5% and 2% nextyear.

Denmark’s gross domestic prod-uct rose 0.5% on a quarterly basis inthe second quarter, helped by risingexports. The Danish economy hasbeen slowly recovering since thedownturn as a sharp fall in houseprices caused consumers to rein inspending, which hurt governmentrevenue and businesses.

BY CHARLES DUXBURY

Lars Rohde, Denmark’s central-bank governor, at a symposium in August.

Bloomberg

New

s

German CandidatesSpar Over Records

BERLIN—The last session of theGerman Parliament turned into aface-off between chancellor candi-dates, as Chancellor Angela Merkelargued that the last four years havebeen a period of prosperity, whileher main challenger called them amissed opportunity.

With the election less than threeweeks away, it is no surprise to seeMs. Merkel talking up her record.She pointed to unemployment, atthe lowest level since reunificationin 1990, and called the center-rightgovernment’s budget policy a “sen-sational success” because of lower-than-expected borrowing.

“I believe we can all state wehave had four unusual years,” Ms.Merkel said Tuesday, pointing to theeuro crisis, nuclear disaster in Fuku-shima and unrest in the Arab world.“Despite these challenges, we cansay: All in all, these have been fourgood years for Germany.”

The exchange follows the officialdebate broadcast on Sunday. Withthe chancellor scoring high on per-sonal popularity, the chances of theopposition’s Peer Steinbrück leadingthe country after the election areslim.

A coalition of his Social Demo-crats and its preferred partner, theGreens, is trailing Ms. Merkel’s cen-ter-right coalition by 11 percentagepoints, according to a TNS Emnid pollpublished Sunday.

On Tuesday, Mr. Steinbrück pre-sented a different picture of Ger-many, accusing Ms. Merkel of being“the architect of power and not thearchitect of the country.”

In particular, he said there is agrowing wealth gap, and pointed tohis plan for a minimum wage andhigher taxes for the rich.

“I share your happiness that wehave a strong country,” Mr. Stein-brück said. “But it is a country wherethe last far-reaching reforms stemfrom your predecessor GerhardSchröder. You have reaped the resultsduring this legislative term thatstarted in 2009, but haven’t sowedanything.”

In a heated part of the session,Mr. Steinbrück expressed outrageabout comments Ms. Merkel allegedlymade in a prerecorded program yetto be broadcast.

According to Mr. Steinbrück, thechancellor said the Social Democratswere “unreliable” regarding Euro-pean policy, even though she has hadto rely on the SPD at times to geteuro-zone crisis response measuresthrough the German Parliament.

“You are burning bridges withsuch comments,” Mr. Steinbrücksaid, indicating the souring moodbetween her party and his own.

Yet the two may find themselvesin another grand coalition—as in Ms.Merkel’s first term—if her currentjunior coalition partner, the FreeDemocrats, doesn't get enough votesto rejoin the government.

BY ANDREA THOMAS

EUROPE NEWS

Mr. Rohde said thedecision to cut thedeposit rate was a sign ofhow highly Nationalbankvalued its euro peg.

RESORT • SPA • DRIVEN EXPERIENCESRESORT • SPA • DRIVEN EXPERIENCESRESORT • SPA • DRIVEN EXPERIENCES

855-520-3378gatewaycanyons.com

“A magnificent locationfor uniquely-inspiring

luxury retreats.”Forbes Travel Guide

24 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Major players & benchmarks

Credit derivativesSpreads on credit derivatives are oneway themarket ratescreditworthiness. Regions that are treading in roughwaterscan see spreads swing toward themaximum—and vice versa.Indexes beloware for five-year swaps.

Markit iTraxx Indexes SPREADRANGE, in pct. pts.Mid-spread, sincemost recent roll

Index: series/version in pct. pts. Mid-price Coupon Maximum Minimum Average

Europe: 19/1 1.04 99.84% 0.01% 1.10 0.95 1.02

Eur. HighVolatility: 19/1 1.56 97.52 0.01 1.64 1.47 1.55

EuropeCrossover: 19/1 4.19 103.28 0.05 4.42 3.92 4.14

Asia ex-Japan IG: 19/1 1.60 97.35 0.01 1.70 1.28 1.47

Japan: 19/1 0.93 100.31 0.01 1.06 0.91 0.96

Note: Data as of September 2

SpreadsSpreads onfive-year swapsfor corporatedebt; based onMarkit iTraxxindexes.

In percentage points

3.00

2.00

1.00

0

–1

tAustralia

t

Japan

2013Mar. April May June July Aug.

Index roll

Source: Markit Group

Behind Europe's deals: Bank revenue rankings, FranceBehind every IPO, bond offering,merger deal or syndicated loan is one ormore investment banks. Here areinvestment banks ranked by year-to-date revenues from recent deals.

PERCENTAGEOFTOTALREVENUERevenue, Equity Debt Mergers&inmillions share capitalmarkets capitalmarkets acquisitions Loans

SGCorporate InvestmentBanking $115 8.6% 8% 54% 16% 22%

BNPParibas 106 8.0 5 55 24 16

GoldmanSachs 103 7.7 11 30 43 16

CreditAgricole CIB 92 6.9 9 52 25 14

DeutscheBank 82 6.2 28 32 18 22

Natixis 80 6.0 5 64 30 1

MorganStanley 73 5.5 6 26 16 52

Credit Suisse 71 5.3 2 43 37 19

HSBC 57 4.3 6 61 32 2

Source: Dealogic

Trackingcreditmarkets &dealmakers

Dow Jones Industrial Average P/E: 15LAST: 14833.96 s 23.65, or 0.16%

YEAR TO DATE: s 1,729.82, or 13.2%OVER 52WEEKS s 1,798.02, or 13.8%

Note: Price-to-earnings ratios are for trailing 12 months

16000

15500

15000

14500

14000

13500

7 14 21 28June

5 12 19 26July

2 9 16 23 30Aug.

High

Close

Low

50–daymoving average

t

Stoxx Europe 50: Tuesday's best and worst...

Previousclose, in STOCK PERFORMANCE

Company Country Industry Volume local currency Previous session YTD 52-week

Telefon L.M. Ericsson B Sweden Telecommunications Equipment 18,822,521 82.50 4.96% 26.7% 35.8%

Imperial Tobacco Grp United Kingdom Tobacco 1,442,438 2,154 0.98 -9.2 -13.4

BHPBilliton United Kingdom GeneralMining 4,976,806 1,936 0.78 -9.1 4.4

Rio Tinto United Kingdom GeneralMining 3,305,105 3,059 0.77 -12.9 9.4

BGGrp United Kingdom Integrated Oil & Gas 3,999,225 1,247 0.61 23.2 -4.0

Vodafone Group United Kingdom Mobile Telecommunications 265,302,867 202.50 -5.02% 31.1 10.5

Sanofi SA France Pharmaceuticals 3,253,420 72.30 -2.82 1.3 8.7

SAP Germany Software 4,116,015 55.09 -1.82 -9.2 5.2

INGGroep Netherlands Life Insurance 15,763,921 8.31 -1.61 17.7 36.1

BNPParibas France Banks 3,671,642 48.27 -1.39 13.3 38.4

...And the rest of Europe's blue chipsLatest,in local STOCK PERFORMANCE

Company/Country (Industry) Volume currency Latest YTD 52-week

Schneider Electric 1,558,720 59.70 0.45% 8.9% 17.1%France (Electrical Components & Equipment)Banco Bilbao Vizcaya Argn 19,929,340 7.41 0.41 7.6 24.8Spain (Banks)ABB 3,630,453 20.21 0.40 7.8 20.9Switzerland (Industrial Machinery)Credit Suisse GroupAG 4,600,072 27.44 0.29 24.5 50.7Switzerland (Banks)Telefonica S.A. 11,998,322 10.47 0.29 2.7 0.2Spain (Fixed Line Telecommunications)Novartis AG 4,674,880 70.05 0.29 21.9 24.0Switzerland (Pharmaceuticals)Deutsche Telekom 16,545,095 9.83 0.12 15.5 4.3Germany (Mobile Telecommunications)Allianz SE 2,005,970 110.35 0.09 5.3 25.3Germany (Full Line Insurance)HSBCHldgs 16,868,751 687.60 0.07 6.3 24.8United Kingdom (Banks)Reckitt Benckiser Grp 840,323 4,426 0.07 14.1 22.9United Kingdom (Nondurable Household Products)Glencore Xstrata PLC 13,259,820 312.20 0.05 -11.1 -19.6United Kingdom (GeneralMining)L'Air Liquide 496,403 100.95 -0.05 6.2 6.8France (Commodity Chemicals)Tesco 7,829,156 369.85 -0.08 10.1 9.0United Kingdom (Food Retailers &Wholesalers)Royal Dutch Shell A 2,316,911 2,073 -0.10 -2.3 -6.9United Kingdom (Integrated Oil & Gas)Financiere Richemont 649,485 91.15 -0.11 27.7 51.9Switzerland (Clothing & Accessories)E.ONSE 9,374,344 12.06 -0.17 -14.4 -34.4Germany (Multiutilities)Barclays 16,172,615 285.10 -0.21 8.7 54.7United Kingdom (Banks)UBS 7,260,520 18.54 -0.22 29.9 72.8Switzerland (Banks)Deutsche Bank 5,061,851 33.29 -0.33 1.0 20.1Germany (Banks)British American Tobacco 2,223,296 3,264 -0.34 4.6 -2.1United Kingdom (Tobacco)

Latest,in local STOCK PERFORMANCE

Company/Country (Industry) Volume currency Latest YTD 52-week

GlaxoSmithKline 4,739,467 1,666 -0.39% 24.8% 15.9%United Kingdom (Pharmaceuticals)Anheuser-Busch InBev 1,008,565 71.86 -0.44 9.3 4.6Belgium (Brewers)Banco Santander S.A. 34,284,996 5.42 -0.50 -8.5 -1.1Spain (Banks)Zurich Insurance Group 434,645 234.00 -0.51 -3.9 2.0Switzerland (Full Line Insurance)Siemens 1,309,586 81.32 -0.51 -1.1 8.8Germany (Diversified Industrials)BASF 2,103,699 67.23 -0.55 -5.5 9.3Germany (Commodity Chemicals)National Grid 4,673,512 747.00 -0.60 6.3 8.7United Kingdom (Multiutilities)Daimler 2,905,610 52.73 -0.66 27.6 39.6Germany (Automobiles)Moet Hennessy Louis Vuitt 518,028 134.90 -0.70 -3.2 3.8France (Clothing & Accessories)Diageo 3,066,952 1,980 -0.70 10.8 13.1United Kingdom (Distillers & Vintners)Nestle 3,291,721 60.95 -0.73 2.3 1.7Switzerland (Food Products)BPPLC 19,324,065 441.85 -0.83 4.0 -0.4United Kingdom (Integrated Oil & Gas)AstraZeneca 1,982,516 3,154 -0.90 8.4 7.0United Kingdom (Pharmaceuticals)Bayer 1,680,778 84.82 -0.96 18.0 36.2Germany (Specialty Chemicals)ENI 9,425,472 17.35 -0.97 -5.4 0.5Italy (Integrated Oil & Gas)Unilever 1,754,337 2,460 -1.01 4.0 7.7United Kingdom (Food Products)Standard Chartered 3,037,912 1,446 -1.13 -8.1 4.0United Kingdom (Banks)Unilever CVA 4,402,750 28.55 -1.19 -1.0 2.0Netherlands (Food Products)RocheHolding Part. Cert. 843,118 233.60 -1.23 27.0 33.6Switzerland (Pharmaceuticals)Total 4,279,377 41.84 -1.30 6.4 4.5France (Integrated Oil & Gas)

Sources: SIX Financial Information

DJIA component stocksVolume, CHANGE

Stock Symbol inmillions Latest Points Percentage

AT&T T 26.2 $33.30 –0.53 –1.58%Alcoa AA 24.5 7.73 0.03 0.39AmExpress AXP 3.1 72.57 0.66 0.92BankAm BAC 65.2 14.28 0.16 1.12Boeing BA 2.9 105.19 1.27 1.22Caterpillar CAT 5.8 82.42 –0.12 –0.15Chevron CVX 3.2 120.47 0.04 0.03CiscoSys CSCO 25.9 23.53 0.22 0.94CocaCola KO 16.5 37.88 –0.30 –0.79Disney DIS 6.1 61.00 0.17 0.28DuPont DD 2.9 56.36 –0.26 –0.46ExxonMobil XOM 8.0 87.10 –0.06 –0.07GenElec GE 43.7 23.07 –0.07 –0.28HewlettPk HPQ 8.6 22.39 0.05 0.22HomeDpt HD 5.7 74.11 0.01 0.01Intel INTC 22.1 22.07 0.09 0.42IBM IBM 2.8 183.71 1.44 0.79JPMorgChas JPM 13.2 51.14 0.61 1.21JohnsJohns JNJ 5.8 86.31 –0.10 –0.12McDonalds MCD 2.7 94.59 0.23 0.24Merck MRK 9.3 47.25 –0.04 –0.08Microsoft MSFT 141.0 31.72 –1.68 –5.04Pfizer PFE 20.4 28.04 –0.17 –0.60ProctGamb PG 5.5 77.80 –0.09 –0.123M MMM 1.8 113.32 –0.26 –0.23TravelersCos TRV 1.2 80.59 0.69 0.86UnitedTech UTX 4.1 102.71 2.61 2.61UtdHlthGp UNH 3.1 72.65 0.91 1.27Verizon VZ 42.1 45.92 –1.46 –3.08

WalMart WMT 5.9 72.73 –0.25 –0.34

Source: WSJ Market Data Group

Credit-default swaps: European companiesAt itsmostbasic, thepricingofcredit-defaultswapsmeasureshowmuchabuyerhastopaytopurchase-andhowmuch a seller demands to sell-protection from default on an issuer's debt. The snapshot below gives asensewhichway themarketwasmoving yesterday.

Showing the biggest improvement...CHANGE, in basis points

Yesterday Yesterday Five-day 28-day

ONOFin II 514 –36 –51 –66

GasNat 180 –9 ... –3

Iberdrola 181 –7 1 –1

BqePsaFin 536 –20 –36 –45

Iberdrola Intl 182 –7 1 ...

Telecom Italia 353 –13 –18 –50

LLOYDSTSBBK 137 –5 2 7

GroheHldg 177 –6 2 19

Peugeot 538 –18 –35 –49

KBCBk 158 –5 –3 –9

And the most deteriorationCHANGE, in basis points

Yesterday Yesterday Five-day 28-day

INGVerzekeringen 74 1 2 5

Nielsen 71 1 1 2

Novartis 30 ... ... 1

Portigon 97 1 1 1

DanskeBk 116 1 3 ...

KabelDeutschlandVertriebundService 66 ... –2 –3

Smurfit KappaFdg 114 ... –1 ...

Heineken 62 ... 2 3

SvenskaCellulosa 64 ... ... –1

Linde 49 ... ... 2

Source:Markit Group

BLUE CHIPS & BONDS

WSJ.com>>Follow the markets throughout the day, with updatedstock quotes, news and commentary at WSJ.com.

Also, receive emails that summarize the day’s trading inEurope and Asia. To sign up, go to WSJ.com/Email.

Below, a look at the Dow Jones Stoxx50, the biggest and best knowncompanies in Europe, including the U.K.

6 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

California Case ContestsImmigration Regulation

California’s Supreme Court is setWednesday to consider whether anillegal immigrant is eligible for a li-cense to practice law in the state, inthe latest case to pit the federalgovernment against a state over im-migration policy.

The California attorney generalhas thrown her support behind Ser-gio C. Garcia, who moved from Mex-ico to Chico, Calif., when he was 17years old and is seeking admission tothe state bar. The U.S. Department ofJustice, however, filed a brief lastyear arguing that federal law prohib-its him from receiving a law license.

The Justice Department said Mr.Garcia is forbidden from obtaining alicense by a law Congress passed in1996, the Personal Responsibility andWork Opportunity Reconciliation Act.

Mr. Garcia, who graduated fromCal Northern School of Law in Chicoand passed the state bar exam in2009, said the case is about statesovereignty—not his immigrationstatus.

“The federal government hasnever controlled who can and can-not be an attorney,” Mr. Garcia said.“They are trying to make a federalissue out of something that iswithin the state’s rights.”

A Justice Department spokes-woman declined to comment.

Mr. Garcia paid for his educationwith wages he made as a producemanager at a grocery store as wellas with credit cards and proceedsfrom a self-help book, “Love, Sexand Romance,” he wrote in 2006.Lately, Mr. Garcia said he has beensupporting himself with motiva-tional-speaking fees and occasionalparalegal work.

Mr. Garcia, who owns a companythat offers paralegal and other sup-port services, plans to open his ownlaw practice.

Mr. Garcia isn’t violating anycriminal law by remaining in the U.S.,but employers are barred from hiringhim as long as he is undocumented.The law is grayer on whether a clientcould legally contract with him, legalexperts said. Still, he could use a lawlicense to provide free legal services,

or, if he were to leave the country, hecould advise foreign companies onU.S. law.

His father, now a U.S. citizen,sponsored Mr. Garcia for a greencard when the family moved here in1994, and Mr. Garcia has been wait-ing for a visa number ever since. Hislong wait is typical.

The hearing in San Franciscocomes roughly a year after theObama administration launched aprogram allowing undocumentedimmigrants brought to the U.S. aschildren to remain here and work le-gally. While Mr. Garcia, who is 36, istoo old to participate in the pro-gram, his supporters say he is em-blematic of the young immigrantsthe Obama administration hassought to shield because he wasbrought to this country withouthaving a say in the matter.

The federal government is alsoopposing an attempt by an undocu-mented immigrant to gain admissionto the Florida bar. Unlike Mr. Garcia,Jose Manuel Godinez-Samperio qual-ified for the Department of Home-land Security’s Deferred Action forChildhood Arrivals program and isnow authorized to work in the U.S.,according to his lawyer. The JusticeDepartment said in court documentsfiled with the state Supreme Courtthat the authorization doesn’t entitlehim to a professional license.

Larry DeSha, a former prosecu-tor for the State Bar of California,said Mr. Garcia should be denied ad-mission because his immigrationstatus could affect his ability to rep-resent clients.

More than half a million peoplehave applied for the deferred action,or DACA, program since August2012, according to U.S. Citizenshipand Immigration Services.

A recent survey of 1,608 pro-gram participants found that 42%expect to obtain a master’s degree,a professional degree or a law de-gree.

Caesar Vargas, who was broughtto the U.S. illegally as a child, hasapplied for admission to the NewYork bar and is awaiting a decision.He is a part of a group called theDream Bar Association, whose mem-

bers, like himself, are undocumentedbut have received or are seeking lawdegrees. The group’s 13 members in-clude law students in Arizona, Idahoand Texas, he said.

The dispute in California con-trasts with the federal government’sconfrontation with Arizona over astate law that created new immigra-tion crimes and penalties. The U.S.Supreme Court in June struck downparts of the measure, ruling that theyconflicted with federal government’sdomain over immigration policy, asthe Justice Department had argued.

In the California case, the scriptis flipped, with the state is arguingthat the federal government has noauthority to decide who receives alicense to practice law. Such deci-sions rest with the California Su-preme Court in an arrangement that“has long been held to be a core at-tribute of state sovereignty,” stateAttorney General Kamala Harriswrote in a court brief.

The federal law cited by the Jus-tice Department prohibits states fromproviding illegal immigrants withpublic benefits, unless states passlaws to contrary. The law was calcu-lated to create political ramificationsfor state legislators who approvedpublic benefits for illegal immigrants.It defines public benefit to include a“professional license…provided by anagency of a State or local govern-ment or by appropriated funds of aState or local government.”

The California Supreme Court op-erates using funds appropriated bythe state, and thus it is barred fromissuing Mr. Garcia his license, accord-ing to the Justice Department.

Mr. Garcia and his supporterssay the law prohibits only profes-sional licenses that are paid for orsubsidized by appropriated statefunds. But the state bar association,which takes the lead role in assess-ing whether candidates are fit to be-come an attorney, is funded bymembership fees.

The California Supreme Courtthen grants admission based on thebar association’s recommendation,but no public funds are appropri-ated to the function, Ms. Harris ar-gued in her brief.

BY JOE PALAZZOLO

Sergio Garcia, outside his Chico, Calif., office, is a law-school graduate, but hasn’t been admitted to the state bar becausehe is an illegal immigrant. He is at the center of California’s latest attempt to thwart federal immigration policy.

Max

Whittaker/Prim

eforTh

eWallS

treetJournal

Home Buyers GetNew FHA Lifeline

The Obama administrationwants to create a mortgage marketthat is more forgiving to borrowerswho lost their homes due to the re-cession, an effort that could widenthe pool of potential homeowners.

A recent rule change lets certainborrowers who have gone througha foreclosure, bankruptcy or otheradverse event—but who have re-paired their credit—become eligibleto receive a new mortgage backedby the Federal Housing Adminis-tration after waiting as little asone year. Previously, they had towait at least three years beforethey could qualify for a new gov-ernment-backed loan.

To be eligible for the new FHAloans, borrowers must show thattheir foreclosure or bankruptcy wascaused by a job loss or reduction inincome that was beyond their con-trol. Borrowers also must provetheir incomes have had a “full re-covery” and complete housingcounseling before getting a newmortgage.

Real-estate companies in bubblehot spots like Las Vegas and Phoe-nix already have stepped up mar-keting campaigns to attract theseso-called “boomerang” buyerswhose finances have improved aftera foreclosure.

But it isn’t clear if banks will beeager to offer loans with the newterms at a time when they are fac-ing a wave of lawsuits and investi-gations related to other govern-ment-backed loans. The FHAalready offers among the most flex-ible lending standards today, re-quiring down payments of just3.5%.

“It’s difficult to see how lenderswould even consider doing mort-gages with higher risk” in the cur-rent environment, said David Ste-vens, the chief executive of theMortgage Bankers Association, whoserved as the FHA’s commissionerfrom 2009 to 2011. Lenders aren’tgoing to expand credit “whileyou’re suing them and threateningthem over minor errors.”

The policy change reflectsbroader concerns among adminis-tration officials and federal regula-tors that the mortgage-credit pen-dulum has swung too far to therestrictive side from the days of laxlending rules that fueled the bub-ble. Some economists say too-strictcredit standards are shutting outsome creditworthy borrowers andholding back economic growth. Lowparticipation in the recovery byyoung buyers “absolutely is a prob-lem, and I’m not exactly an ‘easycredit’ guy,” said Thomas Lawler, ahousing economist in Leesburg, Va.

The new rules, which expire inthree years, also apply to formerhomeowners who completed ashort sale, where a bank approvesthe sale for less than the amountowed.

That could help potential buyerslike Candy Alvarado, who sold acondominium in Norwalk, Calif., for$108,000 three years ago, leavingher bank with a $168,000 loss. The

31-year-old schoolteacher, who useda no-money-down mortgage, said itdidn’t make sense to keep thecondo after home values droppedand her work hours were cut duringthe recession.

Ms. Alvarado and her husbandbegan looking for a home foraround $400,000 in April and theyare preapproved for an FHA-backedloan. “We’ve been saving, and wewant to make sure we have a homewhere we can build equity,” shesaid.

Shaun Donovan, the secretaryfor the Department of Housing andUrban Development, which runs theFHA, played down potential criti-cism that the agency might invite areturn to risky lending practices.“What we are talking about is get-ting back to responsible, plain-va-nilla lending,” he said in an inter-view. “We believe these are low-riskloans that can be made safely.”

In the four years ended last Sep-tember, some 3.9 million homes hadbeen lost to foreclosure. About 1million borrowers who wentthrough foreclosure during the cri-sis have already waited the re-quired three years to be eligible foran FHA-backed mortgage, and byearly next year that number couldrise to 1.5 million, according to es-timates from Moody’s Analytics.

While the new rules could helpsome buyers, many former home-owners will need more time to re-pair their credit, said Aviva Lomeli,a real-estate agent with Redfin whorepresents Ms. Alvarado. “You don’tnecessarily start recovering oneday after you finish a short sale,”she said.

The administration’s broaderpush to ease lending is running upagainst other hurdles. The govern-ment—through mortgage-financefirms Fannie Mae, Freddie Mac orfederal agencies—has guaranteed asmany as nine in 10 new loans in re-cent years. But over the past fouryears, banks have had to buy backtens of billions of defaulted loansas Fannie, Freddie and the FHAfaced mounting losses. Because ofuncertainties about these “put-backs,” lenders have imposed more-conservative standards than whatthe federal entities require.

The FHA says it has a separateeffort under way to provide greaterclarity about when banks could faceput-backs, following on the work ofthe regulator for Fannie and Fred-die last year. Lenders say thosechanges haven’t been specificenough to change their lending pos-ture.

BY NICK TIMIRAOS

U.S. NEWS

What’s Your Number?Average credit score for FHAborrowers obtaining mortgagesto purchase homes

The Wall Street Journal

Source: Federal Housing Administration

720

600

620

640

660

680

700

’07 ’08 ’09 ’10 ’11 ’12 ’13

April 693

An FHA rule changereflects concern credithas become too tight.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 23

Major stock market indexes Stock indexes fromaround theworld, grouped by region. Shown in local-currency terms.

PREVIOUS SESSION PERFORMANCERegion/Country Index Close Net change Percentage change Yr.-to-date 52-wk.

EUROPE Stoxx Europe 600 301.78 -1.16 -0.38% 7.9% 13.7%

Stoxx Europe 50 2702.92 -17.43 -0.64 4.9 8.1

Euro Zone Euro Stoxx 280.46 -1.06 -0.38 7.5 16.2

Euro Stoxx 50 2753.35 -20.74 -0.75 4.5 13.0

Austria ATX 2460.57 7.34 0.30% 2.5 21.9

Belgium Bel-20 2707.20 -2.26 -0.08 9.3 14.4

Czech Republic PX 943.66 0.16 0.02 -9.1 -0.2

Denmark OMXCopenhagen 509.95 -4.60 -0.89 12.7 14.3

Finland OMXHelsinki 6557.20 199.59 3.14 13.0 23.0

France CAC-40 3974.07 -31.94 -0.80 9.1 15.1

Germany DAX 8180.71 -63.16 -0.77 7.5 16.6

Hungary BUX 18271.61 78.72 0.43 0.5 2.9

Ireland ISEQ 4229.71 -18.98 -0.45 24.5 34.0

Italy FTSEMIB 16941.03 -47.54 -0.28 4.1 11.3

Netherlands AEX 367.09 -2.17 -0.59 7.1 10.6

Norway All-Shares 549.02 0.67 0.12 11.9 13.4

Poland WIG 48968.87 -218.35 -0.44 3.2 18.1

Portugal PSI 20 5887.79 -16.56 -0.28 4.1 16.2

Russia RTSI 1293.11 1.13 0.09% -15.3 -8.0

PREVIOUS SESSION PERFORMANCERegion/Country Index Close Net change Percentage change Yr.-to-date 52-wk.Spain IBEX 35 8445.20 15.60 0.19 3.4 12.8

Sweden OMXStockholm 390.86 2.12 0.55 13.6 22.4

Switzerland SMI 7866.23 -25.39 -0.32% 15.3 23.6

Turkey ISE National 100 66973.08 -1572.30 -2.29 -14.4 0.1

U.K. FTSE 100 6468.41 -37.78 -0.58 9.7 14.0

ASIA-PACIFIC DJAsia-Pacific 137.44 1.80 1.33 3.2 12.9

Australia SPX/ASX 200 5196.60 8.30 0.16 11.8 20.8

China CBN 600 19940.60 n.a. ... ...

Hong Kong Hang Seng 22394.58 219.24 0.99 -1.2 15.3

India S&PBSE Sensex 18234.66 -651.47 -3.45 -6.1 4.6

Japan Nikkei Stock Average 13978.44 405.52 2.99 34.5 59.3

Singapore Straits Times 3054.78 -0.94 -0.03 -3.5 1.4

South Korea Kospi 1933.74 8.93 0.46 -3.2 1.4

AMERICAS DJAmericas 414.92 0.64 0.15 11.8 14.4

Brazil Bovespa 51454.16 -380.99 -0.74 -15.6 -10.2

Mexico IPC 39599.23 -529.81 -1.32 -9.4 -0.5

Note:Americas index data are as of 3:00 p.m. ET. Sources: SIX Financial Information;WSJMarketDataGroup

Cross rates U.S.-dollar and euro foreign-exchange rates in global trading

USD GBP CHF SEK RUB NOK JPY ILS EUR DKK CDN AUD

Australia 1.1044 1.7168 1.1795 0.1668 0.0330 0.1818 0.0111 0.3025 1.4538 0.1949 1.0485 ...

Canada 1.0533 1.6374 1.1249 0.1591 0.0314 0.1734 0.0106 0.2885 1.3866 0.1859 ... 0.9537

Denmark 5.6668 8.8088 6.0520 0.8558 0.1692 0.9328 0.0570 1.5520 7.4596 ... 5.3799 5.1310

Euro 0.7597 1.1809 0.8113 0.1147 0.0227 0.1250 0.0076 0.2080 ... 0.1341 0.7212 0.6878

Israel 3.6514 5.6759 3.8996 0.5515 0.1090 0.6010 0.0367 ... 4.8066 0.6444 3.4665 3.3062

Japan 99.4278 154.5557 106.1870 15.0162 2.9681 16.3663 ... 27.2301 130.8838 17.5457 94.3933 90.0267

Norway 6.0752 9.4435 6.4882 0.9175 0.1814 ... 0.0611 1.6638 7.9972 1.0721 5.7675 5.5007

Russia 33.4991 52.0727 35.7764 5.0592 ... 5.5141 0.3369 9.1743 44.0972 5.9115 31.8029 30.3317

Sweden 6.6214 10.2926 7.0715 ... 0.1977 1.0899 0.0666 1.8134 8.7162 1.1685 6.2861 5.9953

Switzerland 0.9363 1.4555 ... 0.1414 0.0280 0.1541 0.0094 0.2564 1.2326 0.1652 0.8889 0.8478

U.K. 0.6433 ... 0.6870 0.0972 0.0192 0.1059 0.0065 0.1762 0.8468 0.1135 0.6107 0.5825

U.S. ... 1.5545 1.0680 0.1510 0.0299 0.1646 0.0101 0.2739 1.3164 0.1765 0.9494 0.9054

Source: ICAPPlc.

MSCI indexesDeveloped and emerging-market regional and country indexesfromMSCI Barra as of September 03, 2013

Price-to- LOCAL-CURRENCYDividend earnings PERFORMANCEyield ratio MorganStanley Index Last Daily YTD 52-wk.

2.60% 15 ALLCOUNTRY (AC)WORLD* 366.21 -0.61% 7.8% 13.7%

2.60 16 World (DevelopedMarkets) 1,481.18 -0.57 10.7 15.8

2.50 16 World ex-EMU 181.64 -0.41 11.1 15.1

2.50 16 World ex-UK 1,489.26 -0.42 11.2 16.2

3.20 15 EAFE 1,720.73 -1.36 7.3 16.9

2.80 11 EmergingMarkets (EM) 938.29 -0.93 -11.1 -1.0

3.50 15 EUROPE 103.63 1.84 7.6 12.8

3.60 15 EMU 169.22 -1.74 7.6 21.5

3.40 16 Europe ex-UK 109.76 1.73 8.7 16.3

4.50 12 EuropeValue 102.90 1.93 6.1 12.4

2.50 19 EuropeGrowth 100.54 1.76 9.1 13.1

2.50 28 EuropeSmall Cap 232.41 1.91 16.3 26.0

3.90 6 EMEurope 269.57 0.92 -13.2 -7.8

3.70 13 UK 1,924.39 1.46 10.1 13.7

3.60 16 Nordic Countries 187.22 1.88 8.3 12.2

3.80 5 Russia 728.45 0.34 -5.0 -2.6

3.00 16 SouthAfrica 1,027.75 0.35 1.6 11.9

3.00 13 ACASIAPACIFICEX-JAPAN 440.29 -1.18 -5.5 5.3

1.90 17 Japan 690.33 1.01 30.2 53.9

3.40 9 China 59.14 1.82 -5.9 12.5

1.50 14 India 735.49 1.19 -3.8 8.9

1.10 10 Korea 556.46 -0.30 -4.1 1.5

3.00 17 Taiwan 284.29 0.17 2.8 8.5

2.00 17 USBROADMARKET 1,855.30 0.00 15.4 17.7

1.50 26 USSmall Cap 2,808.79 0.00 19.3 25.1

3.40 15 EMLATINAMERICA 3,090.60 -1.41 -18.6 -12.7

*Twenty-three developed and 26 emergingmarkets Source:MSCI Barra

Dow Jones IndexesPrice-to-

Dividend earnings PERFORMANCE (euros) PERFORMANCE (U.S.dollars)yield* ratio* Dows Jones Index Last Daily 52-wk. Last Daily 52-wk.

2.58%18.34 Global TSM 2898.58 0.27% 15.3%

2.84 20.30 GlobalDOW 1577.20 0.50% 12.9% 2205.84 0.36 18.4

3.21 13.74 Global Titans 50 213.31 -0.08 4.3 209.78 -0.24 9.4

3.49 19.62 DevEuropeTSM 2970.51 -0.46 20.3

2.53 19.23 DevelopedMarketsTSM 2907.47 0.36 17.2

... 12.96 S&PBMIEmgMarkets 236.56 -0.43 -0.9

3.61 18.95 S&PEurope 350 1231.49 -0.31 13.3 1456.80 -0.51 18.7

3.60 20.45 S&PEuro 1187.90 -0.39 16.3 1424.09 -0.58 21.8

4.26 17.30 EuropeDow 1258.41 -0.28 10.8 1758.39 -0.51 16.1

3.62 8.08 BRIC50 365.19 -0.44 -8.5 458.46 -0.59 -4.1

2.04 19.26 U.S. TSM 17156.70 0.24 17.9

Kuwait Titans 30 -c 198.18 -0.26 10.2

Price-to-Dividend earnings PERFORMANCE (euros) PERFORMANCE (U.S.dollars)yield* ratio* Dows Jones Index Last Daily 52-wk. Last Daily 52-wk.

TurkeyTitans 20 -c 678.15 -2.16% -0.6%

6.15%26.46 Global SelectDiv 225.05 0.11 7.5

5.58 15.53 Asia/Pacific SelectDiv 289.07 1.01% -0.4% 325.49 0.77 4.3

U.S. SelectDividend -d 1100.25 -0.41 16.9

3.24 25.00 S&PGlbNatResources 1951.17 0.74 -6.7 2552.90 0.59 -2.2

2.31 17.91 IslamicMarket 2460.30 0.09 10.5

2.69 15.91 IslamicMarket 100 2677.59 -0.11 10.5

Islamic Turkey -c 4024.84 -1.96 4.9

3.59 21.78 Sustainability Europe 99.49 -0.29 14.1 143.88 -0.53 19.5

4.23 21.38 S&PGlb Infrastructure 1392.17 -0.29 -0.0 2071.06 -0.43 4.8

1.95 13.74 Luxury 1910.36 -0.34 28.0

DJ-UBSCommodity -p 116.65 0.97 -10.4 131.71 0.97 -10.1

*Fundamentals are based on data inU.S. dollar. Footnotes: a-inUSdollar. b-dividends reinvested. c-in local currency. Note:All data as of 2 p.m.ET. Source: S&PDowJones Indices

GLOBAL MARKETS LINEUP

WSJ.com>> Follow the markets throughout the day with updated stock quotes, news andcommentary at WSJ.com. Also, receive email alerts that summarize the day’s trading in Europeand Asia. To sign up, go to WSJ.com/email.

Commodities Prices of futures contractswith themost open interestEXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: ChicagoMercantile Exchange; ICE-US: ICE Futures U.S.MDEX:BursaMalaysiaDerivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: LondonMetals Exchange;NYMEX:NewYorkMercantile Exchange;ICE-EU: ICE Futures Europe *Data as of September 2, 2013

ONE-DAY CHANGE Year YearCommodity Exchange Last price Net Percentage high low

Corn (cents/bu.) CBOT 475.25 -6.25 -1.30% 605.00 445.25Soybeans (cents/bu.) CBOT 1386.25 17.75 1.30% 1,409.50 1,162.50Wheat (cents/bu.) CBOT 647.25 -7.00 -1.07 834.50 0.65Live cattle (cents/lb.) CME 126.150 -0.825 -0.65 135.700 121.250Cocoa ($/ton) ICE-US 2,415 -21 -0.86 2,547 2,071Coffee (cents/lb.) ICE-US 117.50 1.20 1.03 169.30 116.10Sugar (cents/lb.) ICE-US 16.46 0.12 0.73 20.20 15.93Cotton (cents/lb.) ICE-US 82.87 -0.62 -0.74 93.72 77.80Rapeseed (euro/ton) LIFFE 389.00 2.00 0.52 441 353Cocoa (pounds/ton) LIFFE 1,612 -7 -0.43 1,673 1,421Robusta coffee ($/ton) LIFFE 1,786 28 1.59 2,206 1,721

Copper ($/lb.) COMEX 3.3065 0.0460 1.41 3.8305 3.0055Gold ($/troy oz.) COMEX 1413.10 17.00 1.22 1,707.50 1,182.60Silver ($/troy oz.) COMEX 24.375 0.862 3.67 32.670 18.215Aluminum ($/ton)* LME 1,814.00 -3.50 -0.19 2,165.50 1,764.50Tin ($/ton)* LME 21,150.00 -75.00 -0.35 25,150.00 19,300.00Copper ($/ton)* LME 7,200.00 77.50 1.09 8,286.00 6,676.00Lead ($/ton)* LME 2,161.50 -3.50 -0.16 2,455.00 1,961.00Zinc ($/ton)* LME 1,903.50 -9.50 -0.50 2,214.00 1,820.50Nickel ($/ton)* LME 13,825 -5 -0.04 18,665 13,245

Crude oil ($/bbl.) NYMEX 108.46 0.81 0.75 112.24 86.47Heating oil ($/gal.) NYMEX 3.1440 -0.0443 -1.39 3.2290 2.7625RBOB gasoline ($/gal.) NYMEX 2.8655 -0.0651 -2.22 2.9821 2.4668Natural gas ($/mmBtu) NYMEX 3.756 0.036 0.97 4.5970 3.2810Brent crude ($/bbl.) ICE-EU 113.76 1.22 1.08 115.76 96.20Gas oil ($/ton) ICE-EU 963.75 5.50 0.57 985.50 835.50

Sources: SIX Financial Information;WSJMarket Data Group

Currencies London close onSept. 3Per In

AMERICAS Per euro In euros U.S. dollar U.S. dollars

Argentina peso-a 7.4911 0.1335 5.6908 0.1757

Brazil real 3.1407 0.3184 2.3859 0.4191

Canada dollar 1.3866 0.7212 1.0533 0.9494

Chile peso 671.87 0.001488 510.40 0.001959

Colombia peso 2559.67 0.0003907 1944.50 0.0005143

EcuadorUS dollar-f 1.3164 0.7597 1 1

Mexico peso-a 17.6853 0.0565 13.4349 0.0744

Peru sol 3.6945 0.2707 2.8066 0.3563

Uruguay peso-e 29.429 0.0340 22.356 0.0447

U.S. dollar 1.3164 0.7597 1 1

Venezuela bolivar 8.36 0.119632 6.35 0.157480

ASIA-PACIFIC

Australia dollar 1.4538 0.6878 1.1044 0.9054

1-mo. forward 1.4570 0.6863 1.1068 0.9035

3-mos. forward 1.4624 0.6838 1.1110 0.9001

6-mos. forward 1.4708 0.6799 1.1173 0.8950

China yuan 8.0556 0.1241 6.1196 0.1634

Hong Kong dollar 10.2086 0.0980 7.7551 0.1289

India rupee 89.9606 0.0111 68.3400 0.0146

Indonesia rupiah 15073 0.0000663 11450 0.0000873

Japan yen 130.88 0.007640 99.43 0.010058

1-mo. forward 130.87 0.007641 99.41 0.010059

3-mos. forward 130.83 0.007644 99.38 0.010062

6-mos. forward 130.73 0.007649 99.31 0.010069

Malaysia ringgit-c 4.3260 0.2312 3.2863 0.3043

NewZealand dollar 1.6907 0.5915 1.2844 0.7786

Pakistan rupee 138.061 0.0072 104.880 0.0095

Philippines peso 58.553 0.0171 44.481 0.0225

Singapore dollar 1.6821 0.5945 1.2779 0.7826

South Koreawon 1446.22 0.0006915 1098.65 0.0009102

Taiwan dollar 39.230 0.02549 29.802 0.03356

Thailand baht 42.346 0.02362 32.169 0.03109

Per InEUROPE Per euro In euros U.S. dollar U.S. dollars

Euro zone euro 1 1 0.7597 1.3164

1-mo. forward 0.9999 1.0001 0.7596 1.3165

3-mos. forward 0.9997 1.0003 0.7594 1.3168

6-mos. forward 0.9993 1.0007 0.7591 1.3173

Czech Rep. koruna-b 25.804 0.0388 19.602 0.0510

Denmark krone 7.4596 0.1341 5.6668 0.1765

Hungary forint 302.44 0.003306 229.76 0.004352

Norway krone 7.9972 0.1250 6.0752 0.1646

Poland zloty 4.2746 0.2339 3.2473 0.3080

Russia ruble-d 44.097 0.02268 33.499 0.02985

Sweden krona 8.7162 0.1147 6.6214 0.1510

Switzerland franc 1.2326 0.8113 0.9363 1.0680

1-mo. forward 1.2323 0.8115 0.9361 1.0682

3-mos. forward 1.2317 0.8119 0.9357 1.0688

6-mos. forward 1.2306 0.8126 0.9348 1.0697

Turkey lira 2.7123 0.3687 2.0604 0.4853

U.K. pound 0.8468 1.1809 0.6433 1.5545

1-mo. forward 0.8470 1.1806 0.6435 1.5541

3-mos. forward 0.8474 1.1801 0.6437 1.5534

6-mos. forward 0.8479 1.1794 0.6441 1.5525

MIDDLE EAST/AFRICA

Bahrain dinar 0.4964 2.0145 0.3771 2.6519

Egypt pound-a 9.1906 0.1088 6.9818 0.1432

Israel shekel 4.8066 0.2080 3.6514 0.2739

Jordan dinar 0.9326 1.0723 0.7085 1.4115

Kuwait dinar 0.3761 2.6590 0.2857 3.5002

Lebanon pound 1989.82 0.0005026 1511.60 0.0006616

Saudi Arabia riyal 4.9370 0.2026 3.7505 0.2666

South Africa rand 13.5897 0.0736 10.3236 0.0969

United Arab dirham 4.8352 0.2068 3.6732 0.2722

a-floating rate b-financial c-government rate c-commercialrate d-Russian Central Bank rate.Source: ICAPPlc.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 7

Long-Term Jobless Left Out of RecoveryFor those left behind by the long,

slow economic recovery, time isrunning out.

More than four years after the re-cession officially ended, 11.5 millionAmericans are unemployed, many ofthem for years. Millions more haveabandoned their job searches, hidingfrom the economic storm in school orturning to government programs forsupport. A growing body of economicresearch suggests that the longerthey remain on the sidelines, the lesslikely they will be to work again; formany, it may already be too late.

By most conventional measures,the U.S. economy is healing, albeitslowly. Gross domestic product grewat a 2.5% rate in the second quarterof the year, the government said lastweek, the best pace since last fall.Payroll figures, due Friday, willlikely show that hiring held steadyin August. The housing market is re-bounding, corporate profits arestrong, and households are repair-ing their balance sheets.

But the recovery isn’t reachingmany of the most vulnerable. Forthose without a high-school di-ploma, the unemployment rate inJuly was 11%. For African-Ameri-cans, it was 12.6%. For teenagers,23.7%. Even more worrisome toeconomists are signs of a bifurca-tion in the labor market: For thoseunemployed less than six months,the odds of finding a job have im-proved steadily over the past year;the long-term unemployed havemade almost no progress at all.

The recession, for all its brutality,was comparatively egalitarian, saidGary Burtless, a Brookings Institutioneconomist. It struck the young andold, educated and uneducated, whitecollar and blue collar. The recovery,by contrast, has been asymmetric:Those who held on to their jobs orquickly found new ones have madeup much of the ground they lost,while the jobless continue to suffer.

“If you’ve made it through andyou’re still employed, your stockportfolio has recovered, your houseprice is recovering, too,” Mr. Burt-less said. “For the unemployed, thishas been a miserable recovery com-pared to pretty much any of thepostwar recoveries.”

Debbie Orr lost her job as directorof a Dallas-area retirement commu-nity more than five years ago and hasbeen mostly out of work ever since.She receives a $1,500 monthly dis-ability payment, the result of a backinjury, and lives with her 82-year-oldmother, who receives Social Securitybenefits. But the payments aren’tenough to make ends meet withouthelp from her brother, and even with

help Ms. Orr and her mother keep theair conditioning off in the Texas heat.“Every cent that comes out is ear-marked for something,”Ms. Orr said.“I go to bed a lot at night trying tofigure out what I’m going to do topay my electric bill.”

Ms. Orr, 47 years old, says shehasn’t actively looked for work inthe past year, in part because shehas been caring for her mother. Butshe is now reactivating her profes-sional network in the hopes of find-ing a job as the economy improves.

Economic research suggests Ms.Orr may struggle to find work. Re-cent studies in both the U.S. andoverseas found employers oftenwon’t even consider the long-term

jobless for openings.Many have given up applying.

Nearly seven million people say theywant a job but aren’t actively look-ing for work. The share of the popu-lation that is working or looking forwork—a measure known as the par-ticipation rate—stands near a three-decade low. The rate was fallingeven before the recession, partly be-cause of the aging of the baby-boomgeneration, but economists disagreeabout how much of the more recentdecline is tied to the weak economy.

“People have found other things,maybe staying at home, taking care offamily,” said Willem Van Zandweghe,an economist at the Federal ReserveBank of Kansas City. “You need to see

a much stronger economy before theyconsider coming back.”

For economists, the key questionis how many of the labor-force drop-outs will return when the economyeventually rebounds more strongly. Ifmost of the dropouts are simplywaiting for better times, then the la-bor market is significantly worsethan the 7.4% unemployment ratewould indicate. That, advocates ofmore government stimulus argue,means the Federal Reserve shouldkeep trying to boost the economy toput the jobless back to work.

But if most of the dropouts aregone for good, then no amount ofstimulus is likely to bring workersback. A permanently smaller work-force would mean it takes fewerjobs than in the past to bring downunemployment, but it also meansthe economy’s underlying growthrate has slowed.

At least some of those who haveleft the labor force are unlikely toreturn. More than 8.9 million Amer-icans were receiving federal disabil-ity payments in August, 1.8 millionmore than when the recession be-gan. Experts suspect many of thenew recipients would have keptworking in a healthier economy; re-search has found that once peoplebegin receiving disability payments,relatively few return to work.

But other workers, especiallythose in their 20s and 30s, will al-most certainly return.

When Sara Fitouri was nearinggraduation from Ithaca College inNew York state last year, shethought about heading to work. Butwith job prospects weak, and tens ofthousands of dollars in student-debtpayments waiting for her when shegraduated, the 23-year-old decidedto go to law school instead.

“I knew I wouldn’t be able tofind a job, and continuing withschool allows me to defer my loans,”Ms. Fitouri said. “I knew very, veryfew of my peers who had jobs com-ing out of school.”

BY BEN CASSELMAN

U.S. Factories Hum Amid Global Growth PickupThe U.S. manufacturing sector ex-

panded at its quickest pace in morethan two years, as domestic demandremained brisk and trading partnersaround the globe saw their econo-mies improve.

The latest report from the Insti-tute for Supply Management cappedthree months of manufacturinggrowth, reflecting renewed vigor ina sector that showed signs of slow-ing earlier this year.

The ISM’s manufacturing pur-chasing managers index rose to 55.7in August, the highest level since a55.8 reading in June 2011. Readingsabove 50 indicate expansion. The in-crease from July’s 55.4 level waspowered in part by new orders,which climbed to their strongestreading since April 2011.

A number of manufacturers saidthey are having trouble keeping upwith new business. “We’re slammedand we will be until the end of theyear,” said Torey Rose, chief execu-tive of YSS Athletics Inc., whichmakes team uniforms for schools, col-leges and recreational programs, aswell as clothes for sporting-goodsstores. “Our biggest concern rightnow is finding skilled labor.”

The Snellville, Ga., company,which employs 32 people, is running1½ shifts, or a total of 12 hours a

day, up from a single eight-hourshift during part of the 2007-09 re-cession. Before the downturn, YSSAthletics was running two eight-hour shifts, or 16 hours a day. “Idefinitely see that happening again,”said Ms. Rose, noting that saleshave been up for the past two years.

The second-half pickup in U.S.manufacturing comes as major trad-ing partners have shown signs ofimprovement. In Europe, the sectorhas strengthened since the spring-time, as the continent’s economyinches out of a slump. And China,despite slowing economic growth,also notched manufacturing expan-sion in August, following three lack-luster months.

“If we get domestic strength ontop of some recovery in the rest ofthe world, I think the [U.S.] manu-facturing sector is in its best com-petitive position in decades, maybeeven back to the 1960s,” said JosephCarson, director of global economicresearch at AllianceBernstein LP.“The cost structure is low, innova-tion is high and the quality of theproduct is fantastic—near the top inmany categories.”

In the ISM report, 15 of 18 indus-tries reported expansion, while twosaw business hold steady. In justone category—“miscellaneous man-ufacturing”—business contracted.The category, which includes jew-

elry, toys, sporting goods, medicalequipment and office supplies, rep-resents about 5% of U.S. manufac-turing, said ISM Chairman BradleyJ. Holcomb.

August was a “well-balanced,good month for manufacturing,” Mr.Holcomb said. He noted that the U.S.economy remains vulnerable to riskssuch as turbulence in the MiddleEast as well as potential headwindswhen the Federal Reserve at somepoint slows its $85 billion-a-month

bond-buying stimulus program. How-ever, “looking locally at manufactur-ing, we’ve got two really solidmonths for the third quarter and Ithink that we have every possibilitythat continues,” he said.

The report also exposed someweaknesses. A number of industries,including transportation equipmentas well as computers and electronicproducts, said they felt the pinchfrom the federal budget cuts knownas the sequester. Customer invento-

ries continued to contract; produc-tion and employment both contin-ued to grow, but at a slower pacethan in July.

The employment measure’s fall toa still-expansionary 53.3 from 54.4 amonth earlier isn’t that surprising,said Mr. Carson of AllianceBernstein,because “we’re able to produce a lotof products with more capital andless labor.” On Friday, the Labor De-partment is slated to release the na-tion’s jobs picture for August.

BY BRENDA CRONIN

U.S. NEWS

Note: All 12-month moving averages, not seasonally adjusted Source: U.S. Labor Department The Wall Street Journal

Down and OutThe real picture of joblessness in America goeswell beyond the official unemployment rate.

Labor-force participation rate

67

63

64

65

66

%

2008 ’09 ’10 ’11 ’12 ’13

Actual

Predicted bydemographictrends

Percent of unemployed finding jobs each month, byduration of unemployment

0

10

20

2008 ’09 ’10 ’11 ’12 ’13

Six months or less

More than six months

Change since the start of the recession

0

20

40

60

80

100

120%

2008 ’09 ’10 ’11 ’12 ’13

Unemployed

Want a job,haven't searched

Want a job,have searched

OUTLOOK: The short-term unemployed have a betterchance of finding a job than in past years. But the long-termunemployed have seen little improvement.

DEMOGRAPHICS: An aging population means thepercentage looking for work would have fallen. But theweak economy has led to a steeper drop.

BIGGER PICTURE: The number of officially unemployedworkers is falling, but many more people say they want ajob but aren’t actively searching.

30%

65

40

45

50

55

60

’12 ’132011 ’12 ’132011 ’12 ’132011 ’12 ’132011

EXPA

NDING

CONTRACT

ING

U.S. PMI NEW ORDERS PRODUCTION EMPLOYMENT62.463.2

55.7 53.3

Production Lines

Source: Institute for Supply Management The Wall Street Journal

U.S. manufacturing expanded in August, as new orders surged but gaugesof production and employment slowed their pace of growth.

22 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Sector Equity BiotechnologyFundsthat investprimarily intheequitiesofcompaniesthatfocusonbiotechnology. Atleast 75% of total assets are invested in equities. Ranked on % total return (dividendsreinvested) in Euros for one year endingSeptember 03, 2013

Leading 10 PerformersFUND FUND LEGAL %Return in $US **RATING * NAME FUNDMGM'T CO. CURR. BASE YTD 1-YR 2-YR 5-YR

NS Dexia Eqs L Dexia Asset USDLUX 42.19 39.09 45.69 23.92Biotechnology CAcc Management

NS JB EF Swiss Global USDLUX 47.21 37.92 51.89 16.87Biotech-USDA AssetManagement AG

NS AXA AXA Investment GBPGBR 43.21 37.23 48.98 16.72Framlington Biotech RAcc Managers UK Ltd.

NS Franklin Franklin Templeton USDLUX 44.63 37.12 49.09 19.80Biotechnology Disc AAcc $ Investment Funds

NS BBBiotech B Bellevue Asset USDLUX 41.92 36.54 44.49 NSUSD Management AG

NS UBS (Lux) EF UBS Fund USDLUX 42.52 36.27 47.32 19.11Biotech (USD) P Management (Luxembourg) S.A.

NS Carnegie Carnegie Fund EURLUX 42.12 36.12 46.39 17.71Biotechnology Services S.A.

NS Adamant Balfidor CHFCHE 44.75 35.92 45.21 NSGlobal Biotech A Fondsleitung AG

NS CCRActions CCRAsset EURFRA 43.73 35.74 45.02 13.48Biotech A Management

NS CS SICAV Credit Suisse USDLUX 40.86 34.87 47.91 16.85(Lux) Eq Biotechnology B (Luxembourg) S.A.

NOTE: Changes in currency rateswill affect performance and rankings. Source: Morningstar, LtdKEY: ** 2YR and 5YR performance is annualized 1 Oliver’s Yard, 55-71 City RoadNA-not available due to incomplete data; London EC1Y 1HQUnited KingdomNS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com

Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001

MARKETS

Fund Scorecard

Worries Over SyriaWeigh on Stocks

European stocks lost groundTuesday as worries over a possibleU.S.-led military intervention inSyria overshadowed upbeat eco-nomic data and a strong showingfrom the technology sector after Mi-crosoft’s agreement to buy Nokia’scellphone business.

The benchmark Stoxx Europe600 index fell 0.4% to 301.78. The

U.K.’s FTSE 100 indexlost 0.6% to 6468.41,Germany’s DAX re-treated 0.8% to 8180.71,

and France’s CAC-40 also shed 0.8%to 3974.07.

The Stoxx 600 technology indexrallied 2.2% on news that Microsofthad struck a $7 billion deal to ac-quire Nokia’s struggling cellphonebusiness. Nokia shares surged 34%.

Other telecom-related firms alsoclimbed. Alcatel-Lucent jumped9.2%, Telefon AB L.M. Ericssongained 5%, and chip maker STMi-croelectronics rose 0.9%. Microsoftwas down 5% in late U.S. trading.

Meanwhile, U.S. manufacturingactivity picked up in August. TheISM’s manufacturing purchasingmanagers’ index rose to 55.7 in Au-gust from 55.4 in July.

Still, despite the exuberance inthe tech sector and the stronger-than-expected U.S. data, a cautioustone prevailed as developmentsaround Syria continued to dominatesentiment. U.S. President BarackObama said Tuesday he wanted aprompt vote on his plan for militaryaction in Syria when Congress re-turns from recess next week.

While there is no guarantee law-makers will support military strikes,Mr. Obama said he believes Con-gress will ultimately vote in favor ofmilitary action. House Speaker JohnBoehner and House Majority LeaderEric Cantor both threw their weightbehind Mr. Obama, saying they sup-ported the use of military force inSyria.

U.S. stocks edged higher butpared early gains, as the worriesabout military strikes in Syria and a

rise in Treasury yields took theshine off strong global economicdata. The Dow Jones Industrial Av-erage gained 23.65 points, or 0.2%,to 14833.96, in 4 p.m. trading. TheDow was up as much as 123 pointsearlier in the session. The S&P 500-stock index rose 6.80 points, or0.4%, to 1639.77, and the NasdaqComposite Index added 22.74 points,or 0.6%, to 3612.6124.

U.S. Treasury prices tumbled,with the 10-year note dropping18/32, sending the yield up to2.857% in late New York trading.

Earlier in the European session,financial markets were rattled byreports that Russia’s Defense Minis-try had detected the launch of twoballistic objects in the Mediterra-nean Sea. European stocks fell tosession lows, while prices of crudeoil, gold and German governmentbonds rallied. These moves werelargely reversed after Israel said themissiles were part of a joint Ameri-can-Israeli military exercise, but in-vestors remained jittery.

While stocks in Europe’s majormarkets ended lower, Spain buckedthe trend as the IBEX-35 gained0.2% to 8445.20.

On Tuesday, data showed thenumber of registered job seekers inSpain fell in August for the sixthconsecutive month, while on Mon-day data showed the country’s man-ufacturing sector grew in August forthe first time in more than twoyears.

In London, Vodafone Grouppulled back 5% after the companyoutlined its investment plans fol-lowing Monday’s announcement ofthe sale of its stake in Verizon Wire-less.

The euro slipped to $1.3172 lateTuesday in New York from $1.3193late Monday.

Crude oil for October deliverygained 89 cents a barrel, or 0.8%, to$108.54 on the New York MercantileExchange.

Gold for September deliverygained $15.90 a troy ounce, or 1.1%,to $1,412.00 on the Comex divisionof Nymex.

BY NINA BAINS

MARKETREPORT

BofA Ending CCB TiesHONG KONG—Bank of America

Corp. is selling its remaining stakein China Construction Bank Corp.for up to US$1.5 billion, marking theend of an era for the Wall Streetbanks that piled into major Chinesebanks in the last decade in hopes ofhaving an edge in China.

Bank of America is the last of themajor American banks that are sell-ing out of the big Chinese banksthey bought into before those bankswent public in Hong Kong, a timewhen China, and these lenders, werebooming. These banks, most re-cently Goldman Sachs Group Inc.,have been disposing of their Chinesebank stakes since the financial crisisfive years ago, raising billions ofdollars in the process, while reduc-ing the effects on their balancesheets from financial holdings.

International regulations knownas Basel III—the latest standard forbank capital, risk management andliquidity—have made holding minor-ity stakes in other financial institu-tions particularly onerous from acapital standpoint, and forced someof the selling. For their part, most ofthe Chinese banks that Westernlenders bought into have failed todeliver on their promise of greaterChina access. On top of that, manyChinese banks are increasinglystruggling with asset quality and arelooking to raise capital.

“Because of Basel III, the era thatglobal banks can buy small stakes inbusinesses here and there is gone,”said James Antos, a Hong Kong-based banking analyst at Mizuho Se-curities Asia.

Bank of America declined to com-ment, and China Construction Bankcouldn’t be reached for comment.

Bank of America has whittleddown its stake after it purchased aninitial 10% holding for $3 billioneight years ago and invested a fur-ther $7 billion to raise its stake toalmost 20% in late 2008. BetweenJanuary 2009 and November 2011, itraised at least US$22.6 billion froma series of stake sales that left itwith less than 1%.

“These shareholdings haven’tyielded the kind of China accessWestern banks initially expected,but they made a lot of money fol-lowing the IPO of these banks andensuing share sales,” said Keith Pog-son, a Hong Kong-based partner inErnst & Young’s Asian-Pacific finan-cial-services office.

Bank of America is selling twobillion Hong Kong-listed shares inrange of HK$5.63 to HK$5.81 each(73 U.S. cents to 75 U.S. cents), rep-resenting a discount of 2% to 5.1% toTuesday’s closing price of HK$5.93,according to a term sheet seen bythe Wall Street Journal.

Bank of America’s sale comesfour months after Wall Street rivalGoldman Sachs sold the last of itsstake in China’s biggest bank, Indus-trial & Commercial Bank of ChinaLtd., following a series of disposals.

Volatility in ICBC’s shares led

Goldman to report a full-year netloss in Asia in 2011, its first losssince the 2008 financial crisis.

UBS AG kicked off the sellingspree in Chinese banks in January2009, when it sold its whole stake inBank of China Ltd. Two weeks afterthe Swiss bank’s sale, Royal Bank ofScotland Group PLC also exited itsBank of China stake.

To be sure, some Western banks,including HSBC Holdings PLC, con-tinue to hold stakes in Chinese lend-ers, though not the so-called BigFour. HSBC also happens to be theforeign bank with the most branchesin mainland China.

HSBC owns 19% of Bank of Com-munications Co, China’s fifth-biggestlender by assets. It also has an 8%stake in city lender Bank of Shanghai.

Citigroup Inc. owns 20% of ChinaGuangfa Bank, which is based in theSouthern province of Guangdong, butsold its entire 2.71% equity stake inShanghai Pudong DevelopmentBank, a joint-stock commercial bankbased in Shanghai, last year.

Neither Bank of Shanghai andGuangfa are listed.

Bank of America is selling itsstake as investors grow more waryover the asset quality of Chinesebanks, after a huge government-sparked credit boom that fueledenormous lending while buoying theeconomy in recent years.

While CCB said last week that itsnonperforming-loan ratio was un-changed at 0.99% for the first half ofthe year ended June 30, the bankalso said it wrote off a total of 5.38billion yuan ($879 million) in badloans, more than four times the 1.17billion yuan total from the same pe-riod last year.

BY FIONA LAWAND PRUDENCE HO

Investors Starting to Ease Back Into Asiafor the region. Exports from Asiannations should pick up over the nextyear as demand in industrialized na-tions recovers, J.P. Morgan Chase &Co. estimates.

Japanese companies are invest-ing more, according to data releasedMonday by the finance ministry,adding to a sense that Prime Minis-ter Shinzo Abe’s expansionary fiscaland monetary policy is boostingeconomic activity after two decadesof deflation.

China’s economy also is showingsigns of renewed vigor after growthslowed to 7.6% year-over-year in thefirst half of 2013, its weakest pacein years. The official purchasingmanagers’ index hit a 16-month highin August and exports, industrialoutput and investment have allbeaten expectations.

That is good for nations such asSouth Korea and Taiwan that exportelectronics equipment to China. TheSouth Korean won and the nation’sKospi index had weakened withother Asian markets but have sinceregained ground.

While South Korea’s industrialoutput was flat in July, productionof semiconductors rose 13.6% on theprevious month, a sign of recoveringdemand in China and the U.S.

“Certainly the numbers out ofNorth Asia recently have beenpretty positive,” said Shane Oliver,chief economist at AMP Capital inSydney.

Even countries such as Indonesiaand India, which have borne thebrunt of the selloff, may have seenthe worst, some economists say.

Indonesia’s commodity exportsto China dipped rapidly this year—

Continued from page 15

slowing its economic engine—whileimports of fuel and other goodshave remained high, widening thetrade deficit. The country needs toattract foreign capital to fill thatgap, which left it exposed when in-vestors fled its stock and bond mar-kets.

Tim Condon, head of Asian eco-nomic research for ING Bank, saidIndonesia’s economy, which is stillgrowing at an annual pace of morethan 5%, should recover in tandemwith China.

He said Indonesia’s central bank,which unexpectedly raised rates lastweek in a bid to attract back capitalflows, has room to take more suchaction in the weeks ahead. “Hotmoney should flow back,” Mr. Con-

don said, drawn by the country’sstrong growth potential.

Nations such as India and Indo-nesia should use the respite in mar-ket pressure to overhaul their econ-omies to attract capital, said Li-Gang Liu, a Hong Kong-basedeconomist with ANZ Banking Group.

“Stability in China and Japan hasgiven the Indonesian and Indiangovernments breathing space,” hesaid.

Elsewhere in Asia on Tuesday,Australia’s S&P/ASX 200 closed up0.2% at 5196.60 after the ReserveBank of Australia kept interest rateson hold and delivered a neutral pol-icy statement.

Miners in Sydney, however, madestrong gains as the price of iron orerose overnight: Rio Tinto rose 3.1%and Fortescue Metals Group was4.9% higher.

South Korea’s Kospi was up 0.5%at 1933.74, and Taiwan’s Taiexgained 0.6% to 8088.37.

In Mumbai, the S&P BSE Sensexindex fell 3.5%, to 18234.66 points.It was the third time in little morethan two weeks that the 30-stockbenchmark has fallen 3% or more ina single session.

Market participants said a de-gree of caution is to be expected inthe next couple of days before somekey events. The Bank of England andEuropean Central Bank interest rateannouncements are due Thursday,while U.S. nonfarm payrolls arescheduled for release on Friday.

The U.S. jobs figures will belooked at for signals on when theFederal Reserve might start to rollback its stimulus.

—Mia Lamar contributedto this article.

Nikkei 225

Thailand SET

5

–15

–10

–5

0

%

Sept.Aug.

Source: FactSet The Wall Street Journal

Bouncing BackPerformance of select Asianstock indexes

Hang Seng

Minority stakes in otherfinancial institutionshave become onerous.

8 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Rebel Groups Still WaitFor CIA Arms Supplies

In June, the White House autho-rized the Central IntelligenceAgency to help arm moderate fight-ers battling the Assad regime, a sig-nal to Syrian rebels that the cavalrywas coming. Three months later,they are still waiting.

The delay, in part, reflects abroader U.S. approach rarely dis-cussed publicly but that underpinsits decision-making, according toformer and current U.S. officials:The Obama administration doesn’twant to tip the balance in favor ofthe opposition for fear the outcomemay be even worse for U.S. intereststhan the current stalemate.

U.S. officials attribute the delayin providing small arms and muni-tions from the CIA weapons programto the difficulty of establishing se-cure delivery “pipelines” to preventweapons from falling into the wronghands, in particular Jihadi militantsalso battling the Assad regime.

Allied rebel commanders in Syriaand congressional proponents of amore aggressive military responseinstead blame a White House thatwants to be seen as responsive toallies’ needs but fundamentallydoesn’t want to get pulled anydeeper into the country’s grindingconflict.

The administration’s view canalso be seen in White House plan-ning for limited airstrikes—nowawaiting congressional review—topunish Syrian President Bashar al-Assad for his alleged use of chemi-cal weapons.

Pentagon planners were in-structed not to offer strike optionsthat could help drive Mr. Assadfrom power: “The big concern is thewrong groups in the oppositionwould be able to take advantage ofit,” a senior military officer said.

The CIA declined to comment.The White House wants to

strengthen the opposition butdoesn’t want it to prevail, accordingto people who attended closed-doorbriefings by top administration offi-cials over the past week. The admin-istration doesn’t want U.S. air-strikes, for example, tipping thebalance of the conflict because itfears Islamists will fill the void ifthe Assad regime falls, according tobriefing participants, which in-cluded lawmakers and their aides.

Squaring those positions is onefocus of congressional hearings onthe proposed strikes which startedTuesday, administration and con-gressional officials said. DefenseSecretary Chuck Hagel and Secre-tary of State John Kerry are amongthose slated to testify.

Republican Sen. John McCain ofArizona said it was “shameful” thatpromised U.S. arms haven’t materi-alized, given recent shipments ofadvanced weapons from Russia andIran in support of Mr. Assad.

After meeting with President Ba-rack Obama on Monday, Sens. Mc-Cain and Lindsey Graham, anotherleading Republican critic of the ad-ministration’s approach to the con-flict, said they believed the adminis-tration was formulating a plan to“upgrade” the capabilities of moder-ate rebels, but they offered no de-tails.

Sen. McCain also held out the

prospect that Mr. Obama would con-sider widening the targets forstrikes to degrade Mr. Assad’s abil-ity to carry out chemical weaponand conventional attacks.

Growing frustration with the slowpace of the CIA arming and trainingprogram has prompted calls fromlawmakers and some Arab leaders toshift the effort to the Pentagon, saidcongressional officials who favor themove. White House and Pentagon of-ficials had no immediate comment.

Putting the Pentagon in chargewould allow the U.S. to do “indus-trial strength” arming and training,Sen. Bob Corker, the top ranking Re-publican on the Senate Foreign Re-lations Committee, said in an inter-view Monday.

Some lawmakers accused theWhite House of failing to deliver onits promises because of concerns itwould get blamed if the effort wentwrong and for fear of gettingtrapped in a proxy fight that pits Mr.Assad and his backers—Iran, Russiaand Hezbollah—against an array ofopposition groups, some linked to alQaeda and others supported by theU.S. and some Arab allies.

“There’s been a major disconnectbetween what the administrationhas said it’s doing relative to therebels and what is actually happen-ing,” said Sen. Corker, who recentlyvisited rebel leaders in Turkey. “The[CIA] pipeline has been incrediblyslow. It’s really hurt morale amongthe Syrian rebels.”

Many rebel commanders say theaim of U.S. policy in Syria appearsto be a prolonged stalemate thatwould buy the U.S. and its alliesmore time to empower moderatesand choose whom to support.

“The game is clear to all,” saidQassem Saededdine, a spokesmanfor the U.S.-backed Free SyrianArmy’s Supreme Military Council.“When it comes to the interests of

superpowers… the average Syriancomes last.”

Some congressional officials saidthey were concerned the adminis-tration was edging closer to an ap-proach privately advocated by Is-rael. Israeli officials have told theirAmerican counterparts they wouldbe happy to see its enemies Iran,the Lebanese Shiite militia Hezbol-lah and al Qaeda militants fight un-til they are weakened, giving moder-ate rebel forces a chance to play abigger role in Syria’s future.

Gen. Martin Dempsey, chairmanof the Joint Chiefs of Staff, has beenparticularly outspoken with law-makers about his concerns thatweakening Mr. Assad too muchcould tip the scales in favor of alQaeda-linked fighters.

When the CIA arms program wasrevealed in June, it was describedby U.S. officials as a change in Mr.Obama’s approach to the conflictand the beginning of a process tobuild up the armed oppositionagainst Mr. Assad.

It took almost a year for the ideato gain traction in a skeptical WhiteHouse, which last summer autho-rized the CIA to join Saudi Arabiaand other allies to train handpickedrebels at a secret base in Jordan. Atthe time, Mr. Obama balked at pro-viding arms. Nonlethal U.S. militarysupport, such as medical kits andnight-vision goggles, started arriv-ing in small quantities this spring.

Congressional committees thatoversee the CIA and its budget ini-tially raised questions about the co-vert arms program, officials said,delaying startup funding.

The CIA also appeared conflictedabout the effort’s utility. Congressio-nal officials said CIA leaders in brief-ings indicated they believed that U.S.arms would only have a limited im-pact on the fight in a country awashin weapons. They also told Congressthe U.S. was investing little com-pared with Iran and Hezbollah, whichthe U.S. believes will do whatever ittakes in Syria to prevail.

But CIA officials told lawmakersproviding arms would help theagency build relationships withrebel forces and give it greater le-verage with such allies as Saudi Ara-bia, which provide the bulk of armsand money.

“When we have more skin in thegame, it just puts us in a position tohave deeper relationships with theopposition but also work more ef-fectively with other countries whoare doing a lot in terms of support,”a senior administration official said.

A former senior administrationofficial involved in the effort wasmore dismissive, describing the CIAprogram as “designed to buy timewithout getting the U.S. deeply in-volved in the civil war.”

—Carol E. Lee, Julian E. Barnesand Siobhan Gorman

contributed to this article.

BY ADAM ENTOUSAND NOUR MALAS

An opposition fighter loads a locally made mortar bomb near Aleppo Monday.

Reuters

President Barack Obama with Susan Rice and John Boehner on Tuesday.

AssociatedPress

CONFRONTING SYRIA

Putting the Pentagon incharge would allow theU.S. to do ‘industrialstrength’ arming andtraining.

Capitol Hill Support Grows for Strike Against SyriaSyria. The bipartisan show of sup-port afterward marked a shift fol-lowing a weekend in which lawmak-ers from both parties had expressedreservations and no consensus wasapparent.

House Majority Leader Eric Can-tor (R., Va.) offered his support foraction against Syria in a statementreleased after the meeting, saying,“America’s credibility is on the line.”

“A failure to act when acting is inAmerica’s interest and when a redline has been so clearly crossed willonly weaken our ability to use diplo-macy, economic pressure and othernonlethal tools to remove Assad anddeter Iran and other aggressors,”Mr. Cantor said.

Mr. Cantor, a staunch supporterof Israel, said the violence in Syria isspilling over into other countriesand threatens U.S. allies in the re-gion. “It is not just an abstracttheory that the Syrian conflictthreatens the stability of key Ameri-can partners in the region,” he said.“It is a reality.” Mr. Cantor didn’tmention Israel by name.

Other lawmakers, including thechairman of the Senate Select Com-mittee on Intelligence, Sen. DianneFeinstein (D., Calif.), and the rankingmember of the House Permanent Se-

Continued from first page lect Committee on Intelligence, Rep.Dutch Ruppersberger (D., Md.), alsosaid they would support military ac-tion. Moreover, Senate MajorityLeader Harry Reid (D., Nev.) believeshe will have the votes in the Senateto pass such a resolution even if op-ponents try to use a filibuster toblock it, an official familiar with histhinking said Tuesday.

The expressions of support onCapitol Hill were a crucial first stepfor Mr. Obama’s policy, but don’t

guarantee backing from the balkyrank and file of both parties, espe-cially in the House.

Among House Republicans, thereis a sizable faction of tea-party allieswho are more skeptical of military in-tervention as well as other conserva-tives who are hostile to Mr. Obama’sleadership. In the Democratic caucus,there are many liberals reluctant touse military force even when soughtby a president of their own party.

“He has problems on both sides,”

said a senior aide to House Demo-cratic leaders. “There are Republi-cans in the House who hate him andare viscerally opposed to everythinghe puts out, and his own party isfilled with people who, like himwhen he was in the Senate, arehighly skeptical of military action.’’

In the contemporary Congress,the days are long gone when partyleaders can “deliver” votes. Andboth Mrs. Pelosi and Mr. Boehnerhave said they consider votes onmilitary matters a question of con-science that shouldn’t be a matter ofparty-line discipline.

The president’s meeting came aspart of an administration-wide pushto compel Congress to back militaryaction against Syria. Later Tuesday,members of the president’s cabinet,including Secretary of State JohnKerry and Secretary of DefenseChuck Hagel, as well as Gen. MartinDempsey, chairman of the JointChiefs of Staff, were set to takequestions about the administration’sstrategy before the Senate ForeignRelations Committee.

Mr. Obama outlined why he be-lieves it is in America’s national se-curity interest to attack Syria. Hesaid military strikes would hinderthe Assad regime’s ability to usechemical weapons and would send a

clear message to other countriesthat are seeking to build weapons ofmass destruction.

“I want to emphasize once again:what we are envisioning is somethinglimited, it’s something proportional,it will degrade Assad’s capabilities atthe same time we have a broaderstrategy that will allow us to upgradethe capabilities of the opposition andallow Syria ultimately to free itselffrom the kinds of terrible civil warsand death and activity that we’vebeen seeing,” the president said.

While Mr. Obama didn’t mentionIran by name, most observers sayattacking Syria for allegedly usingchemical weapons would send awarning to countries such as Iran,which the U.S. says is seeking tobuild nuclear weapons.

After the meeting with the presi-dent, Rep. Eliot Engel (D., N.Y.), theranking member on the House For-eign Affairs Committee, said the sit-uation is a test of American credibil-ity. “When we tell Iran that they willnot be allowed to have a nuclearweapon, Iran is watching us verycarefully to see how we respond inSyria as a test of how we will re-spond if and when they create a nu-clear weapon,” he said.—Julian E. Barnes and Janet Hook

contributed to this article.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 21

For information about listing your funds, please contact: Lauren Berkemeyer tel: +44 20 7572 2102; email: lauren.berkemeyer@dowjones.com

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 residentsexcept as noted. Prices are in local currencies. All performance figures are calculated using the most recent prices available. 12-month and 2-year returns may be calculated over 11- and 23-month periods pending receipt and publication of the last month end price.

NAV —%RETURN—FUNDNAME GF AT LB DATE CR NAV YTD 12-MO 2-YR

NAV —%RETURN—FUNDNAME GF AT LB DATE CR NAV YTD 12-MO 2-YR

NAV —%RETURN—FUNDNAME GF AT LB DATE CR NAV YTD 12-MO 2-YR

NAV —%RETURN—FUNDNAME GF AT LB DATE CR NAV YTD 12-MO 2-YR

Advertisement INTERNATIONAL INVESTMENT FUNDS

INDICESNAV ——————%RETURN——————

FUNDNAME GF DATE CR NAV 1-WK 1-MO 1-Q 1-YR 2-YR

nARIXABSOLUTERETURN INVESTABLE INDEXFeri Institutional Advisors,www.feri.deARIX Composite Gross USD OT OT GBR 07/31.00 USD1544.39 4.1 6.9 2.6nCGPortfolio FundLtdNAV OT OT CYM 06/07.00 GBP25839.68 5.3 10.9 9.8

Verizon Deal Makes for a Rich Wall Street PaydayVerizon Communications Inc.’s

$130 billion deal with VodafoneGroup PLC for the 45% chunk of Ve-rizon Wireless that Verizon doesn’talready own is huge in the telecom-munications industry. It also is onefor the record books on Wall Street.

The move by Verizon—the sec-ond-biggest takeover deal ever, afterVodafone’s purchase of Mannes-mann AG in 2000—is expected togenerate $500 million or more in to-tal fees for advisers and those put-ting together the debt-financingpackage and performing other func-tions to facilitate it, like currencyconversion, according to people fa-miliar with the matter and estimatesfrom advisory firm Freeman Con-sulting Services.

An amount in that ballparkwould be a contender for the biggestfee bonanza on a single deal at leastin the past 15 years, according toFreeman, rivaling the $530 millionin fees from the Mannesmann deal.

The Verizon transaction is ex-pected to generate business atnearly every big banking house. Butsome, including J.P. Morgan Chase& Co. and Morgan Stanley, are ex-pected to come out ahead of others.

They are leading the financing ef-fort, which is also expected to behistoric.

The takeover is to be financed inpart with $40 billion to $50 billionin bonds issued over the next yearor so to help replace a $61 billionbridge loan initially put in place onthe deal, people familiar with thesituation said.

The initial bond sale, expected tobe at least $20 billion, would topApple Inc.’s $17 billion debt issuancein April, at the time the largest cor-porate-bond offering on record.

Before the announcement of theVerizon Wireless deal, analysts hadanticipated roughly $30 billion intotal financing would be in the formof bonds.

Verizon is seeking to capitalizeon the current low cost of funding,even after increases in interest ratesin recent months amid expectationsthe Federal Reserve will begin towind down its bond-buying pro-gram. Indeed, fears that interestrates will soon head higher was abig impetus for the two sides—which have flirted with this kind ofdeal for years—to finally strike now,people familiar with the matter havesaid.

According to a person workingon the acquisition, a big reason it ishappening now is that global capitalmarkets have become wider and

deeper in recent years and are nowable to support such a large bond is-sue. Just a few years ago, the capac-ity of the markets to fund a deal likethis was closer to $30 billion or $40billion, this person estimated.

The big fee haul would reward along-term effort on the part of anumber of people on the deal, someof whom have been working on itfor the better part of a decade. In2004, Vodafone came close to sell-ing its stake in the venture to Veri-

zon as part of an effort to buy AT&TWireless.

But Vodafone failed to win theauction of AT&T Wireless, scuttlingany Verizon Wireless deal. A numberof bankers who were involved inthat effort to unwind the VerizonWireless partnership continued towork on possible deals between thetwo companies over the years—in-cluding a full-blown combination ofVodafone and Verizon—and were in-volved when the wireless agreementfinally came together this summer.

They include Alan Schwartz, theformer chief executive of BearStearns Cos. who now works at bou-tique advisory firm GuggenheimPartners LLC; Paul J. Taubman, anex-Morgan Stanley banker now onhis own; and Jennifer Nason, theglobal chairman of the technology,media and telecommunicationsgroup at J.P. Morgan.

J.P. Morgan’s chairman and chiefexecutive, James Dimon, is no new-comer either, having counseled Veri-zon’s board in recent years on vari-ous possible deal structures, aperson familiar with the mattersaid.

Mr. Dimon on Friday traveled toVerizon’s headquarters just blocksfrom Wall Street to attend a meet-ing of the telephone giant’s board.His goal, according to people famil-iar with the matter: help assure Ver-

izon Chief Executive Lowell McAdamand his fellow directors that thecompany could pull off a $61 billiondebt sale and remain on sound foot-ing. He succeeded.

Besides Guggenheim and Mr.Taubman, J.P. Morgan and MorganStanley are lead financial advisers toVerizon on the deal. Barclays PLCand Bank of America Merrill Lynch

are also lenders and financial advis-ers to Verizon. With Vodafone areits long-time advisers GoldmanSachs Group Inc. and UBS AG.

According to Freeman’s esti-mates, advisory fees for both sidesof the deal could total as much as$243 million. The financing feesshared by lenders are expected torun into the hundreds of millions ofdollars and could bring the total feetake into the range of $500 million,people familiar with the matter said.

—Ryan Knutsoncontributed to this article.

By Dana Cimilluca,Sharon Terlepand Katy Burne

Data provided by:

MARKETS

Lending a HandLargest bridge loans to companies

The Wall Street JournalSource: Dealogic

Verizon Communications

Anadarko Petroleum

Pfizer

Unilever

Telefonica

$61.0 billion

$24.0

$22.5

$22.0

$21.9

nALEXANDRA INVESTMENTMANAGEMENTAlexandra Convertible Bond Fund I, Ltd. (Class A) OT OT VGB 08/31 USD 2155.22 NS NS NS

nBANC INTERNACIONALD'ANDORRA.BANCAMORA.Avgd.Meritxell 96, Andorra laVella. Andorra. Ph. +376.884884 www.bibm.adAndfs. Anglaterra UK EQ AND 11/16 GBP 8.47 2.8 3.6 14.9Andfs. Borsa Global GL EQ AND 08/30 EUR 6.29 6.5 8.6 5.9Andfs. Emergents GL EQ AND 11/02 USD 14.77 -20.4 -19.2 -4.7Andfs. Espanya EU EQ AND 08/30 EUR 11.09 7.3 19.5 5.9Andfs. Estats Units US EQ AND 08/30 USD 18.31 13.6 16.4 12.3Andfs. Europa EU EQ AND 08/30 EUR 6.57 3.3 6.3 5.7Andfs. Franca EU EQ AND 08/30 EUR 10.16 11.4 16.7 13.2Andfs. Japo JP EQ AND 08/30 JPY 613.29 30.5 46.9 20.1Andfs. Plus Dollars US BA AND 10/22 USD 9.66 2.3 3.0 6.2Andfs. RF Dolars US BD AND 08/30 USD 11.93 -2.4 -1.3 0.5Andfs. RF Euros EU BD AND 08/30 EUR 11.49 -0.6 1.9 2.3Andorfons EU BD AND 08/30 EUR 15.38 0.5 3.0 3.0Andorfons Alternative Premium GL EQ AND 07/31 EUR 97.79 4.5 3.5 -0.3AndorfonsMix 30 EU BA AND 08/30 EUR 9.92 1.0 2.5 3.2AndorfonsMix 60 EU BA AND 12/19 EUR 8.96 4.4 7.1 -2.5

nCGPortfolio FundLtdNAV OT OT CYM 06/07 GBP 25839.68 5.3 10.9 9.8

nCHARTEREDASSETMANAGEMENTPTELTD -TELNO: 65-6835-8866FaxNo: 65-68358865,Website:www.cam.com.sg, Email: cam@cam.com.sgCAM-GTF Limited OT OT MUS 08/23 USD 333685.70 -17.1 -10.1 -4.2

nCitadeleRepublikas square 2a, Riga, LV-1522, LatviaCitadele Eastern Europ Bal EU BD LVA 09/02 EUR 16.11 -0.6 3.4 4.2Citadele Eastern Europ Bd EU BD LVA 09/02 USD 19.80 -0.1 3.9 5.1Citadele Russian Eq EE EQ LVA 09/02 USD 20.67 -7.8 2.3 -5.7

nDJE INVESTMENTS.A.internet:www.dje.lu email: info@dje.lu phone:+0035226925220 fax:+0035226925252DJE Real Estate P OT OT LUX 09/02 EUR 4.61 -5.4 -7.6 -6.0DJE-Absolut P OT OT LUX 09/02 EUR 237.27 1.1 10.3 5.6DJE-Alpha Glbl P OT OT LUX 09/02 EUR 176.59 2.6 9.4 0.2DJE-Div& Substanz P OT OT LUX 09/02 EUR 266.34 5.3 9.4 10.6DJE-Gold&Resourc P OT EQ LUX 09/02 EUR 133.91 -21.4 -22.2 -21.9DJE-Renten Glbl P EU BD LUX 09/02 EUR 152.17 0.6 2.3 5.6LuxPro-Dragon I AS EQ LUX 07/20 EUR 144.57 -8.5 5.0 7.6LuxPro-Dragon P AS EQ LUX 07/20 EUR 140.29 -8.8 4.4 7.0LuxTopic-Aktien Europa EU EQ LUX 09/02 EUR 19.70 1.7 8.9 14.9LuxTopic-Pacific OT OT LUX 09/02 EUR 19.61 -7.7 4.0 2.2

nOTHERFUNDSFor information about these funds, please contact us onTel: +44 (0) 2078429694/9633Medinvest Plc Dublin OT EQ IRL 09/30 USD NS.00 NS 1.3 -4.4

nWINTONCAPITALMANAGEMENTLTDTel: +44 (0)2076105350Fax: +44 (0)2076105301Winton Evolution EUR Cls H GL OT CYM 07/31 EUR 1098.21 6.3 -1.7 -1.0Winton Evolution GBP Cls G GL OT CYM 07/31 GBP 1109.78 6.8 -1.2 -0.7Winton Evolution USD Cls F GL OT CYM 07/31 USD 1396.69 6.7 -1.3 -0.9Winton Futures EUR Cls C GL OT VGB 07/31 EUR 239.14 3.5 -0.4 0.8Winton Futures GBP Cls D GL OT VGB 07/31 GBP 259.90 3.7 0.1 1.1Winton Futures JPY Cls E GL OT VGB 07/31 JPY 16709.97 NS NS NSWinton Futures USD Cls B GL OT VGB 07/31 USD 852.12 3.8 0.0 0.9

Pictet-Biotech-P USD OT EQ LUX 08/30 USD 489.47 36.4 36.5 33.5Pictet-Brazil Index-P USD OT OT LUX 08/30 USD 64.73 -21.5 -16.3 -16.1Pictet-CHF Bonds-P CH BD LUX 08/30 CHF 458.78 -0.3 0.2 2.3Pictet-China Index-P USD AS EQ LUX 08/30 USD 96.48 -5.3 13.1 2.9Pictet-Clean Energy-P USD OT OT LUX 08/30 USD 71.32 12.4 17.4 2.6Pictet-Digital Comm-P USD OT EQ LUX 08/30 USD 176.64 19.6 22.1 12.5Pictet-Eastern Europe-P EUR EU EQ LUX 08/30 EUR 330.62 -9.8 -1.6 0.4Pictet-Em Corp Bds-P USD OT OT LUX 08/30 USD 96.47 -5.9 NS NSPictet-Em Loc Curr Dbt-P USD OT OT LUX 08/30 USD 174.79 -13.1 -5.9 -4.5Pictet-EmMkts Hgh Div-P USD GL EQ LUX 09/02 USD 106.78 -7.4 2.5 NSPictet-EmMkts Index-P USD GL EQ LUX 08/30 USD 226.37 -10.7 0.0 -2.6Pictet-EmMkts Sust Eq-P USD GL EQ LUX 08/30 USD 92.98 -8.7 0.1 NSPictet-EmergingMarkets-P USD GL EQ LUX 09/02 USD 482.52 -8.6 3.2 -6.0Pictet-EnvirMegatr Sel-P EUR OT OT LUX 08/30 EUR 109.54 6.5 8.3 11.1Pictet-Eu Equities Sel-P EUR EU EQ LUX 09/02 EUR 516.33 3.7 8.7 14.7Pictet-EUR Bonds-P EU BD LUX 08/30 EUR 458.90 -0.5 3.8 6.5Pictet-EUR Corp Bds Ex Fin-P EU BD LUX 08/30 EUR 129.29 -0.2 2.0 5.1Pictet-EUR Corporate Bonds-P EU BD LUX 08/30 EUR 173.02 0.2 3.9 5.9Pictet-EURGovernment Bonds-P EU BD LUX 09/02 EUR 133.41 -0.2 3.6 5.4Pictet-EURHigh Yield-P EU BD LUX 08/30 EUR 207.68 4.6 13.9 13.9Pictet-EUR Inflation Lkd Bds-P EU BD LUX 08/30 EUR 115.93 -4.6 -2.5 1.4Pictet-EUR SM-TermBds-P EU BD LUX 08/30 EUR 130.17 0.8 2.0 2.9Pictet-EUR STHigh Yld-P EU BD LUX 08/30 EUR 111.71 2.7 6.7 NSPictet-Euroland Index-P EUR EU EQ LUX 08/30 EUR 100.03 8.1 18.5 15.1Pictet-Europe Index-P EUR EU EQ LUX 08/30 EUR 131.20 8.2 14.3 16.5Pictet-European Sust Eq-P EUR EU EQ LUX 08/30 EUR 167.55 6.9 11.8 13.7Pictet-Generics-P USD OT EQ LUX 08/30 USD 163.18 7.2 13.1 8.7Pictet-Glo Bds Fundamental-P USD OT OT LUX 08/30 USD 126.36 -6.3 -4.4 NSPictet-Glo Em Currencies-P USD OT OT LUX 08/30 USD 103.79 -3.6 -0.3 -2.6Pictet-Glo Emerging Debt-P USD GL BD LUX 08/30 USD 300.25 -8.5 -4.4 3.8Pictet-Glo Flexible Alloc-P EUR OT OT LUX 08/22 EUR 99.55 2.0 2.8 NSPictet-GloMegatrend Sel-P USD GL EQ LUX 08/30 USD 179.14 11.6 18.6 11.6Pictet-Greater China-P USD AS EQ LUX 09/02 USD 374.98 -2.1 11.1 1.6Pictet-High Dividend Sel-P EUR OT OT LUX 08/30 EUR 120.62 9.1 8.3 12.6Pictet-India Index-P USD EA EQ LUX 08/30 USD 69.33 -20.8 -9.9 -11.0Pictet-Indian Equities-P USD EA EQ LUX 09/02 USD 243.74 -20.9 -10.3 -13.9Pictet-Japan Index-P JPY JP EQ LUX 09/02 JPY 11463.85 31.3 56.7 23.1Pictet-Japanese Eq Opp-P JPY JP EQ LUX 09/02 JPY 6292.72 32.7 54.0 24.1Pictet-Japanese Eq Sel-P JPY JP EQ LUX 09/02 JPY 9758.06 29.8 50.6 21.5Pictet-Latam Index-P USD GL EQ LUX 08/30 USD 74.26 -18.7 -11.8 -10.6Pictet-Latin Am Loc Curr Dbt-P USD OT OT LUX 08/30 USD 132.17 -13.1 -9.5 -7.0Pictet-Pac (ExJpn) Idx-P USD AS EQ LUX 09/02 USD 342.98 0.1 10.4 6.6Pictet-Piclife-P CHF OT OT LUX 08/30 CHF 872.36 4.3 6.6 9.1Pictet-PremiumBrands-P EUR OT EQ LUX 08/30 EUR 117.92 12.4 16.2 15.7Pictet-Quality Gl Eq-P USD GL EQ LUX 08/30 USD 112.91 12.1 NS NSPictet-Russia Index-P USD EE EQ LUX 08/30 USD 74.66 -10.1 -2.0 -7.3Pictet-Russian Equities-P USD EE EQ LUX 08/30 USD 60.69 -7.7 1.5 -7.2Pictet-Security-P USD GL EQ LUX 08/30 USD 149.31 12.5 18.9 13.3Pictet-Short-TMoneyMkt CHF-P CH MM LUX 08/30 CHF 124.25 0.0 -0.1 0.0Pictet-Short-TMoneyMkt EUR-P OT OT LUX 08/30 EUR 137.72 -0.1 -0.1 0.2Pictet-Short-TMoneyMkt JPY-P OT OT LUX 08/30 JPY 10128.70 0.0 0.0 0.1Pictet-Short-TMoneyMkt USD-P OT OT LUX 08/30 USD 132.24 0.1 0.2 0.3Pictet-Small Cap Europe-P EUR EU EQ LUX 08/30 EUR 728.41 16.1 25.7 22.3Pictet-Sov. STMoneyMkt-P EUR OT OT LUX 08/30 EUR 102.73 -0.1 -0.2 -0.1Pictet-Sov. STMoneyMkt-P USD OT OT LUX 08/30 USD 102.01 0.1 0.1 0.1Pictet-Timber-P USD GL EQ LUX 08/30 USD 136.67 3.9 20.2 15.1Pictet-US Eq Grwth Sel-P USD US EQ LUX 08/30 USD 141.56 12.7 14.4 12.9Pictet-US Eq Value Sel-P USD US EQ LUX 08/30 USD 167.63 14.9 20.2 16.6Pictet-USHigh Yield-P USD US BD LUX 08/30 USD 137.32 1.5 5.6 8.8Pictet-USA Index-P USD US EQ LUX 08/30 USD 138.54 15.5 18.2 17.5Pictet-USDGovernment Bonds-P US BD LUX 08/30 USD 572.06 -3.6 -3.8 0.2Pictet-USD ShortMid-TermBds-P US BD LUX 08/30 USD 125.24 -0.1 -0.1 0.2Pictet-Water-P EUR OT OT LUX 08/30 EUR 177.56 6.2 5.7 14.1Pictet-World Gvt Bonds-P EUR OT OT LUX 08/30 EUR 133.98 -5.7 -11.0 1.6PTR-Banyan-P USD OT OT LUX 08/30 USD 99.51 -2.9 9.4 NSPTR-Corto Europe-P EUR OT OT LUX 08/30 EUR 113.95 4.0 14.2 8.6PTR-Kosmos-P EUR OT OT LUX 08/30 EUR 105.70 0.2 0.7 2.0PTR-Mandarin-P USD OT OT LUX 09/02 USD 97.38 2.8 13.3 -1.8

nPOLARCAPITALPARTNERSLIMITEDInternational FundManagers (Ireland) LimitedPH - 353 1 670660Fax - 353 1 670 1185Global Technology OT EQ IRL 08/30 USD 19.45 12.6 14.7 12.3Japan Fund USD JP EQ IRL 09/02 USD 20.55 15.2 22.7 6.8Polar Healthcare Class I USD OT EQ IRL 08/30 USD 23.51 29.2 38.6 30.1Polar Healthcare Class R USD OT EQ IRL 08/30 USD 23.11 28.9 38.1 29.6

nHemisphereManagement (Ireland) LimitedDiscovery USDA GL OT CYM 12/31 USD 101.35 NS NS NSElbrus USDA OT OT CYM 07/31 USD 10.08 NS NS NSEuropn Conviction USDB EU EQ CYM 07/31 USD 155.40 -1.6 2.0 4.9

nHERMITAGECAPITALMANAGEMENTLTD.Tel: +7501 258 3160 www.hermitagefund.comTheHermitage Fund GL EQ JEY 03/12 USD 963.12 4.5 105.6 -23.2

nHORSEMANCAPITALMANAGEMENTLTD.T: +44(0)2078387580, F: +44(0) 2078387590,www.horsemancapital.comHorseman EurSelLtd EUR EU EQ GBR 07/31 EUR 307.13 21.1 33.4 13.1Horseman EurSelLtd USD EU EQ GBR 07/31 USD 332.73 NS NS NSHorseman Glbl Ltd EUR GL EQ CYM 07/31 USD 514.46 NS NS NSHorseman Glbl Ltd USD GL EQ CYM 07/31 USD 514.46 NS NS NS

nHSBCALTERNATIVE INVESTMENTSLIMITEDT+442078603074 F +442078603174www.hail.hsbc.comHSBCALTERNATIVESTRATEGYFUNDSpecial Opp EUR OT OT GGY 08/16 EUR 115.47 7.9 17.8 13.7Special Opp Inst EUR OT OT GGY 03/31 EUR 88.51 0.7 -0.3 13.3Special Opp Inst USD OT OT GGY 03/28 USD 123.18 4.2 18.5 10.6Special Opp USD OT OT GGY 08/16 USD 121.88 7.6 17.9 14.0

nHSBCPortfolio SelectionFundGH Fund CHFHdg OT OT GGY 08/16 CHF 120.40 4.6 8.7 2.5GH Fund EURHdg (Non-V) OT OT GGY 08/16 EUR 134.33 4.3 8.5 2.9GH Fund GBPHdg OT OT GGY 08/16 GBP 148.11 4.8 9.3 3.5GH Fund Inst USD OT OT GGY 08/16 USD 127.33 4.7 9.3 3.9GH FUNDS EUR OT OT CYM 08/16 EUR 148.45 4.9 9.4 4.0

nHSBCTrinkaus InvestmentManagersSAE-Mail: funds@hsbctrinkaus.luTelephone: 352 - 47 18471HSBC Trinkaus Golden Opportunities OT OT LUX 08/30 USD 91.07 -29.6 -28.1 -25.1Prosperity Return Fund A JP BD LUX 08/30 JPY 8617.31 -8.9 -3.9 -3.8Prosperity Return Fund B EU BA LUX 08/30 JPY 8654.23 0.2 17.7 4.3Prosperity Return Fund C EU BA LUX 08/30 USD 79.26 -12.0 -5.5 -7.0Prosperity Return Fund D EU BA LUX 08/30 EUR 126.36 -5.3 -0.5 8.7Renaissance Hgh Grade Bd A EU BA LUX 08/30 JPY 10503.49 0.6 8.6 4.6Renaissance Hgh Grade Bd B EU BA LUX 08/30 JPY 10452.61 10.7 32.4 12.4Renaissance Hgh Grade Bd C EU BA LUX 08/30 USD 95.15 -2.7 6.2 0.1Renaissance Hgh Grade Bd D EU BA LUX 08/30 EUR 104.75 -2.8 0.7 4.7

nMPASSETMANAGEMENT INC.Tel: + 386 1 58747 77MP-BALKAN.SI EE EQ SVN 08/12 EUR 19.29 -1.9 -8.4 -10.9MP-TURKEY.SI OT OT SVN 08/30 EUR 38.17 -21.7 -10.4 10.1

Europn Forager USDB EU EQ CYM 07/31 USD 292.39 3.6 7.2 7.2Latin America USDA GL EQ CYM 06/30 USD NS.00 NS NS NSParagon Limited USDA EU EQ CYM 12/31 USD NS.00 12.7 12.7 14.2UK Fund USDA OT OT CYM 04/13 USD 157.94 1.8 NS NS

nPTCIPTADANAASSETMANAGEMENTTel: +6221 25574883 Fax: +6221 25574893 Website:www.ciptadana-asset.comIndonesian Grth Fund GL EQ BMU 08/28 USD 143.78 -19.8 -21.2 -14.5

nTHENATIONAL INVESTORPOBox47435, AbuDhabi, UAEWeb:www.tni.aeMENASpecial Sits Fund OT OT BMU 07/31 USD 1105.04 6.9 8.0 3.9MENAUCITS Fund OT OT IRL 08/15 USD 1222.98 18.4 21.3 13.2UAE Blue Chip Fund OT OT ARE 08/15 AED 7.77 52.2 56.0 27.8

nYUKIMANAGEMENT&RESEARCH

nYMR-NSeriesYMR-NGrowth Fund JP EQ IRL 09/02 JPY 11670.00 34.5 55.8 17.0

nYuki 77SeriesYuki 77 General JP EQ IRL 09/02 JPY 7860.00 49.2 73.2 24.4

nYukiAsiaUmbrella SeriesYuki Rebounding Gro Fd JP EQ IRL 09/02 JPY 14412.00 57.4 77.8 27.6

nYuki ChugokuSeriesYuki Chugoku Jpn Gen JP EQ IRL 09/02 JPY 8118.00 31.0 49.0 18.4Yuki Chugoku JpnLowP JP EQ IRL 09/02 JPY 8947.00 39.4 50.6 14.7

nYukiMizuhoSeriesYukiMizuho Jpn Dyn Gro JP EQ IRL 09/02 JPY 4998.00 33.3 53.2 17.0YukiMizuho Jpn Inc JP EQ IRL 09/02 JPY 8389.00 20.6 35.6 12.7YukiMizuho Jpn Lg Cap JP EQ IRL 09/02 JPY 5619.00 28.1 46.6 16.1YukiMizuho Jpn LowP JP EQ IRL 09/02 JPY 15705.00 56.4 75.3 25.5YukiMizuho Jpn Val Sel AS EQ IRL 09/02 JPY 7884.00 54.9 86.5 29.7

GH FUNDSGBP OT OT CYM 08/16 GBP 155.52 5.3 10.0 4.5GH Fund S USD OT OT CYM 08/16 USD 174.38 5.1 9.8 4.4GH Fund USD OT OT GGY 08/16 USD 304.37 4.3 8.8 3.2Hedge Investments OT OT GGY 08/16 USD 158.48 NS NS 3.6Leverage GHUSD OT OT GGY 08/16 USD 137.23 7.2 15.7 4.2MultiAdv Arb CHFHdg OT OT JEY 08/16 CHF 98.09 2.6 2.9 1.1MultiAdv Arb EURHdg OT OT JEY 08/16 EUR 109.12 2.6 3.0 1.7MultiAdv Arb GBPHdg OT OT JEY 08/16 GBP 118.83 3.1 3.7 2.2MultiAdv Arb S EUR OT OT JEY 08/16 EUR 122.47 3.4 4.3 3.0MultiAdv Arb S GBP OT OT JEY 08/16 GBP 129.37 3.8 5.0 3.5MultiAdv Arb S USD OT OT JEY 08/16 USD 140.22 3.6 4.7 3.3MultiAdv Arb USD OT OT JEY 08/16 USD 206.14 2.7 3.4 2.0

nHSBCUni-folioAsian AdbantEdge EUR OT EQ JEY 07/31 EUR 95.33 5.4 9.7 -3.1Asian AdvantEdge OT EQ JEY 07/31 USD 178.40 5.4 10.2 -2.3Emerg AdvantEdge OT EQ JEY 09/28 USD 151.22 3.4 -2.4 -5.5Emerg AdvantEdge EUR OT EQ JEY 09/28 EUR 82.99 2.8 -3.0 -5.9Europ AdvantEdge EUR OT EQ JEY 06/30 EUR 127.84 -3.4 -1.3 2.2Europ AdvantEdge USD OT EQ JEY 06/30 USD 135.07 2.0 4.3 5.1Real AdvantEdge EUR OT OT JEY 04/30 EUR 104.69 1.3 -9.5 -1.9Real AdvantEdge USD OT OT JEY 04/30 USD 105.31 1.5 -8.8 -1.7Trading AdvantEdge OT OT GGY 08/16 USD 129.34 -9.0 -14.2 -9.2Trading AdvantEdge EUR OT OT GGY 08/16 EUR 116.99 -8.9 -14.3 -9.2Trading AdvantEdge GBP OT OT GGY 08/16 GBP 124.85 -8.9 -14.2 -9.0

nMERIDENGROUPTel: + 376 741 175 Fax: + 376 741 183Email:meriden@meriden-ipm.comAntanta Combined Fund EE EQ AND 08/23 USD 250.28 -4.8 -4.4 -17.5AntantaMidCap Fund EE EQ AND 08/23 USD 390.86 -2.2 -10.0 -20.2Meriden Opps Fund GL OT AND 08/28 EUR 23.18 -8.7 -12.5 -23.1Meriden Protective Div GL EQ AND 11/24 EUR NS.00 -2.8 NS NS

nPictet Funds (Europe) SA,ROUTEDESACACIAS60, CH-1211GENEVA73Tel: + 41 (58) 323 3000 Web:www.pictetfunds.comPictet-Abs Ret Gl Conserv-P EUR OT OT LUX 08/30 EUR 100.57 -4.6 -4.7 -0.1Pictet-Abs Ret Gl Div-P EUR GL OT LUX 08/30 EUR 111.78 -7.0 -6.4 -0.4Pictet-Agriculture-P EUR OT OT LUX 08/30 EUR 143.86 -2.2 1.1 4.6Pictet-Asian Eq ExJpn-P USD OT OT LUX 09/02 USD 168.41 -4.7 6.8 -0.2Pictet-Asian Loc Cur Dbt-P USD AS BD LUX 09/02 USD 141.53 -8.7 -5.7 -2.4

Adviser fees in the rangeof $500 million wouldcontend for the biggestbonanza on a single dealin at least 15 years.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 9

Syrian Diplomat Seeks U.S. DialogueDAMASCUS, Syria—One of

Syria’s top diplomats called for dia-logue with the U.S.—while threaten-ing retaliation—as the U.S. Congressweighs military strikes against hisgovernment.

“We hope the American repre-sentatives will exercise wisdom, willlisten to the voice of justice, not toprovocative actions,” Deputy For-eign Minister Faisal al-Mekdad toldThe Wall Street Journal in an inter-view at his office in Damascus onTuesday.

“We love the American people,we have millions of Americans ofArab origin including Syrians, andwe do not want wars with theUnited States,” said the diplomat,who served as his country’s envoyto the United Nations in New Yorkfrom 2003 to 2006.

While he repeatedly called forreconciliation, Mr. Mekdad warnedof the repercussions of an attack onSyria, as U.S. lawmakers considerwhether to endorse a military re-sponse to what Washington saidwas the Syrian regime’s use ofchemical weapons last month in theDamascus suburbs.

Mr. Mekdad said Damascuswould strike back not only at Israel,but also at Syria’s neighbors Jordanand Turkey if they take part in anyU.S.-led operation. And he said anyaction would strengthen rebel fac-tions affiliated with al Qaeda, notthe moderate rebels the U.S. hassought to bolster.

A green light from Congress toattack Syria would be “a tragedyagainst the Syrian people and theAmerican people and all people inthe region,” he said.

U.S. President Barack Obama saidon Saturday that he had decided itwas necessary to take military ac-

tion against the Assad regime, afterhis administration reported it hadoverwhelming evidence that theSyrian army had used chemicalweapons on Aug. 21. Mr. Obama isseeking authorization from Con-gress for military operations to pun-ish the Assad regime.

Mr. Mekdad rejected the U.S.conclusions. “I assure them that theSyrian government did not usechemical weapons against Syriansand will not use them against Syri-ans and will always be ready for di-alogue with the American peopleand its representatives,” the deputyforeign minister said.

“I know Secretary Kerry person-

ally, and I hope he does not go sofar in plans that will kill more Syri-ans,” he added, referring to the U.S.secretary of state, who has beenone of the Obama administration’smost prominent advocates of mili-tary action.

Like most Syrian officials, Mr.Mekdad said it was opposition reb-els who unleashed chemical weap-ons on their own areas in the Da-mascus suburbs on Aug. 21, afterthe Syrian military launched a majoroperation on several fronts to pre-vent rebels from attacking the capi-tal, which is under regime control.

Asked about his feelings aboutwhat the U.S. said were the deaths

of more than 1,400 people, includingmore than 400 children, in the at-tacks, Mr. Mekdad said: “Any warsof this type are horrible and are un-acceptable; we are in a state of warin Syria. We cannot ignore the suf-fering of the entire Syrian people,but those criminal gangs in Syria,the armed groups, have falsifiedevents in Syria since the beginning.”

Mr. Mekdad argued that a U.S.attack would embolden those oppo-sition fighters who are linked to alQaeda to use chemical weapons.

“What is the United States goingto benefit from fighting the onlysecular political system in the re-gion?” he said.

BY SAM DAGHER

Syrian Deputy Foreign Minister Faisal al-Mekdad, shown in his office in Damascus last week, warned against U.S. action.

AssociatedPress

Beijing Dilemma Reflects Policy of Standing BackBEIJING—U.S. threats to launch

military strikes against Syrian Presi-dent Bashar al-Assad, citing new ev-idence that he has used sarin gasagainst his own people, have pre-sented Beijing with a fresh dilemma.

For decades, the cardinal princi-ple of Chinese foreign policy hasbeen noninterference in the affairsof sovereign states. In the MiddleEast, that’s led to a series of diplo-matic shocks as Chinese foreign-pol-icy mandarins maintain bets on ex-isting regimes, even as their popularsupport crumbles.

From Moammar Gadhafi, Libya’smegalomaniac former strongman, toHosni Mubarak in Egypt, Chineseleaders have stuck with MiddleEastern despots long after atrocitiesagainst their own populationshelped doom their regimes.

Regime change under any cir-cumstances—even, in Syria’s case,the suspected use of sarin gas—makes Chinese leaders nervous.

Their distaste for toppling strong-men springs partly from a deep senseof insecurity about their own politi-cal legitimacy in a country where so-cial unrest is bubbling over every-thing from pollution to land grabs.

If Western nations can interveneto see off undemocratic governmentsin the Middle East, Chinese leadersreason, what will stop them fromtrying to bring down the ChineseCommunist government one day?

To be sure, the problems that

China faces aren’t remotely similarto those afflicting governments inMiddle Eastern countries like Egypt.They stem largely from economicgrowth that arguably has been toorapid and uneven, not too slow. Un-like many countries in the MiddleEast, China has scored impressivevictories in the fight against pov-erty. Its economy creates abundantjobs and opportunity.

Still, Chinese security forces re-acted with overwhelming force onthe streets of Beijing two years agoin response to online calls for pro-tests in support of a Jasmine Revo-lution inspired by the Arab Spring.The demonstrations never took off.

More broadly, for China, turmoilin the Middle East has underlined thereality that there’s still only one su-perpower in today’s world—the U.S.

In his book “China Goes Global,”David Shambaugh, a China scholarat George Washington University,writes: “Real superpowers shapeevents and produce outcomes. Bycontrast, China repeatedly takes alow-key, back seat approach in itsdiplomacy.”

China has no military bases inthe Middle East, or troops on theground. It’s likely to be many yearsbefore China can project sustainedpower beyond its own immediatebackyard in East Asia, where it’spushing back against U.S. domi-nance with ballistic missiles andsubmarines, and by building spaceand cyberwarfare capabilities.

At the same time, China has

growing interests in the Middle East.It has invested heavily in oil fields inIraq and massive construction proj-ects in Saudi Arabia and the Gulf,and its state-owned companies havepacked off tens of thousands of Chi-nese engineers, geologists and work-ers to support the projects.

Ironically, the Chinese lack ofstrategic reach in the Middle East iscompounded by a challenge that’supending the strategic calculus ofthe region: While the U.S. is growingless dependent on imported energy,including from the Middle East,China’s dependence is growing.

This year, China will overtake theU.S. as the world’s largest net oil im-porter on a monthly basis, accordingto the U.S. Department of Energy.

The gap will grow as U.S. produc-tion of shale oil and gas ramps up,and energy conservation kicks in.Meanwhile, an industrializing Chinawill gobble up energy at greaterspeeds, and while China has beenscrambling for new supplies in Africaand Latin America, the Middle Eastremains an essential supplier.

Picking the wrong side in thatregion has been costly for China. Ithas complicated Beijing’s relationswith populist governments thathave emerged from the turmoilsweeping the Middle East, and putat risk the prospects of Chinese en-ergy and engineering companies.

More generally, say Western dip-lomats and foreign-policy analysts,China’s instinctive support for the

status quo has left it flat-footed asevents rapidly unfold. In one crisisafter another, China has reacted toinitiatives from Washington andother Western powers, despite itsaspirations to be seen as a globalpeer of the U.S.

For instance, China was enragedwhen its support for limited actionby the North Atlantic Treaty Organi-zation in Libya—a rare instance ofthe country compromising on its non-intervention principles—turned intoan all-out assault on the Gadhafi clan.That may have hardened Beijing’s re-sponses on Syria, diplomats say.

Three times, moreover, China hasused its veto in the United Nationsto block attempts to isolate the As-sad regime, even as a civil warthat’s lasted for more than twoyears rages across the country. TheChinese have joined the Russians tostymie forceful allied intention.

So far, the latest crisis hasn’t leftthe Chinese as isolated as some pastones have. With the exception ofFrance, no European country hascome out unequivocally in favor ofmilitary strikes.

As the Obama administrationtries to drum up congressional sup-port for a strike on Syria, China hasgrown powerful enough for the U.S.to pay attention to such concerns—but not so strong that it can affectthe outcome. China, writes Mr.Shambaugh, “does not shape inter-national diplomacy, drive other na-tions’ policies, forge global consen-sus, or solve problems.”

BY ANDREW BROWNE

China’s U.N. Ambassador Liu Jieyi attended a Security Council meeting Aug. 30.

Reuters

CONFRONTING SYRIA

Israel, AmericansHold Missile TestIn Mediterranean

Israel said it carried out a suc-cessful joint missile test with the U.S.in the Mediterranean Sea on Tues-day, amid escalating tensions overthe possibility of an attack on Syria.

The test involved at least onemissile fired from an Israeli air-forcebase in central Israel, working in co-operation with vessels deployed inthe Mediterranean Sea, said Myr-iam Nahon, a spokeswoman for Is-rael’s Defense Ministry. Ms. Nahondeclined to say whether the vesselswere American or Israeli warships.The U.S. confirmed the test.

The test involved the Arrow mis-sile defense system, designed to de-fend Israel against the sort of long-range missiles that Iran might use inan attack, the ministry said. It is partof a system in Israel designed to in-tercept short-, medium- and long-range rocket and missile attacks.

Israel’s Defense Ministry and thePentagon said the test was sched-uled and unrelated to consider-ations of an attack on Syria.

Israel has called up reserves andput its shorter-range missile de-fense systems on high alert in an-ticipation of a U.S. attack on Syriaprovoking retaliatory strikes fromthe Assad regime or its ally Hezbol-lah of Lebanon.

Tuesday’s missile test was fol-lowed by a public warning by IsraeliPrime Minister Benjamin Netan-yahu. “I want to say to anyone whowants to harm us—it is not advis-able,” he said.

—Charles Levinson

20 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Standard & Poor’sClaims Fraud SuitIs U.S. Retaliation

Standard & Poor’s Ratings Serv-ices said in a court filing Tuesdaythat it was sued by the Justice De-partment in retaliation for its down-grade of the U.S.

Standard & Poor’s has indicatedpublicly and in previous court fil-ings that the Justice Department’sFeb. 4 lawsuit—accusing it of fraudover its ratings—was politically mo-tivated, but the language in Tues-day’s court filing is the strongest todate.

The U.S. Justice Department“commenced this action in retalia-tion for [S&P’s] exercise of theirfree speech rights with respect tothe creditworthiness of the UnitedStates of America,” lawyers for thecompany wrote in court documentsfiled on Tuesday in the U.S. DistrictCourt for the Central District of Cal-ifornia.

Standard & Poor’s stripped theU.S. of its triple-A rating in August2011, the first downgrade of thecountry by a ratings firm in decadesand a move that drew attention toheightened political infighting thatS&P said had hamstrung CapitolHill’s ability to address a rising debtload.

Standard & Poor’s, a unit ofMcGraw Hill Financial Inc., saidTuesday that such downgrades areopinions that are protected the U.S.Constitution’s First Amendment, anargument long made by the com-pany’s lawyers and other credit-rat-ing firms.

“Such free speech is protectedunder the First Amendment to theUnited States Constitution and theretaliation, causing and embodied inthe commencement of this imper-missibly selective, punitive and mer-itless litigation, is unconstitutional,”the credit-rating firm said in courtfilings.

A spokeswoman for the JusticeDepartment didn’t immediately re-spond to a request for comment.

The Justice Department claimed

in its lawsuit that the world’s larg-est credit-rating firm duped feder-ally insured banks and credit unionsin the years before the financial cri-sis by misrepresenting its ratingsprocess as being independent andobjective.

The federal government chargedthat Standard & Poor’s in fact wasissuing high ratings to complexdeals backed by mortgages andother assets to win business andkeep bankers and other issuer cli-ents happy.

Standard & Poor’s and other ma-jor rating firms are paid by debt is-suers to rate their debt. The compa-nies have acknowledge that the“issuer pay” business model pres-ents potential conflicts of interestbut say they manage them.

Since February, Standard &Poor’s has said that its top competi-tors issued the same ratings. ButTuesday’s argument that the JusticeDepartment’s lawsuit was retaliationis the clearest indication yet thatthe company is turning to the politi-cal-payback argument as a key de-fense.

In previous court filings, Stan-dard & Poor’s had focused on theJustice Department’s allegations ofmisrepresentation. Lawyers forStandard & Poor’s argued that whenthe company said its ratings werethe result of an independent and ob-jective process in its employeecodes of conduct and documentssent to investors and issuers thatlanguage was “mere puffery” andnot intended to be taken at facevalue by anyone.

But the federal judge overseeingthe lawsuit slammed that defense ina ruling earlier in the summer.

U.S. District Judge David O.Carter in Santa Ana, Calif., said inhis July 16 ruling that the ratingfirm’s “puffery” defense is “deeplyand unavoidably troubling.”

Standard & Poor’s asked thejudge on Tuesday to dismiss thecase, a request it has made in previ-ous court filings.

BY JEANNETTE NEUMANN

BUSINESS & FINANCE

EU Car Sales Remain in Rutthe Brussels-based umbrella groupfor European automotive suppliers,known as CLEPA.

Declining levels of car ownershipin big cities is one factor worryingthe industry, Mr. Gales said. In Eu-rope there are 500 cars on averagefor 1,000 inhabitants, a very highdensity. But in cities like Paris, car-ownership has fallen to 280 cars per1,000 inhabitants, the same densityas Poland and half of what it is inthe rest of France. “This trend isn’tgoing away,” he said.

Christian Breitsprecher, automo-tive analyst with Macquarie Capitalin Frankfurt, said while the latesteconomic data suggest Europe’sauto market may soon stabilize,“that won’t be enough for somecompanies, particularly PSA [Peu-geot Citroën] and Fiat, to make de-cent profits in Europe,” he said.

Peugeot, Fiat SpA, Ford MotorCo. and General Motors Co. areamong the major auto makers losingmoney in the region.

The manufacturers have reacted.Ford has closed two production fa-

Continued from page 15 cilities in Europe this year. Peugeotalso is stopping vehicle productionat a plant near Paris in October af-ter a tussle. And GM’s Adam Opelunit will end car assembly at a fac-tory in Germany next year.

But with cutbacks on a muchsmaller scale compared to those un-dertaken by the now-thriving U.S.industry in the aftermath of the2008 financial crisis, the Europeanindustry’s chronic overcapacitylooks set to persist, and with it,many manufacturers’ poor profit-ability. The U.S. auto industry shutabout 24 assembly and parts facto-ries during the recession.

“To wind down production tomatch expected low sales over thenext years, capacity will probablyhave to be cut by a further two mil-lion vehicles,” Mr. Kades said. Thatnumber is equivalent to six to eightmedium-size car factories, AlixPart-ners estimates.

“Given that relatively little ca-pacity has been taken out of themarket, pricing pressure in Europewill remain very tough,” said Mac-quarie’s Mr. Breitsprecher.

Suicide Shakes Zurich InsuranceZurich said late last week that its

board was launching a review intocultural issues in the aftermath ofMr. Wauthier’s death. Among otherthings, that review will examinewhether employees in Zurich’s fi-nance department were subjected toexcessive pressure from higher-ups,according to a person familiar withthe process.

“This is not a good sign for acompany of this magnitude,” saidAndrew Barile, who runs an insur-ance-industry consulting firm in Sa-vannah, Ga.

Mr. Ackermann has declined toelaborate on last week’s statement.“Out of respect I do not currentlywish to make any further commentabout this tragic event,” he saidSunday.

Mr. Ackermann’s brief tenure atZurich was rocky.

Upon joining the board, the 65-year-old Swiss native quickly triedto shake up the culture at the staidinsurance company. Although hewas a nonexecutive chairman, hetook an active role. Like its rivals,Zurich was struggling with a toughmacroeconomic environment. Its re-turn on equity was sagging. Com-petitors were poaching top employ-ees.

In a break from Zurich’s traditionof quiet, polite internal meetings,Mr. Ackermann would drill execu-tives with tough questions, formercolleagues say.

In board meetings, some direc-tors were taken aback when he criti-cized executives, including Mr. Wau-thier, according to a person familiarwith the board.

Still, Mr. Ackermann’s conductwas generally perceived as toughbut professional, former colleaguessay.

Mr. Wauthier, a 53-year-old dualFrench-British citizen, joined Zurichin 1996. Known by colleagues asmild-mannered and quiet, he held avariety of roles at the company, in-cluding a stint in Southern Califor-nia where he honed his surfingskills.

After being named CFO in 2011,Mr. Wauthier sometimes found him-self on the receiving end of Mr. Ack-ermann’s frustrations with the com-

Continued from first page pany’s financial performance,former colleagues say.

Before Zurich reported its mid-year results last month, there wasan internal debate over how to up-date investors about the company’sprogress at hitting three-year busi-ness targets that it had set back in2010, according to people familiarwith the discussions.

Mr. Ackermann argued that thecompany should publicly declare itsdissatisfaction with its lack of prog-ress, according to people familiarwith the debate.

Mr. Wauthier disagreed, arguingthat Zurich should simply empha-size that it was moving in the rightdirection. At times, the debate be-tween the two men and others wasintense, said a person who wit-nessed it.

On Aug. 15, the company saidthat while certain units were ontrack to hit their three-year targets,others “remain more challenging.”Zurich’s shares fell 1.6%.

About 10 days later, Mr. Wauth-ier was alone in his home on theshores of Lake Zug. His wife and sonwere in the U.S.; his daughter was inthe U.K., company officials say. Mr.Wauthier typed out a suicide note inEnglish. Then he took his own life

After he didn’t show up to workon Monday, Aug. 26, local police saythey discovered his body in hishome.

The next day, Mr. Ackermannconvened a meeting of Zurich’sboard of directors to discuss the sit-uation. A group of Switzerland-based directors gathered in a con-ference room; others dialed in fromaround the world.

Mr. Ackermann read aloud ex-cerpts of Mr. Wauthier’s suicidenote. It repeatedly criticized Mr.Ackermann for his harsh manage-ment style and blamed him forheaping pressure on Zurich’s financedepartment, according to people fa-miliar with the note and the meet-ing.

Directors were shocked by thenote’s personal nature, and Mr. Ack-ermann sounded deeply wounded ashe read it, one person said. Theydiscussed the importance of theboard remaining unified amid thetragedy.

The board adjourned for thenight, planning to reconvene the fol-lowing afternoon. Meanwhile, somedirectors tried to reach Mr. Acker-mann to express sympathy for hissituation and to urge him not toblame himself, according to the per-son familiar with the board. Hedidn’t return their calls.

Mr. Ackermann kicked offWednesday’s board meeting with abombshell: He had decided to resignimmediately. Directors were againstunned, and his statement was metwith prolonged silence, this personsaid.

Later in the day, some directorsurged Mr. Ackermann to reconsider.He wouldn’t budge. Board membersexpressed confusion and frustrationabout his decision, fearing it wouldfurther erode confidence in thecompany, said the person familiarwith the board.

Zurich’s communications teamstarted crafting a statement an-nouncing Mr. Ackermann’s depar-ture.

He insisted the news release in-clude a quote from him explicitly ty-ing his resignation to Mr. Wauthier’ssuicide: “I have reasons to believethe family is of the opinion that Ishould take my share of responsibil-ity, as unfounded as any allegationsmight be.”

Several board members andother employees objected vehe-mently. They feared that such astatement raised more questionsthan it answered, according to peo-ple familiar with the discussions. Adebate dragged on until early Thurs-day morning. Mr. Ackermann pre-vailed.

The announcement, issuedThursday morning, hit Zurich’sstock price. The next day, underpressure to provide more clarity, thecompany held a conference call inwhich it disclosed the existence ofthe suicide note.

Mr. Wauthier’s funeral was Mon-day. On Tuesday, Mr. Wauthier’sson, reached at the lakefront home,declined to comment on the family’sbehalf.

—Madeleine Nissen,John Revill

and Neil Maclucascontributed to this article.

Josef Ackermann, shown in 2012, resigned as Zurich Insurance chairman after the suicide of the company’s finance chief.

Reuters

10 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

The Seven Deadly SinsOf Investing

Financial Crisis Be Damned—Investors are Still Making the Same Mistakes They Always Have.Here Are Their Biggest Blunders and How to Avoid Them

BY KIRSTEN GRIND

IN DEPTH

It has been nearly five years since thedepths of the U.S. financial crisis, and in-vestors have learned a lot since then. Orhave they?

Despite the downturn that left many in-vestors reeling from losses on everythingfrom real estate to the stock market, when

it comes to investor behavior—those hard-wired instincts that drive us all—little haschanged, say psychologists and financialadvisers.

Investors still make the kinds of mis-takes that have gotten them in trouble fordecades. They are wooed by the hottestnew trend, they want to follow the crowd—consequences be damned—and they justcan’t seem to pay enough attention to im-portant details, such as the steep annualfees charged by many mutual funds.

“When it comes to money, we are op-erating as if we were in the jungle, hav-ing to deal with predators like tigers,”says Brad Klontz, a clinical psycholo-gist and associate professor of finan-cial planning at Kansas State Univer-sity. “We have a cave-man brain.”

There are ways to avoid thesepitfalls. Investors need a hard andfast plan of their investment goals,they need to find a trusted adviser

or family member to help weed through de-cisions and they need to stop paying somuch attention to the short-term eventsthat drive media coverage.

Here are the seven deadly sins of invest-ing, in no particular order, and how to pro-tect against them.

Lust: Chasing Recent PerformanceThe belief investors feel that recent per-

formance will dictate future performance—known as “recency bias” in psychology—isone of the biggest investor pitfalls, ex-perts say.

“People tend to buy somethingthat has done really well recently,”says Terrance Odean, a professor offinance at the Haas School of Busi-ness at the University of California,Berkeley. “They chase performance.”

In the lead-up to the financialcrisis, investors dived headlonginto real-estate investments, con-

vinced that rising housing prices wouldnever falter.

The latest example: gold. The commod-ity went on a winning streak even beforethe financial crisis, and investors piled in.

A big factor was the heavy prominencegold suddenly received across the media—on commercials, in financial publications,on television shows and in books. Mark

The Wall Street JournalSource: Morningstar

Note: Data are average annual returns through July 31 and don’t include exchange-traded funds.

1 YR.

Investor returnsFund returns

3 YR. 5 YR. 10 YR. 15 YR.

27.3%28.3%

16.4%16.7%

7.3%8.1% 7.1%8.3%

4.6%6.6%

Poor TimingInvestors often perform worse than their own mutual funds by moving money in andout in an attempt to time the market. Fund returns vs. investor returns in U.S. stock funds.

Illustrationby

DaveWhamon

d

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 19

QQQC+69#@B?QBU)E)T*C+>@

1047IL4HG 1L433JFN7RF02R 3420P4HJ4 1:HR769#@B? S .BU)E)T* ;)=;)9)?8)* 2)*)5+> !? 8#) 9BT) >' !89 9#>==!?% +)?8;)=>;8'>T!>D 8>8BT!?% ($DAAA 9<6B;) @)8);9 >' ;)8B!T 9=B+)D '>; B==;>O!@B8)TM -X& @!TT!>?8> 2>+U9=;!?%C0#) =>;8'>T!> !?+T6*)9 /W;@*K IK=+)?8;6@D B ,(D"V( 9<6B;) @)8);9#>==!?% +)?8;) T>+B8)* !? 8#) +)?8); >' >?) >' 8#) 'B98)98 %;>Q!?% @6?!+!=BT!8!)9!? 8#) 18>+U#>T@ ;)%!>?C

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 11

IN DEPTHBerg, president of Timothy Financial Counsel,a fee-only financial advisory firm in Wheaton,Ill., says one otherwise rational client wantedto move her entire portfolio into gold afterreading a book warning of another marketcrash.

To combat this behavior, financial adviserssay it is important that investors study histor-ical prices and performance of the latest pop-ular investments. Historical charts, for exam-ple, will show the rise and fall of anyinvestment over time.

Instead of looking just at prices over thepast few months or a couple of years, look atthe long-term history over periods extendingback at least 10 years—and sometimes more.Gold, for example, had been increasing inprice since 2001, but over the longer term hastrailed stocks and barely kept pace with infla-tion.

Despite the multiyear frenzy, gold pricespeaked in 2011 and are now trading about 26%below their record high.

Similarly, investor returns often lag behindthose of the mutual funds they invest in, sincemany people buy funds only after their per-formance begins to overheat, then sell afterthe funds drop. As a result, the typical fundinvestor misses out on early gains and locks inthe later losses—ending up falling behind thefund itself.

The average annual return for U.S. stockmutual funds over the past 15 years was6.6%—while the average investor in thosefunds earned just 4.6%, according to invest-ment research firm Morningstar.

While it is easier said than done, investorshave to try not to pay attention to daily newsreports and advertisements touting the latestpopular investment.

Pride: Being OverconfidentEric Glohr, 54 years old, new to investing

at the time, planned to buy Microsoft stock atits 1986 initial public offering at $21 a share—less than a dime in split-adjusted terms, ac-cording to FactSet. But on the first day oftrading, the share price shot up to more than$27, still less than a dime in split-adjustedterms.

Mr. Glohr decided to wait until it sanklower again. He waited for years as the stockmarched higher until he finally realized itwould never dip to the lower price he had an-ticipated.

Its peak price, in split-adjusted terms, was$59.56 a share on Dec. 27, 1999, according toFactSet.

“I was worried about a couple hundreddollars and I missed out on close to a milliondollars,” he says.

Investors, especially ones new to the game,frequently believe they know far more thanthey actually do about a particular invest-ment, say psychologists and financial advisers.

“Our opinion of ourselves is much toohigh,” says Mr. Odean, the finance professor.“We all need a healthy dose of self-doubt andhumility.”

The best way for investors to keep theiroverconfidence in check is to make sure theyhave an unbiased third party available to goover all investing ideas. That could be a finan-cial adviser, or it could be a trusted closefriend or relative who isn’t directly affectedby any decision.

Mr. Glohr, for his part, says he learnedfrom his early mistake. Rather than trust hisinstincts entirely, he joined an investmentclub and now diligently researches each com-pany in which he chooses to invest, bouncing

ideas off the members of his group.

Sloth: Overlooking CostsInvestors often just don’t pay attention to

details. Consider their willingness to invest inexpensive mutual funds that don’t performwell, says James Choi, an associate professorof finance at Yale School of Management.

Investors, wooed by a fund manager’sname or recent performance, fail to look at afund’s expense ratio before buying in. Ratherthan buy a cheap index fund that mimics abroad market index, such as the S&P 500, withan expense ratio of as little as 0.05%, inves-tors will buy one managed by a professionalstock picker that charges a much higher fee,Mr. Choi says.

But more expensive funds tend to under-perform less expensive ones, says Mr. Choi,citing numerous studies.

It is the same with 401(k) fees. Investorsoften won’t pay attention to their statementseven though taking an active role in choosingtheir investments would likely save themthousands of dollars in the long run, say ex-perts.

While a 401(k) investor doesn’t hold muchsway over the administration fees charged bythe provider—or even the choice of provider—there are ways to manage costs, say financialadvisers. Often 401(k) plans will give investorsa choice of funds in certain asset classes, withexpense ratios that vary. Mr. Choi recom-mends choosing the cheapest option.

“The expenses are much more predictive offuture performance because there’s so muchrandomness in past performance,” he says.

Envy: Wanting to Join the ClubWhat is better than a great deal? A great

deal available only to you.In the run-up to Facebook’s initial public

offering in May 2012, financial advisers saythey were slammed with calls from clientswho wanted to get in on the stock before itmade its debut. The fact that there were alimited number of shares available to retail in-vestors only drove the frenzy, advisers say.

It is the same reason investors were sowilling to believe in Bernard Madoff’s Ponzischeme, experts say. They were part of a smallgroup making a lot of money; Mr. Madoff re-

portedly accepted only a limited number ofclients.

“A lot of that has to do with that sense ofexclusivity,” says Meir Statman, a professor offinance at Santa Clara University who focuseson behavioral finance.

The desire to be part of an exclusive offer-ing often drives people to throw money intoan investment that doesn’t fit into the overallgoals of their portfolio, against their betterjudgment. Investors who poured money intoFacebook just after its launch watched as thecompany’s stock fell below $20 a share severalmonths later, far less than its $38 IPO price.(The stock is now trading at about $41.)

Susan Strasbaugh, owner of Strasbaugh Fi-nancial Advisory in Colorado Springs, Colo.,which has $100 million in assets under man-agement, says she recommends clients set upa separate “Vegas” account for hot invest-ments like Facebook that don’t fit into a cli-ent’s portfolio.

She says clients should invest no morethan 5% of their portfolio in the Vegas ac-count, and treat it like gambling—hence thename.

Wrath: Failing to Admit FailurePeople hate to lose money. Along with her

investing club, Lori Towers-Hoover, 54,bought shares of home builder MeritageHomes at about $32 a share in 2007. Ms. Tow-ers-Hoover and her club in Howell, Mich., hadthoroughly researched the company and be-lieved in its strong financials. But the stock al-ready was on its way down, and by early2009, it was trading at less than $10 a share.

Ms. Towers-Hoover and her club hung on.They waited for another year as the stockhovered around $20. Finally they sold. “Wejust made the decision it’s not going to re-bound and we’re not going to get our moneyback,” she says.

Loss aversion, as it is called by psycholo-gists, isn’t hard to spot. Investors held on totech stocks as they plummeted during thecrash of the early 2000s, as they did to finan-cial stocks during the crisis, and as they con-tinue to want to do today.

“We don’t want to be honest with our-selves and admit the loss,” says Mr. Klontz,the psychologist.

That type of thinking can be dangerous forinvestors. If they regret a decision, they maysell too soon, but if they can’t accept theirloss and move beyond the “sunk costs” of aninvestment, they may hold on too long, saypsychologists.

Instead of just researching the financials ofa particular stock, investors need to under-stand the economic environment as much aspossible, say financial advisers and experts. Ifa company is dependent on a job-market orhousing-market recovery to perform well, in-vestors need to fully understand the outlookfor those sectors and plan their investmentaccordingly. Too often investors will basetheir decision to buy or sell solely on thestrength of a company.

Of course, economic predictions aren’t al-ways correct. Ms. Towers-Hoover says herclub’s decision to sell Meritage was based onpredictions that the U.S. wouldn’t fully re-cover from the 2008 downturn until 2016. But,buoyed by a housing-market recovery, Meri-tage stock began to rise in mid-2011 and istrading around $40 a share now.

That stock’s recent tear taught Ms. Tow-ers-Hoover another lesson: It is impossible totime the market.

Gluttony: Living for TodayLet’s face it: There are a host of activities

more interesting than monitoring your401(k)—and a host of temptations to spendmoney on today. But investors’ tendency to-ward apathy is damaging, particularly when itcomes to retirement savings.

Fifty-seven percent of U.S. workers sur-veyed by the Employee Benefit Research Insti-tute earlier this year reported less than$25,000 in total household savings and invest-ments, not counting their house or defined-benefit retirement plans. The lack of pre-paredness has led experts to deem it a crisis.

Often workers aren’t saving early enoughbecause they view retirement as a far-offevent, leading to apathy toward puttingmoney away, say financial advisers and psy-chologists.

The key for investors, Mr. Klontz says, ismaking retirement less abstract. Investorsshould ask themselves a series of questionsabout how they want their lifestyle to bewhen they retire: How old will they be? Wherewill they live? What will they be doing?

Mr. Klontz also uses a measuring tape tomake this point, marking it at an investor’sage and then again at the age an investor ex-pects to live until, based on the longevity ofother family members. When an investor islooking at a length of tape that is only, say, 20or 30 years long, that can be a stark realiza-tion of the lack of time he has left to save.

Often, Mr. Klontz says, this encourages in-vestors to add more to their 401(k) contribu-tions or ratchet back spending.

Greed: Following the HerdWhen the stock market tanked during the

2008 financial crisis, many investors fled,some abandoning their entire portfolios andputting the money into cash. The same phe-nomenon is happening now in the bond mar-ket as investors, worried about the effect ofrising interest rates, are fleeing bond funds.

Investors yanked $11.7 billion from thefunds in July, according to Morningstar, fol-lowing an outflow of $60 billion in June. Asinvestors pull money, it encourages more in-vestors to do the same.

To battle the fear that inevitably comeswith a market decline or other adverse events,financial advisers say it is crucial that inves-tors have a detailed portfolio plan that theystick with regardless of short-term events.The plan should outline investors’ targetedholdings in bonds, stocks and other invest-ments, and be based on their retirement goals.

“Right now, bonds are bad in the minds ofinvestors,” says Chad Carlson, a wealth man-ager at Balasa Dinverno Foltz in Itasca, Ill.,which has $2.6 billion in assets under man-agement. “Our clients will say, ‘I want to beout of bonds entirely.’”

Rather than encouraging an “all or noth-ing” approach, Mr. Carlson recommends thatinvestors adjust their portfolio a smallamount. For example, a client who previouslyheld 40% of his portfolio in bonds would re-duce that exposure by several percentagepoints.

That move tends to reassure investors andhelps them avoid rash decisions, he says.Lehman Brothers filed for bankruptcy protection on Sept. 15, 2008. What have investors learned since then?

Reuters

Gold prices peaked in 2011 and are now trading about 26% below their record high.

Bloomberg

New

s

18 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Norway Fund ProposedOSLO—Less than a week before

national elections, Norway’s oil min-ister proposed carving out a sepa-rate real-estate fund from the na-tion’s giant $750 billion oil-wealthfund that would have increased ex-posure to U.S. property.

Ola Borten Moe, minister of pe-troleum and energy and a deputyleader of the nation’s Center Party,said he is proposing taking 10% ofthe sovereign-wealth fund and put-ting it into a new vehicle designedexclusively for real-estate holdings.

Norway’s pension fund is allowedto set aside 5% for real estate, but itis far from meeting that threshold.The fund currently has 63.4% of itsmoney in equities, 35.7% in fixed-in-come investments and the remain-ing less than 1% in real estate.

“What we want now is a heavierweighting in real estate in the Nor-wegian pension fund,” Mr. Moe saidin an interview. “We want a smallerexposure to bonds and a bigger ex-posure to real estate, and go from [agoal of] 5% to 10% in real estate.”

He said the proposal is on behalfof his party and isn’t the officialpolicy of the three-party coalitiongovernment. Norwegians will voteSept. 9, and polls suggest that PrimeMinister Jens Stoltenberg could bereplaced by a more right-leaning co-alition.

Mr. Moe acknowledged that thefate of his proposal would dependon the elections Monday. Even if thereal-estate proposal isn’t immedi-

ately adopted, the fund may face ashake-up, as the partners of a po-tential new center-right governmenthave suggested setting up separatefunds in order to invest more ingreen technology and emergingmarkets.

“The Norwegian oil fund and itsmanagement is a continuing pro-cess,” Mr. Moe said, outlining hisview that real estate offers more-at-tractive returns on capital thanbonds.

Mr. Moe said a new real-estatefund should be based in Trondheimin the middle of Norway, rather thanthe capital of Oslo, where NorgesBank Investment Management, orNBIM, which manages the oil fund,is based.

NBIM officials have declined tocomment on proposals for changingthe fund’s structure. The fund hasbeen gradually reducing its expo-sure to bonds.

Norway’s wealth has grown con-siderably in recent years amid fa-vorable conditions for the nation’sbooming oil and gas industry. Witha value of 4.56 trillion Norwegiankroner, or an increase of 654% froma decade ago, it is expected to growto 6.8 trillion kroner ($1.1 trillion)by 2020.

The debate about where to investthe money likely will intensify thebigger the fund gets, Mr. Moe said.

He said the current growth rateof the fund could lead Norway toown “$120 billion to $130 billion inreal estate by the end of this de-cade” if the proposal is followed.

“That alone would make the Norwe-gian government one of the biggestreal-estate investors globally, proba-bly also heavily weighted in the U.S.,the world’s biggest real-estate mar-ket.”

Mr. Moe said the U.S. showedsigns of recovery, with falling unem-ployment and a relatively youngpopulation. He also is encouragedthat new oil resources in the mar-ket, as a result of better extractionmethods such as fracking, can im-prove the U.S. trade deficit.

“I don’t think it’s bad timing toenter U.S. real estate,” he said.“We’ll stay away from subprime andstructured products. We’re talkingabout entering directly into busi-ness properties—hotels and proper-ties in central areas where it’s hardnot to expect a cash flow.”

The Norwegian sovereign-wealthfund, often referred to as the oilfund, jumped into the U.S. real-es-tate market in February, snappingup half of a $1.2 billion block of fiveupscale East Coast office buildingsowned by pension-fund managerTIAA-CREF, including a pair of officebuildings in Washington, D.C.

Mr. Moe said the proposal for anew fund was inspired by a trip toAlaska to study the strategies of the$40 billion Alaska Permanent Fund,which has 12% of its assets in realestate.

“It’s invested much heavier andearlier than us in real estate,” hesaid. “Their returns have over timebeen much higher than ours, around9%.”

BY KJETIL MALKENES HOVLAND

London High-RiseHas Glaring Flaw

LONDON—The sun doesn’t shineall that often in London. But when itdoes, it is best to avoid walking near20 Fenchurch Street, the newestskyscraper rising in the city’s finan-cial district.

One facade of the 37-story glassbuilding—dubbed the Walkie Talkiefor its slight resemblance to a hand-held radio—slants downward towardthe street below. For about twohours a day in recent weeks, it hasbeen reflecting an intense beam ofsunlight onto pedestrians and Lon-don traffic.

Nearby workers complain thelight can be blinding. The project’sdevelopers said Tuesday that streetparking in the affected area hadbeen temporarily suspended, afterone car owner told British newspa-pers the light had damaged hisbodywork.

The £200 million ($311 million)project’s developers, Land Securi-ties PLC and Canary Wharf PLC, saythey’re working to fix the problem,including plans to add a chemicalagent to the building’s facade to re-duce reflection, according to a per-son familiar with the situation. An-other possible solution: usenonreflecting foil to cover the of-fending panes of glass, this personsaid.

Meanwhile, the developers saidTuesday that they would erect a

temporary screen at street level forthe next two weeks to prevent fur-ther problems. The statement didn’treveal a long-term solution to theissue.

The board of Land Securities,Britain’s biggest developer by mar-ket value, met Monday night to dis-cuss options, according to anotherperson familiar with the situation.

The office building, expected tobe finished next year, was designedby Uruguayan architect Rafael Vi-ñoly.

Mr. Viñoly’s firm, Rafael ViñolyArchitects, didn’t respond to re-quests for comment on the build-ing’s design.

The building isn’t the first to runinto problems from the sun’s glare.The Walt Disney Concert Hall in LosAngeles, which first opened in 2003,was modified after local residentscomplained the reflection from thebuilding’s stainless steel arches wasoverheating their homes and addingto their air conditioning bills.

BY PETER EVANS

Apartment blocks under construction in the Liljeholmskajen neighborhood of Stockholm in April.

Swedish Capital Struggles to Provide Desirable Housinggoverning development, Sweden’sproduction costs for new housing,for instance, are the highest in theEuropean Union—and 72% above theaverage.

The result is that constructionprojects limp along, and interna-tional developers for the most partare staying on the sidelines. Mean-while, the country’s small industryof developers, builders and investorsfocus primarily on upscale housingwhere margins are better, largely ig-noring the needs of the middle class.

“I don’t think we can develop ourbusiness by trying to keep thingsthe way they are,” says Peter Wåg-ström, chief executive of NCC, Swe-den’s third-largest constructioncompany.

Stockholm isn’t alone. Concernsabout housing shortages are echoedin other European cities, such asLondon and Berlin, that have faredrelatively well during the past yearsof financial turbulence. The rest ofEurope is looking to these cities, inpart, to fuel the Continent’s recov-ery, but affordable housing could bea stumbling block.

Many of these cities are lookingto find ways to increase supply. Lon-don Mayor Boris Johnson, for exam-ple, has set a target of building55,000 affordable homes by 2015,and Germany’s Chancellor AngelaMerkel has incorporated plans formore-affordable housing into herplatform ahead of the election nextmonth.

Some investors are benefitingfrom the imbalance between supplyand demand. With rents rising inGermany, for example, stocks in Ger-man rental-apartment companieshave been seen as an attractivelong-term bet.

Also, risk-averse institutional in-

Continued from page 15

vestors are buying rental propertiesin Sweden, seeking safety in theirpredictable, if low, returns. Residen-tial properties accounted for 36% ofthe transaction market in Swedenthis year, up from 10% to 20% in theearly 2000s, according to estimatesby Stockholm-based property con-sultancy Newsec.

But officials and business leadersin cities facing housing shortagesrecognize their economic growthcould be stifled if workforces can’tfind places to live.

With a population in the Stock-holm region of over 2.1 million, thecounty administration board esti-mates that up to 319,000 homes

need to be built by 2030, or morethan 17,000 new homes a year. Butbetween 2000 and 2012, only an av-erage of 7,248 new homes a yearwere completed.

“We cannot provide housing forour young colleagues,” says Kon-stantin Papaxanthis, chief executiveof small software developer Prime-key. While his company is posting a20% annual sales growth rate and ishiring, the expanding workforceisn’t necessarily enjoying the bestStockholm has to offer.

The company “can’t expand theway we would like because of thehousing shortage,” Mr. Papaxanthissays.

The Swedish rent-control systeminvolves a bargaining process be-tween property owners and tenants’unions that sets rents according tosize, standard and location. Thiskeeps rents low in older housing inattractive locations so that tenantshave little incentive to move. Whathas emerged is a black market inwhich firsthand rental contracts inthe red-hot city center can sell foraround 500,000 Swedish kronor($76,800).

Stefan Attefall, Sweden’s 53-year-old housing minister, saysthere is no quick fix for the problem.Changing the system isn’t politicallypopular in Sweden, where many citi-

zens view rental-market regulationas a critical part of a social safetynet that Sweden and other Nordiccountries strive to maintain throughhigh taxes and other measures.

“The dilemma is how do weachieve consumer protection, secu-rity for tenants and a decent soci-ety?” Mr. Attefall says.

Knowing he won’t be able to getthe political support needed to doaway with the current rent regula-tion, he is fighting instead to reducered tape. In the three years since heassumed his post, Mr. Attefall haslaunched 65 inquiries to find outwhat can be done to ease the hous-ing crisis and has decided to focusefforts on simplifying and standard-izing regulation.

There also has been small stepstaken to loosen regulation, andsome analysts believe there may bemore to come. “It has become morepolitically acceptable to talk aboutless regulated rents,” says equity an-alyst Albin Sandberg at Handelsban-ken.

But that is little consolation foreveryday renters like Therese Lar-sen, who are increasingly out in thecold. A 27-year-old lawyer workingon a temporary contract in down-town Stockholm, Ms. Larsen hasbeen searching for a place close towork for more than a year.

“When you’re young and ambi-tious, you want to live where some-thing’s going on—in the city, ofcourse,” says 27-year-old Ms. Lar-sen. As she waits on a list for arental apartment, her sister has puther up in her apartment, which is a30-minute train ride from her office.“At least I don’t have to live on thestreet,” she says.

—John D. Stolland Ellen Emmerentze Jervell

contributed to this article.

THE PROPERTY REPORT

Bloomberg

New

s

The building has beenreflecting an intensebeam of sunlight ontoboth pedestrians andLondon traffic.

12 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

OPINION: REVIEW & OUTLOOK

M icrosoft announced Tuesday thatit is buying Nokia’s mobile-phone business for $7 billion

(€5.44 billion), including $2 billion to li-cense a portfolio of Nokia patents. Oh,how the mighty have fallen.

When Nokia’s stock-market valuepeaked at some $300 billion in the year2000, it was the biggest mobile-phonemaker in the world, with more than aquarter of the global handset market. Itsphones were status symbols, its charac-teristic ringtone iconic. Readers of a cer-tain age may even remember the Com-municator 9000, which looked like alarge cellphone from the outside andopened up to reveal a full, if diminutive,keyboard. These were once cool, kids.

Nokia was caught in the tech-stockdowndraft in 2000, but it still had be-lievers. After a big selloff in its stockthat summer, one investment-bank ana-lyst declared that “The longer-term out-look is tremendous.” He added: “If youbelieve in the mobile wireless Internetworld where your mobile communica-tions device is your primary Internet ac-cess device and so on, whoever domi-nates that market will have significantrevenues for a very long time to come.”

He was right, except for the role that

Nokia would play in that world. Apple’smarket cap in December 2000 was $6.5billion and it didn’t make its first phoneuntil 2007, but it ushered in the smart-phone revolution that Nokia had tried topioneer. Samsung has since usedGoogle’s Android operating system to be-come the largest handset maker in theworld.

At the time Nokia waspeaking, Microsoft wasalso considered so domi-nant that regulatorsaround the world arguedthat its position was allbut unassailable. They filed antitrustlawsuits and even tried to break it up, ala AT&T in the 1980s. The claim at thetime was that the “network effects”—orincreasing economic returns—created bythe Windows operating system meantthat Microsoft would dominate the fu-ture of computing for decades to come.Every competitor would be devoured.

These regulators and pundits merelymissed the rise of the Internet, Google,wireless telephony, the cloud, and somuch more. Windows, now in its eighthiteration, is still on millions of comput-ers and Microsoft makes plenty of moneyselling it. But those PCs are far less cen-

tral to our digital lives. In mobile, Win-dows remains far behind the marketshares of Android and Apple’s iOS.

At its peak in 1999, Microsoft’s marketcap was $620 billion, a record at thetime in nominal dollars. Today, its stockvalue is $263.8 billion, while Apple’s isabout $445 billion. Microsoft CEO Steve

Ballmer is retiring nextyear to give someone elsethe chance to return thecompany to its formerglory. The Nokia acquisi-tion is an attempt, argu-ably too belated, to catch

up to the Apples and Samsungs in smart-phone hardware and mobile computing.

None of this was forecast by the eco-nomic models that antitrust and otherregulators use to justify their crusadesagainst the fleeting dominance of which-ever company is on top. In the same waythey had failed to foresee Microsoft’semergence via the personal computerfrom the shadow of IBM’s mainframedominance in the 1980s.

Nokia itself has been the veritable av-atar of corporate reinvention, startingout in wood pulp in the 19th century. Asrecently as the early 1990s, the companywas an unwieldy Finnish industrial con-

glomerate, trying to make its pivot intomobile telephony. Few then predicted itsmeteoric rise, or its equally meteoric fall.In shedding its handset business, Nokiawill become essentially a maker of net-work equipment for cellphone operators.

The larger point here is that corpo-rate giants come and go in a competitiveeconomy. No monopoly is permanent,unless it is enforced by government,which as everyone knows almost neverchanges. It thinks and usually behavesthe same even as the rest of the worldchanges.

In the latest evidence, the U.S. Depart-ment of Justice told a federal court inAugust that it wants a government over-seer for Apple’s iTunes and App Stores inorder to prevent the company from abus-ing the alleged network effects and“lock-in” created by Apple’s tech ecosys-tem. Never mind competition from Ama-zon, Google and others.

The good news is that federal JudgeDenise Cote seems skeptical of the re-quest, saying last week that “I want Ap-ple to have the flexibility to innovate.”Imagine that. Microsoft, Nokia and otherformer giants deserved the same whenthey were on top, and they deserve itnow as they try to catch up.

A leading candidate for the biggestU.S. government failure in recentyears is the $25 billion Advanced

Technology Vehicle Manufacturing LoanProgram (ATVM), which stopped dolingout loans in 2011 after funding such de-bacles as Fisker Automotive. But this isthe Obama Administration, where noth-ing in government fails, so naturally newEnergy Secretary Ernest Moniz wants torevive it.

The Energy Department said last weekthat it “plans to conduct an active out-reach campaign to educate industry asso-ciations and potential applicants aboutthe substantial remaining funds” inATVM. The PR campaign appears to bethe first step in what Mr. Moniz tells theDetroit News may be a “new solicitation”for loans. Hold on to your wallets.

Congress created this market-distort-ing program in 2008 to spur a green-car

revolution, and President Bush wentalong for the ride in his unlamented lateperiod. The Obama Administration madethe program a highlight of its stimulus,committing some $9 bil-lion to electric-vehicle andother projects. Two of thelargest taxpayer loanswent to global titans Fordand Nissan—not exactlyneedy but at least goingconcerns.

The biggest bust wasthe $529 million loan promise to Fisker,which planned to make luxury cars forthe masses from a defunct GM plant inJoe Biden territory in Delaware. Despitethis federal loan, state subsidies andmore than $1 billion in private financingfrom Kleiner Perkins and other SiliconValley investors, Fisker ceased produc-tion last year. It had already drawn some

$193 million of its federal loan, whichlooks to be a taxpayer loss.

Energy is also trying to recoup its $50million to the Vehicle Production Group,

a maker of natural-gaspowered wheelchair-ac-cessible vans. VPG shutdown in May, and the En-ergy Department recentlyannounced it would auc-tion off its promissorynote on August 15. But thefederal auction website

(GovSales.gov) doesn’t show that theevent took place.

Secretary Moniz will no doubt toutthe case of Tesla, another luxury-carcompany that earlier this year repaid its$465 million loan ahead of schedule.Tesla’s stock price is soaring, and this issupposed to be the success story of gov-ernment venture capital. But Tesla still

benefits from other government subsi-dies—such as the $7,500 federal taxcredit for electric-car buyers and theemissions credits Tesla has cashed in onat the expense of traditional car makers.Let’s see how Tesla does when it takesoff the taxpayer training wheels.

The $16 billion or so left in the auto-loan program seems to be burning a holein Mr. Moniz’s pocket, so taxpayersshould be on the lookout for political fa-voritism. Congress’s investigations intoFisker, Solyndra and other losers showedthat the Energy Department passed outfunds on the basis of political calcula-tions and then was incapable of exercis-ing due diligence over its portfolio.

Rather than let Mr. Moniz throwmoney at more companies that will gobust or become government dependen-cies, Congress ought to kill this monu-ment to crony capitalism.

A media cliche is that House Repub-licans are reflexively anti-Obamaregardless of the issue, but look

who have declared their support for thePresident’s Syrian resolution: SpeakerJohn Boehner and Majority Leader EricCantor.

The top two GOP House leaders an-nounced their backing on Tuesday aftermeeting with President Obama and otherCongressional leaders at the WhiteHouse. Mr. Boehner’s spokesman addedin a statement that the Speaker “encour-ages all Members of Congress to do thesame.” Their support is no guaranteethat most Republicans will follow, but bycoming out early they have set an exam-ple and provided some cover for back-

benchers who may agree on principle butare wary of taking the political risk.

Mr. Obama is luckier in his oppositionthan was George W. Bush. Mr. Bush hadSenator Obama, who op-posed the GOP President’sforeign policy at nearlyevery turn, including re-lentless hostility to the“surge” that defeated theIraq insurgency.

Mr. Bush was also stuck with SenatorJoe Biden, who also opposed the surgeand had opposed George H.W. Bush onthe 1990 Gulf War and Ronald Reagan onmissile deployments in Europe and es-corting tankers in the Persian Gulf in1987. The challenge is finding a single

policy by a Republican President that Mr.Biden did support as a Democratic Sena-tor—save for the Iraq war resolution in2002 that he soon repudiated when the

going got tough.The historical fact is

that at least since WorldWar II, Republican leaderson Capitol Hill have beenfar more likely to supportDemocratic Presidents on

foreign policy than vice versa. John Mc-Cain and Bob Dole backed Bill Clinton onBosnia in 1996, and then Speaker DennyHastert supported a Democratic resolu-tion backing Mr. Clinton on Kosovo in1999. (The resolution failed on a tievote.)

Some of this is due to the GOP tradi-tion of deferring to presidential warpowers that developed during the ColdWar and repudiated the party’s pre-World War II isolationism. A larger partflows from a belief that the U.S. militaryis generally a source for good in theworld. This is in contrast to the post-Vietnam Democrats, most of whom havesought to limit presidential war powersand U.S. action overseas.

The political irony is that if Mr.Obama’s Syrian resolution passes nextweek, it will owe more to these GOPleaders, and to Senators McCain andLindsey Graham, than it will to the Presi-dent’s own arguments or his overall cred-ibility as Commander in Chief.

They Once Were Giants

Electric Losers, Round Two

Water’s Edge Republicans

Microsoft and Nokiaruled the tech world.Then they didn’t.

On Syria, Boehnerand Cantor rise

above partisanship.

The EnergyDepartment

hopes to revive anObama clunker.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 17

BallmerTapsNokiaCEOToLeadNewBusiness

After three years of trying to re-pair businesses that proved to beunfixable, Nokia Corp. Chief Execu-tive Stephen Elop is back at Micro-soft Corp. to help shape the legacyof the software giant’s longtimeboss, and potentially take his job.

Nokia on Tuesday announced the$7 billion sale of an ailing handsetbusiness to Microsoft, ending sev-eral months of discussions betweenMr. Elop and Microsoft Chief Execu-tive Steve Ballmer. The negotiationswere the subject of dozens of board-room deliberations on both sides ofthe Atlantic.

Nokia shareholders and many inFinland applauded the move. Nokiashares jumped 34% to €3.97 ($5.24)in Helsinki trading Tuesday amidsentiment that the deal is the bestsolution for a mobile-device opera-tion that already relied heavily onMicrosoft Windows technology.

It is a stark reversal to the chillyreception Mr. Elop has recentlyweathered in Helsinki, where somehad taken to calling him “StephenEflop.”

Having left Microsoft after run-ning the company’s profitable busi-ness division, Mr. Elop returns a bitof a hero. He was the only executivein the global handset business to ex-clusively use the Microsoft mobileplatform and Nokia now sells nearlyevery Windows phone that is soldworld-wide.

The table is set for the 49-year-old executive to help Mr. Ballmerpull off an ambitious plan and, inthe process, win respect in Micro-soft’s board room as its directorssearch for a new CEO.

In an interview Tuesday, Mr.Ballmer said the public shouldn’tread too much into what the dealmeans for Mr. Elop’s future, but ac-knowledged his longtime associatehas gone from being an externalcandidate to an internal candidate.

The immediate goal is to workhand-in-hand with engineers and

marketing staff at Microsoft to putthe pieces in place to truly competewith rivals. The executives are eagerto develop a legitimate third ecosys-tem capable of taking on playerslike Samsung Electronics Co., Ap-ple Inc., and Google Inc., which aremiles ahead thanks to iOS and An-droid.

If he fails, Mr. Ballmer’s legacywill be dented. The Microsoft chiefhas been criticized for not keepingup in a fast-moving industry. Peopleinvolved in the Nokia deal say theplay for a struggling handset busi-ness is one last effort to prove hismettle.

In choosing Mr. Elop to lead theintegration of the new business, Mr.Ballmer taps a respected ally. Dur-ing the interview, Mr. Ballmer saidhe values Mr. Elop as a partner. TheCanadian-born executive was one ofthe few people he called before an-nouncing his coming retirement.

Mr. Ballmer also picked an exec-utive who hasn’t strayed far fromhome.

Since joining Nokia in 2010, Mr.Elop has taken commercial flightsbetween Helsinki and Seattle. He es-sentially lived out of a suitcase tobalance the demands of turningaround a crumbling business andraising teenage daughters whom hedidn’t want to uproot.

Mr. Elop isn’t a stranger to toughdecisions. He made waves almostimmediately after starting at Nokia.He set to work on a plan that wouldlead to tens of thousands of job cutsand a downsizing of Nokia’s trea-sured research and development de-

partment. He sold key assets, in-cluding the seaside headquartersnear Helsinki and closed the last re-maining handset factory in Finland.

He also changed the focus. Ear-lier this year, after an extensive re-build of the Nokia Siemens Net-works wireless division, Mr. Eloppaid about $2.2 billion to buy outSiemens AG. Nokia now looks a lotlike Sweden’s Ericsson, which ex-ited handset manufacturing a coupleof years ago and is now making bigprofits selling infrastructure.

The results of the handset strat-egy have been less than stellar.

Nokia’s cash burn and losseshave narrowed, but it only controlsabout 3% of the global smartphonemarket and 14% of a total handsetmarket. While many analysts haveblamed Nokia’s demise on a weakMicrosoft operating system, criti-cism can be aimed at Nokia execu-tives who underestimated rivals.

In recent months, it became in-creasingly clear the Windows phonestrategy was running into a road-block. No matter how good Nokia’snew Lumia smartphones were, otherplayers in the industry—particularlySamsung Electronics—had deeperpockets that allowed them to pourfar more money into marketing anddiscounting smartphones than Mr.Elop has initially calculated.

Samsung’s market share, fueledby the popularity of both the Galaxyhandset and the Google Inc. An-droid operating system it runs, hasskyrocketed as Nokia’s shareplummeted, with the Koreancompany overtaking Nokia at No. 1in 2012.

Mr. Elop has done his best topaint a positive picture of Nokia’sphone business, pointing out thatLumia volume, while small, has beengrowing, with sales increasing 32%to 7.4 million in the second quarter.Samsung, however, sold nearly 10times as many smartphones in thefirst three months of 2013.

The clock is now ticking on Mr.Elop’s attempt to catch up.

BY JOHN D. STOLL

Nokia’s outgoing Chief Executive Stephen Elop spoke at a news conference on Tuesday in Espoo, Finland.

Bloomberg

New

s

Microsoft Pins HopeFor Revival on Nokia

Nokia said the deal with Micro-soft will improve its financial posi-tion and “provide a solid basis forfuture investment in its continuingbusinesses.”

Microsoft, meanwhile, said it ex-pects the deal to accelerate thegrowth of its market share andprofit in mobile devices. This deal“builds on the phenomenal partner-ship we’ve built with Nokia,” Mr.Ballmer said during a joint inter-view late Monday with Nokia Chair-man Risto Siilasmaa. He said thatbecause Nokia and Microsoft al-ready work so closely together, itshould be a “smooth transition” tointegrate Nokia’s mobile businessinto Microsoft.

The workers being added fromNokia will pad Microsoft’s employeecount by about one-third.

“This is definitely major newsfor Nokia, Nokia employees and Fin-land,” Mr. Siilasmaa added.

The Wall Street Journal reportedin June that Microsoft and Nokiahad discussed a sale of Nokia’s mo-bile-phone business but the talksfell apart over the price of thetransaction.

Deal negotiations were sparkedby a phone call from Mr. Ballmer toMr. Siilasmaa just before a Februarymobile-industry conference in Bar-celona.

Mr. Ballmer sought to seewhether Microsoft could be morethan just a partner to Nokia, Messrs.Ballmer and Siilasmaa said in thetelephone interview.

The Nokia board met more than50 times to discuss the possibility ofa deal with Microsoft, Mr. Siilasmaasaid. As for his part in the deal, Mr.Ballmer said: “This has been a highpriority for me.”

Mr. Ballmer didn’t say whetherthe Nokia deal timing and the an-nouncement of his retirement justover a week ago was a coincidence.The Microsoft CEO did say he calledtwo people, Messrs. Siilasmaa andElop, just before his retirement wasmade public, as the two companieswere in the final stage of acquisitiontalks.

The companies said Microsoft isexpected to use its stockpile of over-seas cash to pay for the Nokia pur-chase and licensing pact. Microsoftand Nokia said the transaction is ex-pected to close in the first threemonths of 2014, subject to approvalby Nokia shareholders and otherconditions.

“For Microsoft, this is a boldstep into the future,” Mr. Ballmersaid in a note to employees. Mr.

Continued from first page Ballmer has been reworking Micro-soft around what he calls a “devicesand services” strategy—a vision ofMicrosoft not only producing thesoftware underlying manycomputing devices, but being moreresponsible for the personalcomputers, smartphones and otherhardware on which people and busi-nesses rely.

Mr. Ballmer’s strategy, however,has been hamstrung by Microsoft’sweak position in smartphones, avast and fast-growing business thatis reshaping the technology battle-ground and minting new winners.

Microsoft’s market share insmartphones is about 3% in the U.S.,according to comScore.

“So far, the experience of Micro-soft in the hardware business hasnot been positive, so shareholdersare understandably apprehensive,”wrote Rick Sherlund, an analyst atNomura Securities, in response tothe deal.

Nokia’s market share and marketvalue have tumbled during the ten-ure of Mr. Elop, who took over in2010. Last year, Nokia generatednearly half of its €30.2 billion inrevenue from its mobile-phone seg-ment.

One of Mr. Elop’s key moves wascutting the broad alliance withMicrosoft in 2011, agreeing to usethe software giant’s mobileoperating system at a time manysmartphone makers were adoptingGoogle’s Android software.

So far, the alliance has failed tobear much fruit, with Android pow-ering its way to a dominant share ofthe market.

With the new deal for Nokia, Mi-crosoft will for the first time controlboth the smartphone hardware andsoftware teams—matching advan-tages that companies like Applehave leveraged for years, includingeasier planning of features and com-plete control of the customer’s expe-rience, said Van Baker, an analyst atGartner Inc. But there will also be asmaller group of Windows Phonedevices as well, he added, puttingfurther pressure on Microsoft tosucceed.

“It’s an all-or-nothing bet,” Mr.Baker said. “They have to be suc-cessful in the marketplace becausethere won’t be anyone else to fallback on.”

Al Hilwa, an analyst at IDC,noted the price was almost too goodto pass up for Microsoft, whichended up paying less for Nokia’ssmartphone business than the $8.5billion it did for the communica-tions service Skype in 2011.

All ChangeNokia has fallen far behind its rivals in the global smartphone market.

MARKET SHARE

The Wall Street Journal*First half Source: Gartner

Samsung

AppleAppleApple

NokiaBlackBerry

2006 ’07 ’08 ’09 ’10 ’11 ’12 ’13*

50%

0

10

20

30

40

%

THE NOKIA-MICROSOFT DEAL

The table is set for the49-year-old Mr. Elop tohelp Microsoft’s CEO,Steve Ballmer, pull off anambitious plan.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 13

Letters To The Editor

Regarding your editorial“The Problem Is Assad” (Aug.28): I am no fan of Bashar As-sad, but I think the U.S. admin-istration and most pundits aregetting it wrong on Syria. Whatis going on there is not an in-surrection of the good guysagainst the bad regime but is afull-blown civil war betweentwo equally bad players, andSyrians are divided roughly50-50. Both sides are equallybrutal and anti-American. Theonly reason the rebels didn’tuse chemical weapons is be-cause they don’t have them. Totake sides means we alienatehalf the population, and wemake a bad situation a lotworse.

If Assad falls, Syria will notturn into a Middle-Eastern Swit-zerland. And not even into anAfghanistan or Iraq. It will mostlikely be a Somalia or Yemenruled by a malicious Hydra witha thousand jihadist heads. Therewill be unimaginable slaughterof minorities and loyalists(roughly half the population),which is already taking place inrebel-controlled areas.

How would anybody who iscalling for intervention have re-acted if in 1864 some foreigncountry decided that the Ameri-can civil war had gone far toolong and had become too brutal,and that was time to end it byarming the rebels, bombingWashington and eliminatingAbraham Lincoln?

An attack on Syria will be agrave mistake and will have cat-astrophic consequences for Syri-ans as well as for the whole re-gion and far beyond. I hope

cooler heads will prevail beforeit’s too late.

HANY HAMDYBoston

The very idea that we haveany chance of controlling theoutcome by taking out Assad isfolly. How would this be accom-plished unless we deploy an oc-cupying force? Syria would bethe mother of all slogs, and theRussians and Chinese wouldjump for joy as we becomepinned down again and depleteour Treasury. I say take outsome serious Assad assets withcruise missiles and high-altitudebombers to send the message onthe use of chemical weapons,and do so again and again ifneeded to cement the message,and then let them have at it anduse the savings to invest in thiscountry. Please, please, please,rent the film “Lawrence of Ara-bia.” You all need a refresher.

JOHN R. BRIGGSFair Oaks, California

Regarding Andrew Roberts’s“Syria’s Gas Attack on Civiliza-tion” (op-ed, Aug. 27): Why is an-nihilating 100,000 people with anuclear bomb deemed less bar-baric than killing a few hundredpeople with poison gas? Why isassassinating someone with a mis-sile fired from a drone consideredmore civilized than beheading thesame person? Quite simply the“law of war” is an irreconcilableoxymoron. Any attempt to ratio-nalize one form of mass murderas inherently morally superior toanother is a fool’s errand.

MICHAEL H. LEBPasadena, California

George Melloan makes thepoint that the upsurge in legalactivity isn’t a result of slippagein bank integrity but rather anunjustified redefinition of bankstandards by, for instance,America’s Dodd-Frank Act(“Bankers Haven’t Gone Rogue—Regulators Have,” op-ed, Aug.27). While Dodd-Frank is accu-rately described, the banks havealso shown ethical slippage.

I suggest that bad guidanceand regulation drive out goodbankers. The legislators and reg-ulators set the moral standardfor those subject to the regula-tion. For instance, when Con-gress declares that it wants to“roll the dice” on extending real-estate loans to those with mar-ginal ability to afford suchloans, responsible bankers whoappreciate the devastation thiswould visit on the unsophisti-cated mortgagors resisted andoften left that profession. Lessethical bankers, on a missionfrom Congress, made such mar-ginal loans, collected the feesand offloaded the bad paper toFreddie Mac and Fannie Mae.Other tainted paper was sliced

and diced for sale to naive in-vestors, ironically, includingother banks.

The regulators stretched theterm red-lining to include desig-nating declining neighborhoodswith poor prospects of maintain-ing value. Such judgments are avalid and ethical business con-sideration in that the red-liningwas of real estate not ethnicgroups. Ethical bankers had aproblem with approvingdoomed-to-failure loans whileless ethical bankers earned theprofits and off-loaded the risks.These loans were devastating tothose unfortunate to be enabledby misregulation to obtain them.

Those with the power to reg-ulate and jawbone also have thepower to determine the moresof those regulated, both bypushing out those with higherstandards and by empoweringthose with conforming moralturpitude. This is reflected inthe inability to prosecute thosewho were merely following theirmarching orders from Congress,et al.

THOMAS W. O’ROURKEBoulder, Colorado

OPINION

The Stakes on the Syria VoteBarack Obama does not need

congressional approval to launcha war. Even under the War Pow-ers Resolution of 1973, which is ofdubious constitutionality, the U.S.president has only to notify Con-gress within 48 hours of initiatingmilitary action. He also has a 60-day window to conduct opera-tions (plus 30 to withdraw)absent congressional authoriza-tion.

Whether launching warfarewithout congressional approvalis sound policy, however, is an-other matter. Both George W.Bush and his father, in theirpresidencies, securedcongressional authorization fortheir wars with Iraq. PresidentClinton did not get congressionalauthorizations for the operationsin Somalia or Bosnia in the1990s, but he did report to Con-gress and informally secure itsconcurrence. The same was thecase for Operation Desert Fox,the intense, four-day bombingcampaign Mr. Clinton launchedon Iraq in 1998, during thecourse of which he changed U.S.policy to support the overthrowof Saddam Hussein.

When the executive launches awar, the president should, if at allpossible, secure congressionalsupport and authorization as amatter of good politics but alsoout of respect for democratic le-gitimacy. Moreover, the powers ofinvestigation, legislation and au-thorization to spend money giveCongress the ability to overseeand influence a war for good orill.

On Saturday, when PresidentObama overruled his advisers,reversed his own policy and de-clared that he would not actagainst Syria until Congress hashad its say, he did not—as hemight have—recall Congress forthat purpose. Instead, Mr. Obamasaid he would let the vote waitfor 10 days or more. Then hepromptly left the White House forthe golf course. Later this week,he’ll travel to Stockholm and thento St. Petersburg, Russia, for aG-20 economic summit.

Mr. Obama’s dwindling band ofdefenders insist that this decision“to seek authorization for the useof force from the American peo-ple’s representatives in Congress”was a matter of principle that hadescaped him in Libya in 2011, andthat only occurred to him now af-ter many days of plotting an aircampaign against the Syrian gov-ernment for its use of chemicalweapons.

Others, less charitably inclined,see in his Saturday announcementa mixture of unworthy motives—an outright panic when BritishPrime Minister David Cameronlost a war vote in the House ofCommons; an unbecoming wishthat Congress would give him anexcuse for inaction; and an un-worthy scheme to stick his ene-mies (as he understands them) inCongress with a responsibility hehopes to shirk.

It is beside the point to assessthese motives. Congress now hasdecisions to make. This is the ar-

gument that lies before them.The case against authorizing

the use of force begins with an in-dictment of the administration’sfeckless policy toward Syria. Mr.Obama chose passivity two yearsago when he might have tippedthe balance to a then largely sec-ular opposition. He concocted andthen ignored red lines regardingthe use of chemical weapons. Andhe has, with this latest backflip,shown himself eager to squirmout of his own commitments,even as the rhetoric of his pro-nouncements (“limited,”“tailored,” “no boots on theground,” etc.) indicates far moreinterest in what the U.S. will notdo than what it should do, andwhy.

The president’s critics will fur-ther note, and correctly, that waris war, and, as such, unpredict-able. As Winston Churchill put it:“Never, never, never believe anywar will be smooth and easy, orthat anyone who embarks on thatstrange voyage can measure thetides and hurricanes he will en-counter.”

Despite Mr. Obama’s state-ments about narrowly definedgoals, precise uses of force andlimited duration, it is entirely rea-sonable to expect that such astrange voyage may lie aheadonce operations begin, and thathe is singularly ill-fitted to navi-gate it.

Finally, as a practical matter,critics can ask why the U.S.should intervene after a massacre,however hideous, of some 1,400Syrians, when America has re-fused to act over the slaughter of100,000 in the preceding twoyears. And, even if the U.S. strikesat Assad and helps bring abouthis downfall, the danger is realthat having administered a defeatto the regime and its sponsor,Iran, America will hand a victoryto al Qaeda.

These are all serious argu-ments. But weightier are thecounterarguments. For better orfor worse, the credibility notonly of this president, but ofAmerica as a global power and aguarantor of international order,is on the line. If the U.S.—afterits president said two years agothat Assad must go and then, ayear later, drew a red line atSyria’s use of chemical weap-ons—now does nothing, pro-found conclusions will be drawnby a China ready to bully itsneighbors, by a North Koreawhose scruples are already mini-mal, and by an Iran that has al-ready killed many Americans in a

covert war waged against us inIraq and Afghanistan.

i i iAmerica’s friends will realize

that its word means nothing. As aresult, they will either abandonus, or arm themselves with nu-clear weapons. And these coun-tries will be increasingly willingto wield them in a world in whichthey have no great ally who maybe counted upon to stand by themin an hour of need.

One has to suspect that theSyrian government deliberatelyused sarin in the Damascus sub-urbs while United Nations inspec-tors were in the capital, and onthe eve of the anniversary of Mr.Obama’s red line statement. Theessence of tyranny is this mes-sage to a population: “We will im-pose our will on you. No onecares about your suffering, and noone will do anything to rescueyou.” Assad’s message was deliv-ered by chemical weapons ofmass destruction. Civilized na-tions let that message remain un-answered at their peril.

The U.S. now faces a twofoldproblem. The first is that manyAmericans who came of age in thepast 25 years, having grown up ina world that has been shaped byU.S. primacy, take that primacyand the stability and prosperity ithas brought for granted. Theyshould not. It hangs in the bal-ance.

The second is a problem ofstatesmanship. American steward-ship of the Cold War world de-pended not only on presidentslike Truman, Eisenhower, Kennedyand Reagan, but also on congres-sional leaders like Arthur Vanden-berg and Scoop Jackson. Today,the latter-day equivalents ofHiram Johnson and William Bo-rah, leaders of the isolationistmovement in the 1920s and 1930s,speak loudly on Capitol Hill. Whatis needed are spokesmen for theopposing, and wiser, view.

The country desperately needslegislators who understand thatthe arguments are too serious andcomplex for tweets and Facebookposts. Legislative statesmen ac-cept that partisanship and self-seeking must stop at the water’sedge—and they soberly realizethat responsibility lies with them,no less than with the inept andinconstant president who hasbrought the nation to this pass.

Mr. Cohen teaches at JohnsHopkins School of Advanced In-ternational Studies. From2007-08 he served as counselorof the State Department.

* * *

Bombing or Killing AssadWon’t Solve the Syrian Mess

* * *

Bad Regulation PenalizesResponsible Banking Practice

America’s credibility as aguarantor of internationalorder is on the line.

President Obama meeting with his national-security advisers in the WhiteHouse Situation Room, Aug. 31.

TheWhite

Hou

se/G

etty

Images

16 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Morgan Stanley............21NCC................................18Nokia................1,16,17,28Onyx Pharmaceuticals..28Peugeot.........................20Primekey.......................18Rio Tinto.......................22Royal Bank ofScotland.....................22

SamsungElectronics.........1,16,17

Shanghai PudongDevelopment Bank....22

Siemens...................16,17Telefon L.M.Ericsson.................16,28

UBS .......................... 21,22VerizonCommunications...21,28

Vodafone..................21,28

Ford Motor....................20Fortescue MetalsGroup..........................22

Gartner..........................17General Motors.............20Goldman SachsGroup.....................21,22

Google..............1,16,17,28HSBC Holdings ............. 22HTC................................28Huawei Technologies....16Industrial & CommercialBank of China............22

International BusinessMachines....................17

J.P. Morgan Chase........21Land Securities Group..18Lenovo...........................28McGraw Hill Financial..20Microsoft..........1,16,17,28

Alcatel-Lucent ......... 16,28Algeta............................28Amgen...........................28Apple...........1,16,17,21,28Bank of America......21,22Bank of China...............22Bank ofCommunications........22

Barclays.........................21Bayer.............................28BlackBerry.....................28China ConstructionBank...........................22

Citigroup ....................... 22Daimler..........................16Danske Bank...................5Facebook ....................... 11Federal HousingAdministration ............6

Fiat................................20

INDEX TO BUSINESSESBusinessesThis index of businessesmentioned in today’sissue of TheWall StreetJournal is intended toinclude all significantreference to companies.First reference to thecompanies appears inbold face type in allarticles except thoseon page one and theeditorial pages.

Corrections Amplifications

Daimler AG’s Mercedes-Benz sold 196,211 cars in China last year, including cars madein China and imported cars. A Business & Finance article on Monday about the companyincorrectly said it sold 100,000 vehicles.

Sea ice extent covered 3.63 million square kilometers of the Arctic in September 2012,the time of year when the ice extent is at its minimum, according to the National Snowand Ice Data Center of the U.S. Excluding the ice concentration near the North Pole, icecovered 2.15 million square kilometers in September 2012, the group said, noting that bothfigures are about half the levels of September 1979. A Business & Finance article on Aug.20 about an Arctic shipping route referred to the smaller measurement but failed to notethat it excludes the ice extent near the North Pole.Readers can alert the London newsroom of TheWall Street Journal to any errors in news articles by emailingwsjcon-tact@wsj.com or by calling +44 (0)20 7842 9901.

THE NOKIA-MICROSOFT DEAL

Nokia Deal Marks the ‘End of an Era’HELSINKI—Nokia Corp.’s deci-

sion to sell its handset business toMicrosoft Corp. closes the latestchapter in its 148-year history of re-inventing itself during a crisis.

But for many here in Finland, thedeal also marks the end of the com-pany’s role as a once-feared globaltech giant and Finnish nationalchampion. Its proposed $7 billiondeal to sell its unprofitable cell-phone business to Microsoft leaves56,000 employees and a collectionof businesses focused mainly onmaking network equipment for cell-phone operators.

It will also hold a lucrative pat-ent portfolio and a mobile-mappingbusiness that competes with GoogleInc. and Apple Inc. If a deal issealed, Nokia will emerge about halfthe size it is today, by revenue—butprofitable.

Union leaders and politicianshere embraced the deal, hopeful itwill save jobs. But for many Finns,any expected benefit is bittersweet,underscoring Nokia’s dramatic fallfrom its perch atop the global cell-phone market. Finland’s minister ofeconomic affairs, Jan Vapaavuori,said Tuesday that the deal markedan “end of an era in Finland."

“There aren’t many other Finnishcompanies apart from Nokia thatmade it big in the world,” said Dan-iel Hanninen, a 22-year-old student.“It’s part of our national identity.”

Nokia executives made a seriesof strategic missteps, allowing rivalslike Apple and Samsung Electron-ics Co., to leap ahead in a smart-phone market Nokia trailblazed, butthen pulled back from. But its fallfrom dominance also parallels yearsof economic hardship in Finland,where Europe’s economic crisis has

battered the country’s core heavyindustries.

In past economic crises, Nokiaemerged as a savior. Two decadesago, its transformation into a nim-ble, global tech player came at atime when Finland was strugglingwith the weight of a lumbering wel-fare state, while its economy washeavily dominated by cyclical indus-tries like pulp, paper and machinerymanufacturing.

“Suddenly, in the 1990s, Nokiaemerged and solved all the prob-lems that Finland had,” said MattaPohjola, economics professor atAalto business school in Helsinki.“We didn’t have to worry anymore.”

Nokia’s economic footprint hereis relatively small these days. It nolonger produces phones in its home-land. Last year, it sold its seasideheadquarters in Espoo—built de-cades ago as a sprawling testamentto the company’s dominance—andstarted leasing back space.

Microsoft Chief Executive SteveBallmer, speaking in Espoo, the Hel-sinki suburb where Nokia is based,told employees Tuesday the U.S.software giant is committed tokeeping thousands of jobs associ-ated with the handset business inFinland, and Microsoft plans tobuild a $250 million data centerhere.

Founded in 1865, when engineerFredrik Idestam set up a wood pulpmill in southwestern Finland, Nokiahas had a history of radical shifts inits business. The first was at theturn of the 20th century when thecompany moved into making rubberproducts, including rubber boots.

In 1967, the company mergedwith partner Finnish Cable Works,which, among other things, hadbeen developing radio telephonesfor the Finnish army. Nokia went onto become one of the first players inthe cellphone industry in the early1980s.

It launched some of the firstproducts of the cellphone age, in-cluding the Senator car phone in1982 and the Cityman, the firstphone to work on a newly createdNordic cellular network, in 1987.

After the company’s unsuccessfulforay into television, former Citi-bank executive Joma Ollila took overin 1992 and focused the companysolely on telecommunications, ex-panding it to the point where itdominated the cellphone market.Nokia’s success boosted its shareprice, and at its peak in 2000 thecompany was valued at €303 billion($400 billion at today’s exchangerate).

Nokia launched its first smart-phone, the Nokia 9000, in 1996, overa decade before the launch of thefirst iPhone. But shareholders grewworried about the billions of dollarsin research the company was pour-ing into the smartphone market,and Nokia shifted again: this time,

putting most of its firepower intoproducing more basic phones. Thatput it on the defensive when Applerolled out its iPhone in 2007.

Under Chief Executive StephenElop, it joined with Microsoft in2011, abandoning its own operatingsystem and launching a last-ditcheffort to turn around flagging sales.Its latest line of smartphones im-pressed many critics, but hasn’t soldwell. At Nokia’s flagship store indowntown Helsinki Tuesday, thefloors were empty except for thestaff.

“I feel sadness because, inevita-bly, we are changing Nokia and whatit stands for,” Mr. Elop, the firstnon-Finn to run Nokia, told report-ers here at a news conference. “Yet,there is also a feeling of absolute re-solve and conviction that we have todo the right thing.”

—Johannes Ledeland Sam Schechner

contributed to this article.

BY SVEN GRUNDBERG

Customers browsed cellphone displays in a Nokia store in Helsinki in July.

Bloomberg

New

s

Smaller Nokia to Focus on Network Gear, MappingWhat’s left of Nokia Corp.?The Finnish company’s proposed

$7 billion deal to sell its unprofit-able cellphone business to Micro-soft Corp. will leave behind 56,000employees and a collection of busi-nesses focused mainly on makingnetwork equipment for cellphoneoperators.

But Nokia will also hold on to alucrative patent portfolio and a mo-bile-mapping business that com-petes with Google Inc. and AppleInc. If a deal is sealed, Nokia wouldemerge about half the size it is to-day, by revenue, but profitable.

“Clearly, Nokia looks very differ-

ent,” said Nokia Chairman Risto Si-ilasmaa at a news conference Tues-day. Mr. Siilasmaa will serve asinterim chief executive after theplanned departure of current CEOStephen Elop to Microsoft.

The deal could also leave Nokiawith a war chest of cash, which itcould return to shareholders or de-ploy through acquisitions. Investorscheered the move, pushing Nokiastock up more than 40% Tuesday.

If Nokia opts to pursue acquisi-tions one possible target could bethe wireless assets of unprofitableFranco-American telecom-gearmaker Alcatel-Lucent SA, whichcould be combined with Nokia’smain network-gear unit. One person

close to Nokia said such a deal couldeventually make sense, but it isn’tsomething the board is ready toconsider. An Alcatel representativedeclined to comment.

Nokia’s network-gear unit,dubbed Nokia Solutions & Networks,or NSN, is a former joint venturewith Siemens AG that Nokia agreedto buy out for €1.7 billion ($2.24 bil-lion) over the summer—sealing thedeal at the same time it was in in-tense negotiations with Microsoft.NSN represented more than 90% ofNokia’s revenue in 2012, excludingits cellphone division.

NSN is in the midst of a turn-around, after years of losses partlyas a result of heavy competition in

the telecommunications-equipmentsector. It and other players havebeen squeezed between the rapidgrowth of Chinese giant HuaweiTechnologies Co. and the heft ofleading incumbent Ericsson.

But the business is now profit-able, after strong sales to U.S. cell-phone operators and a turnaroundplan that slashed costs at the once-bloated former joint venture.

Nokia will also retain its Heremapping service, built into cars andmobile devices, and is hanging on tomuch of the company’s intellectual-property portfolio. Mr. Siilasmaasaid Tuesday its patents bring inrevenue of roughly half a billion eu-ros a year. Microsoft, as part of the

deal, has agreed to license bothmapping services and other patentsfrom Nokia.

Moving away from mobilephones is just the latest change fora company that started as a papermill in 1865, and has had past livesproducing rubber boots and elec-tronics. In the 1980s, it moved intomobile phones, with models thatinitially weighed nearly a kilogramand looked like bricks.

“I feel sadness because, inevita-bly, we are changing Nokia and whatit stands for,” said Mr. Elop, the out-going CEO. “And yet, there is also afeeling of absolute resolve and con-viction that we have to do the rightthing.”

BY SAM SCHECHNER

Struggling

Revenue, in billions

Nokia’s business has suffered in recent years

Source: the company*First-half

€60

0

10

20

30

40

50

’07’06 ’08 ’09 ’10 ’11 ’12 ’13*

€11.55 billion

Net profit or loss, in billions

The Wall Street Journal

€8

–4

–2

0

2

4

6

’07’06 ’08 ’09 ’10 ’11 ’12 ’13*

–€0.5 billion

14 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

OPINION

The most telling line in U.S.President Barack Obama’s Satur-day Syria address came near theend, when he (once again) lecturedCongress about its duty to riseabove “partisan differences or thepolitics of the moment.” Havingput America’s global credibility atrisk, Mr. Obama defaulted to thesame political cynicism that hasdefined his presidency.

The commander in chief is in abox. His desperation to avoid mili-tary entanglement in Syria last

year—in the run-up to the presi-dential election—inspired Mr.Obama to fumble out his “red line”warning to Bashar Assad on chem-ical-weapons use. The statementwas a green light to the dictator tocommit every atrocity up to thatline and—when he received nopushback—to cross it.

Now trapped by his own decla-ration, Mr. Obama is reverting tothe same strategy he has used incountless domestic brawls—thatis, to lay responsibility for any ac-tion, or failure of action, on Con-gress. The decision was made eas-ier by the fact that Congress itselfwas demanding a say.

That proved too tempting for apresident whose crude calculus isthat Congress can now rescue himhowever it votes. Should Congressoppose authorizing action againstSyria, he can lay America’s failureto honor his promises on the legis-lative branch. Obama aides insistthat even if Congress votes no, thepresident may still act—thoughthey would say that. The idea thatMr. Obama, having lacked the willto act on his own, would proceedin the face of congressional oppo-sition is near-fantasy.

Mr. Obama must figure that ifhe gets authorization, he nets twopolitical wins. He provides himselfcover for taking action, while si-multaneously presenting Con-

gress’s vote as affirmation of hisflawed plan to lob a few missilesand call it a day. When that pin-prick bombing has no discernibleeffect on Assad’s murderous cam-paign, Mr. Obama will note thatthis was Congress’s will. As he saidin his Saturday speech, “all of usshould be accountable” for Mr.Obama’s actions.

A congressional vote is all themore tantalizing to a presidentwho lives and breathes rough poli-tics, and who knows that this Syriadebate will be particularly punish-ing for Republicans. The comingweeks will highlight the growingrift in the GOP between the tradi-tional defenders of national secu-rity and the party’s libertarian-iso-lationist wing. While the latterdoes not yet occupy a large spacein the GOP, its members are loudand wield much influence amongthe cranky conservative grassroots.

Those Republicans who might

be expected to vote for a militarystrike will be pressured by thethreat of primary challengers us-ing that vote against them. Theywill likely be accused of helpingMr. Obama extract himself fromhis box. The president is going toenjoy this show, all the more so ifit results in upheaval for Republi-cans in next year’s midterms.

Likewise, he will enjoy puttingon the spot the GOP’s hawks, likeSen. John McCain, who have beenmerciless in their criticism of anObama military strategy that willdo nothing to end Syria’s civil waror depose Assad. With the authori-zation Mr. Obama has sent to Con-gress, he is forcing Republicans tochoose between an inconstantstrategy and a “no” vote thatharms American interests. Whendid a U.S. commander in chief lastso cynically play politics withAmerican credibility?

Finally, Mr. Obama is bettingthat the GOP rift will divert atten-tion from the most pertinent as-pect of this debate: the extent towhich his own party abandonshim. The president’s withdrawalfrom the world stage—his exitfrom Afghanistan and Iraq, in par-ticular—has nurtured the Demo-cratic Party’s worst instincts andleft it even more resistant to a callfor military action. Mr. Obama iscounting on Senate Majority

Leader Harry Reid and House Mi-nority Leader Nancy Pelosi to cor-ral votes for him, but the liberalDemocratic wing is not a sure bet.

Americans do not want to thinkthat the president is making gravedecisions about military action andU.S. standing on the basis of politi-cal calculation. Yet Mr. Obama hastreated Syria as a political problemfrom the start, viewing it almostsolely as a liability to the adminis-tration’s public-opinion polling, itspresidential electioneering and itsrival domestic priorities. ViewingMr. Obama’s punt to Congress asanything but political is almost im-possible. And yet the presidentagain lectures Congress to riseabove the “partisan” politics thathe has, with great calculation,dumped on them.

The challenge for Republicansis to do just that, to remember (nomatter how painful) that this isnot a vote about the president orhis machinations. The only ques-tion before Republicans is this:Will they send a message to theworld’s despots that America willnot tolerate the use of weapons ofmass destruction? If they will notsend that message, they risk com-plicity in this president’s failedforeign policy.

Ms. Strassel writes the Journal’sPotomac Watch column.

“We’ll be luckyto get 80 Republi-cans out of 230.”That’s an astuteGOP congressman’sbest guess for how

his caucus now stands on the voteto authorize U.S. military forceagainst Syria.

At town hall meetings in theirdistricts, the congressman re-ports, House Republicans arehearing “an isolationist message.”It’s not America’s war. The evi-dence that the Assad regime usedchemical weapons is ambiguous,

maybe cooked. There isn’t a com-pelling national interest to inter-vene. “Let Allah sort it out.” We’dbe coming in on the side of alQaeda. The strike serves symbolic,not strategic, purposes. There’s noendgame. It would be anotherIraq.

Or, to quote Sean Hannity in allhis profundity, it would be “thenext world war.”

There’s also the trust issue.“Why should I go out on a limb tohelp this president?” The this inthat question, as House Republi-cans ask it, means Benghazi andSusan Rice, the IRS and LoisLerner, the NSA and James Clap-per. It means a president forwhom all policy is partisanship,

including the referral to Congress.“Big move by POTUS,” former

Obama spinmeister David Axelrodtweeted over the weekend. “Con-sistent with his principles. Con-gress is now the dog that caughtthe car.” Thanks, David, for thatconciliating image to win overfence-sitting Republicans.

Most Republicans don’t wantto become, again, the party of iso-lationists. Not consciously at anyrate. Nearly all of them professfidelity to a strong military, toIsrael’s security, to stopping Iran’smarch to a bomb. And oppositionto military intervention in Syria—particularly if it’s of the pinpricksort being contemplated by theadministration—isn’t necessarilyproof of isolationist sympathies.Henry Kissinger is opposed tointervening in Syria. Henry Kissin-ger is not, last I checked, an isola-tionist.

Yet the Syria debate is alsoexposing the isolationist wormeating its way through the GOPapple. Thus:

“The war in Syria has no clearnational security connection tothe United States and victory byeither side will not necessarilybring into power people friendlyto the United States.” Sen. RandPaul (R., Ky.).

“I believe the situation in Syriais not an imminent threat toAmerican national security and,therefore, I do not support mili-tary intervention. Before takingaction, the president should firstcome present his plan to Congressoutlining the approach, cost, ob-jectives and timeline, and get au-thorization from Congress for hisproposal.” Sen. Mike Lee (R.,Utah).

“When the United States is not

under attack, the American peo-ple, through our elected represen-tatives, must decide whether wego to war.” Rep. Justin Amash (R.,Mich.).

Such faux-constitutional asser-tions—based on the notion thatonly direct attacks to the home-land constitute an actionablethreat to national security—wouldhave astonished Ronald Reagan,who invaded Grenada in 1983without consulting a single mem-ber of Congress. It would haveamazed George H.W. Bush, whogave Congress five hours noticebefore invading Panama. And itwould have flabbergasted the Re-publican caucus of, say, 2002,which understood it was better totake care of threats over thererather than wait for them to ar-rive right here.

Then again, the views ofMessrs. Paul, Lee and Amashwould have sat well with Sen.Robert Taft of Ohio (1889-1953),son of a president, a man of unim-peachable integrity, high princi-ples, probing intelligence—and un-

failing bad judgment.A history lesson: In April 1939,

the man known as Mr. Republicancharged that “every member ofthe government . . . is ballyhooingthe foreign situation, trying to stirup prejudice against this countryor that, and at all costs take theminds of the people off their trou-ble at home.” By “this country orthat,” Taft meant Nazi Germanyand Fascist Italy. The invasion ofPoland was four months away.

Another history lesson: AfterWorld War II, Republicans underthe leadership of Sen. ArthurVandenberg joined Democrats tosupport the Truman Doctrine, thecreation of NATO, and the Mar-shall Plan. But not Robert Taft. Heopposed NATO as a threat to U.S.sovereignty, a provocation toRussia, and an undue burden onthe federal fisc.

“Can we afford this new proj-ect of foreign assistance?” heasked in 1949. “I am as muchagainst Communist aggression asanyone. . . but we can’t let themscare us into bankruptcy and the

surrender of all liberty, or letthem determine our foreign poli-cies.” Substitute “Islamist” for“Communist” in that sentence,and you have a Rand Paul speech.

Which brings us to another iso-lationist idea: that what we doabroad takes away from what wehave, and can spend, at home.When Barack Obama claims, dis-honestly, that the cost of foreignwars is guilty of “helping toexplode our deficits and con-straining our ability to nation-build here at home,” he is sound-ing this theme. So is Mr. Paulwhen he demagogues against for-eign aid by insisting that “whilewe are trying in vain to nationbuild across the globe, our nationis crumbling here at home.”

Republicans should know thatdeficits are exploding not becauseof military spending or foreignaid—as a percentage of GDP,George W. Bush spent less on de-fense in 2008 than Jimmy Carterdid in 1980—but because of thegrowth of entitlement programs.Republicans should know, too, thatinvesting in global order detersmore dangerous would-be aggres-sors and creates a world congenialto American trade, security andvalues. One cost-effective way ofdoing that is making an exampleof a thug who flouts U.S. warningsand civilized conventions.

Taft couldn’t understand thiswhen it came to the dictators ofhis day. Neither does Mr. Paulwhen it comes to the dictators oftoday. The junior senator fromKentucky may not know it yet,but, intellectually speaking, he’salready yesterday’s man. Republi-cans follow him at their peril.

Write to bstephens@wsj.com

[ Global View ]

BY BRET STEPHENS

The Politics of the Obama Delay on Syria

The Robert Taft Republicans Return

BY KIMBERLEY A. STRASSEL

Mr. Republican: Ohio Sen. Robert Taft, leader of the isolationist pack, in 1952.

TimeLife

Photo/Getty

Images

Thorold Barker, Editor,Europe, Middle East & Africa

Bruce Orwall, Senior Editor, EuropeGren Manuel, Executive Editor, EuropeTerence Roth, Managing Editor, Europe

Brian M. Carney, Editorial Page Editor

Lauren Berkemeyer, MarketingKate Dobbin, Communications

Florence LeFevre, Institutional Sales EuropeMichael Lloyd, Institutional Sales U.K.Jonathan Wright, Circulation Sales

Kelly Leach, PublisherPublished since 1889 byDow Jones & Company

© 2013 Dow Jones & Company. All Rights Reserved

Betting that the focuson a GOP rift will divertattention from how manyDemocrats won’t supportthe president.

Isolationism has neverserved the interests ofAmerica, or the GOP.

Wednesday, September 4, 2013

Pound/Euro 0.8468 g 0.28% Yen/$ ¥99.43 À 0.08% Global Dow 2207.73 À 0.44% Gold 1412.00 À 1.14% Oil 108.54 À 0.83% 3-month Libor 0.25950 10-year Treasury g 29/32 yield 2.852%

THE WALL STREET JOURNAL. europe.WSJ.com

Verizon’s Deal With VodafoneMakes for Wall Street Pay DayMARKETS 21

Microsoft and NokiaSend a Weak SignalHEARDONTHE STREET 28

Investors Are Venturing Back Into AsiaHONG KONG—Asian stocks and

currencies are clawing back somebig losses from the recent exodus ofcapital from emerging markets.

The gains are fragile and manyAsian currencies are still at multi-year lows. On Tuesday, Indonesia’srupiah fell to its lowest level againstthe U.S. dollar in four years.

But a number of stock indexesand currencies have rebounded inrecent days as investors recalibratetheir views on the region. Some in-vestors are taking heart over recentpositive economic data from China

and Japan, which appears to bespurring activity in the rest of Asia.Strong European manufacturing fig-ures this week and a broader U.S.recovery have added to a guardedsense of optimism.

Other observers said markets al-ready have factored in expectationsthe Federal Reserve will soon winddown its easy-money policies laterthis year. It was fear of this shiftthat pushed U.S. rates higher in thespring, leading investors to pullmoney out of emerging markets andback to developed nations.

“Fundamentals for Asia are notthat bad,” said Daniel Martin, aneconomist with Capital Economics,

a research company. “We’re not ex-pecting weaknesses in any Asiancurrencies to spiral into financialtroubles.”

Asian stock markets have ralliedin recent days. Japan’s Nikkei is up4.4% the past two days, while theHang Seng China Enterprises Index,which tracks large Chinese compa-nies traded in Hong Kong, gained4.3%. Elsewhere, Thailand’s SET In-dex is 1.6% higher and Hong Kong’sHang Seng Index is up 3.1%.

Currencies, too, have regainedsome ground. The Indian rupee rose1.7% Tuesday. Malaysia’s ringgit hasappreciated 1.5% from a three-yearlow last week.

Japan’s yen, an asset that inves-tors turn to in times of turmoil, hasgiven up some of its recent strengthand is edging closer to the much-watched 100-per-dollar mark, a levelnot breached since July.

To be sure, many Asian assetsare still in negative territory for theyear and investors remain jittery.Late Tuesday, markets gave up someof their gains amid fears of an im-minent U.S. attack on Syria. Higher-than-expected increases in U.S. ratescould also lead to further selloffs ofAsian assets. Yields on benchmark10-year U.S. Treasurys rose sharplyTuesday after Asian trading endedon strong U.S. economic data.

Concerns also remain over eco-nomic news closer to home. Indone-sia’s rupiah currency was almost 1%weaker after the nation on Mondaysaid it recorded a record trade defi-cit of $2.3 billion in July. And in In-dia, where the government reportedFriday that growth slowed to a four-year low of 4.4% in the April-Junequarter, markets were weigheddown by huge budget and trade def-icits and New Delhi’s failure to bringin overhauls that would attract for-eign businesses or to cut publicspending.

A number of analysts, though,say they believe the worst is over

Please turn to page 22

BY DANIEL INMANAND MICHAEL S. ARNOLD

European Car Sales Remain in Deep RutNew auto registrations in August

for Europe’s biggest car marketsshow that a near six-year slump insales hasn’t leveled off.

The data, a proxy for sales, raisean uninviting prospect for the re-gion’s mass-market car makers: Eu-ropeans may never buy as manycars as they did before the financialcrisis, leaving manufacturers com-peting for a permanently shrunkenmarket.

The August figures by majorcountries show continued drops insome of the EU’s largest car marketsand come just ahead of the Frank-furt motor show, where auto makerswill showcase a wide range of newmodels beginning Sept. 12.

“There’s no way around it, thecar market, particularly in WesternEurope, is saturated,” said FelixKuhnert, senior automotive consul-tant in Europe for consulting firm

PricewaterhouseCoopers.August is typically a quiet month

for car sales across Europe withmany retailers closing for summervacation. Registrations in Germany,Europe’s biggest single car market,fell 5% in August compared with ayear earlier and were down 7% forthe first eight months of the year,according to the latest data fromVDA, the German auto makers’ asso-ciation.

The situation was worse inFrance, Europe’s third-largest mar-ket. Registrations tumbled 11% lastmonth and were down 10% over thefirst eight months, said CCFA, theFrench auto makers’ association.The Spanish car manufacturers’ as-sociation said sales dropped 18% inAugust after rising by almost 15% inJuly. In Italy, the rate of declineslowed to 6.6% in August, with reg-istrations down 9% for the firsteight months, according to govern-ment figures.

Overall, the European Automo-

bile Manufacturers’ Association saidnew car registrations in WesternEurope fell 6.6% in the year’s firsthalf, on top of the 8.1% drop to 12.8million vehicles for all of last year.

Consumer attitudes are changingtoward car ownership in Europe. In-creasingly thrifty young people aredemoting cars as a priority amongthe big-ticket items they are willingto splurge on as jobless rates climbhigher and taxes rise.

The greater reliability of newcars, reducing the need to replacethem as frequently, also is sappingdemand.

The upshot for car makers isthat improving returns on the heavycapital investment in existing facto-ries and new technology will requireeven more cost cutting and morestrenuous efforts to attract buyersto premium-priced models.

Yet competition remains intense,putting downward pressure onprices for cars aimed at price-sensi-tive consumers.

“Flat is the new up,” said ElmarKades, a managing director at con-sultancy AlixPartners. “Western Eu-ropean car sales will be around 12million vehicles this year and next,and will hover around that level—far from the historical high of 2007,when 16.8 million vehicles weresold,” he said.

The decline of the car as a statussymbol in Europe, the impact of theregion’s slack growth, lower vehicle-density in cities, and stagnant or de-clining populations in some coun-tries are all weighing on demand,the industry consultants said.

“No single element is a big prob-lem, it’s the sheer sum of them thatwill keep market growth…flat,” Alix-Partners’ Mr. Kades said.

“Some car makers say they seelight at the end of the tunnel in Eu-rope. I wonder what light that isand whether they’re wearing specialglasses, because I have not seenthat,” said Jean-Marc Gales, head of

Please turn to page 20

BY DAVID PEARSONAND NICO SCHMIDT

Downshift | European auto sales are forecast to bottom out this year.

Sources: European Automobile Manufacturers’ Association; AlixPartners (forecast) Photo: Associated Press The Wall Street Journal

New car registrations inWestern Europe, in millions

15

0

5

10

2007 ’08 ’09 ’10 ’11 ’12 ’13

FOREC

AST

A Peugeot assembly line in Sochaux, France

12 million

StockholmStrugglesTo ProvideHousing

STOCKHOLM—Few projects areas important to the future of Stock-holm’s constrained housing marketas the plan to reinvent the RoyalSeaport.

Developers have been working torelocate much of the seaport’s activ-ity to make room for thousands ofnew homes and offices in proximityto the water and city center. Theseaport has long been an industrialand transportation hub with an oildepot, container port and ferry ter-minal.

There should be no shortage ofinterest. Stockholm’s job opportuni-ties and a desirable city center hasmade the Swedish capital the sec-ond-fastest-rising city in Europe, be-hind Oslo.

But the pace of transformation atthe seaport shows why Stockholm’ssupply of housing seems to beshrinking by the day. The seaportproject has been under way a dozenyears and eventually is slated to in-clude 12,000 new apartments.

But because of the red tape anddelays—over such issues as noisepollution and whether the sanctityof a nearby park will be threat-ened—only 600 units have beenbuilt. Planners say the project won’tbe completed until 2030.

“There is a lot of waiting,” saidStaffan Lorentz, the project man-ager for Stockholm Royal Seaport,the municipal organization runningthe project. “Everything is rejectedby someone.”

Despite enormous demand fornew housing, Stockholm’s home-building industry is being stifled byregulation. Partly because of rules

Please turn to page 18

BY NICLAS ROLANDER

Norway oil minister proposes real-estate fund .............................................. 18

14 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

OPINION

The most telling line in U.S.President Barack Obama’s Satur-day Syria address came near theend, when he (once again) lecturedCongress about its duty to riseabove “partisan differences or thepolitics of the moment.” Havingput America’s global credibility atrisk, Mr. Obama defaulted to thesame political cynicism that hasdefined his presidency.

The commander in chief is in abox. His desperation to avoid mili-tary entanglement in Syria last

year—in the run-up to the presi-dential election—inspired Mr.Obama to fumble out his “red line”warning to Bashar Assad on chem-ical-weapons use. The statementwas a green light to the dictator tocommit every atrocity up to thatline and—when he received nopushback—to cross it.

Now trapped by his own decla-ration, Mr. Obama is reverting tothe same strategy he has used incountless domestic brawls—thatis, to lay responsibility for any ac-tion, or failure of action, on Con-gress. The decision was made eas-ier by the fact that Congress itselfwas demanding a say.

That proved too tempting for apresident whose crude calculus isthat Congress can now rescue himhowever it votes. Should Congressoppose authorizing action againstSyria, he can lay America’s failureto honor his promises on the legis-lative branch. Obama aides insistthat even if Congress votes no, thepresident may still act—thoughthey would say that. The idea thatMr. Obama, having lacked the willto act on his own, would proceedin the face of congressional oppo-sition is near-fantasy.

Mr. Obama must figure that ifhe gets authorization, he nets twopolitical wins. He provides himselfcover for taking action, while si-multaneously presenting Con-

gress’s vote as affirmation of hisflawed plan to lob a few missilesand call it a day. When that pin-prick bombing has no discernibleeffect on Assad’s murderous cam-paign, Mr. Obama will note thatthis was Congress’s will. As he saidin his Saturday speech, “all of usshould be accountable” for Mr.Obama’s actions.

A congressional vote is all themore tantalizing to a presidentwho lives and breathes rough poli-tics, and who knows that this Syriadebate will be particularly punish-ing for Republicans. The comingweeks will highlight the growingrift in the GOP between the tradi-tional defenders of national secu-rity and the party’s libertarian-iso-lationist wing. While the latterdoes not yet occupy a large spacein the GOP, its members are loudand wield much influence amongthe cranky conservative grassroots.

Those Republicans who might

be expected to vote for a militarystrike will be pressured by thethreat of primary challengers us-ing that vote against them. Theywill likely be accused of helpingMr. Obama extract himself fromhis box. The president is going toenjoy this show, all the more so ifit results in upheaval for Republi-cans in next year’s midterms.

Likewise, he will enjoy puttingon the spot the GOP’s hawks, likeSen. John McCain, who have beenmerciless in their criticism of anObama military strategy that willdo nothing to end Syria’s civil waror depose Assad. With the authori-zation Mr. Obama has sent to Con-gress, he is forcing Republicans tochoose between an inconstantstrategy and a “no” vote thatharms American interests. Whendid a U.S. commander in chief lastso cynically play politics withAmerican credibility?

Finally, Mr. Obama is bettingthat the GOP rift will divert atten-tion from the most pertinent as-pect of this debate: the extent towhich his own party abandonshim. The president’s withdrawalfrom the world stage—his exitfrom Afghanistan and Iraq, in par-ticular—has nurtured the Demo-cratic Party’s worst instincts andleft it even more resistant to a callfor military action. Mr. Obama iscounting on Senate Majority

Leader Harry Reid and House Mi-nority Leader Nancy Pelosi to cor-ral votes for him, but the liberalDemocratic wing is not a sure bet.

Americans do not want to thinkthat the president is making gravedecisions about military action andU.S. standing on the basis of politi-cal calculation. Yet Mr. Obama hastreated Syria as a political problemfrom the start, viewing it almostsolely as a liability to the adminis-tration’s public-opinion polling, itspresidential electioneering and itsrival domestic priorities. ViewingMr. Obama’s punt to Congress asanything but political is almost im-possible. And yet the presidentagain lectures Congress to riseabove the “partisan” politics thathe has, with great calculation,dumped on them.

The challenge for Republicansis to do just that, to remember (nomatter how painful) that this isnot a vote about the president orhis machinations. The only ques-tion before Republicans is this:Will they send a message to theworld’s despots that America willnot tolerate the use of weapons ofmass destruction? If they will notsend that message, they risk com-plicity in this president’s failedforeign policy.

Ms. Strassel writes the Journal’sPotomac Watch column.

“We’ll be luckyto get 80 Republi-cans out of 230.”That’s an astuteGOP congressman’sbest guess for how

his caucus now stands on the voteto authorize U.S. military forceagainst Syria.

At town hall meetings in theirdistricts, the congressman re-ports, House Republicans arehearing “an isolationist message.”It’s not America’s war. The evi-dence that the Assad regime usedchemical weapons is ambiguous,

maybe cooked. There isn’t a com-pelling national interest to inter-vene. “Let Allah sort it out.” We’dbe coming in on the side of alQaeda. The strike serves symbolic,not strategic, purposes. There’s noendgame. It would be anotherIraq.

Or, to quote Sean Hannity in allhis profundity, it would be “thenext world war.”

There’s also the trust issue.“Why should I go out on a limb tohelp this president?” The this inthat question, as House Republi-cans ask it, means Benghazi andSusan Rice, the IRS and LoisLerner, the NSA and James Clap-per. It means a president forwhom all policy is partisanship,

including the referral to Congress.“Big move by POTUS,” former

Obama spinmeister David Axelrodtweeted over the weekend. “Con-sistent with his principles. Con-gress is now the dog that caughtthe car.” Thanks, David, for thatconciliating image to win overfence-sitting Republicans.

Most Republicans don’t wantto become, again, the party of iso-lationists. Not consciously at anyrate. Nearly all of them professfidelity to a strong military, toIsrael’s security, to stopping Iran’smarch to a bomb. And oppositionto military intervention in Syria—particularly if it’s of the pinpricksort being contemplated by theadministration—isn’t necessarilyproof of isolationist sympathies.Henry Kissinger is opposed tointervening in Syria. Henry Kissin-ger is not, last I checked, an isola-tionist.

Yet the Syria debate is alsoexposing the isolationist wormeating its way through the GOPapple. Thus:

“The war in Syria has no clearnational security connection tothe United States and victory byeither side will not necessarilybring into power people friendlyto the United States.” Sen. RandPaul (R., Ky.).

“I believe the situation in Syriais not an imminent threat toAmerican national security and,therefore, I do not support mili-tary intervention. Before takingaction, the president should firstcome present his plan to Congressoutlining the approach, cost, ob-jectives and timeline, and get au-thorization from Congress for hisproposal.” Sen. Mike Lee (R.,Utah).

“When the United States is not

under attack, the American peo-ple, through our elected represen-tatives, must decide whether wego to war.” Rep. Justin Amash (R.,Mich.).

Such faux-constitutional asser-tions—based on the notion thatonly direct attacks to the home-land constitute an actionablethreat to national security—wouldhave astonished Ronald Reagan,who invaded Grenada in 1983without consulting a single mem-ber of Congress. It would haveamazed George H.W. Bush, whogave Congress five hours noticebefore invading Panama. And itwould have flabbergasted the Re-publican caucus of, say, 2002,which understood it was better totake care of threats over thererather than wait for them to ar-rive right here.

Then again, the views ofMessrs. Paul, Lee and Amashwould have sat well with Sen.Robert Taft of Ohio (1889-1953),son of a president, a man of unim-peachable integrity, high princi-ples, probing intelligence—and un-

failing bad judgment.A history lesson: In April 1939,

the man known as Mr. Republicancharged that “every member ofthe government . . . is ballyhooingthe foreign situation, trying to stirup prejudice against this countryor that, and at all costs take theminds of the people off their trou-ble at home.” By “this country orthat,” Taft meant Nazi Germanyand Fascist Italy. The invasion ofPoland was four months away.

Another history lesson: AfterWorld War II, Republicans underthe leadership of Sen. ArthurVandenberg joined Democrats tosupport the Truman Doctrine, thecreation of NATO, and the Mar-shall Plan. But not Robert Taft. Heopposed NATO as a threat to U.S.sovereignty, a provocation toRussia, and an undue burden onthe federal fisc.

“Can we afford this new proj-ect of foreign assistance?” heasked in 1949. “I am as muchagainst Communist aggression asanyone. . . but we can’t let themscare us into bankruptcy and the

surrender of all liberty, or letthem determine our foreign poli-cies.” Substitute “Islamist” for“Communist” in that sentence,and you have a Rand Paul speech.

Which brings us to another iso-lationist idea: that what we doabroad takes away from what wehave, and can spend, at home.When Barack Obama claims, dis-honestly, that the cost of foreignwars is guilty of “helping toexplode our deficits and con-straining our ability to nation-build here at home,” he is sound-ing this theme. So is Mr. Paulwhen he demagogues against for-eign aid by insisting that “whilewe are trying in vain to nationbuild across the globe, our nationis crumbling here at home.”

Republicans should know thatdeficits are exploding not becauseof military spending or foreignaid—as a percentage of GDP,George W. Bush spent less on de-fense in 2008 than Jimmy Carterdid in 1980—but because of thegrowth of entitlement programs.Republicans should know, too, thatinvesting in global order detersmore dangerous would-be aggres-sors and creates a world congenialto American trade, security andvalues. One cost-effective way ofdoing that is making an exampleof a thug who flouts U.S. warningsand civilized conventions.

Taft couldn’t understand thiswhen it came to the dictators ofhis day. Neither does Mr. Paulwhen it comes to the dictators oftoday. The junior senator fromKentucky may not know it yet,but, intellectually speaking, he’salready yesterday’s man. Republi-cans follow him at their peril.

Write to bstephens@wsj.com

[ Global View ]

BY BRET STEPHENS

The Politics of the Obama Delay on Syria

The Robert Taft Republicans Return

BY KIMBERLEY A. STRASSEL

Mr. Republican: Ohio Sen. Robert Taft, leader of the isolationist pack, in 1952.

TimeLife

Photo/Getty

Images

Thorold Barker, Editor,Europe, Middle East & Africa

Bruce Orwall, Senior Editor, EuropeGren Manuel, Executive Editor, EuropeTerence Roth, Managing Editor, Europe

Brian M. Carney, Editorial Page Editor

Lauren Berkemeyer, MarketingKate Dobbin, Communications

Florence LeFevre, Institutional Sales EuropeMichael Lloyd, Institutional Sales U.K.Jonathan Wright, Circulation Sales

Kelly Leach, PublisherPublished since 1889 byDow Jones & Company

© 2013 Dow Jones & Company. All Rights Reserved

Betting that the focuson a GOP rift will divertattention from how manyDemocrats won’t supportthe president.

Isolationism has neverserved the interests ofAmerica, or the GOP.

Wednesday, September 4, 2013

Pound/Euro 0.8468 g 0.28% Yen/$ ¥99.43 À 0.08% Global Dow 2207.73 À 0.44% Gold 1412.00 À 1.14% Oil 108.54 À 0.83% 3-month Libor 0.25950 10-year Treasury g 29/32 yield 2.852%

THE WALL STREET JOURNAL. europe.WSJ.com

Verizon’s Deal With VodafoneMakes for Wall Street Pay DayMARKETS 21

Microsoft and NokiaSend a Weak SignalHEARDONTHE STREET 28

Investors Are Venturing Back Into AsiaHONG KONG—Asian stocks and

currencies are clawing back somebig losses from the recent exodus ofcapital from emerging markets.

The gains are fragile and manyAsian currencies are still at multi-year lows. On Tuesday, Indonesia’srupiah fell to its lowest level againstthe U.S. dollar in four years.

But a number of stock indexesand currencies have rebounded inrecent days as investors recalibratetheir views on the region. Some in-vestors are taking heart over recentpositive economic data from China

and Japan, which appears to bespurring activity in the rest of Asia.Strong European manufacturing fig-ures this week and a broader U.S.recovery have added to a guardedsense of optimism.

Other observers said markets al-ready have factored in expectationsthe Federal Reserve will soon winddown its easy-money policies laterthis year. It was fear of this shiftthat pushed U.S. rates higher in thespring, leading investors to pullmoney out of emerging markets andback to developed nations.

“Fundamentals for Asia are notthat bad,” said Daniel Martin, aneconomist with Capital Economics,

a research company. “We’re not ex-pecting weaknesses in any Asiancurrencies to spiral into financialtroubles.”

Asian stock markets have ralliedin recent days. Japan’s Nikkei is up4.4% the past two days, while theHang Seng China Enterprises Index,which tracks large Chinese compa-nies traded in Hong Kong, gained4.3%. Elsewhere, Thailand’s SET In-dex is 1.6% higher and Hong Kong’sHang Seng Index is up 3.1%.

Currencies, too, have regainedsome ground. The Indian rupee rose1.7% Tuesday. Malaysia’s ringgit hasappreciated 1.5% from a three-yearlow last week.

Japan’s yen, an asset that inves-tors turn to in times of turmoil, hasgiven up some of its recent strengthand is edging closer to the much-watched 100-per-dollar mark, a levelnot breached since July.

To be sure, many Asian assetsare still in negative territory for theyear and investors remain jittery.Late Tuesday, markets gave up someof their gains amid fears of an im-minent U.S. attack on Syria. Higher-than-expected increases in U.S. ratescould also lead to further selloffs ofAsian assets. Yields on benchmark10-year U.S. Treasurys rose sharplyTuesday after Asian trading endedon strong U.S. economic data.

Concerns also remain over eco-nomic news closer to home. Indone-sia’s rupiah currency was almost 1%weaker after the nation on Mondaysaid it recorded a record trade defi-cit of $2.3 billion in July. And in In-dia, where the government reportedFriday that growth slowed to a four-year low of 4.4% in the April-Junequarter, markets were weigheddown by huge budget and trade def-icits and New Delhi’s failure to bringin overhauls that would attract for-eign businesses or to cut publicspending.

A number of analysts, though,say they believe the worst is over

Please turn to page 22

BY DANIEL INMANAND MICHAEL S. ARNOLD

European Car Sales Remain in Deep RutNew auto registrations in August

for Europe’s biggest car marketsshow that a near six-year slump insales hasn’t leveled off.

The data, a proxy for sales, raisean uninviting prospect for the re-gion’s mass-market car makers: Eu-ropeans may never buy as manycars as they did before the financialcrisis, leaving manufacturers com-peting for a permanently shrunkenmarket.

The August figures by majorcountries show continued drops insome of the EU’s largest car marketsand come just ahead of the Frank-furt motor show, where auto makerswill showcase a wide range of newmodels beginning Sept. 12.

“There’s no way around it, thecar market, particularly in WesternEurope, is saturated,” said FelixKuhnert, senior automotive consul-tant in Europe for consulting firm

PricewaterhouseCoopers.August is typically a quiet month

for car sales across Europe withmany retailers closing for summervacation. Registrations in Germany,Europe’s biggest single car market,fell 5% in August compared with ayear earlier and were down 7% forthe first eight months of the year,according to the latest data fromVDA, the German auto makers’ asso-ciation.

The situation was worse inFrance, Europe’s third-largest mar-ket. Registrations tumbled 11% lastmonth and were down 10% over thefirst eight months, said CCFA, theFrench auto makers’ association.The Spanish car manufacturers’ as-sociation said sales dropped 18% inAugust after rising by almost 15% inJuly. In Italy, the rate of declineslowed to 6.6% in August, with reg-istrations down 9% for the firsteight months, according to govern-ment figures.

Overall, the European Automo-

bile Manufacturers’ Association saidnew car registrations in WesternEurope fell 6.6% in the year’s firsthalf, on top of the 8.1% drop to 12.8million vehicles for all of last year.

Consumer attitudes are changingtoward car ownership in Europe. In-creasingly thrifty young people aredemoting cars as a priority amongthe big-ticket items they are willingto splurge on as jobless rates climbhigher and taxes rise.

The greater reliability of newcars, reducing the need to replacethem as frequently, also is sappingdemand.

The upshot for car makers isthat improving returns on the heavycapital investment in existing facto-ries and new technology will requireeven more cost cutting and morestrenuous efforts to attract buyersto premium-priced models.

Yet competition remains intense,putting downward pressure onprices for cars aimed at price-sensi-tive consumers.

“Flat is the new up,” said ElmarKades, a managing director at con-sultancy AlixPartners. “Western Eu-ropean car sales will be around 12million vehicles this year and next,and will hover around that level—far from the historical high of 2007,when 16.8 million vehicles weresold,” he said.

The decline of the car as a statussymbol in Europe, the impact of theregion’s slack growth, lower vehicle-density in cities, and stagnant or de-clining populations in some coun-tries are all weighing on demand,the industry consultants said.

“No single element is a big prob-lem, it’s the sheer sum of them thatwill keep market growth…flat,” Alix-Partners’ Mr. Kades said.

“Some car makers say they seelight at the end of the tunnel in Eu-rope. I wonder what light that isand whether they’re wearing specialglasses, because I have not seenthat,” said Jean-Marc Gales, head of

Please turn to page 20

BY DAVID PEARSONAND NICO SCHMIDT

Downshift | European auto sales are forecast to bottom out this year.

Sources: European Automobile Manufacturers’ Association; AlixPartners (forecast) Photo: Associated Press The Wall Street Journal

New car registrations inWestern Europe, in millions

15

0

5

10

2007 ’08 ’09 ’10 ’11 ’12 ’13

FOREC

AST

A Peugeot assembly line in Sochaux, France

12 million

StockholmStrugglesTo ProvideHousing

STOCKHOLM—Few projects areas important to the future of Stock-holm’s constrained housing marketas the plan to reinvent the RoyalSeaport.

Developers have been working torelocate much of the seaport’s activ-ity to make room for thousands ofnew homes and offices in proximityto the water and city center. Theseaport has long been an industrialand transportation hub with an oildepot, container port and ferry ter-minal.

There should be no shortage ofinterest. Stockholm’s job opportuni-ties and a desirable city center hasmade the Swedish capital the sec-ond-fastest-rising city in Europe, be-hind Oslo.

But the pace of transformation atthe seaport shows why Stockholm’ssupply of housing seems to beshrinking by the day. The seaportproject has been under way a dozenyears and eventually is slated to in-clude 12,000 new apartments.

But because of the red tape anddelays—over such issues as noisepollution and whether the sanctityof a nearby park will be threat-ened—only 600 units have beenbuilt. Planners say the project won’tbe completed until 2030.

“There is a lot of waiting,” saidStaffan Lorentz, the project man-ager for Stockholm Royal Seaport,the municipal organization runningthe project. “Everything is rejectedby someone.”

Despite enormous demand fornew housing, Stockholm’s home-building industry is being stifled byregulation. Partly because of rules

Please turn to page 18

BY NICLAS ROLANDER

Norway oil minister proposes real-estate fund .............................................. 18

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 13

Letters To The Editor

Regarding your editorial“The Problem Is Assad” (Aug.28): I am no fan of Bashar As-sad, but I think the U.S. admin-istration and most pundits aregetting it wrong on Syria. Whatis going on there is not an in-surrection of the good guysagainst the bad regime but is afull-blown civil war betweentwo equally bad players, andSyrians are divided roughly50-50. Both sides are equallybrutal and anti-American. Theonly reason the rebels didn’tuse chemical weapons is be-cause they don’t have them. Totake sides means we alienatehalf the population, and wemake a bad situation a lotworse.

If Assad falls, Syria will notturn into a Middle-Eastern Swit-zerland. And not even into anAfghanistan or Iraq. It will mostlikely be a Somalia or Yemenruled by a malicious Hydra witha thousand jihadist heads. Therewill be unimaginable slaughterof minorities and loyalists(roughly half the population),which is already taking place inrebel-controlled areas.

How would anybody who iscalling for intervention have re-acted if in 1864 some foreigncountry decided that the Ameri-can civil war had gone far toolong and had become too brutal,and that was time to end it byarming the rebels, bombingWashington and eliminatingAbraham Lincoln?

An attack on Syria will be agrave mistake and will have cat-astrophic consequences for Syri-ans as well as for the whole re-gion and far beyond. I hope

cooler heads will prevail beforeit’s too late.

HANY HAMDYBoston

The very idea that we haveany chance of controlling theoutcome by taking out Assad isfolly. How would this be accom-plished unless we deploy an oc-cupying force? Syria would bethe mother of all slogs, and theRussians and Chinese wouldjump for joy as we becomepinned down again and depleteour Treasury. I say take outsome serious Assad assets withcruise missiles and high-altitudebombers to send the message onthe use of chemical weapons,and do so again and again ifneeded to cement the message,and then let them have at it anduse the savings to invest in thiscountry. Please, please, please,rent the film “Lawrence of Ara-bia.” You all need a refresher.

JOHN R. BRIGGSFair Oaks, California

Regarding Andrew Roberts’s“Syria’s Gas Attack on Civiliza-tion” (op-ed, Aug. 27): Why is an-nihilating 100,000 people with anuclear bomb deemed less bar-baric than killing a few hundredpeople with poison gas? Why isassassinating someone with a mis-sile fired from a drone consideredmore civilized than beheading thesame person? Quite simply the“law of war” is an irreconcilableoxymoron. Any attempt to ratio-nalize one form of mass murderas inherently morally superior toanother is a fool’s errand.

MICHAEL H. LEBPasadena, California

George Melloan makes thepoint that the upsurge in legalactivity isn’t a result of slippagein bank integrity but rather anunjustified redefinition of bankstandards by, for instance,America’s Dodd-Frank Act(“Bankers Haven’t Gone Rogue—Regulators Have,” op-ed, Aug.27). While Dodd-Frank is accu-rately described, the banks havealso shown ethical slippage.

I suggest that bad guidanceand regulation drive out goodbankers. The legislators and reg-ulators set the moral standardfor those subject to the regula-tion. For instance, when Con-gress declares that it wants to“roll the dice” on extending real-estate loans to those with mar-ginal ability to afford suchloans, responsible bankers whoappreciate the devastation thiswould visit on the unsophisti-cated mortgagors resisted andoften left that profession. Lessethical bankers, on a missionfrom Congress, made such mar-ginal loans, collected the feesand offloaded the bad paper toFreddie Mac and Fannie Mae.Other tainted paper was sliced

and diced for sale to naive in-vestors, ironically, includingother banks.

The regulators stretched theterm red-lining to include desig-nating declining neighborhoodswith poor prospects of maintain-ing value. Such judgments are avalid and ethical business con-sideration in that the red-liningwas of real estate not ethnicgroups. Ethical bankers had aproblem with approvingdoomed-to-failure loans whileless ethical bankers earned theprofits and off-loaded the risks.These loans were devastating tothose unfortunate to be enabledby misregulation to obtain them.

Those with the power to reg-ulate and jawbone also have thepower to determine the moresof those regulated, both bypushing out those with higherstandards and by empoweringthose with conforming moralturpitude. This is reflected inthe inability to prosecute thosewho were merely following theirmarching orders from Congress,et al.

THOMAS W. O’ROURKEBoulder, Colorado

OPINION

The Stakes on the Syria VoteBarack Obama does not need

congressional approval to launcha war. Even under the War Pow-ers Resolution of 1973, which is ofdubious constitutionality, the U.S.president has only to notify Con-gress within 48 hours of initiatingmilitary action. He also has a 60-day window to conduct opera-tions (plus 30 to withdraw)absent congressional authoriza-tion.

Whether launching warfarewithout congressional approvalis sound policy, however, is an-other matter. Both George W.Bush and his father, in theirpresidencies, securedcongressional authorization fortheir wars with Iraq. PresidentClinton did not get congressionalauthorizations for the operationsin Somalia or Bosnia in the1990s, but he did report to Con-gress and informally secure itsconcurrence. The same was thecase for Operation Desert Fox,the intense, four-day bombingcampaign Mr. Clinton launchedon Iraq in 1998, during thecourse of which he changed U.S.policy to support the overthrowof Saddam Hussein.

When the executive launches awar, the president should, if at allpossible, secure congressionalsupport and authorization as amatter of good politics but alsoout of respect for democratic le-gitimacy. Moreover, the powers ofinvestigation, legislation and au-thorization to spend money giveCongress the ability to overseeand influence a war for good orill.

On Saturday, when PresidentObama overruled his advisers,reversed his own policy and de-clared that he would not actagainst Syria until Congress hashad its say, he did not—as hemight have—recall Congress forthat purpose. Instead, Mr. Obamasaid he would let the vote waitfor 10 days or more. Then hepromptly left the White House forthe golf course. Later this week,he’ll travel to Stockholm and thento St. Petersburg, Russia, for aG-20 economic summit.

Mr. Obama’s dwindling band ofdefenders insist that this decision“to seek authorization for the useof force from the American peo-ple’s representatives in Congress”was a matter of principle that hadescaped him in Libya in 2011, andthat only occurred to him now af-ter many days of plotting an aircampaign against the Syrian gov-ernment for its use of chemicalweapons.

Others, less charitably inclined,see in his Saturday announcementa mixture of unworthy motives—an outright panic when BritishPrime Minister David Cameronlost a war vote in the House ofCommons; an unbecoming wishthat Congress would give him anexcuse for inaction; and an un-worthy scheme to stick his ene-mies (as he understands them) inCongress with a responsibility hehopes to shirk.

It is beside the point to assessthese motives. Congress now hasdecisions to make. This is the ar-

gument that lies before them.The case against authorizing

the use of force begins with an in-dictment of the administration’sfeckless policy toward Syria. Mr.Obama chose passivity two yearsago when he might have tippedthe balance to a then largely sec-ular opposition. He concocted andthen ignored red lines regardingthe use of chemical weapons. Andhe has, with this latest backflip,shown himself eager to squirmout of his own commitments,even as the rhetoric of his pro-nouncements (“limited,”“tailored,” “no boots on theground,” etc.) indicates far moreinterest in what the U.S. will notdo than what it should do, andwhy.

The president’s critics will fur-ther note, and correctly, that waris war, and, as such, unpredict-able. As Winston Churchill put it:“Never, never, never believe anywar will be smooth and easy, orthat anyone who embarks on thatstrange voyage can measure thetides and hurricanes he will en-counter.”

Despite Mr. Obama’s state-ments about narrowly definedgoals, precise uses of force andlimited duration, it is entirely rea-sonable to expect that such astrange voyage may lie aheadonce operations begin, and thathe is singularly ill-fitted to navi-gate it.

Finally, as a practical matter,critics can ask why the U.S.should intervene after a massacre,however hideous, of some 1,400Syrians, when America has re-fused to act over the slaughter of100,000 in the preceding twoyears. And, even if the U.S. strikesat Assad and helps bring abouthis downfall, the danger is realthat having administered a defeatto the regime and its sponsor,Iran, America will hand a victoryto al Qaeda.

These are all serious argu-ments. But weightier are thecounterarguments. For better orfor worse, the credibility notonly of this president, but ofAmerica as a global power and aguarantor of international order,is on the line. If the U.S.—afterits president said two years agothat Assad must go and then, ayear later, drew a red line atSyria’s use of chemical weap-ons—now does nothing, pro-found conclusions will be drawnby a China ready to bully itsneighbors, by a North Koreawhose scruples are already mini-mal, and by an Iran that has al-ready killed many Americans in a

covert war waged against us inIraq and Afghanistan.

i i iAmerica’s friends will realize

that its word means nothing. As aresult, they will either abandonus, or arm themselves with nu-clear weapons. And these coun-tries will be increasingly willingto wield them in a world in whichthey have no great ally who maybe counted upon to stand by themin an hour of need.

One has to suspect that theSyrian government deliberatelyused sarin in the Damascus sub-urbs while United Nations inspec-tors were in the capital, and onthe eve of the anniversary of Mr.Obama’s red line statement. Theessence of tyranny is this mes-sage to a population: “We will im-pose our will on you. No onecares about your suffering, and noone will do anything to rescueyou.” Assad’s message was deliv-ered by chemical weapons ofmass destruction. Civilized na-tions let that message remain un-answered at their peril.

The U.S. now faces a twofoldproblem. The first is that manyAmericans who came of age in thepast 25 years, having grown up ina world that has been shaped byU.S. primacy, take that primacyand the stability and prosperity ithas brought for granted. Theyshould not. It hangs in the bal-ance.

The second is a problem ofstatesmanship. American steward-ship of the Cold War world de-pended not only on presidentslike Truman, Eisenhower, Kennedyand Reagan, but also on congres-sional leaders like Arthur Vanden-berg and Scoop Jackson. Today,the latter-day equivalents ofHiram Johnson and William Bo-rah, leaders of the isolationistmovement in the 1920s and 1930s,speak loudly on Capitol Hill. Whatis needed are spokesmen for theopposing, and wiser, view.

The country desperately needslegislators who understand thatthe arguments are too serious andcomplex for tweets and Facebookposts. Legislative statesmen ac-cept that partisanship and self-seeking must stop at the water’sedge—and they soberly realizethat responsibility lies with them,no less than with the inept andinconstant president who hasbrought the nation to this pass.

Mr. Cohen teaches at JohnsHopkins School of Advanced In-ternational Studies. From2007-08 he served as counselorof the State Department.

* * *

Bombing or Killing AssadWon’t Solve the Syrian Mess

* * *

Bad Regulation PenalizesResponsible Banking Practice

America’s credibility as aguarantor of internationalorder is on the line.

President Obama meeting with his national-security advisers in the WhiteHouse Situation Room, Aug. 31.

TheWhite

Hou

se/G

etty

Images

16 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Morgan Stanley............21NCC................................18Nokia................1,16,17,28Onyx Pharmaceuticals..28Peugeot.........................20Primekey.......................18Rio Tinto.......................22Royal Bank ofScotland.....................22

SamsungElectronics.........1,16,17

Shanghai PudongDevelopment Bank....22

Siemens...................16,17Telefon L.M.Ericsson.................16,28

UBS .......................... 21,22VerizonCommunications...21,28

Vodafone..................21,28

Ford Motor....................20Fortescue MetalsGroup..........................22

Gartner..........................17General Motors.............20Goldman SachsGroup.....................21,22

Google..............1,16,17,28HSBC Holdings ............. 22HTC................................28Huawei Technologies....16Industrial & CommercialBank of China............22

International BusinessMachines....................17

J.P. Morgan Chase........21Land Securities Group..18Lenovo...........................28McGraw Hill Financial..20Microsoft..........1,16,17,28

Alcatel-Lucent ......... 16,28Algeta............................28Amgen...........................28Apple...........1,16,17,21,28Bank of America......21,22Bank of China...............22Bank ofCommunications........22

Barclays.........................21Bayer.............................28BlackBerry.....................28China ConstructionBank...........................22

Citigroup ....................... 22Daimler..........................16Danske Bank...................5Facebook ....................... 11Federal HousingAdministration ............6

Fiat................................20

INDEX TO BUSINESSESBusinessesThis index of businessesmentioned in today’sissue of TheWall StreetJournal is intended toinclude all significantreference to companies.First reference to thecompanies appears inbold face type in allarticles except thoseon page one and theeditorial pages.

Corrections Amplifications

Daimler AG’s Mercedes-Benz sold 196,211 cars in China last year, including cars madein China and imported cars. A Business & Finance article on Monday about the companyincorrectly said it sold 100,000 vehicles.

Sea ice extent covered 3.63 million square kilometers of the Arctic in September 2012,the time of year when the ice extent is at its minimum, according to the National Snowand Ice Data Center of the U.S. Excluding the ice concentration near the North Pole, icecovered 2.15 million square kilometers in September 2012, the group said, noting that bothfigures are about half the levels of September 1979. A Business & Finance article on Aug.20 about an Arctic shipping route referred to the smaller measurement but failed to notethat it excludes the ice extent near the North Pole.Readers can alert the London newsroom of TheWall Street Journal to any errors in news articles by emailingwsjcon-tact@wsj.com or by calling +44 (0)20 7842 9901.

THE NOKIA-MICROSOFT DEAL

Nokia Deal Marks the ‘End of an Era’HELSINKI—Nokia Corp.’s deci-

sion to sell its handset business toMicrosoft Corp. closes the latestchapter in its 148-year history of re-inventing itself during a crisis.

But for many here in Finland, thedeal also marks the end of the com-pany’s role as a once-feared globaltech giant and Finnish nationalchampion. Its proposed $7 billiondeal to sell its unprofitable cell-phone business to Microsoft leaves56,000 employees and a collectionof businesses focused mainly onmaking network equipment for cell-phone operators.

It will also hold a lucrative pat-ent portfolio and a mobile-mappingbusiness that competes with GoogleInc. and Apple Inc. If a deal issealed, Nokia will emerge about halfthe size it is today, by revenue—butprofitable.

Union leaders and politicianshere embraced the deal, hopeful itwill save jobs. But for many Finns,any expected benefit is bittersweet,underscoring Nokia’s dramatic fallfrom its perch atop the global cell-phone market. Finland’s minister ofeconomic affairs, Jan Vapaavuori,said Tuesday that the deal markedan “end of an era in Finland."

“There aren’t many other Finnishcompanies apart from Nokia thatmade it big in the world,” said Dan-iel Hanninen, a 22-year-old student.“It’s part of our national identity.”

Nokia executives made a seriesof strategic missteps, allowing rivalslike Apple and Samsung Electron-ics Co., to leap ahead in a smart-phone market Nokia trailblazed, butthen pulled back from. But its fallfrom dominance also parallels yearsof economic hardship in Finland,where Europe’s economic crisis has

battered the country’s core heavyindustries.

In past economic crises, Nokiaemerged as a savior. Two decadesago, its transformation into a nim-ble, global tech player came at atime when Finland was strugglingwith the weight of a lumbering wel-fare state, while its economy washeavily dominated by cyclical indus-tries like pulp, paper and machinerymanufacturing.

“Suddenly, in the 1990s, Nokiaemerged and solved all the prob-lems that Finland had,” said MattaPohjola, economics professor atAalto business school in Helsinki.“We didn’t have to worry anymore.”

Nokia’s economic footprint hereis relatively small these days. It nolonger produces phones in its home-land. Last year, it sold its seasideheadquarters in Espoo—built de-cades ago as a sprawling testamentto the company’s dominance—andstarted leasing back space.

Microsoft Chief Executive SteveBallmer, speaking in Espoo, the Hel-sinki suburb where Nokia is based,told employees Tuesday the U.S.software giant is committed tokeeping thousands of jobs associ-ated with the handset business inFinland, and Microsoft plans tobuild a $250 million data centerhere.

Founded in 1865, when engineerFredrik Idestam set up a wood pulpmill in southwestern Finland, Nokiahas had a history of radical shifts inits business. The first was at theturn of the 20th century when thecompany moved into making rubberproducts, including rubber boots.

In 1967, the company mergedwith partner Finnish Cable Works,which, among other things, hadbeen developing radio telephonesfor the Finnish army. Nokia went onto become one of the first players inthe cellphone industry in the early1980s.

It launched some of the firstproducts of the cellphone age, in-cluding the Senator car phone in1982 and the Cityman, the firstphone to work on a newly createdNordic cellular network, in 1987.

After the company’s unsuccessfulforay into television, former Citi-bank executive Joma Ollila took overin 1992 and focused the companysolely on telecommunications, ex-panding it to the point where itdominated the cellphone market.Nokia’s success boosted its shareprice, and at its peak in 2000 thecompany was valued at €303 billion($400 billion at today’s exchangerate).

Nokia launched its first smart-phone, the Nokia 9000, in 1996, overa decade before the launch of thefirst iPhone. But shareholders grewworried about the billions of dollarsin research the company was pour-ing into the smartphone market,and Nokia shifted again: this time,

putting most of its firepower intoproducing more basic phones. Thatput it on the defensive when Applerolled out its iPhone in 2007.

Under Chief Executive StephenElop, it joined with Microsoft in2011, abandoning its own operatingsystem and launching a last-ditcheffort to turn around flagging sales.Its latest line of smartphones im-pressed many critics, but hasn’t soldwell. At Nokia’s flagship store indowntown Helsinki Tuesday, thefloors were empty except for thestaff.

“I feel sadness because, inevita-bly, we are changing Nokia and whatit stands for,” Mr. Elop, the firstnon-Finn to run Nokia, told report-ers here at a news conference. “Yet,there is also a feeling of absolute re-solve and conviction that we have todo the right thing.”

—Johannes Ledeland Sam Schechner

contributed to this article.

BY SVEN GRUNDBERG

Customers browsed cellphone displays in a Nokia store in Helsinki in July.

Bloomberg

New

s

Smaller Nokia to Focus on Network Gear, MappingWhat’s left of Nokia Corp.?The Finnish company’s proposed

$7 billion deal to sell its unprofit-able cellphone business to Micro-soft Corp. will leave behind 56,000employees and a collection of busi-nesses focused mainly on makingnetwork equipment for cellphoneoperators.

But Nokia will also hold on to alucrative patent portfolio and a mo-bile-mapping business that com-petes with Google Inc. and AppleInc. If a deal is sealed, Nokia wouldemerge about half the size it is to-day, by revenue, but profitable.

“Clearly, Nokia looks very differ-

ent,” said Nokia Chairman Risto Si-ilasmaa at a news conference Tues-day. Mr. Siilasmaa will serve asinterim chief executive after theplanned departure of current CEOStephen Elop to Microsoft.

The deal could also leave Nokiawith a war chest of cash, which itcould return to shareholders or de-ploy through acquisitions. Investorscheered the move, pushing Nokiastock up more than 40% Tuesday.

If Nokia opts to pursue acquisi-tions one possible target could bethe wireless assets of unprofitableFranco-American telecom-gearmaker Alcatel-Lucent SA, whichcould be combined with Nokia’smain network-gear unit. One person

close to Nokia said such a deal couldeventually make sense, but it isn’tsomething the board is ready toconsider. An Alcatel representativedeclined to comment.

Nokia’s network-gear unit,dubbed Nokia Solutions & Networks,or NSN, is a former joint venturewith Siemens AG that Nokia agreedto buy out for €1.7 billion ($2.24 bil-lion) over the summer—sealing thedeal at the same time it was in in-tense negotiations with Microsoft.NSN represented more than 90% ofNokia’s revenue in 2012, excludingits cellphone division.

NSN is in the midst of a turn-around, after years of losses partlyas a result of heavy competition in

the telecommunications-equipmentsector. It and other players havebeen squeezed between the rapidgrowth of Chinese giant HuaweiTechnologies Co. and the heft ofleading incumbent Ericsson.

But the business is now profit-able, after strong sales to U.S. cell-phone operators and a turnaroundplan that slashed costs at the once-bloated former joint venture.

Nokia will also retain its Heremapping service, built into cars andmobile devices, and is hanging on tomuch of the company’s intellectual-property portfolio. Mr. Siilasmaasaid Tuesday its patents bring inrevenue of roughly half a billion eu-ros a year. Microsoft, as part of the

deal, has agreed to license bothmapping services and other patentsfrom Nokia.

Moving away from mobilephones is just the latest change fora company that started as a papermill in 1865, and has had past livesproducing rubber boots and elec-tronics. In the 1980s, it moved intomobile phones, with models thatinitially weighed nearly a kilogramand looked like bricks.

“I feel sadness because, inevita-bly, we are changing Nokia and whatit stands for,” said Mr. Elop, the out-going CEO. “And yet, there is also afeeling of absolute resolve and con-viction that we have to do the rightthing.”

BY SAM SCHECHNER

Struggling

Revenue, in billions

Nokia’s business has suffered in recent years

Source: the company*First-half

€60

0

10

20

30

40

50

’07’06 ’08 ’09 ’10 ’11 ’12 ’13*

€11.55 billion

Net profit or loss, in billions

The Wall Street Journal

€8

–4

–2

0

2

4

6

’07’06 ’08 ’09 ’10 ’11 ’12 ’13*

–€0.5 billion

12 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

OPINION: REVIEW & OUTLOOK

M icrosoft announced Tuesday thatit is buying Nokia’s mobile-phone business for $7 billion

(€5.44 billion), including $2 billion to li-cense a portfolio of Nokia patents. Oh,how the mighty have fallen.

When Nokia’s stock-market valuepeaked at some $300 billion in the year2000, it was the biggest mobile-phonemaker in the world, with more than aquarter of the global handset market. Itsphones were status symbols, its charac-teristic ringtone iconic. Readers of a cer-tain age may even remember the Com-municator 9000, which looked like alarge cellphone from the outside andopened up to reveal a full, if diminutive,keyboard. These were once cool, kids.

Nokia was caught in the tech-stockdowndraft in 2000, but it still had be-lievers. After a big selloff in its stockthat summer, one investment-bank ana-lyst declared that “The longer-term out-look is tremendous.” He added: “If youbelieve in the mobile wireless Internetworld where your mobile communica-tions device is your primary Internet ac-cess device and so on, whoever domi-nates that market will have significantrevenues for a very long time to come.”

He was right, except for the role that

Nokia would play in that world. Apple’smarket cap in December 2000 was $6.5billion and it didn’t make its first phoneuntil 2007, but it ushered in the smart-phone revolution that Nokia had tried topioneer. Samsung has since usedGoogle’s Android operating system to be-come the largest handset maker in theworld.

At the time Nokia waspeaking, Microsoft wasalso considered so domi-nant that regulatorsaround the world arguedthat its position was allbut unassailable. They filed antitrustlawsuits and even tried to break it up, ala AT&T in the 1980s. The claim at thetime was that the “network effects”—orincreasing economic returns—created bythe Windows operating system meantthat Microsoft would dominate the fu-ture of computing for decades to come.Every competitor would be devoured.

These regulators and pundits merelymissed the rise of the Internet, Google,wireless telephony, the cloud, and somuch more. Windows, now in its eighthiteration, is still on millions of comput-ers and Microsoft makes plenty of moneyselling it. But those PCs are far less cen-

tral to our digital lives. In mobile, Win-dows remains far behind the marketshares of Android and Apple’s iOS.

At its peak in 1999, Microsoft’s marketcap was $620 billion, a record at thetime in nominal dollars. Today, its stockvalue is $263.8 billion, while Apple’s isabout $445 billion. Microsoft CEO Steve

Ballmer is retiring nextyear to give someone elsethe chance to return thecompany to its formerglory. The Nokia acquisi-tion is an attempt, argu-ably too belated, to catch

up to the Apples and Samsungs in smart-phone hardware and mobile computing.

None of this was forecast by the eco-nomic models that antitrust and otherregulators use to justify their crusadesagainst the fleeting dominance of which-ever company is on top. In the same waythey had failed to foresee Microsoft’semergence via the personal computerfrom the shadow of IBM’s mainframedominance in the 1980s.

Nokia itself has been the veritable av-atar of corporate reinvention, startingout in wood pulp in the 19th century. Asrecently as the early 1990s, the companywas an unwieldy Finnish industrial con-

glomerate, trying to make its pivot intomobile telephony. Few then predicted itsmeteoric rise, or its equally meteoric fall.In shedding its handset business, Nokiawill become essentially a maker of net-work equipment for cellphone operators.

The larger point here is that corpo-rate giants come and go in a competitiveeconomy. No monopoly is permanent,unless it is enforced by government,which as everyone knows almost neverchanges. It thinks and usually behavesthe same even as the rest of the worldchanges.

In the latest evidence, the U.S. Depart-ment of Justice told a federal court inAugust that it wants a government over-seer for Apple’s iTunes and App Stores inorder to prevent the company from abus-ing the alleged network effects and“lock-in” created by Apple’s tech ecosys-tem. Never mind competition from Ama-zon, Google and others.

The good news is that federal JudgeDenise Cote seems skeptical of the re-quest, saying last week that “I want Ap-ple to have the flexibility to innovate.”Imagine that. Microsoft, Nokia and otherformer giants deserved the same whenthey were on top, and they deserve itnow as they try to catch up.

A leading candidate for the biggestU.S. government failure in recentyears is the $25 billion Advanced

Technology Vehicle Manufacturing LoanProgram (ATVM), which stopped dolingout loans in 2011 after funding such de-bacles as Fisker Automotive. But this isthe Obama Administration, where noth-ing in government fails, so naturally newEnergy Secretary Ernest Moniz wants torevive it.

The Energy Department said last weekthat it “plans to conduct an active out-reach campaign to educate industry asso-ciations and potential applicants aboutthe substantial remaining funds” inATVM. The PR campaign appears to bethe first step in what Mr. Moniz tells theDetroit News may be a “new solicitation”for loans. Hold on to your wallets.

Congress created this market-distort-ing program in 2008 to spur a green-car

revolution, and President Bush wentalong for the ride in his unlamented lateperiod. The Obama Administration madethe program a highlight of its stimulus,committing some $9 bil-lion to electric-vehicle andother projects. Two of thelargest taxpayer loanswent to global titans Fordand Nissan—not exactlyneedy but at least goingconcerns.

The biggest bust wasthe $529 million loan promise to Fisker,which planned to make luxury cars forthe masses from a defunct GM plant inJoe Biden territory in Delaware. Despitethis federal loan, state subsidies andmore than $1 billion in private financingfrom Kleiner Perkins and other SiliconValley investors, Fisker ceased produc-tion last year. It had already drawn some

$193 million of its federal loan, whichlooks to be a taxpayer loss.

Energy is also trying to recoup its $50million to the Vehicle Production Group,

a maker of natural-gaspowered wheelchair-ac-cessible vans. VPG shutdown in May, and the En-ergy Department recentlyannounced it would auc-tion off its promissorynote on August 15. But thefederal auction website

(GovSales.gov) doesn’t show that theevent took place.

Secretary Moniz will no doubt toutthe case of Tesla, another luxury-carcompany that earlier this year repaid its$465 million loan ahead of schedule.Tesla’s stock price is soaring, and this issupposed to be the success story of gov-ernment venture capital. But Tesla still

benefits from other government subsi-dies—such as the $7,500 federal taxcredit for electric-car buyers and theemissions credits Tesla has cashed in onat the expense of traditional car makers.Let’s see how Tesla does when it takesoff the taxpayer training wheels.

The $16 billion or so left in the auto-loan program seems to be burning a holein Mr. Moniz’s pocket, so taxpayersshould be on the lookout for political fa-voritism. Congress’s investigations intoFisker, Solyndra and other losers showedthat the Energy Department passed outfunds on the basis of political calcula-tions and then was incapable of exercis-ing due diligence over its portfolio.

Rather than let Mr. Moniz throwmoney at more companies that will gobust or become government dependen-cies, Congress ought to kill this monu-ment to crony capitalism.

A media cliche is that House Repub-licans are reflexively anti-Obamaregardless of the issue, but look

who have declared their support for thePresident’s Syrian resolution: SpeakerJohn Boehner and Majority Leader EricCantor.

The top two GOP House leaders an-nounced their backing on Tuesday aftermeeting with President Obama and otherCongressional leaders at the WhiteHouse. Mr. Boehner’s spokesman addedin a statement that the Speaker “encour-ages all Members of Congress to do thesame.” Their support is no guaranteethat most Republicans will follow, but bycoming out early they have set an exam-ple and provided some cover for back-

benchers who may agree on principle butare wary of taking the political risk.

Mr. Obama is luckier in his oppositionthan was George W. Bush. Mr. Bush hadSenator Obama, who op-posed the GOP President’sforeign policy at nearlyevery turn, including re-lentless hostility to the“surge” that defeated theIraq insurgency.

Mr. Bush was also stuck with SenatorJoe Biden, who also opposed the surgeand had opposed George H.W. Bush onthe 1990 Gulf War and Ronald Reagan onmissile deployments in Europe and es-corting tankers in the Persian Gulf in1987. The challenge is finding a single

policy by a Republican President that Mr.Biden did support as a Democratic Sena-tor—save for the Iraq war resolution in2002 that he soon repudiated when the

going got tough.The historical fact is

that at least since WorldWar II, Republican leaderson Capitol Hill have beenfar more likely to supportDemocratic Presidents on

foreign policy than vice versa. John Mc-Cain and Bob Dole backed Bill Clinton onBosnia in 1996, and then Speaker DennyHastert supported a Democratic resolu-tion backing Mr. Clinton on Kosovo in1999. (The resolution failed on a tievote.)

Some of this is due to the GOP tradi-tion of deferring to presidential warpowers that developed during the ColdWar and repudiated the party’s pre-World War II isolationism. A larger partflows from a belief that the U.S. militaryis generally a source for good in theworld. This is in contrast to the post-Vietnam Democrats, most of whom havesought to limit presidential war powersand U.S. action overseas.

The political irony is that if Mr.Obama’s Syrian resolution passes nextweek, it will owe more to these GOPleaders, and to Senators McCain andLindsey Graham, than it will to the Presi-dent’s own arguments or his overall cred-ibility as Commander in Chief.

They Once Were Giants

Electric Losers, Round Two

Water’s Edge Republicans

Microsoft and Nokiaruled the tech world.Then they didn’t.

On Syria, Boehnerand Cantor rise

above partisanship.

The EnergyDepartment

hopes to revive anObama clunker.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 17

BallmerTapsNokiaCEOToLeadNewBusiness

After three years of trying to re-pair businesses that proved to beunfixable, Nokia Corp. Chief Execu-tive Stephen Elop is back at Micro-soft Corp. to help shape the legacyof the software giant’s longtimeboss, and potentially take his job.

Nokia on Tuesday announced the$7 billion sale of an ailing handsetbusiness to Microsoft, ending sev-eral months of discussions betweenMr. Elop and Microsoft Chief Execu-tive Steve Ballmer. The negotiationswere the subject of dozens of board-room deliberations on both sides ofthe Atlantic.

Nokia shareholders and many inFinland applauded the move. Nokiashares jumped 34% to €3.97 ($5.24)in Helsinki trading Tuesday amidsentiment that the deal is the bestsolution for a mobile-device opera-tion that already relied heavily onMicrosoft Windows technology.

It is a stark reversal to the chillyreception Mr. Elop has recentlyweathered in Helsinki, where somehad taken to calling him “StephenEflop.”

Having left Microsoft after run-ning the company’s profitable busi-ness division, Mr. Elop returns a bitof a hero. He was the only executivein the global handset business to ex-clusively use the Microsoft mobileplatform and Nokia now sells nearlyevery Windows phone that is soldworld-wide.

The table is set for the 49-year-old executive to help Mr. Ballmerpull off an ambitious plan and, inthe process, win respect in Micro-soft’s board room as its directorssearch for a new CEO.

In an interview Tuesday, Mr.Ballmer said the public shouldn’tread too much into what the dealmeans for Mr. Elop’s future, but ac-knowledged his longtime associatehas gone from being an externalcandidate to an internal candidate.

The immediate goal is to workhand-in-hand with engineers and

marketing staff at Microsoft to putthe pieces in place to truly competewith rivals. The executives are eagerto develop a legitimate third ecosys-tem capable of taking on playerslike Samsung Electronics Co., Ap-ple Inc., and Google Inc., which aremiles ahead thanks to iOS and An-droid.

If he fails, Mr. Ballmer’s legacywill be dented. The Microsoft chiefhas been criticized for not keepingup in a fast-moving industry. Peopleinvolved in the Nokia deal say theplay for a struggling handset busi-ness is one last effort to prove hismettle.

In choosing Mr. Elop to lead theintegration of the new business, Mr.Ballmer taps a respected ally. Dur-ing the interview, Mr. Ballmer saidhe values Mr. Elop as a partner. TheCanadian-born executive was one ofthe few people he called before an-nouncing his coming retirement.

Mr. Ballmer also picked an exec-utive who hasn’t strayed far fromhome.

Since joining Nokia in 2010, Mr.Elop has taken commercial flightsbetween Helsinki and Seattle. He es-sentially lived out of a suitcase tobalance the demands of turningaround a crumbling business andraising teenage daughters whom hedidn’t want to uproot.

Mr. Elop isn’t a stranger to toughdecisions. He made waves almostimmediately after starting at Nokia.He set to work on a plan that wouldlead to tens of thousands of job cutsand a downsizing of Nokia’s trea-sured research and development de-

partment. He sold key assets, in-cluding the seaside headquartersnear Helsinki and closed the last re-maining handset factory in Finland.

He also changed the focus. Ear-lier this year, after an extensive re-build of the Nokia Siemens Net-works wireless division, Mr. Eloppaid about $2.2 billion to buy outSiemens AG. Nokia now looks a lotlike Sweden’s Ericsson, which ex-ited handset manufacturing a coupleof years ago and is now making bigprofits selling infrastructure.

The results of the handset strat-egy have been less than stellar.

Nokia’s cash burn and losseshave narrowed, but it only controlsabout 3% of the global smartphonemarket and 14% of a total handsetmarket. While many analysts haveblamed Nokia’s demise on a weakMicrosoft operating system, criti-cism can be aimed at Nokia execu-tives who underestimated rivals.

In recent months, it became in-creasingly clear the Windows phonestrategy was running into a road-block. No matter how good Nokia’snew Lumia smartphones were, otherplayers in the industry—particularlySamsung Electronics—had deeperpockets that allowed them to pourfar more money into marketing anddiscounting smartphones than Mr.Elop has initially calculated.

Samsung’s market share, fueledby the popularity of both the Galaxyhandset and the Google Inc. An-droid operating system it runs, hasskyrocketed as Nokia’s shareplummeted, with the Koreancompany overtaking Nokia at No. 1in 2012.

Mr. Elop has done his best topaint a positive picture of Nokia’sphone business, pointing out thatLumia volume, while small, has beengrowing, with sales increasing 32%to 7.4 million in the second quarter.Samsung, however, sold nearly 10times as many smartphones in thefirst three months of 2013.

The clock is now ticking on Mr.Elop’s attempt to catch up.

BY JOHN D. STOLL

Nokia’s outgoing Chief Executive Stephen Elop spoke at a news conference on Tuesday in Espoo, Finland.

Bloomberg

New

s

Microsoft Pins HopeFor Revival on Nokia

Nokia said the deal with Micro-soft will improve its financial posi-tion and “provide a solid basis forfuture investment in its continuingbusinesses.”

Microsoft, meanwhile, said it ex-pects the deal to accelerate thegrowth of its market share andprofit in mobile devices. This deal“builds on the phenomenal partner-ship we’ve built with Nokia,” Mr.Ballmer said during a joint inter-view late Monday with Nokia Chair-man Risto Siilasmaa. He said thatbecause Nokia and Microsoft al-ready work so closely together, itshould be a “smooth transition” tointegrate Nokia’s mobile businessinto Microsoft.

The workers being added fromNokia will pad Microsoft’s employeecount by about one-third.

“This is definitely major newsfor Nokia, Nokia employees and Fin-land,” Mr. Siilasmaa added.

The Wall Street Journal reportedin June that Microsoft and Nokiahad discussed a sale of Nokia’s mo-bile-phone business but the talksfell apart over the price of thetransaction.

Deal negotiations were sparkedby a phone call from Mr. Ballmer toMr. Siilasmaa just before a Februarymobile-industry conference in Bar-celona.

Mr. Ballmer sought to seewhether Microsoft could be morethan just a partner to Nokia, Messrs.Ballmer and Siilasmaa said in thetelephone interview.

The Nokia board met more than50 times to discuss the possibility ofa deal with Microsoft, Mr. Siilasmaasaid. As for his part in the deal, Mr.Ballmer said: “This has been a highpriority for me.”

Mr. Ballmer didn’t say whetherthe Nokia deal timing and the an-nouncement of his retirement justover a week ago was a coincidence.The Microsoft CEO did say he calledtwo people, Messrs. Siilasmaa andElop, just before his retirement wasmade public, as the two companieswere in the final stage of acquisitiontalks.

The companies said Microsoft isexpected to use its stockpile of over-seas cash to pay for the Nokia pur-chase and licensing pact. Microsoftand Nokia said the transaction is ex-pected to close in the first threemonths of 2014, subject to approvalby Nokia shareholders and otherconditions.

“For Microsoft, this is a boldstep into the future,” Mr. Ballmersaid in a note to employees. Mr.

Continued from first page Ballmer has been reworking Micro-soft around what he calls a “devicesand services” strategy—a vision ofMicrosoft not only producing thesoftware underlying manycomputing devices, but being moreresponsible for the personalcomputers, smartphones and otherhardware on which people and busi-nesses rely.

Mr. Ballmer’s strategy, however,has been hamstrung by Microsoft’sweak position in smartphones, avast and fast-growing business thatis reshaping the technology battle-ground and minting new winners.

Microsoft’s market share insmartphones is about 3% in the U.S.,according to comScore.

“So far, the experience of Micro-soft in the hardware business hasnot been positive, so shareholdersare understandably apprehensive,”wrote Rick Sherlund, an analyst atNomura Securities, in response tothe deal.

Nokia’s market share and marketvalue have tumbled during the ten-ure of Mr. Elop, who took over in2010. Last year, Nokia generatednearly half of its €30.2 billion inrevenue from its mobile-phone seg-ment.

One of Mr. Elop’s key moves wascutting the broad alliance withMicrosoft in 2011, agreeing to usethe software giant’s mobileoperating system at a time manysmartphone makers were adoptingGoogle’s Android software.

So far, the alliance has failed tobear much fruit, with Android pow-ering its way to a dominant share ofthe market.

With the new deal for Nokia, Mi-crosoft will for the first time controlboth the smartphone hardware andsoftware teams—matching advan-tages that companies like Applehave leveraged for years, includingeasier planning of features and com-plete control of the customer’s expe-rience, said Van Baker, an analyst atGartner Inc. But there will also be asmaller group of Windows Phonedevices as well, he added, puttingfurther pressure on Microsoft tosucceed.

“It’s an all-or-nothing bet,” Mr.Baker said. “They have to be suc-cessful in the marketplace becausethere won’t be anyone else to fallback on.”

Al Hilwa, an analyst at IDC,noted the price was almost too goodto pass up for Microsoft, whichended up paying less for Nokia’ssmartphone business than the $8.5billion it did for the communica-tions service Skype in 2011.

All ChangeNokia has fallen far behind its rivals in the global smartphone market.

MARKET SHARE

The Wall Street Journal*First half Source: Gartner

Samsung

AppleAppleApple

NokiaBlackBerry

2006 ’07 ’08 ’09 ’10 ’11 ’12 ’13*

50%

0

10

20

30

40

%

THE NOKIA-MICROSOFT DEAL

The table is set for the49-year-old Mr. Elop tohelp Microsoft’s CEO,Steve Ballmer, pull off anambitious plan.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 11

IN DEPTHBerg, president of Timothy Financial Counsel,a fee-only financial advisory firm in Wheaton,Ill., says one otherwise rational client wantedto move her entire portfolio into gold afterreading a book warning of another marketcrash.

To combat this behavior, financial adviserssay it is important that investors study histor-ical prices and performance of the latest pop-ular investments. Historical charts, for exam-ple, will show the rise and fall of anyinvestment over time.

Instead of looking just at prices over thepast few months or a couple of years, look atthe long-term history over periods extendingback at least 10 years—and sometimes more.Gold, for example, had been increasing inprice since 2001, but over the longer term hastrailed stocks and barely kept pace with infla-tion.

Despite the multiyear frenzy, gold pricespeaked in 2011 and are now trading about 26%below their record high.

Similarly, investor returns often lag behindthose of the mutual funds they invest in, sincemany people buy funds only after their per-formance begins to overheat, then sell afterthe funds drop. As a result, the typical fundinvestor misses out on early gains and locks inthe later losses—ending up falling behind thefund itself.

The average annual return for U.S. stockmutual funds over the past 15 years was6.6%—while the average investor in thosefunds earned just 4.6%, according to invest-ment research firm Morningstar.

While it is easier said than done, investorshave to try not to pay attention to daily newsreports and advertisements touting the latestpopular investment.

Pride: Being OverconfidentEric Glohr, 54 years old, new to investing

at the time, planned to buy Microsoft stock atits 1986 initial public offering at $21 a share—less than a dime in split-adjusted terms, ac-cording to FactSet. But on the first day oftrading, the share price shot up to more than$27, still less than a dime in split-adjustedterms.

Mr. Glohr decided to wait until it sanklower again. He waited for years as the stockmarched higher until he finally realized itwould never dip to the lower price he had an-ticipated.

Its peak price, in split-adjusted terms, was$59.56 a share on Dec. 27, 1999, according toFactSet.

“I was worried about a couple hundreddollars and I missed out on close to a milliondollars,” he says.

Investors, especially ones new to the game,frequently believe they know far more thanthey actually do about a particular invest-ment, say psychologists and financial advisers.

“Our opinion of ourselves is much toohigh,” says Mr. Odean, the finance professor.“We all need a healthy dose of self-doubt andhumility.”

The best way for investors to keep theiroverconfidence in check is to make sure theyhave an unbiased third party available to goover all investing ideas. That could be a finan-cial adviser, or it could be a trusted closefriend or relative who isn’t directly affectedby any decision.

Mr. Glohr, for his part, says he learnedfrom his early mistake. Rather than trust hisinstincts entirely, he joined an investmentclub and now diligently researches each com-pany in which he chooses to invest, bouncing

ideas off the members of his group.

Sloth: Overlooking CostsInvestors often just don’t pay attention to

details. Consider their willingness to invest inexpensive mutual funds that don’t performwell, says James Choi, an associate professorof finance at Yale School of Management.

Investors, wooed by a fund manager’sname or recent performance, fail to look at afund’s expense ratio before buying in. Ratherthan buy a cheap index fund that mimics abroad market index, such as the S&P 500, withan expense ratio of as little as 0.05%, inves-tors will buy one managed by a professionalstock picker that charges a much higher fee,Mr. Choi says.

But more expensive funds tend to under-perform less expensive ones, says Mr. Choi,citing numerous studies.

It is the same with 401(k) fees. Investorsoften won’t pay attention to their statementseven though taking an active role in choosingtheir investments would likely save themthousands of dollars in the long run, say ex-perts.

While a 401(k) investor doesn’t hold muchsway over the administration fees charged bythe provider—or even the choice of provider—there are ways to manage costs, say financialadvisers. Often 401(k) plans will give investorsa choice of funds in certain asset classes, withexpense ratios that vary. Mr. Choi recom-mends choosing the cheapest option.

“The expenses are much more predictive offuture performance because there’s so muchrandomness in past performance,” he says.

Envy: Wanting to Join the ClubWhat is better than a great deal? A great

deal available only to you.In the run-up to Facebook’s initial public

offering in May 2012, financial advisers saythey were slammed with calls from clientswho wanted to get in on the stock before itmade its debut. The fact that there were alimited number of shares available to retail in-vestors only drove the frenzy, advisers say.

It is the same reason investors were sowilling to believe in Bernard Madoff’s Ponzischeme, experts say. They were part of a smallgroup making a lot of money; Mr. Madoff re-

portedly accepted only a limited number ofclients.

“A lot of that has to do with that sense ofexclusivity,” says Meir Statman, a professor offinance at Santa Clara University who focuseson behavioral finance.

The desire to be part of an exclusive offer-ing often drives people to throw money intoan investment that doesn’t fit into the overallgoals of their portfolio, against their betterjudgment. Investors who poured money intoFacebook just after its launch watched as thecompany’s stock fell below $20 a share severalmonths later, far less than its $38 IPO price.(The stock is now trading at about $41.)

Susan Strasbaugh, owner of Strasbaugh Fi-nancial Advisory in Colorado Springs, Colo.,which has $100 million in assets under man-agement, says she recommends clients set upa separate “Vegas” account for hot invest-ments like Facebook that don’t fit into a cli-ent’s portfolio.

She says clients should invest no morethan 5% of their portfolio in the Vegas ac-count, and treat it like gambling—hence thename.

Wrath: Failing to Admit FailurePeople hate to lose money. Along with her

investing club, Lori Towers-Hoover, 54,bought shares of home builder MeritageHomes at about $32 a share in 2007. Ms. Tow-ers-Hoover and her club in Howell, Mich., hadthoroughly researched the company and be-lieved in its strong financials. But the stock al-ready was on its way down, and by early2009, it was trading at less than $10 a share.

Ms. Towers-Hoover and her club hung on.They waited for another year as the stockhovered around $20. Finally they sold. “Wejust made the decision it’s not going to re-bound and we’re not going to get our moneyback,” she says.

Loss aversion, as it is called by psycholo-gists, isn’t hard to spot. Investors held on totech stocks as they plummeted during thecrash of the early 2000s, as they did to finan-cial stocks during the crisis, and as they con-tinue to want to do today.

“We don’t want to be honest with our-selves and admit the loss,” says Mr. Klontz,the psychologist.

That type of thinking can be dangerous forinvestors. If they regret a decision, they maysell too soon, but if they can’t accept theirloss and move beyond the “sunk costs” of aninvestment, they may hold on too long, saypsychologists.

Instead of just researching the financials ofa particular stock, investors need to under-stand the economic environment as much aspossible, say financial advisers and experts. Ifa company is dependent on a job-market orhousing-market recovery to perform well, in-vestors need to fully understand the outlookfor those sectors and plan their investmentaccordingly. Too often investors will basetheir decision to buy or sell solely on thestrength of a company.

Of course, economic predictions aren’t al-ways correct. Ms. Towers-Hoover says herclub’s decision to sell Meritage was based onpredictions that the U.S. wouldn’t fully re-cover from the 2008 downturn until 2016. But,buoyed by a housing-market recovery, Meri-tage stock began to rise in mid-2011 and istrading around $40 a share now.

That stock’s recent tear taught Ms. Tow-ers-Hoover another lesson: It is impossible totime the market.

Gluttony: Living for TodayLet’s face it: There are a host of activities

more interesting than monitoring your401(k)—and a host of temptations to spendmoney on today. But investors’ tendency to-ward apathy is damaging, particularly when itcomes to retirement savings.

Fifty-seven percent of U.S. workers sur-veyed by the Employee Benefit Research Insti-tute earlier this year reported less than$25,000 in total household savings and invest-ments, not counting their house or defined-benefit retirement plans. The lack of pre-paredness has led experts to deem it a crisis.

Often workers aren’t saving early enoughbecause they view retirement as a far-offevent, leading to apathy toward puttingmoney away, say financial advisers and psy-chologists.

The key for investors, Mr. Klontz says, ismaking retirement less abstract. Investorsshould ask themselves a series of questionsabout how they want their lifestyle to bewhen they retire: How old will they be? Wherewill they live? What will they be doing?

Mr. Klontz also uses a measuring tape tomake this point, marking it at an investor’sage and then again at the age an investor ex-pects to live until, based on the longevity ofother family members. When an investor islooking at a length of tape that is only, say, 20or 30 years long, that can be a stark realiza-tion of the lack of time he has left to save.

Often, Mr. Klontz says, this encourages in-vestors to add more to their 401(k) contribu-tions or ratchet back spending.

Greed: Following the HerdWhen the stock market tanked during the

2008 financial crisis, many investors fled,some abandoning their entire portfolios andputting the money into cash. The same phe-nomenon is happening now in the bond mar-ket as investors, worried about the effect ofrising interest rates, are fleeing bond funds.

Investors yanked $11.7 billion from thefunds in July, according to Morningstar, fol-lowing an outflow of $60 billion in June. Asinvestors pull money, it encourages more in-vestors to do the same.

To battle the fear that inevitably comeswith a market decline or other adverse events,financial advisers say it is crucial that inves-tors have a detailed portfolio plan that theystick with regardless of short-term events.The plan should outline investors’ targetedholdings in bonds, stocks and other invest-ments, and be based on their retirement goals.

“Right now, bonds are bad in the minds ofinvestors,” says Chad Carlson, a wealth man-ager at Balasa Dinverno Foltz in Itasca, Ill.,which has $2.6 billion in assets under man-agement. “Our clients will say, ‘I want to beout of bonds entirely.’”

Rather than encouraging an “all or noth-ing” approach, Mr. Carlson recommends thatinvestors adjust their portfolio a smallamount. For example, a client who previouslyheld 40% of his portfolio in bonds would re-duce that exposure by several percentagepoints.

That move tends to reassure investors andhelps them avoid rash decisions, he says.Lehman Brothers filed for bankruptcy protection on Sept. 15, 2008. What have investors learned since then?

Reuters

Gold prices peaked in 2011 and are now trading about 26% below their record high.

Bloomberg

New

s

18 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Norway Fund ProposedOSLO—Less than a week before

national elections, Norway’s oil min-ister proposed carving out a sepa-rate real-estate fund from the na-tion’s giant $750 billion oil-wealthfund that would have increased ex-posure to U.S. property.

Ola Borten Moe, minister of pe-troleum and energy and a deputyleader of the nation’s Center Party,said he is proposing taking 10% ofthe sovereign-wealth fund and put-ting it into a new vehicle designedexclusively for real-estate holdings.

Norway’s pension fund is allowedto set aside 5% for real estate, but itis far from meeting that threshold.The fund currently has 63.4% of itsmoney in equities, 35.7% in fixed-in-come investments and the remain-ing less than 1% in real estate.

“What we want now is a heavierweighting in real estate in the Nor-wegian pension fund,” Mr. Moe saidin an interview. “We want a smallerexposure to bonds and a bigger ex-posure to real estate, and go from [agoal of] 5% to 10% in real estate.”

He said the proposal is on behalfof his party and isn’t the officialpolicy of the three-party coalitiongovernment. Norwegians will voteSept. 9, and polls suggest that PrimeMinister Jens Stoltenberg could bereplaced by a more right-leaning co-alition.

Mr. Moe acknowledged that thefate of his proposal would dependon the elections Monday. Even if thereal-estate proposal isn’t immedi-

ately adopted, the fund may face ashake-up, as the partners of a po-tential new center-right governmenthave suggested setting up separatefunds in order to invest more ingreen technology and emergingmarkets.

“The Norwegian oil fund and itsmanagement is a continuing pro-cess,” Mr. Moe said, outlining hisview that real estate offers more-at-tractive returns on capital thanbonds.

Mr. Moe said a new real-estatefund should be based in Trondheimin the middle of Norway, rather thanthe capital of Oslo, where NorgesBank Investment Management, orNBIM, which manages the oil fund,is based.

NBIM officials have declined tocomment on proposals for changingthe fund’s structure. The fund hasbeen gradually reducing its expo-sure to bonds.

Norway’s wealth has grown con-siderably in recent years amid fa-vorable conditions for the nation’sbooming oil and gas industry. Witha value of 4.56 trillion Norwegiankroner, or an increase of 654% froma decade ago, it is expected to growto 6.8 trillion kroner ($1.1 trillion)by 2020.

The debate about where to investthe money likely will intensify thebigger the fund gets, Mr. Moe said.

He said the current growth rateof the fund could lead Norway toown “$120 billion to $130 billion inreal estate by the end of this de-cade” if the proposal is followed.

“That alone would make the Norwe-gian government one of the biggestreal-estate investors globally, proba-bly also heavily weighted in the U.S.,the world’s biggest real-estate mar-ket.”

Mr. Moe said the U.S. showedsigns of recovery, with falling unem-ployment and a relatively youngpopulation. He also is encouragedthat new oil resources in the mar-ket, as a result of better extractionmethods such as fracking, can im-prove the U.S. trade deficit.

“I don’t think it’s bad timing toenter U.S. real estate,” he said.“We’ll stay away from subprime andstructured products. We’re talkingabout entering directly into busi-ness properties—hotels and proper-ties in central areas where it’s hardnot to expect a cash flow.”

The Norwegian sovereign-wealthfund, often referred to as the oilfund, jumped into the U.S. real-es-tate market in February, snappingup half of a $1.2 billion block of fiveupscale East Coast office buildingsowned by pension-fund managerTIAA-CREF, including a pair of officebuildings in Washington, D.C.

Mr. Moe said the proposal for anew fund was inspired by a trip toAlaska to study the strategies of the$40 billion Alaska Permanent Fund,which has 12% of its assets in realestate.

“It’s invested much heavier andearlier than us in real estate,” hesaid. “Their returns have over timebeen much higher than ours, around9%.”

BY KJETIL MALKENES HOVLAND

London High-RiseHas Glaring Flaw

LONDON—The sun doesn’t shineall that often in London. But when itdoes, it is best to avoid walking near20 Fenchurch Street, the newestskyscraper rising in the city’s finan-cial district.

One facade of the 37-story glassbuilding—dubbed the Walkie Talkiefor its slight resemblance to a hand-held radio—slants downward towardthe street below. For about twohours a day in recent weeks, it hasbeen reflecting an intense beam ofsunlight onto pedestrians and Lon-don traffic.

Nearby workers complain thelight can be blinding. The project’sdevelopers said Tuesday that streetparking in the affected area hadbeen temporarily suspended, afterone car owner told British newspa-pers the light had damaged hisbodywork.

The £200 million ($311 million)project’s developers, Land Securi-ties PLC and Canary Wharf PLC, saythey’re working to fix the problem,including plans to add a chemicalagent to the building’s facade to re-duce reflection, according to a per-son familiar with the situation. An-other possible solution: usenonreflecting foil to cover the of-fending panes of glass, this personsaid.

Meanwhile, the developers saidTuesday that they would erect a

temporary screen at street level forthe next two weeks to prevent fur-ther problems. The statement didn’treveal a long-term solution to theissue.

The board of Land Securities,Britain’s biggest developer by mar-ket value, met Monday night to dis-cuss options, according to anotherperson familiar with the situation.

The office building, expected tobe finished next year, was designedby Uruguayan architect Rafael Vi-ñoly.

Mr. Viñoly’s firm, Rafael ViñolyArchitects, didn’t respond to re-quests for comment on the build-ing’s design.

The building isn’t the first to runinto problems from the sun’s glare.The Walt Disney Concert Hall in LosAngeles, which first opened in 2003,was modified after local residentscomplained the reflection from thebuilding’s stainless steel arches wasoverheating their homes and addingto their air conditioning bills.

BY PETER EVANS

Apartment blocks under construction in the Liljeholmskajen neighborhood of Stockholm in April.

Swedish Capital Struggles to Provide Desirable Housinggoverning development, Sweden’sproduction costs for new housing,for instance, are the highest in theEuropean Union—and 72% above theaverage.

The result is that constructionprojects limp along, and interna-tional developers for the most partare staying on the sidelines. Mean-while, the country’s small industryof developers, builders and investorsfocus primarily on upscale housingwhere margins are better, largely ig-noring the needs of the middle class.

“I don’t think we can develop ourbusiness by trying to keep thingsthe way they are,” says Peter Wåg-ström, chief executive of NCC, Swe-den’s third-largest constructioncompany.

Stockholm isn’t alone. Concernsabout housing shortages are echoedin other European cities, such asLondon and Berlin, that have faredrelatively well during the past yearsof financial turbulence. The rest ofEurope is looking to these cities, inpart, to fuel the Continent’s recov-ery, but affordable housing could bea stumbling block.

Many of these cities are lookingto find ways to increase supply. Lon-don Mayor Boris Johnson, for exam-ple, has set a target of building55,000 affordable homes by 2015,and Germany’s Chancellor AngelaMerkel has incorporated plans formore-affordable housing into herplatform ahead of the election nextmonth.

Some investors are benefitingfrom the imbalance between supplyand demand. With rents rising inGermany, for example, stocks in Ger-man rental-apartment companieshave been seen as an attractivelong-term bet.

Also, risk-averse institutional in-

Continued from page 15

vestors are buying rental propertiesin Sweden, seeking safety in theirpredictable, if low, returns. Residen-tial properties accounted for 36% ofthe transaction market in Swedenthis year, up from 10% to 20% in theearly 2000s, according to estimatesby Stockholm-based property con-sultancy Newsec.

But officials and business leadersin cities facing housing shortagesrecognize their economic growthcould be stifled if workforces can’tfind places to live.

With a population in the Stock-holm region of over 2.1 million, thecounty administration board esti-mates that up to 319,000 homes

need to be built by 2030, or morethan 17,000 new homes a year. Butbetween 2000 and 2012, only an av-erage of 7,248 new homes a yearwere completed.

“We cannot provide housing forour young colleagues,” says Kon-stantin Papaxanthis, chief executiveof small software developer Prime-key. While his company is posting a20% annual sales growth rate and ishiring, the expanding workforceisn’t necessarily enjoying the bestStockholm has to offer.

The company “can’t expand theway we would like because of thehousing shortage,” Mr. Papaxanthissays.

The Swedish rent-control systeminvolves a bargaining process be-tween property owners and tenants’unions that sets rents according tosize, standard and location. Thiskeeps rents low in older housing inattractive locations so that tenantshave little incentive to move. Whathas emerged is a black market inwhich firsthand rental contracts inthe red-hot city center can sell foraround 500,000 Swedish kronor($76,800).

Stefan Attefall, Sweden’s 53-year-old housing minister, saysthere is no quick fix for the problem.Changing the system isn’t politicallypopular in Sweden, where many citi-

zens view rental-market regulationas a critical part of a social safetynet that Sweden and other Nordiccountries strive to maintain throughhigh taxes and other measures.

“The dilemma is how do weachieve consumer protection, secu-rity for tenants and a decent soci-ety?” Mr. Attefall says.

Knowing he won’t be able to getthe political support needed to doaway with the current rent regula-tion, he is fighting instead to reducered tape. In the three years since heassumed his post, Mr. Attefall haslaunched 65 inquiries to find outwhat can be done to ease the hous-ing crisis and has decided to focusefforts on simplifying and standard-izing regulation.

There also has been small stepstaken to loosen regulation, andsome analysts believe there may bemore to come. “It has become morepolitically acceptable to talk aboutless regulated rents,” says equity an-alyst Albin Sandberg at Handelsban-ken.

But that is little consolation foreveryday renters like Therese Lar-sen, who are increasingly out in thecold. A 27-year-old lawyer workingon a temporary contract in down-town Stockholm, Ms. Larsen hasbeen searching for a place close towork for more than a year.

“When you’re young and ambi-tious, you want to live where some-thing’s going on—in the city, ofcourse,” says 27-year-old Ms. Lar-sen. As she waits on a list for arental apartment, her sister has puther up in her apartment, which is a30-minute train ride from her office.“At least I don’t have to live on thestreet,” she says.

—John D. Stolland Ellen Emmerentze Jervell

contributed to this article.

THE PROPERTY REPORT

Bloomberg

New

s

The building has beenreflecting an intensebeam of sunlight ontoboth pedestrians andLondon traffic.

10 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

The Seven Deadly SinsOf Investing

Financial Crisis Be Damned—Investors are Still Making the Same Mistakes They Always Have.Here Are Their Biggest Blunders and How to Avoid Them

BY KIRSTEN GRIND

IN DEPTH

It has been nearly five years since thedepths of the U.S. financial crisis, and in-vestors have learned a lot since then. Orhave they?

Despite the downturn that left many in-vestors reeling from losses on everythingfrom real estate to the stock market, when

it comes to investor behavior—those hard-wired instincts that drive us all—little haschanged, say psychologists and financialadvisers.

Investors still make the kinds of mis-takes that have gotten them in trouble fordecades. They are wooed by the hottestnew trend, they want to follow the crowd—consequences be damned—and they justcan’t seem to pay enough attention to im-portant details, such as the steep annualfees charged by many mutual funds.

“When it comes to money, we are op-erating as if we were in the jungle, hav-ing to deal with predators like tigers,”says Brad Klontz, a clinical psycholo-gist and associate professor of finan-cial planning at Kansas State Univer-sity. “We have a cave-man brain.”

There are ways to avoid thesepitfalls. Investors need a hard andfast plan of their investment goals,they need to find a trusted adviser

or family member to help weed through de-cisions and they need to stop paying somuch attention to the short-term eventsthat drive media coverage.

Here are the seven deadly sins of invest-ing, in no particular order, and how to pro-tect against them.

Lust: Chasing Recent PerformanceThe belief investors feel that recent per-

formance will dictate future performance—known as “recency bias” in psychology—isone of the biggest investor pitfalls, ex-perts say.

“People tend to buy somethingthat has done really well recently,”says Terrance Odean, a professor offinance at the Haas School of Busi-ness at the University of California,Berkeley. “They chase performance.”

In the lead-up to the financialcrisis, investors dived headlonginto real-estate investments, con-

vinced that rising housing prices wouldnever falter.

The latest example: gold. The commod-ity went on a winning streak even beforethe financial crisis, and investors piled in.

A big factor was the heavy prominencegold suddenly received across the media—on commercials, in financial publications,on television shows and in books. Mark

The Wall Street JournalSource: Morningstar

Note: Data are average annual returns through July 31 and don’t include exchange-traded funds.

1 YR.

Investor returnsFund returns

3 YR. 5 YR. 10 YR. 15 YR.

27.3%28.3%

16.4%16.7%

7.3%8.1% 7.1%8.3%

4.6%6.6%

Poor TimingInvestors often perform worse than their own mutual funds by moving money in andout in an attempt to time the market. Fund returns vs. investor returns in U.S. stock funds.

Illustrationby

DaveWhamon

d

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 19

QQQC+69#@B?QBU)E)T*C+>@

1047IL4HG 1L433JFN7RF02R 3420P4HJ4 1:HR769#@B? S .BU)E)T* ;)=;)9)?8)* 2)*)5+> !? 8#) 9BT) >' !89 9#>==!?% +)?8;)=>;8'>T!>D 8>8BT!?% ($DAAA 9<6B;) @)8);9 >' ;)8B!T 9=B+)D '>; B==;>O!@B8)TM -X& @!TT!>?8> 2>+U9=;!?%C0#) =>;8'>T!> !?+T6*)9 /W;@*K IK=+)?8;6@D B ,(D"V( 9<6B;) @)8);9#>==!?% +)?8;) T>+B8)* !? 8#) +)?8); >' >?) >' 8#) 'B98)98 %;>Q!?% @6?!+!=BT!8!)9!? 8#) 18>+U#>T@ ;)%!>?C

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 9

Syrian Diplomat Seeks U.S. DialogueDAMASCUS, Syria—One of

Syria’s top diplomats called for dia-logue with the U.S.—while threaten-ing retaliation—as the U.S. Congressweighs military strikes against hisgovernment.

“We hope the American repre-sentatives will exercise wisdom, willlisten to the voice of justice, not toprovocative actions,” Deputy For-eign Minister Faisal al-Mekdad toldThe Wall Street Journal in an inter-view at his office in Damascus onTuesday.

“We love the American people,we have millions of Americans ofArab origin including Syrians, andwe do not want wars with theUnited States,” said the diplomat,who served as his country’s envoyto the United Nations in New Yorkfrom 2003 to 2006.

While he repeatedly called forreconciliation, Mr. Mekdad warnedof the repercussions of an attack onSyria, as U.S. lawmakers considerwhether to endorse a military re-sponse to what Washington saidwas the Syrian regime’s use ofchemical weapons last month in theDamascus suburbs.

Mr. Mekdad said Damascuswould strike back not only at Israel,but also at Syria’s neighbors Jordanand Turkey if they take part in anyU.S.-led operation. And he said anyaction would strengthen rebel fac-tions affiliated with al Qaeda, notthe moderate rebels the U.S. hassought to bolster.

A green light from Congress toattack Syria would be “a tragedyagainst the Syrian people and theAmerican people and all people inthe region,” he said.

U.S. President Barack Obama saidon Saturday that he had decided itwas necessary to take military ac-

tion against the Assad regime, afterhis administration reported it hadoverwhelming evidence that theSyrian army had used chemicalweapons on Aug. 21. Mr. Obama isseeking authorization from Con-gress for military operations to pun-ish the Assad regime.

Mr. Mekdad rejected the U.S.conclusions. “I assure them that theSyrian government did not usechemical weapons against Syriansand will not use them against Syri-ans and will always be ready for di-alogue with the American peopleand its representatives,” the deputyforeign minister said.

“I know Secretary Kerry person-

ally, and I hope he does not go sofar in plans that will kill more Syri-ans,” he added, referring to the U.S.secretary of state, who has beenone of the Obama administration’smost prominent advocates of mili-tary action.

Like most Syrian officials, Mr.Mekdad said it was opposition reb-els who unleashed chemical weap-ons on their own areas in the Da-mascus suburbs on Aug. 21, afterthe Syrian military launched a majoroperation on several fronts to pre-vent rebels from attacking the capi-tal, which is under regime control.

Asked about his feelings aboutwhat the U.S. said were the deaths

of more than 1,400 people, includingmore than 400 children, in the at-tacks, Mr. Mekdad said: “Any warsof this type are horrible and are un-acceptable; we are in a state of warin Syria. We cannot ignore the suf-fering of the entire Syrian people,but those criminal gangs in Syria,the armed groups, have falsifiedevents in Syria since the beginning.”

Mr. Mekdad argued that a U.S.attack would embolden those oppo-sition fighters who are linked to alQaeda to use chemical weapons.

“What is the United States goingto benefit from fighting the onlysecular political system in the re-gion?” he said.

BY SAM DAGHER

Syrian Deputy Foreign Minister Faisal al-Mekdad, shown in his office in Damascus last week, warned against U.S. action.

AssociatedPress

Beijing Dilemma Reflects Policy of Standing BackBEIJING—U.S. threats to launch

military strikes against Syrian Presi-dent Bashar al-Assad, citing new ev-idence that he has used sarin gasagainst his own people, have pre-sented Beijing with a fresh dilemma.

For decades, the cardinal princi-ple of Chinese foreign policy hasbeen noninterference in the affairsof sovereign states. In the MiddleEast, that’s led to a series of diplo-matic shocks as Chinese foreign-pol-icy mandarins maintain bets on ex-isting regimes, even as their popularsupport crumbles.

From Moammar Gadhafi, Libya’smegalomaniac former strongman, toHosni Mubarak in Egypt, Chineseleaders have stuck with MiddleEastern despots long after atrocitiesagainst their own populationshelped doom their regimes.

Regime change under any cir-cumstances—even, in Syria’s case,the suspected use of sarin gas—makes Chinese leaders nervous.

Their distaste for toppling strong-men springs partly from a deep senseof insecurity about their own politi-cal legitimacy in a country where so-cial unrest is bubbling over every-thing from pollution to land grabs.

If Western nations can interveneto see off undemocratic governmentsin the Middle East, Chinese leadersreason, what will stop them fromtrying to bring down the ChineseCommunist government one day?

To be sure, the problems that

China faces aren’t remotely similarto those afflicting governments inMiddle Eastern countries like Egypt.They stem largely from economicgrowth that arguably has been toorapid and uneven, not too slow. Un-like many countries in the MiddleEast, China has scored impressivevictories in the fight against pov-erty. Its economy creates abundantjobs and opportunity.

Still, Chinese security forces re-acted with overwhelming force onthe streets of Beijing two years agoin response to online calls for pro-tests in support of a Jasmine Revo-lution inspired by the Arab Spring.The demonstrations never took off.

More broadly, for China, turmoilin the Middle East has underlined thereality that there’s still only one su-perpower in today’s world—the U.S.

In his book “China Goes Global,”David Shambaugh, a China scholarat George Washington University,writes: “Real superpowers shapeevents and produce outcomes. Bycontrast, China repeatedly takes alow-key, back seat approach in itsdiplomacy.”

China has no military bases inthe Middle East, or troops on theground. It’s likely to be many yearsbefore China can project sustainedpower beyond its own immediatebackyard in East Asia, where it’spushing back against U.S. domi-nance with ballistic missiles andsubmarines, and by building spaceand cyberwarfare capabilities.

At the same time, China has

growing interests in the Middle East.It has invested heavily in oil fields inIraq and massive construction proj-ects in Saudi Arabia and the Gulf,and its state-owned companies havepacked off tens of thousands of Chi-nese engineers, geologists and work-ers to support the projects.

Ironically, the Chinese lack ofstrategic reach in the Middle East iscompounded by a challenge that’supending the strategic calculus ofthe region: While the U.S. is growingless dependent on imported energy,including from the Middle East,China’s dependence is growing.

This year, China will overtake theU.S. as the world’s largest net oil im-porter on a monthly basis, accordingto the U.S. Department of Energy.

The gap will grow as U.S. produc-tion of shale oil and gas ramps up,and energy conservation kicks in.Meanwhile, an industrializing Chinawill gobble up energy at greaterspeeds, and while China has beenscrambling for new supplies in Africaand Latin America, the Middle Eastremains an essential supplier.

Picking the wrong side in thatregion has been costly for China. Ithas complicated Beijing’s relationswith populist governments thathave emerged from the turmoilsweeping the Middle East, and putat risk the prospects of Chinese en-ergy and engineering companies.

More generally, say Western dip-lomats and foreign-policy analysts,China’s instinctive support for the

status quo has left it flat-footed asevents rapidly unfold. In one crisisafter another, China has reacted toinitiatives from Washington andother Western powers, despite itsaspirations to be seen as a globalpeer of the U.S.

For instance, China was enragedwhen its support for limited actionby the North Atlantic Treaty Organi-zation in Libya—a rare instance ofthe country compromising on its non-intervention principles—turned intoan all-out assault on the Gadhafi clan.That may have hardened Beijing’s re-sponses on Syria, diplomats say.

Three times, moreover, China hasused its veto in the United Nationsto block attempts to isolate the As-sad regime, even as a civil warthat’s lasted for more than twoyears rages across the country. TheChinese have joined the Russians tostymie forceful allied intention.

So far, the latest crisis hasn’t leftthe Chinese as isolated as some pastones have. With the exception ofFrance, no European country hascome out unequivocally in favor ofmilitary strikes.

As the Obama administrationtries to drum up congressional sup-port for a strike on Syria, China hasgrown powerful enough for the U.S.to pay attention to such concerns—but not so strong that it can affectthe outcome. China, writes Mr.Shambaugh, “does not shape inter-national diplomacy, drive other na-tions’ policies, forge global consen-sus, or solve problems.”

BY ANDREW BROWNE

China’s U.N. Ambassador Liu Jieyi attended a Security Council meeting Aug. 30.

Reuters

CONFRONTING SYRIA

Israel, AmericansHold Missile TestIn Mediterranean

Israel said it carried out a suc-cessful joint missile test with the U.S.in the Mediterranean Sea on Tues-day, amid escalating tensions overthe possibility of an attack on Syria.

The test involved at least onemissile fired from an Israeli air-forcebase in central Israel, working in co-operation with vessels deployed inthe Mediterranean Sea, said Myr-iam Nahon, a spokeswoman for Is-rael’s Defense Ministry. Ms. Nahondeclined to say whether the vesselswere American or Israeli warships.The U.S. confirmed the test.

The test involved the Arrow mis-sile defense system, designed to de-fend Israel against the sort of long-range missiles that Iran might use inan attack, the ministry said. It is partof a system in Israel designed to in-tercept short-, medium- and long-range rocket and missile attacks.

Israel’s Defense Ministry and thePentagon said the test was sched-uled and unrelated to consider-ations of an attack on Syria.

Israel has called up reserves andput its shorter-range missile de-fense systems on high alert in an-ticipation of a U.S. attack on Syriaprovoking retaliatory strikes fromthe Assad regime or its ally Hezbol-lah of Lebanon.

Tuesday’s missile test was fol-lowed by a public warning by IsraeliPrime Minister Benjamin Netan-yahu. “I want to say to anyone whowants to harm us—it is not advis-able,” he said.

—Charles Levinson

20 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Standard & Poor’sClaims Fraud SuitIs U.S. Retaliation

Standard & Poor’s Ratings Serv-ices said in a court filing Tuesdaythat it was sued by the Justice De-partment in retaliation for its down-grade of the U.S.

Standard & Poor’s has indicatedpublicly and in previous court fil-ings that the Justice Department’sFeb. 4 lawsuit—accusing it of fraudover its ratings—was politically mo-tivated, but the language in Tues-day’s court filing is the strongest todate.

The U.S. Justice Department“commenced this action in retalia-tion for [S&P’s] exercise of theirfree speech rights with respect tothe creditworthiness of the UnitedStates of America,” lawyers for thecompany wrote in court documentsfiled on Tuesday in the U.S. DistrictCourt for the Central District of Cal-ifornia.

Standard & Poor’s stripped theU.S. of its triple-A rating in August2011, the first downgrade of thecountry by a ratings firm in decadesand a move that drew attention toheightened political infighting thatS&P said had hamstrung CapitolHill’s ability to address a rising debtload.

Standard & Poor’s, a unit ofMcGraw Hill Financial Inc., saidTuesday that such downgrades areopinions that are protected the U.S.Constitution’s First Amendment, anargument long made by the com-pany’s lawyers and other credit-rat-ing firms.

“Such free speech is protectedunder the First Amendment to theUnited States Constitution and theretaliation, causing and embodied inthe commencement of this imper-missibly selective, punitive and mer-itless litigation, is unconstitutional,”the credit-rating firm said in courtfilings.

A spokeswoman for the JusticeDepartment didn’t immediately re-spond to a request for comment.

The Justice Department claimed

in its lawsuit that the world’s larg-est credit-rating firm duped feder-ally insured banks and credit unionsin the years before the financial cri-sis by misrepresenting its ratingsprocess as being independent andobjective.

The federal government chargedthat Standard & Poor’s in fact wasissuing high ratings to complexdeals backed by mortgages andother assets to win business andkeep bankers and other issuer cli-ents happy.

Standard & Poor’s and other ma-jor rating firms are paid by debt is-suers to rate their debt. The compa-nies have acknowledge that the“issuer pay” business model pres-ents potential conflicts of interestbut say they manage them.

Since February, Standard &Poor’s has said that its top competi-tors issued the same ratings. ButTuesday’s argument that the JusticeDepartment’s lawsuit was retaliationis the clearest indication yet thatthe company is turning to the politi-cal-payback argument as a key de-fense.

In previous court filings, Stan-dard & Poor’s had focused on theJustice Department’s allegations ofmisrepresentation. Lawyers forStandard & Poor’s argued that whenthe company said its ratings werethe result of an independent and ob-jective process in its employeecodes of conduct and documentssent to investors and issuers thatlanguage was “mere puffery” andnot intended to be taken at facevalue by anyone.

But the federal judge overseeingthe lawsuit slammed that defense ina ruling earlier in the summer.

U.S. District Judge David O.Carter in Santa Ana, Calif., said inhis July 16 ruling that the ratingfirm’s “puffery” defense is “deeplyand unavoidably troubling.”

Standard & Poor’s asked thejudge on Tuesday to dismiss thecase, a request it has made in previ-ous court filings.

BY JEANNETTE NEUMANN

BUSINESS & FINANCE

EU Car Sales Remain in Rutthe Brussels-based umbrella groupfor European automotive suppliers,known as CLEPA.

Declining levels of car ownershipin big cities is one factor worryingthe industry, Mr. Gales said. In Eu-rope there are 500 cars on averagefor 1,000 inhabitants, a very highdensity. But in cities like Paris, car-ownership has fallen to 280 cars per1,000 inhabitants, the same densityas Poland and half of what it is inthe rest of France. “This trend isn’tgoing away,” he said.

Christian Breitsprecher, automo-tive analyst with Macquarie Capitalin Frankfurt, said while the latesteconomic data suggest Europe’sauto market may soon stabilize,“that won’t be enough for somecompanies, particularly PSA [Peu-geot Citroën] and Fiat, to make de-cent profits in Europe,” he said.

Peugeot, Fiat SpA, Ford MotorCo. and General Motors Co. areamong the major auto makers losingmoney in the region.

The manufacturers have reacted.Ford has closed two production fa-

Continued from page 15 cilities in Europe this year. Peugeotalso is stopping vehicle productionat a plant near Paris in October af-ter a tussle. And GM’s Adam Opelunit will end car assembly at a fac-tory in Germany next year.

But with cutbacks on a muchsmaller scale compared to those un-dertaken by the now-thriving U.S.industry in the aftermath of the2008 financial crisis, the Europeanindustry’s chronic overcapacitylooks set to persist, and with it,many manufacturers’ poor profit-ability. The U.S. auto industry shutabout 24 assembly and parts facto-ries during the recession.

“To wind down production tomatch expected low sales over thenext years, capacity will probablyhave to be cut by a further two mil-lion vehicles,” Mr. Kades said. Thatnumber is equivalent to six to eightmedium-size car factories, AlixPart-ners estimates.

“Given that relatively little ca-pacity has been taken out of themarket, pricing pressure in Europewill remain very tough,” said Mac-quarie’s Mr. Breitsprecher.

Suicide Shakes Zurich InsuranceZurich said late last week that its

board was launching a review intocultural issues in the aftermath ofMr. Wauthier’s death. Among otherthings, that review will examinewhether employees in Zurich’s fi-nance department were subjected toexcessive pressure from higher-ups,according to a person familiar withthe process.

“This is not a good sign for acompany of this magnitude,” saidAndrew Barile, who runs an insur-ance-industry consulting firm in Sa-vannah, Ga.

Mr. Ackermann has declined toelaborate on last week’s statement.“Out of respect I do not currentlywish to make any further commentabout this tragic event,” he saidSunday.

Mr. Ackermann’s brief tenure atZurich was rocky.

Upon joining the board, the 65-year-old Swiss native quickly triedto shake up the culture at the staidinsurance company. Although hewas a nonexecutive chairman, hetook an active role. Like its rivals,Zurich was struggling with a toughmacroeconomic environment. Its re-turn on equity was sagging. Com-petitors were poaching top employ-ees.

In a break from Zurich’s traditionof quiet, polite internal meetings,Mr. Ackermann would drill execu-tives with tough questions, formercolleagues say.

In board meetings, some direc-tors were taken aback when he criti-cized executives, including Mr. Wau-thier, according to a person familiarwith the board.

Still, Mr. Ackermann’s conductwas generally perceived as toughbut professional, former colleaguessay.

Mr. Wauthier, a 53-year-old dualFrench-British citizen, joined Zurichin 1996. Known by colleagues asmild-mannered and quiet, he held avariety of roles at the company, in-cluding a stint in Southern Califor-nia where he honed his surfingskills.

After being named CFO in 2011,Mr. Wauthier sometimes found him-self on the receiving end of Mr. Ack-ermann’s frustrations with the com-

Continued from first page pany’s financial performance,former colleagues say.

Before Zurich reported its mid-year results last month, there wasan internal debate over how to up-date investors about the company’sprogress at hitting three-year busi-ness targets that it had set back in2010, according to people familiarwith the discussions.

Mr. Ackermann argued that thecompany should publicly declare itsdissatisfaction with its lack of prog-ress, according to people familiarwith the debate.

Mr. Wauthier disagreed, arguingthat Zurich should simply empha-size that it was moving in the rightdirection. At times, the debate be-tween the two men and others wasintense, said a person who wit-nessed it.

On Aug. 15, the company saidthat while certain units were ontrack to hit their three-year targets,others “remain more challenging.”Zurich’s shares fell 1.6%.

About 10 days later, Mr. Wauth-ier was alone in his home on theshores of Lake Zug. His wife and sonwere in the U.S.; his daughter was inthe U.K., company officials say. Mr.Wauthier typed out a suicide note inEnglish. Then he took his own life

After he didn’t show up to workon Monday, Aug. 26, local police saythey discovered his body in hishome.

The next day, Mr. Ackermannconvened a meeting of Zurich’sboard of directors to discuss the sit-uation. A group of Switzerland-based directors gathered in a con-ference room; others dialed in fromaround the world.

Mr. Ackermann read aloud ex-cerpts of Mr. Wauthier’s suicidenote. It repeatedly criticized Mr.Ackermann for his harsh manage-ment style and blamed him forheaping pressure on Zurich’s financedepartment, according to people fa-miliar with the note and the meet-ing.

Directors were shocked by thenote’s personal nature, and Mr. Ack-ermann sounded deeply wounded ashe read it, one person said. Theydiscussed the importance of theboard remaining unified amid thetragedy.

The board adjourned for thenight, planning to reconvene the fol-lowing afternoon. Meanwhile, somedirectors tried to reach Mr. Acker-mann to express sympathy for hissituation and to urge him not toblame himself, according to the per-son familiar with the board. Hedidn’t return their calls.

Mr. Ackermann kicked offWednesday’s board meeting with abombshell: He had decided to resignimmediately. Directors were againstunned, and his statement was metwith prolonged silence, this personsaid.

Later in the day, some directorsurged Mr. Ackermann to reconsider.He wouldn’t budge. Board membersexpressed confusion and frustrationabout his decision, fearing it wouldfurther erode confidence in thecompany, said the person familiarwith the board.

Zurich’s communications teamstarted crafting a statement an-nouncing Mr. Ackermann’s depar-ture.

He insisted the news release in-clude a quote from him explicitly ty-ing his resignation to Mr. Wauthier’ssuicide: “I have reasons to believethe family is of the opinion that Ishould take my share of responsibil-ity, as unfounded as any allegationsmight be.”

Several board members andother employees objected vehe-mently. They feared that such astatement raised more questionsthan it answered, according to peo-ple familiar with the discussions. Adebate dragged on until early Thurs-day morning. Mr. Ackermann pre-vailed.

The announcement, issuedThursday morning, hit Zurich’sstock price. The next day, underpressure to provide more clarity, thecompany held a conference call inwhich it disclosed the existence ofthe suicide note.

Mr. Wauthier’s funeral was Mon-day. On Tuesday, Mr. Wauthier’sson, reached at the lakefront home,declined to comment on the family’sbehalf.

—Madeleine Nissen,John Revill

and Neil Maclucascontributed to this article.

Josef Ackermann, shown in 2012, resigned as Zurich Insurance chairman after the suicide of the company’s finance chief.

Reuters

8 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Rebel Groups Still WaitFor CIA Arms Supplies

In June, the White House autho-rized the Central IntelligenceAgency to help arm moderate fight-ers battling the Assad regime, a sig-nal to Syrian rebels that the cavalrywas coming. Three months later,they are still waiting.

The delay, in part, reflects abroader U.S. approach rarely dis-cussed publicly but that underpinsits decision-making, according toformer and current U.S. officials:The Obama administration doesn’twant to tip the balance in favor ofthe opposition for fear the outcomemay be even worse for U.S. intereststhan the current stalemate.

U.S. officials attribute the delayin providing small arms and muni-tions from the CIA weapons programto the difficulty of establishing se-cure delivery “pipelines” to preventweapons from falling into the wronghands, in particular Jihadi militantsalso battling the Assad regime.

Allied rebel commanders in Syriaand congressional proponents of amore aggressive military responseinstead blame a White House thatwants to be seen as responsive toallies’ needs but fundamentallydoesn’t want to get pulled anydeeper into the country’s grindingconflict.

The administration’s view canalso be seen in White House plan-ning for limited airstrikes—nowawaiting congressional review—topunish Syrian President Bashar al-Assad for his alleged use of chemi-cal weapons.

Pentagon planners were in-structed not to offer strike optionsthat could help drive Mr. Assadfrom power: “The big concern is thewrong groups in the oppositionwould be able to take advantage ofit,” a senior military officer said.

The CIA declined to comment.The White House wants to

strengthen the opposition butdoesn’t want it to prevail, accordingto people who attended closed-doorbriefings by top administration offi-cials over the past week. The admin-istration doesn’t want U.S. air-strikes, for example, tipping thebalance of the conflict because itfears Islamists will fill the void ifthe Assad regime falls, according tobriefing participants, which in-cluded lawmakers and their aides.

Squaring those positions is onefocus of congressional hearings onthe proposed strikes which startedTuesday, administration and con-gressional officials said. DefenseSecretary Chuck Hagel and Secre-tary of State John Kerry are amongthose slated to testify.

Republican Sen. John McCain ofArizona said it was “shameful” thatpromised U.S. arms haven’t materi-alized, given recent shipments ofadvanced weapons from Russia andIran in support of Mr. Assad.

After meeting with President Ba-rack Obama on Monday, Sens. Mc-Cain and Lindsey Graham, anotherleading Republican critic of the ad-ministration’s approach to the con-flict, said they believed the adminis-tration was formulating a plan to“upgrade” the capabilities of moder-ate rebels, but they offered no de-tails.

Sen. McCain also held out the

prospect that Mr. Obama would con-sider widening the targets forstrikes to degrade Mr. Assad’s abil-ity to carry out chemical weaponand conventional attacks.

Growing frustration with the slowpace of the CIA arming and trainingprogram has prompted calls fromlawmakers and some Arab leaders toshift the effort to the Pentagon, saidcongressional officials who favor themove. White House and Pentagon of-ficials had no immediate comment.

Putting the Pentagon in chargewould allow the U.S. to do “indus-trial strength” arming and training,Sen. Bob Corker, the top ranking Re-publican on the Senate Foreign Re-lations Committee, said in an inter-view Monday.

Some lawmakers accused theWhite House of failing to deliver onits promises because of concerns itwould get blamed if the effort wentwrong and for fear of gettingtrapped in a proxy fight that pits Mr.Assad and his backers—Iran, Russiaand Hezbollah—against an array ofopposition groups, some linked to alQaeda and others supported by theU.S. and some Arab allies.

“There’s been a major disconnectbetween what the administrationhas said it’s doing relative to therebels and what is actually happen-ing,” said Sen. Corker, who recentlyvisited rebel leaders in Turkey. “The[CIA] pipeline has been incrediblyslow. It’s really hurt morale amongthe Syrian rebels.”

Many rebel commanders say theaim of U.S. policy in Syria appearsto be a prolonged stalemate thatwould buy the U.S. and its alliesmore time to empower moderatesand choose whom to support.

“The game is clear to all,” saidQassem Saededdine, a spokesmanfor the U.S.-backed Free SyrianArmy’s Supreme Military Council.“When it comes to the interests of

superpowers… the average Syriancomes last.”

Some congressional officials saidthey were concerned the adminis-tration was edging closer to an ap-proach privately advocated by Is-rael. Israeli officials have told theirAmerican counterparts they wouldbe happy to see its enemies Iran,the Lebanese Shiite militia Hezbol-lah and al Qaeda militants fight un-til they are weakened, giving moder-ate rebel forces a chance to play abigger role in Syria’s future.

Gen. Martin Dempsey, chairmanof the Joint Chiefs of Staff, has beenparticularly outspoken with law-makers about his concerns thatweakening Mr. Assad too muchcould tip the scales in favor of alQaeda-linked fighters.

When the CIA arms program wasrevealed in June, it was describedby U.S. officials as a change in Mr.Obama’s approach to the conflictand the beginning of a process tobuild up the armed oppositionagainst Mr. Assad.

It took almost a year for the ideato gain traction in a skeptical WhiteHouse, which last summer autho-rized the CIA to join Saudi Arabiaand other allies to train handpickedrebels at a secret base in Jordan. Atthe time, Mr. Obama balked at pro-viding arms. Nonlethal U.S. militarysupport, such as medical kits andnight-vision goggles, started arriv-ing in small quantities this spring.

Congressional committees thatoversee the CIA and its budget ini-tially raised questions about the co-vert arms program, officials said,delaying startup funding.

The CIA also appeared conflictedabout the effort’s utility. Congressio-nal officials said CIA leaders in brief-ings indicated they believed that U.S.arms would only have a limited im-pact on the fight in a country awashin weapons. They also told Congressthe U.S. was investing little com-pared with Iran and Hezbollah, whichthe U.S. believes will do whatever ittakes in Syria to prevail.

But CIA officials told lawmakersproviding arms would help theagency build relationships withrebel forces and give it greater le-verage with such allies as Saudi Ara-bia, which provide the bulk of armsand money.

“When we have more skin in thegame, it just puts us in a position tohave deeper relationships with theopposition but also work more ef-fectively with other countries whoare doing a lot in terms of support,”a senior administration official said.

A former senior administrationofficial involved in the effort wasmore dismissive, describing the CIAprogram as “designed to buy timewithout getting the U.S. deeply in-volved in the civil war.”

—Carol E. Lee, Julian E. Barnesand Siobhan Gorman

contributed to this article.

BY ADAM ENTOUSAND NOUR MALAS

An opposition fighter loads a locally made mortar bomb near Aleppo Monday.

Reuters

President Barack Obama with Susan Rice and John Boehner on Tuesday.

AssociatedPress

CONFRONTING SYRIA

Putting the Pentagon incharge would allow theU.S. to do ‘industrialstrength’ arming andtraining.

Capitol Hill Support Grows for Strike Against SyriaSyria. The bipartisan show of sup-port afterward marked a shift fol-lowing a weekend in which lawmak-ers from both parties had expressedreservations and no consensus wasapparent.

House Majority Leader Eric Can-tor (R., Va.) offered his support foraction against Syria in a statementreleased after the meeting, saying,“America’s credibility is on the line.”

“A failure to act when acting is inAmerica’s interest and when a redline has been so clearly crossed willonly weaken our ability to use diplo-macy, economic pressure and othernonlethal tools to remove Assad anddeter Iran and other aggressors,”Mr. Cantor said.

Mr. Cantor, a staunch supporterof Israel, said the violence in Syria isspilling over into other countriesand threatens U.S. allies in the re-gion. “It is not just an abstracttheory that the Syrian conflictthreatens the stability of key Ameri-can partners in the region,” he said.“It is a reality.” Mr. Cantor didn’tmention Israel by name.

Other lawmakers, including thechairman of the Senate Select Com-mittee on Intelligence, Sen. DianneFeinstein (D., Calif.), and the rankingmember of the House Permanent Se-

Continued from first page lect Committee on Intelligence, Rep.Dutch Ruppersberger (D., Md.), alsosaid they would support military ac-tion. Moreover, Senate MajorityLeader Harry Reid (D., Nev.) believeshe will have the votes in the Senateto pass such a resolution even if op-ponents try to use a filibuster toblock it, an official familiar with histhinking said Tuesday.

The expressions of support onCapitol Hill were a crucial first stepfor Mr. Obama’s policy, but don’t

guarantee backing from the balkyrank and file of both parties, espe-cially in the House.

Among House Republicans, thereis a sizable faction of tea-party allieswho are more skeptical of military in-tervention as well as other conserva-tives who are hostile to Mr. Obama’sleadership. In the Democratic caucus,there are many liberals reluctant touse military force even when soughtby a president of their own party.

“He has problems on both sides,”

said a senior aide to House Demo-cratic leaders. “There are Republi-cans in the House who hate him andare viscerally opposed to everythinghe puts out, and his own party isfilled with people who, like himwhen he was in the Senate, arehighly skeptical of military action.’’

In the contemporary Congress,the days are long gone when partyleaders can “deliver” votes. Andboth Mrs. Pelosi and Mr. Boehnerhave said they consider votes onmilitary matters a question of con-science that shouldn’t be a matter ofparty-line discipline.

The president’s meeting came aspart of an administration-wide pushto compel Congress to back militaryaction against Syria. Later Tuesday,members of the president’s cabinet,including Secretary of State JohnKerry and Secretary of DefenseChuck Hagel, as well as Gen. MartinDempsey, chairman of the JointChiefs of Staff, were set to takequestions about the administration’sstrategy before the Senate ForeignRelations Committee.

Mr. Obama outlined why he be-lieves it is in America’s national se-curity interest to attack Syria. Hesaid military strikes would hinderthe Assad regime’s ability to usechemical weapons and would send a

clear message to other countriesthat are seeking to build weapons ofmass destruction.

“I want to emphasize once again:what we are envisioning is somethinglimited, it’s something proportional,it will degrade Assad’s capabilities atthe same time we have a broaderstrategy that will allow us to upgradethe capabilities of the opposition andallow Syria ultimately to free itselffrom the kinds of terrible civil warsand death and activity that we’vebeen seeing,” the president said.

While Mr. Obama didn’t mentionIran by name, most observers sayattacking Syria for allegedly usingchemical weapons would send awarning to countries such as Iran,which the U.S. says is seeking tobuild nuclear weapons.

After the meeting with the presi-dent, Rep. Eliot Engel (D., N.Y.), theranking member on the House For-eign Affairs Committee, said the sit-uation is a test of American credibil-ity. “When we tell Iran that they willnot be allowed to have a nuclearweapon, Iran is watching us verycarefully to see how we respond inSyria as a test of how we will re-spond if and when they create a nu-clear weapon,” he said.—Julian E. Barnes and Janet Hook

contributed to this article.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 21

For information about listing your funds, please contact: Lauren Berkemeyer tel: +44 20 7572 2102; email: lauren.berkemeyer@dowjones.com

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 residentsexcept as noted. Prices are in local currencies. All performance figures are calculated using the most recent prices available. 12-month and 2-year returns may be calculated over 11- and 23-month periods pending receipt and publication of the last month end price.

NAV —%RETURN—FUNDNAME GF AT LB DATE CR NAV YTD 12-MO 2-YR

NAV —%RETURN—FUNDNAME GF AT LB DATE CR NAV YTD 12-MO 2-YR

NAV —%RETURN—FUNDNAME GF AT LB DATE CR NAV YTD 12-MO 2-YR

NAV —%RETURN—FUNDNAME GF AT LB DATE CR NAV YTD 12-MO 2-YR

Advertisement INTERNATIONAL INVESTMENT FUNDS

INDICESNAV ——————%RETURN——————

FUNDNAME GF DATE CR NAV 1-WK 1-MO 1-Q 1-YR 2-YR

nARIXABSOLUTERETURN INVESTABLE INDEXFeri Institutional Advisors,www.feri.deARIX Composite Gross USD OT OT GBR 07/31.00 USD1544.39 4.1 6.9 2.6nCGPortfolio FundLtdNAV OT OT CYM 06/07.00 GBP25839.68 5.3 10.9 9.8

Verizon Deal Makes for a Rich Wall Street PaydayVerizon Communications Inc.’s

$130 billion deal with VodafoneGroup PLC for the 45% chunk of Ve-rizon Wireless that Verizon doesn’talready own is huge in the telecom-munications industry. It also is onefor the record books on Wall Street.

The move by Verizon—the sec-ond-biggest takeover deal ever, afterVodafone’s purchase of Mannes-mann AG in 2000—is expected togenerate $500 million or more in to-tal fees for advisers and those put-ting together the debt-financingpackage and performing other func-tions to facilitate it, like currencyconversion, according to people fa-miliar with the matter and estimatesfrom advisory firm Freeman Con-sulting Services.

An amount in that ballparkwould be a contender for the biggestfee bonanza on a single deal at leastin the past 15 years, according toFreeman, rivaling the $530 millionin fees from the Mannesmann deal.

The Verizon transaction is ex-pected to generate business atnearly every big banking house. Butsome, including J.P. Morgan Chase& Co. and Morgan Stanley, are ex-pected to come out ahead of others.

They are leading the financing ef-fort, which is also expected to behistoric.

The takeover is to be financed inpart with $40 billion to $50 billionin bonds issued over the next yearor so to help replace a $61 billionbridge loan initially put in place onthe deal, people familiar with thesituation said.

The initial bond sale, expected tobe at least $20 billion, would topApple Inc.’s $17 billion debt issuancein April, at the time the largest cor-porate-bond offering on record.

Before the announcement of theVerizon Wireless deal, analysts hadanticipated roughly $30 billion intotal financing would be in the formof bonds.

Verizon is seeking to capitalizeon the current low cost of funding,even after increases in interest ratesin recent months amid expectationsthe Federal Reserve will begin towind down its bond-buying pro-gram. Indeed, fears that interestrates will soon head higher was abig impetus for the two sides—which have flirted with this kind ofdeal for years—to finally strike now,people familiar with the matter havesaid.

According to a person workingon the acquisition, a big reason it ishappening now is that global capitalmarkets have become wider and

deeper in recent years and are nowable to support such a large bond is-sue. Just a few years ago, the capac-ity of the markets to fund a deal likethis was closer to $30 billion or $40billion, this person estimated.

The big fee haul would reward along-term effort on the part of anumber of people on the deal, someof whom have been working on itfor the better part of a decade. In2004, Vodafone came close to sell-ing its stake in the venture to Veri-

zon as part of an effort to buy AT&TWireless.

But Vodafone failed to win theauction of AT&T Wireless, scuttlingany Verizon Wireless deal. A numberof bankers who were involved inthat effort to unwind the VerizonWireless partnership continued towork on possible deals between thetwo companies over the years—in-cluding a full-blown combination ofVodafone and Verizon—and were in-volved when the wireless agreementfinally came together this summer.

They include Alan Schwartz, theformer chief executive of BearStearns Cos. who now works at bou-tique advisory firm GuggenheimPartners LLC; Paul J. Taubman, anex-Morgan Stanley banker now onhis own; and Jennifer Nason, theglobal chairman of the technology,media and telecommunicationsgroup at J.P. Morgan.

J.P. Morgan’s chairman and chiefexecutive, James Dimon, is no new-comer either, having counseled Veri-zon’s board in recent years on vari-ous possible deal structures, aperson familiar with the mattersaid.

Mr. Dimon on Friday traveled toVerizon’s headquarters just blocksfrom Wall Street to attend a meet-ing of the telephone giant’s board.His goal, according to people famil-iar with the matter: help assure Ver-

izon Chief Executive Lowell McAdamand his fellow directors that thecompany could pull off a $61 billiondebt sale and remain on sound foot-ing. He succeeded.

Besides Guggenheim and Mr.Taubman, J.P. Morgan and MorganStanley are lead financial advisers toVerizon on the deal. Barclays PLCand Bank of America Merrill Lynch

are also lenders and financial advis-ers to Verizon. With Vodafone areits long-time advisers GoldmanSachs Group Inc. and UBS AG.

According to Freeman’s esti-mates, advisory fees for both sidesof the deal could total as much as$243 million. The financing feesshared by lenders are expected torun into the hundreds of millions ofdollars and could bring the total feetake into the range of $500 million,people familiar with the matter said.

—Ryan Knutsoncontributed to this article.

By Dana Cimilluca,Sharon Terlepand Katy Burne

Data provided by:

MARKETS

Lending a HandLargest bridge loans to companies

The Wall Street JournalSource: Dealogic

Verizon Communications

Anadarko Petroleum

Pfizer

Unilever

Telefonica

$61.0 billion

$24.0

$22.5

$22.0

$21.9

nALEXANDRA INVESTMENTMANAGEMENTAlexandra Convertible Bond Fund I, Ltd. (Class A) OT OT VGB 08/31 USD 2155.22 NS NS NS

nBANC INTERNACIONALD'ANDORRA.BANCAMORA.Avgd.Meritxell 96, Andorra laVella. Andorra. Ph. +376.884884 www.bibm.adAndfs. Anglaterra UK EQ AND 11/16 GBP 8.47 2.8 3.6 14.9Andfs. Borsa Global GL EQ AND 08/30 EUR 6.29 6.5 8.6 5.9Andfs. Emergents GL EQ AND 11/02 USD 14.77 -20.4 -19.2 -4.7Andfs. Espanya EU EQ AND 08/30 EUR 11.09 7.3 19.5 5.9Andfs. Estats Units US EQ AND 08/30 USD 18.31 13.6 16.4 12.3Andfs. Europa EU EQ AND 08/30 EUR 6.57 3.3 6.3 5.7Andfs. Franca EU EQ AND 08/30 EUR 10.16 11.4 16.7 13.2Andfs. Japo JP EQ AND 08/30 JPY 613.29 30.5 46.9 20.1Andfs. Plus Dollars US BA AND 10/22 USD 9.66 2.3 3.0 6.2Andfs. RF Dolars US BD AND 08/30 USD 11.93 -2.4 -1.3 0.5Andfs. RF Euros EU BD AND 08/30 EUR 11.49 -0.6 1.9 2.3Andorfons EU BD AND 08/30 EUR 15.38 0.5 3.0 3.0Andorfons Alternative Premium GL EQ AND 07/31 EUR 97.79 4.5 3.5 -0.3AndorfonsMix 30 EU BA AND 08/30 EUR 9.92 1.0 2.5 3.2AndorfonsMix 60 EU BA AND 12/19 EUR 8.96 4.4 7.1 -2.5

nCGPortfolio FundLtdNAV OT OT CYM 06/07 GBP 25839.68 5.3 10.9 9.8

nCHARTEREDASSETMANAGEMENTPTELTD -TELNO: 65-6835-8866FaxNo: 65-68358865,Website:www.cam.com.sg, Email: cam@cam.com.sgCAM-GTF Limited OT OT MUS 08/23 USD 333685.70 -17.1 -10.1 -4.2

nCitadeleRepublikas square 2a, Riga, LV-1522, LatviaCitadele Eastern Europ Bal EU BD LVA 09/02 EUR 16.11 -0.6 3.4 4.2Citadele Eastern Europ Bd EU BD LVA 09/02 USD 19.80 -0.1 3.9 5.1Citadele Russian Eq EE EQ LVA 09/02 USD 20.67 -7.8 2.3 -5.7

nDJE INVESTMENTS.A.internet:www.dje.lu email: info@dje.lu phone:+0035226925220 fax:+0035226925252DJE Real Estate P OT OT LUX 09/02 EUR 4.61 -5.4 -7.6 -6.0DJE-Absolut P OT OT LUX 09/02 EUR 237.27 1.1 10.3 5.6DJE-Alpha Glbl P OT OT LUX 09/02 EUR 176.59 2.6 9.4 0.2DJE-Div& Substanz P OT OT LUX 09/02 EUR 266.34 5.3 9.4 10.6DJE-Gold&Resourc P OT EQ LUX 09/02 EUR 133.91 -21.4 -22.2 -21.9DJE-Renten Glbl P EU BD LUX 09/02 EUR 152.17 0.6 2.3 5.6LuxPro-Dragon I AS EQ LUX 07/20 EUR 144.57 -8.5 5.0 7.6LuxPro-Dragon P AS EQ LUX 07/20 EUR 140.29 -8.8 4.4 7.0LuxTopic-Aktien Europa EU EQ LUX 09/02 EUR 19.70 1.7 8.9 14.9LuxTopic-Pacific OT OT LUX 09/02 EUR 19.61 -7.7 4.0 2.2

nOTHERFUNDSFor information about these funds, please contact us onTel: +44 (0) 2078429694/9633Medinvest Plc Dublin OT EQ IRL 09/30 USD NS.00 NS 1.3 -4.4

nWINTONCAPITALMANAGEMENTLTDTel: +44 (0)2076105350Fax: +44 (0)2076105301Winton Evolution EUR Cls H GL OT CYM 07/31 EUR 1098.21 6.3 -1.7 -1.0Winton Evolution GBP Cls G GL OT CYM 07/31 GBP 1109.78 6.8 -1.2 -0.7Winton Evolution USD Cls F GL OT CYM 07/31 USD 1396.69 6.7 -1.3 -0.9Winton Futures EUR Cls C GL OT VGB 07/31 EUR 239.14 3.5 -0.4 0.8Winton Futures GBP Cls D GL OT VGB 07/31 GBP 259.90 3.7 0.1 1.1Winton Futures JPY Cls E GL OT VGB 07/31 JPY 16709.97 NS NS NSWinton Futures USD Cls B GL OT VGB 07/31 USD 852.12 3.8 0.0 0.9

Pictet-Biotech-P USD OT EQ LUX 08/30 USD 489.47 36.4 36.5 33.5Pictet-Brazil Index-P USD OT OT LUX 08/30 USD 64.73 -21.5 -16.3 -16.1Pictet-CHF Bonds-P CH BD LUX 08/30 CHF 458.78 -0.3 0.2 2.3Pictet-China Index-P USD AS EQ LUX 08/30 USD 96.48 -5.3 13.1 2.9Pictet-Clean Energy-P USD OT OT LUX 08/30 USD 71.32 12.4 17.4 2.6Pictet-Digital Comm-P USD OT EQ LUX 08/30 USD 176.64 19.6 22.1 12.5Pictet-Eastern Europe-P EUR EU EQ LUX 08/30 EUR 330.62 -9.8 -1.6 0.4Pictet-Em Corp Bds-P USD OT OT LUX 08/30 USD 96.47 -5.9 NS NSPictet-Em Loc Curr Dbt-P USD OT OT LUX 08/30 USD 174.79 -13.1 -5.9 -4.5Pictet-EmMkts Hgh Div-P USD GL EQ LUX 09/02 USD 106.78 -7.4 2.5 NSPictet-EmMkts Index-P USD GL EQ LUX 08/30 USD 226.37 -10.7 0.0 -2.6Pictet-EmMkts Sust Eq-P USD GL EQ LUX 08/30 USD 92.98 -8.7 0.1 NSPictet-EmergingMarkets-P USD GL EQ LUX 09/02 USD 482.52 -8.6 3.2 -6.0Pictet-EnvirMegatr Sel-P EUR OT OT LUX 08/30 EUR 109.54 6.5 8.3 11.1Pictet-Eu Equities Sel-P EUR EU EQ LUX 09/02 EUR 516.33 3.7 8.7 14.7Pictet-EUR Bonds-P EU BD LUX 08/30 EUR 458.90 -0.5 3.8 6.5Pictet-EUR Corp Bds Ex Fin-P EU BD LUX 08/30 EUR 129.29 -0.2 2.0 5.1Pictet-EUR Corporate Bonds-P EU BD LUX 08/30 EUR 173.02 0.2 3.9 5.9Pictet-EURGovernment Bonds-P EU BD LUX 09/02 EUR 133.41 -0.2 3.6 5.4Pictet-EURHigh Yield-P EU BD LUX 08/30 EUR 207.68 4.6 13.9 13.9Pictet-EUR Inflation Lkd Bds-P EU BD LUX 08/30 EUR 115.93 -4.6 -2.5 1.4Pictet-EUR SM-TermBds-P EU BD LUX 08/30 EUR 130.17 0.8 2.0 2.9Pictet-EUR STHigh Yld-P EU BD LUX 08/30 EUR 111.71 2.7 6.7 NSPictet-Euroland Index-P EUR EU EQ LUX 08/30 EUR 100.03 8.1 18.5 15.1Pictet-Europe Index-P EUR EU EQ LUX 08/30 EUR 131.20 8.2 14.3 16.5Pictet-European Sust Eq-P EUR EU EQ LUX 08/30 EUR 167.55 6.9 11.8 13.7Pictet-Generics-P USD OT EQ LUX 08/30 USD 163.18 7.2 13.1 8.7Pictet-Glo Bds Fundamental-P USD OT OT LUX 08/30 USD 126.36 -6.3 -4.4 NSPictet-Glo Em Currencies-P USD OT OT LUX 08/30 USD 103.79 -3.6 -0.3 -2.6Pictet-Glo Emerging Debt-P USD GL BD LUX 08/30 USD 300.25 -8.5 -4.4 3.8Pictet-Glo Flexible Alloc-P EUR OT OT LUX 08/22 EUR 99.55 2.0 2.8 NSPictet-GloMegatrend Sel-P USD GL EQ LUX 08/30 USD 179.14 11.6 18.6 11.6Pictet-Greater China-P USD AS EQ LUX 09/02 USD 374.98 -2.1 11.1 1.6Pictet-High Dividend Sel-P EUR OT OT LUX 08/30 EUR 120.62 9.1 8.3 12.6Pictet-India Index-P USD EA EQ LUX 08/30 USD 69.33 -20.8 -9.9 -11.0Pictet-Indian Equities-P USD EA EQ LUX 09/02 USD 243.74 -20.9 -10.3 -13.9Pictet-Japan Index-P JPY JP EQ LUX 09/02 JPY 11463.85 31.3 56.7 23.1Pictet-Japanese Eq Opp-P JPY JP EQ LUX 09/02 JPY 6292.72 32.7 54.0 24.1Pictet-Japanese Eq Sel-P JPY JP EQ LUX 09/02 JPY 9758.06 29.8 50.6 21.5Pictet-Latam Index-P USD GL EQ LUX 08/30 USD 74.26 -18.7 -11.8 -10.6Pictet-Latin Am Loc Curr Dbt-P USD OT OT LUX 08/30 USD 132.17 -13.1 -9.5 -7.0Pictet-Pac (ExJpn) Idx-P USD AS EQ LUX 09/02 USD 342.98 0.1 10.4 6.6Pictet-Piclife-P CHF OT OT LUX 08/30 CHF 872.36 4.3 6.6 9.1Pictet-PremiumBrands-P EUR OT EQ LUX 08/30 EUR 117.92 12.4 16.2 15.7Pictet-Quality Gl Eq-P USD GL EQ LUX 08/30 USD 112.91 12.1 NS NSPictet-Russia Index-P USD EE EQ LUX 08/30 USD 74.66 -10.1 -2.0 -7.3Pictet-Russian Equities-P USD EE EQ LUX 08/30 USD 60.69 -7.7 1.5 -7.2Pictet-Security-P USD GL EQ LUX 08/30 USD 149.31 12.5 18.9 13.3Pictet-Short-TMoneyMkt CHF-P CH MM LUX 08/30 CHF 124.25 0.0 -0.1 0.0Pictet-Short-TMoneyMkt EUR-P OT OT LUX 08/30 EUR 137.72 -0.1 -0.1 0.2Pictet-Short-TMoneyMkt JPY-P OT OT LUX 08/30 JPY 10128.70 0.0 0.0 0.1Pictet-Short-TMoneyMkt USD-P OT OT LUX 08/30 USD 132.24 0.1 0.2 0.3Pictet-Small Cap Europe-P EUR EU EQ LUX 08/30 EUR 728.41 16.1 25.7 22.3Pictet-Sov. STMoneyMkt-P EUR OT OT LUX 08/30 EUR 102.73 -0.1 -0.2 -0.1Pictet-Sov. STMoneyMkt-P USD OT OT LUX 08/30 USD 102.01 0.1 0.1 0.1Pictet-Timber-P USD GL EQ LUX 08/30 USD 136.67 3.9 20.2 15.1Pictet-US Eq Grwth Sel-P USD US EQ LUX 08/30 USD 141.56 12.7 14.4 12.9Pictet-US Eq Value Sel-P USD US EQ LUX 08/30 USD 167.63 14.9 20.2 16.6Pictet-USHigh Yield-P USD US BD LUX 08/30 USD 137.32 1.5 5.6 8.8Pictet-USA Index-P USD US EQ LUX 08/30 USD 138.54 15.5 18.2 17.5Pictet-USDGovernment Bonds-P US BD LUX 08/30 USD 572.06 -3.6 -3.8 0.2Pictet-USD ShortMid-TermBds-P US BD LUX 08/30 USD 125.24 -0.1 -0.1 0.2Pictet-Water-P EUR OT OT LUX 08/30 EUR 177.56 6.2 5.7 14.1Pictet-World Gvt Bonds-P EUR OT OT LUX 08/30 EUR 133.98 -5.7 -11.0 1.6PTR-Banyan-P USD OT OT LUX 08/30 USD 99.51 -2.9 9.4 NSPTR-Corto Europe-P EUR OT OT LUX 08/30 EUR 113.95 4.0 14.2 8.6PTR-Kosmos-P EUR OT OT LUX 08/30 EUR 105.70 0.2 0.7 2.0PTR-Mandarin-P USD OT OT LUX 09/02 USD 97.38 2.8 13.3 -1.8

nPOLARCAPITALPARTNERSLIMITEDInternational FundManagers (Ireland) LimitedPH - 353 1 670660Fax - 353 1 670 1185Global Technology OT EQ IRL 08/30 USD 19.45 12.6 14.7 12.3Japan Fund USD JP EQ IRL 09/02 USD 20.55 15.2 22.7 6.8Polar Healthcare Class I USD OT EQ IRL 08/30 USD 23.51 29.2 38.6 30.1Polar Healthcare Class R USD OT EQ IRL 08/30 USD 23.11 28.9 38.1 29.6

nHemisphereManagement (Ireland) LimitedDiscovery USDA GL OT CYM 12/31 USD 101.35 NS NS NSElbrus USDA OT OT CYM 07/31 USD 10.08 NS NS NSEuropn Conviction USDB EU EQ CYM 07/31 USD 155.40 -1.6 2.0 4.9

nHERMITAGECAPITALMANAGEMENTLTD.Tel: +7501 258 3160 www.hermitagefund.comTheHermitage Fund GL EQ JEY 03/12 USD 963.12 4.5 105.6 -23.2

nHORSEMANCAPITALMANAGEMENTLTD.T: +44(0)2078387580, F: +44(0) 2078387590,www.horsemancapital.comHorseman EurSelLtd EUR EU EQ GBR 07/31 EUR 307.13 21.1 33.4 13.1Horseman EurSelLtd USD EU EQ GBR 07/31 USD 332.73 NS NS NSHorseman Glbl Ltd EUR GL EQ CYM 07/31 USD 514.46 NS NS NSHorseman Glbl Ltd USD GL EQ CYM 07/31 USD 514.46 NS NS NS

nHSBCALTERNATIVE INVESTMENTSLIMITEDT+442078603074 F +442078603174www.hail.hsbc.comHSBCALTERNATIVESTRATEGYFUNDSpecial Opp EUR OT OT GGY 08/16 EUR 115.47 7.9 17.8 13.7Special Opp Inst EUR OT OT GGY 03/31 EUR 88.51 0.7 -0.3 13.3Special Opp Inst USD OT OT GGY 03/28 USD 123.18 4.2 18.5 10.6Special Opp USD OT OT GGY 08/16 USD 121.88 7.6 17.9 14.0

nHSBCPortfolio SelectionFundGH Fund CHFHdg OT OT GGY 08/16 CHF 120.40 4.6 8.7 2.5GH Fund EURHdg (Non-V) OT OT GGY 08/16 EUR 134.33 4.3 8.5 2.9GH Fund GBPHdg OT OT GGY 08/16 GBP 148.11 4.8 9.3 3.5GH Fund Inst USD OT OT GGY 08/16 USD 127.33 4.7 9.3 3.9GH FUNDS EUR OT OT CYM 08/16 EUR 148.45 4.9 9.4 4.0

nHSBCTrinkaus InvestmentManagersSAE-Mail: funds@hsbctrinkaus.luTelephone: 352 - 47 18471HSBC Trinkaus Golden Opportunities OT OT LUX 08/30 USD 91.07 -29.6 -28.1 -25.1Prosperity Return Fund A JP BD LUX 08/30 JPY 8617.31 -8.9 -3.9 -3.8Prosperity Return Fund B EU BA LUX 08/30 JPY 8654.23 0.2 17.7 4.3Prosperity Return Fund C EU BA LUX 08/30 USD 79.26 -12.0 -5.5 -7.0Prosperity Return Fund D EU BA LUX 08/30 EUR 126.36 -5.3 -0.5 8.7Renaissance Hgh Grade Bd A EU BA LUX 08/30 JPY 10503.49 0.6 8.6 4.6Renaissance Hgh Grade Bd B EU BA LUX 08/30 JPY 10452.61 10.7 32.4 12.4Renaissance Hgh Grade Bd C EU BA LUX 08/30 USD 95.15 -2.7 6.2 0.1Renaissance Hgh Grade Bd D EU BA LUX 08/30 EUR 104.75 -2.8 0.7 4.7

nMPASSETMANAGEMENT INC.Tel: + 386 1 58747 77MP-BALKAN.SI EE EQ SVN 08/12 EUR 19.29 -1.9 -8.4 -10.9MP-TURKEY.SI OT OT SVN 08/30 EUR 38.17 -21.7 -10.4 10.1

Europn Forager USDB EU EQ CYM 07/31 USD 292.39 3.6 7.2 7.2Latin America USDA GL EQ CYM 06/30 USD NS.00 NS NS NSParagon Limited USDA EU EQ CYM 12/31 USD NS.00 12.7 12.7 14.2UK Fund USDA OT OT CYM 04/13 USD 157.94 1.8 NS NS

nPTCIPTADANAASSETMANAGEMENTTel: +6221 25574883 Fax: +6221 25574893 Website:www.ciptadana-asset.comIndonesian Grth Fund GL EQ BMU 08/28 USD 143.78 -19.8 -21.2 -14.5

nTHENATIONAL INVESTORPOBox47435, AbuDhabi, UAEWeb:www.tni.aeMENASpecial Sits Fund OT OT BMU 07/31 USD 1105.04 6.9 8.0 3.9MENAUCITS Fund OT OT IRL 08/15 USD 1222.98 18.4 21.3 13.2UAE Blue Chip Fund OT OT ARE 08/15 AED 7.77 52.2 56.0 27.8

nYUKIMANAGEMENT&RESEARCH

nYMR-NSeriesYMR-NGrowth Fund JP EQ IRL 09/02 JPY 11670.00 34.5 55.8 17.0

nYuki 77SeriesYuki 77 General JP EQ IRL 09/02 JPY 7860.00 49.2 73.2 24.4

nYukiAsiaUmbrella SeriesYuki Rebounding Gro Fd JP EQ IRL 09/02 JPY 14412.00 57.4 77.8 27.6

nYuki ChugokuSeriesYuki Chugoku Jpn Gen JP EQ IRL 09/02 JPY 8118.00 31.0 49.0 18.4Yuki Chugoku JpnLowP JP EQ IRL 09/02 JPY 8947.00 39.4 50.6 14.7

nYukiMizuhoSeriesYukiMizuho Jpn Dyn Gro JP EQ IRL 09/02 JPY 4998.00 33.3 53.2 17.0YukiMizuho Jpn Inc JP EQ IRL 09/02 JPY 8389.00 20.6 35.6 12.7YukiMizuho Jpn Lg Cap JP EQ IRL 09/02 JPY 5619.00 28.1 46.6 16.1YukiMizuho Jpn LowP JP EQ IRL 09/02 JPY 15705.00 56.4 75.3 25.5YukiMizuho Jpn Val Sel AS EQ IRL 09/02 JPY 7884.00 54.9 86.5 29.7

GH FUNDSGBP OT OT CYM 08/16 GBP 155.52 5.3 10.0 4.5GH Fund S USD OT OT CYM 08/16 USD 174.38 5.1 9.8 4.4GH Fund USD OT OT GGY 08/16 USD 304.37 4.3 8.8 3.2Hedge Investments OT OT GGY 08/16 USD 158.48 NS NS 3.6Leverage GHUSD OT OT GGY 08/16 USD 137.23 7.2 15.7 4.2MultiAdv Arb CHFHdg OT OT JEY 08/16 CHF 98.09 2.6 2.9 1.1MultiAdv Arb EURHdg OT OT JEY 08/16 EUR 109.12 2.6 3.0 1.7MultiAdv Arb GBPHdg OT OT JEY 08/16 GBP 118.83 3.1 3.7 2.2MultiAdv Arb S EUR OT OT JEY 08/16 EUR 122.47 3.4 4.3 3.0MultiAdv Arb S GBP OT OT JEY 08/16 GBP 129.37 3.8 5.0 3.5MultiAdv Arb S USD OT OT JEY 08/16 USD 140.22 3.6 4.7 3.3MultiAdv Arb USD OT OT JEY 08/16 USD 206.14 2.7 3.4 2.0

nHSBCUni-folioAsian AdbantEdge EUR OT EQ JEY 07/31 EUR 95.33 5.4 9.7 -3.1Asian AdvantEdge OT EQ JEY 07/31 USD 178.40 5.4 10.2 -2.3Emerg AdvantEdge OT EQ JEY 09/28 USD 151.22 3.4 -2.4 -5.5Emerg AdvantEdge EUR OT EQ JEY 09/28 EUR 82.99 2.8 -3.0 -5.9Europ AdvantEdge EUR OT EQ JEY 06/30 EUR 127.84 -3.4 -1.3 2.2Europ AdvantEdge USD OT EQ JEY 06/30 USD 135.07 2.0 4.3 5.1Real AdvantEdge EUR OT OT JEY 04/30 EUR 104.69 1.3 -9.5 -1.9Real AdvantEdge USD OT OT JEY 04/30 USD 105.31 1.5 -8.8 -1.7Trading AdvantEdge OT OT GGY 08/16 USD 129.34 -9.0 -14.2 -9.2Trading AdvantEdge EUR OT OT GGY 08/16 EUR 116.99 -8.9 -14.3 -9.2Trading AdvantEdge GBP OT OT GGY 08/16 GBP 124.85 -8.9 -14.2 -9.0

nMERIDENGROUPTel: + 376 741 175 Fax: + 376 741 183Email:meriden@meriden-ipm.comAntanta Combined Fund EE EQ AND 08/23 USD 250.28 -4.8 -4.4 -17.5AntantaMidCap Fund EE EQ AND 08/23 USD 390.86 -2.2 -10.0 -20.2Meriden Opps Fund GL OT AND 08/28 EUR 23.18 -8.7 -12.5 -23.1Meriden Protective Div GL EQ AND 11/24 EUR NS.00 -2.8 NS NS

nPictet Funds (Europe) SA,ROUTEDESACACIAS60, CH-1211GENEVA73Tel: + 41 (58) 323 3000 Web:www.pictetfunds.comPictet-Abs Ret Gl Conserv-P EUR OT OT LUX 08/30 EUR 100.57 -4.6 -4.7 -0.1Pictet-Abs Ret Gl Div-P EUR GL OT LUX 08/30 EUR 111.78 -7.0 -6.4 -0.4Pictet-Agriculture-P EUR OT OT LUX 08/30 EUR 143.86 -2.2 1.1 4.6Pictet-Asian Eq ExJpn-P USD OT OT LUX 09/02 USD 168.41 -4.7 6.8 -0.2Pictet-Asian Loc Cur Dbt-P USD AS BD LUX 09/02 USD 141.53 -8.7 -5.7 -2.4

Adviser fees in the rangeof $500 million wouldcontend for the biggestbonanza on a single dealin at least 15 years.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 7

Long-Term Jobless Left Out of RecoveryFor those left behind by the long,

slow economic recovery, time isrunning out.

More than four years after the re-cession officially ended, 11.5 millionAmericans are unemployed, many ofthem for years. Millions more haveabandoned their job searches, hidingfrom the economic storm in school orturning to government programs forsupport. A growing body of economicresearch suggests that the longerthey remain on the sidelines, the lesslikely they will be to work again; formany, it may already be too late.

By most conventional measures,the U.S. economy is healing, albeitslowly. Gross domestic product grewat a 2.5% rate in the second quarterof the year, the government said lastweek, the best pace since last fall.Payroll figures, due Friday, willlikely show that hiring held steadyin August. The housing market is re-bounding, corporate profits arestrong, and households are repair-ing their balance sheets.

But the recovery isn’t reachingmany of the most vulnerable. Forthose without a high-school di-ploma, the unemployment rate inJuly was 11%. For African-Ameri-cans, it was 12.6%. For teenagers,23.7%. Even more worrisome toeconomists are signs of a bifurca-tion in the labor market: For thoseunemployed less than six months,the odds of finding a job have im-proved steadily over the past year;the long-term unemployed havemade almost no progress at all.

The recession, for all its brutality,was comparatively egalitarian, saidGary Burtless, a Brookings Institutioneconomist. It struck the young andold, educated and uneducated, whitecollar and blue collar. The recovery,by contrast, has been asymmetric:Those who held on to their jobs orquickly found new ones have madeup much of the ground they lost,while the jobless continue to suffer.

“If you’ve made it through andyou’re still employed, your stockportfolio has recovered, your houseprice is recovering, too,” Mr. Burt-less said. “For the unemployed, thishas been a miserable recovery com-pared to pretty much any of thepostwar recoveries.”

Debbie Orr lost her job as directorof a Dallas-area retirement commu-nity more than five years ago and hasbeen mostly out of work ever since.She receives a $1,500 monthly dis-ability payment, the result of a backinjury, and lives with her 82-year-oldmother, who receives Social Securitybenefits. But the payments aren’tenough to make ends meet withouthelp from her brother, and even with

help Ms. Orr and her mother keep theair conditioning off in the Texas heat.“Every cent that comes out is ear-marked for something,”Ms. Orr said.“I go to bed a lot at night trying tofigure out what I’m going to do topay my electric bill.”

Ms. Orr, 47 years old, says shehasn’t actively looked for work inthe past year, in part because shehas been caring for her mother. Butshe is now reactivating her profes-sional network in the hopes of find-ing a job as the economy improves.

Economic research suggests Ms.Orr may struggle to find work. Re-cent studies in both the U.S. andoverseas found employers oftenwon’t even consider the long-term

jobless for openings.Many have given up applying.

Nearly seven million people say theywant a job but aren’t actively look-ing for work. The share of the popu-lation that is working or looking forwork—a measure known as the par-ticipation rate—stands near a three-decade low. The rate was fallingeven before the recession, partly be-cause of the aging of the baby-boomgeneration, but economists disagreeabout how much of the more recentdecline is tied to the weak economy.

“People have found other things,maybe staying at home, taking care offamily,” said Willem Van Zandweghe,an economist at the Federal ReserveBank of Kansas City. “You need to see

a much stronger economy before theyconsider coming back.”

For economists, the key questionis how many of the labor-force drop-outs will return when the economyeventually rebounds more strongly. Ifmost of the dropouts are simplywaiting for better times, then the la-bor market is significantly worsethan the 7.4% unemployment ratewould indicate. That, advocates ofmore government stimulus argue,means the Federal Reserve shouldkeep trying to boost the economy toput the jobless back to work.

But if most of the dropouts aregone for good, then no amount ofstimulus is likely to bring workersback. A permanently smaller work-force would mean it takes fewerjobs than in the past to bring downunemployment, but it also meansthe economy’s underlying growthrate has slowed.

At least some of those who haveleft the labor force are unlikely toreturn. More than 8.9 million Amer-icans were receiving federal disabil-ity payments in August, 1.8 millionmore than when the recession be-gan. Experts suspect many of thenew recipients would have keptworking in a healthier economy; re-search has found that once peoplebegin receiving disability payments,relatively few return to work.

But other workers, especiallythose in their 20s and 30s, will al-most certainly return.

When Sara Fitouri was nearinggraduation from Ithaca College inNew York state last year, shethought about heading to work. Butwith job prospects weak, and tens ofthousands of dollars in student-debtpayments waiting for her when shegraduated, the 23-year-old decidedto go to law school instead.

“I knew I wouldn’t be able tofind a job, and continuing withschool allows me to defer my loans,”Ms. Fitouri said. “I knew very, veryfew of my peers who had jobs com-ing out of school.”

BY BEN CASSELMAN

U.S. Factories Hum Amid Global Growth PickupThe U.S. manufacturing sector ex-

panded at its quickest pace in morethan two years, as domestic demandremained brisk and trading partnersaround the globe saw their econo-mies improve.

The latest report from the Insti-tute for Supply Management cappedthree months of manufacturinggrowth, reflecting renewed vigor ina sector that showed signs of slow-ing earlier this year.

The ISM’s manufacturing pur-chasing managers index rose to 55.7in August, the highest level since a55.8 reading in June 2011. Readingsabove 50 indicate expansion. The in-crease from July’s 55.4 level waspowered in part by new orders,which climbed to their strongestreading since April 2011.

A number of manufacturers saidthey are having trouble keeping upwith new business. “We’re slammedand we will be until the end of theyear,” said Torey Rose, chief execu-tive of YSS Athletics Inc., whichmakes team uniforms for schools, col-leges and recreational programs, aswell as clothes for sporting-goodsstores. “Our biggest concern rightnow is finding skilled labor.”

The Snellville, Ga., company,which employs 32 people, is running1½ shifts, or a total of 12 hours a

day, up from a single eight-hourshift during part of the 2007-09 re-cession. Before the downturn, YSSAthletics was running two eight-hour shifts, or 16 hours a day. “Idefinitely see that happening again,”said Ms. Rose, noting that saleshave been up for the past two years.

The second-half pickup in U.S.manufacturing comes as major trad-ing partners have shown signs ofimprovement. In Europe, the sectorhas strengthened since the spring-time, as the continent’s economyinches out of a slump. And China,despite slowing economic growth,also notched manufacturing expan-sion in August, following three lack-luster months.

“If we get domestic strength ontop of some recovery in the rest ofthe world, I think the [U.S.] manu-facturing sector is in its best com-petitive position in decades, maybeeven back to the 1960s,” said JosephCarson, director of global economicresearch at AllianceBernstein LP.“The cost structure is low, innova-tion is high and the quality of theproduct is fantastic—near the top inmany categories.”

In the ISM report, 15 of 18 indus-tries reported expansion, while twosaw business hold steady. In justone category—“miscellaneous man-ufacturing”—business contracted.The category, which includes jew-

elry, toys, sporting goods, medicalequipment and office supplies, rep-resents about 5% of U.S. manufac-turing, said ISM Chairman BradleyJ. Holcomb.

August was a “well-balanced,good month for manufacturing,” Mr.Holcomb said. He noted that the U.S.economy remains vulnerable to riskssuch as turbulence in the MiddleEast as well as potential headwindswhen the Federal Reserve at somepoint slows its $85 billion-a-month

bond-buying stimulus program. How-ever, “looking locally at manufactur-ing, we’ve got two really solidmonths for the third quarter and Ithink that we have every possibilitythat continues,” he said.

The report also exposed someweaknesses. A number of industries,including transportation equipmentas well as computers and electronicproducts, said they felt the pinchfrom the federal budget cuts knownas the sequester. Customer invento-

ries continued to contract; produc-tion and employment both contin-ued to grow, but at a slower pacethan in July.

The employment measure’s fall toa still-expansionary 53.3 from 54.4 amonth earlier isn’t that surprising,said Mr. Carson of AllianceBernstein,because “we’re able to produce a lotof products with more capital andless labor.” On Friday, the Labor De-partment is slated to release the na-tion’s jobs picture for August.

BY BRENDA CRONIN

U.S. NEWS

Note: All 12-month moving averages, not seasonally adjusted Source: U.S. Labor Department The Wall Street Journal

Down and OutThe real picture of joblessness in America goeswell beyond the official unemployment rate.

Labor-force participation rate

67

63

64

65

66

%

2008 ’09 ’10 ’11 ’12 ’13

Actual

Predicted bydemographictrends

Percent of unemployed finding jobs each month, byduration of unemployment

0

10

20

2008 ’09 ’10 ’11 ’12 ’13

Six months or less

More than six months

Change since the start of the recession

0

20

40

60

80

100

120%

2008 ’09 ’10 ’11 ’12 ’13

Unemployed

Want a job,haven't searched

Want a job,have searched

OUTLOOK: The short-term unemployed have a betterchance of finding a job than in past years. But the long-termunemployed have seen little improvement.

DEMOGRAPHICS: An aging population means thepercentage looking for work would have fallen. But theweak economy has led to a steeper drop.

BIGGER PICTURE: The number of officially unemployedworkers is falling, but many more people say they want ajob but aren’t actively searching.

30%

65

40

45

50

55

60

’12 ’132011 ’12 ’132011 ’12 ’132011 ’12 ’132011

EXPA

NDING

CONTRACT

ING

U.S. PMI NEW ORDERS PRODUCTION EMPLOYMENT62.463.2

55.7 53.3

Production Lines

Source: Institute for Supply Management The Wall Street Journal

U.S. manufacturing expanded in August, as new orders surged but gaugesof production and employment slowed their pace of growth.

22 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Sector Equity BiotechnologyFundsthat investprimarily intheequitiesofcompaniesthatfocusonbiotechnology. Atleast 75% of total assets are invested in equities. Ranked on % total return (dividendsreinvested) in Euros for one year endingSeptember 03, 2013

Leading 10 PerformersFUND FUND LEGAL %Return in $US **RATING * NAME FUNDMGM'T CO. CURR. BASE YTD 1-YR 2-YR 5-YR

NS Dexia Eqs L Dexia Asset USDLUX 42.19 39.09 45.69 23.92Biotechnology CAcc Management

NS JB EF Swiss Global USDLUX 47.21 37.92 51.89 16.87Biotech-USDA AssetManagement AG

NS AXA AXA Investment GBPGBR 43.21 37.23 48.98 16.72Framlington Biotech RAcc Managers UK Ltd.

NS Franklin Franklin Templeton USDLUX 44.63 37.12 49.09 19.80Biotechnology Disc AAcc $ Investment Funds

NS BBBiotech B Bellevue Asset USDLUX 41.92 36.54 44.49 NSUSD Management AG

NS UBS (Lux) EF UBS Fund USDLUX 42.52 36.27 47.32 19.11Biotech (USD) P Management (Luxembourg) S.A.

NS Carnegie Carnegie Fund EURLUX 42.12 36.12 46.39 17.71Biotechnology Services S.A.

NS Adamant Balfidor CHFCHE 44.75 35.92 45.21 NSGlobal Biotech A Fondsleitung AG

NS CCRActions CCRAsset EURFRA 43.73 35.74 45.02 13.48Biotech A Management

NS CS SICAV Credit Suisse USDLUX 40.86 34.87 47.91 16.85(Lux) Eq Biotechnology B (Luxembourg) S.A.

NOTE: Changes in currency rateswill affect performance and rankings. Source: Morningstar, LtdKEY: ** 2YR and 5YR performance is annualized 1 Oliver’s Yard, 55-71 City RoadNA-not available due to incomplete data; London EC1Y 1HQUnited KingdomNS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com

Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001

MARKETS

Fund Scorecard

Worries Over SyriaWeigh on Stocks

European stocks lost groundTuesday as worries over a possibleU.S.-led military intervention inSyria overshadowed upbeat eco-nomic data and a strong showingfrom the technology sector after Mi-crosoft’s agreement to buy Nokia’scellphone business.

The benchmark Stoxx Europe600 index fell 0.4% to 301.78. The

U.K.’s FTSE 100 indexlost 0.6% to 6468.41,Germany’s DAX re-treated 0.8% to 8180.71,

and France’s CAC-40 also shed 0.8%to 3974.07.

The Stoxx 600 technology indexrallied 2.2% on news that Microsofthad struck a $7 billion deal to ac-quire Nokia’s struggling cellphonebusiness. Nokia shares surged 34%.

Other telecom-related firms alsoclimbed. Alcatel-Lucent jumped9.2%, Telefon AB L.M. Ericssongained 5%, and chip maker STMi-croelectronics rose 0.9%. Microsoftwas down 5% in late U.S. trading.

Meanwhile, U.S. manufacturingactivity picked up in August. TheISM’s manufacturing purchasingmanagers’ index rose to 55.7 in Au-gust from 55.4 in July.

Still, despite the exuberance inthe tech sector and the stronger-than-expected U.S. data, a cautioustone prevailed as developmentsaround Syria continued to dominatesentiment. U.S. President BarackObama said Tuesday he wanted aprompt vote on his plan for militaryaction in Syria when Congress re-turns from recess next week.

While there is no guarantee law-makers will support military strikes,Mr. Obama said he believes Con-gress will ultimately vote in favor ofmilitary action. House Speaker JohnBoehner and House Majority LeaderEric Cantor both threw their weightbehind Mr. Obama, saying they sup-ported the use of military force inSyria.

U.S. stocks edged higher butpared early gains, as the worriesabout military strikes in Syria and a

rise in Treasury yields took theshine off strong global economicdata. The Dow Jones Industrial Av-erage gained 23.65 points, or 0.2%,to 14833.96, in 4 p.m. trading. TheDow was up as much as 123 pointsearlier in the session. The S&P 500-stock index rose 6.80 points, or0.4%, to 1639.77, and the NasdaqComposite Index added 22.74 points,or 0.6%, to 3612.6124.

U.S. Treasury prices tumbled,with the 10-year note dropping18/32, sending the yield up to2.857% in late New York trading.

Earlier in the European session,financial markets were rattled byreports that Russia’s Defense Minis-try had detected the launch of twoballistic objects in the Mediterra-nean Sea. European stocks fell tosession lows, while prices of crudeoil, gold and German governmentbonds rallied. These moves werelargely reversed after Israel said themissiles were part of a joint Ameri-can-Israeli military exercise, but in-vestors remained jittery.

While stocks in Europe’s majormarkets ended lower, Spain buckedthe trend as the IBEX-35 gained0.2% to 8445.20.

On Tuesday, data showed thenumber of registered job seekers inSpain fell in August for the sixthconsecutive month, while on Mon-day data showed the country’s man-ufacturing sector grew in August forthe first time in more than twoyears.

In London, Vodafone Grouppulled back 5% after the companyoutlined its investment plans fol-lowing Monday’s announcement ofthe sale of its stake in Verizon Wire-less.

The euro slipped to $1.3172 lateTuesday in New York from $1.3193late Monday.

Crude oil for October deliverygained 89 cents a barrel, or 0.8%, to$108.54 on the New York MercantileExchange.

Gold for September deliverygained $15.90 a troy ounce, or 1.1%,to $1,412.00 on the Comex divisionof Nymex.

BY NINA BAINS

MARKETREPORT

BofA Ending CCB TiesHONG KONG—Bank of America

Corp. is selling its remaining stakein China Construction Bank Corp.for up to US$1.5 billion, marking theend of an era for the Wall Streetbanks that piled into major Chinesebanks in the last decade in hopes ofhaving an edge in China.

Bank of America is the last of themajor American banks that are sell-ing out of the big Chinese banksthey bought into before those bankswent public in Hong Kong, a timewhen China, and these lenders, werebooming. These banks, most re-cently Goldman Sachs Group Inc.,have been disposing of their Chinesebank stakes since the financial crisisfive years ago, raising billions ofdollars in the process, while reduc-ing the effects on their balancesheets from financial holdings.

International regulations knownas Basel III—the latest standard forbank capital, risk management andliquidity—have made holding minor-ity stakes in other financial institu-tions particularly onerous from acapital standpoint, and forced someof the selling. For their part, most ofthe Chinese banks that Westernlenders bought into have failed todeliver on their promise of greaterChina access. On top of that, manyChinese banks are increasinglystruggling with asset quality and arelooking to raise capital.

“Because of Basel III, the era thatglobal banks can buy small stakes inbusinesses here and there is gone,”said James Antos, a Hong Kong-based banking analyst at Mizuho Se-curities Asia.

Bank of America declined to com-ment, and China Construction Bankcouldn’t be reached for comment.

Bank of America has whittleddown its stake after it purchased aninitial 10% holding for $3 billioneight years ago and invested a fur-ther $7 billion to raise its stake toalmost 20% in late 2008. BetweenJanuary 2009 and November 2011, itraised at least US$22.6 billion froma series of stake sales that left itwith less than 1%.

“These shareholdings haven’tyielded the kind of China accessWestern banks initially expected,but they made a lot of money fol-lowing the IPO of these banks andensuing share sales,” said Keith Pog-son, a Hong Kong-based partner inErnst & Young’s Asian-Pacific finan-cial-services office.

Bank of America is selling twobillion Hong Kong-listed shares inrange of HK$5.63 to HK$5.81 each(73 U.S. cents to 75 U.S. cents), rep-resenting a discount of 2% to 5.1% toTuesday’s closing price of HK$5.93,according to a term sheet seen bythe Wall Street Journal.

Bank of America’s sale comesfour months after Wall Street rivalGoldman Sachs sold the last of itsstake in China’s biggest bank, Indus-trial & Commercial Bank of ChinaLtd., following a series of disposals.

Volatility in ICBC’s shares led

Goldman to report a full-year netloss in Asia in 2011, its first losssince the 2008 financial crisis.

UBS AG kicked off the sellingspree in Chinese banks in January2009, when it sold its whole stake inBank of China Ltd. Two weeks afterthe Swiss bank’s sale, Royal Bank ofScotland Group PLC also exited itsBank of China stake.

To be sure, some Western banks,including HSBC Holdings PLC, con-tinue to hold stakes in Chinese lend-ers, though not the so-called BigFour. HSBC also happens to be theforeign bank with the most branchesin mainland China.

HSBC owns 19% of Bank of Com-munications Co, China’s fifth-biggestlender by assets. It also has an 8%stake in city lender Bank of Shanghai.

Citigroup Inc. owns 20% of ChinaGuangfa Bank, which is based in theSouthern province of Guangdong, butsold its entire 2.71% equity stake inShanghai Pudong DevelopmentBank, a joint-stock commercial bankbased in Shanghai, last year.

Neither Bank of Shanghai andGuangfa are listed.

Bank of America is selling itsstake as investors grow more waryover the asset quality of Chinesebanks, after a huge government-sparked credit boom that fueledenormous lending while buoying theeconomy in recent years.

While CCB said last week that itsnonperforming-loan ratio was un-changed at 0.99% for the first half ofthe year ended June 30, the bankalso said it wrote off a total of 5.38billion yuan ($879 million) in badloans, more than four times the 1.17billion yuan total from the same pe-riod last year.

BY FIONA LAWAND PRUDENCE HO

Investors Starting to Ease Back Into Asiafor the region. Exports from Asiannations should pick up over the nextyear as demand in industrialized na-tions recovers, J.P. Morgan Chase &Co. estimates.

Japanese companies are invest-ing more, according to data releasedMonday by the finance ministry,adding to a sense that Prime Minis-ter Shinzo Abe’s expansionary fiscaland monetary policy is boostingeconomic activity after two decadesof deflation.

China’s economy also is showingsigns of renewed vigor after growthslowed to 7.6% year-over-year in thefirst half of 2013, its weakest pacein years. The official purchasingmanagers’ index hit a 16-month highin August and exports, industrialoutput and investment have allbeaten expectations.

That is good for nations such asSouth Korea and Taiwan that exportelectronics equipment to China. TheSouth Korean won and the nation’sKospi index had weakened withother Asian markets but have sinceregained ground.

While South Korea’s industrialoutput was flat in July, productionof semiconductors rose 13.6% on theprevious month, a sign of recoveringdemand in China and the U.S.

“Certainly the numbers out ofNorth Asia recently have beenpretty positive,” said Shane Oliver,chief economist at AMP Capital inSydney.

Even countries such as Indonesiaand India, which have borne thebrunt of the selloff, may have seenthe worst, some economists say.

Indonesia’s commodity exportsto China dipped rapidly this year—

Continued from page 15

slowing its economic engine—whileimports of fuel and other goodshave remained high, widening thetrade deficit. The country needs toattract foreign capital to fill thatgap, which left it exposed when in-vestors fled its stock and bond mar-kets.

Tim Condon, head of Asian eco-nomic research for ING Bank, saidIndonesia’s economy, which is stillgrowing at an annual pace of morethan 5%, should recover in tandemwith China.

He said Indonesia’s central bank,which unexpectedly raised rates lastweek in a bid to attract back capitalflows, has room to take more suchaction in the weeks ahead. “Hotmoney should flow back,” Mr. Con-

don said, drawn by the country’sstrong growth potential.

Nations such as India and Indo-nesia should use the respite in mar-ket pressure to overhaul their econ-omies to attract capital, said Li-Gang Liu, a Hong Kong-basedeconomist with ANZ Banking Group.

“Stability in China and Japan hasgiven the Indonesian and Indiangovernments breathing space,” hesaid.

Elsewhere in Asia on Tuesday,Australia’s S&P/ASX 200 closed up0.2% at 5196.60 after the ReserveBank of Australia kept interest rateson hold and delivered a neutral pol-icy statement.

Miners in Sydney, however, madestrong gains as the price of iron orerose overnight: Rio Tinto rose 3.1%and Fortescue Metals Group was4.9% higher.

South Korea’s Kospi was up 0.5%at 1933.74, and Taiwan’s Taiexgained 0.6% to 8088.37.

In Mumbai, the S&P BSE Sensexindex fell 3.5%, to 18234.66 points.It was the third time in little morethan two weeks that the 30-stockbenchmark has fallen 3% or more ina single session.

Market participants said a de-gree of caution is to be expected inthe next couple of days before somekey events. The Bank of England andEuropean Central Bank interest rateannouncements are due Thursday,while U.S. nonfarm payrolls arescheduled for release on Friday.

The U.S. jobs figures will belooked at for signals on when theFederal Reserve might start to rollback its stimulus.

—Mia Lamar contributedto this article.

Nikkei 225

Thailand SET

5

–15

–10

–5

0

%

Sept.Aug.

Source: FactSet The Wall Street Journal

Bouncing BackPerformance of select Asianstock indexes

Hang Seng

Minority stakes in otherfinancial institutionshave become onerous.

6 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

California Case ContestsImmigration Regulation

California’s Supreme Court is setWednesday to consider whether anillegal immigrant is eligible for a li-cense to practice law in the state, inthe latest case to pit the federalgovernment against a state over im-migration policy.

The California attorney generalhas thrown her support behind Ser-gio C. Garcia, who moved from Mex-ico to Chico, Calif., when he was 17years old and is seeking admission tothe state bar. The U.S. Department ofJustice, however, filed a brief lastyear arguing that federal law prohib-its him from receiving a law license.

The Justice Department said Mr.Garcia is forbidden from obtaining alicense by a law Congress passed in1996, the Personal Responsibility andWork Opportunity Reconciliation Act.

Mr. Garcia, who graduated fromCal Northern School of Law in Chicoand passed the state bar exam in2009, said the case is about statesovereignty—not his immigrationstatus.

“The federal government hasnever controlled who can and can-not be an attorney,” Mr. Garcia said.“They are trying to make a federalissue out of something that iswithin the state’s rights.”

A Justice Department spokes-woman declined to comment.

Mr. Garcia paid for his educationwith wages he made as a producemanager at a grocery store as wellas with credit cards and proceedsfrom a self-help book, “Love, Sexand Romance,” he wrote in 2006.Lately, Mr. Garcia said he has beensupporting himself with motiva-tional-speaking fees and occasionalparalegal work.

Mr. Garcia, who owns a companythat offers paralegal and other sup-port services, plans to open his ownlaw practice.

Mr. Garcia isn’t violating anycriminal law by remaining in the U.S.,but employers are barred from hiringhim as long as he is undocumented.The law is grayer on whether a clientcould legally contract with him, legalexperts said. Still, he could use a lawlicense to provide free legal services,

or, if he were to leave the country, hecould advise foreign companies onU.S. law.

His father, now a U.S. citizen,sponsored Mr. Garcia for a greencard when the family moved here in1994, and Mr. Garcia has been wait-ing for a visa number ever since. Hislong wait is typical.

The hearing in San Franciscocomes roughly a year after theObama administration launched aprogram allowing undocumentedimmigrants brought to the U.S. aschildren to remain here and work le-gally. While Mr. Garcia, who is 36, istoo old to participate in the pro-gram, his supporters say he is em-blematic of the young immigrantsthe Obama administration hassought to shield because he wasbrought to this country withouthaving a say in the matter.

The federal government is alsoopposing an attempt by an undocu-mented immigrant to gain admissionto the Florida bar. Unlike Mr. Garcia,Jose Manuel Godinez-Samperio qual-ified for the Department of Home-land Security’s Deferred Action forChildhood Arrivals program and isnow authorized to work in the U.S.,according to his lawyer. The JusticeDepartment said in court documentsfiled with the state Supreme Courtthat the authorization doesn’t entitlehim to a professional license.

Larry DeSha, a former prosecu-tor for the State Bar of California,said Mr. Garcia should be denied ad-mission because his immigrationstatus could affect his ability to rep-resent clients.

More than half a million peoplehave applied for the deferred action,or DACA, program since August2012, according to U.S. Citizenshipand Immigration Services.

A recent survey of 1,608 pro-gram participants found that 42%expect to obtain a master’s degree,a professional degree or a law de-gree.

Caesar Vargas, who was broughtto the U.S. illegally as a child, hasapplied for admission to the NewYork bar and is awaiting a decision.He is a part of a group called theDream Bar Association, whose mem-

bers, like himself, are undocumentedbut have received or are seeking lawdegrees. The group’s 13 members in-clude law students in Arizona, Idahoand Texas, he said.

The dispute in California con-trasts with the federal government’sconfrontation with Arizona over astate law that created new immigra-tion crimes and penalties. The U.S.Supreme Court in June struck downparts of the measure, ruling that theyconflicted with federal government’sdomain over immigration policy, asthe Justice Department had argued.

In the California case, the scriptis flipped, with the state is arguingthat the federal government has noauthority to decide who receives alicense to practice law. Such deci-sions rest with the California Su-preme Court in an arrangement that“has long been held to be a core at-tribute of state sovereignty,” stateAttorney General Kamala Harriswrote in a court brief.

The federal law cited by the Jus-tice Department prohibits states fromproviding illegal immigrants withpublic benefits, unless states passlaws to contrary. The law was calcu-lated to create political ramificationsfor state legislators who approvedpublic benefits for illegal immigrants.It defines public benefit to include a“professional license…provided by anagency of a State or local govern-ment or by appropriated funds of aState or local government.”

The California Supreme Court op-erates using funds appropriated bythe state, and thus it is barred fromissuing Mr. Garcia his license, accord-ing to the Justice Department.

Mr. Garcia and his supporterssay the law prohibits only profes-sional licenses that are paid for orsubsidized by appropriated statefunds. But the state bar association,which takes the lead role in assess-ing whether candidates are fit to be-come an attorney, is funded bymembership fees.

The California Supreme Courtthen grants admission based on thebar association’s recommendation,but no public funds are appropri-ated to the function, Ms. Harris ar-gued in her brief.

BY JOE PALAZZOLO

Sergio Garcia, outside his Chico, Calif., office, is a law-school graduate, but hasn’t been admitted to the state bar becausehe is an illegal immigrant. He is at the center of California’s latest attempt to thwart federal immigration policy.

Max

Whittaker/Prim

eforTh

eWallS

treetJournal

Home Buyers GetNew FHA Lifeline

The Obama administrationwants to create a mortgage marketthat is more forgiving to borrowerswho lost their homes due to the re-cession, an effort that could widenthe pool of potential homeowners.

A recent rule change lets certainborrowers who have gone througha foreclosure, bankruptcy or otheradverse event—but who have re-paired their credit—become eligibleto receive a new mortgage backedby the Federal Housing Adminis-tration after waiting as little asone year. Previously, they had towait at least three years beforethey could qualify for a new gov-ernment-backed loan.

To be eligible for the new FHAloans, borrowers must show thattheir foreclosure or bankruptcy wascaused by a job loss or reduction inincome that was beyond their con-trol. Borrowers also must provetheir incomes have had a “full re-covery” and complete housingcounseling before getting a newmortgage.

Real-estate companies in bubblehot spots like Las Vegas and Phoe-nix already have stepped up mar-keting campaigns to attract theseso-called “boomerang” buyerswhose finances have improved aftera foreclosure.

But it isn’t clear if banks will beeager to offer loans with the newterms at a time when they are fac-ing a wave of lawsuits and investi-gations related to other govern-ment-backed loans. The FHAalready offers among the most flex-ible lending standards today, re-quiring down payments of just3.5%.

“It’s difficult to see how lenderswould even consider doing mort-gages with higher risk” in the cur-rent environment, said David Ste-vens, the chief executive of theMortgage Bankers Association, whoserved as the FHA’s commissionerfrom 2009 to 2011. Lenders aren’tgoing to expand credit “whileyou’re suing them and threateningthem over minor errors.”

The policy change reflectsbroader concerns among adminis-tration officials and federal regula-tors that the mortgage-credit pen-dulum has swung too far to therestrictive side from the days of laxlending rules that fueled the bub-ble. Some economists say too-strictcredit standards are shutting outsome creditworthy borrowers andholding back economic growth. Lowparticipation in the recovery byyoung buyers “absolutely is a prob-lem, and I’m not exactly an ‘easycredit’ guy,” said Thomas Lawler, ahousing economist in Leesburg, Va.

The new rules, which expire inthree years, also apply to formerhomeowners who completed ashort sale, where a bank approvesthe sale for less than the amountowed.

That could help potential buyerslike Candy Alvarado, who sold acondominium in Norwalk, Calif., for$108,000 three years ago, leavingher bank with a $168,000 loss. The

31-year-old schoolteacher, who useda no-money-down mortgage, said itdidn’t make sense to keep thecondo after home values droppedand her work hours were cut duringthe recession.

Ms. Alvarado and her husbandbegan looking for a home foraround $400,000 in April and theyare preapproved for an FHA-backedloan. “We’ve been saving, and wewant to make sure we have a homewhere we can build equity,” shesaid.

Shaun Donovan, the secretaryfor the Department of Housing andUrban Development, which runs theFHA, played down potential criti-cism that the agency might invite areturn to risky lending practices.“What we are talking about is get-ting back to responsible, plain-va-nilla lending,” he said in an inter-view. “We believe these are low-riskloans that can be made safely.”

In the four years ended last Sep-tember, some 3.9 million homes hadbeen lost to foreclosure. About 1million borrowers who wentthrough foreclosure during the cri-sis have already waited the re-quired three years to be eligible foran FHA-backed mortgage, and byearly next year that number couldrise to 1.5 million, according to es-timates from Moody’s Analytics.

While the new rules could helpsome buyers, many former home-owners will need more time to re-pair their credit, said Aviva Lomeli,a real-estate agent with Redfin whorepresents Ms. Alvarado. “You don’tnecessarily start recovering oneday after you finish a short sale,”she said.

The administration’s broaderpush to ease lending is running upagainst other hurdles. The govern-ment—through mortgage-financefirms Fannie Mae, Freddie Mac orfederal agencies—has guaranteed asmany as nine in 10 new loans in re-cent years. But over the past fouryears, banks have had to buy backtens of billions of defaulted loansas Fannie, Freddie and the FHAfaced mounting losses. Because ofuncertainties about these “put-backs,” lenders have imposed more-conservative standards than whatthe federal entities require.

The FHA says it has a separateeffort under way to provide greaterclarity about when banks could faceput-backs, following on the work ofthe regulator for Fannie and Fred-die last year. Lenders say thosechanges haven’t been specificenough to change their lending pos-ture.

BY NICK TIMIRAOS

U.S. NEWS

What’s Your Number?Average credit score for FHAborrowers obtaining mortgagesto purchase homes

The Wall Street Journal

Source: Federal Housing Administration

720

600

620

640

660

680

700

’07 ’08 ’09 ’10 ’11 ’12 ’13

April 693

An FHA rule changereflects concern credithas become too tight.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 23

Major stock market indexes Stock indexes fromaround theworld, grouped by region. Shown in local-currency terms.

PREVIOUS SESSION PERFORMANCERegion/Country Index Close Net change Percentage change Yr.-to-date 52-wk.

EUROPE Stoxx Europe 600 301.78 -1.16 -0.38% 7.9% 13.7%

Stoxx Europe 50 2702.92 -17.43 -0.64 4.9 8.1

Euro Zone Euro Stoxx 280.46 -1.06 -0.38 7.5 16.2

Euro Stoxx 50 2753.35 -20.74 -0.75 4.5 13.0

Austria ATX 2460.57 7.34 0.30% 2.5 21.9

Belgium Bel-20 2707.20 -2.26 -0.08 9.3 14.4

Czech Republic PX 943.66 0.16 0.02 -9.1 -0.2

Denmark OMXCopenhagen 509.95 -4.60 -0.89 12.7 14.3

Finland OMXHelsinki 6557.20 199.59 3.14 13.0 23.0

France CAC-40 3974.07 -31.94 -0.80 9.1 15.1

Germany DAX 8180.71 -63.16 -0.77 7.5 16.6

Hungary BUX 18271.61 78.72 0.43 0.5 2.9

Ireland ISEQ 4229.71 -18.98 -0.45 24.5 34.0

Italy FTSEMIB 16941.03 -47.54 -0.28 4.1 11.3

Netherlands AEX 367.09 -2.17 -0.59 7.1 10.6

Norway All-Shares 549.02 0.67 0.12 11.9 13.4

Poland WIG 48968.87 -218.35 -0.44 3.2 18.1

Portugal PSI 20 5887.79 -16.56 -0.28 4.1 16.2

Russia RTSI 1293.11 1.13 0.09% -15.3 -8.0

PREVIOUS SESSION PERFORMANCERegion/Country Index Close Net change Percentage change Yr.-to-date 52-wk.Spain IBEX 35 8445.20 15.60 0.19 3.4 12.8

Sweden OMXStockholm 390.86 2.12 0.55 13.6 22.4

Switzerland SMI 7866.23 -25.39 -0.32% 15.3 23.6

Turkey ISE National 100 66973.08 -1572.30 -2.29 -14.4 0.1

U.K. FTSE 100 6468.41 -37.78 -0.58 9.7 14.0

ASIA-PACIFIC DJAsia-Pacific 137.44 1.80 1.33 3.2 12.9

Australia SPX/ASX 200 5196.60 8.30 0.16 11.8 20.8

China CBN 600 19940.60 n.a. ... ...

Hong Kong Hang Seng 22394.58 219.24 0.99 -1.2 15.3

India S&PBSE Sensex 18234.66 -651.47 -3.45 -6.1 4.6

Japan Nikkei Stock Average 13978.44 405.52 2.99 34.5 59.3

Singapore Straits Times 3054.78 -0.94 -0.03 -3.5 1.4

South Korea Kospi 1933.74 8.93 0.46 -3.2 1.4

AMERICAS DJAmericas 414.92 0.64 0.15 11.8 14.4

Brazil Bovespa 51454.16 -380.99 -0.74 -15.6 -10.2

Mexico IPC 39599.23 -529.81 -1.32 -9.4 -0.5

Note:Americas index data are as of 3:00 p.m. ET. Sources: SIX Financial Information;WSJMarketDataGroup

Cross rates U.S.-dollar and euro foreign-exchange rates in global trading

USD GBP CHF SEK RUB NOK JPY ILS EUR DKK CDN AUD

Australia 1.1044 1.7168 1.1795 0.1668 0.0330 0.1818 0.0111 0.3025 1.4538 0.1949 1.0485 ...

Canada 1.0533 1.6374 1.1249 0.1591 0.0314 0.1734 0.0106 0.2885 1.3866 0.1859 ... 0.9537

Denmark 5.6668 8.8088 6.0520 0.8558 0.1692 0.9328 0.0570 1.5520 7.4596 ... 5.3799 5.1310

Euro 0.7597 1.1809 0.8113 0.1147 0.0227 0.1250 0.0076 0.2080 ... 0.1341 0.7212 0.6878

Israel 3.6514 5.6759 3.8996 0.5515 0.1090 0.6010 0.0367 ... 4.8066 0.6444 3.4665 3.3062

Japan 99.4278 154.5557 106.1870 15.0162 2.9681 16.3663 ... 27.2301 130.8838 17.5457 94.3933 90.0267

Norway 6.0752 9.4435 6.4882 0.9175 0.1814 ... 0.0611 1.6638 7.9972 1.0721 5.7675 5.5007

Russia 33.4991 52.0727 35.7764 5.0592 ... 5.5141 0.3369 9.1743 44.0972 5.9115 31.8029 30.3317

Sweden 6.6214 10.2926 7.0715 ... 0.1977 1.0899 0.0666 1.8134 8.7162 1.1685 6.2861 5.9953

Switzerland 0.9363 1.4555 ... 0.1414 0.0280 0.1541 0.0094 0.2564 1.2326 0.1652 0.8889 0.8478

U.K. 0.6433 ... 0.6870 0.0972 0.0192 0.1059 0.0065 0.1762 0.8468 0.1135 0.6107 0.5825

U.S. ... 1.5545 1.0680 0.1510 0.0299 0.1646 0.0101 0.2739 1.3164 0.1765 0.9494 0.9054

Source: ICAPPlc.

MSCI indexesDeveloped and emerging-market regional and country indexesfromMSCI Barra as of September 03, 2013

Price-to- LOCAL-CURRENCYDividend earnings PERFORMANCEyield ratio MorganStanley Index Last Daily YTD 52-wk.

2.60% 15 ALLCOUNTRY (AC)WORLD* 366.21 -0.61% 7.8% 13.7%

2.60 16 World (DevelopedMarkets) 1,481.18 -0.57 10.7 15.8

2.50 16 World ex-EMU 181.64 -0.41 11.1 15.1

2.50 16 World ex-UK 1,489.26 -0.42 11.2 16.2

3.20 15 EAFE 1,720.73 -1.36 7.3 16.9

2.80 11 EmergingMarkets (EM) 938.29 -0.93 -11.1 -1.0

3.50 15 EUROPE 103.63 1.84 7.6 12.8

3.60 15 EMU 169.22 -1.74 7.6 21.5

3.40 16 Europe ex-UK 109.76 1.73 8.7 16.3

4.50 12 EuropeValue 102.90 1.93 6.1 12.4

2.50 19 EuropeGrowth 100.54 1.76 9.1 13.1

2.50 28 EuropeSmall Cap 232.41 1.91 16.3 26.0

3.90 6 EMEurope 269.57 0.92 -13.2 -7.8

3.70 13 UK 1,924.39 1.46 10.1 13.7

3.60 16 Nordic Countries 187.22 1.88 8.3 12.2

3.80 5 Russia 728.45 0.34 -5.0 -2.6

3.00 16 SouthAfrica 1,027.75 0.35 1.6 11.9

3.00 13 ACASIAPACIFICEX-JAPAN 440.29 -1.18 -5.5 5.3

1.90 17 Japan 690.33 1.01 30.2 53.9

3.40 9 China 59.14 1.82 -5.9 12.5

1.50 14 India 735.49 1.19 -3.8 8.9

1.10 10 Korea 556.46 -0.30 -4.1 1.5

3.00 17 Taiwan 284.29 0.17 2.8 8.5

2.00 17 USBROADMARKET 1,855.30 0.00 15.4 17.7

1.50 26 USSmall Cap 2,808.79 0.00 19.3 25.1

3.40 15 EMLATINAMERICA 3,090.60 -1.41 -18.6 -12.7

*Twenty-three developed and 26 emergingmarkets Source:MSCI Barra

Dow Jones IndexesPrice-to-

Dividend earnings PERFORMANCE (euros) PERFORMANCE (U.S.dollars)yield* ratio* Dows Jones Index Last Daily 52-wk. Last Daily 52-wk.

2.58%18.34 Global TSM 2898.58 0.27% 15.3%

2.84 20.30 GlobalDOW 1577.20 0.50% 12.9% 2205.84 0.36 18.4

3.21 13.74 Global Titans 50 213.31 -0.08 4.3 209.78 -0.24 9.4

3.49 19.62 DevEuropeTSM 2970.51 -0.46 20.3

2.53 19.23 DevelopedMarketsTSM 2907.47 0.36 17.2

... 12.96 S&PBMIEmgMarkets 236.56 -0.43 -0.9

3.61 18.95 S&PEurope 350 1231.49 -0.31 13.3 1456.80 -0.51 18.7

3.60 20.45 S&PEuro 1187.90 -0.39 16.3 1424.09 -0.58 21.8

4.26 17.30 EuropeDow 1258.41 -0.28 10.8 1758.39 -0.51 16.1

3.62 8.08 BRIC50 365.19 -0.44 -8.5 458.46 -0.59 -4.1

2.04 19.26 U.S. TSM 17156.70 0.24 17.9

Kuwait Titans 30 -c 198.18 -0.26 10.2

Price-to-Dividend earnings PERFORMANCE (euros) PERFORMANCE (U.S.dollars)yield* ratio* Dows Jones Index Last Daily 52-wk. Last Daily 52-wk.

TurkeyTitans 20 -c 678.15 -2.16% -0.6%

6.15%26.46 Global SelectDiv 225.05 0.11 7.5

5.58 15.53 Asia/Pacific SelectDiv 289.07 1.01% -0.4% 325.49 0.77 4.3

U.S. SelectDividend -d 1100.25 -0.41 16.9

3.24 25.00 S&PGlbNatResources 1951.17 0.74 -6.7 2552.90 0.59 -2.2

2.31 17.91 IslamicMarket 2460.30 0.09 10.5

2.69 15.91 IslamicMarket 100 2677.59 -0.11 10.5

Islamic Turkey -c 4024.84 -1.96 4.9

3.59 21.78 Sustainability Europe 99.49 -0.29 14.1 143.88 -0.53 19.5

4.23 21.38 S&PGlb Infrastructure 1392.17 -0.29 -0.0 2071.06 -0.43 4.8

1.95 13.74 Luxury 1910.36 -0.34 28.0

DJ-UBSCommodity -p 116.65 0.97 -10.4 131.71 0.97 -10.1

*Fundamentals are based on data inU.S. dollar. Footnotes: a-inUSdollar. b-dividends reinvested. c-in local currency. Note:All data as of 2 p.m.ET. Source: S&PDowJones Indices

GLOBAL MARKETS LINEUP

WSJ.com>> Follow the markets throughout the day with updated stock quotes, news andcommentary at WSJ.com. Also, receive email alerts that summarize the day’s trading in Europeand Asia. To sign up, go to WSJ.com/email.

Commodities Prices of futures contractswith themost open interestEXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: ChicagoMercantile Exchange; ICE-US: ICE Futures U.S.MDEX:BursaMalaysiaDerivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: LondonMetals Exchange;NYMEX:NewYorkMercantile Exchange;ICE-EU: ICE Futures Europe *Data as of September 2, 2013

ONE-DAY CHANGE Year YearCommodity Exchange Last price Net Percentage high low

Corn (cents/bu.) CBOT 475.25 -6.25 -1.30% 605.00 445.25Soybeans (cents/bu.) CBOT 1386.25 17.75 1.30% 1,409.50 1,162.50Wheat (cents/bu.) CBOT 647.25 -7.00 -1.07 834.50 0.65Live cattle (cents/lb.) CME 126.150 -0.825 -0.65 135.700 121.250Cocoa ($/ton) ICE-US 2,415 -21 -0.86 2,547 2,071Coffee (cents/lb.) ICE-US 117.50 1.20 1.03 169.30 116.10Sugar (cents/lb.) ICE-US 16.46 0.12 0.73 20.20 15.93Cotton (cents/lb.) ICE-US 82.87 -0.62 -0.74 93.72 77.80Rapeseed (euro/ton) LIFFE 389.00 2.00 0.52 441 353Cocoa (pounds/ton) LIFFE 1,612 -7 -0.43 1,673 1,421Robusta coffee ($/ton) LIFFE 1,786 28 1.59 2,206 1,721

Copper ($/lb.) COMEX 3.3065 0.0460 1.41 3.8305 3.0055Gold ($/troy oz.) COMEX 1413.10 17.00 1.22 1,707.50 1,182.60Silver ($/troy oz.) COMEX 24.375 0.862 3.67 32.670 18.215Aluminum ($/ton)* LME 1,814.00 -3.50 -0.19 2,165.50 1,764.50Tin ($/ton)* LME 21,150.00 -75.00 -0.35 25,150.00 19,300.00Copper ($/ton)* LME 7,200.00 77.50 1.09 8,286.00 6,676.00Lead ($/ton)* LME 2,161.50 -3.50 -0.16 2,455.00 1,961.00Zinc ($/ton)* LME 1,903.50 -9.50 -0.50 2,214.00 1,820.50Nickel ($/ton)* LME 13,825 -5 -0.04 18,665 13,245

Crude oil ($/bbl.) NYMEX 108.46 0.81 0.75 112.24 86.47Heating oil ($/gal.) NYMEX 3.1440 -0.0443 -1.39 3.2290 2.7625RBOB gasoline ($/gal.) NYMEX 2.8655 -0.0651 -2.22 2.9821 2.4668Natural gas ($/mmBtu) NYMEX 3.756 0.036 0.97 4.5970 3.2810Brent crude ($/bbl.) ICE-EU 113.76 1.22 1.08 115.76 96.20Gas oil ($/ton) ICE-EU 963.75 5.50 0.57 985.50 835.50

Sources: SIX Financial Information;WSJMarket Data Group

Currencies London close onSept. 3Per In

AMERICAS Per euro In euros U.S. dollar U.S. dollars

Argentina peso-a 7.4911 0.1335 5.6908 0.1757

Brazil real 3.1407 0.3184 2.3859 0.4191

Canada dollar 1.3866 0.7212 1.0533 0.9494

Chile peso 671.87 0.001488 510.40 0.001959

Colombia peso 2559.67 0.0003907 1944.50 0.0005143

EcuadorUS dollar-f 1.3164 0.7597 1 1

Mexico peso-a 17.6853 0.0565 13.4349 0.0744

Peru sol 3.6945 0.2707 2.8066 0.3563

Uruguay peso-e 29.429 0.0340 22.356 0.0447

U.S. dollar 1.3164 0.7597 1 1

Venezuela bolivar 8.36 0.119632 6.35 0.157480

ASIA-PACIFIC

Australia dollar 1.4538 0.6878 1.1044 0.9054

1-mo. forward 1.4570 0.6863 1.1068 0.9035

3-mos. forward 1.4624 0.6838 1.1110 0.9001

6-mos. forward 1.4708 0.6799 1.1173 0.8950

China yuan 8.0556 0.1241 6.1196 0.1634

Hong Kong dollar 10.2086 0.0980 7.7551 0.1289

India rupee 89.9606 0.0111 68.3400 0.0146

Indonesia rupiah 15073 0.0000663 11450 0.0000873

Japan yen 130.88 0.007640 99.43 0.010058

1-mo. forward 130.87 0.007641 99.41 0.010059

3-mos. forward 130.83 0.007644 99.38 0.010062

6-mos. forward 130.73 0.007649 99.31 0.010069

Malaysia ringgit-c 4.3260 0.2312 3.2863 0.3043

NewZealand dollar 1.6907 0.5915 1.2844 0.7786

Pakistan rupee 138.061 0.0072 104.880 0.0095

Philippines peso 58.553 0.0171 44.481 0.0225

Singapore dollar 1.6821 0.5945 1.2779 0.7826

South Koreawon 1446.22 0.0006915 1098.65 0.0009102

Taiwan dollar 39.230 0.02549 29.802 0.03356

Thailand baht 42.346 0.02362 32.169 0.03109

Per InEUROPE Per euro In euros U.S. dollar U.S. dollars

Euro zone euro 1 1 0.7597 1.3164

1-mo. forward 0.9999 1.0001 0.7596 1.3165

3-mos. forward 0.9997 1.0003 0.7594 1.3168

6-mos. forward 0.9993 1.0007 0.7591 1.3173

Czech Rep. koruna-b 25.804 0.0388 19.602 0.0510

Denmark krone 7.4596 0.1341 5.6668 0.1765

Hungary forint 302.44 0.003306 229.76 0.004352

Norway krone 7.9972 0.1250 6.0752 0.1646

Poland zloty 4.2746 0.2339 3.2473 0.3080

Russia ruble-d 44.097 0.02268 33.499 0.02985

Sweden krona 8.7162 0.1147 6.6214 0.1510

Switzerland franc 1.2326 0.8113 0.9363 1.0680

1-mo. forward 1.2323 0.8115 0.9361 1.0682

3-mos. forward 1.2317 0.8119 0.9357 1.0688

6-mos. forward 1.2306 0.8126 0.9348 1.0697

Turkey lira 2.7123 0.3687 2.0604 0.4853

U.K. pound 0.8468 1.1809 0.6433 1.5545

1-mo. forward 0.8470 1.1806 0.6435 1.5541

3-mos. forward 0.8474 1.1801 0.6437 1.5534

6-mos. forward 0.8479 1.1794 0.6441 1.5525

MIDDLE EAST/AFRICA

Bahrain dinar 0.4964 2.0145 0.3771 2.6519

Egypt pound-a 9.1906 0.1088 6.9818 0.1432

Israel shekel 4.8066 0.2080 3.6514 0.2739

Jordan dinar 0.9326 1.0723 0.7085 1.4115

Kuwait dinar 0.3761 2.6590 0.2857 3.5002

Lebanon pound 1989.82 0.0005026 1511.60 0.0006616

Saudi Arabia riyal 4.9370 0.2026 3.7505 0.2666

South Africa rand 13.5897 0.0736 10.3236 0.0969

United Arab dirham 4.8352 0.2068 3.6732 0.2722

a-floating rate b-financial c-government rate c-commercialrate d-Russian Central Bank rate.Source: ICAPPlc.

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 5

Denmark’s Top BankerExtols Rates Policy

COPENHAGEN—Denmark’s cen-tral-bank governor said the adoptionof negative interest rates a year agoat the height of Europe’s debt crisishas kept the krone steady even amidrenewed turbulence on currencymarkets.

In an interview with The WallStreet Journal, Nationalbank Gover-nor Lars Rohde said the bank’s deci-sion to cut its deposit rate to belowzero has helped defend the krone’sfixed exchange rate at little cost tothe country’s banks.

The krone has remained stablewithin its narrow peg against theeuro in recent months, while curren-cies ranging from the Brazilian realto the Indian rupee and the Norwe-gian krone have seen sharp movesas investors ready for the U.S. Fed-eral Reserve to gradually ease itsmonetary stimulus.

Nationalbank’s decision put itamong a select few to adopt nega-tive interest rates, and its relativelysuccessful defense of the currencysuggests such a policy can be pur-sued without creating unforeseenconsequences for banks.

“The good news is that [the neg-ative rate] has had an impact on thecurrency market,” Mr. Rohde said.“It has been a very efficient tool toavoid unwarranted capital inflows.”

In July 2012, with the euro crisisdeepening, investors were scram-bling to sell euros and buy Danishkroner, then seen by investors asless risky because of Denmark’s rela-tively strong public finances. Thekrone had strengthened over theprevious six months and National-bank cut interest rates to sap inves-tor enthusiasm for the currency.

When the deposit rate reachedzero, and with the krone still rising,the bank cut the rate to minus 0.2%before later raising it in January tominus 0.1%, where it has stayedsince.

As a deposit rate below zero re-quires banks to pay to park depositsover a certain size with the centralbank, it should theoretically drivedown the desirability of krone-basedassets. Sweden’s Riksbank, whichpushed its deposit rate below zeroduring the financial crisis, is one ofthe few other central banks to havepursued a similar policy.

More than a year on, the krone islittle changed against the euro. Theeuro currently trades at about 7.461kroner, compared with its 2012 highof 7.4311 kroner in mid-June. Nation-albank hasn’t intervened in currencymarkets since January, unlike thecentral bank of New Zealand, an-other steady, small economy, whichhad to sell its currency over recentmonths to cool appreciation.

Mr. Rohde said the central bank’sdecision to cut the deposit rate tobelow zero was a sign of how highlyNationalbank valued its euro peg.

The central bank, which unlikemost major central banks doesn’thave an inflation target, has a statedaim of keeping the euro within2.25% of 7.46038 kroner, a range itset upon the euro’s introduction in1999. It changes interest rates andbuys and sells kroner to stay withinthis band.

“We will do whatever it takes toprotect the peg,” Mr. Rohde said.“The one and only role for Danishmonetary policy today is to securethe peg.”

Denmark is unusual in Europe inbinding its currency to the euro, asit has no immediate plans to join thecurrency area. Other countries witha similar peg, such as Latvia andLithuania, are in the process of join-ing the euro zone.

Having a currency peg offers alevel of stability for Denmark’s ex-porters, which struggled during theeuro zone’s debt crisis but fared bet-ter in the second quarter this year.The central bank’s commitment tothe peg also helps anchor inflationexpectations, Mr. Rohde said.

“Everyone knows the rules of thegame,” he said.

Mr. Rohde acknowledged the lim-its of his bank’s use of a negativerate, as below a certain rate banksand depositors have an incentive toswitch into cash rather than pay thecentral bank to hold its deposits.

“We have not come near thoselimits,” Mr. Rohde said.

Nationalbank says moving thedeposit rate below zero hasn’t im-posed large costs on banks.

The impact of the negative rateon banks’ profitability is about 200million kroner ($35 million) a year,according to the central bank’s cal-culations.

The biggest bank, Danske BankAS, posted profits of around 2 bil-lion kroner in the second quarteralone.

These practical lessons of whathappens in a subzero rate environ-ment will be closely watched byother central banks in case they oneday need to do something similar.The European Central Bank, theBank of England and the Fed allhave rates close to zero to helpstimulate struggling economies.

Mr. Rohde didn’t comment onwhether he had received calls fromcolleagues elsewhere asking for ad-vice. But as the Nationalbankdoesn’t have an inflation target, andthe monetary regimes of the majorcentral banks are so different, it isdifficult to estimate how such a pol-icy would fare in other countries.

Mr. Rohde said he felt that thebanks were probably now “out ofthe woods” after a series of Parlia-ment-sponsored support packages.Danish banks suffered during theeconomic downturn that followedthe financial crisis in 2008, as agri-cultural and commercial propertydevelopment projects turned sour.

The governor said economic in-dicators point to “modest but posi-tive” economic growth this year andgrowth of between 1.5% and 2% nextyear.

Denmark’s gross domestic prod-uct rose 0.5% on a quarterly basis inthe second quarter, helped by risingexports. The Danish economy hasbeen slowly recovering since thedownturn as a sharp fall in houseprices caused consumers to rein inspending, which hurt governmentrevenue and businesses.

BY CHARLES DUXBURY

Lars Rohde, Denmark’s central-bank governor, at a symposium in August.

Bloomberg

New

s

German CandidatesSpar Over Records

BERLIN—The last session of theGerman Parliament turned into aface-off between chancellor candi-dates, as Chancellor Angela Merkelargued that the last four years havebeen a period of prosperity, whileher main challenger called them amissed opportunity.

With the election less than threeweeks away, it is no surprise to seeMs. Merkel talking up her record.She pointed to unemployment, atthe lowest level since reunificationin 1990, and called the center-rightgovernment’s budget policy a “sen-sational success” because of lower-than-expected borrowing.

“I believe we can all state wehave had four unusual years,” Ms.Merkel said Tuesday, pointing to theeuro crisis, nuclear disaster in Fuku-shima and unrest in the Arab world.“Despite these challenges, we cansay: All in all, these have been fourgood years for Germany.”

The exchange follows the officialdebate broadcast on Sunday. Withthe chancellor scoring high on per-sonal popularity, the chances of theopposition’s Peer Steinbrück leadingthe country after the election areslim.

A coalition of his Social Demo-crats and its preferred partner, theGreens, is trailing Ms. Merkel’s cen-ter-right coalition by 11 percentagepoints, according to a TNS Emnid pollpublished Sunday.

On Tuesday, Mr. Steinbrück pre-sented a different picture of Ger-many, accusing Ms. Merkel of being“the architect of power and not thearchitect of the country.”

In particular, he said there is agrowing wealth gap, and pointed tohis plan for a minimum wage andhigher taxes for the rich.

“I share your happiness that wehave a strong country,” Mr. Stein-brück said. “But it is a country wherethe last far-reaching reforms stemfrom your predecessor GerhardSchröder. You have reaped the resultsduring this legislative term thatstarted in 2009, but haven’t sowedanything.”

In a heated part of the session,Mr. Steinbrück expressed outrageabout comments Ms. Merkel allegedlymade in a prerecorded program yetto be broadcast.

According to Mr. Steinbrück, thechancellor said the Social Democratswere “unreliable” regarding Euro-pean policy, even though she has hadto rely on the SPD at times to geteuro-zone crisis response measuresthrough the German Parliament.

“You are burning bridges withsuch comments,” Mr. Steinbrücksaid, indicating the souring moodbetween her party and his own.

Yet the two may find themselvesin another grand coalition—as in Ms.Merkel’s first term—if her currentjunior coalition partner, the FreeDemocrats, doesn't get enough votesto rejoin the government.

BY ANDREA THOMAS

EUROPE NEWS

Mr. Rohde said thedecision to cut thedeposit rate was a sign ofhow highly Nationalbankvalued its euro peg.

RESORT • SPA • DRIVEN EXPERIENCESRESORT • SPA • DRIVEN EXPERIENCESRESORT • SPA • DRIVEN EXPERIENCES

855-520-3378gatewaycanyons.com

“A magnificent locationfor uniquely-inspiring

luxury retreats.”Forbes Travel Guide

24 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

Major players & benchmarks

Credit derivativesSpreads on credit derivatives are oneway themarket ratescreditworthiness. Regions that are treading in roughwaterscan see spreads swing toward themaximum—and vice versa.Indexes beloware for five-year swaps.

Markit iTraxx Indexes SPREADRANGE, in pct. pts.Mid-spread, sincemost recent roll

Index: series/version in pct. pts. Mid-price Coupon Maximum Minimum Average

Europe: 19/1 1.04 99.84% 0.01% 1.10 0.95 1.02

Eur. HighVolatility: 19/1 1.56 97.52 0.01 1.64 1.47 1.55

EuropeCrossover: 19/1 4.19 103.28 0.05 4.42 3.92 4.14

Asia ex-Japan IG: 19/1 1.60 97.35 0.01 1.70 1.28 1.47

Japan: 19/1 0.93 100.31 0.01 1.06 0.91 0.96

Note: Data as of September 2

SpreadsSpreads onfive-year swapsfor corporatedebt; based onMarkit iTraxxindexes.

In percentage points

3.00

2.00

1.00

0

–1

tAustralia

t

Japan

2013Mar. April May June July Aug.

Index roll

Source: Markit Group

Behind Europe's deals: Bank revenue rankings, FranceBehind every IPO, bond offering,merger deal or syndicated loan is one ormore investment banks. Here areinvestment banks ranked by year-to-date revenues from recent deals.

PERCENTAGEOFTOTALREVENUERevenue, Equity Debt Mergers&inmillions share capitalmarkets capitalmarkets acquisitions Loans

SGCorporate InvestmentBanking $115 8.6% 8% 54% 16% 22%

BNPParibas 106 8.0 5 55 24 16

GoldmanSachs 103 7.7 11 30 43 16

CreditAgricole CIB 92 6.9 9 52 25 14

DeutscheBank 82 6.2 28 32 18 22

Natixis 80 6.0 5 64 30 1

MorganStanley 73 5.5 6 26 16 52

Credit Suisse 71 5.3 2 43 37 19

HSBC 57 4.3 6 61 32 2

Source: Dealogic

Trackingcreditmarkets &dealmakers

Dow Jones Industrial Average P/E: 15LAST: 14833.96 s 23.65, or 0.16%

YEAR TO DATE: s 1,729.82, or 13.2%OVER 52WEEKS s 1,798.02, or 13.8%

Note: Price-to-earnings ratios are for trailing 12 months

16000

15500

15000

14500

14000

13500

7 14 21 28June

5 12 19 26July

2 9 16 23 30Aug.

High

Close

Low

50–daymoving average

t

Stoxx Europe 50: Tuesday's best and worst...

Previousclose, in STOCK PERFORMANCE

Company Country Industry Volume local currency Previous session YTD 52-week

Telefon L.M. Ericsson B Sweden Telecommunications Equipment 18,822,521 82.50 4.96% 26.7% 35.8%

Imperial Tobacco Grp United Kingdom Tobacco 1,442,438 2,154 0.98 -9.2 -13.4

BHPBilliton United Kingdom GeneralMining 4,976,806 1,936 0.78 -9.1 4.4

Rio Tinto United Kingdom GeneralMining 3,305,105 3,059 0.77 -12.9 9.4

BGGrp United Kingdom Integrated Oil & Gas 3,999,225 1,247 0.61 23.2 -4.0

Vodafone Group United Kingdom Mobile Telecommunications 265,302,867 202.50 -5.02% 31.1 10.5

Sanofi SA France Pharmaceuticals 3,253,420 72.30 -2.82 1.3 8.7

SAP Germany Software 4,116,015 55.09 -1.82 -9.2 5.2

INGGroep Netherlands Life Insurance 15,763,921 8.31 -1.61 17.7 36.1

BNPParibas France Banks 3,671,642 48.27 -1.39 13.3 38.4

...And the rest of Europe's blue chipsLatest,in local STOCK PERFORMANCE

Company/Country (Industry) Volume currency Latest YTD 52-week

Schneider Electric 1,558,720 59.70 0.45% 8.9% 17.1%France (Electrical Components & Equipment)Banco Bilbao Vizcaya Argn 19,929,340 7.41 0.41 7.6 24.8Spain (Banks)ABB 3,630,453 20.21 0.40 7.8 20.9Switzerland (Industrial Machinery)Credit Suisse GroupAG 4,600,072 27.44 0.29 24.5 50.7Switzerland (Banks)Telefonica S.A. 11,998,322 10.47 0.29 2.7 0.2Spain (Fixed Line Telecommunications)Novartis AG 4,674,880 70.05 0.29 21.9 24.0Switzerland (Pharmaceuticals)Deutsche Telekom 16,545,095 9.83 0.12 15.5 4.3Germany (Mobile Telecommunications)Allianz SE 2,005,970 110.35 0.09 5.3 25.3Germany (Full Line Insurance)HSBCHldgs 16,868,751 687.60 0.07 6.3 24.8United Kingdom (Banks)Reckitt Benckiser Grp 840,323 4,426 0.07 14.1 22.9United Kingdom (Nondurable Household Products)Glencore Xstrata PLC 13,259,820 312.20 0.05 -11.1 -19.6United Kingdom (GeneralMining)L'Air Liquide 496,403 100.95 -0.05 6.2 6.8France (Commodity Chemicals)Tesco 7,829,156 369.85 -0.08 10.1 9.0United Kingdom (Food Retailers &Wholesalers)Royal Dutch Shell A 2,316,911 2,073 -0.10 -2.3 -6.9United Kingdom (Integrated Oil & Gas)Financiere Richemont 649,485 91.15 -0.11 27.7 51.9Switzerland (Clothing & Accessories)E.ONSE 9,374,344 12.06 -0.17 -14.4 -34.4Germany (Multiutilities)Barclays 16,172,615 285.10 -0.21 8.7 54.7United Kingdom (Banks)UBS 7,260,520 18.54 -0.22 29.9 72.8Switzerland (Banks)Deutsche Bank 5,061,851 33.29 -0.33 1.0 20.1Germany (Banks)British American Tobacco 2,223,296 3,264 -0.34 4.6 -2.1United Kingdom (Tobacco)

Latest,in local STOCK PERFORMANCE

Company/Country (Industry) Volume currency Latest YTD 52-week

GlaxoSmithKline 4,739,467 1,666 -0.39% 24.8% 15.9%United Kingdom (Pharmaceuticals)Anheuser-Busch InBev 1,008,565 71.86 -0.44 9.3 4.6Belgium (Brewers)Banco Santander S.A. 34,284,996 5.42 -0.50 -8.5 -1.1Spain (Banks)Zurich Insurance Group 434,645 234.00 -0.51 -3.9 2.0Switzerland (Full Line Insurance)Siemens 1,309,586 81.32 -0.51 -1.1 8.8Germany (Diversified Industrials)BASF 2,103,699 67.23 -0.55 -5.5 9.3Germany (Commodity Chemicals)National Grid 4,673,512 747.00 -0.60 6.3 8.7United Kingdom (Multiutilities)Daimler 2,905,610 52.73 -0.66 27.6 39.6Germany (Automobiles)Moet Hennessy Louis Vuitt 518,028 134.90 -0.70 -3.2 3.8France (Clothing & Accessories)Diageo 3,066,952 1,980 -0.70 10.8 13.1United Kingdom (Distillers & Vintners)Nestle 3,291,721 60.95 -0.73 2.3 1.7Switzerland (Food Products)BPPLC 19,324,065 441.85 -0.83 4.0 -0.4United Kingdom (Integrated Oil & Gas)AstraZeneca 1,982,516 3,154 -0.90 8.4 7.0United Kingdom (Pharmaceuticals)Bayer 1,680,778 84.82 -0.96 18.0 36.2Germany (Specialty Chemicals)ENI 9,425,472 17.35 -0.97 -5.4 0.5Italy (Integrated Oil & Gas)Unilever 1,754,337 2,460 -1.01 4.0 7.7United Kingdom (Food Products)Standard Chartered 3,037,912 1,446 -1.13 -8.1 4.0United Kingdom (Banks)Unilever CVA 4,402,750 28.55 -1.19 -1.0 2.0Netherlands (Food Products)RocheHolding Part. Cert. 843,118 233.60 -1.23 27.0 33.6Switzerland (Pharmaceuticals)Total 4,279,377 41.84 -1.30 6.4 4.5France (Integrated Oil & Gas)

Sources: SIX Financial Information

DJIA component stocksVolume, CHANGE

Stock Symbol inmillions Latest Points Percentage

AT&T T 26.2 $33.30 –0.53 –1.58%Alcoa AA 24.5 7.73 0.03 0.39AmExpress AXP 3.1 72.57 0.66 0.92BankAm BAC 65.2 14.28 0.16 1.12Boeing BA 2.9 105.19 1.27 1.22Caterpillar CAT 5.8 82.42 –0.12 –0.15Chevron CVX 3.2 120.47 0.04 0.03CiscoSys CSCO 25.9 23.53 0.22 0.94CocaCola KO 16.5 37.88 –0.30 –0.79Disney DIS 6.1 61.00 0.17 0.28DuPont DD 2.9 56.36 –0.26 –0.46ExxonMobil XOM 8.0 87.10 –0.06 –0.07GenElec GE 43.7 23.07 –0.07 –0.28HewlettPk HPQ 8.6 22.39 0.05 0.22HomeDpt HD 5.7 74.11 0.01 0.01Intel INTC 22.1 22.07 0.09 0.42IBM IBM 2.8 183.71 1.44 0.79JPMorgChas JPM 13.2 51.14 0.61 1.21JohnsJohns JNJ 5.8 86.31 –0.10 –0.12McDonalds MCD 2.7 94.59 0.23 0.24Merck MRK 9.3 47.25 –0.04 –0.08Microsoft MSFT 141.0 31.72 –1.68 –5.04Pfizer PFE 20.4 28.04 –0.17 –0.60ProctGamb PG 5.5 77.80 –0.09 –0.123M MMM 1.8 113.32 –0.26 –0.23TravelersCos TRV 1.2 80.59 0.69 0.86UnitedTech UTX 4.1 102.71 2.61 2.61UtdHlthGp UNH 3.1 72.65 0.91 1.27Verizon VZ 42.1 45.92 –1.46 –3.08

WalMart WMT 5.9 72.73 –0.25 –0.34

Source: WSJ Market Data Group

Credit-default swaps: European companiesAt itsmostbasic, thepricingofcredit-defaultswapsmeasureshowmuchabuyerhastopaytopurchase-andhowmuch a seller demands to sell-protection from default on an issuer's debt. The snapshot below gives asensewhichway themarketwasmoving yesterday.

Showing the biggest improvement...CHANGE, in basis points

Yesterday Yesterday Five-day 28-day

ONOFin II 514 –36 –51 –66

GasNat 180 –9 ... –3

Iberdrola 181 –7 1 –1

BqePsaFin 536 –20 –36 –45

Iberdrola Intl 182 –7 1 ...

Telecom Italia 353 –13 –18 –50

LLOYDSTSBBK 137 –5 2 7

GroheHldg 177 –6 2 19

Peugeot 538 –18 –35 –49

KBCBk 158 –5 –3 –9

And the most deteriorationCHANGE, in basis points

Yesterday Yesterday Five-day 28-day

INGVerzekeringen 74 1 2 5

Nielsen 71 1 1 2

Novartis 30 ... ... 1

Portigon 97 1 1 1

DanskeBk 116 1 3 ...

KabelDeutschlandVertriebundService 66 ... –2 –3

Smurfit KappaFdg 114 ... –1 ...

Heineken 62 ... 2 3

SvenskaCellulosa 64 ... ... –1

Linde 49 ... ... 2

Source:Markit Group

BLUE CHIPS & BONDS

WSJ.com>>Follow the markets throughout the day, with updatedstock quotes, news and commentary at WSJ.com.

Also, receive emails that summarize the day’s trading inEurope and Asia. To sign up, go to WSJ.com/Email.

Below, a look at the Dow Jones Stoxx50, the biggest and best knowncompanies in Europe, including the U.K.

4 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

EUROPE NEWS

Study EasesFear OverExercise,Heart Health

AMSTERDAM—Cycling does thebody good.

New data from Tour de Francecyclists finds that those athletes livean average of six years longer thantheir counterparts in the generalpopulation and die from heart-re-lated ailments less often, dampingconcerns that extreme, intense exer-cise increases the likelihood of deathfrom cardiovascular causes.

The new study, presented Tues-day at an Amsterdam meeting of theEuropean Society of Cardiology, ex-amined 786 French cyclists whocompeted in the Tour de Francefrom 1947 to 2012 and the cause ofdeath for those who died.

The data also give limited reas-surance that doping with “Epo”(erythropoietin) doesn’t appear todramatically increase the risk ofheart attack or early death amongelite cyclists—at least in the nearterm.

The findings offer “good proofthat sports—even if the sport isvery, very intensive—among healthypeople, without any heart disease, isstill beneficial,” said Eloi Marijon,one of the study authors and a car-diologist at the European GeorgesPompidou Hospital and Paris Des-cartes University.

The results “laid to rest” con-cerns over exercise intensity withcycling, though the results don’tnecessarily generalize to marathonrunning, said Donna Arnett, chairof epidemiology at the Universityof Alabama at Birmingham andpast president of the AmericanHeart Association, who led the ses-sion at which the data were pre-sented.

Cardiovascular concerns abouthigh-intensity exercise stemmedfrom a small number of studies onmarathon runners. Measurementtools including advanced imagingfound some detrimental signs on theheart immediately after races,prompting some doctors to worrythat there may be drawbacks to suchextreme exercise.

But those findings were likelynormal wear and tear that occursduring strenuous physical activitythat pushes muscles and sends agreater volume of blood coursingthrough the heart, said Alfred Bove,professor emeritus at Temple Uni-versity in Philadelphia and a formerpresident of the American College ofCardiology, who wasn’t involved inTuesday’s study.

Because the use of Epo wasthought to be common among cy-clists in the Tour de France in the1990s, researchers expected that ifEpo was linked to heart attacks, theywould see an uptick in the numberof deaths among riders in the past20 years as compared with competi-tors in previous decades, accordingto Dr. Marijon.

Instead, they observed no differ-ence in the rate of death by decade,suggesting that “probably there isno strong or immediate associationwith doping” and heart attack, saidDr. Marijon. He urged caution in in-terpreting the results and said thatmore research is needed over a lon-ger period of a time.

The study also was published onTuesday in the European HeartJournal.

BY SHIRLEY S. WANG

Sun, Sand Help Lift ‘Club Med’The Russians came, and they

saved hotelier Gustavo Cabedo’stourist season.

Spanish visitors to his Tryp PortCambrils hotel, down the coast fromBarcelona, had dwindled in recentyears as the economy slumped. Buta rush of Russian and French tour-ists put off by turmoil in Egypt—andlured to Spain by falling prices—haspicked up the slack, lifting occu-pancy in the 156-room hotel nearthe beach above 90% this summer.

The growth in international tour-ism “has been vital,” said Mr.Cabedo, the hotel’s general manager.“I don’t wish anyone harm, butproblems in North Africa have beengood for Spain.”

Tourists have been flocking thisyear to the euro zone’s “Club Med”vacation spots, boosting strugglingeconomies. Foreign visits to Spainsince January have set a record,while Greece and Portugal are en-joying banner years.

International tourist arrivals inSouthern Europe grew 6% in thefirst half of the year over the sameperiod of 2012, a percentage pointabove the global increase, accordingto the U.N. World Tourism Organiza-tion.

In the previous decade, relativestability and new hotel developmenthelped Egypt and other North Afri-can countries compete for touristsseeking sun, sand and cultural at-tractions, industry analysts say.

But falling prices in the euro-zone periphery—hotel rates in Spainare down around 10% since 2008,according to official statistics—andthe continuing political upheavalthat began in the Arab Spring of2011 has made the Mediterranean’snorthern shores look more attrac-tive.

Cruise-ship operators are addingsix Greek ports to their routes thisyear and next as they cancelplanned port calls in Egypt. TheFinnish tour operator Finnmatkatcanceled trips to Egypt for more

than 20,000 people this coming win-ter, offering to route them to Spain’sCanary Islands and elsewhere.

The tourist boom underscoreshow economic restructuring is help-ing Southern European countries re-gain international competitiveness.

In Greece, labor-market changeshave helped cut payrolls—which ac-count for about 40% of a hotel’s op-erating costs—pushing down aver-age wage bills by a fifth. That hastranslated into an average 8% reduc-tion in hotel rates in the last year,according to industry sources.

In Portugal, where the AtlanticAlgarve region entices hordes ofBritish visitors, prices for hotels andother services declined while spend-ing by foreign tourists rose 8.2%, to€3.7 billion ($4.9 billion), in the firsthalf of the year over the same pe-riod in 2012.

To be sure, tourist spending istoo small on its own to end South-ern Europe’s recession or sustain arecovery.

Still, it could make the recessionshallower than forecast for this yearand hasten a return to growth, saidSara Baliña, a partner at Madrid-based economic analysis firmAnalistas Financieros Internaciona-les SA. It is “an important stabiliz-ing factor” for Southern Europeaneconomies, she said.

A peace dividend of sorts is lift-ing Greece’s tourist industry. Fearsof an abrupt Greek exit from theeuro zone have receded in the pastyear. The violent antiausterity pro-tests that rocked Athens at the startof the crisis and frightened awaywould-be visitors have petered out.

Carsten Palvig, a 62-year-oldDanish information technology de-veloper, a frequent visitor for morethan three decades, said Greece’sturmoil kept him away for the pastfew years “but we thought we wouldtry it again this year.”

He spoke as his companion pho-tographed the 19th century neoclas-sical buildings that line the alley-ways of Athens’s Plaka touristquarter. “You can’t really see anysign of the crisis here.”

A few steps away, MargaretSmith perused tourist shops be-neath the Acropolis. The-49 year-oldreal estate agent from Virginia hadorganized a 10-day trip with half adozen friends to Crete and theGreek capital.

“Who doesn’t want to come toGreece anyway?” she said. “But thelow prices were an extra induce-ment.”

The Greek government has overthe past few years eased visa re-strictions for various countries, in-cluding traditional rival Turkey,

helping to draw new visitors.Tourist arrivals and spending in

Greece are surpassing even the opti-mistic forecasts at the start of theyear. The latest data suggests that arecord 17.5 million visitors willspend €11.5 billion this year, indus-try sources said.

In Spain, regional and centralgovernments also have been tryingto attract tourists from beyond theusual sources—Britain, Germany andFrance—by, for example, sendingdelegations to tourism fairs in Rus-sia. Visits from Nordic countries andRussia through July of this yeargrew 18% and 31%, respectively, overthe same period in 2012.

In Cambrils, a fishing port with30,000 permanent residents, foreigntourist overnight stays since Janu-ary hit a record despite a 20-per-centage-point decline in Spanish vis-its. Russian nationals accounted for13% of July occupancy this year,compared with nearly none in 2009,according to the local tourismboard.

Businesses are hiring Russianspeakers. The Michelin-starred CanBosch Restaurant offers a Russian-language menu. Cyrillic script cov-ers signs for bicycle rentals and atice cream shops.

The Tryp Port Cambrils hotelstarted buying more watermelon afew years ago after the staff noticedEastern European guests gobblingup the fruit at buffet tables. Mr.Cabedo said his average revenue perroom has declined 7% since 2009, inpart because he´s offering morepromotions.

Vladimir Ovtchinnikoff, a touristfrom Moscow who sells tractorparts, said safety concerns aboutEgypt influenced his family’s deci-sion to vacation in Spain. He praisedthe wide beaches, which workerstidy each morning. He marveled atthe cleanliness of the water, despitethe proximity of large ships and achemical plant.

“I see tankers in the sea, but nooil fumes in the water,” he said. “Itis unbelievable for me.”

—Patricia Kowsmannand Liis Kangsepp

contributed to this article.

By Ilan Brat in Cambrils,Spain, and AlkmanGranitsas in Athens

A sailboat at port recently at Cambrils, a town in northeastern Spain. Europe’s southern rim is attracting more foreign tourists this year even as locals stay home.

SarahTenn

antforTh

eWallS

treetJournal

Visitors WelcomeA rise in tourism could help bolster troubled Mediterranean economies.

*Includes jobs indirectly supported by tourism industry; Note: for 2012

Source: World Travel & Tourism Council

TOURISM’S TOTALCONTRIBUTION TO GDP

SHARE OF ALL JOBSSUPPORTED BY TOURISM*

Portugal

Greece

Spain

Tunisia

Egypt

Italy

Turkey

18.5%

18.3

15.5

13.7

13.3

11.7

8.3

15.9%

16.4

15.2

15.1

15.1

10.3

10.9

The Wall Street Journal

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 25

PERSONAL JOURNAL

See the Phone? Try Picking It UpYounger Employees Love Email but Often Hate the Telephone, With Effects on the Bottom Line

Patty Baxter realized there wasa problem. In her 20 years atMetro Guide Publishing in Halifax,Nova Scotia, the office usuallyhummed with sales calls. Now, itwas quiet.

Advertising sales were downand Ms. Baxter identified a reason:Her sales staff, all under age 35,were emailing clients with theirpitches, not calling them on thephone.

Younger workers may havemastered technologies that someof their older colleagues havebarely heard of, such as photo andvideo sharing apps Instagram andVine, but some bosses wish they’dlearn a more traditional skill: pick-ing up the phone.

While millennials—usually de-fined as people born between 1981and the early 2000s—are rarelyfar from their smartphones, theygrew up with a wider array ofcommunication tools, such as tex-ting and online chatting, and havedifferent expectations for how andwhen they’d like to be reached. Inthe workplace, some managers sayavoiding the phone in favor ofemail can hurt business, hindercreativity and delay projects.

Stephanie Shih, 27, says phonecalls are an interruption. Thebrand marketing manager at Pa-perless Post, a New York-basedcompany that designs online andpaper stationery, doesn’t have awork phone. Nor do the majorityof her co-workers. The companysays that not having individualphone lines in open-plan areasprotects people from unwantedcalls, which can interrupt conver-sations.

Besides, says Ms. Shih, phonesseem “outdated.” She takes sched-uled work calls once or twice aweek. “Even my dentist’s officetexts me because they know phonecalls can be burdensome,” shewrote in an email.

Kevin Castle, a 32-year-oldchief technology officer at Tech-

nossus, an Irvine, Calif.-basedbusiness-software company, saysunplanned calls are such an an-noyance that he usually unplugshis desk phone and stashes it in acabinet. Calling someone withoutemailing first can make it seem asthough you’re prioritizing yourneeds over theirs, Mr. Castle says.Technossus’s staff relies mainly onemail to communicate, whichhelps bridge the time differencebetween the company’s offices inthe U.S. and India, he says. Heuses Microsoft Lync for instantmessaging and video conferencing.Phone calls are his last resort.

But email won’t cut it in pro-fessions like sales, where personalrapport matters, says Ms. Baxter,age 49. “You’re not selling ifyou’re just asking a question andgetting an answer back,” she says.

In August, a member of hersales team misunderstood anemail from a client and antici-

pated a sale that didn’t happen—amistake Ms. Baxter says couldhave been avoided had the em-ployee called the client to beginwith.

Since May, she’s had Mary JaneCopps, a phone-use consultant inHalifax, Novia Scotia, spend twodays a week at the office helpingnudge her staff onto the phone.Now, employees keep track of howthey contact clients and follow ascript when leaving voice mail.

Ms. Copps’s training includesrole playing that simulates salescalls to help with what she calls“phone phobia.” “For many people,it’s a lack of confidence thatthey’ll be able to say the rightwords in the right order in theright amount of time,” she says.

Ms. Copps, 55, whose website isthephonelady.com, charges $1,800for a full-day workshop. She beganworking as a phone consultant in2003 at the encouragement of a

friend. She was skeptical at firstas she thought phone skills werejust common sense.

Jason Nazar, a 34-year-oldSanta Monica, Calif.-based tech-nology entrepreneur, says his com-pany has missed out on potentialhires because his 20-somethingemployees schedule interviews byemail, rather than phoning appli-cants, which can take longer. “Ifyou can do something morequickly and more efficiently by us-ing older technology, then do it,”said Mr. Nazar, who is chief execu-tive of Docstoc, a service thathelps small businesses managedocuments online.

While data traffic on mobilephones nearly doubled, to 1.468trillion megabytes, between De-cember 2011 and December 2012,the number of minutes spent talk-ing during that period increasedby less than 1%, from 2.296 trillionto 2.30 trillion, according to CTIA,

a wireless-communications tradegroup.

Businesses aren’t giving up onthe phone yet. The number ofdesktop phones shipped to busi-nesses grew by 4.5% from 2011 to2012, according to Richard Cos-tello, an analyst at the market-re-search firm International DataCorp. Many new phones allowworkers to receive calls, texts, in-stant messages, transcribed voicemails and more all in one systemand access the phone systemthrough their work computers.

Dana Brownlee, a corporatetrainer based in Atlanta, says theissue of phone aversion frequentlycomes up in her project-manage-ment training sessions. One of herclients, a manager at a large utilitycompany, recently had to teach hisyoung employee what a dial tonewas and explain that desktopphones don’t require you to press“Send.”

BY ANITA HOFSCHNEIDER

Metro Guide Publishing is encouraging young sales staff to use the phone more for business deals. Above, sales project managers review department strategies.

DeanCa

savechia

forTh

eWallS

treetJournal

When Your Home Is Your Office, Separation MattersNot long ago, we had an unex-

pected guest for dinner: my job.Well, to be honest, it wasn’t all

that unexpected. My job pops infairly frequently at the dinner hour.And although it doesn’t eat anyfood, there’s no question that it’s in-trusive, disruptive—and annoys myhusband greatly.

“I’m just going to take this onecall,” I told Clay that night, gettingup from the table. Cue the eye rollfrom Clay, as he continued to qui-etly chew his chicken.

“It’s from the West Coast,” Icountered, as if that somehow madea difference. As I headed upstairs tothe home office, I called back: “I’llmake it quick.”

In many ways, of course, the lux-ury of a home office is the workingparent’s brass ring. I am extraordi-narily blessed to have the option ofworking from home when I am nottraveling. It gives me the flexibilityto pop down into the basement andtoss the wet laundry into the dryeror take a few minutes to welcome

my daughter home from school inthe afternoon or catch up on herday in between calls. It is a privi-lege, and one that I am grateful tohave.

But that privilege comes with aprice.

Clay has long griped about thedownside of working from home.Yes, he appreciates the flexibilitythat a home office affords our fam-ily, and loves having me around. Buthe often feels that I allow the officepart to seep too much into ourhome life—emotionally and physi-cally. He gets annoyed when workkeeps me from fully engaging infamily activities. And he sometimesis irritated when I bring my laptopdownstairs to work from the chaiselongue, getting in his way as he goesabout doing the daily housework.

To me, the frustration of a homeoffice is that, basically, you’re per-petually in the office. You step outof your office door right into therest of the house, and sometimesthe work doesn’t get the messagethat it shouldn’t come along. Too of-ten, it follows me around like a clerk

hawking perfume at a department-store cosmetics counter. My familyends up losing my attention; I’mthere, but I’m not there. And itmeans I can’t fully enjoy the plea-sure of family events as well. Workalways seems to beckon, just a fewfeet away.

Part of the problem, of course, isthat I have a lot of work to do. Butface it: So do most people. The big-ger part is that I often feel com-pelled to make sure that I am con-sistently available so no one at themother ship in New York thinks thatI’m slacking off (which, if my bossesare reading this, I’m not).

I also feel that it isn’t fair to askone of my team members who workin the office to take on a particu-larly late-breaking story, when mostof them have a 30-to-45 minutecommute to get home.

But I hit my wall one night notlong ago, as I put our 7-year-old tobed.

“When I grow up, I’m going to berich,” she said to me sleepily. “Thenyou won’t have to work so much.”

As I thought about it more, I re-

alized that I have been the architectof my own problems. It has been fartoo easy to justify quickly checkingone’s email or spending an extrahour or two to work on a project inthe office when the office is only afew feet away. I need to try to setbetter boundaries between my worklife and home life.

Much of the challenge lies inlearning when to turn things off. Af-ter chatting with a few others whowork from home, I have decided tomake a few simple (I hope) changes.

First, barring an emergency or aparticularly important story ordeadline, I am setting a strict eve-ning cutoff time for responding towork-related emails or calls.

I realize that it’s probably some-thing I should have done a long timeago. If it isn’t absolutely pressing,my horse and carriage turns backinto a pumpkin by 7 p.m., and I’mcalling it a night. I realize that I maynot be able to hit that goal everyday, but at this point, I’m not doingit at all, so I’m going to try my best.

Also, I plan to restrict work pa-pers and other work-related materi-

als to the home office. Too often, re-search reports or copies of ourpublications seep into the livingroom, our bedroom or the kitchen.If it isn’t there, I can’t read it.

At the end of each workday, Ialso plan to spend 10 to 15 minutesjust organizing my desk and pullingtogether a to-do list for the follow-ing morning.

By doing so, I hope that I canbring a sense of closure to my daybut also feel more relaxed and orga-nized about my game plan for thenext day.

One friend also suggested that Ispend a few weeks documenting myhours and what I do each day. If Istep away for an extra hour or 30minutes to tackle a personal task,then I should make sure I add thattime back into the end of the day orlater in the week.

“You’ll get a better sense of howmuch time you actually spend work-ing,” she said.

It may not be easy, but with afew small changes I think I can do abetter job of keeping work in the of-fice, where it belongs.

BY LAURA KREUTZER

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 3

NEWS

Obama’s Trials on World StageWhat had been shaping up to be

a routine meeting of world leadersnow poses one of the fiercest testsyet of President Barack Obama’sleadership on the world stage, com-ing off his surprise decision to delaya U.S. military strike in Syria.

Mr. Obama will arrive in Russiaon Thursday for a Group of 20meeting that will be dominated bydebate over a Syrian war that tookan unexpected twist over the week-end when the president said hewould seek a vote in Congress be-fore striking the regime of PresidentBashar al-Assad in response to al-leged chemical-arms attacks.

Some allies have voiced dismayover Mr. Obama’s announcement,while foes of the U.S. ridiculed himfor failing to enforce his own “redline” on the use of chemical weap-ons.

That dynamic could lead to someawkward moments as Mr. Obamatries to round up partners for a mil-itary strike in Syria while reassuringallies like Japan, South Korea andSaudi Arabia, who may be wonder-ing about the American president’sresolve to back them up during anycrisis. France remains the lone Eu-ropean country willing to carry outmilitary strikes as part of a possiblecoalition with Washington.

“That was the unfortunate thingabout the president’s announce-ment,” said Steven Pifer, a seniorfellow at the Brookings Institution.“The signal to many is going to behesitance and indecision. If he wasgoing to ask Congress, it would havemade sense to bring Congress intothe game a week ago.”

Hosting the summit is RussianPresident Vladimir Putin, whosesupport for the Assad regime hashardened a rift with the U.S.

Mr. Obama will try to reasserthis leadership on the world stage,making the case that any U.S. mili-tary reprisals will have greater con-stitutional authority if backed by avote in the U.S. Congress.

“We’re making a political argu-ment that the country’s strongerwhen these things are done withCongress’s support,” a senior Obamaadministration official said. “That’sthe preferred course of action.”

An aide to an Israeli cabinet min-ister said many officials worried af-ter Mr. Obama’s announcement thatWashington might not be preparedto enforce similar warnings to Iranover its nuclear program. Prime Min-ister Benjamin Netanyahu has askedcabinet ministers not to speak outagainst the U.S. president, fearing itcould harm ties between the twoleaders, the aide said. Israel isn’t aG-20 member.

Mr. Obama’s itinerary at onetime included a stop in Moscow tomeet with Mr. Putin, but differencesover Syria were among reasons Mr.Obama canceled those plans. Thetwo also were at odds over Russia’sdecision to give asylum to NationalSecurity Agency leaker EdwardSnowden.

The war of words between theKremlin and the White House overSyria has shown no signs of abating.On Monday, Russian Foreign Minis-ter Sergei Lavrov dismissed U.S. evi-dence of the Assad regime’s allegedchemical-weapons use. Speakingduring a public appearance, Mr. Lav-rov said there was “nothing con-crete” in the information the U.S.has shown Russia on the use of suchweapons by the Syrian government.

No informal meetings betweenMessers. Obama and Putin are

scheduled during the two-day sum-mit in St. Petersburg, an Obama ad-ministration official said.

Mr. Obama also faces a difficultchallenge back home. He mustround up the votes in Congress toauthorize the strike. Complicatingthat effort, he will be out of thecountry from Tuesday through Fri-day. If he fails and if other domesticpriorities such as an immigrationoverhaul remain stuck in Congress,he runs the risk of looking like alame duck.

“If by Christmas Congress rejectsthe intervention in Syria and he’snot able to do some deals on domes-tic affairs with Congress, he’ll be avery weakened president,” saidDouglas Brinkley, a Rice Universityprofessor and presidential historian.“So he has a very fluid and impor-tant three months ahead of him.”

Other countries attending thesummit meeting in St. Petersburghope to use the forum to end theSyrian crisis. On Tuesday, FrenchPresident François Hollande andGerman President Joachim Gaucksought to rally public and diplo-matic support ahead of the summit.The two seized on a joint news con-

ference in Paris to call for actionagainst Syria.

“When chemical massacre oc-curs…there must be a response,” Mr.Hollande said.

“We find it unacceptable that adictator can act with impunity andbreak such a taboo,” Mr. Gauck said,calling on world leaders to “find anappropriate response.”

Many of France and Germany’sEuropean allies are divided overwhat course of action to take inSyria. France has called for strikesin tandem with the U.S. while Italyhas called for a U.N. resolution be-fore any military action is takenagainst the regime.

Mr. Hollande said Europeancountries planned to meet on thesidelines of the G-20 summit to dis-cuss Syria and broaden support forstriking the regime.

Mr. Gauck reiterated that Ger-many is pushing for an “interna-tional agreement” on Syria, and henoted that Berlin has refrained fromtaking a harder line against the As-sad regime for “historical reasons,”an apparent reference to Germany’sWorld War II legacy. However, hesaid, Germany and France “are abso-lutely on the same page.”

Officials from Turkey, which hasin recent days called for militarystrikes with a goal of regime changein Damascus, have said Ankarawould lobby its allies on Syria at themeeting, but weren’t hopeful of adiplomatic breakthrough.

“We won’t allow the importantG-20 agenda items to be overshad-owed but we will take the opportu-nity to discuss our views on Syria

with our allies,” said a Turkish for-eign ministry spokesman.

Turkish Prime Minister RecepTayyip Erdogan, who will lead hiscountry’s delegation, heads to thesummit as one of the world leaders’most hawkish voices on Syria.

Energy-dependent Turkey’sstrong commercial ties with Russia,the world’s largest gas supplier,have been strained by the Syrianconflict, as Ankara’s regional ambi-tions have expanded into regionswhere Moscow is sensitive to itswaning influence.

Analysts stress that the coun-tries have thus far been able toavert a full-blown diplomatic crisisbecause of the crucial commercialand strategic relationship betweenMoscow and Ankara.

Turkish officials are concernedthat the country’s 565-mile longborder with Syria could be vulnera-ble to a retaliatory attack from Da-mascus if a U.S.-led strike againstMr. Assad’s government occurs. Tur-key has in recent days moved to for-tify the border with heavy armorand moved its troops to a height-ened state of alert.

Supporters of military actionagainst the Assad regime seem un-likely to get much support from theArab League after Saudi Arabia, apassionate advocate of tough inter-national action, struggled on Sundayto assemble an Arab coalition thatwould give the U.S. political backingfor airstrikes.

—Carol E. Lee, Stacy Meichtry,Anton Troianovski, Charles

Levinson, Joe Parkinson and PaulSonne contributed to this article.

BY PETER NICHOLAS

Two women are stopped outside the Swedish Parliament in Stockholm ahead of Barack Obama’s visit on Wednesday.

AssociatedPress

Emerging MarketsSeek Attention atG-20 Summit Too

Leaders from the Group of 20economies have been preoccupiedby Syria ahead of their summit thisweek, but some are hoping to find away to steady the suddenly shakyfortunes of emerging markets.

In recent years, most of the eco-nomic threats tackled by the G-20have stemmed from large flows ofcapital from developed countries todeveloping ones. But now that flowhas begun to reverse, posing newchallenges to the global recovery.

The turnaround has acceleratedin recent weeks as investors antici-pate an end to the U.S. Federal Re-serve’s period of extraordinary mon-etary stimulus this year. The resulthas been sharp falls in developing-country currencies.

The Organization for EconomicCooperation and Developmentwarned that an already subdued re-covery in global economic growthcould be weakened further if theoutflow of capital from developingeconomies intensifies.

Some leaders are hoping thatthe issue can still be addressed,even if the meetings in St. Peters-burg on Thursday and Friday aredominated by the crisis surroundingthe alleged use of chemical weap-ons in Syria’s civil war.

For instance, a person familiarwith Brazilian President Dilma Rous-seff’s thinking said she hopes thesummit will produce agreement onways to ease the impact of the an-ticipated change in Fed policy.

Brazilian officials say they havethe backing of other developingcountries in seeking moves to ad-dress recent currency volatility, al-though they are unclear aboutwhich among the G-20 memberswill be offering support.

In particular, they want the Fedto improve the way it communi-cates its intentions to reduce mar-ket swings.

With the U.S. government focus-ing on efforts to boost support forits approach to Syria, those devel-oping economies may be left frus-trated. But even without Syria, theU.S. would have been unlikely tomake major concessions, econo-mists say.

“Other than a vague commit-ment to take into account the ef-fects of its monetary policy onother countries, the Fed is in prac-tice likely to make no concessionsto developments elsewhere,” saidCapital Economics, a London-basedresearch firm.

In recent months, German offi-cials have pushed G-20 nations toagree to hard targets for reducingdebt after the current deficit-cuttingagreement expires in 2016. But theeffort ran into strong U.S. opposi-tion when finance ministers met inJuly, with Treasury Department offi-cials insisting that the priority hadto be boosting jobs and growth asopposed to reducing debt.

A U.S. administration official saidan overriding U.S. goal at the sum-mit is persuading other nations thatthey need to help boost demandworld-wide. Global demand is “im-proving,” but “remains weak,” theofficial said.

Beyond that, the U.S. wants tomake progress toward another goal:cracking down on tax evasion.

That issue was front-and-centerat a separate meeting of the Groupof Eight nations in Northern Irelandin June.

—Paul Hannonand Paulo Trevisani.

Mr. Obama will make thecase that U.S. militaryreprisals will havegreater authority ifbacked by Congress.

26 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

HEARD ONTHE FIELD

SPORT

Time for Zimbabwe to Cough UpRejoining InternationalCricketWon’tMeanMuchUnlessPlayersCanMakeaLiving

Zimbabwean cricketing history,it seems, repeats itself first as farce,and then as farce again, with just atinge of tragedy thrown in. As Zim-babwe started the first of its two-Test home series against PakistanTuesday, the national board finds it-self millions of dollars in debt, itsplayers haven’t been paid even thenugatory sums they’re due, playerstrikes have been and still are beingthreatened, and the debilitatingplayer drain that has long bedeviledthe country continues apace.

If this all sounds wearily famil-iar, it is because this is the exactsame laundry list of problems thathave affected Zimbabwean cricketfor the best part of a decade. Thecountry might have been rehabili-tated back into Test cricket back inAugust 2011 after a six-year hiatus,and it might deliver the odd encour-aging performance, such as its re-cent win in the first One-Day Inter-national against Pakistan, but thesame issues rear their heads be-cause the reasons behind them—andparticularly the people behindthem—have never gone away.

Zimbabwe continued throughoutits self-imposed Test exile to be afull member of the InternationalCricket Council—the status given tothe Test-playing nations, of whichthere are only 10—and to enjoy thegenerous financial support that goeswith it. Despite that, ZimbabweCricket is $18 million in debt, do-mestic competitions barely splutteralong, and the players—the board’smost important employees—haven’treceived their salaries recently.

In protest, the players have re-cently threatened to boycott boththe final ODI and the first Test be-

fore agreeing to play on, at onepoint refusing to train. Two players,leg-spinner Graeme Cremer andbatsman Sean Williams, have madethemselves unavailable as a result ofthe current dispute. Endless negoti-ations with ZC have been led by fivesenior players, including currentcaptain Brendan Taylor and formercaptains Prosper Utseya and EltonChigumbura; the Zimbabwe playersare also talking about setting up aunion to represent their interests,including their demands for mean-ingful match fees.

The one critical thing that hasn’thappened yet is the board actuallypaying them, and until it does sothe dispute is just going to rumbleon. ZC is now saying it will pony upbefore the second Test, which startson Sept. 10, something the playersare currently having to take ontrust. Even if it does so, history sug-gests that it won’t be long beforethe problem occurs again.

Even when the players do getpaid, they don’t get much. Back inApril this year, a number of non-contracted players threatened not tosign the cricketing equivalent of azero-hours contract, offering them afew dollars a day, plus match fees ifthey were lucky, to play for theircountry.

These aren't the conditions un-der which professional internationalsportsmen expect to toil, particu-larly when they can earn moremoney playing club cricket overseas.That is precisely what the team’sbest bowler, 24-year-old Kyle Jarvis,has recently chosen to do, takingemployment with domestic teams inEngland and New Zealand becauseplaying for his country doesn’t guar-antee him a stable livelihood.

But he is only the latest in a long

line of players to do something sim-ilar—batsman Craig Ervine did so inApril. Indeed you could make sev-eral fine international sides fromthe players lost to Zimbabwe in thisway over the past decade. In factyou can almost test the health ofZimbabwe cricket by looking at therate of defections.

It was at its height just beforethe crisis in the middle of the previ-ous decade that resulted in theteam’s withdrawal from Tests. Be-fore that sorry period began, a teamfilled with stars—such as fast-bowl-ing all-rounder Heath Streak and

wicketkeeper-batsman Andy Flower,whose average of 51.54 from 63Tests puts him in the highest cate-gory—had been in the process of es-tablishing itself at cricket’s top ta-ble. What brought it down werearguments over the way the boardmanaged its players and in particu-lar the way it paid them, resultingin a mass player exodus and a once-strong team reduced to abominablealso-rans.

The recent ODI victory showsthat the talent is still there today.There was some useful seam bowl-ing up front throughout the three-match series, particularly from Ti-nashe Panyangara and TendaiChatara although, in the absence ofJarvis, the team’s bowling lacksdepth and struggled in the latterhalf of each innings. The batting is

likewise full of promise, but isoverly reliant on Taylor and the on-form Hamilton Masakadza.

But it doesn’t matter how muchtalent the team has. As if the play-ers’ constant uncertainty abouttheir own futures, particularly fi-nancial, weren’t enough, the team’schances are also hampered by thechronically inadequate amount ofinternational cricket it plays. It istrapped in a vicious circle: BecauseZimbabwe isn’t very good, no onewants to play against it, so itschances of making money from se-ries against marquee sides are slim.

For all those reasons, the hometeam’s chances in the Test series ofpulling off an upset similar to itslone ODI victory are equally slim; agreat performance or two can swinga limited-overs game, but over fivedays the stronger team overall willusually triumph. And there is nodoubt which team that is: A collec-tion of demoralized players, wran-gling with their employers overmoney, seeing a continual trickle oftheir colleagues head away to lessstressful and better remuneratedpastures, simply don’t have the fire-power to overcome an experiencedPakistan side. Pakistan is fourth inthe world and boasts a consistentbatting lineup and probably theworld’s best spinner in Saeed Ajmal.

The Zimbabwe players face manyof the same problems as their pre-decessors, and probably as theirsuccessors too. The talent is therebut money and structure aren’t—those things are the board’s respon-sibility, and the Zimbabwe boardunder the current management hasfailed to deliver them for almost adecade now. The solution, if Zimba-bwean cricket wants to move for-ward, would appear to be obvious.

BY RICHARD LORD

Zimbabwe bowler Tendai Chatara in action on the opening day of the first Test against Pakistan at the Harare Sports Club on Tuesday.

AgenceFrance-Presse

Chances of making moneyfrom series againstmarquee sides are slim.

Nadal Returns for SpainIn Davis Cup Playoff

Rafael Nadal will play in the Da-vis Cup for Spain next week forthe first time since winning the2011 final.

He will team with Tommy Ro-bredo, Fernando Verdasco andMarc Lopez for the World Groupplayoff against Ukraine at Madrid’sCaja Magica from Sept. 13.

Nadal last played for Spain inDecember 2011, when he won thefourth and final point of the DavisCup final against Argentina inSeville, earning Spain its fifth title.Nadal’s absence has been due inpart to a knee injury that sidelinedhim for seven months last season.

Spain captain Alex Corretja saidTuesday it will be a pleasure tohave Nadal back as he alwaysspreads “vitality and optimism” tohis teammates.

The defending champion CzechRepublic will be represented byTomas Berdych and RadekStepanek, who will team up for thefirst time this year in next week’ssemifinal against Argentina.

—Associated Press

Saudi Prince Buys IntoLowly English Club

A Saudi Arabian prince has be-come the joint owner of Englishsoccer club Sheffield United.

Prince Abdullah bin Mosaad binAbdulaziz Al Saud has bought halfof the third-tier club from KevinMcCabe and will become co-chair-man.

The 47-year-old prince, who is agrandson of Saudi Arabia’s founder,King Abdulaziz, says he’s investingin “a sensibly-organized, family andcommunity club with a great his-tory and heritage.”

Financial details were not dis-closed by the northern English club,which was founded in 1889. —A.P.

Blatter Doubtful OverBale Record Transfer

FIFA President Sepp Blatterdoubts whether Gareth Bale wasworth a world-record €100 million($132 million).

Real Madrid made the Welshwinger the most expensive foot-baller in history when he wassigned on Sunday from Tottenham.

Blatter said on Tuesday, “if aplayer is the value of that, I doubt,I doubt, but I cannot stop this.”

The transfer fee was at oddswith the economic hardships inSpain, which has been in recessionfor much of the past four years.

Blatter said “when you say thecountry is a poor country or in-debted, but in football you alwaysfind money... this is the marketand we cannot intervene in thismarket.” —A.P.

HEARD ONTHE PITCH

Agence France-Presse/Getty Images

FIFA’s Sepp Blatter on Tuesday

2 | Wednesday, September 4, 2013 AM IM UK SW FR IT SP TK BR PL IS AE GR THEWALL STREET JOURNAL.

PAGE TWO

i i iBusiness & Finance

n New registrations data fromEurope’s biggest car markets showthat a near six-year slump in salesstill hasn’t leveled off. 15

n Asian stocks and currencies areclawing back some of their hugelosses from the recent exodus ofcapital from emerging markets. 15

n Few projects are as importantto the future of Stockholm’s hous-ing market as the plan to reinventthe Royal Seaport. 15

n Nokia’s decision to sell itshandset business to MicrosoftCorp. closes the latest chapter inits 148-year history of reinventingitself amid crisis. 16

n Nokia’s proposed $7 billiondeal to sell its cellphone businessleaves behind 56,000 employeesand a set of businesses focusedmainly on making network equip-ment for cellphone operators. 16

n Nokia chief Stephen Elop isback at Microsoft to help shapethe legacy of the software giant’slongtime boss, Steve Ballmer, andpotentially take his job. 17

n One of London’s newest sky-scrapers has been reflecting an in-tense beam of sunlight onto pe-destrians and traffic, forcingdevelopers to fix the problem. 18

n Standard & Poor’s says in acourt filing that a lawsuit filed bythe Justice Department was in“retaliation” for stripping the U.S.of its triple-A credit rating. 20

n The Verizon Wireless Pact isexpected to generate $500 millionor more in total fees for advisersand those performing other func-tions to facilitate it. 21

n Bank of America is selling itsremaining stake in China Con-struction Bank for up to $1.5 bil-lion, marking the end of an era forWall Street banks that invested intop Chinese banks. 22

i i iWorld-Wide

nWhat had been shaping up tobe a routine meeting of worldleaders now poses one of thefiercest tests yet of Obama’s lead-ership on the world stage. 3

n Some G-20 leaders are hopingto find a way to steady the sud-denly shaky fortunes of emerging-market economies. 3

n Tourists have been flockingthis year to the euro zone’s south-ern vacation spots, boostingstruggling economies. 4

n Tour de France cyclists livelonger than the general populationand die from heart-related ail-ments less often, damping con-cerns that extreme exercise in-creases cardiovascular risks. 4

n An unusual monetary policymix that Denmark introduced todefend the country’s fixed ex-change rate is helping to shield itfrom market turbulence, the coun-try’s central-bank governor said. 5

n The last session of the Germanparliament turned into a face-offbetween chancellor candidates. 5

n Some borrowers in the U.S.who have gone through a foreclo-sure, bankruptcy or other adverseevent are eligible to receive a newmortgage backed by the FHA afterwaiting as little as one year. 6

n A growing body of economicresearch suggests that the longerthe unemployed remain on thesidelines, the less likely they willbe to work again. 7

n Syrian rebels are still waitingfor U.S. weapons, three months af-ter President Obama authorizedthe CIA to arm moderate fightersbattling the Assad regime. 8

n One of Syria’s top diplomatscalled for dialogue with the U.S.—while threatening retaliation—asWashington weighs militarystrikes against his country. 9

What’s News—

Readers’ Choices

1. Microsoft to Acquire NokiaMobile Business2. A Guide to the Perfect Nap3. Opinion: The Politics of theObama Delay on Syria4. U.S. Still Hasn’t Armed SyrianRebels5. Opinion: Stephens—The RobertTaft Republicans Return6. Religious Dorms Sprout Up7. Syria Prepares for U.S. Attack8. Israel Says It Held Joint MissileTest With U.S.9. Opinion: Eliot A. Cohen—TheStakes on the Syria Vote10. Opinion: California’s Union-Sponsored War on Farmers

Microsoft Buys Nokiaeurope.wsj.com

‘This is definitelymajor news forNokia, Nokiaemployees andFinland.’Nokia Chairman Risto Siilasmaa saidafter the Microsoft acquisition.

IFA Berlin

Latest news and analysisfrom the Berlin consumerelectronics show.europe.wsj.com/tech

Best of the Blogs

Soccer moms and dadsmay soon be driving instyle. British sports-carmaker Jaguar revealed asketch that hints at howits new C-X17 conceptvehicle will look–and theimage looks a lot like anSUV.View online today atblogs.wsj.com/speakeasy

ONLINE TODAY

French President François Hollande speaks with students as he visits the school Michelet for the start of the school year,in Denain, northern France, on Tuesday.

AssociatedPress

SUBSCRIBETODAY

Advertising Sales worldwide through Dow JonesInternational. Frankfurt: 49 69 29725 390;London: +44 20 7573 4060; Paris: 331 40 17 17 01.Printed in Belgium by Concentra Media N.V.Printed in Germany by Dogan Media Group / Hür-riyet A.S. Branch Germany. Printed in Switzerlandby Zehnder Print AGWil. Printed in the UnitedKingdom by Newsprinters (Broxbourne) Limited,Great Cambridge Road, Waltham Cross, EN8 8DY.Printed in Italy by Telestampa Centro Italia s.r.l.Printed in Spain by Bermont S.A. Printed in Israelby Jerusalem Post Group. Printed in Turkey byDunya Super Veb Ofset A.S. Printed in Poland byPolskapresse Printing Division.Registered as a newspaper at the Post Office.Trademarks appearing herein are used under licensefrom Dow Jones & Co. ©2013 Dow Jones & Com-pany. All rights reserved. Editeur responsable. TracyCorrigan M-17936-2003. Registered address:Avenue Cortenbergh 60, 1040 Brussels, Belgium

THE WALL STREET JOURNAL EUROPE(ISSN 0921-99)222 Grays Inn Road, London, WC1X 8HB

FOR ISSUES RELATED TO SERVICE:CALL +44 (0) 20 3426 1313EMAIL subs.wsje@dowjones.comWEB service.wsje.com

CALL +44 (0) 20 3426 1313VISIT wsjeuropesubs.com/wsje

THEWALL STREET JOURNAL. Wednesday, September 4, 2013 | 27

OFF THE WALL

Try to Unwind by Throwing an AxToronto League Allows the Corporate Crowd to Bury Hatchets; Finding Your Inner Viking

It didn’t take James Watson longto get back into form after atwo-year absence from his regu-

lar Tuesday night league.“I’ve got my swing down” again,

he says.He’s not swinging a softball bat

or a golf club. Instead, Mr. Watson,owner of an events-planning con-sulting firm, hurls freshly sharp-ened axes at targets in a warehousein an industrial park here.

Toronto’s Backyard Axe Throw-ing League, or BATL, was bornseven years ago in the backyard of34-year-old Matt Wilson, after aweekend of throwing axes at treesat a friend’s lakeside cottage. It isnow a 128-member, four-nights-a-week league.

The core die-hard ax hurlerscompete under names like “Arm,”“Diamond” and “Killface.” Theykeep meticulous statistics and trackone another’s career scoring.

“Everybody on earth lovesthrowing an ax. They just don’tknow it yet,” says founder Mr. Wil-son, a former bartender withgroomed mutton chops and lots oftattoos. “Once you throw one andsink it in there, you’re hooked.”

Mr. Wilson, who now runs hisax-throwing operation full time,says he has had to cap membershipas he finishes an expansion into anew space. Until then, there is awaiting list to throw at his 140-square-meter space. He says thebusiness is profitable but declinedto be specific.

Key to the league’s success arethe six or more private events itbooks each week.

FreshBooks, which providesWeb-based accounting software,has held several company events atMr. Wilson’s warehouse.

“I didn’t come last year becauseI thought, ‘Over my dead body,’ ”says Jaclyn Tanner, a support spe-cialist at the firm. But at a recentevent, she found her inner Viking—sinking axes into a wooden bull’s-eye at the end of one of the cen-ter’s throwing “lanes.” By the endof the day, she had made it into thetop eight of the round-robin tour-nament.

The art of ax throwing is a sta-ple of Viking-themed re-enact-ments, Renaissance fairs and lum-berjack expositions andcompetitions. But Toronto’s leagueis arming bankers, attorneys andother white-collar professionals.

Video and motion-graphics edi-tor Meika Henry says BATL hashelped her out professionally. “I’vedone so much networking,” shesays, filing her ax during a recent

league night.A three-hour event costs 40 Ca-

nadian dollars a person, or aboutUS$38, with a minimum of 10 peo-ple required. League fees arearound C$120 for an eight-weeksession. Throwers must be at least18 years old.

The league’s popularity hascome with its share of headwinds.It was forced to move indoors twoyears ago after weekly noise com-plaints, Mr. Wilson says. He says heinitially hung tarp around the out-door area, but the police keptshowing up when axes started fly-ing.

Getting insurance wasn’t easy;one agent required six emergencystaff on site at all times as a condi-tion of coverage. Mr. Wilson sayshe has found more “reasonable” in-surance since then.

He says the league has loggedjust two minor incidents requiringa stitch or two. Staffers are quickto prevent throwers from wander-ing through the warehouse withaxes in hand. Hunks of wood areplaced throughout the space to sinkaxes not in play.

“We promote a responsible at-mosphere,” says Mr. Wilson, whocirculates the room on leaguenights. He has been known to askthrowers acting erratically to leaveor take a break.

Taylor Battista, a regular BATLmember, persuaded his employersat FreshBooks to start holdingteam-building events at theleague’s warehouse two years ago.

“Throwing axes at things is themost satisfying feeling,” Mr. Bat-tista says.

On a recent afternoon, heavy-metal music blasted and a group ofabout two dozen FreshBooks em-ployees started to warm up. Ax-throwing neophytes paired up withBATL staff to go over the basics.

The axes are standard yardhatchets, with a 680-gram headand a 38-centimeter wooden han-dle.

Three key elements to considerwhen throwing an ax: the grip; thestance; and when to let go.

Throwers line up along each offour, 4½-meter lanes, painted in vi-brant colors, ending in standardbull’s-eye targets on wood planks.

To hit its mark and sink into thetarget, the ax needs to make onefull rotation in the air. That re-quires throwers to move forwardor back a step or two, dependingon their size and strength.

Opponents play one-on-one andthrow three rounds of five axes.Throwers must win two out ofthree rounds to win a match. Scor-ing depends on where the ax lands:five points for a bull’s-eye, threefor the middle ring and one for theouter ring.

Play is structured like a mix oftennis, archery and darts—but afew unique elements have come inover the years.

To settle contested shots,throwers call for the “device”—acaliper, or high-precision measur-ing tool. And then there is the“clutch” shot. If players hit one oftwo small green dots on the tar-gets, they rack up seven points.

The crowd-pleaser, though, isthe “big ax,” brought out to settletie matches. It is twice the size of ahatchet and thrown nearly doublethe distance.

Mr. Wilson is set to open a new,

740-square-meter location closer toToronto’s downtown center in Jan-uary. The site will quadruple thenumber of ax throwing lanes to 16,offering more space for leagues,drop-ins and events.

Mr. Wilson says he will be care-ful not to sideline more hard-coreax-throwers in the expansion. Atightknit, competitive group oftradespeople and professionals,they have helped develop an intri-cate system for compiling leaguestatistics.

On regular nights, league mem-bers who aren’t throwing keepscore for matches under way, track-ing wins, losses, perfect games,perfect matches and more. Statis-tics are posted weekly on theleague’s website, and a smartphoneapplication for scoring and trackingcareer statistics is in the works.

Trevor Welsh, a pastry chef andchocolatier who started in theleague’s early days, is one such ax-throwing die-hard.

“There are so many rivalries,”he says, “and so much trash talk-ing.”

BY JUDY MCKINNONToronto

Backyard Axe Throwing League founder Matt Wilson at the group’s warehouse.

Judy

McKinno

n/Th

eWallS

treetJournal(2)

Watch a Video>>Scan this code to seea video about ax-throwing or watchit atWSJ.com/OffTheWall.

Axes at Toronto’s throwing league.

HigH FinancetoHigH FasHionThe most influential business leaders to today’s trendsetters.

Celebrate Off Duty in StyleRead the Off Duty lifestyle section in theEurope edition of The Wall Street Journalevery Friday.

©2013 Dow Jones & Company, Inc. All rights reserved. 3DJ1024

VOL. XXXI NO. 152

WEDNESDAY, SEPTEMBER 4, 2013

Seven Deadly Sins of InvestingIN DEPTH 10-11

Pound/Euro 0.8468 g 0.28% Yen/$ ¥99.43 À 0.08% Global Dow 2207.73 À 0.44% Gold 1412.00 À 1.14% Oil 108.54 À 0.83% 3-month Libor 0.25950 10-year Treasury g 29/32 yield 2.852%

EUROPE EDITION

WSJ.com

$1.75 (C/V) - KES 250 - NAI 375 - £1.70

Roaming Charges

Source: FactSetPhoto: Getty Images

€60

0

10

20

30

40

50

’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

Microsoft CEO Steve Ballmer holds a Nokia Lumia 920 smartphone during aWindows Phone 8 launch event in October 2012.

Tuesday’s close€3.97

up 34%

Nokia's share price reflects its struggles in a changingmarketplace (weekly data)

€60

0

10

20

30

40

50

’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

Tuesday’s close€3.97

up 34%

Record closeJune 20, 2000€64.88

Support Grows forU.S. Strike on Syria

WASHINGTON—Top law-makers from both partiesemerged from a meetingTuesday with President Ba-rack Obama saying they willsupport military action inSyria to deter the future use

of chemical weapons, pushingthe U.S. closer to militarystrikes against the regime ofPresident Bashar al-Assad.

House Speaker John Boeh-ner (R., Ohio) said after themeeting that only the U.S. hasthe capability to stop Mr. As-sad and warn others about theuse of chemical weapons.

“This is something that theUnited States as a country

needs to do—I’m going to sup-port the president’s call foraction,” Mr. Boehner said.

He added, “I believe mycolleagues should support thiscall for action. We have ene-mies around the world thatneed to understand that we’renot going to tolerate this typeof behavior. We also have al-lies around the world and al-lies in the region who alsoneed to know that Americawill be there and stand upwhen it’s necessary.”

The president and otheradministration officials metwith 16 key lawmakers at theWhite House to make the casefor congressional authoriza-tion of military action against

Please turn to page 8

Friction at Zurich BuiltIn Months Before Death

Long-simmering frictionbetween the chairman andchief financial officer of Zu-rich Insurance Group AG es-calated this summer as thetwo tussled over how to ex-plain the company’s disap-pointing progress towardmeeting certain business tar-gets, according to companyofficials familiar with the sit-uation.

The sometimes-heated ex-changes between Josef Acker-mann, who became chairmanin 2012, and CFO Pierre Wau-thier didn’t strike Zurich offi-cials as problematic. Then,last week, Mr. Wauthier com-mitted suicide at his lakeside

home outside Zurich.He left a typed note blam-

ing Mr. Ackermann for creat-ing an unbearable, pressure-cooker working environment,and for treating colleaguesdisrespectfully, according topeople familiar with the note,which hasn’t been released.

Mr. Ackermann, a hard-charging former investmentbanker who became Zurich’schairman after a long careeras the chief executive ofDeutsche Bank AG, abruptlyresigned.

Clearly distraught, he toldstunned board members lastWednesday that his positionas chairman had become un-tenable, according to peoplefamiliar with the events. Thenhe insisted on releasing a

public statement that saidsome people held him respon-sible for Mr. Wauthier’sdeath—an allegation he re-jected.

The extraordinary eventshave left their mark on allparties. They have stained theprofessional reputation of Mr.Ackermann, one of Europe’smost prominent financiers,and shaken investor confi-dence in Zurich, one of theworld’s largest insurancecompanies.

Despite the suicide note,Mr. Wauthier’s broader stateof mind remains unclear. Nei-ther the directors nor otheremployees had detectedwarning signs about Mr. Wau-thier, company officials say.

Please turn to page 20

BY DAVID ENRICHAND ANDREW MORSE

By Jared A.Favole, ColleenMcCain Nelson

and Patrick O’Connor

Microsoft Makes Call: NokiaMicrosoft Corp. made a

case Tuesday for its $7 billiondeal to acquire Nokia Corp.’sstruggling cellphone unit, atransaction that solidifies thesoftware giant’s position as adistant No. 3 in the smart-phone market.

But the initial reaction wasmixed at best, given the longodds both companies face incatching to market leaderslike Apple Inc., Google Inc.and Samsung Electronics Co.Microsoft’s stock sank 6% inmidday trading.

The deal comes on theheels of Microsoft’s an-nouncement that Chief Execu-tive Steve Ballmer will retireas soon as a successor isfound. The company’s laggingposition in mobile is one ofthe most serious threats Mr.Ballmer’s successor will needto tackle.

For Nokia, the onetimeleader of the mobile-phonebusiness, the deal is a capitu-lation to the harsh realities ofits deteriorating position—asign that management con-cluded it is unable to take onrivals like Apple and Samsungon its own.

The companies said lateMonday that Microsoft willpay €3.79 billion ($5 billion)

to buy “substantially all” ofthe Nokia business, which in-cludes its smartphone opera-tions. The Redmond, Wash.,company will also pay €1.65billion to license Nokia’s pat-

ents, the companies said,bringing the deal to €5.44 bil-lion, or $7.18 billion.

As part of the deal forNokia’s devices-and-servicesbusiness, Microsoft will bring

aboard 32,000 Nokia employ-ees including CEO StephenElop, who is believed to beamong the contenders for Mr.Ballmer’s job.

Nokia was already Micro-

soft’s closest partner insmartphones, with the ailingFinnish company one of thebiggest supporters of Micro-soft’s phone software.

During a conference call

Tuesday morning, Mr. Ballmersaid the companies were look-ing ahead to negotiations in2014 about ways to modifythe partnership they struck in2011. But they concluded thatan outright acquisition by Mi-crosoft was the best way for-ward.

“It’s quite complicated, butwe have been talking for awhile about where we wantedto go,” Mr. Ballmer said. “Wethink we have made excellent,excellent progress with thepartnership and yet we alsoknow we have a long way togo and felt in balance that to-gether this is the best ap-proach for both companies’shareholders.”

Mr. Elop has been hackingcosts out of Nokia in the threeyears since the Finnish com-pany agreed to tether itselfexclusively to Microsoft’sWindows Phone operatingsystem. But while Mr. Elophas promised that Nokia’s op-erating expenditures for itsphone business will be cut tohalf the 2010 levels by theend of this year, analysts sayNokia’s phone sales havefallen even faster.

Please turn to page 17

BY SHIRA OVIDEAND SVEN GRUNDBERG

More coverage in Business &Finance................................... 16, 17

Heard on the Street: Weaksignal by Microsoft, Nokia 28

‘Club Med’ cashes in astourists avoid NorthAfrica hot spotsEurope News.............4

It’s good to talk: Youngsales teams rely toomuch on technologyPersonal Journal....25

Try to unwind—bythrowing an axOff the Wall ............ 27

Inside

Related news and opinion onpages 3, 8, 9, 13, 14

28 | Wednesday, September 4, 2013 THEWALL STREET JOURNAL.

HEARDON THE STREETEmail: heard@wsj.com FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard

VodafoneHoldersCollaredBy Terms

Before Vodafone share-holders haul home their win-nings from the Verizon Wire-less deal, they should bewarea potential hole in theirmoney bag.

When Vodafone gets $130billion from Verizon Commu-nications for its 45% stake inVerizon Wireless early nextyear, the U.K. firm plans topay its shareholders a specialdistribution. Some $23.9 bil-lion of that will be cash, withthe other part coming in Veri-zon Communications shares—valued at $60.2 billion basedon Friday’s close.

Normally, the value of theshares would move up ordown with the market beforeany deal closes. But in rarecases, a buyer uses a so-calledcollar to keep the value of thedeal steady. It works like this:The number of shares declinesif the buyer’s stock goes up, orincreases if the stock goesdown. The collar almost al-ways applies within a certainrange of share prices, with theupper and lower limits equi-distant from the most recentprice, says Mark Kelly of Ol-ivetree Financial Group.

But Verizon has negotiateda collar that works to its ad-vantage. The key is that whilethe collar’s maximum is $51 ashare, the minimum is $47—just below Friday’s closingprice of $47.38. That meansthe collar only protectedVodafone shareholders againsta 38-cent drop in Verizonshares at the deal’s announce-ment. If the stock fell below$47, the number of shareswouldn’t change and the valueof the payment would fall.

In contrast, if Verizon’sstock rises, the number ofshares will decline until thestock surpasses $51. As a re-sult, shareholders would missout on a potential 7.6% rise inVerizon shares from $47.38 to$51, which equals $4.6 billion,or six pence (9.3 cents) a share,for Vodafone shareholders.

Things already lookedworse in midday trading Tues-day, when Verizon was tradingbelow $46. That meant thecollar gave Vodafone share-holders no protection fromany decline in Verizon sharesand prevented them from par-ticipating in any rise between$47 and $51.

The collar is troubling forVodafone shareholders be-cause Verizon’s stock spentonly a few weeks of this yearabove $51. The stock is down15% from its high in April.With competition from U.S. ri-vals Sprint and T-Mobile heat-ing up, the collar may leaveVodafone shareholders in asweat. —John Jannarone

Weak Signal by Microsoft, NokiaSteve Ballmer couldn’t

leave his successor without asmartphone strategy. That isthe real reason he had to buya chunk of Nokia. Meanwhile,Microsoft’s retiring chief ex-ecutive also brings in a logicalcandidate to replace himself.

But the deal also is essen-tially an admission of Micro-soft’s weakness.

In buying Nokia’s devicesand services segment for $7.2billion, Microsoft joins Appleand Google as smartphonesoftware makers that also de-sign their own hardware.

Yet it seems the main rea-son for the deal is that, with-out more financial firepower,Nokia never could hope tocompete. And with their stra-tegic partnership deal set toexpire in 2014, and Nokiastruggling to justify continuedinvestment in handsets, Mi-crosoft was facing a dilemma.Were Nokia to dial back itsmobile ambitions, Microsoftwould lose the toehold it hasin the smartphone market:More than 80% of Windowssmartphones sold are de-signed by Nokia.

Microsoft says it will grab15% of the smartphone marketby 2018, claiming this meansthe assets it is buying areworth double what it is pay-ing.

But that would represent ahuge increase in marketshare. In the year throughJune, Google’s Android oper-ating system powered 75% ofsmartphones world-wide,with Apple’s iOS grabbing afurther 17% share, accordingto Strategy Analytics.

Microsoft’s WindowsPhone operating system hadjust 3% market share—the av-erage since 2010, despite de-cent sales of Nokia’s Lumialine of devices. It is hard tosee that rising fivefold givenhow badly Microsoft lags be-hind Google and Apple in at-tracting developers to makethe apps that are critical to

attracting buyers of smart-phones. In the personal-com-puting world, a huge amountof Windows-compatible soft-ware helped Microsoft estab-lish its dominance. But in thesmartphone world, softwaredevelopers are struggling al-ready to make apps for bothAndroid and iOS.

In trying to solve thischicken/egg problem—need-ing market share to attractdevelopers but needing devel-opers to build market share—Microsoft can deploy its gi-gantic financial resources. Butit will take more than market-ing muscle to get real trac-tion.

Besides a lack of developersupport, Microsoft suffersfrom what Neil Mawston ofStrategy Analytics calls thecompany’s own “glacier-like”pace of development. In high-end smartphones, for in-stance, Mr. Mawston pointsout that Microsoft hasn’t beenable to deliver software thatworks with the fastest mobilechips, unlike Android. At thelow end, it hasn’t been able toreduce costs in order to com-pete: Some Android deviceswholesale for just $35, whilethe cheapest Windows Phonedevice is around $110.

The Nokia deal also fur-ther complicates Microsoft’sbusiness model. Historically,Microsoft relied on outsidehardware makers to deliverits highly profitable softwarein their machines. Now, in ad-dition to designing its owntablet, it will be designing itsown smartphones. And thislatest deal comes in additionto Microsoft’s planned debtinvestment in PC maker Dell.

Add all this up, and Len-ovo, for one, must be reas-sessing its strategic relation-ship with Microsoft,considering it makes its owntablets and smartphones be-sides being the biggest PCmaker by market share.

Indeed, to build market

share in smartphones, Micro-soft likely needs other hard-ware makers to push Win-dows Phone as well. But whywould they commit resourcesto an operating system forwhich they would have to paya license fee and where theywould be competing directlywith Microsoft? Sure, Googlenow has Motorola Mobility inits stable, but at least hard-ware partners don’t have topay for Android.

Set against Microsoft’s $61billion net cash, the deal is atleast pretty small. Moreover,as part of the deal, Microsoftrefugee and current NokiaCEO Stephen Elop will rejointhe company. He was incharge of Microsoft’s mostprofitable product, Officesoftware, before taking thereins at Nokia. He instantlybecomes the front-runner tosucceed the retiring Mr.Ballmer.

But these are fringe bene-fits. This deal both compli-cates and further dilutes Mi-crosoft’s highly profitable,software-based businessmodel.

The added twist is that,despite this, Microsoft’s weakposition in mobile meant ithad little choice but to do itanyway.

—Rolfe Winkler

Nokia’s Investors Need AnswersWhen Stephen Elop lik-

ened Nokia to a burning oilrig in early 2011, investorsdidn’t expect this would behow he would damp theflames: The chief executivehas cast off what was oncethe world’s most valuablehandset vendor and hoppedinto a Microsoft lifeboat.

Nokia agreed late Mondayto sell its devices-and-servicesdivision to its Windows Phonepartner Microsoft for €3.79billion ($5 billion). And Mr.Elop and other senior person-nel will move to Microsoft aspart of the deal. The sharesjumped 34%. But this ishardly a victory for Nokia.

The partnership has fallenfar short of both sides’ expec-tations. The aim was forNokia to move its 34% shareof the smartphone market in2010 to the Windows Phonesoperating system, which had a4.2% share.

Instead, Nokia ditched itsown operating system buttook almost a year to get aWindows Phone device tomarket, costing it valuablesales. By the end of June thisyear, Nokia’s share of theglobal smartphone marketwas a paltry 3%, according toGartner.

Nokia had some negotiat-ing leverage. It could have runthe phone business for cash,rather than the market-sharetargets and volumes that Mi-

crosoft needs to make itsstrategy in the cellphone busi-ness work.

But the price still reflectsthe unit’s woes. At 0.4 timessales, the deal values Nokia’sbusiness just above strugglinghandset makers HTC andBlackBerry. Google paid onetimes sales for Motorola Mo-bility last year. But Microsoft,unlike Google, won’t get holdof its target’s valuable pat-ents. And most analysts val-ued Nokia’s devices divisionat zero.

Nokia must hope investorswill focus on the promise of astronger company. Nokia willhave almost €8 billion in netcash and should be more prof-itable with pro forma 12% op-erating-profit margins, com-

pared with 4% at the end ofJune.

Yet the company isn’thelping shareholders look tothe future by not saying howit intends to use the cash. Re-storing its investment-gradecredit rating, the companyconcedes, is important. Cus-tomers of the telecom-equip-ment business Nokia Solu-tions & Networks demand abusiness partner with a solidbalance sheet considering thelong-term nature of con-tracts.

Equally, if NSN is to beNokia’s core business, it mightsee an opportunity for furtherconsolidation: NSN still is rel-atively small next to Ericssonin an industry where scale iseverything. Rival Alcatel-Lu-cent’s shares rose 9.2% Tues-day.

But shedding further as-sets is also an option Nokiashould consider.

The Finnish company’smapping business HERE is arare, independent competitorto the likes of Google Mapsand TomTom. But it haswasted away in the Nokia sta-ble tethered to WindowsPhone.

Nokia’s board may feel ithas time to consider its nextmoves.

But once the smoke hascleared, investors will rightlydemand answers.

—Renée Schultes

Fight to the FinnishNokia’s share price

The Wall Street JournalSource: Thomson Reuters Datastream

€10

0

2

4

6

8

'11'10 '12 '13

Tuesday:€3.97

Algeta InvestorsGet All Fired Up

Biotechnology stocks arehot property. Amgen’s $10.4billion deal to buy oncology-drug maker Onyx Pharma-ceuticals last week fueled en-thusiasm around the sector,up 40% over the past 12months. Investors should bewary of getting singed.

Take Algeta: Shares in theNorwegian biotech firm are upabout 70% over the past year.

Some fervor around thecompany is justified. U.S. reg-ulators in May approved Al-geta’s first-of-its-kind cancerdrug Xofigo. This uses alpharadiation to attack bone me-tastases related to prostatecancer in a targeted way. Notonly did U.S. approval comeearly, regulators gave Xofigothe nod in a broader range ofcases than expected. And Al-geta has a heavyweight part-ner: Germany’s Bayer.

But Xofigo’s launch couldbe a slow burn. Clinics mustbe licensed to provide thetherapy. Algeta this week said320 U.S. clinics are ready tosee patients. There may beother logistical hurdles re-lated to Medicare reimburse-ment and getting physiciansfrom different specialties likeoncology and radiology towork together. An alternative

to chemotherapy is welcome,but a radiopharmaceuticalmay take time to get tractionwith doctors and patients.

The stock appears pricedfor flawless commercial exe-cution. Amgen paid 11 timesOnyx’s forecast 2014 sales,while Algeta trades at morethan 20 times.

Uncertainty abounds,though. For 2015, the top endof analysts’ revenue forecastsfor Algeta is approaching threetimes the lowest estimate,based on FactSet. That reflectsthe broad range of possibleoutcomes for Xofigo. What’smore, the company’s currentvaluation already implies Xo-figo reaching more than $1.2billion in peak sales in prostatecancer, Deutsche Bank notes.

Getting beyond that re-quires Bayer winning approvalto use Xofigo in earlier-stagepatients, in combination withhormone therapies and inother types of cancer. Most ofthose trials have yet to begin.And Algeta’s pipeline pros-pect—a promising method forattaching an alpha emitter toa cancer-seeking antibody—isin the early stages.

Even successful, innovativebiotechs can get too hot tohandle. —Helen Thomas

Source: Strategy AnalyticsThe Wall Street Journal

Windows PainMarket share for smartphoneoperating systems, world-wide

Nokia Oyj Lumia 1020 handset

80

010203040506070

%

20132012

Android

Apple iOS

Microsoft

Bloomberg

New

s