The Wall Street Journal Europe 2011.08.18

VOL. XXI X NO.
141
Thursday, August 18, 2011
Could Those Hours Online
Be Making Kids Nicer?
PERSONAL JOURNAL 29
U.S. and Brazil
Can Give Europe
ACrisis Lesson
DAVID WESSEL 7
EUROPE
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The obsessive federal
lawyer and the
seahorse ranch.
Off the Wall ............. 31
Syria in global threat
to dissidents, says U.S.
In Depth .............. 14-15
Merkel and Sarkozy
join the tea party.
Editorial ..................... 16
Inside
Fed Eyes Cash
Europe Banks
Have in U.S.
Federal regulators are in-
tensifying their scrutiny of the
U.S. arms of European banks
amid concerns about those in-
stitutions abilities to fund
themselves, according to peo-
ple familiar with the matter.
The Federal Reserve Bank
of New York, which oversees
the U.S. operations of many
large European banks, re-
cently has been demanding
more information from the
banks about whether they
have reliable access to the
funds needed to operate on a
day-to-day basis, these people
said.
The concerns come amid
turbulence in foreign banks
U.S. funding positions, which
have fluctuated wildly in re-
cent months, according to
Federal Reserve data. The
Feds goal is to avoid a repeat
of recent crises during which
banks were unable to gain ac-
cess to enough dollars to pay
maturing debts.
The regulators heightened
attention signals a growing
concern Europes financial cri-
sis could destabilize the U.S.
banking system.
Regulators would be on
watch because a danger
would be loss of liquidity for
certain large banks, particu-
larly in Europe, that depend
critically on access to large
quantities of dollars, said
Darrell Duffie, a derivatives
expert and finance professor
at Stanford University in Cali-
fornia. Mr. Duffie said that
could spill over into the cur-
rency markets and cause large
price movements.
While U.S. banks have rela-
tively small exposures to the
risky government and bank
debt that is at the heart of Eu-
ropes woes, some of the Con-
tinents biggest banks have
major operations in the U.S.
In particular, many European
banks run big trading busi-
nesses in the U.S. that use dol-
lars to fuel borrowing and
lending. Typically, the banks
try to match the flow of loans
to the flow of debt the banks
owe. Problems can occur if
banks cant renew the debt or
if money moves too fast to be
tracked.
Foreign banks that lack ex-
tensive U.S. branch networks
have a handful of ways to
bankroll U.S. operations. They
can borrow from money-mar-
ket funds, central banks or
other commercial banks. Or
they can swap their home cur-
rencies, such as euros, for dol-
lars in the foreign-exchange
market. The problem is, most
of those options can vanish in
Please turn to page 4
BY DAVID ENRICH
AND CARRICK MOLLENKAMP
Russias Vladimir Putin, center, watches a flight at the MAKS airshow in Moscow, which sprouted
more than $1 billion worth of deals. Mr. Putin promised more support for Russias aviation industry.
Meanwhile, as the new Russia marks its 20th anniversary, martyrs are forgotten. Article on page 6
Lift for Russian Aviation
Associated Press
Abercrombie Has Offer
For Star: Shop Elsewhere
With their quick rise to
fame, cast members of MTV
reality show Jersey Shore
have cashed in on a number
of endorsement deals, includ-
ing weight-loss supplements,
alcohol and bronzer.
But heres a first. Teen ap-
parel retailer Abercrombie &
Fitch Co. is offering to pay
Michael The Situation Sor-
rentino not to wear its mer-
chandise.
The New Albany, Ohio,
company released a statement
titled A Win-Win Situation,
in which it stated a deep
concern over the association
between Mr. Sorrentino and
the brand. A&F offered up a
substantial payment to Mr.
Sorrentino to wear an alter-
nate brand.
We understand that the
show is for entertainment
purposes, but believe this as-
sociation is contrary to the
aspirational nature of our
brand, and may be distressing
to many of our fans, the
statement, released late Tues-
day, read.
The company also ex-
tended the pay-to-not-play of-
fer to the other Jersey Shore
reality stars and said it was
urgently waiting a response.
About 45 minutes into the
A&F quarterly earnings call
Wednesday morning, after
Wall Street analysts peppered
executives with endless ques-
tions about inventory and
gross margins, A&F Chief Ex-
ecutive Mike Jeffries chuck-
led. Is no one going to ask
about The Situation? he said.
BY ELIZABETH HOLMES
Michael Sorrentino
A
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France, Germany propose
sanctions using EU funds..... 5
Agenda: Latest European
plan is emotional at best...... 6
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2 THE WALL STREET JOURNAL. Thursday, August 18, 2011
PAGE TWO
i i i
Business & Finance
n The soaring Swiss franc is be-
ginning to nibble away at Switzer-
lands role as a favorite destina-
tion for foreign multinationals
even as the Swiss National Bank
sought again to temper the cur-
rencys rise. 4
n France and Germany increased
pressure on their euro-zone peers
to improve fiscal discipline in the
bloc with a proposal to cut off the
regions wayward spenders from
key EU transfer funds. 5
n Greece could be headed for a
fourth year of recession in 2012,
analysts warned, defying official
forecasts of a recovery and deal-
ing a further setback to the gov-
ernments deficit-cutting plans. 5
n German exchange operator
Deutsche Brse and several lobby
groups strongly rejected a pro-
posed tax on financial transac-
tions that is becoming more con-
crete in Europe. 26
n Maersk warned that new ship-
ping capacity and deteriorating
world economic prospects are
pressuring freight rates. 19
n SABMiller stepped up its pur-
suit of Fosters, announcing plans
to take a $9.97 billion bid for the
Australian beer maker directly to
shareholders, just two months af-
ter the Fosters board rejected the
same offer. 19
n Roche and Daiichi Sankyo won
approval from U.S. regulators for
a new skin-cancer treatment that
promises to shrink tumors and
prolong the lives of patients with
a particular genetic mutation. 19
n Shell said some 660 tons of oil
are still inside a leaking pipeline
in the U.K. North Sea, adding ef-
forts to stop the flow of crude are
taking considerable time in order
to minimize further leakage. 21
n McGraw-Hill is exploring a
separation of its education busi-
ness, which has been struggling
amid state budget cuts, people fa-
miliar with the matter said. 24
n U.S. producer prices rose 0.2%
in July, signaling that inflation
pressures may make it hard for
the Federal Reserve to lift the
economy by easing credit. 9
n Chinas struggle to meet the
growing demands of its middle
class is fueling a sudden surge in
demand for corn, sending vast rip-
ples across the U.S. farm belt and
potentially upending the grains
trade flows around the world. 23
n High levels of volatility in
stock markets last week, triggered
by Standard &Poors downgrade of
U.S. debt and concerns over the
euro zone, led to the third-highest
number of daily trades at the Lon-
don Stock Exchange since data
was made first public in 2006. 25
i i i
World-Wide
n The Vatican published a cache
of internal files documenting the
Catholic Churchs handling of alle-
gations of sexual abuse by a
priestan unusual attempt by the
Holy See to rebut claims it sought
to cover up the alleged abuse. 3
n Britains police watchdog
cleared four senior police officers
of misconduct over their role in
the London polices widely criti-
cized 2006 investigation into
phone hacking at the News of the
World tabloid. 7
n Spains football body said it
has failed to reach an agreement
with player representatives to
cancel a planned two-week strike
starting this weekend, which may
delay the start of the countrys La
Liga championship. 7
n The U.N.-backed tribunal inves-
tigating the assassination of for-
mer Lebanese Prime Minister
Rafik Hariri released the full in-
dictments of four suspects linked
to Hezbollah. 11
n Kurdistan guerillas killed eight
Turkish soldiers and a civilian in
one of the bloodiest days for the
Turkish army since violence in the
countrys restive southeast esca-
lated in July. 12
n Chvez said he plans to nation-
alize Venezuelas gold industry in
bid to take over production and
ramp up international reserves, a
day after plans to bring home bil-
lions in cash and bullion held
overseas were divulged. 12
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Most read in Europe
1. Franco-German Plan Disappoints
2. Ban Lifted on Samsung Tablet
3. Eurobond Debate Rises in
Germany, France
4. Fresh Plan for Europe Crisis
5. Verizon Hopes Google Deal
Calms Patent Spats
Most emailed in Europe
1. Chinese Jews Face Existential
Questions
2. Opinion: Stephens: Lesson From
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3. How to Negotiate Your Salary
4. Mean People Earn More
5. Opinion: The Fall of the
Midwest Economic Model
The Source
bl;ogs.wsj.com/source
With the euro-zone
debt crisis dragging
on, the Swiss
currencys safe-haven
status will hardly be
dented.
Europe debt crisis
Follow the latest analysis
on Europes debt crisis
at wsj.com/europedebt
Question of the day
Vote and discuss: Should
the Swiss National Bank
intervene in the money
markets to weaken the
Swiss franc?
Vote online today at wsj.com/polls
Previous results
Q: Are euro-zone bonds
an effective way to deal
with Europes ongoing
debt crisis?
44%
56%
No
Yes
ONLINE TODAY
Men climb greased poles as part of a celebration on Indonesias independence day at Jakartas Ancol beach Wednesday.
Contestants race up to grab items ranging from buckets to bicycles hanging from the top of the poles as prizes.
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6 DAILY fLIgHtS fROM LOnDOn cItYAIRPORt
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Thursday, August 18, 2011 THE WALL STREET JOURNAL. 3
NEWS
Vatican Publishes Files to Rebut Cover-Up Claims
ROMEThe Vatican published a
cache of internal files on Wednesday
documenting the Catholic Churchs
handling of allegations of sexual
abuse against a U.S. priestan un-
usual attempt by the Holy See to re-
but claims that it sought to cover up
the alleged abuse.
Vatican lawyer Jeffrey Lena said
in a statement that the Holy See de-
cided to post the cache on the web-
site of Vatican Radio after a federal
court in Portland, Ore., ordered the
Vatican to turn over the documents
by Friday to lawyers of a man who
alleges he was abused by the late
Rev. Andrew Ronan in the 1960s.
The alleged victim, who is named
John V. Doe in court filings, brought
a lawsuit against the Vatican in
2002 alleging the Holy See acted as
the late priests employer, oversee-
ing plans to transfer Father Ronan
from Irelandwhere his religious
order said it had received com-
plaints of abuse from parents of
childrento archdioceses in the U.S.
The move to release the docu-
ments is a rare step for the Vatican,
a sovereign city-state that has often
said that its internal affairs and ar-
chives are off-limits to foreign au-
thorities.
The Vatican has often been slow
to respond to allegations of sexual
abuse by priests, including the thou-
sands of allegations that emerged in
Europe and other parts of the world
last year, rocking the papacy of
Pope Benedict XVI.
On Wednesday, Mr. Lena said
documents culled from the archives
of the Vaticans office for religious
orders showed that Vatican officials
learned about the possible abuse af-
ter it allegedly occurred in the U.S.
and acted swiftly to dismiss the
priest.
In his original complaint, the
plaintiff alleged he was abused by
Father Ronan in late 1965 or early
1966.
Years of correspondence be-
tween Father Ronans superiors dis-
cussing his alleged abuse of minors
in Ireland were first sent as attach-
ments to the Vatican in February
1966, Mr. Lena said, as part of re-
quest from his religious order to de-
frock Father Ronana request that
was granted weeks later. Father Ro-
nan died in 1992.
The Holy See was not involved
in Ronans transfers, including the
transfer to Portland, and had no
prior knowledge that Ronan posed a
danger to minors, Mr. Lena said.
The plaintiffs lawyers never had
support for their calumnious accu-
sations against the Holy See, he
added.
In a statement, Jeff Anderson, a
lawyer for the plaintiff in the case,
said he hadnt yet received the doc-
umentation ordered by the Portland
court and will reserve comment
until the document production is re-
ceived and reviewed.
The Vatican cache released
Wednesday, Mr. Anderson added,
didnt include documents detailing
its protocols for handling all abuse
cases, which the Portland court also
ordered the Holy See to turn over.
Mr. Lena said he planned to send
those additional documents by Fri-
day, adding that they consisted of
thousands of pages in Latin.
BY STACY MEICHTRY
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EUROPE NEWS
Franc Erodes Swiss Drawfor Companies
ZURICHEven as the Swiss Na-
tional Bank sought again to pull
down the soaring Swiss franc, the
currencys strength is beginning to
nibble away at Switzerlands role as
a favorite destination for foreign
multinationals.
While the tax benefits still
largely outweigh the soaring cost of
running a foreign business in Swit-
zerlandone new study found Zur-
ich and Geneva have the highest
wages in the worldsome compa-
nies are already cutting expat pack-
ages and could decide on bigger
cuts after the summer holidays, say
consultants.
On Wednesday, the SNB said it
would boost banks most readily
available depositsa type of over-
draft available to retail banks who
want itfrom 120 billion Swiss
francs (around $151 billion) to 200
billion francs. The move was the
third effort in the past several
weeks to weaken the franc by flood-
ing the market with liquidity; last
week the bank boosted such so-
called sight deposits from 80 billion
francs to 120 billion francs and be-
gan conducting foreign-exchange
swap transactions.
However, the latest moves in-
stead sparked a rise in the franc,
with traders disappointed that the
bank didnt take bolder action, such
as pegging the franc to the euro.
The banks previous moves had
pulled the franc down nearly 10%
against the euro in the past week,
but the SNB acknowledged Wednes-
day that the currency remains mas-
sively overvalued. The franc is up
14% against the euro and 32%
against the dollar in the past year as
investors seek a haven amid fears
over the debt crisis in the euro zone
and in the U.S.
After the latest announcement
by the central bank, the franc rose
2.3% against the euro and 2.2%
against the dollar. In afternoon trad-
ing in Europe, the euro traded at
1.139 francs, while the dollar traded
at 0.789 franc.
The francs strength is beginning
to erode Switzerlands place as a fa-
vored destination for multinationals
looking to lower their tax bills. The
economic downturn as well as fears
of tax increases in countries such as
the U.K. and Ireland have increased
the attractiveness of Switzerland.
From 1998 to 2008, Switzerland at-
tracted more than 180 regional
headquarters of large foreign com-
panies, with Yahoo Inc., Google Inc.
and Kraft Foods Inc. some recent
arrivals.
But the soaring franc has made
doing business in Switzerland pro-
hibitively expensive. According to a
new study by UBS, wage levels in
Zurich and Geneva are the highest
in the world, respectively 39% and
44% higher than New York in dollar
terms. For foreign companies, the
strong franc only exacerbates an al-
ready tight job market: Swiss unem-
ployment is below 3%.
As a result, the Geneva-based
World Health Organization, which
receives 60% of its income in dol-
lars, is in the midst of cutting 300
of its 2,400 Swiss-based staff.
Mark Summers, a partner with
Speechly Bircham who moved to Zu-
rich in the spring to open a Swiss
office for the U.K.-based law firm,
says the appreciation of the franc
has pushed up the cost of the ex-
pansion. What people are paid here
is already considerably higher, he
says. A secretary can cost more
than double one in London. And
that is exacerbated by the exchange
rate. Mr. Summers says he will
watch costs carefully as he builds
out the office.
Most companies have hedged
the currency exposure for three, six
or 12 months, so the pain has slowly
been starting to hit, says Stephane
Gard, a consultant with KPMG in Zu-
rich. Overall the greatest pain will
come this semester and early next
year. We might see fewer companies
coming to Switzerland. He says cli-
ents are talking about moving cer-
tain functions, such as research, out
of Switzerland to emerging markets
or the U.S.
Swiss officials, however, say the
same drivers behind the rise in the
francSwitzerlands low taxes, po-
litical stability and sound fiscal poli-
ciesstill make it a magnet for
firms in a time of economic turmoil.
Rock-bottom taxes also go far to off-
set the pain of the franc.
If you pay only 6% in corporate
taxes, even if you have an apprecia-
tion of 30%, its okay, says Walter
Stalder, director of the economic-
promotion office of Lucerne, which
will halve its corporate tax to 6%
next years.
Still, new arrivals are rethinking
bringing less valuable operations,
such as back offices, to Switzerland
in the first place, according to Dan-
iel Loeffler, head of Genevas eco-
nomic-promotion office. And inter-
national consultancies with offices
in Switzerland are under pressure to
lower their rates in order to be com-
petitive with offices in New York
and London.
Relocation experts say multina-
tionals are already trimming allow-
ances for housing and schooling for
expatriates in Switzerland. Clients
are asking for new benchmarking
studies for living costs to see where
they can trim, according to Robert
Baldwin, director of Packimplex Ltd.
Its becoming harder and harder
to get good packages, he says.
Only the most valuable employees
have the muscle to negotiate.
BY DEBORAH BALL
Above, properties in Zurich, which has some of the highest wages and prices in the world amid a soaring Swiss franc.
B
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s
U.S. Scrutinizing Europe Banks Arms to Check Funds
a crisis.
Until recently, that hadnt been a
problem. Thanks partly to the Fed-
eral Reserves so-called quantitative-
easing program, huge amounts of
dollars were sloshing around the fi-
nancial system, and much of it
landed at European banks. But that
program has ended.
Fed officials recently have held
extensive meetings with U.S.-based
executives from top European banks
to discuss their funding positions,
according to the people familiar
with the matter. Officials also are in
contact with regulators in the coun-
tries where the European banks are
headquartered.
The Fed officials also are trying
to guard against the possibility Eu-
ropean banks that encounter trouble
could siphon funds out of their U.S.
arms, leaving them stranded with fi-
nancial holes, these people said.
Regulators recently have amped up
pressure on European banks to
transform their U.S. businesses into
self-financed organizations that are
better insulated from potential prob-
lems with their parent companies, a
senior bank executive said.
Officials at the New York Fed are
very concerned about European
banks facing funding difficulties in
the U.S., said a senior executive at a
major European bank who has par-
ticipated in talks with the Fed.
In one sign of how European
banks may be having trouble getting
dollar funding, an unidentified Euro-
pean bank on Wednesday borrowed
$500 million in one-week debt from
the European Central Bank, accord-
ing to ECB data. The bank paid a
Continued from first page
higher cost than what other banks
would pay to borrow dollars from
fellow lenders. It was the first time
that type of borrowing had occurred
since Feb 23.
Anxiety about European banks
U.S. funding comes amid broader
concerns about whether the Conti-
nents struggling banks will be able
to refinance maturing debt in com-
ing years. Investors, wary of many
European banks holdings of debt is-
sued by troubled euro-zone govern-
ments, are shunning large swaths of
the sector. While top European
banks already have satisfied about
90% of their funding needs for 2011,
they still need to raise a total of
roughly 80 billion ($115 billion) by
the end of the year, according to
Morgan Stanley.
Part of what is unsettling regula-
tors and bankers is the speed at
which funding can reverse direction.
This spring, foreign banks were able
to build up ample cash cushions,
thanks largely to the Feds $600 bil-
lion bond-buying program, which
brought more money into the bank-
ing system in the U.S., including for-
eign banks coffers.
In July 2010, non-U.S. banks had
$418.7 billion on reserve and collect-
ing interest at the Fed, according to
Fed data. By July 13 of this year, the
total had more than doubled, to
about $900 billion.
In recent weeks, though, the cash
piles at foreign banks U.S. arms
have diminished. While individual
banks havent reported data after
June 30, foreign banks overall U.S.
cash reserves fell to $758 billion as
of Aug. 3, the latest data available.
$80
0
20
40
60
$1,000
0
250
500
750
UniCredit
Rabobank
Socit Gnrale
RBS
Deutsche Bank
Dash for Dollars | European banks stockpiled billions in the U.S., but the trend might have peaked
Cash reserves of foreign banks in the U.S., weekly data in billions European banks cash reserves in their U.S. units
June 30, 2010 March 31, 2011 June 30 Sept. 30 Dec. 31
billion
0.2 0.1 0.1 0.5 0.2
Note: Bank gures are based on cash reserves in their main New York branches Sources: Federal Reserve; bank regulatory lings
August 3
$758 billion
Top cities by wage level index Top cities by price level index*
Notes: Indexes relative to New York = 100
*Calculated using the cost of a weighted shopping basket of 122 goods and services (excludes rent)
Calculated using wages, social insurance contributions and working-hours data for 14 occupations
Source: UBS
144.1
138.8
134.8
116.9
111.3
101.9
100.0
95.5
94.5
91.3
139.1
135.0
133.1
118.4
117.5
112.6
107.7
103.5
102.8
102.4
100.0
1. Zurich
2. Geneva
3. Copenhagen
4. Oslo
5. Sydney
6. Stockholm
7. New York
8. Luxembourg
9. Munich
10. Los Angeles
1. Oslo
2. Zurich
3. Geneva
4. Copenhagen
5. Stockholm
6. Tokyo
7. Sydney
8. Helsinki
9. Toronto
10. Singapore
14. New York
Pricey Switzerland
Zurich and Geneva have some of the highest prices and wages in the world
hotnpapers
EUROPE NEWS
France and Germany
Push for EU Sanctions
PARISFrance and Germany on
Wednesday increased the pressure
on their euro-zone peers to improve
fiscal discipline in the bloc with a
proposal to cut off the regions way-
ward spenders from key European
Union transfer funds.
The proposal marks an effort to
boost fiscal discipline across the
euro zone by giving countries incen-
tives to rein in spending and cut
their budget gaps. But the idea is
controversial and could be difficult
to enforce, as well as to sell to the
rest of the bloc. The euro zone has
repeatedly failed to impose financial
penalties on profligate members.
In a letter to European Council
President Herman Van Rompuy,
French President Nicolas Sarkozy
and German Chancellor Angela
Merkel proposed withholding ac-
cess to billions of euros in EU funds
as a key stick to keep euro-zone
countries spending in line. In the
future, payments from structural
and cohesion funds would have to be
suspended for euro-zone countries
that do not follow recommendations
of excessive deficit procedure, Mr.
Sarkozy and Ms. Merkel wrote.
The euro zone officially requires
nations in the common currency to
keep their public deficits below 3%
of gross domestic product and their
debt below 60% of GDP, though it
has a poor record of imposing finan-
cial sanctions on countries breaking
those rules. France has also resisted
making sanctions automatic.
The proposal refers to money
from the EUs so-called cohesion
fund, aimed at helping the unions
poorer members catch up with the
regions richer core, and separate
structural funds that target regional
development and increasing com-
petitiveness throughout the EU.
Taken together, they are the second-
largest item in the EU budget and
stand to account for 36% of total EU
expenditure, or 347 billion ($500
billion) over the 2007-13 period, ac-
cording to European Commission
figures.
The letter also suggested that if
countries under bailout programs
arent able to spend the money they
have been granted from EU struc-
tural and cohesion funds within a
certain time, the remaining funds
should be taken away and pooled
into a new fund to be managed by
the European Commission in order
to bolster growth and improve com-
petitiveness in the European Union.
The European Unions executive
arm, the European Commission,
now has some narrow scope to sus-
pend payments for misuse of EU
funds. The European Commission,
which represents the 27 members of
the EU, has had only limited over-
sight of the 17-member currency
union itself.
The proposals are part of a
wider initiative unveiled Tuesday by
the French and German leaders to
improve governance in the currency
union in a bid to ease market fears
over debt woes in the euro zone.
The recommendations include cre-
ating the position of euro-zone
president to help better coordinate
macroeconomic policies in the bloc.
The Franco-German letter under-
scores the fine line the euro zones
two largest economies are treading
in trying to convince financial mar-
kets they are committed to fiscal
discipline and at the same time to
shoring up competitiveness in the
region after economic growth
stalled in the second quarter.
But analysts say their proposals
fall far short of more ambitious
measures needed to address the
euro-zone crisis, such as increasing
the size of the blocs bailout fund or
making the euro zone as a whole re-
sponsible for its member nations
debtsan idea that Ms. Merkel and
Mr. Sarkozy played down Tuesday.
Sanctions may have an impact
in relatively good times, but in
times of crisis they would only
make things worse, said Zsolt Dar-
vas, an analyst at the Brussels-
based Bruegel think tank. One of
the possible effects of the proposal
is that, knowing that they could lose
the money, member states would
just try to spend it anyway.
The largest recipients of the EU
funds mentioned in the letter are
mainly EU accession countries led
by Poland, which arent yet in the
currency bloc. But rich euro-zone
members are also large beneficia-
ries of EU funding to improve their
infrastructures and prop up employ-
ment, with France set to receive 14
billion from 2007 to 2013, and Ger-
many 26 billion.
Separately, the French and Ger-
man finance ministers said they
would meet very soon to flesh out
proposals made by Mr. Sarkozy and
Ms. Merkel on Tuesday to establish
a financial transaction tax in the
European Union, an idea that hit
European exchange stocks Wednes-
day as investors anticipated the tax
hurting future business.
It is too early to talk now about
details and the [expected] size of
the tax, German Finance Ministry
spokesman Martin Kotthaus said.
Dutch Finance Minister Jan Kees de
Jager said he is very reserved
about the proposal, saying that such
a measure should be introduced ei-
ther across the globe or not at all.
Laurence Norman
and Riva Froymovich
contributed to this article.
BY NATHALIE BOSCHAT
AND GABRIELE PARUSSINI
Agence France-Presse/Getty Images
European Council President Herman Van Rompuy has been suggested in a Franco-German plan as a euro-zone chief.
GreecesRecession
IsForecasttoPersist
ATHENSGreece is at risk for a
fourth year of recession in 2012, an-
alysts warned, defying official fore-
casts of a recovery and dealing a
further setback to the governments
deficit-cutting plans.
Amid plunging consumer de-
mand, weakening global growth
prospects and the possibility of
fresh austerity measures, analysts
said Greeces economy could shrink
2% or more next year, following a
4.5% contraction in 2010 and an ex-
pected 3.9% downturn this year.
That would raise questions about
the 110 billion ($158.5 billion) bail-
out the country received last year
from its fellow euro-zone members
and the International Monetary
Fund. Those bailout loans are predi-
cated on the moribund economy re-
turning to growth in 2012 after
painful fiscal and economic changes.
The deteriorating forecast could
refocus market attention on the
country where the euro-zone debt
crisis began, after weeks of hand-
wringing over the economic woes in
Italy and Spain.
A longer recession would hurt
Greeces efforts to meet deficit-re-
duction goals, weighing on its abil-
ity to collect tax revenues while
boosting outlays on social welfare.
The countrys debt ratio as a per-
centage of gross domestic product
would deteriorate further. And ris-
ing unemployment, now nearly 17%,
might further stoke public discon-
tent and imperil the governments
ability to push through unpopular
fiscal steps.
I am absolutely convinced that
we are headed for further recession
in 2012, said George Kyrtsos, a po-
litical commentator and editor of
the City Press newspaper. As such,
it is a mathematical certainty that
the budget deficit will increase next
year, while just to keep our debt dy-
namics stable, Greece needs to have
growth of at least 3.5% to 4%.
In the latest predictions pre-
pared by the IMF, the European
Commission and the European Cen-
tral Bank, Greeces 325 billion-a-
year economy is forecast to grow at
an annual pace of 0.6% in 2012,
down from a previous 1.1% forecast.
The Greek government also has
cut economic forecasts several
times since Greece received the 110
billion bailout last year. But official
forecasters have stuck by their cen-
tral assumption that the economy
would return to growthalbeit
modestnext year.
Now, doubts are creeping into of-
ficial circles as well. At least one se-
nior Greek government official pri-
vately admitted the government
could revise its growth forecast in
the fallwhen it will draw up next
years budgetto show a recession
of as much as 2% next year.
Costas Paris in London
BY STELIOS BOURAS
AND ALKMAN GRANITSAS
Raising Pressure
Paris and Berlin propose to:
Withhold access to billions of
euros in European Union funds as a
key stick to keep euro-zone
countries spending in line
If countries under bailout
programs arent able to spend the
money they have been granted
from EU funds within a certain
time, to take away the remaining
funds
Some analysts say:
Proposals fall far short of more
ambitious measures needed to
address the euro-zone crisis, such
as increasing the size of the blocs
bailout fund or making the euro
zone as a whole responsible for its
member nations debts
WSJ research
Project Director, Project Director, Project Director, Project Director,
Monorail Project Monorail Project Monorail Project Monorail Project
No.3/MTC/Monorailcell/2011
METROPOLITAN TRANSPORT CORPORATION (CHENNAI) LIMITED
(Government of Tamilnadu Undertaking)
International Notifcation for Submission of Request for Qualifcation (RFQ)
Dated : August, 2011
DIPR/1653/Tender/2011 DIPR/1653/Tender/2011 DIPR/1653/Tender/2011 DIPR/1653/Tender/2011
Development of Development of Development of Development of Monorail Mass Rapid Transit System for Chennai under Monorail Mass Rapid Transit System for Chennai under Monorail Mass Rapid Transit System for Chennai under Monorail Mass Rapid Transit System for Chennai under
Design Build Finance Design Build Finance Design Build Finance Design Build Finance
Operate and Transfer (DBFOT) Basis Operate and Transfer (DBFOT) Basis Operate and Transfer (DBFOT) Basis Operate and Transfer (DBFOT) Basis
Chennai Metropolis the capital of Tamilnadu, is the fourth largest in India, covering Chennai Metropolis the capital of Tamilnadu, is the fourth largest in India, covering Chennai Metropolis the capital of Tamilnadu, is the fourth largest in India, covering Chennai Metropolis the capital of Tamilnadu, is the fourth largest in India, covering
an area of 1189 square kilometres. The Chennai Metropolis is en-route to become one an area of 1189 square kilometres. The Chennai Metropolis is en-route to become one an area of 1189 square kilometres. The Chennai Metropolis is en-route to become one an area of 1189 square kilometres. The Chennai Metropolis is en-route to become one
of the Mega Cities in the world with more than 10 million population in next few years. of the Mega Cities in the world with more than 10 million population in next few years. of the Mega Cities in the world with more than 10 million population in next few years. of the Mega Cities in the world with more than 10 million population in next few years.
The current population is about 8.2 million. Various developmental activities in CMA The current population is about 8.2 million. Various developmental activities in CMA The current population is about 8.2 million. Various developmental activities in CMA The current population is about 8.2 million. Various developmental activities in CMA
have attracted people to migrate from rural areas and also from various other states have attracted people to migrate from rural areas and also from various other states have attracted people to migrate from rural areas and also from various other states have attracted people to migrate from rural areas and also from various other states
necessitating operation of additional Mass Rapid Transit System. necessitating operation of additional Mass Rapid Transit System. necessitating operation of additional Mass Rapid Transit System. necessitating operation of additional Mass Rapid Transit System.
The Metropolitan Transport Corporation (Chennai) Limited (MTC), an undertaking The Metropolitan Transport Corporation (Chennai) Limited (MTC), an undertaking The Metropolitan Transport Corporation (Chennai) Limited (MTC), an undertaking The Metropolitan Transport Corporation (Chennai) Limited (MTC), an undertaking
of Government of Tamilnadu, India, the Monopoly passenger transport operator in of Government of Tamilnadu, India, the Monopoly passenger transport operator in of Government of Tamilnadu, India, the Monopoly passenger transport operator in of Government of Tamilnadu, India, the Monopoly passenger transport operator in
Chennai has proposed to provide Monorail as Mass Rapid Transit System for Chennai Chennai has proposed to provide Monorail as Mass Rapid Transit System for Chennai Chennai has proposed to provide Monorail as Mass Rapid Transit System for Chennai Chennai has proposed to provide Monorail as Mass Rapid Transit System for Chennai
Metropolitan area in selected corridors. MTC has identifed four corridors of various Metropolitan area in selected corridors. MTC has identifed four corridors of various Metropolitan area in selected corridors. MTC has identifed four corridors of various Metropolitan area in selected corridors. MTC has identifed four corridors of various
lengths and the Monorail system will cover in all 111 kms. lengths and the Monorail system will cover in all 111 kms. lengths and the Monorail system will cover in all 111 kms. lengths and the Monorail system will cover in all 111 kms.
Accordingly, MTC invites bids from Interested parties / developers of Accordingly, MTC invites bids from Interested parties / developers of Accordingly, MTC invites bids from Interested parties / developers of Accordingly, MTC invites bids from Interested parties / developers of
National / International appropriate may either download or procure the RFQ National / International appropriate may either download or procure the RFQ National / International appropriate may either download or procure the RFQ National / International appropriate may either download or procure the RFQ
document in person containing detailed Scope of Work. Eligibility Criteria, document in person containing detailed Scope of Work. Eligibility Criteria, document in person containing detailed Scope of Work. Eligibility Criteria, document in person containing detailed Scope of Work. Eligibility Criteria,
Evaluation methodology, Details of corridor and other project details from Evaluation methodology, Details of corridor and other project details from Evaluation methodology, Details of corridor and other project details from Evaluation methodology, Details of corridor and other project details from
15 15 15 15
th th th th
August, 2011 from our Corporate Offce during Offce hours between August, 2011 from our Corporate Offce during Offce hours between August, 2011 from our Corporate Offce during Offce hours between August, 2011 from our Corporate Offce during Offce hours between
10 A.M. and 3 P.M. on all working days situated in the address given below by 10 A.M. and 3 P.M. on all working days situated in the address given below by 10 A.M. and 3 P.M. on all working days situated in the address given below by 10 A.M. and 3 P.M. on all working days situated in the address given below by
remitting a non-refundable crossed Demand Draft for a sum of INR. 50,000/- (Rupees remitting a non-refundable crossed Demand Draft for a sum of INR. 50,000/- (Rupees remitting a non-refundable crossed Demand Draft for a sum of INR. 50,000/- (Rupees remitting a non-refundable crossed Demand Draft for a sum of INR. 50,000/- (Rupees
Fifty Thousand only). The Demand Draft is to be drawn from a Nationalised bank on Fifty Thousand only). The Demand Draft is to be drawn from a Nationalised bank on Fifty Thousand only). The Demand Draft is to be drawn from a Nationalised bank on Fifty Thousand only). The Demand Draft is to be drawn from a Nationalised bank on
the name of The Managing Director, Metropolitan Transport Corporation (Chennai) the name of The Managing Director, Metropolitan Transport Corporation (Chennai) the name of The Managing Director, Metropolitan Transport Corporation (Chennai) the name of The Managing Director, Metropolitan Transport Corporation (Chennai)
Limited, payable at Chennai. The international bidders should submit a Demand Draft Limited, payable at Chennai. The international bidders should submit a Demand Draft Limited, payable at Chennai. The international bidders should submit a Demand Draft Limited, payable at Chennai. The international bidders should submit a Demand Draft
for a sum of USD 1111. In the case of Bidders downloading the RFQ from the Net, they for a sum of USD 1111. In the case of Bidders downloading the RFQ from the Net, they for a sum of USD 1111. In the case of Bidders downloading the RFQ from the Net, they for a sum of USD 1111. In the case of Bidders downloading the RFQ from the Net, they
shall enclose a crossed Demand Draft for the above amount along with the RFQ. shall enclose a crossed Demand Draft for the above amount along with the RFQ. shall enclose a crossed Demand Draft for the above amount along with the RFQ. shall enclose a crossed Demand Draft for the above amount along with the RFQ.
The developer will be responsible to design, develop, construct, fnance, own, The developer will be responsible to design, develop, construct, fnance, own, The developer will be responsible to design, develop, construct, fnance, own, The developer will be responsible to design, develop, construct, fnance, own,
implement, complete, maintain and transfer the project at the end of the concession implement, complete, maintain and transfer the project at the end of the concession implement, complete, maintain and transfer the project at the end of the concession implement, complete, maintain and transfer the project at the end of the concession
period. period. period. period.
Theproposedbidmust meet anumber of minimumcriteriainorder tobeconsidered Theproposedbidmust meet anumber of minimumcriteriainorder tobeconsidered Theproposedbidmust meet anumber of minimumcriteriainorder tobeconsidered Theproposedbidmust meet anumber of minimumcriteriainorder tobeconsidered
in assessing the specifcation of the proposed system, the prime requirement will be in assessing the specifcation of the proposed system, the prime requirement will be in assessing the specifcation of the proposed system, the prime requirement will be in assessing the specifcation of the proposed system, the prime requirement will be
the ability to cause minimal disruption during construction, to be cost effective, energy the ability to cause minimal disruption during construction, to be cost effective, energy the ability to cause minimal disruption during construction, to be cost effective, energy the ability to cause minimal disruption during construction, to be cost effective, energy
effcient and upgradable to cater to the future expansion needs, both in terms of effcient and upgradable to cater to the future expansion needs, both in terms of effcient and upgradable to cater to the future expansion needs, both in terms of effcient and upgradable to cater to the future expansion needs, both in terms of
capacity and route expansion. capacity and route expansion. capacity and route expansion. capacity and route expansion.
Bids are invited from interested Developers of National / International repute Bids are invited from interested Developers of National / International repute Bids are invited from interested Developers of National / International repute Bids are invited from interested Developers of National / International repute
with an appropriate track record in Monorail Mass Rapid Transit System technology, with an appropriate track record in Monorail Mass Rapid Transit System technology, with an appropriate track record in Monorail Mass Rapid Transit System technology, with an appropriate track record in Monorail Mass Rapid Transit System technology,
operation and fnance. Developers may apply either individually or in consortium not operation and fnance. Developers may apply either individually or in consortium not operation and fnance. Developers may apply either individually or in consortium not operation and fnance. Developers may apply either individually or in consortium not
exceeding fve members. exceeding fve members. exceeding fve members. exceeding fve members.
The salient criteria conditions to be fulflled are : The salient criteria conditions to be fulflled are : The salient criteria conditions to be fulflled are : The salient criteria conditions to be fulflled are :
1. Technical Capacity : 1. Technical Capacity : 1. Technical Capacity : 1. Technical Capacity :
For demonstrating technical capacity and experience, the Applicant shall, within For demonstrating technical capacity and experience, the Applicant shall, within For demonstrating technical capacity and experience, the Applicant shall, within For demonstrating technical capacity and experience, the Applicant shall, within
the last three fnancial years preceding the Application Due Date, have been awarded the last three fnancial years preceding the Application Due Date, have been awarded the last three fnancial years preceding the Application Due Date, have been awarded the last three fnancial years preceding the Application Due Date, have been awarded
on a BOOT / DBFOT basis an urban rail project (defned herein as a project which on a BOOT / DBFOT basis an urban rail project (defned herein as a project which on a BOOT / DBFOT basis an urban rail project (defned herein as a project which on a BOOT / DBFOT basis an urban rail project (defned herein as a project which
would be an activity involving monorail, railway, metro-rail and or tramway) with a would be an activity involving monorail, railway, metro-rail and or tramway) with a would be an activity involving monorail, railway, metro-rail and or tramway) with a would be an activity involving monorail, railway, metro-rail and or tramway) with a
minimum continuous route length of 37 Kms. (the Threshold Technical Capacity). minimum continuous route length of 37 Kms. (the Threshold Technical Capacity). minimum continuous route length of 37 Kms. (the Threshold Technical Capacity). minimum continuous route length of 37 Kms. (the Threshold Technical Capacity).
2. Financial Capacity : 2. Financial Capacity : 2. Financial Capacity : 2. Financial Capacity :
In the immediately preceding Financial Years, the Applicant or the Applicant In the immediately preceding Financial Years, the Applicant or the Applicant In the immediately preceding Financial Years, the Applicant or the Applicant In the immediately preceding Financial Years, the Applicant or the Applicant
Consortium as the case may be, shall demonstrate a minimum Shareholders Net Consortium as the case may be, shall demonstrate a minimum Shareholders Net Consortium as the case may be, shall demonstrate a minimum Shareholders Net Consortium as the case may be, shall demonstrate a minimum Shareholders Net
Worth of Rs.500 crores (Rupees Five Hundred Crores) (the Financial Capacity). Worth of Rs.500 crores (Rupees Five Hundred Crores) (the Financial Capacity). Worth of Rs.500 crores (Rupees Five Hundred Crores) (the Financial Capacity). Worth of Rs.500 crores (Rupees Five Hundred Crores) (the Financial Capacity).
The interested parties may clarify their queries either by e-mail or in person during The interested parties may clarify their queries either by e-mail or in person during The interested parties may clarify their queries either by e-mail or in person during The interested parties may clarify their queries either by e-mail or in person during
offce hours within 10 days from date of issue of this Notice. offce hours within 10 days from date of issue of this Notice. offce hours within 10 days from date of issue of this Notice. offce hours within 10 days from date of issue of this Notice.
The Pre-Bid meeting will be held on 7 The Pre-Bid meeting will be held on 7 The Pre-Bid meeting will be held on 7 The Pre-Bid meeting will be held on 7
th th th th
September, 2011, at 11.00 hours IST in the September, 2011, at 11.00 hours IST in the September, 2011, at 11.00 hours IST in the September, 2011, at 11.00 hours IST in the
Conference Hall of MTC, Chennai. Conference Hall of MTC, Chennai. Conference Hall of MTC, Chennai. Conference Hall of MTC, Chennai.
The Last date for submission of RFQ is 28 The Last date for submission of RFQ is 28 The Last date for submission of RFQ is 28 The Last date for submission of RFQ is 28
th th th th
September, 2011, 15.00 hours IST. September, 2011, 15.00 hours IST. September, 2011, 15.00 hours IST. September, 2011, 15.00 hours IST.
The Management will not take any responsibility for the RFQs received after the due The Management will not take any responsibility for the RFQs received after the due The Management will not take any responsibility for the RFQs received after the due The Management will not take any responsibility for the RFQs received after the due
date and time. The RFQ will be opened on the same date at 15.30 hours IST in the date and time. The RFQ will be opened on the same date at 15.30 hours IST in the date and time. The RFQ will be opened on the same date at 15.30 hours IST in the date and time. The RFQ will be opened on the same date at 15.30 hours IST in the
presence of available bidders in the Conference Hall of MTC. presence of available bidders in the Conference Hall of MTC. presence of available bidders in the Conference Hall of MTC. presence of available bidders in the Conference Hall of MTC.
Corporate Offce Address : Corporate Offce Address : Corporate Offce Address : Corporate Offce Address :
Metropolitan Transport Corporation (Chennai) Limited, Metropolitan Transport Corporation (Chennai) Limited, Metropolitan Transport Corporation (Chennai) Limited, Metropolitan Transport Corporation (Chennai) Limited,
Pallavan House, Pallavan Salai, Chennai - 600 002, Tamilnadu, India. Pallavan House, Pallavan Salai, Chennai - 600 002, Tamilnadu, India. Pallavan House, Pallavan Salai, Chennai - 600 002, Tamilnadu, India. Pallavan House, Pallavan Salai, Chennai - 600 002, Tamilnadu, India.
Telephone Nos. : +9144 - 23455801 Extn 267, 23455841, Telephone Nos. : +9144 - 23455801 Extn 267, 23455841, Telephone Nos. : +9144 - 23455801 Extn 267, 23455841, Telephone Nos. : +9144 - 23455801 Extn 267, 23455841,
Fax No.:+9144 - 23455858 Fax No.:+9144 - 23455858 Fax No.:+9144 - 23455858 Fax No.:+9144 - 23455858
Website : www.mtcbus.org E-mail Id : mtcmonorail@gmail.com Website : www.mtcbus.org E-mail Id : mtcmonorail@gmail.com Website : www.mtcbus.org E-mail Id : mtcmonorail@gmail.com Website : www.mtcbus.org E-mail Id : mtcmonorail@gmail.com
hotnpapers
EUROPE NEWS
I suppose we
knew that the
meeting between
Angela Merkel and
Nicolas Sarkozy on
Tuesday wouldnt
produce any serious results. After
all, there had been pretty clear
guidance from both sides that
there would be no ground-
breaking agreements on euro-zone
bonds or increasing the European
Financial Stability Facility.
What we were unprepared for,
however, was the emphasis on an
initiative for a financial-
transactions tax, and this is surely
the best explanation for the
markets disappointed reaction
Wednesday. Quite apart from
being negative for markets in its
own right, it signaled better than
anything the fact that they had
nothing more urgent to agree on.
For one thing, common wisdom
argues that FTTs will achieve
nothing unless adopted
everywhere, and the chance of
that happening has been virtually
zero since the International
Monetary Fund came down
against them in a report to the
G-20 in June 2010. The report,
which in many other ways was
sympathetic to the notion of
making the financial sector pay
for the damage it had caused to
the world economy, spelled out
that FTTs did nothing to address
the root cause of financial
instability, and said that any
marginal benefit from damping
the effects of short-term trading
activityi.e., speculationwas
outweighed by the extra cost of
capital it imposed on companies
by making markets less liquid.
Moreover, it stressed that the
costs of such taxes are invariably
passed on to bank customers,
rather than absorbed by banks.
The IMF recommendedand
most of the G-20 states appeared
to agreethat there were better
ways both to collect more revenue
from the financial sector and to
address the financial-stability
issues raised by the crisis. A raft
of bank levies at national level
have followed, as well as the new
Basel III regulations on capital and
liquidity, and there is plenty of
evidence to suggest these are
having, within the limits of
realistic expectations, the desired
effect: deleveraging has begun,
higher-risk activities are being
isolated from Main Streets
savings, and more and more
business is being channeled
through platforms where
regulators can keep a better eye
on them.
With the intellectual basis for
the FTT rather convincingly
rubbished, it may seem strange
that the European Commission has
made such a startling U-turn on
the issue in the past 12 months, to
the point where it now supports
the introduction of a tax of 0.1%
on equity and bond transactions
and 0.01% on derivatives.
The explanation isnt simple,
but it goes roughly like this: In
both France and Germany, the
financial sector is still the best
possible scapegoat for the ills
caused by the financial crisis.
Despite the bank levies and, in
Germany, the salary caps, the
perception is still that the cost to
the taxpayer of bailing out the
banksestimated around 27% of
euro-zone GDP by European
Central Bank President Jean-
Claude Trichetstill far outweighs
the financial-stability benefits.
Emotion, in politics a force as
unreliable as it is irresistible,
demands that more be squeezed
from the bankers. Since nationally
levied FTTs cant function in a
world of free capital movements,
the only solution is to levy it at
European level.
Meanwhile, in Brussels, a
European-levied FTT satisfies the
traditional yearning for a way to
bolster the EUs own resources
without having to beg national
governments. Tax Commissioner
Algirdas Semeta, a late and, one
senses, reluctant convert to the
idea of the FTT, argues that the
revenue would replace the money
transferred from national budgets
to fund the EU budget, rather than
represent a new tax. He also says
the tax will be levied according to
the domicile of the customer
ordering the transaction, rather
than according to the marketplace
in which it is executed. This
supposedly solves the problem of
the funds being generated largely
in the U.K., France and Germany.
So far, so good. Mr. Sarkozy
and Ms. Merkel get the credit for
soaking the banks, while Mr.
Semeta gets to show his
receptiveness to the democratic
demands of the EU Parliament,
which passed a nonbinding vote
on the issue by a thumping
majority in March (again, what
parliament doesnt vote for more
resources to fund its own
budget?).
In years gone by, none of this
would have mattered because the
U.K. government would simply
have vetoed it, both as
threatening to the British
economy and as an unjustifiable
expansion of the EUs revenue-
raising powers. Also, if the
Continent had plowed ahead,
regardless of its ability to impose
its will on the U.K., the reaction
in London would have been one
of unalloyed joy, as yet more jobs
and income migrated from the
overregulated mainland to the
single markets offshore paradise.
But the U.K. authorities
response to such a development
today might not necessarily be the
same. The government, while no
less hostile to the EU, is certainly
less nave about the financial-
services industry, and the Bank of
England is painfully aware of the
systemic risks to the broader
economy from the sectors sheer
size.
The central U.K. objection
that business would still migrate
to jurisdictions without the tax
stands. But it is equally clear that
a large taxable mass would stay in
the EU. Setting an example would
also make it easier for other
jurisdictions to follow, though one
can hardly see this U.S. Congress
adopting it. In short, an FTT
mightjustbe more workable
now than in the past, but only if
your most serious political
purpose in life is to soak the rich
in an inefficient and essentially
emotional way. Europe has to do
better than that.
[ Agenda ]
BY GEOFFREY T. SMITH
Latest European Tax Plan
Is an Emotional Irrelevance
New Russia Turns 20,
Its Martyrs Forgotten
MOSCOWThey died in an epic
struggle against Soviet rule and
were proclaimed heroic martyrs of a
free Russia. Huge crowds glimpsed
the three coffins, draped in the
emerging nations tricolor flag and
honored by its new anthem.
Our defenders, our saviors, the
breakaway leader, Boris Yeltsin, told
the mourners in August 1991. From
now on, their names are sacred.
Today, Dmitry Komar, Ilya
Krichevsky and Vladimir Usov are
all but forgottenobscured by disil-
lusionment with the political and
economic chaos that for many Rus-
sians defined Mr. Yeltins attempt at
democratic rule in the 1990s. Rus-
sias current leaders, who have re-
imposed a large dose of authoritar-
ian control, speak nothing of the
three men and little about the event
that consumed thema last-gasp
Communist coup, 20 years ago this
weekend, to salvage Soviet rule.
That leaves their relatives and a
few hundred stalwarts each year to
commemorate the days when the
men helped turn back the Soviet
tanks and change historys course.
The coup launched on Aug. 19,
1991, collapsed two days later after
a defiant Mr. Yeltsin, the democrati-
cally elected president of the Soviet
Russian Republic, rallied tens of
thousands of peaceful resisters to
erect barricades near his Moscow
headquarters and thwart an armed
takeover. Over the next four months,
as Russia and other republics se-
ceded, the Soviet Union fell apart.
Germany two years ago cele-
brated the 20th anniversary of the
fall of the Berlin Wall with dignitar-
ies from all over Europe. Other for-
mer Soviet republics officially mark
anniversaries of their independence
as a matter of pride.
Not so in Russia.
Russians seem to have nearly
forgotten one of the most glorious
pages in their history, says Kon-
stantin Eggert, a Russian journalist
who covered and rooted for August
91 resistance. Its the indifference
that baffles me.
A poll last month by Russias Le-
vada Center offers a sobering expla-
nation: 49% of Russians believe the
country has taken the wrong direc-
tion since 1991, compared to 27%
who believe the opposite. Thirty-
nine percent say the botched coup
by Soviet hardliners that propelled
Mr. Yeltsin to power over an inde-
pendent Russia was a tragic event
with disastrous consequences for
the country, and 35% dismiss it as
part of an ongoing power struggle.
Just 10% consider it a demo-
cratic victory over Soviet Commu-
nist rule.
As optimism wilted, turnouts for
the anniversary of the three mens
deaths dwindled. Commemorative
stamps bearing their images fell
into disuse as runaway inflation rav-
aged their seven-kopeck face value.
A Defender of Free Russia medal in-
stituted by the Kremlin in their
honor hasnt been awarded since
2001; resistance-veterans groups
stopped sending nominations.
Even among those who spent
sleepless nights on Mr. Yeltsins bar-
ricades, few today can name all
three men.
Dmitry Komar, a 22-year-old me-
chanic, learned of the coup on the
radio. Soviet President Mikhail Gor-
bachevs top military and secret po-
lice officials, concluding that his re-
forms would destroy the union,
detained Mr. Gorbachev and an-
nounced that a State of Emergency
committee had taken control.
As resistance swelled, Mr. Komar
assured his parents he had suffered
enough in combat and would stay
off the streets, his mother recalls.
But he changed his mind when fel-
low veterans of the Soviet war in
Afghanistan rallied to Mr. Yeltsins
side. That brotherhood meant a lot
to him, Lyubov Komara says.
The night of Aug. 20, the former
paratrooper triggered what many
consider a pivotal spasm of blood-
shed. A column of 20 armored vehi-
cles had moved along Moscows ring
road near Mr. Yeltsins headquarters
and met a barricade formed by two
trolleybuses in an underpass. Mr.
Komar leaped onto the lead tank but
fell, dangling head-down, his feet
caught on the vehicle. As the tank
moved back and forth, ramming the
barricade, Mr. Komar hit the pave-
ment and was crushed.
Vladimir Usov, a 37-year-old
businessman, had been watching
through binoculars from his office.
He went to the underpass, where he
tried to rescue the dangling Mr. Ko-
mar. He was shot in the head and
crushed under the same tank.
A crowd set fire to the tank, its
crew firing warning shots as they
fled. Ilya Krichevsky, a 28-year-old
architect and Afghan war veteran,
took a bullet in the forehead.
The deaths of the three, drawn
to the same spot without knowing
each other, emboldened the resis-
tance. Wary of further bloodshed,
the coup plotters gave up the next
day. Mr. Gorbachev returned to the
Kremlin, but his power and his
country slipped away.
Ms. Komara, a 64-year-old re-
tiree, now struggles to reconcile her
sons brave act with the corruption,
insecurity and economic hardship
that followed. Like many, she
blames Mr. Yeltsin for wasting a his-
toric opportunity, ushering in what
she calls a bandit regime controlled
by powerful oligarchs, and generat-
ing profound distrust of politicians.
If my son had known what state
the country would reach, she says,
he would never have gone to the
barricades. An argument erupted
years ago when she shared that
view with Mr. Usovs father, a re-
tired admiral and democratic activ-
ist who since has died.
My son went there to stop
tanks, to protect people against
armed violence, Sofia Usova, his
mother, said this week. His choice
remains correct whatever political
changes happened afterward.
For those seeking to bury the So-
viet past, the changes fell short. The
coup leaders were freed from prison
while awaiting trial and given am-
nesty. Sergei Surovikin, the captain
who led the armored column, was
absolved of the deaths in the under-
pass and now holds the rank of lieu-
tenant general.
Vladimir Putin, the former KGB
colonel who succeeded Mr. Yeltsin
as president in 2000, called the So-
viet collapse the greatest geopoliti-
cal catastrophe of the century. Now
prime minister, Mr. Putin brought
former KGB men into government
office and revived the Soviet na-
tional anthem, with slightly modi-
fied lyrics. With most Russians ap-
proval or acquiescence, the regime,
nominally a democracy, keeps a lid
on genuine opposition politics.
Mr. Gorbachev criticized the
leadership Wednesday for monopo-
lizing power and manipulating elec-
tions. At a news conference, the 80-
year-old statesman called Mr.
Putins United Russia party a poor
copy of the Soviet Communist Party
and said Russia is going back-
wards.
Mikhail Shneider, an organizer of
the 1991 resistance, put it bluntly:
We live in a country where the
coup plotters have finally won.
Mr. Shneider is co-custodian of a
granite memorial to the three men
above the underpass where they
died. At Saturdays annual commem-
oration there, he will bring a record-
ing of the now-abolished Russian
anthem, the classical tune that was
played at the mens funeral.
Mr. Shneider says his mission is
to keep those obscure rituals alive.
One day, maybe in another 20
years, our country will have a real
democracy, he says. Then the
events of 91 will take their deserved
place in history, as a great victory
for Russia.
BY RICHARD BOUDREAUX
Lyubov Komara with a photo of her son, who was killed on Moscows barricades.
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EUROPE NEWS
Spanish Football League Faces
Strike in Owner-Player Rift
MADRIDSpains football-clubs
association LFP said on Wednesday
that it has failed to reach an agree-
ment with player representatives to
cancel a planned two-week strike
starting this weekend, which may
delay the start of the countrys La
Liga football season.
The strike, which has become a
high-profile example of growing la-
bor unrest as Spains economy re-
mains comatose after a deep con-
traction in 2008-10, was called last
week by the players union. The
strike call was a widely publicized
event that included well-known stars
from Spains world champion na-
tional squad.
Jess Daz, vice president of the
players union, said that more than
200 professional football players
have been hurt by wage-payment de-
lays.
The union is demanding that the
LFP, which stands for the Liga de
Ftbol Profesional, boosts compen-
satory payments for players not re-
ceiving salaries from their own
teams. This is because payment de-
lays among teams have multiplied in
recent years, as many teams strug-
gle to honor contracts signed during
the booming economy before 2008,
or even those signed later.
Sponsorship and advertising rev-
enue has dropped over the past few
seasons, and many teams also face
lower income from television broad-
casting rights, after disputes over
them between rival media compa-
nies resulted in inflated TV con-
tracts during the boom years.
The top spanish clubs, Real
Madrid and Barcelona, havent been
affected, but many other teams in
the first division are struggling.
In a statement, the LFP called the
strike completely unjustified and
said a new collective bargaining
agreement was nearly completed
when the union broke off talks. The
LFP said it has already agreed to
guarantee 240,000 ($346,656) in
annual payments for players in La
Ligas top division, and 120,000 for
players in the second division.
It scheduled another meeting
with the players union for Friday.
BY DAVID ROMAN
Barcelonas Lionel Messi, left, and Real Madrids Sami Khedira, fought for the
ball at the Santiago Bernabeu stadium in Madrid on Sunday.
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Europeans
sometimes act as
if the only history
that matters is
their own: Greece
and Rome, the
strains of the post-World War I
peace and the recovery from the
devastation of World War II, the
fall of the Berlin Wall and todays
German export boom.
But the relevant lessons for
Europe may be found on the other
side of the Atlantic, in 18th-
century America and 20th-century
Brazil.
For months, Europe has been
hamstrung by what one seasoned
observer of the global economy
describes as three Nos:
No devaluations, meaning
neither Greece nor Portugal can
leave the euro to depreciate their
currencies to regain
competitiveness.
No defaults, meaning
holders of government debts must
be paid in full.
No transfers, meaning
taxpayers in rich countries like
Germany and France wont bail
out Southern European
spendthrifts.
The past few weeks have seen
Europe dilute the second and
third principles to protect the
first. Thats understandable. If any
euro-zone countries were to break
free of the shackles of the
common currency, the European
experiment would be threatened.
Monetary union is the strongest
tie among European economies
and the European Central Bank
one of the few functioning pan-
European institutions.
But tensions between sharing a
currency and a central bank while
pursuing largely independent
national fiscal policies are now
painfully evident. Alexander
Hamilton understood this. So did
Fernando Henrique Cardoso,
president of Brazil from 1995 to
2002.
A history lesson for Europe: In
1790, the U.S. government owed
$54 million and the 13 individual
states owed an additional $25
million. The combined debt equaled
42% of the nations gross domestic
product. Hamilton, then secretary
of the Treasury, proposed that the
national government assume the
states Revolutionary War debts.
It would be, he said, a measure
of sound policy and substantial
justice and would contribute to
an orderly, stable and
satisfactory arrangement of the
national finances.
Admitting...that a provision
must be made in some way or
other, for the entire debt,
Hamilton told Congress in his first
Report on Credit, it will follow,
that no greater revenues will be
required, whether that provision
be made wholly by the United
States, or partly by them, and
partly by the states separately.
James Madison and Thomas
Jefferson fought Hamilton. Among
the issues: their state, Virginia,
had repaid more of its debts than
other states. But Madison and
Jefferson acquiesced in a
compromise in which Hamilton
agreed to move the nations
capital from his adopted home
state of New York to Washington.
The result was a stronger central
government, the birth of what
became the worlds largest bond
market, and credit strong enough
for the U.S. to finance the
Louisiana Purchase from France.
About 200 years later, Brazils
President Cardoso, his nation
buffeted by financial crises in
Mexico, Argentina and Asia,
confronted state governments that
had borrowed more than their tax
revenues could ever repay. The
federal government became
convinced that it would have to
take an active role in the fiscal
reform of individual states to
prevent a systemic crisis,
according to an account by
economists Fabio Giambiagi and
Marcio Ronci published by the
International Monetary Fund in
2004.
It took Mr. Cardoso five years
to cut a deal with the states and
major municipalities, but
eventually the national
government refinanced their debts
in return for changes in state
accounting, spending and tax
practices. Brazil has had its ups
and downs since, and this wasnt
its only significant economic
policy change, but it did help the
country withstand the 2008
financial crisis better than many.
In both cases, the central
government used the
restructuring of state government
debts to impose a measure of
fiscal discipline and to bolster the
power of the central government.
For Europe, the price of continued
monetary union will be stronger
fiscal union. Eventually, money
will flow from the strong to the
weak in some fashion, either
directly or through bailouts of the
rich-country banks that have lent
to weaker-country governments.
Eventually, fiscal autonomy of
member countries will be
constrained.
Thoughtful Europeans
understand this. The Journals Jon
Hilsenrath reported this year that
ECB President Jean-Claude
Trichet was reading Ron
Chernows biography of Hamilton.
And Germanys Angela Merkel
and Frances Nicolas Sarkozy now
talk about the need for a stronger
European center, though they
arent moving very fast toward
euro-zone bonds or other facets of
such a change.
For all its problems, Europe
has one strong point. As a whole,
its fiscal arithmetic looks good,
as economists at J.P. Morgan
Chase put it in a recent note. The
public debt of euro-zone
governments amounts to about
85% of gross domestic product. As
a group, its running a budget
surplus (excluding interest) of
3.2% of GDP, far healthier than the
U.S. or the U.K.
The problem is, of course,
political.
Unlike the U.S. and Brazil,
Europe doesntyethave a
functioning central government
nor states ready to create one.
Nor does it have another
critical ingredienta 21st-century
leader with the courage and
sagacity of Alexander Hamilton or
Fernando Henrique Cardoso.
Lessons for Europes Crisis From U.S., Brazil
[ Capital ]
BY DAVID WESSEL
U.K. Police Watchdog
Clears Senior Officers
Britains police watchdog cleared
four senior police officers of mis-
conduct over their role in the Lon-
don polices widely criticized 2006
investigation into phone hacking at
the News of the World tabloid.
The conclusions of the Indepen-
dent Police Complaints Commission,
however, wont end the pressure on
Scotland Yard over an affair that
has already ended the careers of
two of the forces top officials at the
force.
The IPCC continues to probe
three other cases involving the
police forces relations with the
News of the World and other media.
And the government plans to launch
a public enquiry that will examine
the polices 2006 investigation.
Scotland Yard has faced intense
criticism over its initial
investigation into phone hacking,
which resulted in two prosecutions
but concluded that the practice was
limited to one rogue reporter, for-
mer royal correspondent Clive
Goodman.
That conclusion came under in-
creasing pressure as evidence
mounted that phone hacking may
have been more common at the now
shuttered newspaper that was
owned by News Corp., which also
owns The Wall Street Journal. This
year, Scotland Yard said it would re-
open its investigation.
Police were also criticized by the
media and politicians for allegedly
having close relationships with ex-
ecutives and reporters from the
News of the World and its parent
company, News International, and
for some officers allegedly accepting
bribes from journalists.
In July, Metropolitan Police Com-
missioner Paul Stephenson resigned,
along with Assistant Commissioner
John Yates, saying the attention was
making it difficult for them to con-
tinue with their jobs.
On Wednesday, the IPCC told Sir
Paul, Mr. Yates and two other for-
mer senior officers, Andy Hayman
and Peter Clarke, that they wouldnt
be charged with misconduct.
IPCC Deputy Chair Deborah Glass
said in a statement that while the
handling of the original investiga-
tion had damaged the forces repu-
tation, public concerns werent the
same as conduct that is either
criminal or for which an officer
should be disciplined.
Sir Paul, for instance, couldnt be
charged with misconduct because
officers working for him carried out
a poor investigation, she said.
The IPCC continues to investi-
gate three other related affairs: that
ex-commissioner John Yates helped
the daughter of one former News of
the World executive obtain a job
with the police; the forces hiring of
a former News of the World editor
as a press relations adviser; and al-
leged police corruption.
In a statement, Mr. Yates denied
any wrongdoing and said he is
confident that he will be exonerated.
BY ALISTAIR MACDONALD
In cricket, England beat India in
their third test match......................... 30
Continental Divide
Debt as a percentage of gross domestic product for several
euro-zone nations:
Source: J.P. Morgan, 2010 data
Greece
Italy
Belgium
Ireland
Portugal
Germany
France
Austria
Netherlands
Spain
Finland
Slovakia
Slovenia
Euro-zone average
143%
119
97
96
93
83
82
72
63
60
48
41
38
85%
hotnpapers
At 9/11 Site, a Memorial but Little Else
Visitors Coming to Remember Flight 93 in Shanksville, 10 Years Later, May Struggle to Find a Meal or a Motel
SHANKSVILLE, Pa.People in
this part of southwestern Pennsyl-
vania used to worry the nearby 9/11
memorial might attract souvenir
shops and fast-food joints that
would detract from the solemnity of
the rural site where Flight 93
crashed.
That hasnt happened, and the
question now is whether there are
enough businesses nearby to serve
the 230,000 people expected to visit
the memorial each year. Blame a
weak economy, lack of infrastruc-
ture and squeamishness about prof-
iting from tragedy.
With a planned Sept. 11 visit
from President Barack Obama, the
National Park Service will open the
first phase of the $62 million me-
morial about 75 miles southeast of
Pittsburgh. It features a field of
wildflowers and marble walls bear-
ing the names of 40 passengers and
crew members who died when their
United Airlines jetliner slammed
into a former coal mine after they
struggled with terrorists. The Park
Service has plans to add a visitor
center and wind chimes.
A new Subway sandwich shop
has opened about five miles east of
the memorial. A Holiday Inn Express
is under construction in Somerset,
Pa., about 10 miles west. Otherwise,
little has changed. There are a few
places to have a meal, or a drink,
and Duppstadts Country Store offers
Flight 93 T-shirts and shot glasses.
Visitors arriving from the west
along U.S. Highway 30generally a
scenic route through the Laurel
Highlandspass a 50-acre junkyard
and a corrugated-steel shop called
Adult Country, touting pornographic
videos, just before reaching the me-
morial.
The area is severely under-
served by restaurants and shops,
said Jeff Silka, executive director of
the Somerset County Economic De-
velopment Council. He said entre-
preneurs are waiting to see how
much traffic the memorial generates
before investing, especially given
that many areas near the site lack
water and sewage lines, making it
expensive to develop big projects.
I dont think people [in the
business community] realize how
big this is, said Ron Aldom, execu-
tive director of the Somerset County
Chamber of Commerce, who be-
lieves more motels are needed. Last
year, a temporary memorial at the
site drew 138,000 people, who af-
fixed flowers to a chain-link fence
and contended with portable toilets.
(The permanent memorial will have
rest rooms.)
Somerset County, with about
77,000 residents, could use jobs,
having in recent years suffered the
closure of a factory making camping
trailers and another producing gar-
den-hose nozzles. The main employ-
ers today include prisons, ski re-
sorts, coal mines and metal-
fabrication shops.
But the sluggish economy is dis-
couraging business people from
opening more motels and restau-
rants. So is a general desire to avoid
being seen as exploiting a tragedy.
Visitors to the memorial are
here to pay their respects and I
dont want to take advantage of
people, but of course Im hoping
business improves, said Gloria
Zubek, whose family owns the Alley
Sports Bar, a few miles east of the
memorial. The cavernous bar, a con-
verted bowling alley, is convenient
for motorcyclistswho on busy
days are allowed to serve them-
selves beer from an ice-filled horse
troughbut it doesnt cater to fami-
lies with children.
A few hundred yards from the
memorial entrance is Castagnas, a
restaurant and lounge open for din-
ner nightly but for lunch only Friday
through Sunday. While three regu-
lars wearing baseball caps sipped
beer on a recent afternoon, owner
Karen Carper said she was thinking
of adding a window to serve hot
dogs and ice cream. But she was
hesitant, partly because the busi-
ness wasnt producing enough in-
come to easily finance an expansion.
Could she handle a busload of
tourists? Heck no, said Ms. Carper.
Theyd have to make prior arrange-
ments.
Most visitors will likely find
their way to the memorial from the
nearby Pennsylvania Turnpikeexit-
ing either at Somerset to the west
or Bedford, about 25 miles east. And
those spots are where many are
likely to find refreshment and re-
pose.
Somerset has benefited more
from increased traffic so far. But
tourism officials in Bedford say it
makes more sense for drivers head-
ing west to turn off the turnpike
there, and the city is lobbying the
Turnpike Commission to erect a sign
near their town alerting drivers to
the memorial. A commission spokes-
man said that was being discussed.
About four years ago, Somerset
County government officials pro-
posed a master zoning plan for the
Highway 30 corridor near the me-
morial entrance, partly to ensure
commercial development wouldnt
clash with the memorial. But munic-
ipal governments rejected that idea,
leaving almost no zoning restric-
tions. Developers can pretty much
do whatever they want, said Jim
Marker, a county commissioner.
To stop anyone from establishing
a tourist trap outside the memorial
gates, the Families of Flight 93, an
organization for relatives of those
killed, acquired about 67 acres of
land in that area. The group has
given some to a charity that will
grow roses to honor the 9/11 dead
and arranged for the rest to be set
aside for recreational purposes.
BY JAMES R. HAGERTY
At top, visitors at the overlook at the temporary Flight 93 memorial in Shanksville. Among the businesses near the
memorial are several junkyards, above left, and the Creekside Country Store, right, where Tina Hunt holds a Flight 93 mug.
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Florida Student Is Arrested in School-Bomb Plot
TAMPA, Fla.Tampa police ar-
rested an expelled student after
thwarting what they called a cata-
strophic plot to set off a bomb at
his former high school next week,
authorities said Wednesday.
Police Chief Jane Castor said
Jared Cano, 17 years old, had threat-
ened to plant a device at Freedom
High School in north Tampa and dis-
charge it on the first day of school
Tuesday. He was arrested Tuesday
night after someone tipped off po-
lice about the plot.
Chief Castor told a news confer-
ence that police and the school sys-
tem were probably able to thwart a
potentially catastrophic event, the
likes of which the city of Tampa has
not seen, and hopefully never will.
At Mr. Canos home, police found
materials to make pipe bombs, in-
cluding a fuel source, shrapnel, plas-
tic tubing and timing and fusing de-
vices, Chief Castor said. Police also
found a journal containing sche-
matic drawings of rooms inside the
school and statements about his in-
tent to kill.
Chief Castor said the minute-by-
minute plan to bomb the school in-
cluded his intent to cause more ca-
sualties than the 1999 Columbine
High School massacre in Colorado
that resulted in the deaths of 13 peo-
ple before the two shooters killed
themselves.
The plot targeted specific school
administrators and any students
who were nearby, police said. They
didnt name the administrators.
They also wouldnt disclose who
tipped them off about the plot.
Mr. Canos mother consented to a
police search at about 6:30 p.m.
Tuesday, Chief Castor said. In addi-
tion to the bomb-making materials,
police also found a marijuana-grow-
ing operation.
Mr. Cano faces felony charges of
possessing bomb-making materials,
threatening to throw, project, place
or discharge a destructive device,
cultivating marijuana, possession of
drug paraphernalia and possession
of marijuana.
Authorities said Mr. Cano had
multiple juvenile arrests. Charges
have included burglary, carrying a
concealed weapon, altering serial
numbers on a firearm and drug pos-
session. All have been either dis-
missed or no action has been taken.
Police Maj. John Newman said
Mr. Cano had been on a list of juve-
niles whom police checked on from
time to time because of their
brushes with the law.
Weve been very, very familiar
with him, Maj. Newman said.
The St. Petersburg Times re-
ported that prosecutors, at a hearing
Wednesday morning, said that when
Mr. Cano was arrested he repeated
his plan to discharge a bomb and
cause mass casualties at the school.
The Times reported that Mr.
Cano tried to speak when he ap-
peared before a judge Wednesday
morning but was quickly hushed by
a public defender standing next to
him.
The plot wasnt... Mr. Cano
said, before the public defender
stopped him and told the judge that
he has no comment, according to
the Times.
Mr. Cano was expelled from Free-
dom High School in April 2010 be-
cause of an off-campus incident that
wasnt school-related, Hillsborough
County schools spokeswoman Linda
Cobbe said.
Last year, he attended a charter
school and left voluntarily in March,
Ms. Cobbe said. At that point he was
16 and could have chosen to drop
out. He wasnt registered to attend
classes this coming school year.
Were thankful to Tampa police
for taking the tip they got seriously
and working with us to keep our
schools safe, Ms. Cobbe said.
Associated Press
U.S. NEWS
The plot targeted specific
school administrators and
any students who were
nearby, police said.
hotnpapers
StrugglingPageants WidenScope
Tough Economy and Changing Tastes Damp Popularity; Luring Miss Loris Bog-Off
BENSON, N.C.The young
woman lucky enough to be crowned
queen of the Mule Days festival this
year wont walk away with just a
commemorative T-shirt and the
chance to kiss a mule at the festival
rodeo.
Shell also get to compete to be-
come the next Miss North Caro-
linaand ultimately, perhaps, Miss
America.
The prestigious state feeder
competition for the Miss America
pageant used to bristle at festival
queens. Organizers particularly
turned their noses up at agricultural
types. Those contestants often dont
have to model swimsuits or exhibit
any talent other than, say, spitting
seeds at a watermelon festival.
But the tough economy and
changing cultural tastes are damp-
ing the popularity of the competi-
tions the state contests have tradi-
tionally drawn from, even in the
heart of pageant country in the
South. The recent Miss North Caro-
lina pageant featured 33 hopefuls,
down from about 55 contestants in
the mid-1990s, when preliminary
rounds in the state drew huge
crowds.
Its time that we started includ-
ing them, says Beth Knox, a North
Carolina pageant board member.
Broadening the field makes the pro-
cess more democratic, she says.
Not everyone is so enthusiastic
about the new casting call. A festi-
val queen is just a local girl who has
a prom gown and puts it on and
wins, says Chuck Black, who has
coached North Carolina pageant con-
testants for years. While he says he
welcomes the influx of new girls, he
believes the state-level contenders
are in an entirely different league
making for a possible tense atmo-
sphere for the festival newcomers.
These girls have these expen-
sive wardrobes, theyve got Firm
Grip [spray] on their butt to hold
their swimsuit in place, he says.
Its intimidating.
So too, can be the cost of partici-
pating. Title seekers can expect to
shell out $3,000 in fees, lodging and
tickets alonenot to mention pricey
evening gowns, spray tans and in-
creasingly de rigueur hair exten-
sions.
The poor economy has been es-
pecially challenging for pageantry
after it suffered other setbacks.
Sponsorships have dried up. And
events in some small Northeastern
states have struggled to fill their
ranks ever since the 1996 murder of
toddler pageant queen JonBenet
Ramsey.
Another crimp in the crown: TV
talent shows like American Idol
are now regarded by many as the ul-
timate stage experience. Kellie Pick-
ler, a former Miss Stanly County,
failed to win the Miss North Caro-
lina title in 2004, but went on to be-
come a country music star after ap-
pearing on American Idol two
years later.
Now pageant honchos are openly
scoping out local festivals for talent.
A team in South Carolina is recruit-
ing local festival and college pag-
eants to become official preliminary
Miss America contests.
Among those theyve tried to
lure are Miss Loris Bog-Off. Shes
the main attraction at a Loris, S.C.,
celebration of the chicken boga
slow-cooked stew of chicken, rice
and smoked sausage.
Recruiters have also been on the
heels of Miss Chitlin Strut, crowned
at an annual fte for fried pig intes-
tines.
Festivals have long been eligible
to join the Miss America organiza-
tion, but in practice, very few did.
State pageants, especially those
in the agrarian South, began lobby-
ing about three years ago to be able
to recruit festivals, says Art McMas-
ter, president of the Miss America
Organization.
They argued that the high-profile
national pageant system, which
doles out $45 million in college
scholarships a year, should be
opened to a wider pool of contes-
tants.
The states wanted us to open
that up more because they said
were missing a lot of opportuni-
ties, Mr. McMaster said. The girls
get crowned for a festival, but then
what do they do with it?
For one contestant in the Benson
pageant, the answer was to up her
game. Last year, Amanda Barefoot
beat out three other girls by model-
ing a white pantsuit and tap dancing
to Walking on Sunshine.
The native of Benson, a farming
hub of 3,600 people, then entered
the Miss North Carolina pageant af-
ter a Benson Mule Days pageant or-
ganizer filed paperwork to make the
local festival an official preliminary
competitionthe first in recent his-
tory.
To compete at Miss North Caro-
lina, Ms. Barefoot was coached by
former local Miss North Carolina
contestants on how to model a
swimsuit and how to answer ques-
tions on stageelements not re-
quired at the Mule Days pageant.
She bought a half-dozen new
outfits, including a used navy velvet
and sequin gown for $800. She had
metal tap plates attached to Con-
verse tennis shoes for a new, more
intricate tap routine, set this time to
Footloose.
I had to step it up a notch, says
the college student and former
cheerleader. Its a whole different
world from small-town pageants.
The extra work paid off: She won
the $1,000 scholarship for Miss Con-
geniality. She says she wants to take
another run at Miss North Carolina,
if she can win another feeder com-
petition.
Next year, the Miss South Caro-
lina pageant will include Miss Loris
Bog-Off for the first time.
Samantha Norris, director of the
festivals pageant, said she hopes
the events new status will boost
participation and draw attention to
the Bog-Off.
But she said the pageant will
stay family friendly, with no swim-
suit competition.
Mrs. Norris said she is nervous
that the festival queen might get
picked on at the Miss South Caro-
lina contest next summer.
I dont want to look crazy be-
cause everyones like, Miss Colum-
bia, Miss Charleston, and here we
are, Miss Loris Bog-Off, she says.
Still, she notes, Its not like
shes Miss Chitlin Strut.
Miss Chitlin Strut, as it turns
out, wont be participating.
The Salley, S.C., town council
considered the Miss South Carolina
invitation to send its Chitlin Strut
festival queen to the state pageant,
says Mayor Bob Salley. But they de-
cided against it to preserve the fes-
tivals down-home atmosphere,
says the mayor.
To some, Miss Chitlin Strut isnt
the main attraction in any case.
That distinction is reserved for the
winner of the eating contest.
To be honest, it takes more to
eat chitlins boiled than it takes to
be a beauty queen, says Mr. Salley.
BY VALERIE BAUERLEIN
Amanda Barefoot won the Miss Benson title at the Mule Days Festival and
then went on to compete in the 2011 Miss North Carolina pageant.
L
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Airport Is Warned of Water Violations
PHILADELPHIAThe U.S. Food
and Drug Administration has said
Philadelphia International Airport
violated regulations aimed at ensur-
ing clean water is used on aircraft.
In an Aug. 9 warning letter, the
FDA said the airport wasnt doing
enough to prevent contamination of
water used for drinking and food-
preparation on planes, though the
letter didnt cite any instances of
passengers or workers being ex-
posed to contaminated water.
As a result, the FDA temporarily
downgraded its classification of the
airports watering point and air-
craft-servicing area to provisional
from approved, the agency said.
The airport can regain ap-
proved status if it fixes the prob-
lems. But if corrections arent made
before the next FDA inspection, the
agency said it will reclassify the air-
ports water-service facilities to
nonapproved for carrier use. Non-
approval means aircraft wont be
able to obtain the airports water for
drinking and culinary purposes.
The city-owned airport said its
water supply is clean and safe. It
has addressed the majority of the
observations made by the FDA and
plans to resolve the remaining is-
sues in the next 20 days, said air-
port spokeswoman Victoria Lupica.
The airport plans to install addi-
tional equipment mandated by the
FDA.
BY PETER LOFTUS
Food Costs
Drive Up
Wholesale
Prices 0.2%
U.S. producer prices climbed last
month, an indication that growing
inflation pressures could leave less
room for the Federal Reserve to try
to boost the economy by easing
credit.
The index of producer prices,
which measures how much manu-
facturers and wholesalers pay for
goods and materials, rose a season-
ally adjusted 0.2% in July, the Labor
Department said Wednesday. That
followed a 0.4% dip in June.
The report comes amid mixed
signals for the economy and worries
about a weaker U.S. outlook. The
Federal Reserve last week said it
plans to keep its benchmark short-
term interest rate near zero until at
least mid-2013 in an effort to spur
growth. The central bank could be
constrained from taking further ac-
tion if producers pass on higher
costs to consumers and inflation
stays above its informal target of
close to 2%.
Wednesdays report showed that
last months rise in producer prices
was driven by higher costs for food,
tobacco products and trucks.
There is also clear evidence in
this report of growing pipeline pres-
sures more broadly, with gains in
passenger cars, mens apparel, fur-
nishings and pharmaceuticals, said
Barclays Capital senior economist
Peter Newland.
The index for food was up 0.6%,
the second rise in a row, largely ow-
ing to higher prices for beef and
veal, as well as fruit. Energy costs,
meanwhile, dropped for the second
consecutive month as gasoline
prices in July slid 2.8%.
Some economists say inflation-
ary pressure will ease as lower oil
prices work their way through the
production pipeline. Other factors
also may prove temporary, such as a
surge in auto and parts prices fol-
lowing supply-chain disruptions
stemming from Japans earthquake
in March.
Core prices, which strip out vola-
tile food and energy components
and are considered a more reliable
indicator of inflation, jumped 0.4%
last month for their eighth consecu-
tive gain. Year over year, the core
index in July was up 2.5%, the high-
est since June 2009. Overall prices
increased 7.2% year over year,
largely reflecting the effects of the
recent oil-price spike.
Prices for intermediate goods
rose 0.2% from the previous month.
BY JEFFREY SPARSHOTT
AND LUCA DI LEO
U.S. NEWS
Source: U.S. Labor Department
Higher Costs
U.S. producer price index,
change from previous month
1.5%
1.0
0.5
0
0.5
11 2010
Overall
Excluding food, energy
WSJ.com
ONLINE TODAY: Watch a video
about Amanda Barefoot, Miss
Benson Mule Days, at WSJ.com.
hotnpapers
Historically Black Colleges Break
From Tradition in Their Recruiting
Katy Daugherty enrolled at Ten-
nessee State University because of
the schools flexible daytime, eve-
ning and online classes and its new
urban-studies program.
Once on campus at this histori-
cally black college, where more than
70% of the students are African-
American, Ms. Daugherty, 29, who is
white, became the minority.
It was definitely different, hav-
ing grown up and been in the major-
ity, and all of a sudden you are in
the minority, she says.
In what has become a mutually
beneficial relationship for schools
and students, many of the nations
105 historically black colleges are in-
creasingly wooing non-black stu-
dents. The goals: to boost lagging
enrollment and offset funding short-
falls.
Some black colleges are stepping
up recruiting at mostly white or His-
panic high schools and community
colleges. Delaware State University
is bringing 100 Chinese students to
its Dover campus this fall for cul-
tural and language training. Other
colleges are showcasing unique pro-
grams. Florida Memorial University
in Miami Gardens promotes its cho-
rale, which backed Queen Latifah in
the 2010 Super Bowl, for example.
Even top-ranked black schools,
such as Howard University in Wash-
ington and Spelman College in At-
lanta, are recruiting more aggres-
sively in the face of intensifying
competition for top African-Ameri-
can students.
About 82% of students at the na-
tions 105 black colleges are African-
American, a percentage that has
been fairly constant over the past 30
years, according to a data analysis
for this column by the Thurgood
Marshall College Fund, a New York
nonprofit. Increases in Hispanic and
Asian students have offset declines
in whites, partly because of cuts in
federal- and state-scholarship pro-
grams that encouraged white stu-
dents to attend historically black
colleges, says the funds president,
Johnny C. Taylor Jr. He predicts
growth in white, Hispanic and Asian
enrollment, as black colleges cast a
wider net.
Ms. Daugherty was looking for a
school that offered flexible sched-
ules. As a teenager, she lost interest
in college after three semesters,
dropped out and went to work. In
time, she became interested in city
planning and decided to go back to
school. Tennessee States downtown
Nashville campus enabled her to
combine a full-time course load
with her job as a supervisor at a
nonprofit performing-arts center.
As at many black colleges, its cost
at $2,400 a semesterwas low as
well.
She quickly found her professors
and fellow students friendly. Race
would sometimes enter the conver-
sation. In one class, she says, her so-
ciology professor looked out at the
40 students, most of whom were
black, and asked rhetorically, When
did you first become aware that you
were black? She says she locked
eyes with one of the two other white
students, laughed and mouthed the
words, Today, I guess!
After graduating last weekend,
Ms. Daugherty regards her experi-
ence as a big plus that prepared her
to live in a diverse society. It has
expanded me as a person.
Tennessee States interim presi-
dent, Portia Holmes Shields sees its
mission as a public university to
provide a quality education to stu-
dents of all races, she says. While
some older alumni are uneasy with
the increasing diversity, younger
grads embrace it, says the former
dean of education at Howard Univer-
sity.
Michael Sorrell, president of tiny
Paul Quinn College in Dallas, says
black colleges must stay committed
to their historical mission as bea-
cons of light for students who need
resources and support. My differ-
ence is, I just dont assign a race to
that.
After being hired in 2007 to help
solve the schools financial and ac-
creditation problems, Mr. Sorrell
told alumni that the campus would
soon look dramatically different,
he says. It doesnt mean that weve
turned our backs on the colleges
historical constituency. It means
weve expanded our mission and our
definition of who will benefit, he
says. No alumni have objected, he
adds.
Part of his strategy is to recruit
top students of all races to serve as
campus leaders, by offering personal
mentoring, full $20,000-a-year
scholarships and a post-graduation
job guarantee. Among these 20
hand-picked presidential scholars,
six have been white or Hispanic.
This fall, African-American enroll-
ment among Paul Quinns 200 stu-
dents will likely drop to 85% from
about 94% last year.
One presidential scholar, 22-year-
old Jessika Lara, who is Hispanic,
completed her studies in December
and works now as a recruiter for the
college. To lure non-black recruits,
she tells about her own arrival on
campus: Everybody was so open, so
welcoming. They didnt see a differ-
ence in me just because I was His-
panic, she tells visitors.
One of Ms. Laras many Hispanic
recruits is incoming freshman, Celia
Soto, 19, who graduated with honors
from a Dallas high school.
Ms. Soto admits that on her first
visit to campus, I felt weird, like,
Oh my God, Im the only one who
wasnt African-American. But after
spending time at Paul Quinn, she
says, it doesnt really matter if
youre Hispanic or any other race.
Some black colleges, of course,
are doing relatively well financially.
Headed for 43 years by current pres-
ident Norman Francis, an adroit
fund-raiser, Xavier University of
Louisiana in New Orleans has more
than doubled its endowment since
2005 to nearly $134 million, larger
than that of many black colleges.
Many schools have track records
in producing top African-American
professionals. Xavier sends more
black students to medical school
than any other U.S. college and is
among the top-three producers of
African-American pharmacists with
doctorate degrees.
With just 7,000 undergrads,
Howard produces more African-
American graduates who go on to
earn doctorate degrees in science
and engineering than any other col-
lege in the country, the National Sci-
ence Foundation says. Second is
Spelman, with about 2,100 students.
They do it by really nurturing
students and providing role mod-
elsnot by fostering a competitive
cutthroat environment, says Mary-
beth Gasman, professor of higher
education at the University of Penn-
sylvanias graduate school of educa-
tion.
Black colleges do a good job by
another measure, in educating stu-
dents who enroll with less money
and lower college-entrance test
scores, on average, than incoming
freshmen at other schools. Histori-
cally black colleges and universities
enroll 16% of all black undergrads,
but award 25% of the bachelors de-
grees received by African Ameri-
cans, Dr. Gasman says.
BY SUE SHELLENBARGER
Paul Quinn College President Michael
Sorrell, center, with incoming
freshman Celia Soto, left, and
recruiter Jessika Lara, right.
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Texas Drought Losses Exceed $5 Billion
The historically severe drought
thats hammering the Southern U.S.
has led to a record $5.2 billion of
losses in Texas, according to re-
searchers at the Texas A&M Univer-
sity System.
The losses have ballooned since
May, when the university reported
them at more than $1 billion.
This drought is ongoing, said
David Anderson, livestock economist
at the universitys Texas AgriLife
Extension Service, in a statement.
Further losses will continue if rain-
fall does not come soon to establish
this years winter wheat crop and
wheat grazing.
Of the $5.2 billion in losses tied
to the drought, $2 billion are due to
troubles among livestock producers,
who have moved quickly to shrink
their herds as suitable water and
grazing lands have dried up.
Losses among cotton growers
have reached $1.8 billion.
The period of October 2010
through July 2011 was the driest 10-
month period of weather ever re-
corded in Texas, the organization
said.
BY MARSHALL ECKBLAD
Scientists
Find Boost
For Drug
Recycling
In a bit of high-tech recycling,
researchers have developed an inno-
vative way to identify already-ap-
proved drugs that may work against
diseases they werent originally de-
signed to combat.
They also demonstrated how two
such repurposed drugs may have
benefits in treating two conditions,
inflammatory bowel disease and
lung cancer.
The findings, published in two
papers Wednesday in Science Trans-
lational Medicine, come as both
drug companies and the National In-
stitutes of Health are putting
greater emphasis on so-called drug
repositioning as a way of lowering
the costs of drug development and
getting therapies to patients more
quickly.
There are numerous examples of
medications being developed for
one condition and then found to
have efficacy in another. Viagra is
among the most famous; the drug
was tested in a cardiac trial and was
found to be useful against erectile
dysfunction. Its also being used for
pulmonary hypertension. But rather
than rely on such serendipitous dis-
coveries, researchers would like a
fast, inexpensive way of identifying
potential hits.
Atul Butte, an associate profes-
sor of systems medicine in pediat-
rics at Stanford University School of
Medicine, who led the researchers,
said they created a computer pro-
gram that he likened to an online
dating service, albeit one that oper-
ates on the principle that opposites
attract.
The program, using so-called
high-throughput technology, rapidly
searched National Institutes of
Health public databases containing
the results of thousands of genomic
studies from around the world. To
narrow the search, the program fo-
cused on 100 diseases and 164 drugs
where normal and diseased tissue
samples or drugged and nondrugged
samples were compared in the same
experiment.
The program then looked for ex-
amples where a drug created a
change in gene activity that was op-
posite to the gene activity caused by
a disease, figuring that this might
indicate a likelihood that the drug
would prove to be an effective treat-
ment.
Using the new strategy, the re-
searchers found that topiramate, a
drug used in epilepsy, might work
on inflammatory bowel disease, in-
cluding Crohns disease and ulcer-
ative colitis. Another hit suggested
that cimetidine, an ulcer drug,
might be effective in treating lung
cancer.
They then tested the two generic
drugs in small studies using animal
models of the diseases. In the
bowel-disease study, the drug re-
duced symptoms, and in the lung-
cancer paper, the drug was found to
slow tumor growth.
Rochelle M. Long, chief of phar-
macological and physiological sci-
ences at the National Institute of
General Medical Sciences, which
helped fund the studies, said more
work needed to be done to demon-
strate that the two drugs would in-
deed benefit patients with the dis-
eases.
BY AMY DOCKSER MARCUS
U.S. NEWS
*Race/ethnicity unknown, nonresident alien,
or two or more races
Source: Thurgood Marshall College Fund
The Student Body
About 209,000 students attended
a historically black college or
university in the U.S. past year. A
breakdown of the enrollment:
Black
82.1%
White
7.5%
Hispanic
2.7%
Asian or Pacic Islander
1.4%
American Indian
0.3%
Other*
6%
hotnpapers
Thousands Rally for JailedIndia Activist
NEW DELHISeveral thousand
people gathered in central Delhi and
other cities on Wednesday evening
in support of activist Anna Hazare,
who was jailed on Tuesday after re-
fusing to agree to police conditions
for his planned hunger-strike pro-
test calling for a more powerful an-
ticorruption ombudsman.
At the India Gate monument
near Parliament, people surrounded
a battery of television news trucks,
chanting Anna, were with you!
and Long Live Anna! in Hindi as
they held candles and waved Indian
flags and banners. Television foot-
age showed smaller crowds in other
cities such as Bangalore and Chen-
nai.
On Wednesday evening, Mr. Haz-
are remained in New Delhis Tihar
Jail, which also houses several poli-
ticians arrested in recent months in
connection with corruption scandals
that have rocked the government
and helped fuel support for the 73-
year-old activists campaign.
Indian Prime Minister Manmo-
han Singh earlier Wednesday backed
the police decision to arrest Mr.
Hazare and detain more than 2,600
protesters, but Mr. Singh has faced
heavy criticism, including from Arun
Jaitley of the opposition Bharatiya
Janata Party, who defended Mr.
Hazares right to protest.
Have you forgotten all sense of
statecraft? Have you forgotten how
political agitations are to be dealt
with? Mr. Jaitley asked in the up-
per house of Parliament on Wednes-
day after the prime minister had
said Mr. Hazare would have been al-
lowed to protest if he had agreed to
police conditions, which included
restricting his fast to three days and
limiting the number of protesters at
the sitea public park in New
Delhito 5,000.
Mr. Singh told Parliament that
Mr. Hazare was wrong to use pro-
test to force the adoption of addi-
tional provisions to the Lokpal Bill,
as the draft legislation to set up an
anticorruption ombudsman is
known.
Our government does not seek
any confrontation with any section
of the society, Mr. Singh said. But
when some sections of society delib-
erately challenge the authority of
the governmentit is the bounden
duty of the government to maintain
peace and tranquility.
He continued: Anna Hazare may
be inspired by high ideals in his
campaign. However, the path that
he has chosen to impose his draft of
a bill upon Parliament is totally mis-
conceived and fraught with grave
consequences for our parliamentary
democracy.
Delhi police spokesman Rajan
Bhagat said the police issued an
unconditional release warrant for
Mr. Hazare and his aides late Tues-
day night. But Mr. Hazare has re-
fused to leave jail until he receives
written assurance from the gov-
ernment that he will be allowed to
go ahead with his earlier plan for
the hunger strike, an aide who was
arrested and released told television
reporters outside the jail.
Mr. Bhagat said Wednesday eve-
ning that the police have relaxed
the conditions under which Mr. Haz-
are can now sit on his fast at the
citys Ramlila Grounds instead of
the park where he was supposed to
begin his hunger strike on Tuesday.
We have offered the initial permis-
sion for seven days which can then
be extended on the day-to-day ba-
sis, Mr. Bhagat said.
He added that the police havent
put any restrictions on the number
of protesters allowed at the pro-
posed new site, but said only as
many people can participate as per
the capacity of the place. Negotia-
tions are continuing between Mr.
Hazare and the police to end the
deadlock, Mr. Bhagat said.
Abhimanyu Singh, a coordinator
for the Delhi chapter of India
Against Corruption that supports
Mr. Hazares campaign, said the ac-
tivist and his team have agreed to
the new protest venue but not on a
restriction on the duration of the
hunger strike. Our demand is we
should be allowed to protest for at
least 30 days, he said.
There are political risks for Mr.
Singh if Mr. Hazares anticorruption
crusade drags on and he is viewed
as blocking the creation of an om-
budsman with the power to go after
top politicians. After a brief hunger
strike by Mr. Hazare in April, the
Congress party-led government
formed a joint committee of five
civil-society representatives and five
senior ministers to draft the Lokpal
Bill establishing an anticorruption
ombudsman. But there were dis-
agreements over the scope of the
bill, as it didnt bring all govern-
ment officials under its jurisdiction.
Mr. Hazare and his supporters
wanted all government officials, in-
cluding the prime minister, to be
covered by the Lokpal Bill. They
later burned copies of the draft leg-
islation in protest.
The P.M. isnt corrupt, but now
hes supporting corrupt people,
said Ravinder Singh, 29, who works
in sales at a financial-services firm
and was among the thousands gath-
ered at dusk at India Gate, where
there was a carnival-like atmo-
sphere with vendors hawking street
snacks and tea while police mingled
with protesters.
Many of the protesters at India
Gate were young. Archana Dang, 22,
said she was backing Mr. Hazare be-
cause the governments anticorrup-
tion bill is too weak, since it shields
sitting prime ministers and the judi-
ciary from investigation. In a de-
mocracy, a basic principle is that all
people are equal before the law
why should the prime minister be
different? she said.
Mehul Gaur, a 24-year-old archi-
tect, said Prime Minister Singh
acted irresponsibly by condoning
the arrest of Mr. Hazare prior to the
protest. If we arent able to assem-
ble freely to protest, God knows
what will happen next, he said.
Mr. Singh of India Against Cor-
ruption said about 80,000 people
were marching Wednesday evening
from India Gate to Jantar Mantar,
the scene of Mr. Hazares hunger
strike in April. A policeman at Jan-
tar Mantar said a large crowd of
about 70,000 to 80,000 protesters
filled the roads and thoroughfares
leading to the parliament building
at 7 p.m. and soon dispersed.
As night fell, the remaining peo-
ple at India Gate circled the grounds
holding candles. R.D. Sharma, an el-
derly man with an I am Anna flyer
posted on his chest, said: Annas
bill is the only bill. The govern-
ments bill is nothing.
Nikita Garia and Tripti Lahiri
By Krishna Pokharel,
Amol Sharma
and Will Davies
An activist in Bhubaneswar, India, holds a sign backing jailed anticorruption advocate Anna Hazare on Wednesday.
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Tribunal Links Four to Hariris Killing in Beirut
BEIRUTThe United Nations-
backed international tribunal inves-
tigating the assassination of former
Lebanese Prime Minister Rafik Har-
iri publicly released the full indict-
ments of four suspects linked to
Hezbollah on Wednesday.
The 47-page document says the
findings of the Special Tribunal for
Lebanon are based on circumstantial
evidence, gathered from cellphone
records, tying the four Lebanese na-
tionals to the 2005 car bombing in
Beirut that killed Mr. Hariri and 21
others. The indictments fall short of
providing a smoking gun, and
dont address the larger question of
who ordered Mr. Hariris assassina-
tion and why.
The probe into Mr. Hariris killing
has polarized Lebanon and its politi-
cal clans along sectarian lines, with
the pro-Western Sunni bloc support-
ing the tribunal and the Shiite bloc,
led by Hezbollah, dismissing it as
politically biased.
The documents revelations
arent game-changing, analysts say,
but they could further stoke sectar-
ian tensions at a time when Lebanon
is fearful of a spillover of violence
from unrest in neighboring Syria.
The situation here is very much
governed by the regional events,
said Paul Salem, director of the Car-
negie Middle East Center in Beirut,
part of the Carnegie Endowment for
International Peace, a think tank.
The country is divided as it is and
people are taking positions.
Hezbollah, the militant and polit-
ical Shiite group backed by Iran and
Syria, has denied all the allegations
and dismissed the tribunal as politi-
cally motivated.
There is no critical evidence
against the men, said Hezbollah
leader Sheik Hassan Nasrallah,
speaking Wednesday on Hezbollahs
Al Manar television. It is clear that
the [special tribunal] is politicized,
and the [accused] members of the
resistance should not be seen as
criminals but as honest people, he
added.
Lebanese authorities say they ha-
vent found or detained any of the
four suspects.
The tribunal made public the
names of the suspects in June when
it issued the indictments. On
Wednesday, it offered fresh informa-
tion on the roles they allegedly
played in Mr. Hariris killing.
According to the indictments,
Mustafa Badreddine, a senior Hez-
bollah commander, served as the
overall controller of the operation.
Mr. Badreddine is the brother-in-law
of Imad Mughniyeh, a suspect in the
1983 bombing of a Marine Corps
barracks in Beirut that killed 241
U.S. servicemen. Mr. Mughniyeh was
killed in a car bombing in Damascus
in 2008.
Salim Ayyash, also a well-known
Hezbollah member, coordinated the
team that carried out the attack, the
documents said. Assad Sabra and
Hassan Oneissi, two other Hezbollah
members charged with conspiring in
the attack, attempted to cover that
up by preparing a video of a bogus
Jihadi group claiming the attack and
then bringing it to the attention of
media organizations, according to
the indictments.
The team allegedly used two
types of telephone networks to com-
municatecovert networks, used
by the team to call one another, and
open networks that members
sometimes used to call people out-
side the team, according to the in-
dictments.
An examination of these net-
works, the indictments say, shows a
flurry of calls leading up to Mr. Har-
iris assassination. The calls stopped
two minutes before the explosion
and the phone numbers were never
used again, the indictments say.
In January, a Hezbollah-led coali-
tion of ministers quit the govern-
ment over disagreement on how
Lebanon should handle the tribunals
indictments. Their resignations
caused the government of Prime
Minister Saad Hariri, a son of Rafik
Hariri, to collapse.
The new Lebanese prime minis-
ter, Najib Mikati, a Sunni business-
man whose candidacy Hezbollah
supported, has pledged his govern-
ment would cooperate with the tri-
bunal. Mr. Hariri, in a statement
Wednesday, urged Hezbollah to take
a historic stand and cooperate
with the tribunal because the in-
dictment and all the accompanying
evidence are too overwhelming to be
outmaneuvered.
BY FARNAZ FASSIHI
The burial place of Lebanons slain former Prime Minister Rafik Hariri in Beirut.
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WORLD NEWS
hotnpapers
Chvez to Nationalize
Venezuelan Gold Sector
CARACASPresident Hugo
Chvez said Wednesday he planned
to take over Venezuelas largely un-
derdeveloped gold mining industry
in an attempt to boost international
reserves.
The populist leader has already
nationalized banks, telecommunica-
tions, oil fields, the power sector,
and hundreds of thousands of acres
of farmland, making Wednesday's
move unsurprising.
Speaking on state television via
telephone, Mr. Chvez said he would
introduce a new decree in the com-
ing days to put exploration and ex-
traction of gold into the govern-
ments hands. It will be a decree to
take the gold sector, which still re-
mains in the hands of a mafia and
smugglers, he said.
We dont only have oil wealth,
we have here one of the largest re-
serves of gold in the world, Mr.
Chvez said. Lets convert it into
our international reserves because
gold is increasing in its value.
The move comes one day after
documents reviewed by The Wall
Street Journal showed that the Ven-
ezuelan government planned to
transfer billions of dollars in cash
reserves held abroad to banks in
Russia, China and Brazil and tons of
gold from European banks to its
own central bank vaults. The docu-
ments say the South American
country aims to move 211 tons of
gold it keeps abroad and values at
$11 billion to the Central Bank in Ca-
racas, where the government keeps
its remaining 154 tons of bullion.
Mr. Chvez announcement gave
gold futures in New York a boost,
with the contract for August deliv-
ery rising $8.80, or 0.5%, to settle at
a record $1,791.20 a troy ounce.
Although it boasts Latin Amer-
icas largest reserves, Venezuela is a
minor player in the gold market.
Venezuela is not even in the top 22
(producers), they are not a huge
gold producer, said Bart Melek
head of commodity strategy with TD
Securities. Mr. Melek said Venezuela
produced about 1.7 metric tons of
gold a year.
Rusoro Mining Ltd, which is
listed in the Toronto Venture Ex-
change, is the only major gold pro-
ducer working in Venezuela. Andre
Agapov, Rusoros CEO, said he
wasnt worried about the announce-
ment. Mr. Agapov, whose father is a
personal friend of Mr. Chvez, said
he believed Mr. Chvezs words were
directed to the many illegal mining
operations which operate without
government permits and use envi-
ronmentally damaging practices,
like mercury dumping.
All the gold is being sold ille-
gally, said Mr. Agapov in a tele-
phone interview from London. The
president said enough is enough.
Rusoro produces about 100,000
ounces a year, about the same as the
Venezuelan state produces, Mr. Aga-
pov said. But illegal miners produce
about 400,000 ounces of gold a
year, he said.
Other foreign mining companies
have been hurt before by the Chvez
government. In February, Canadas
Crystallex International Corp. had
its contract to develop the Las Cris-
tinas gold fields terminated by the
government. The company is now
seeking arbitration.
A year ago, the state allowed
gold miners to export up to half of
their product, softening an earlier
law that required companies to sell
70% of their product domestically.
The change in the law came after
pressure from Rusoro.
Venezuelas gold mining industry
has not played a mayor role in the
countrys economy. Although Vene-
zuela is believed to have Latin
Americas largest gold reserves, the
countrys oil industry has garnered
most of the attention. As a result,
Venezuelas gold fields, which are in
jungle areas close to the Brazilian
border, have been mostly dominated
by small, illegal wildcat producers.
Its the Wild West, said Moiss
Naim, a former Venezuelan trade
minister. There are no police,
roads, or authority. The industry is
dominated by smugglers.
To modernize the gold mining
sector, previous Venezuelan govern-
ments had enacted legislation to
lure companies such as Crystallex,
but to little avail.
BY KEJAL VYAS
AND JOS DE CRDOBA
President Chvez giving a speech in Caracas Tuesday. He said the gold sector was in the hands of mafia and smugglers.
Malaysia Posts Growth of 4%
KUALA LUMPURMalaysias
economic output in the second
quarter increased 4% from a year
earlier, slightly exceeding market
expectations but falling short of the
4.9% revised first-quarter growth
rate, the Department of Statistics
reported Wednesday.
The median forecast of the 17
economists polled by Dow Jones
Newswires was for a 3.8% increase
in second-quarter gross domestic
product.
The services sector was the main
contributor in the latest quarter, the
department said in a statement,
while manufacturing was a drag.
For the first half, the trade-de-
pendent economy grew 4.4%.
Bank Negara Malaysia Gov. Zeti
Akhtar Aziz, speaking at a press
conference announcing the data,
cautioned that the Europe debt
crisis and slowing growth in the
U.S. pose risks to growth because
they cause volatility in the finan-
cial markets in the immediate
term.
But he added, Barring that from
happening, we can achieve 5%
growth because our economic fun-
damentals are intact.
In 2010, Malaysias economy, the
third-largest in Southeast Asia,
grew 7.2%, recovering from a 1.7%
contraction the year before.
BY JASON NG
AND ANKUR RELIA
WORLD NEWS
Turkish Soldiers
Killed in Ambush
ISTANBULEight Turkish sol-
diers and one civilian were killed,
and several soldiers were injured in
an attack by Kurdistan guerillas on
Wednesday, government officials
said, marking one of the bloodiest
days for the Turkish army since vio-
lence in the countrys restive south-
east escalated in July.
The attack took place in the Cu-
kurca region of Hakkari province,
close to the border with Iraq. The
governor of Hakkari, Moammer
Turker, blamed the attack on rebels
from the outlawed Kurdistan Work-
ers Party, or PKK, but there was no
immediate claim of responsibility
from the group.
In the morning hours, on the
12th kilometer of the Hakkari Cuku-
rca highway, while a military convoy
was passing, four separate explo-
sives detonated. They were placed
on the road by PKK terrorist-organi-
zation members, the governors of-
fice said.
Gov. Turker told Turkish televi-
sion 11 were injured. Later in the
day, the prime minister confirmed
the number killed.
Turkeys government was swift
in its condemnation. Prime Minister
Recep Tayyip Erdogan warned: The
ones who dont put distance be-
tween themselves and terror will
pay the price.
The attack, which marks the
bloodiest day for Turkish troops
since 13 soldiers were killed in Diya-
bakir province in July, comes just
days after the prime minister said
Turkeys patience is running out
and signaled tougher measures
against rebels would follow the
Muslim holy month of Ramadan. He
didnt elaborate.
Defense Minister Ismet Yilmaz
told reporters that there would be
reprisals, and local media re-
ported the military launched an air
and ground offensive in the largely
Kurdish Hakkari province.
More than 30 Turkish soldiers
have died since attacks intensified
last month. The clashes also have
left about 10 rebels dead. The con-
flict with the PKK, considered a ter-
rorist organization by Turkey and
much of the international commu-
nity, has claimed more than 45,000
lives since it began in 1984.
Ankara already has said it will
ask the Turkish police to play a
broader role in fighting the insur-
gency, although this idea has been
challenged by critics who say the
police are no better equipped to
tackle the PKK than the army.
Analysts say the government
also is planning more cross-border
operations into northern Iraq,
where the PKK houses its main
bases.
Turkeys Kurds make up an esti-
mated 20% of the countrys popula-
tion of 73 million. Ethnic Kurds also
live on the other side of Turkeys
borders with Iraq, Iran and Syria. In
recent years, the PKK and other Kur-
dish leaders have abandoned calls
for an independent Kurdish state,
but their demands for political au-
tonomy and for schools to teach in
the Kurdish language have met with
strong resistance in Ankara.
In the years before the latest
bout of violence, the PKK curbed the
intensity of its military activities,
but it also began to splinter. One
breakaway group claimed responsi-
bility for a suicide bombing in Istan-
buls Taksim Square in November,
which wounded 32 people and killed
the attacker.
BY JOE PARKINSON
Water-Treatment Efforts
At Daiichi Plant Off Track
TOKYOThe operator of the
Fukushima Daiichi nuclear plant ac-
knowledged Wednesday that its ef-
forts to clean up heavily radioactive
water flooding the facility are be-
hind schedule, but maintained it will
bring the plant to a safe shutdown
as planned.
The assessment came in a
monthly review of the road map is-
sued in mid-April by Tokyo Electric
Power Co. that calls for an end to
radiation emissions and a safe shut-
down of the reactors by January.
Also Wednesday, a reactor at
Hokkaido Electric Power Co.s
Tomari nuclear plant in northern
Japan was given the go-ahead to re-
sume regular operations, the first
authorization of its kind since the
Fukushima disaster began March 11.
Removal of contaminated water
is considered essential to bringing
about a safe shutdown of the heav-
ily damaged reactors and their
eventual decommissioning.
Strengthening the capability of
the water treatment is the most im-
portant task facing us, said Goshi
Hosono, the minister in charge of
the nuclear crisis at the plant.
As of Aug. 16, there were still
95,000 cubic meters of irradiated
water in the basements of reactors
Nos. 1-4, even though 50,000 cubic
meters had been treated since a
complex filtration process began in
mid-June. The amount is decreasing
slowly as new water is injected into
the reactors each day to keep them
from overheating.
Some progress was made in con-
taining radiation releases from the
reactors. A cooling system has been
restored for the spent-fuel storage
pool at all four reactors, reducing
the chances of contaminated water
vaporizing into the atmosphere.
Tepco said the amount of radia-
tion emissions from the plant
dropped to 1/10 millionth of the
level at the early stage of the crisis.
That level would produce exposure
of 0.4 millisieverts per year of radia-
tion along the boundary of the
plants compound, about equal to
what the average person receives in
a year.
The estimate is based on a two-
week sampling at one point in the
plant, and not where levels of radia-
tion tend to be highest. The figure
also doesnt take into account po-
tential exposure to the significant
amounts of radiation already re-
leased in the air and ground.
Tepco wants to begin repairing
the primary containment vessels
that serve as a shield around the re-
actor vessels once the basements
are drained. Damage to both sets of
vessels means highly contaminated
water used for cooling continues to
leak out, creating toxic pools.
BY MITSURU OBE
Associated Press
hotnpapers
In China Interview, Biden Stresses Ties
SHANGHAIU.S. Vice President
Joe Biden sounded a positive note
toward China in an interview with
its main official newspaper ahead of
a four-day visit to the country, wel-
coming Chinese companies to invest
in the U.S. and reiterating a pledge
to address a key Chinese trade com-
plaint by easing U.S. restrictions on
exports.
Mr. Biden, who arrived in Beijing
Wednesday and starts meetings
with Chinese leaders on Thursday,
emphasized the need to improve
U.S.-China relations in an interview
with the Peoples Daily on the eve of
his departure from Washington.
We are determined to put U.S.-
China relations on a steady and sus-
tainable track for the coming de-
cades, the Communist Party
mouthpiece quoted Mr. Biden as
saying.
The Peoples Daily interview
didnt directly address two issues
that are expected to be central
points in Mr. Bidens visit: discus-
sion of Washingtons fiscal woes and
the prospect of U.S. arms sales to
Taiwan.
But in a separate interview pub-
lished Wednesday with Caijing, a
leading independent business maga-
zine in China, Mr. Biden was quoted
as saying that the administration of
U.S. President Barack Obama is
deeply committed to maintaining
economic fundamentals that ensure
the safety, liquidity and value of U.S.
Treasurys.
This is first and foremost a firm
commitment to U.S. citizens, who
hold the large majority of all out-
standing Treasury obligations and,
also, to our foreign investors, in-
cluding China, Mr. Biden said in the
interview posted on Caijings web-
site.
The recent agreement to raise
the U.S. debt limit and set spending
cuts will help keep the United
States on a responsible financial
path, Caijing quoted Mr. Biden as
saying. In the coming months,
President Obama and I will urge
Congress to enact substantial deficit
reduction, as well as take additional
measures to spark jobs and
strengthen the U.S. economic recov-
ery.
Meanwhile, China continued to
publicly fret about Washingtons
economic policies and the safety of
the countrys holdings of U.S. gov-
ernment debt, which are estimated
to total at least $1.2 trillion, a huge
share of Beijings U.S. dollar-denom-
inated foreign-exchange reserves.
The overseas edition of the Peo-
ples Dailys published on Wednes-
day a front-page commentary by
Shen Dingli, a professor at Shang-
hais Fudan University, that urged
the U.S. government to take re-
sponsibility for the issue and take
measures in that direction.
In an essay published in the offi-
cial China Daily Wednesday, Bank of
China Ltd. Chairman Xiao Gang said
that the U.S. should refrain from
launching a third round of quantita-
tive easingcommonly called QE3
and tighten its monetary policy to
raise the worlds confidence in the
U.S. dollar. Under quantitative eas-
ing, the U.S. central bank would buy
assets such as U.S. Treasurys to
keep rates low and stimulate the
economy.
Initiating the QE3 may boost fi-
nancial and commodity markets for
a short time, but it will bring about
new asset bubbles and stoke further
inflationary expectations, which will
create problems for their own and
emerging economies, he said. The
downgrading of the U.S. credit rat-
ing has triggered turmoil on inter-
national markets, he added. There
is a real sense that a new crisis
point is fast approaching.
In the Peoples Daily interview,
Mr. Biden said he and Mr. Obama
are working on export restriction
reforms with an eye toward increas-
ing U.S. competitiveness and stimu-
lating U.S. exports, the report said.
Chinese officials have repeatedly
urged the U.S. to ease restrictions
on exports to China of high-technol-
ogy products. They say the restric-
tions contribute to Chinas trade
surplus with the U.S. by reducing its
imports from that country.
Mr. Biden said that less than 1%
of U.S. exports to China were sub-
ject to export permits last year, add-
ing, We believe we can utilize
many other effective ways to expand
trade and achieve a more balanced
economic relationship, the Peoples
Daily said.
The vice president also sought to
dispel complaints from Chinese offi-
cials and executives about political
resistance to Chinese investment in
the U.S. We welcome and encour-
age Chinese companies investing
abroad to look first at the U.S., the
Peoples Daily quoted him as saying.
Foreign investors benefit from our
open, transparent and nondiscrimi-
natory investment environment.
During his trip, Mr. Biden is
scheduled to meet several times
with Chinese Vice President Xi Jin-
ping, who is widely expected to suc-
ceed Hu Jintao as Communist Party
chief next year and as president in
2013.
Mr Xi will also break with prece-
dent by joining Mr. Biden during his
visits to the cities of Dujiangyan and
Chengdu in the western province of
Sichuan, an area devastated by a
2008 earthquake. Mr. Biden departs
on Monday for Mongolia.
Eliot Gao in Beijing
BY JEAN YUNG
Chinas Foreign Minister Yang Jiechi smiles as a girl presents flowers to a just-arrived U.S. Vice President Joe Biden in Beijing on Wednesday.
R
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r
s
New Measures Boost Hong Kongs Role in Yuan
HONG KONGTop Chinese lead-
ers announced new measures to bol-
ster Hong Kongs status as a major
center for trading Chinas currency,
Beijings latest move to increase the
yuans standing internationally.
While on an official visit to Hong
Kong, Chinese Vice Premier Li Keq-
iang announced several initiatives
on Wednesday aimed at easing the
flow of so-called offshore yuan
traded in Hong Kong back into
mainland China. He also announced
plans for funds that would let main-
land Chinese investors trade Hong
Kong stocks. Chinas central bank
governor, Zhou Xiaochuan, said the
range of Chinese companies able to
issue yuan debt in the territory
would be expanded.
Analysts said the measures could
generate even more demand for
yuan-denominated assets in Hong
Kong, which is part of China but op-
erates under its own laws and with
its own currency.
Mr. Li, who was joined in Hong
Kong by Mr. Zhou and other high-
ranking mainland officials, is widely
seen as a leading contender to suc-
ceed Premier Wen Jiabao in 2013.
China keeps strict controls on
the yuan, also called the renminbi.
By serving as a center for trading
the yuan outside mainland China,
Hong Kong has become a key player
in Chinas push to give its currency
a more international presence.
Several of Wednesdays initia-
tives were expected, and it was un-
clear how quickly any would be im-
plemented. For example, businesses
and bankers eagerly await new rules
from China that would allow pro-
ceeds from yuan debt offerings to
be plowed back into China without
red tape. Mr. Li suggested Beijing
intends to follow through, but didnt
say when.
Still, the latest move from China
takes yuan internationalization to
the next stage, HSBC Holdings said
in a note Wednesday.
This is the strongest endorse-
ment yet of using Hong Kong as the
platform for the increased use of ren-
minbi internationally, said Julia Le-
ung, Hong Kongs undersecretary for
financial services and the treasury.
The measures come at a time of
uncertain economic outlook for
Hong Kong, which has seen its re-
covery from the 2008 financial cri-
sis slow in recent months amid vola-
tility in the U.S. and European
markets, compounded by surging in-
flation and intensifying competition
with neighboring financial centers.
In recent years, Chinas central
government has implemented a
number of policies that have helped
boost Hong Kongs economy. Some
critics in Hong Kong accuse Beijing
of seeking to placate demands for
greater democracy with economic
incentives.
Political reform is the most
pressing issue in Hong Kong, said
Albert Ho, chairman of the citys
biggest opposition party. Its a
shame we didnt get to hear their
thoughts on this front during the
officials visit.
In an address Wednesday morn-
ing, Mr. Li said financial institutions
in Hong Kong will be allowed to in-
vest offshore yuan they hold in do-
mestic Chinese securities, with an
initial upper limit of 20 billion yuan,
or about US$3.13 billion. The figure
is small compared with the more
than 500 billion yuan held on de-
posit in Hong Kongs banking sys-
tem as of June, but analysts believe
the limits could be increased in the
future.
Mr. Li also announced plans to
allow exchange-traded funds with
Hong Kong-listed stocks as constitu-
ents to be sold in mainland China,
making it easier for mainland inves-
tors to gain exposure to Hong
Kongs equities market.
This is significant as, for the
first time, a high-ranking Chinese
official is endorsing a channel for
domestic funds to invest in Hong
Kong stocks, which could support
the city as a wealth management
center and reinforce its financial
hub status, said Raymond Yeung,
senior economist at ANZ Banking
Group.
It wasnt clear when the Hong
Kong ETFs, which have been ex-
pected for some time, would actu-
ally become available.
Also on Wednesday, Peoples
Bank of China Gov. Zhou said Beijing
will allow nonfinancial companies
from China to issue yuan bonds in
Hong Kong. He said domestic enti-
ties will be allowed to raise 50 bil-
lion yuan in so-called dim sum
bonds in Hong Kong this year.
Polly Hui and Peter Stein
BY CHESTER YUNG
AND FIONA LAW
WORLD NEWS
HSBC said the latest move
from China takes yuan
internationalization to the
next stage.
hotnpapers
IN DEPTH
Syria Threatens Dissidents
Around Globe, U.S. Says
Obama Administration Contends Assad Regime Is Using Its Diplomats to Track and Intimidate Expatriates
S
YRIA is taking its war against Presi-
dent Bashar al-Assads political oppo-
nents global, using diplomats in
Washington, London and elsewhere to track
and intimidate expatriates who speak out
against the Damascus regime, according to
Syrian dissidents and U.S. officials.
Syrian embassy staffers are tracking and
photographing antiregime protesters and
sending reports back home, Syrian activists
and U.S. officials say. Syrian diplomats, in-
cluding the ambassador to the U.S., have
fanned out to Arab diaspora communities
to brand dissidents traitors and warn
them against conspiring with Zionists.
A half-dozen Syrian-Americans inter-
viewed by The Wall Street Journal in recent
weeks say that as a result of their activities
in the U.S., family members have been in-
terrogated, threatened or arrested in Syria.
The Obama administration says it has
credible evidence that the Assad regime
is targeting relatives of Syrian-Americans
who have participated in peaceful U.S. pro-
tests.
In an interview Tuesday, Imad Mou-
stapha, the Syrian ambassador, dismissed
the allegations by Syrian dissidents and
U.S. officials as slander and sheer lies.
One Syrian-American scientist in Phila-
delphia, Hazem Hallak, said his physician
brother, Sakher, was tortured and killed in
May by Syrias intelligence agencies, the
mukhabarat, after he returned from a medi-
cal conference in the U.S. Syrian agents in
Aleppo were obsessed with obtaining a list
of Syrian activists and U.S. officials the
brother had allegedly met during his stay,
Hazem Hallak said.
They want to intimidate us wherever
we are, said Mr. Hallak, who said he be-
lieves Syrian agents or regime sympathiz-
ers tracked his brother inside the U.S. Mr.
Hallak said his brother wasnt involved in
anti-Assad activities.
The State Department recently publicly
rebuked the Syrian ambassador, Mr. Mou-
stapha, for allegedly intimidating activists
and confined him to a 25-mile (40-kilome-
ter) radius around Washington.
We received reports that Syrian mission
personnel under Ambassador Moustaphas
authority have been conducting video and
photographic surveillance of people partici-
pating in peaceful demonstrations in the
United States, the State Department said.
The United States Government takes very
seriously reports of any foreign government
actions attempting to intimidate individuals
in the United States who are exercising their
lawful right to freedom of speech as pro-
tected by the U.S. Constitution.
The Federal Bureau of Investigation,
meanwhile, is investigating allegations that
Mr. Moustapha and his staff have threat-
ened or harmed Syrian-Americans, accord-
ing to three individuals interviewed by the
FBI in recent weeks. An FBI spokesman said
the bureau wont comment on any possible
investigation into the Syrian embassys ac-
tivities.
Ambassador Moustapha is having none
of it. The Embassy of Syria challenges the
State Department to provide a single shred
of evidence that the embassy has harassed
or conducted surveillance on anyone, he
said by telephone from Damascus, where he
said he is on vacation. We challenge any
authority or organization that has extended
such a ridiculous and preposterous claim to
provide proof.
Asked if he was aware his travel inside
the U.S. had been limited to a 25-mile ra-
dius around Washington, Mr. Moustapha
said, This is true, and we did the same to
the American ambassador here in Damas-
cus. He called the U.S. move reciprocity.
Some of the most explosive allegations
against the Syrian government come solely
from family members of alleged victims.
However, the Syrian Human Rights Commit-
tee, a group based in London, published an
account of the Sakher Hallak case and
blamed his death on the Syrian security
apparatus. It cited a Syrian coroners re-
port that determined torture and strangula-
tion by rope as the cause of death. And it
said family members had been told Mr. Hal-
lak had been killed by the Mossad, the Is-
raeli intelligence agency. No one believed
it, said the report.
Syria has long had a reputation as one
of the most repressive regimes in the
world. President Assad inherited power
from his late father, Hafez al-Assad, in
2000, pledging to open up Syrian society
and embrace political changean implicit
rejection of his fathers hard-line ways. His
diplomats overseas, particularly Mr. Mou-
stapha in Washington, have cast Mr. Assad
as an agent for positive change in speeches
before foreign audiences.
Even as Arab revolts began early this
year in Tunisia, then spread to Egypt, the
younger Mr. Assad kept positioning himself
as a reformer. If you didnt see the need of
reform before what happened in Egypt and
Tunisia, its too late, he said in January.
The revolts reached Syria in mid-March,
and that prompted an increasingly violent
response from the Assad government. The
BY JAY SOLOMON
AND NOUR MALAS
Syrian ambassador to the U.S. Imad Moustapha on Tuesday dismissed the allegations by dissidents and U.S. officials. Above, Mr. Moustapha, center, with students at Carnegie Mellon in 2008 in Pittsburgh.
Associated Press
hotnpapers
IN DEPTH
United Nations estimates that more than
2,000 civilians in Syria have been killed.
The State Department gauges that 30,000
Syrians are in detention.
U.S. and European officials said intelli-
gence shows Syrias closest strategic ally,
Iran, has been assisting Damascus in its
crackdown against opponents both at home
and abroad. The officials said many of the
tactics used by Mr. Assads security forces
mirror those utilized by Tehran in 2009 to
stamp out a public revolt against President
Mahmoud Ahmadinejads rule following a
disputed election.
In recent months, Tehran has sent to Mr.
Assads government scrambling devices
used to disrupt satellite-phone communica-
tions among activists inside Syria and over-
seas, according to U.S. and European offi-
cials. Iran has also dispatched advisers to
Damascus to tutor Syria on how to use so-
cial-networking sites, such as Facebook and
Twitter, to track communications among
opposition figures.
This spring, Syrias intelligence agency
recruited dozens of information-technology
specialists for their ability to crack online
pseudonyms and trace computer Internet
addresses, according to online activists. A
few weeks later, Mr. Assad lifted a govern-
ment ban on social media and set the infor-
mation-technology specialists to work spy-
ing on those who used the sites, and
particularly on Syrians who communicated
with activists abroad. The government ac-
cused the activists of being Islamists or
Western-backed agents.
Iran seems to have provided Syria with
the playbook on how to combat dissent,
said a senior European official. Iran has re-
peatedly denied assisting in Syrias crack-
down.
In May, hundreds of Syrian-Americans
descended upon Damascuss red-brick mis-
sion in an upscale Washington neighbor-
hood to challenge Mr. Assads rule. Attend-
ees at the event said they were unnerved
when embassy staff took photos of their
faces and wrote down license-plate num-
bers. The dissidents said they saw men in
upstairs rooms monitoring the crowd.
Mr. Moustapha, the Syrian ambassador,
eventually invited a five-person delegation
into the mission to present its grievances,
according to attendees. One of the men, a
70-year-old doctor, hadnt lived in Syria for
40 years and surprised protesters by re-
vealing to the ambassador that his six
brothers and other family members still re-
sided in Deraa, the province where the anti-
Assad revolt took root. The doctor stressed
that the Assad regime needed to fall be-
cause of its history of human-rights abuses,
according to a family member. Within a
day, Syrian intelligence agents appeared at
the mans family home and interrogated his
brothers, according to a family member.
One of them was killed weeks later by pro-
government militiamen, the family member
said.
Mr. Moustapha is related through mar-
riage to the deputy chief of staff of the Syr-
ian army, Gen. Assef Shawkat, President As-
sads brother-in-law. Mr. Moustapha has
been a large presence on Washingtons dip-
lomatic circuit in recent years. He has
hosted dinners for prominent politicians
and journalists and written a blog com-
menting on everything from art and Mozart
to the George W. Bush administrations al-
leged foreign-policy blunders.
This year, Mr. Moustapha has taken his
message of support for Mr. Assad to Arab-
American communities in Detroit, Atlanta
and Cleveland. He has stressed to audiences
the need for political reform in Syria, but
also that efforts by the Syrian diaspora to
challenge Damascuss writ is treachery and
places them on equal footing with Zionists,
a serious charge as Syria is technically at
war with Israel.
You are the ones that show the true
face of Syria, not those other traitors that
go to U.S. Congress demanding Congress to
impose sanctions on your nation, on our
nation, Mr. Moustapha told a gathering of
pro-Assad supporters in Washington, ac-
cording to a video posted on YouTube.
Malek Jandali, a Syrian-American com-
poser and pianist, performed his song I
Am My Homeland at a rally in a park
across from the White House on July 23.
The piece includes the lyrics Oh homeland,
when will I see you free?
Four days after the event, Mr. Jandali
said, his parents were attacked and beaten
in Homs, Syria. Two plainclothes agents
handcuffed Mr. Jandalis 73-year-old father
as he approached his home, duct-taping his
mouth and nose, and then forcing him to
open his front door. Mr. Jandali said the
men then assaulted his mother, breaking
her teeth and punching her in the eye.
They were referring to mesaying
things like, This is what happens when
your son makes fun of us, Mr. Jandali said
in an interview.
Syrias intimidation campaign has
reached into Europe and Latin America in
recent months, according to Syrian protest-
ers. In the U.K., a handful of Syrian-Britons
said they are planning to submit a formal
complaint to the Foreign & Commonwealth
Office about threats and harassment by
staff of the Syrian embassy in London and
what they see as the inadequacy of the For-
eign Offices response. They said embassy
staff members have taken photos of them at
rallies and warned them that continuing to
demonstrate would harm their ability to re-
turn to Syria or put their families in un-
comfortable situations.
Syrias embassy in London said Tuesday
those allegations are completely without
foundation. The embassy said it continues
to receive delegations from protesters and
opposition groups in a spirit of peaceful
and open dialogue.
The Foreign Office on June 28 called in
the Syrian ambassador, Sami Khiyami, to
express concern over allegations that a dip-
lomat at his embassy had been intimidating
Syrians. A spokesperson for the Foreign Of-
fice said officials there are continuing to in-
vestigate.
In Chile, Naima Darwish, a fashion de-
signer, said she got a call from the Syrian
embassys charg daffaires in Santiago two
days after she created a Facebook invite for
a protest denouncing the regimes violence.
She agreed to meet the diplomat at a cafe,
where she said he warned her to stop orga-
nizing antigovernment actions if she ever
wanted to return to Syria.
The Syrian embassy in Chile didnt re-
spond to requests for comment.
In U.S. district court in Washington,
seven Syrian activists have sued the Syrian
government, charging it with killing mem-
bers of their families during the current
crackdown. Named in the suit, according to
court records, are Mr. Assads brother, Ma-
her al-Assad, a brigade commander under
U.S. and European Union sanctions for his
role in the crackdown, Mr. Moustapha and
another diplomat at the Syrian embassy in
Washington. In his phone interview, Mr.
Moustapha said the allegations in the law-
suits were lies.
Syrian-Americans have also assisted the
FBI in what they describe as an ongoing in-
vestigation into the actions of the embassy
in Washington. Amr al-Azm, an anthropolo-
gist at Shawnee State University in Ohio,
previously worked as a consultant for
Syrias first lady, Asma al-Assad, looking
into ways to modernize Damascuss govern-
ment. In June, he went to Turkey for the
first major conference that brought to-
gether Syrias opposition groups.
Getting word of Mr. Azms trip, Mr. Mou-
stapha sent an email to the academic in
June where he sarcastically criticized the
anthropologist for breaking with Damascus.
You have single-handedly changed the ugly
fundamentalist face of those convening
there to that of a secular, enlightened and
progressive opposition led by a former
presidential advisor, the ambassador
wrote, according to a copy of the email
viewed by The Wall Street Journal.
The FBI, subsequently, sent agents twice
to visit Mr. Azm at his rural Ohio home and
voiced concerns about his security. Mr. Azm
said he got the impression that the FBI had
seen intercepted communications that sug-
gested Syrian activists could be targeted in-
side the U.S. Mr. Moustapha scoffed at the
notion that any Syrian-Americans are under
the protection of the FBI. They should be
protected from the FBI, he said.
Syrias intimidation campaign has reached into Europe and Latin America, according to Syrian protesters. Above, protests in Beirut against Syrias regime.
Below: Queen Elizabeth meets with Syrian ambassador Sami Khiyami; Syrian-American pianist Malek Jandali says his parents were attacked in Syria.
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hotnpapers
OPINION: REVIEW OUTLOOK
T
he crusade for a balanced-budget
amendment that roiled American
politics this summer reached Paris
this week, with the announcement from
Nicolas Sarkozy and Angela Merkel that
every country in the euro zone would
commit to passing a balanced-budget
amendment to their constitutions by next
summer. Who says theres no tea party in
Europe?
Alas, who says that Europe is immune
from the tea partys bad ideas? We doubt
it would be possible to get 17 democra-
cies to approve such an amendment. We
doubt even more that it would be possi-
ble to enforce those amendmentscer-
tainly not any more than it proved possi-
ble to enforce the Maastricht Treaty
rules for the currency union, which
France and Germany were among the
first to violate.
But the main objection to balanced-
budget amendments is that they do noth-
ing to address Europes central economic
problem, which isnt the size of its (mas-
sive) debts. The problem is the lack of
growth. Tuesdays news that second-
quarter growth has slowed to 0.2% in the
euro zone and flatlined in previously ro-
bust Germany underlines the point.
In the U.S., at least, the fervor for a
balanced budget is a proxy for what the
tea party really wants, which is smaller
government. By contrast, Mr. Sarkozy
and Mrs. Merkel see such amendments as
symbols of fiscal rectitude. And because
they are silent on how countries achieve
balance, over time the amendments are
likely to create a bias toward higher
taxes and bigger government.
Mr. Sarkozy and Mrs. Merkel hinted as
much at their meeting, which produced a
statement calling for French and German
tax rates to be harmonized within two
years. Calls for harmonization have been
common in Europe for at least a decade,
and almost invariably they are a bid by
high-tax countries to suppress economic
competition from their lower-tax neigh-
bors. One reason Ireland has been slowly
recovering from the 2008 financial melt-
down, in contrast to Greece, is its invest-
ment-inviting 12.5% corporate tax rate.
A harmonized, cross-border tax re-
gime would make pro-growth tax cuts,
particularly on capital gains and the top
marginal rate of income tax, difficult to
achieve. Combine them with a balanced-
budget amendment that would require
any tax cuts to be paid for by cuts in
government spending, and they become
a political impossibility.
Mr. Sarkozy and Mrs. Merkel are both
politicians of the center-right, and we
once had hopes that they understood the
importance of tax cuts for growing the
overall economic pieand thus of the pie
eligible for taxation. They have disap-
pointed those hopes. To do better, theyll
need something other than what Barack
Obama likes to call a balanced ap-
proachby which he means higher taxes.
B
arney Kilgore, the man who made
the Wall Street Journal into a na-
tional publication in the U.S., was
once asked why so many rich people fa-
vored higher taxes. Thats easy, he replied.
They already have their money.
That insight is worth recalling amid
the latest political duet from President
Obama and Warren Buffett demanding
higher taxes on millionaires and billion-
aires. Mr. Buffett is repeating his now fa-
miliar argument this week, coinciding
with Mr. Obamas Midwestern road trip
on the economy. Since the media are
treating Mr. Buffett as a tax oracle, lets
take a closer look at some of the billion-
aires intellectual tax dodges.
The double tax oversight. The Berk-
shire Hathaway magnate makes much of
the fact that he paid only 17.4% of his in-
come in taxes, which he considers unfair
when salaried workers often pay more.
But Mr. Buffett makes most of his income
from his investments, in particular from
dividends and capital gains that are taxed
at a rate of 15%.
What he doesnt say is that much of his
income was already taxed once as corpo-
rate income, which is assessed at a 35%
rate (less deductions). The 15% levy on
capital gains and dividends to individuals
is thus a double tax that takes the overall
tax rate on that corporate income closer
to 45%.
This onerous tax on capital is a com-
petitive disadvantage for the U.S. in the
global economy, which is why Congress
agreed in 2003 to cut the rates on divi-
dends and capital gains. Even as the rest
of the world is cutting
tax rates on corporate
income, Mr. Buffett
wants to raise U.S. rates
in a way that would
make America less at-
tractive for investment.
Under a sensible tax re-
form, the feds would impose either a cor-
porate tax or a dividend and capital gains
tax, but not both.
The middle-class bait-and-switch.
Like Mr. Obama, Mr. Buffett speaks about
raising taxes only on the rich. But some-
how he ignores that the Presidents tax in-
crease starts at $200,000 for individuals
and $250,000 for couples. Mr. Obama
ought to call them thousandaires, but
that probably doesnt poll as well.
The President needs to levy his tax in-
crease at such a lower income level be-
cause thats where the money is. In 2009,
237,000 taxpayers reported income above
$1 million and they paid $178 billion in
taxes. A mere 8,274 filers reported income
above $10 million, and they paid only $54
billion in taxes.
But 3.92 million Americans reported
income above $200,000 in 2009, and they
paid $434 billion in taxes. To put it an-
other way, roughly 90% of the tax filers
who would pay more under Mr. Obamas
plan arent millionaires,
and 99.99% arent bil-
lionaires.
Mr. Buffett says its
only fair to raise his
taxes, but hes lending
his credibility to raising
taxes on millions of
middle-class earners for whom a few ex-
tra thousand dollars in after-tax income is
a big deal. Unlike Mr. Buffett, those mid-
dle-class earners arent rich and may earn
$250,000 for only a few years of their
working lives. How is that fair?
The charity loophole. For billionaires
like Mr. Buffett, the single most important
deduction in the tax code is for charitable
giving. Middle-class earners cant give
nearly as much money away to reduce
their overall tax burden. Yet we dont hear
Mr. Buffett calling for the elimination of
that deduction in the name of fairness.
Mr. Buffett has also already sheltered
the bulk of his fortune from federal taxes
by putting them into a foundation that
will give the money away. Thats an act of
generosity, but if the governments pur-
poses are so vital, why doesnt he simply
give the money to the IRS?
Rebecca Quick of CNBC put that ques-
tion to Mr. Buffett in 2007. His answer:
Well, thats a choice and its an option
. . . If I had to give it to a single individual,
or make some young Buffett a multibil-
lionaire, or give it to the government, Id
absolutely give it to the government. I
think that on balance the Gates Founda-
tion, my daughters foundation, my two
sons foundations will do a better job with
lower administrative costs and better se-
lection of beneficiaries than the govern-
ment.
Mr. Buffett is no doubt right about the
relative efficiency of private donors, but
should billionaire philanthropists get such
a large tax preference? Another case of
fairness?
Mr. Buffett is one of the great stock-
pickers of his time, and we dont be-
grudge him a single dollar of his wealth.
We only wish that, having already made
himself rich, he werent so intent on mak-
ing it harder for others to become rich
too. If hes worried about being under-
taxed, wed suggest he simply write a big
check to Uncle Sam and go back to his day
job of picking investments.
I
n 2008, Reuters published one of
those stories predicting that green
power would be cost-competitive
with fossil fuels in five years. Headline:
As Energy Costs Soar, U.S. Looks to So-
lar. Among the prophets was Richard
Feldt, then the CEO of Evergreen Solar,
who said that its not far away and
called for more subsidies. On Monday, Ev-
ergreen filed for Chapter 11 bankruptcy.
In the grave-dancing department, lets
note that failure is part of the risk-taking
and creative destruction that drive
growth, and that Evergreen got its start
in 1994 with an innovation that reduced
the costs of silicon panels. The bank-
ruptcy is notable mainly because the
Massachusetts-based manufacturer re-
ceived so much taxpayer support.
Governor Deval Patrick took a $58 mil-
lion stake in Evergreen in 2007 with di-
rect subsidies and tax breaks in return
for the company building a plant in the
state. The goal was to help Evergreen
Solar grow and thrive right here in Mas-
sachusetts, and give us a head start to-
ward building a clean energy economy,
Mr. Patrick said at the time.
But in January, Evergreen, shedding
cash, shut down the Devens plant and
fired 800 workers, claiming it was at a
competitive disadvantage because U.S.
solar subsidies are lower than Chinas. In
a letter to the Journal, the U.S. solar
lobby in Washington said the solution
was to follow Chinese policy makers
and make strategic investments to at-
tract this rapidly growing industry.
Mr. Patricks economic development
secretary, Greg Bialecki, told the Boston
Globe that Evergreens collapse was a
cautionary lesson, but not about the dis-
tortions and waste that come with the
political allocation of capital. We knew
that it would be challenging to do that
kind of manufacturing in the United
States. It also probably suggests that
Massachusetts cant do it alonein other
words, we probably also need federal pol-
icy, he said.
So Massachusetts subsidies werent
enough for Evergreen to succeed because
the federal subsidies werent enough,
even though with the stimulus the Obama
Energy Department has become one of
the largest venture-capital firms in the
world. And the federal subsidies will only
be enough if Washington emulates the
Chinese model of a state-planned econ-
omy. As Evergreens bankruptcy shows,
the real story is that the government-as-
investor model isnt going to lead the U.S.
back to prosperity.
A European Tea Party?
Warren Buffetts Tax Dodge
Nevergreen Solar
The billionaire
volunteers the middle
class for a tax increase.
All my luggage arrived,
but I left my shoes at
security back in Cleveland.
Pepper . . . and Salt
THE WALL STREET JOURNAL
hotnpapers
OPINION
The mobile
market Metter-
nichs are out in
force, wargaming
Googles $12.5 bil-
lion purchase of
Motorolas handset business. The
imponderables are many.
Will partners like Samsung and
HTC, which have been enriched by
Googles Android phone software,
abandon Google, or even look at
Google cross-eyed, now that
Google will own a competing
phone maker? Dont bet on it.
Android has been hugely ad-
vantageous for everyone who is a
successful phone maker not
named Apple. Remember, Apples
premium smartphone holds up
the pricing structure for the
whole industry. Samsung, HTC
and the rest have been selling
phones into this market and pock-
eting huge margins because they
pay nothing for Android.
Google wouldnt be human if it
didnt want some of this loot,
which buying Motorola would en-
able it to grab. But that doesnt
mean, in the long term or the
short term, that other hardware
makers will walk away from a re-
lationship that has lined their
pockets and propelled them to the
top of the rapidly growing and gi-
ant new business of making
smartphones. Lets just say that
while having Google as a competi-
tor is not ideal, handset makers
will learn to live with it.
The Metternichs also wonder:
Did Google buy Motorola just for
its patents? No. If Google buys a
handset maker, it wants a handset
maker. Plenty of other ways were
available to lay its hands on
enough patents to create the de-
sired patent stalemate with Apple,
Microsoft, Oracle and whoever
else comes along.
Still, the patents are important
too. Patent wars are not, at least
superficially, an appealing feature
of Silicon Valley. But intellectual
property is complicated. Invention
is more collaborative, more a mat-
ter of stealing, copying or, to
phrase it nicely, standing on the
shoulders of giants, than the
patent system likes to think.
At every stage of the com-
puters evolution, even back unto
the day of the mainframe, a nec-
essary rite of passage has been
patent litigation. These tests of
strength proceed in the courts for
a while, and then peace is made,
with checks and cross-licensing
agreements passing between the
parties in rough proportion to the
expected outcome. In some cases,
companies have bought entire
other companies just to put such
disputes to rest.
Google hopes to recapitulate
this history in smartphone soft-
ware. But Googles weakness was
that it rushed into the mobile
marketplace with Android without
a portfolio of patents. Complicat-
ing matters, it also gave Android
away free to phone makers with
the idea that Google would make
money by tying Android to
Googles search and advertising
functions.
To those competing with
Google (say, Microsoft and Apple)
this was both an annoyance and
an opportunity. The opportunity
was to raise the cost of Android
above zero by slagging handset
makers with patent claims. Google
appears not to have seen this on-
slaught coming, but lately had en-
tered the market in pursuit of a
patent portfolio with which to
slag back. Its urgency can only
have been heightened by deci-
sions in Germany and Australia to
block sales of an Android-pow-
ered Samsung tablet over unre-
solved patent litigation. Even
more urgently, the U.S. Interna-
tional Trade Commission is ex-
pected to rule this fall on a peti-
tion that could keep certain
Android phones out of the U.S.
market.
Verizon, which usually minds
its own business, applauded the
Google-Motorola deal hoping, in
incantatory fashion, that an
armed peace would let everyone
get back to the real job of making
products and serving customers.
This is a reasonable hope. Once-
deadly squabbles over mainframe
software, the personal computer
graphical interface, and the Intel-
compatible microprocessor pe-
tered out with a whimper.
Finally, the Metternichs are de-
bating whether Google is throw-
ing up a white flag and adopting
a Steve Jobs-like philosophy of
the mobile phone business, unify-
ing hardware and software. Al-
most certainly, the answer is yes.
Mobile is an inadequate
word. Better to say ubiquitous
computing, in which all your data,
all your entertainment, all your
snapshots are available easily
from whatever device is at hand,
whether a big-screen TV or a
teensy mobile device, without you
having to puzzle your way
through an unfamiliar user inter-
face.
Even more, this will be an in-
creasingly lively experience, with
artificial intelligence anticipating
or inspiring your whims, and
throwing targeted advertising at
you to the extent that you are
willing to let advertisers subsidize
your use of online services.
Since the first Android device
hit the market, a worry has been
fragmentationa proliferation of
versions and devices that all
worked slightly differently from
each other, some of which might
be incompatible with the app you
suddenly couldnt live without.
Google was going to have to
rectify this problem one way or
another, by exercising greater
control. In some fashion, dont be
surprised if Motorola is eventu-
ally put to work as an attempt to
do so.
[ Business World ]
BY HOLMAN W. JENKINS, JR.
The Many Wars of Google
Andrew Langhoff, Publisher
Tracy Corrigan, Editor in Chief, Europe
Tim Hanrahan, Managing Editor, News
Brian M. Carney, Editorial Page Editor
Paul Little, Circulation
Michele Lally, Marketing
Lauren Berkemeyer, Advertising
Mike Elsas, Operations
Kate Dobbin, Communications
Published since 1889 by
Dow Jones and Company
2011 Dow Jones & Company. All Rights Reserved
jk
EUROPE
Handset makers will learn to
live with their new frenemy.
What is it about August? Though
its only Aug. 17, the U.S. economy
has already been downgraded twice.
One of those downgrades was ridic-
ulous. The other was serious.
The nonserious downgrade came
first, on Aug. 5, when Standard &
Poors dropped its rating on the
sovereign debt of the United States
from AAA to AA+. Yes, S&P is now
telling investors that lending to the
U.S. government today is riskier
than (it said) lending to Enron was
in August 2001, or than buying any
one of thousands of soon-to-be-
toxic mortgage-related securities
was in 2007. If you listen to such
advice, you deserve what you get.
Fortunately, most people arent
listening. The downgrade succeeded
in panicking the worlds stock mar-
kets and leaving blood on many fi-
nancial streets. But many frightened
investors moved their money
straight into what they still know is
the worlds safest asset: U.S. Trea-
surys. Treasury yields fell across
the boardnot exactly what you ex-
pect from a downgrade. In practice,
S&P downgraded itself.
A credit-rating agencys job is to
gather information, including infor-
mation that virtually no one else
has, and issue opinions based on
that information. In the case of a
corporate security, the agency may
know things that the rest of us do
notwhich is the main source of its
value added. But does S&P have any
special knowledge about the fi-
nances of the U.S. government? The
question answers itself.
A rating agencys opinion is
supposed to be about the risk that
the bond or other fixed-income se-
curity will not pay off in full and on
time. But S&Ps downgrade seemed
to be more about American poli-
ticswhich probably does deserve a
downgrade, though to a much lower
rating than AA+. The agency is un-
happy that the recent deal to raise
the national debt ceilinga ceiling
America shouldnt have in the first
placeembodied a measly $2.4 tril-
lion in promised budget cuts, not
the $4 trillion grand bargain they
preferred. Well, I didnt like the deal
either, but I didnt sell any T-bills.
S&P said it is concerned that
further near-term progress [to-
ward reducing the deficit] is less
likely than we previously assumed
and will remain a contentious and
fitful process. Lets parse those
words, starting with contentious
and fitful. Gee, no kidding. Where
have they been since Hamilton and
Jefferson crossed swordsnot to
mention since Barack Obama ran
into implacable Republican resis-
tance on everything?
Is deficit reduction really less
likely now than it was before Aug.
1? It seems to me that the real sur-
prise is that America got any agree-
ment at all. And American politics
is now focused like a laser beam on
the deficit. So, if youre a deficit
hawk, the recent news was good,
not bad.
Furthermore, near-term defi-
cits are not Americas main concern.
The real fiscal problem doesnt
come in the next decade, on which
S&P focuses, but rather in the de-
cades beyond. For example, the
Congressional Budget Offices long-
term budget projection shows the
primary deficit (excluding interest
payments) shrinking for most of the
next decade, but then exploding af-
ter that. And lets not forget the
folly of raising taxes or cutting
spending when the economy is so
weak. S&P may not worry much
about Americas struggling econ-
omy. But I do.
Fortunately, so does U.S. Federal
Reserve Chairman Ben Bernanke.
Which brings me to the more seri-
ous downgrade. Meeting on Aug. 9,
the Federal Open Market Commit-
tee (FOMC) downgraded its near-
term assessment of the U.S. econ-
omy sharply. Since the Feds code of
conduct mandates the use of Fed-
speak instead of English, let me of-
fer a quick translation: Yikes!
Things have sure deteriorated
quickly!
The Fed expressed its alarm in
two ways, both remarkable. The
first was Mr. Bernankes willingness
to push ahead despite a level of dis-
cord that is almost unheard of on
the consensus-bound FOMC: The
motion passed on a far-from-re-
sounding 7-3 vote. Second, his pol-
icy innovation stunned veteran Fed
watchers (including me): The Com-
mittee more or less promised to
maintain the current rock-bottom
federal funds rate for almost two
more years.
In so doing, the Fed violated one
of the most revered canons of
central banking: Always keep your
options open. No one knows what
might happen between now and
June 2013not you, not me, and
not the FOMC. A booming economy
by, say, Christmas 2012 doesnt look
too likely right now, but it could
happen. And if it does, the Fed
wont want to keep the federal-
funds rate near zero. So why risk
the loss of credibility?
The answer is that the FOMC
majority was so concerned about
the health of the U.S. economy that
they felt a duty to offer some sup-
port to the frail economy and to
soothe the nearly panicked financial
markets. But they had used up all
their good ammunition long ago.
The two-year interest-rate com-
mitment is based on a wing and a
prayer. Economists main theory of
the yield curve, the expectations
theory, holds that, for example, the
two-year Treasury rate should ap-
proximate the average of the over-
night interest rates expected over
the next two years. So promising to
hold the federal-funds rate in the
zero-to-0.25% range for two years
should push the two-year rate down
into that range. Makes sense.
But there are two big problems,
both of which Mr. Bernanke knows
well. First, the expectations theory
has been proven wrong six ways
from Sunday. Did someone say
weak reed? Second, markets were
already expecting very low funds
rates for the next two years. So the
Feds announcement, while stun-
ning, didnt change market beliefs
much. Accordingly, the two-year
Treasury rate dropped just eight ba-
sis points between Aug. 8 and Aug.
9, to 0.19% from 0.27%. How much
difference can eight basis points
make?
What all this says to me is that
the FOMC majority is very worried.
So unless the storm clouds lift
quickly, there is probably more eas-
ing to come. That could mean an-
other round of quantitative easing,
such as the Fed buying more Trea-
sury bonds. Or it could mean paying
a lower interest rate on excess re-
serves. Or the brilliant and creative
Mr. Bernanke could pull another
rabbit out of his oft-used hat.
So stay tunedbut to the Fed,
not to S&P.
Mr. Blinder, a professor of econom-
ics and public affairs at Princeton
University, is a former vice chair-
man of the Federal Reserve.
C
h
a
d
C
r
o
w
e
A Tale of Two Downgrades
BY ALAN S. BLINDER
hotnpapers
OPINION
After the words
Dow 11,000 came to
feel more like days
spent inside a Na-
scar stock car than
the U.S. stock mar-
ket, an exhausted Washington set-
tled on one big question: Should
President Obama join his familys
vacation on Marthas Vineyard? One
Beltway pundit said the Vineyard
was the last place on earth Obama
should be.
My vote was for the vacation.
Hanging out with Team Obama
doesnt look like what this president
needs right now. Whatever advice
the worlds smartest advisers have
been giving him has just outputted
a 39% Gallup approval rating.
What Barack Obama mainly
needs is for the economy to start
growing above a 2% rate and for the
unemployment rate to fall toward
8%. His advisers on the economy
told him that if he spent nearly $1
trillion in stimulus, these things
would start to happen. They ha-
vent.
Amid this gloom, Standard &
Poors decided that the dog days of
summer would be an appropriate
time to burst the 45-year federal-
spending bubble.
Burst bubbles put people in a
nasty mood. But Uncle Sam cant be
sued for debt malfeasance, so with
the nation downgraded below
France, we simmer through a bad
summer. The political shock of the
moment is that many in Mr.
Obamas own political baseits fa-
mously bilious invective once re-
served for George W. Bushhas
suddenly rerouted its anger to the
Obama Oval Office.
Dripping sarcasm about his per-
sonality and even regret for having
voted for Mr. Obama, they accuse
him of wimping out on the debt-
ceiling negotiation, of being unable
or unwilling to trash and torch his
oppositionwhat one called the
villains who cause our epic prob-
lems.
One wonders what Mr. Obama
makes of his ex-pundit pals in pri-
vate. Barack Obama in his first
term, amid a financial crisis, en-
acted ObamaCare and Dodd-Frank,
two of the largest pieces of regula-
tory legislation in our lifetime.
ObamaCare, unless repealed or
overturned (neither a certainty) cre-
ated a path to nationalized health
care. His supporters called it the
completion of a 74-year dream. In
a similarly historic settling of ac-
counts, Dodd-Frank hammered what
Franklin Roosevelt in a previous
economic downturn called the Ish-
mael and the Insull, whose hand is
against every mans.
Historic fulfillment is what he
did for them yesterday. Today
hes a wimp.
It is one of the ironies of our
time. Electronic media has allowed
people to immerse themselves more
deeply than ever before in the de-
tails of Washingtons daily politics.
Yet this same closeness to the reali-
ties of politics somehow makes
many more anti-political than ever.
Theyd rather rage at how someone
else is always selling them out than
do the pedestrian work of assem-
bling the unavoidable coalitions that
make political victories possible.
This was essentially Sen. Rick
Santorums pointed critique of
Michele Bachmann at the Iowa de-
bate last week. You cant stand and
say, you give me everything I want
or Ill vote no, he said. You need
people who are good at leadership,
not showmanship.
But on the evidence of the Iowa
straw poll, with the hopelessly quix-
otic Ron Paul a strong second to
Mrs. Bachmann, thats not what
many people today appear to need,
or want.
The rights internal war over the
debt ceiling was well publicized.
But now bubbling to the surface of
the fever swamps is the lefts ire at
its once-perfect president for cut-
ting a deal with Mitch McConnell
and John Boehner, whose party con-
trols the House of Representatives.
Here, however, is the crude polit-
ical reality for the progressive base.
After the Obama administration
spent nearly two years using a
dream-team liberal majority in Con-
gress to achieve progressive goals,
the Republicans in November 2010
pocketed one of the most breathtak-
ing off-year election wins in the
past century.
They won the House of Repre-
sentatives; governorships in the key
swing states of Ohio, Wisconsin,
Pennsylvania and Michigan; and
Southern state legislatures they
hadnt held since the Civil War. In-
dependent voters, who now make
up about a third of any presidential
vote, went overwhelmingly for GOP
candidates.
This anti-political insistence is
the mirror image of those on the
right who wanted a forced vote to
shut down the government, no mat-
ter that they controlled neither the
presidency nor the Senate.
In the ever-escalating political
psychodramas of our time, people
are more convinced than ever of the
correctness of their politics, and
they want all of it put in place, now.
But one of the enduring virtues of
Americas system of democracy is
that when the day comes to choose
a president and a Congress, these
same people have to decide whether
to vote only their beliefs or vote for
getting political power. Most still
choose the latter. But that could be
changing, most likely to the detri-
ment of GOP hopes.
Come November 2012, you can
bet the ranch that the furious left
will vote for Barack Obama. And the
Obama campaign has to hope that
the Republicans will keep voting as
they did in Iowa and produce a
nominee that pretty much no one
wants to vote for.
Write to henninger@wsj.com
[ Wonder Land ]
BY DANIEL HENNINGER
Dog Days
M
a
r
t
i
n
K
o
z
l
o
w
s
k
i
Former Los Angeles and New
York police chief William Bratton
has been busy the last few days
preparing for a new role overseas.
The mayor of Philadelphia, Michael
Nutter, has been busy as well, walk-
ing the streets of his cityrecently
the scene of flash mobs committing
ugly assaults along with robbery
and making clear his refusal to tol-
erate any of it. Mr. Bratton has
been tapped, in the wake of the
London riots, to serve as British
Prime Minister David Camerons
adviser on crime control, policing
and related matters. Hed do well to
take the Philadelphia mayor with
him, at least in spirit.
The eruptions of flash mobs in a
few American cities will seem no
great matter compared to the four-
day reign of terror loosed over Lon-
don, Manchester, Birmingham and
other British cities last week. Still
theres no missing their common
factorsthe same gleeful assault-
iveness, the party atmosphere, the
unembarrassed rationalizations for
criminal brutality. In both cases, the
rationalizations for criminality took
a much further leap into the absurd
than is usual for such effortsno
small distinction.
Former London Mayor Ken Liv-
ingstone explained that government
spending cuts had caused the trou-
ble, especially in Tottenham, where
the problems began. But Labour
Member of Parliament John McDon-
nell easily topped that old social-
causes standby with his announce-
ment, reported in the London
Telegraph, that Britain was reaping
what had been sown: the alienated
young had been copying the ethos
of looting bankers.
The looting-bankers defense
turns out to have been popular
across the ocean as well. Washing-
ton Post columnist Courtland Milloy
had also divinedin a column last
Tuesday titled From London to
Philadelphia, youths erupting over
the theft of their futuresthat the
bankers and their kind were to
blame for the rioters in Britain and
the flash mobs in America.
Think of their actions in both
places, he advised, as the alley ver-
sion of the Wall Street bum rush and
rip-off. First, explained Mr. Milloy,
there were flash mobs of bankers
and mortgage lenders picking pock-
ets, looting businesses, taking over
homes. Now the young were using
a crude version of the same tactics
as they struck out in anger.
Mr. Milloy was apparently of-
fended, too, that the black mayor of
Philadelphia, Mr. Nutter, had advised
young black men, after the flash riot
there, that they would do well to
find jobs. But, Mr. Nutter told them,
they couldnt come to interviews
with hair uncombed, a pick in the
back, shoes untied, full arm and neck
tattoos, and their pants half down.
Mr. Milloy, who described the
mayors remarks as even nuttier
than others he had heard, had evi-
dently found the remarks insensi-
tive to these young. Youngsters who
rioted and took part in flash mobs
felt disrespectedthat was why, Mr.
Milloy explained, they were threat-
ening to destroy what they cant
have. And why not? It was a strat-
egy that had worked, he added, for
tea party anarchists.
For some reason, Mr. Milloy ne-
glected to mention a key element in
the violence of these youths
namely that it has been entirely and
indisputably racial in its targets.
The attackers are invariably young
blacks, the people they assault in-
variably whites. This was true in
Philadelphia as it was in Wisconsin,
in Chicago and everywhere else that
has seen these mobs.
Its not difficult to imagine the
column Mr. Milloy would have writ-
ten if the story were reversedwith
gangs of young white males beating
and kicking black men and women
in the streets of America. Its a good
bet that column would have con-
cerned itself with matters other
than the anger of these young,
robbed of their futures by bankers
and Wall Street.
Its a good bet too that Mr. Nut-
ters entirely different response to
the rioters in his citya powerful
display of moral authoritywill be
remembered, to his great credit. In
tones of steel he described the
flash mob members who had set
upon innocent people and beaten
them, as cowards. On Friday, after
Philadelphia police arrested 50 of
the rioters, the mayor announced
the imposition of strict curfews for
all young people. Get a watch, he
instructed parents. Were as seri-
ous as a heart attack about this,
he informed them. The curfew is
the curfew. No one listening could
have imagined otherwise.
Back in England, meanwhile, they
were still cleaning up. The families
of the dead still mourned, and the
grousing by police opposed to the
appointment of the American, Mr.
Bratton, was becoming increasingly
bitter. Former Scotland Yard official
John OConnor told the BBC that to
control crime Americans locked
people up. . . . We havent got the
heart for that over here.
Perhaps. But there were indica-
tionsafter the outrages that had
shaken their lives and stunned most
of the worldthat more than a few
British citizens would have found it
in their hearts to see criminals
locked up. As many of them as pos-
sible, and for a long time.
It seemed best for a while last
week to avoid certain historical im-
agesthose well-known pictures of
Londoners marching briskly
through bombed-out streets to their
day jobs after another night of Luft-
waffe attacks, of the shops with
their shattered windows and rubble
for storefronts, always open for
business. Haunting images today for
their reminder of the nation that
was, and the startlingly different
one it has become today.
It was a transformation made
strikingly clear in the four-day rule-
by-mob. It showed in the confident
thuggery of the looters, and even
more so in the fact that a number of
regular job-holding Britons took
part in the action. Others opined in
emails that it was all a matter of so-
cial justiceafter all, big depart-
ment stores that had been ran-
sacked had plenty of insurance.
Nowhere was the transformation
clearer than in the helplessness of
citizens largely left to the mercy of
marauders in the first stages of the
riots. There would be little help ini-
tially from the policeoutmanned,
taken by surprise, uncertain of what
they were allowed to do and not do
in this situation. What violation of
human rights regulations might
they be charged with?
In the spring of 1941, Noel Cow-
ard sat in a bomb-damaged railroad
station composing that exquisitely
buoyant song, London Pride, a
tribute to his beloved city and of
course to England itself. Citizen of a
nation at war, and in imminent
peril, Coward dropped into the gai-
ety of that tribute a different mood.
In our city darkened now
Street and square and crescent
We can feel our living past in our
shadowed present.
Those words came to mind while
the show of horrors in Britain
played out: the arsonists, the un-
stoppable army of destroyers, the
three young men killed because they
had assembled to protect a local
business, the old man beatenhe
would diefor his attempt to stomp
out the fire set by marauders.
Still there remained, in the city
now darkened, reminders of that
other England. It was there in the
brigades of people who turned out
to wield brooms, sweep up the rub-
ble and glass, clear ruins. It was
there too in those who had made it
clear that they expected punishment
for crimes committedso many
people signed a government peti-
tion on this subject that the site
crashedand in those who had
shown they werent prepared to tol-
erate any recurrence of this trip to
the abyss, or any excuses for it. The
prime minister and his men would
be well-advised to listen.
Ms. Rabinowitz is a member of
the Journals editorial board.
Mob Violence and the Looting Bankers Defense
BY DOROTHY RABINOWITZ
In Philadelphia and
London, excuses for
criminality are the same.
hotnpapers
Thursday, August 18, 2011
Pound/Euro 0.8703 g 0.89% Yen/$ 76.47 g 0.38% Global Dow 1896.36 0.26% Gold 1791.20 0.49% Oil 87.58 1.07% 3-month Libor 0.29589 10-year Treasury 12/32 yield 2.170%
THE WALL STREET JOURNAL. europe.WSJ.com
&
BUSINESS FINANCE.
Chinas Growing Hunger for Corn
Gives U.S. FarmBelt a Stretch
BUSINESS &FINANCE 23
Companies In No Mood
To Part With Their Cash
HEARDONTHE STREET 32
Maersk Says
Economy
Is Pinching
Freight Fees
COPENHAGENShipping and oil
company A.P. Moller-Maersk A/S
warned Wednesday that new ship-
ping capacity and deteriorating
world economic prospects are pres-
suring freight rates, and said it isnt
sure when they are likely to recover.
The Danish company issued a
cautious forecast for the full year,
after posting a 5.8% decline in first-
half net profit. Maerskwhich oper-
ates the worlds largest container-
shipping company, Maersk Line
didnt include any freight-rate im-
provement for the second half in its
adjusted full-year forecast, Maersk
Chief Executive Nils Smedegaard
Andersen said.
Our competitors are very ner-
vous, Mr. Smedegaard Andersen
said. Theyve bought a lot of new
ships at a time where it was expen-
sive, and now they are nervous that
they wont be able to fill them. That
means they are very aggressive with
their pricing on the Asia-Europe and
Asia-U.S. routes.
Cline Aerdeman, head of Asia-
to-Europe shipping at CMA CGM,
the worlds third-largest container-
shipping company, said competition
on the Asia-Europe route had be-
come very competitive in terms of
pricing. She said CMA CGM, like its
competitors, intends to add a sea-
sonal surcharge to all shipments
from Asia to northern Europe as of
Sept. 1, as the container-shipping in-
dustry enters its peak period.
The weakening global economy,
exacerbated by sovereign-debt prob-
lems in Europe and the U.S., has
added to the pressure on rates as
shippers worry about demand, Mr.
Smedegaard Andersen said. He
played down the likelihood of a di-
rect effect on Maersks trading vol-
umes, however.
Theres no doubt that the weak
BY FLEMMING EMIL HANSEN
AND NEENA RAI
SABMiller Turns Hostile
Brewing giant SABMiller PLC
stepped up its pursuit of Fosters
Group Ltd., announcing plans to
take a 9.51 billion Australian dollar
(US$9.97 billion) bid for the beer
maker directly to shareholders, just
two months after Foster rejected
the same offer.
Having failed to re-engage Fos-
ters board since being rebuffed,
SABMiller said it had no choice but
to take the bid of A$4.90 (US$5.14)
a share straight to the Australian
companys shareholders. Those
shareholders, however, appeared to
be looking for more. Fosters shares
closed Wednesday at A$4.96, up
three Australian cents in Sydney.
The result is the start of a new
episode in London-based SAB-
Millers quest to snap up Australias
leading brewer, which makes seven
of the countrys top-10 beer brands.
SABMillers offer significantly
undervalues the company, Fosters
said in June. The Australian brewer,
which produces Carlton and Crown
beers in addition to Fosters, de-
clined to comment Wednesday.
Now SABMiller, whose brands in-
clude Peroni and Grolsch, has a two-
month window to submit its formal
offer to shareholders. Deutsche
Bank called SABMillers declaration
an attempt to force the Fosters
board to engage.
Many Fosters shareholders ap-
peared willing to sit tight for the
time being. Well sit back and see
whats said and make an assessment
from there, said Geoff Driver, gen-
eral manager of Australian Founda-
tion Investment Co. The firm held
6.5 million of Fosters ordinary
shares as of last August, making it
the 11th-largest shareholder.
After the Fosters board rejected
SABMillers bid in June, speculation
emerged that a counter bidder, such
as Asahi Breweries Ltd. or An-
heuser-Busch InBev NV, could enter
the fray. But so far no other suitor
has emerged.
At stake is one of the last major
independent assets left in a consoli-
dating beer industry. Other poten-
tial targets have family sharehold-
ings that make acquisitions difficult.
Openly traded Fosters split off its
wine business in May, a move
widely interpreted as preparation
for the beer operations sale.
SABMiller, the worlds No. 2
brewer, said in June that Australias
economic strength, long-term popu-
lation growth and close links to
booming Asia made the country an
attractive market.
The multinational brewer also
suggested that it could improve Fos-
ters performance. That can be done
partly by repositioning the brands
Fosters owns and pegging each one
to a specific price range, demo-
graphic or drinking occasion, a per-
son familiar with the matter said.
Still, Australia is a mature beer
market, and Fosters has felt pres-
sure from craft beers and alterna-
tive drinks. Fosters beer volume de-
clined 5.1% to 57.8 million nine-liter
cases in the six months ended Dec.
31. Net beer sales slumped 5.3% to
A$1.23 billion over the same period.
Fosters reports full-year results
next week.
SABMiller has ignited debate
among its own shareholders about
the wisdom of acquiring Fosters, in
part because such a deal would re-
duce the portion of SABMillers rev-
enue derived from emerging mar-
kets. On the day SABMiller unveiled
the bid in June, the companys
shares fell 3.6% to 21.03
(US$34.61). The shares closed
Wednesday at 21.41, up 23 pence.
Im not wildly enthusiastic
about this, Rusty Johnson, emerg-
ing-market portfolio manager at
Harding Loevner LLC, said Wednes-
day. The investment firm, based in
New Jersey, holds about US$50 mil-
lion in SABMiller stock, he said.
Shifting your mix further away
from emerging markets, which has
been their cornerstone and their
reason for growth potential, cer-
tainly doesnt help the cause.
By Paul Sonne in London and
Cynthia Koons in Sydney
$10.1 billion
FOSTERS (Melbourne) SABMILLER (London)
Market cap:
Fosters, VB, Cascade,
Crown, Carlton Draught,
Total revenue:
$55.3 billion
$4.68 billion $19.41 billion
Grolsch, Miller Genuine Draft,
Castle Lager, Peroni, Pilsner Urquell
Year ended June 30, 2010 Year ended March 31, 2011
Brands:
Note: Figures converted to U.S. dollars at current rate
Source: WSJ research Photos: Bloomberg News
Beer Battle | SABMiller said it had no choice but to take its bid straight to Fosters holders
Roche Skin-Cancer Drug Wins U.S. Nod
A new skin-cancer treatment
that promises to shrink tumors and
prolong the lives of patients with a
particular genetic mutation won
speedy approval that signals U.S.
regulators enthusiasm for such tar-
geted therapies.
Vemurafenib, from Roche Hold-
ing AG and Daiichi Sankyo Co., be-
longs to an emerging class of treat-
ments targeting the molecular
underpinnings of the cancer.
These therapies offer the oppor-
tunity for significantly more effec-
tive treatment for patients who test
positive for a genetic mutation driv-
ing the proliferation of their cancer
cells. Patients would take the drugs
only after a test showed they have
the mutation.
The Food and Drug Administra-
tions approval Wednesday of vemu-
rafenib, which was submitted in
May, came before an accelerated
deadline in late October. The agency,
which has faced criticism for mov-
ing slowly and cautiously while re-
viewing new medicines, is also soon
expected to rapidly approve another
treatment paired with a genetic
test, a lung-cancer therapy from
Pfizer Inc. called crizotinib.
If there is a group that a drug
works really well in, there is some
urgency getting it to them, said
Robert Temple, a senior FDA offi-
cial. Dr. Temple said it is easier for
regulators to pass judgment on an
experimental therapy that shows a
strong benefit in select patients,
and clinical trials dont need to be
as large in order to provide evi-
dence of that efficacy.
The approval marks a major
step forward in personalizing the
treatment of metastatic melanoma,
said Hal Barron, chief medical of-
ficer at Roche.
Vemurafenib stops a mutated
gene called BRAF from its usual work
of driving the proliferation of cancer
cells. About half of metastatic mela-
noma patients have the mutation. In
clinical trials, the drug decreased the
risk of death among this subset of
patients by 64%, compared with peo-
ple using the standard chemother-
apy. Almost 50% of the patients tak-
ing the pills saw their tumors shrink,
compared with 5.5% who received
chemotherapy.
The result takes your breath
away if youre a melanoma doc, said
Anna Pavlick, director of the mela-
noma program at the New York Uni-
versity Cancer Institute who partici-
pated in vemurafenibs clinical trials.
For four decades, she said, skin-can-
cer patients whose tumors had
spread to their lymph nodes and
other organs were forced to rely on
BY JONATHAN D. ROCKOFF
Drug Year approved Company Use
Zelboraf
Tasigna
Tykerb
Gleevec
Promacta
Alimta
Vectibix
Thalomid
Femara
2011
2010
2010
2008
2008
2008
2006
2006
2005
Roche, Daiichi Sankyo
Novartis
GlaxoSmithKline
Novartis
GlaxoSmithKline
Eli Lilly
Amgen
Celgene
Novartis
Advanced skin cancer
Chronic myeloid leukemia
Advanced breast cancer
Gastrointestinal stromal tumors
Low blood platelet counts
Non-small cell lung cancer
Advanced colorectal cancer
Multiple myeloma
Breast cancer
Source: U.S. Food and Drug Administration, WSJ research
Pipeline Boost
Recent FDA accelerated approvals of cancer drugs
Depressed Freight Rates
The Baltic Dry Index
Source: Factset Research Systems
0
1000
2000
3000
4000
10 09 11
hotnpapers
BUSINESS FINANCE
INDEX TO BUSINESSES
Abercrombie & Fitch...... 1
Agricultural Bank of
China.......................... 32
Aixtron SE.................... 26
American International
Group..........................25
Anheuser-Busch InBev.19
A.P. Moller-Maersk...... 19
Apple........................20,22
Asahi Breweries........... 19
Australian Foundation
Investment................ 19
Baidu............................. 21
Bank of America...........25
BP..................................21
Bristol-Myers Squibb... 20
Carlsberg.............21,26,32
Centerbridge Credit
Advisors LLC..............23
China Central
Television...................21
CHS................................23
CMA CGM..................... 19
Commerzbank............... 26
Daiichi Sankyo..............19
Dell................................ 26
Deutsche Bank..............26
Deutsche Brse............ 26
Eastman Kodak.............20
Exxon Mobil..................21
Fosters Group...............19
Fresnillo........................ 26
Geeknet.........................32
Goldman Sachs Group..23
Google.............. 4,20,22,32
Harding Loevner LLC....19
Heineken....................... 21
Hewlett-Packard...........26
Hokkaido Electric
Power.........................12
Home Depot..................32
HTC................................22
Icap................................26
International Business
Machines....................20
Jana Partners LLC........24
J.P. Morgan...................32
Kraft Foods.....................4
Lazard............................20
Lehman Brothers
Holdings Inc...............23
LG Electronics...............22
London Stock
Exchange....................26
M&A.............................. 32
McGraw-Hill Cos...........24
Merrill Lynch.................25
Microsoft.......................22
Monsanto......................23
Motorola Mobilitys
Holdings................22,32
Nobel Biocare Holding..26
Nokia............................. 22
Nortel............................20
Nortel Networks Corp..20
NYSE Euronext.............26
Paulson & Co................ 23
Pfizer.............................19
Qatalyst Partners.........32
Research in Motion......20
Roche Holding..........19,26
Royal Dutch Shell.........21
Russian Duma...............32
SABMiller......................19
Samsung Electronics....22
Sanlam Investment
Management..............21
Sanofi............................26
SAS AB......................... 21
Shutterfly..................... 20
Sinochem...................... 23
State Street..................23
State Street Bank &
Trust Co..................... 23
Tokyo Electric Power....12
Veolia Environnement..26
WCAS Fraser Sullivan
Investment
Management LLC...... 23
Yahoo...............................4
Businesses
This index of businesses
mentioned in todays
issue of The Wall Street
Journal is intended to
include all significant
reference to companies.
First reference to the
companies appears in
bold face type in all
articles except those
on page one and the
editorial pages.
economic development makes ship-
pers more nervous and adds to the
price competition, the CEO said.
But generally speaking, we dont
see any signs currently that the
weaker economy and the financial
crisis influence the trading vol-
umes.
Maersk said it now expects the
companys container-shipping arm
to generate a modest positive re-
sult in 2011. Previously, the com-
pany expected Maersk Line to gen-
erate a full-year net result below
that of 2010, which came in at 14.86
billion kroner ($2.87 billion).
Data from the Organization for
Economic Cooperation and Develop-
ment, or OECD, last week indicated
that most of the worlds largest
economies are heading for a period
of slower growth, and that it is in-
Continued from page 19 creasingly likely that the U.S.a key
driver of global tradewill share
that fate.
Mr. Smedegaard Andersen said
Maersk is closely monitoring the sit-
uation and its impact on trade. The
company doesnt expect freight
rates to fall further, he said. We ha-
vent seen a further rates decline in
the past few months, but the rates
are simply at a level where the in-
dustry cant make any money, Mr.
Smedegaard Andersen said.
Maersk still expects 6% to 8%
growth in 2011 shipping volumes,
which Mr. Smedegaard Andersen
said he hopes will lend some sup-
port to freight rates.
But the latest reading of dry bulk
commodities-shipping costs, ex-
pressed by the Baltic Dry Index,
shows rates have fallen by almost
30% so far this year. Market partici-
pants expect freight rates to slide
even further as an oversupply of
vessels and economic concerns take
their toll.
Among others, the Baltic and In-
ternational Maritime Council, or
BIMCO, shipping association has
said it expects depressed freight
rates over the coming months.
Summer has been slow, so
freight rates are likely to bottom out
now, but only a little upside is visi-
ble for owners, BIMCO analyst Pe-
ter Sands said.
Global ratings company Moodys
also dealt a blow to the shipping in-
dustry earlier this month when it
downgraded the industry to nega-
tive status for the next 12 to 18
months.
Dry-bulk ships make up about
46% of the shipping industrys ton-
nage. About 80% of dry-bulk vessels
on shipbuilders order books will be
built and delivered over the next
two years. That tilts the dry-bulk
shipping market toward excess sup-
ply, which will continue to depress
freight rates, Moodys said.
Considering the tough shipping
environment, Mr. Smedegaard An-
dersen said, Maersks first-half re-
sults were satisfactory.
First-half net profit declined to
12.61 billion kroner from 13.4 billion
kroner.
Earnings before interest and tax,
or Ebit, rose 13% to 34.6 billion kro-
ner, from 30.52 billion kroner in the
same period a year earlier. Sales
rose 3.7% to 159.23 billion kroner,
from 153.53 billion kroner, helped by
higher oil prices for the companys
oil-production business.
Paul Hannon
treatments like chemotherapy that
often failed. Some 8,700 Americans
died from the disease in 2010.
Among those staring down that
fate was Richard Kaminski, a retired
accountant from Oxford, Conn. He
was diagnosed with skin cancer two
years ago and was given six months
to live after a normal treatment
called high-dose Interleukin-2 failed.
Im a year past that deadline
now, and Im feeling great, said Mr.
Kaminski, 64 years old, who took
vemurafenib as part of its phase 2
clinical trials. He is still taking the
pillsfour in the morning, and four
in the eveningand says medical
tests show that all thats left of his
two lung tumors might be dead cells
or scar tissue.
Some patients taking vemu-
rafenib during clinical trials experi-
enced side effects such as fatigue
and joint pain, prompting doctors to
lower their dose.
Vemurafenib, which will be sold
under the brand name Zelboraf, is
the second new treatment approved
recently for metastatic melanoma.
In March, the FDA cleared Yervoy
from Bristol-Myers Squibb Co. Un-
like vemurafenibs focus on the mo-
lecular causes of metastatic mela-
noma, Yervoy works by marshaling
the bodys immune system to fight
the cancer.
The rival treatments are expensive,
with a course of Yervoy costing
$120,000. Most patients will take Zel-
boraf for about six months at an esti-
mated cost of $56,400, Roche said.
The genetic test identifying skin-can-
cer patients with the BRAF mutation
will cost $120 to $150, the company
said.
Despite the high price, the impact
might be temporary without the ad-
dition of complementary treat-
ments. The molecular mechanisms
that have made for such promising
drug targets can also lead the tu-
mors to develop resistance to the
new treatments. As a result, compa-
nies are researching the combina-
tion of therapies, including vemu-
rafenib and Yervoy.
Roche holds world-wide commer-
cial rights to vemurafenib, though it
will co-promote the drug in the U.S.
with Daiichi Sankyo. Roche is already
a major player in cancer treatment. Its
three big therapiesAvastin, Hercep-
tin and Rituxanaccount for 35% of
its $47.8 billion total revenue and have
helped drive its 30% share of the
world-wide cancer market, according
to Morningstar.
But Roche could use a new prod-
uct with an estimated $1 billion in
peak yearly sales. Tight budgets
could force governments to limit the
prices paid for cancer drugs.
Jared A. Favole
Continued from page 19
Kodak Launches Sale of Patents
Eastman Kodak Co. has kicked
off its patent sale, as the iconic U.S.
imaging company seeks to ride the
bull market for patents and capital-
ize on its intellectual property in
the market for tablet computers.
Investment bank Lazard Ltd. be-
gan marketing the portfolio this
week, reaching out to companies
that may be interested, said a per-
son familiar with the matter. The
auction will be conducted over two
stages, according to a person advis-
ing a company interested in buying
Kodaks digital-imaging patents.
This person says the interested
company is a large, strategic buyer
in the wireless industry looking to
use the patents for defensive pro-
tection.
Speculation that Kodak could
strike a lucrative deal propelled a
sizable gain in the companys share
price Wednesday, with the stock up
24% at $2.66 in late trading on the
New York Stock Exchange. Lazard
declined to comment.
Despite a growing frenzy around
patents that can be used in smart-
phones and other mobile devices,
other people familiar with sale pro-
cess question the ultimate value of
Kodaks patents because it has al-
ready struck numerous licensing
deals with cellphone makers for
some of the patents it is now put-
ting on the auction block. There is
also a concern that because of the
license deals, an acquirer of the
Kodak patents would be subject to
lawsuits, these people added.
The licensing strategy brought in
$1.9 billion from 2008 to 2010, but
the flow of settlements dried up this
year, prompting the company to
look more seriously at selling pat-
ents, one board member said.
Despite those concerns, Kodak
Chief Executive Antonio Perez said
the patents could be very attractive
to tablet makers, in an interview
with The Wall Street Journal in July.
While Kodak struck settlements
with many mobile-phone makers to
use its digital-image-previewing
patent, its licensing deals are usu-
ally done by product category. That
means that in many cases those
same mobile-phone makers would
have to license the same patent
again for use in a tablet, he said.
My team has counted 200 dif-
ferent models of tablets with cam-
eras, Mr. Perez said.
The challenge of cutting deals
with so many companies, he added,
was a major factor that led Kodak to
explore selling its patents.
In addition, he said recent events
in the war for patents also came
into consideration. [With] Nortel
and many other companies, it
looked like it was the perfect time,
he said. In July, Nortel Networks
Corp. sold a trove of wireless pat-
ents for $4.5 billion and Google Inc.
bought hundreds of technology pat-
ents from International Business
Machines Corp. to defend itself
against lawsuits.
Shortly after the Nortel deal,
Kodak said it was exploring the pos-
sible sale of 10% of its patent port-
folio, or 1,100 digital patents. The
company hired Lazard to advise the
sale. Lazard also advised Nortel in
its sale and Google in its acquisition
of Motorola Mobility Holdings Inc.
While the 1,100 patents are used
for a variety of uses, they include a
patent at the center of Kodaks liti-
gation with Apple Inc. and Re-
search in Motion Ltd. that relates
to digital-image previewing. Mr.
Perez said that patent alone could
result in $1 billion in payments from
the two companies. The portfolio
also includesf patents Kodak is cur-
rently litigating with Shutterfly Inc.
Mr. Perez said Kodak will still be
able to use its patents after a sale,
but will no longer be able to litigate
them.
Gina Chon
BY DANA MATTIOLI
Antonio Perez, Kodaks CEO, during the Bloomberg Link Spain Investment Strategies Briefing in New York on Wednesday.
B
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Skin-Cancer
Drug of Roche
Gets U.S. Nod
Maersk Says Economy, Capacity Glut Pinch Freight Fees
hotnpapers
BUSINESS FINANCE
Shell Works
To End Leak
In North Sea
LONDONSome 660 tons of oil
are still inside a leaking Royal
Dutch Shell PLC pipeline in the U.K.
North Sea, the Anglo-Dutch energy
producer said Wednesday, explain-
ing that efforts to stop the relatively
light flow of crude are taking con-
siderable time in order to minimize
further leakage.
Shell has been trying to stop a
leaking line from its Gannet Alpha
platform for the past seven days
amid mounting public criticism of
its perceived lack of transparency
about the spill.
I cannot stress enough the need
to undertake detailed risk assess-
ments and ensure any work consid-
ered is undertaken safely, Glen Cay-
ley, technical director of Shells
exploration and production activi-
ties in Europe, said at a joint press
conference with a U.K. government
representative.
Shell has estimated that around
216 tonsor 1,300 barrelsof oil
have spilled from the Gannet Alpha
platform since last week. By
Wednesday afternoon, oil was con-
tinuing to leak at a rate of less than
a barrel a day.
Shell declined to say how long it
would take to finally close the leak.
If oil continued to leak from the
pipeline, Mr. Cayley said, it was in-
evitable that it would cross the me-
dian line into the Norwegian North
Sea. He said Shell had informed the
Norwegian government of the possi-
bility.
The Norwegian Petroleum Safety
Authority wasnt available for com-
ment.
The U.K. Department of Energy
and Climate Change official assigned
to monitor Shells response to the
spill said that, in his view, the leak
is under control and has now been
greatly reduced. Hugh Shaw said
the DECC and the Health and Safety
Executive will thoroughly investi-
gate the causes of the incident, after
which a full report will be sent to
Scottish Procurator Fiscal, or public
prosecutor.
The leak is located about 177 ki-
lometers east of Aberdeen, Scotland,
in the North Sea.
Scottish Environment Secretary
Richard Lochhead said Shell had
been made aware of the need for
better communication about what
happened and what it was doing to
address the leak.
I have spoken with both Shells
senior management and the U.K.
governments offshore-incident rep-
resentative and I stressed, once
again, the importance of clear com-
munication on the current operation
and the expectation people have for
complete openness and transpar-
ency on the situation, Mr. Loch-
head said.
I was assured by both that this
point had been taken on board, and
Im pleased to see that steps have
now been taken to put more infor-
mation in the public domain. This
must continue, he said.
The Gannet platform will be shut
down for 30 days beginning Thurs-
day, Mr. Cayley said, although he
stressed that this was a long-
planned maintenance halt. However,
inspections would be carried out on
the rest of Gannets pipelines in
light of this incident, he added.
Shell co-owns the Gannet platform
with Exxon Mobil Corp., with Shell
operating the platform.
BY ALEXIS FLYNN
ChinaTVSteps UpBaiduAttack
BEIJINGState broadcaster
China Central Television escalated
its assault on Baidu Inc. with more
reportsincluding one complaining
about slanderous posts on a Baidu
messaging siteand a newly cre-
ated CCTV website that seems
largely dedicated to criticizing the
Internet search giant.
The latest efforts follow an ear-
lier CCTV investigative report al-
leging that Baidu is negligent in its
checks on fraudulent drug advertis-
ers, which pushed down Baidus
Nasdaq-listed shares 9% this week.
The extraordinary attacks pit
Chinas most important propaganda
outlet against one of its most
prominent Internet companiesone
that, while privately owned, has
long been seen as a government fa-
vorite, in part because of its com-
pliance with Chinese censorship
regulations.
CCTV on Wednesday night read a
statement from Baidu, which said it
is investigating CCTVs allegations
and would seriously deal with be-
havior that violates the companys
system. The statement said, It will
be a long-term and tough journey to
fight against cheating companies,
adding, Baidu welcomes the super-
vision from society, including the
public security authority, industry
and commerce authority and me-
dia.
Baidu spokesman Kaiser Kuo
again declined to comment.
The criticism in one of CCTVs
new reports seems to blur the line
between exposing corporate wrong-
doing and the sort of freewheeling
expression that is common on the
Internet, even in China. The report,
first aired late Tuesday, features Cai
Jiming, a professor at Beijings pres-
tigious Tsinghua University. Mr. Cai
has drawn criticism in recent years
for supporting a government move
to shorten some of the countrys key
national holidays.
In the segment, Mr. Cai tells
CCTV that a slew of harassing
phone calls and text messages led
him to discover postings about him
on Tieba, an online forum operated
by Baidu, where people opposed to
his views on public holidays were
ridiculing him, sometimes profanely.
In the CCTV interview, he says
Baidu rejected his requests to delete
the forum or to make him the mod-
erator, and he accuses Baidu of prof-
iting from the traffic to forums on
which Internet users mock him and
other famous people.
Mr. Cai on Wednesday confirmed
that the depiction of his views on
CCTV was accurate, but didnt com-
ment further. CCTV didnt respond
to requests for comment.
As of Wednesday, Baidu Tieba
showed nearly 300 posts related to
Mr. Cai, most of which were about
public holiday rules, including some
that supported his views on the sub-
ject. It was impossible to indepen-
dently verify whether there had
been any postings about Mr. Cai
that were profane.
On Wednesday night, CCTV fol-
lowed with one more broadcast on
Baidu, showing another attempt by
a reporter to register as a Baidu ad-
vertiserthis time using a different
persons identification document
and succeeding.
Separately, CCTVs finance chan-
nel launched a website dedicated to
Building Trust on the Internet,
saying that it aims to expose bad In-
ternet practices in light of a joint
initiative by various government
agencies to crack down on illegal
conduct on the Internet. The site
largely features videos and articles
about Baidu.
It is unclear what is driving the
CCTV criticism of Baidu, and to
what degree it represents broader
anger at the company in Chinas
government that could affect
Baidus operations.
On the one hand, CCTV, whose
dozens of channels reach hundreds
of millions of Chinese viewers, is at
the center of a government propa-
ganda apparatus that has sought to
control information on Chinas bur-
geoning Internet. While CCTV
doesnt compete directly with Baidu,
two other pillars of that state sys-
temthe Xinhua news agency and
the Peoples Daily newspaperboth
recently started their own Internet
search engines.
But even in state media outlets
these days, Chinese journalists have
been given some leeway to engage
in investigative reports that arent
necessarily ordered by top officials.
Some of those reports have brought
about change.
Some analysts say CCTVs criti-
cism of Baidu could stem from a de-
sire to more closely oversee the
fast-growing Internet sector, which
is now dominated by private-sector
companies.
Sue Feng and Kersten Zhang
BY LORETTA CHAO
The attacks pit Chinas main propaganda outlet against an Internet titan. Above, a woman passing Baidus Beijing offices.
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WSJ.com
To read more about these items,
and for all the latest breaking
news, go to WSJ.com/Business
AIRLINES
SAS Swings to Profit
In Second Quarter
SAS AB on Wednesday reported
that it swung to a profit in the second
quarter as a huge cost-cutting
program continued to help the
Scandinavian airline back to
profitability, but it warned that its
very worried about the state of the
global economy and the likely impact
on the airline sector.
The airline Wednesday said it had
cut costs by about 23%, or 7.6 billion
Swedish kronor ($1.19 billion), since
2008, and expects a further reduction
of 500 million kronor in the second
half of this year and 500 million
kronor in 2012 as a whole.
The huge fall in costs helped it post
its best second-quarter result since
2008, swinging to a net profit of 551
million kronor for the three months to
end of June, compared with a 502
million kronor loss a year earlier.
However, revenue also rose sharply,
to 11.23 billion kronor from 9.98 billion
kronor, as it flew 1.1 million more
passengers, up almost 18% on an
annual basis. The airline attributed this
to its better customer experience, with
improved punctuality and customer
service bringing flyers back to the
airline.
Jens Hansegard
ENERGY
BP Appoints MacLeod
As New Strategy Chief
BP PLC has appointed head of
investor relations Fergus MacLeod as
its strategy chief, as the U.K. oil major
seeks to allay investor concerns about
its weak share price and future
direction.
Mr. MacLeod, who has been BPs
head of investor relations since 2002,
replaces incumbent Ian Smale as
group head of strategy, effective
immediately, a BP spokeswoman said
Wednesday. Mr. Smale will leave BP,
where he has worked for 30 years.
Before joining BP, Mr. MacLeod was
an oil analyst at Deutsche Bank.
Alexis Flynn
DRINKS
Carlsberg Warns on Profit
After Russian Demand Falls
Danish brewer Carlsberg A/S
issued a full-year profit warning
Wednesday after demand in Russia
fell on the back of higher beer taxes
and tougher legislation in the country.
The worlds fourth-largest brewer
said it now expects net profit to grow
5% to 10% in 2011, adjusted for a year-
earlier one-off gain. It had previously
forecast more than 20% growth.
A three-fold increase in the excise
duty on beer in Russia since the start
of 2010 has pushed beer prices up
30% over the past 18 months. The
higher prices caused average beer
consumption to fall to 66 liters a
person last year from 80 liters prior to
2008, and Carlsberg expects it to fall
to 64 liters this year.
Adding to the higher prices were
unfavorable weather conditions during
the second quarter, which also hit
consumption. Carlsberg said the beer
market in Russia declined by 2% in the
second quarter.
Second-quarter net profit fell to
2.06 billion Danish kroner ($398
million) from 2.63 billion kroner a year
earlier, below analysts expectations.
Sales rose 4.3% to 18.74 billion kroner,
also short of estimates, despite strong
growth in Carlsbergs Asian markets.
Shares fell 16.7% to 397 Danish
kroner.
Carlsberg is one of several
European companies that have warned
in recent weeks of the difficulty of
passing higher costs on to consumers.
Sven Grundberg
and Gustav Sandstrom
BUSINESS BRIEFS
In the year ended March 31,
more than 60% of SABMillers
US$28.3 billion group revenue came
from outside Europe and North
Americaan attractive growth pros-
pect for many investors.
Other SABMiller shareholders ex-
pressed support for the offer.
Its not like they havent done
this sort of thing before, said An-
drew Kingston, an equity analyst
and portfolio manager at South Af-
ricas Sanlam Investment Manage-
ment, a long-term investor in SAB-
Miller. We would think there are at
least some opportunities to extract
synergies and optimize the brands,
he said.
At the current price, the Fosters
deal would mark the brewing indus-
trys biggest since InBev paid US$52
billion to merge with Anheuser-
Busch in 2008. It would be the first
major deal in the sector since Hei-
neken NV bought Mexican brewer
Femsa Cerveza for 5.3 billion
(US$7.64 billion) last year.
For SABMillers offer to go
through, 90% of Fosters sharehold-
ers must accept.
Gavin Lower
Continued from page 19
SABMiller Goes
Hostile With Bid
hotnpapers
THE GOOGLE-MOTOROLA DEAL
The Man Behind the Rise of Android
At the core of Google Inc.s $12.5
billion Motorola deal is Silicon Val-
ley engineer Andy Rubin, who in six
years has reordered the wireless
market and positioned the Internet
giant as a central player in it.
Mr. Rubin, 48 years old, has
changed Googles organizational
structure and become one of the
most powerful people at the com-
pany. Under his leadership, the op-
erating system known as Android
has become the most widely used
software on smartphonessurpass-
ing the creations of Apple Inc. and
Nokia Corp.and powering tablets
from many companies.
Mr. Rubins success has enabled
Googles search engine and digital-
advertising business to spread rap-
idly through the mobile world.
When Google co-founder Larry
Page became CEO in April, Mr. Ru-
bin was promoted to be one of 18
senior vice presidents. His star has
continued to rise, culminating in his
personal involvement in Mondays
deal for Motorola Mobility Hold-
ings Inc., said a person familiar
with the matter.
People close to the deal said one
of Googles motivations was its de-
sire to design devices, not just the
software that powers them, thus
giving it the sort of influ-
ence that rival Apple enjoys
with its iPhone and iPad.
Google declined to make
Mr. Rubin available for an
interview.
A longtime builder of
phones, Mr. Rubin started
Android in 2003 but strug-
gled to get funding.
Android attracted
Googles attention in part
because Mr. Rubin had pre-
viously met Google found-
ers Mr. Page and Sergey Brin, who
were fans of a phone called the
Sidekick, which Mr. Rubin had
helped build while running an ear-
lier start-up called Danger.
Between 2005 and 2007, Android
was largely a secret project within
Google. Its mission: create a modern
operating system for smartphones
that would allow powerful Internet
applications and break the strangle-
hold of wireless carriers, who then
dictated which applications could be
installed on phones.
Unlike Microsoft, which levied
fees on device makers that
used its mobile operating
system, Google planned to
give away Android soft-
ware, believing it could
make back its investment
through online-ads served
up on the phones. An-
droids open-source devel-
opment plan also allowed
programmers outside
Google to help enhance the
software.
By 2007, with about 100
engineers working for him, Mr. Ru-
bin began to negotiate with partners
on creating the first Android phone,
even as Google was developing mo-
bile applications including Web
search and Google Maps for the
still-secret Apple iPhone, which
didnt launch until that June.
In mid-2007 he faced a setback
when LG Electronics Co. backed out
of a deal to build the first Android
phone, said a person familiar with
the matter. Mr. Rubin then turned to
little-known HTC Corp., which had
built a phone for Microsoft.
With the launch of the iPhone,
Apple became a major competitor
but also provided a boost to An-
droid. The iPhones strong sales
spurred handset makers to take up
Android.
By November, Samsung Elec-
tronics Co., Motorola and LG all
signed on to Googles open handset
alliance, a consortium of more than
30 hardware makers, carriers and
application companies that said
they would help build Android de-
vices.
The first Android phone, the G1,
launched in the fall of 2008 to poor
reviews but impressed hardware
makers and carriers enough for
them to begin approaching Mr. Ru-
bin. Androids headquarters in
Mountain View, Calif., became a
mecca for mobile CEOs.
In the middle of 2009, when An-
droid still had around 150 employ-
ees, Mr. Rubin decided he wanted a
dedicated business teaman un-
heard of concept at Google.
Not all has gone smoothly. Mr.
Rubins effort in early 2010 to sell
the Google-branded HTC Nexus One
smartphone directly to consumers
got bogged down. Yet the broader
Android strategy was working, as
device makers continued to build
better Android smartphones.
Mr. Rubin and the rest of the An-
droid team were elated when Apple
CEO Steve Jobs took a swipe at
them in the fall of 2010, said a per-
son familiar with the matter. Mr.
Jobs said that Android was prob-
lematic because customers and app
developers such as TweetDeck had
to deal with a mess of numerous
versions of the software.
In a blog post, however, the CEO
of TweetDeck, Iain Dodsworth, came
to Androids defense, saying it
wasnt difficult to work with.
Nick Wingfield
BY AMIR EFRATI
Google-Motorola Tie-Up to Test Corporate Style
Sanjay Jha, Motorola Mobility
Holdings Inc.s chief executive, re-
calls creating a stir with colleagues
the first time he wore a pair of flip
flops to the companys headquarters
in Libertyville, Ill.
They said Sanjay, your toes are
showing! said Mr. Jha, who inked a
deal Monday to sell the company to
Google Inc. for $12.5 billion.
Since arriving at Motorola in
2008, Mr. Jha, who spoke in an in-
terview Tuesday, has sought to
change the companys Midwestern
approach: Among other things, but-
ton-down shirts and slacks have
largely been replaced by more ca-
sual jeans and polos. Still, cooler
clothes couldnt cover a steep de-
cline in cellphone sales, which in
part led Motorola to split earlier
this year.
Mr. Jhas cultural transformation
will be put to the test with the tie-
up of two companies half a conti-
nent apart, each a product of dis-
tinctly different eras. People
familiar with Motorolas inner work-
ings say there is still a big gap from
the culture at Google. Though Mo-
torola delivered some hit cell-
phones, for example, others were
slowed by a bureaucratic layer of
middle management and little inno-
vation from rank and file workers,
say some current and former em-
ployees.
A key difference between the
companies stems from Motorolas
focus on hardware and Googles on
software. That helps explain why
Google is more able to take risks,
Mr. Jha said.
One of Motorolas biggest mis-
steps was nearly missing the evolu-
tion to smartphones. A turning
point came when Mr. Jha decided to
slash jobs and focus on creating
phones based solely on Googles An-
droid operating system. He said he
also tried to encourage engineers to
take more risks and shorten devel-
opment times, which he said has
paid off.
When he first came on board,
there were fifteen gates to pass in
the development of a handset,
largely reflecting concerns about
quality. Wed have experts say, add
three more screws and delay the
product by four weeks, said Mr.
Jha, who came from San Diego-
based Qualcomm Inc.
There was also the impact of job
cuts, which at times replaced older,
experienced engineers with young
recruits. Mr. Jha said some of the
older staff didnt have the newer
skills required as the technology
evolved.
Indeed, the two companies sit
very differently in the technology
pecking order. Last year Motorola
lost $86 million. Google made $8.6
billion. Perhaps thats why some
Motorola employees in Libertyville
were excited about joining the Sili-
con Valley star. The employees
About 20,000 at Motorola Mobility
and nearly 29,000 at Googlewill
have to get used to each other. One
former Android executive boasted
that Google employees has, on aver-
age, 20 IQ points more than their
Motorola counterparts. One former
Motorola product manager noted
that Over time, the [Motorola] en-
gineers have been so beaten down.
A Google employee starts dictating
and that wont be taken well at all.
Regarding cultural differences, a
Google spokeswoman said: This
story is searching for a problem
that does not exist. As we have said
repeatedly, we intend to run the
company as a separate entity. Mr.
Jha said on Monday that the two
cultures will mesh really well, but
that both companies can learn from
each other.
Martin Cooper, a former Motor-
ola engineer at the company who
worked on the first portable cell-
phone in 1973, predicts Google will
not place a high enough value on
Motorolas deep expertise in radio
technology. Its a sad thing to see
an 82-year-old culture of focus on
radio specifically, and on excellence
in technology, and see that be ab-
sorbed by an Internet company, he
said.
Some concerns are also shared
by Edward Zander, who served as
Motorolas chairman and CEO from
2004 to 2008 and called his own
struggle to update the companys
culture as probably the hardest
thing Ive ever faced in my working
career.
Mr. Zander said he made some
progress, and believes Mr. Jha has
made more. But the performance
has been inconsistent, making Mo-
torola seem more valuable for its
patents than its business. They are
going to have to stand alone and
win in the marketplace, or Google
will shut them down and just focus
on the patents, he predicted.
Jack Nicas, Amir Efrati and Don
Clark contributed to this article.
BY SHAYNDI RAICE
Sources: WSJ research; Glassdoor.com users (salary)
Comparing Campus Cultures
Gourmet chefs, free
lunch and dinner
Big selection,
employees pay
Vint Cerf, Internet
pioneer and Google
evangelist
Robert Galvin,
co-founders son and
former CEO
$114,084 $79,776
T-shirts Polos
Toyota Prius SUVs and Minivans
CAFETERIA
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ENGINEER
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STANDARD
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IN THE
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Source: the company; Photos: Motorola; Motorola DynaTAC (Bloomberg News)
1983
A history of Motorola and its offerings:
A Technology Spectrum
1943 1940 1996 1974 2004 2007 2008
2011
1928
Galvin brothers
start Galvin
Manufacturing
Corp. in Chicago
Creates brand
Motorola for
introduction
of rst car
radio
Develops
portable
two-way radio,
used widely in
WWII
Galvin goes
public and
is renamed
Motorola
Inc. in 1947
Releases rst
television; sells
100,000 units
in one year
Sells TV
business
to maker
of Panasonic
Develops
DynaTAC, the
rst portable
cellular phone
Introduces Razr
cellphone, which
sells more than
100 million units
in three years
Company struggles
with slumping phone
sales; Carl Icahn buys
Motorola stake
Unveils plans
to split in two
companies,
sets up
dual-CEOs
Money-losing
cellphone business
decides to focus
on Googles
software
Completes split
into two public
companies
4G Motorola
Droid Bionic
1930
1947
Introduces Ra
cellphone, w
sells more
100 millio
in three
of
ss
C
in
c
4G M
Droi
Introduces
clamshell
StarTAC
cellphone,
which is a
bestseller
for years
1943 1940
928
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Motor
introd
of rs
radio
1930
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Andy Rubin
hotnpapers
BUSINESS FINANCE
Judge OKs
Transfer Of
A Lehman
Loan Book
NEW YORKA judge on Wednes-
day approved a deal that will let
Lehman Brothers Holdings Inc.
turn its $5.3 billion commercial-loan
portfolio into cash, adding to the
amount that could one day go back
to the Wall Street firm's creditors.
The deal with WCAS Fraser Sul-
livan Investment Management LLC
allows Lehman, which filed for
bankruptcy protection in September
2008, to more quickly monetize one
of its largest assets rather than sell-
ing the loans at depressed prices or
waiting for them to be due for re-
payment. Some 30% of those loans
dont mature until 2016 or later.
Lehman will pay a fee to Fraser
Sullivan, a firm that manages collat-
eralized loan obligations.
While no parties objected to that
deal, Judge James Peck of the U.S.
Bankruptcy Court in Manhattan
pushed lawyers to take out wording
that would have essentially meant
the bankruptcy court was preemp-
tively deeming future sales of the
securities as true sales rather
than financings. Such a distinction
is usually reserved for lawyers who
analyze the transactions.
Mr. Peck said that while he had
no problem allowing Lehman to
transfer the assets to Fraser Sulli-
van, I am not doing the work of a
transactional lawyer who would de-
termine whether that constitutes a
true sale. He added, No bank-
ruptcy judge in his right mind would
do that. Thats what all you lawyers
are paid so much to do.
Lehman then eliminated the lan-
guage in question, and Judge Peck
approved the deal.
Employees in Lehmans asset-
management wing who manage the
commercial loans will move to Fra-
ser Sullivan.
The judge also approved a com-
mercial-loan settlement between
Lehman Brothers Holdings and
State Street Bank & Trust Co., in
which State Street agreed to drop
litigation in a dispute and to back
Lehmans new plan to pay back
creditors. State Street had claimed
that just days before the bankruptcy
filing, Lehman stopped making re-
quired payments under a commer-
cial loan repurchase agreement.
The deal calls for State Street to
cut its claim against Lehman by
more than a third, to $400 million
from $638 million.
The settlement is another exam-
ple of Lehman striking a deal as it
tries to get its liquidation plan ap-
proved by the end of the year.
The firms newest creditor-pay-
back plan could total up to $65 bil-
lion and gives those owed money
from Lehmans various subsidiaries
more than they would have received
under its original plan, but also de-
fines how much they can claim.
A hearing on whether to send
the plan to creditors is set for Aug.
30.
Support for the plan isnt univer-
sal, however. Monday, New York dis-
tressed investment hedge-fund man-
ager Centerbridge Credit Advisors
LLC said Judge Peck shouldnt send
the plan to creditors for a vote. It
objected, among other things, to the
handling of some of its claims.
Eric Morath
BY JOSEPH CHECKLER
China Gives Farm Belt a Stretch
With Growing Hunger for Corn
Chinas struggle to meet the
growing demands of its middle class
is fueling a sudden surge in demand
for corn, sending vast ripples across
the U.S. farm belt and potentially
upending the grains trade flows
around the world.
Chinas need for cornwhich
forms the basis of sweeteners,
starch and alcohol as well as feed
for livestockwas on stark display
in July when the nation ordered 21
million bushels of U.S. corn in one
hit, more than the U.S. government
thought the country would buy in a
year. The purchase surprised the
market and came as an intense July
heat wave was shrinking the poten-
tial size of the Midwest crop. China
bought another 2.2 million bushels
of U.S. corn early this month.
Corn prices, which have nearly
doubled over the past year, climbed
another 1% Tuesday. The corn fu-
tures contract for December deliv-
ery at the Chicago Board of Trade
rose 7.5 cents to settle at $7.275 a
bushel.
Chinas influence on corn de-
mand underlines how its fast-grow-
ing economy is reshaping global
commerce. The nation, with its
growing population of 1.3 billion
people, has been a major player in
commodities markets in recent
years.
China already buys about a quar-
ter of all U.S. soybeans. But its sud-
den demand for corn caught many
off guard. China, which hadnt been
a net importer of corn for 15 years
until last year, has a vast corn belt
of its own and for many years
strove to be self-sufficient. And be-
cause China is secretive about the
levels of commodities it holds in its
strategic reserves, the rest of the
market can only guess what its sup-
ply needs are.
Many attribute the larger-than-
expected demand to a growing mid-
dle class that is changing its tastes
more quickly than anticipated. As
the Chinese population becomes
wealthier, for example, it is eating
more pork. And the Chinese govern-
ment is pushing its farmers to adopt
Western methods of raising their
pigs, including feeding them more
corn. Citizens are also slurping up
juices and other products that in-
clude corn-based sweeteners: Coca-
Cola Co. said that its volume in
China spiked 21% in the second
quarter.
Ma Liangfeng, a 69-year-old re-
tired engineer living in Shanghai,
says the array of packaged products
lining store shelves was unthink-
able just 30 years ago. Back then,
families had to reserve staple meats
like pork for special occasions.
The changes have created big
shifts throughout the food chain, in-
cluding U.S. companies and farmers
putting in place infrastructure that
will enable massive shipments of
grains and other products to Asia.
Many U.S. traders and econo-
mists believe the recent purchases
signal U.S. sales will grow so rapidly
that China could become the biggest
foreign buyer of U.S. corn within
five to 10 years, dethroning Japan,
which bought about 610 million
bushels of U.S. corn last year.
We think this is the inflection
point, says Brian Schouvieller, a
grain marketing executive at CHS
Inc., the U.S.s biggest farmer-owned
cooperative. We believe that, from
now, China is going to be a steady
buyer.
To be sure, Western executives
have been wrong before about
Chinas appetite for foreign corn. A
sudden surge of Chinese buying in
the mid-1990s sparked talk of a
trade boon for U.S. farmers, but it
was a blip. While Chinas middle
class is far bigger now, and its gross
domestic product grew a blistering
9.5% in the second quarter, econo-
mists predict turbulence.
Much of Chinas breakneck
growth is fueled by government-led
investment, not entrepreneurs, and
Chinas housing market appears to
be overheating.
Still, the threat of instability
might well work in the favor of U.S.
farmers. Chinas ruling Communist
Party worries in particular about
food inflation, which could put so-
cial stability at risk. In an effort to
preserve domestic supplies, the gov-
ernment has already stopped con-
struction of factories that convert
Chinese corn into ethanol fuel.
But rising pork prices, thanks in
part to higher demand and the ris-
ing cost of feed, accounted for more
than a quarter of the 6.5% jump in
Chinas consumer price index in July
from a year earlier.
In the eastern province of Zheji-
ang, pig farmer Qian Fanghuas op-
eration has grown to about 2,000
animals today, from less than 200
pigs four years ago. Mr. Qians hogs
require about 4,000 kilograms of
corn-based feed each day. His grow-
ing farm, and others dotted around
the country, is one of the reasons
domestic corn prices have climbed
so high as to make U.S. corn seem
affordable.
This year, China is expected to
use about five billion bushels of
corn to make feed, a growth of 20%
from five years ago, according to
the U.S. Department of Agriculture.
The USDA now forecasts that
China will import 79 million bushels
of corn from all sources for the
2011-2012 crop year. But some grain
traders are much more optimistic.
They said in interviews that they
think China wants to buy 200 mil-
lion bushels of corn from the U.S.
alone.
U.S. companies are already in-
vesting with Chinas ever-expanding
appetite in mind. Decatur, Ill., grain
exporter Archer-Daniels-Midland Co.
said in July that it would build a
shuttle-loading grain elevator near
St. Cloud, Minn., with the capability
of loading trains that are 110 cars
long. And Minneapolis-commodity
processing giant Cargill Inc. is ex-
panding its corn sweetener factory
in Pinghu.
A port terminal in Longview,
Wash., scheduled to open this fall is
the nations first in at least two de-
cades for loading ocean-going ships
with grain. Grain giant Bunge and
two Asian partners invested $200
million to build it. The Asia market
is the fastest growing market in the
world, says Larry Clarke, the ven-
tures chief executive. Were work-
ing to get our infrastructure ahead
of it.
Biotechnology giant Monsanto
Co. has had talks about deepening
ties with Sinochem, the state-
owned chemicals conglomerate with
which it has had a corn seed-breed-
ing venture in China since 2001.
Ron Litterer, a Greene, Iowa,
farmer, says hes paying close atten-
tion to Chinas growth and while he
hasnt yet decided to increase his
corn planting, that could change.
Mr. Litterer raises 1,000 acres of
corn and 500 acres of soybeans. It
just makes sense to think they will
have to depend more and more on
[food] imports, says Mr. Litterer.
For now, the amount of Chinese
business confirmed by Washington
is relatively small alongside Amer-
icas total foreign sales. The U.S. ex-
ports about 1.8 billion bushels of
corn globally.
While nobody in the West knows
for sure how much corn China will
want to import and how soon, the
possibilities fascinate grain traders.
According to Michael Swanson, a
Wells Fargo & Co. economist, dou-
bling of per-capita meat consump-
tion in China so that it matches the
U.S. level would require the country
to use an additional 24 billion bush-
els of corn, or about twice what the
U.S. produces in a year.
Theres not enough grain in the
world for them to do that, Mr.
Swanson says. But just moving in
the direction is staggering to con-
sider.
Tom Polansek and Carolyn Cui
and Yang Jie contributed
to this article.
BY SCOTT KILMAN
AND BRIAN SPEGELE
Chinese Menu | Chinese demand for corn is upending commodity markets ows
Chinas push to raise
more pigs
helps spur its appetite for
foreign corn
adding fuel to the
corn-price rally.
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0
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1.6
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6
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hotnpapers
BUSINESS FINANCE
McGraw-Hill
May Separate
Education Unit
McGraw-Hill Cos. is exploring a
separation of its education busi-
ness, which has been struggling
amid state budget cuts, people fa-
miliar with the matter said.
The company hired independent
bank Evercore Partners in March to
assess options for its education
business, the people added. As part
of that effort, McGraw-Hill has
ruled out breaking up the educa-
tion division, the people said.
The focus has been on separat-
ing the education business, but
what form that will take is still un-
clear, people familiar with the mat-
ter said. No final decisions have
been made, the people added.
The unit publishes school text-
books, provides testing materials
and produces education software,
among other services.
A sale of the education busi-
ness, which could attract interest
from private equity, is unlikely
partly because of the taxes related
to such a transaction, the people
said.
However, a sale could occur in
the future if the education business
becomes a stand-alone unit, the
people added.
Representatives for McGraw-Hill
and Evercore declined to comment.
An assessment of the education
business is part of the broader
company operations review that
McGraw-Hill established at the end
of last year, people familiar with
the matter said.
The company is divided into
four business divisions, which in-
clude the S&P and McGraw-Hill Fi-
nancial, McGraw-Hill Education and
McGraw-Hill Information & Media.
The financial division receives roy-
alties from trades based on its S&P
500 and other benchmark indexes.
The company has recently come
under investor pressure from
shareholders who think McGraw-
Hill has moved too slowly and con-
servatively in its review. Earlier
this month, hedge-fund firm Jana
Partners LLC and the Ontario
Teachers Pension Plan reported in-
creasing their joint stake in the
company to 5.2%, a move that
could lead to a breakup of the com-
pany.
Some shareholders and analysts
have criticized the structure of the
company, saying the ailing educa-
tion business is dragging down
McGraw-Hills lucrative Standard &
Poors bond-ratings service.
But McGraw-Hill noted it al-
ready was conducting a review of
its operations before the investor
pressure became public, and the
company has taken some steps to-
ward restructuring. Goldman Sachs
is advising McGraw-Hill on its port-
folio review.
In June, McGraw-Hill said it
hired Morgan Stanley to advise it
on the sale of its small broadcast
business, which would include ABC
affiliate television stations in Ba-
kersfield, Calif., Denver, Indianapo-
lis and San Diego.
Chairman and Chief Executive
Harold McGraw III recently said on
a conference call that investors can
expect significant statements on
coming actions in the second half
of the year. An awful lot of things
are being considered, he said.
McGraw-Hill sold one of its flag-
ship properties, BusinessWeek, to
Bloomberg LP in December 2009.
Evercore advised McGraw-Hill on
that transaction.
BY GINA CHON
AND JEFFREY A. TRACHTENBERG
The education business, one of four divisions, has been a drag on McGraw-Hills overall performance. Above, attendees
walked under a McGraw-Hill sign at the BookExpo America trade fair in New York in May.
E
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r
o
p
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a
n
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s
s
p
h
o
t
o
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g
e
n
c
y
A few minutes later, a questioner
acquiesced and asked for the back
story on the situation, as it were.
Last Friday, an employee ap-
proached Mr. Jeffries with what he
called terrible, terrible news that
Mr. Sorrentino had been wearing
A&F product on the episode that
aired the night before. We all said,
Oh, thats terrible, Mr. Jeffries re-
called with a groan. What are we
going to do about it?
The solution the group came up
with was to pay the reality star not
to wear the product, Mr. Jeffries
said, adding, Were having a lot of
fun with it.
A spokesman for Mr. Sorentino
declined to comment.
An MTV spokesman said on
Wednesday: Its a clever PR stunt
and wed love to work with them on
other ways they can leverage Jersey
Shore to reach the largest youth au-
dience on television.
Mr. Sorrentino, one of the most
popular characters on the show, is
known for lifting up his shirt to re-
veal his abdomen muscles, more of-
ten flashing the logo on the waist-
band of his underwear.
As retail analysts at Nomura Se-
curities pointed out in a research
note Tuesday evening, Mr. Sorren-
tino was seen in the most recent ep-
isode of Jersey Shore wearing a
pair of neon green A&F sweatpants
loudly (and proudly) on the
streets of Florence, Italy.
Last year, Mr. Sorrentino gave an
interview to New York magazine
where he said, Abercrombie &
Fitch, their most popular shirt, they
Continued from first page told me, is Fitchuation. I mean,
where did they get that from? Obvi-
ously from myself.
A&F confirmed that it sold that
shirt as part of its humor graphic
tee assortment.
ISI analyst Omar Saad said A&Fs
move was a wise one.
We applaud the decision to dis-
sociate A&F brands from The Jer-
sey Shore characters. Especially
overseas, this is a proactive step to
help maintain the brands emerging
position as the beacon of casual
American luxury. Mr. Saad said.
This is particularly important given
that The Jersey Shore has taken its
in-your-face, over-the-top antics to
Florence, Italy, this year for season
4. If Europeans begin to associate
A&F with boorish American behav-
ior, it could dampen the brands siz-
able Europe opportunity just as the
A&F flagship and Hollister expan-
sion has begun to accelerate.
Jersey Shore cast members
quickly became controversial house-
hold names when the first season
launched in late 2009, featuring
endless nights of partying and fre-
quent fighting. Before shooting be-
gan on its current season, set in
Florence, the citys mayor released a
list of rules, including no public con-
sumption of alcohol.
Mark Gongloff
Abercrombie Suggests
Star Shop Elsewhere
WSJ.com
ONLINE TODAY: Is Abercrombie &
Fitchs move good PR? Vote and
comment at WSJ.com/speakeasy.
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ARIX Composite Gross USD OT OT GBR 07/29.00 USD1469.25 7.4 -12.7 -6.5
A Volatile Week Sends LSE Trading Levels Soaring
High levels of volatility in global
stock markets last week, triggered
by the Standard & Poors down-
grade of U.S. debt and concerns
over the euro zone, led to the
third-highest number of daily
trades at the London Stock Ex-
change.
Some 1.54 million trades were
carried out on the LSE on Aug. 9,
according to data from the U.K. ex-
change operator.
That amounted to almost three
times the average daily trading vol-
ume this year, which had been
around 642,000 trades per day
through the end of July.
On only two previous days has
higher volume been recorded on
the exchange. They were on Sept.
16, 2008, the day after U.S. invest-
ment bank Lehman Brothers filed
for bankruptcy, and three days
later, on Sept. 19, in a week that
also saw American International
Group Inc. virtually nationalized
and Merrill Lynch taken over by
Bank of America Corp.
On those two days, 1.65 million
and 1.58 million trades were exe-
cuted, respectively, according to
the LSE.
A comparison with Black Mon-
day in October 1987 isnt possible
because data on specific daily
trades wasnt publicly available
from the LSE until 2006.
Last week, stock markets
around the world suffered severe
swings in trading as the VIX, which
tracks volatility, reached 48its
second-highest point on record. On
Aug. 9, the FTSE 100 at one point
fell as much as 3%, from 5164 to
5007, its lowest point since the
start of July. The Dow Jones Indus-
trial Average hit its lowest point in
the year, at 10604. Both markets
have since risen.
Last weeks trading volume
came against a backdrop of trading
that has failed to reach the expec-
tations of many investment banks
across Europe.
According to LSE data, average
daily trading levels sank from an
all-time high in 2008 of 766,542 to
623,349 the following yeara drop
of more than 18%and have strug-
gled to rebound since.
In terms of value, the average
daily 4.8 billion ($7.9 billion) turn-
over to the end of July 2011 was
just over half the daily level of the
8.5 billion traded in 2007.
As a result of this decline in
trading, Greenwich Associates, a
U.S. consultancy, said that Euro-
pean investment banks may have to
start cutting back their sales, trad-
ing and research units, unless vol-
umes and revenues pick up.
In a report, the consultant said
many financial institutions had in-
vested heavily in building up eq-
uity-trading teams over the past 24
months, despite achieving only half
of their predicted 11% increase in
2010-2011 commissions. The banks
are predicting a 12% increase in
their commission pools for
2011-2012, Greenwich said.
The sell-side will only be able
to maintain its current level of ca-
pacity if trading volumes recover
to projected levels, it said.
If sell-side commission reve-
nues remain below forecast, it is
only a matter of time before insti-
tutions begin to feel pressure from
core providers to consolidate trad-
ing volumes or risk reductions in
sales coverage, research and other
advisory services.
More at efinancialnews.com
BY ELIZABETH PFEUTI
Data provided by:
MARKETS
nALEXANDRAINVESTMENTMANAGEMENT
Alexandra Convertible Bond Fund I, Ltd. (Class A) OT OT VGB 06/30 USD 2316.22 -1.0 7.3 29.8
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Andfs. Anglaterra UK EQ AND 11/16 GBP 8.47 2.8 3.6 14.9
Andfs. Borsa Global GL EQ AND 08/16 EUR 5.74 -13.7 -5.9 -1.2
Andfs. Emergents GL EQ AND 08/16 USD 15.38 -17.1 -6.3 1.9
Andfs. Espanya EU EQ AND 08/16 EUR 10.13 -11.4 -14.9 -10.1
Andfs. Estats Units US EQ AND 08/16 USD 14.53 -8.8 4.9 4.0
Andfs. Europa EU EQ AND 08/16 EUR 6.10 -16.7 -14.2 -7.2
Andfs. Franca EU EQ AND 08/16 EUR 8.11 -14.7 -7.5 -3.4
Andfs. Japo JP EQ AND 08/16 JPY 433.09 -12.3 -4.1 -8.0
Andfs. Plus Dollars US BA AND 10/22 USD 9.66 2.3 3.0 6.2
Andfs. RF Dolars US BD AND 08/16 USD 11.90 0.9 0.2 3.8
Andfs. RF Euros EU BD AND 08/16 EUR 11.00 0.9 -0.7 2.3
Andorfons EU BD AND 08/16 EUR 14.51 0.9 -1.8 1.8
Andorfons Alternative Premium GL EQ AND 06/30 EUR 98.29 -1.9 -2.3 1.4
Andorfons Mix 30 EU BA AND 08/16 EUR 9.43 -4.4 -1.4 2.1
Andorfons Mix 60 EU BA AND 08/16 EUR 8.63 -9.2 -3.5 0.2
nCHARTEREDASSETMANAGEMENTPTELTD- TEL NO: 65-6835-8866
Fax No: 65-68358865, Website: www.cam.com.sg, Email: cam@cam.com.sg
CAM-GTF Limited OT OT MUS 08/12 USD 364049.64 -12.3 7.3 32.7
nCitadele
Republikas square 2a, Riga, LV-1522, Latvia
Citadele Eastern Europ Bal OT OT LVA 08/16 EUR 14.87 -6.5 -0.3 9.6
Citadele Eastern Europ Bd EU BD LVA 08/16 USD 17.94 3.6 7.4 16.5
Citadele Russian Eq EE EQ LVA 08/16 USD 22.70 -13.9 8.2 19.4
nDJEINVESTMENTS.A.
internet: www.dje.lu email: info@dje.luphone:+0035226925220fax:+0035226925252
DJE Real Estate P OT OT LUX 08/17 EUR 8.17 -9.2 -8.6 -3.8
DJE-Absolut P GL EQ LUX 08/17 EUR 214.58 -7.7 2.7 7.4
DJE-Alpha Glbl P OT OT LUX 08/17 EUR 178.44 -8.5 2.8 4.6
DJE-Div&Substanz P GL EQ LUX 08/17 EUR 217.94 -12.3 -1.1 5.7
DJE-Gold&Resourc P OT EQ LUX 08/17 EUR 210.50 -13.7 7.3 19.6
DJE-Renten Glbl P EU BD LUX 08/17 EUR 136.02 -1.2 -0.8 3.4
LuxPro-Dragon I AS EQ LUX 07/20 EUR 144.57 -8.5 5.0 7.6
LuxPro-Dragon P AS EQ LUX 07/20 EUR 140.29 -8.8 4.4 7.0
LuxTopic-Aktien Europa EU EQ LUX 08/17 EUR 15.25 -15.7 -10.8 -2.3
LuxTopic-Pacific OT OT LUX 08/17 EUR 19.23 -10.0 -0.7 16.6
nHSBCTrinkaus Investment Managers SA
E-Mail: funds@hsbctrinkaus.lu
Telephone: 352- 47 18471
Prosperity Return Fund A JP BD LUX 08/08 JPY 9918.47 2.1 -0.9 NS
Prosperity Return Fund B OT OT LUX 08/08 JPY 8542.37 0.1 -4.6 NS
Prosperity Return Fund C OT OT LUX 08/08 USD 98.43 6.3 5.8 NS
Prosperity Return Fund D OT OT LUX 08/08 EUR 116.21 5.4 7.7 NS
Renaissance Hgh Grade Bd A JP BD LUX 08/08 JPY 10180.31 2.0 0.3 NS
Renaissance Hgh Grade Bd B JP BD LUX 08/08 JPY 8862.86 1.4 -1.6 NS
Renaissance Hgh Grade Bd C JP BD LUX 08/08 USD 101.21 7.3 8.8 NS
Renaissance Hgh Grade Bd D JP BD LUX 08/08 EUR 103.61 -1.4 -0.4 NS
Trinkaus Golden Opportunities OT OT LUX 08/16 USD 157.07 11.4 29.0 24.2
Meriden Protective Div GL EQ AND 11/24 EUR NS.00 -2.8 NS NS
nOTHERFUNDS
For information about these funds, please contact us on Tel: +44(0) 207 842 9694/9633
Medinvest Plc Dublin OT EQ IRL 09/30 USD NS.00 NS 1.3 -4.4
nWINTONCAPITAL MANAGEMENTLTD
Tel: +44(0)2076105350Fax: +44(0)2076105301
Winton Evolution EURCls H GL OT CYM 07/29 EUR NS.00 3.5 11.6 10.9
Winton Evolution GBP Cls G GL OT CYM 07/29 GBP NS.00 3.2 11.4 11.1
Winton Evolution USDCls F GL OT CYM 07/29 USD NS.00 3.3 11.7 11.1
Winton Futures EURCls C GL OT VGB 07/29 EUR NS.00 4.8 15.2 11.5
Winton Futures GBP Cls D GL OT VGB 07/29 GBP NS.00 4.5 15.2 11.6
Winton Futures JPY Cls E GL OT VGB 07/29 JPY NS.00 5.4 15.6 11.6
Winton Futures USDCls B GL OT VGB 07/29 USD NS.00 4.7 15.4 11.7
Pictet-EURBonds-Pdy EU BD LUX 08/15 EUR 286.05 1.1 -1.2 3.0
Pictet-EURCorporate Bonds-P EU BD LUX 08/16 EUR 154.86 1.2 -0.6 4.3
Pictet-EURCorporate Bonds-Pdy EU BD LUX 08/16 EUR 100.99 1.2 -0.6 4.3
Pictet-EURHigh Yield-P EU BD LUX 08/16 EUR 163.77 -4.1 1.8 12.1
Pictet-EURHigh Yield-Pdy EU BD LUX 08/16 EUR 84.85 -4.1 1.8 12.1
Pictet-EURLiquidity-P EU MM LUX 08/16 EUR 137.05 0.5 0.7 0.5
Pictet-EURLiquidity-Pdy EU MM LUX 08/16 EUR 96.85 0.5 0.7 0.5
Pictet-EURSovereign Liq-P EU MM LUX 08/16 EUR 102.91 0.4 0.5 0.3
Pictet-EURSovereign Liq-Pdy EU MM LUX 08/16 EUR 100.38 0.4 0.5 0.3
Pictet-Europe Index-P EUR EU EQ LUX 08/16 EUR 99.51 -11.9 -4.4 4.7
Pictet-European Sust Eq-P EUR EU EQ LUX 08/16 EUR 132.42 -10.1 -3.8 5.5
Pictet-Glo Emerging Debt-P USD GL BD LUX 08/16 USD 276.91 5.3 3.9 10.2
Pictet-Glo Emerging Debt-Pdy USD GL BD LUX 08/16 USD 171.14 5.3 3.9 10.2
Pictet-Greater China-P USD AS EQ LUX 08/16 USD 365.81 -8.7 7.9 7.6
Pictet-Indian Equities-P USD EA EQ LUX 08/17 USD 335.52 -21.4 -11.3 8.5
Pictet-Japan Index-P JPY JP EQ LUX 08/16 JPY 7679.12 -13.8 -5.4 -9.5
Pictet-Japanese Eq Opp-P JPY JP EQ LUX 08/17 JPY 4140.98 -9.5 2.0 -3.9
Pictet-Japanese Eq Sel-I JPY JP EQ LUX 08/17 JPY 6984.13 -12.0 -0.7 -6.3
Pictet-Japanese Eq Sel-P JPY JP EQ LUX 08/17 JPY 6704.08 -12.3 -1.3 -6.9
Pictet-MENA-P USD OT OT LUX 08/16 USD 45.50 -15.3 -2.8 -2.4
Pictet-Pac (ExJpn) Idx-P USD AS EQ LUX 08/16 USD 295.55 -6.5 13.6 11.7
Pictet-Piclife-P CHF OT OT LUX 08/15 CHF 721.03 -8.7 -8.2 -2.5
Pictet-PremiumBrands-P EUR OT EQ LUX 08/16 EUR 87.96 -6.0 15.9 25.5
Pictet-Russian Equities-P USD EE EQ LUX 08/16 USD 70.19 -13.8 6.7 23.3
Pictet-Security-P USD GL EQ LUX 08/15 USD 117.64 -7.0 15.4 16.6
Pictet-Small Cap Europe-P EUR EU EQ LUX 08/16 EUR 497.71 -16.7 2.8 9.8
Pictet-Timber-P USD GL EQ LUX 08/16 USD 102.32 -13.9 -2.2 6.5
Pictet-USAIndex-P USD US EQ LUX 08/16 USD 98.59 -4.5 11.7 10.1
Pictet-USDGovernment Bonds-P US BD LUX 08/16 USD 567.33 6.0 3.5 5.8
Pictet-USDGovernment Bonds-Pdy US BD LUX 08/16 USD 393.39 6.0 3.4 5.8
Pictet-USDLiquidity-P US MM LUX 08/16 USD 131.36 0.1 0.2 0.2
Pictet-USDLiquidity-Pdy US MM LUX 08/16 USD 84.78 0.1 0.2 0.2
Pictet-USDSovereign Liq-P US MM LUX 08/16 USD 101.70 0.0 0.1 0.1
Pictet-USDSovereign Liq-Pdy US MM LUX 08/16 USD 100.20 0.0 0.1 0.1
Pictet-Water-P EUR OT OT LUX 08/16 EUR 133.36 -12.1 -0.5 8.9
Pictet-World Gvt Bonds-P USD OT OT LUX 08/16 USD 186.22 8.1 8.0 6.9
Pictet-World Gvt Bonds-Pdy USD OT OT LUX 08/16 USD 147.03 8.1 8.0 6.9
nPOLARCAPITAL PARTNERSLIMITED
International FundManagers (Ireland) LimitedPH- 353 1 670660Fax - 353 1 6701185
Global Technology OT EQ IRL 08/16 USD 15.49 -13.3 13.1 17.5
Japan Fund USD JP EQ IRL 08/17 USD 18.40 -1.8 15.7 5.6
Polar Healthcare Class I USD OT EQ IRL 08/16 USD 13.52 0.8 14.5 7.8
Polar Healthcare Class RUSD OT EQ IRL 08/16 USD 13.39 0.5 13.9 7.3
nHemisphere Management (Ireland) Limited
Discovery USDA GL OT CYM 12/31 USD 101.35 -10.6 -10.6 -10.5
Elbrus USDA GL EQ CYM 07/29 USD 12.67 2.1 19.9 19.5
Europn Conviction USDB EU EQ CYM 06/30 USD 143.56 4.7 5.7 4.0
Europn Forager USDB EU EQ CYM 06/30 USD 254.71 3.0 12.8 12.9
Latin America USDA GL EQ CYM 06/30 USD NS.00 1.9 0.1 5.4
Paragon Limited USDA EU EQ CYM 12/31 USD NS.00 12.7 12.7 14.2
UKFund USDA OT OT CYM 06/30 USD 168.96 -9.2 -1.2 -0.8
nPTCIPTADANAASSETMANAGEMENT
Tel: +6221 25574883 Fax: +6221 25574893 Website: www.ciptadana-asset.com
Indonesian Grth Fund GL EQ BMU 08/10 USD 196.97 8.2 29.9 34.4
nRUSSELL INVESTMENTGROUP
Multi-Style, Multi-Manager Funds www.russell.com
ACTIONFRANCE A EU EQ IRL 08/16 EUR 620.12 -13.7 -6.9 -0.8
CORE EUROZONE EQB EU EQ IRL 08/16 EUR 719.64 -15.6 -10.3 -2.0
EUROPEANSMALL CAP A EU EQ IRL 08/16 EUR 1317.62 -16.4 3.2 9.9
EUROPEANSMALL CAP B EU EQ IRL 08/16 EUR 1425.18 -16.1 3.8 10.6
EUROZONE AGGAEUR EU EQ IRL 08/16 EUR 625.24 -16.2 -5.3 3.3
EUROZONE AGGBEUR EU EQ IRL 08/16 EUR 907.34 -15.9 -4.7 3.9
GLBREAL EST SEC A OT EQ IRL 08/16 USD 1008.41 -3.6 10.5 12.2
GLBREAL EST SEC B OT EQ IRL 08/16 USD 1049.82 -3.2 11.2 12.9
GLBREAL EST SEC EHA OT EQ IRL 08/16 EUR 853.44 -5.6 4.7 8.2
GLBREAL EST SEC SHB OT EQ IRL 08/16 GBP 80.94 -5.7 5.1 8.9
GLBSTRAT YIELDA OT OT IRL 08/16 EUR 1859.86 2.0 6.8 13.8
GLBSTRAT YIELDB OT OT IRL 08/16 EUR 2009.58 2.4 7.4 14.5
GLOBAL BONDA OT OT IRL 08/16 EUR 1265.79 -0.8 -3.5 9.0
GLOBAL BONDB OT OT IRL 08/16 EUR 1361.27 -0.4 -2.9 9.7
JAPANEQUITY A JP EQ IRL 08/16 JPY 10081.76 -11.5 -3.8 -10.4
JAPANEQUITY B JP EQ IRL 08/16 JPY 10851.56 -11.2 -3.2 -9.8
PAC BASIN(X JPN) A AS EQ IRL 08/16 USD 2432.66 -8.5 8.3 10.2
PAC BASIN(X JPN) B AS EQ IRL 08/16 USD 2621.62 -8.1 8.9 10.8
RIC II PANEUROPEANEQUITY A EU EQ IRL 08/16 EUR 671.27 -13.2 -4.9 4.4
RIC II PANEUROPEANEQUITY B EU EQ IRL 08/16 EUR 714.73 -12.9 -4.3 5.0
nD'AURIOL FUNDS WWW.DAURIOL.BIZ
2 FUNDSOFFUNDSOFHEDGEFUNDS
D'Auriol Alt Non-Lev A OT EQ CYM 04/30 EUR 104.99 1.1 2.8 4.0
D'Auriol Opp F3 EUR OT EQ CYM 11/30 EUR 960.87 -2.8 -3.1 -2.5
nHERMITAGECAPITAL MANAGEMENTLTD.
Tel: +7501 2583160 www.hermitagefund.com
The Hermitage Fund GL EQ JEY 03/12 USD 963.12 4.5 105.6 -23.2
nHORSEMANCAPITAL MANAGEMENTLTD.
T: +44(0)2078387580, F: +44(0) 2078387590, www.horsemancapital.com
Horseman EurSelLtd EUR EU EQ GBR 07/29 EUR 239.93 6.2 20.6 16.0
Horseman EurSelLtd USD EU EQ GBR 07/29 USD 254.88 6.1 21.7 17.4
Horseman Glbl Ltd EUR GL EQ CYM 07/29 USD 426.05 9.0 20.8 4.4
Horseman Glbl Ltd USD GL EQ CYM 07/29 USD 426.05 9.0 20.8 4.4
nHSBCALTERNATIVEINVESTMENTSLIMITED
T+442078603074 F+ 442078603174www.hail.hsbc.com
HSBCALTERNATIVESTRATEGYFUND
Special Opp EUR OT OT CYM 07/29 EUR 92.32 -0.1 2.7 5.9
Special Opp Inst EUR OT OT CYM 03/31 EUR 88.51 0.7 -0.3 13.3
Special Opp Inst USD OT OT CYM 07/29 USD 99.98 -0.1 3.1 6.6
Special Opp USD OT OT CYM 07/29 USD 96.85 -0.5 2.4 5.9
nHSBCPortfolioSelectionFund
GHFund CHF Hdg OT OT GGY 07/29 CHF NS.00 1.1 6.4 4.8
GHFund EURHdg (Non-V) OT OT GGY 05/31 EUR 129.68 2.2 6.5 7.2
GHFund GBP Hdg OT OT GGY 07/29 GBP NS.00 1.4 7.2 5.7
GHFund Inst USD OT OT GGY 07/29 USD NS.00 1.6 7.7 6.1
GHFUNDS EUR OT OT CYM 07/29 EUR NS.00 2.3 8.9 7.0
GHFUNDS GBP OT OT CYM 07/29 GBP NS.00 1.9 8.7 7.1
GHFund S USD OT OT CYM 07/29 USD NS.00 1.9 8.2 6.7
GHFund USD OT OT GGY 07/29 USD NS.00 1.3 7.1 5.4
Hedge Investments OT OT JEY 06/17 USD NS.00 NS 5.8 6.7
Leverage GHUSD OT OT GGY 07/29 USD NS.00 1.4 12.2 8.8
MultiAdv Arb CHF Hdg OT OT JEY 07/29 CHF NS.00 0.4 1.5 3.8
MultiAdv Arb EURHdg OT OT JEY 07/29 EUR NS.00 0.8 2.1 4.6
MultiAdv Arb GBP Hdg OT OT JEY 07/29 GBP NS.00 0.6 1.9 4.6
MultiAdv Arb S EUR OT OT CYM 07/29 EUR NS.00 1.6 3.5 6.0
nMPASSETMANAGEMENTINC.
Tel: + 3861 587 47 77
MP-BALKAN.SI EE EQ SVN 08/12 EUR 19.29 -1.9 -8.4 -10.9
MP-TURKEY.SI OT OT SVN 08/12 EUR 30.30 -33.9 -28.9 0.8
nPICTET&CIE, ROUTEDESACACIAS60, CH-1211 GENEVA73
Tel: + 41 (58) 323 3000 Web: www.pictetfunds.com
Pictet-Agriculture-P EUR OT OT LUX 08/16 EUR 128.68 -16.9 -2.9 10.6
Pictet-Asian Eq ExJpn-I USD OT OT LUX 08/17 USD 181.36 -8.6 5.3 11.2
Pictet-Asian Eq ExJpn-P USD OT OT LUX 08/17 USD 170.26 -9.1 4.4 10.3
Pictet-Biotech-P USD OT EQ LUX 08/16 USD 273.39 -10.5 5.5 -0.9
Pictet-CHF Liquidity-P CH MM LUX 08/16 CHF 124.23 0.1 0.1 0.0
Pictet-CHF Liquidity-P dy CH MM LUX 08/16 CHF 93.08 0.1 0.1 0.0
Pictet-Conv. Bonds-P EUR OT OT LUX 08/16 EUR 97.81 -7.8 -1.2 NS
Pictet-Digital Comm-P USD OT EQ LUX 08/16 USD 135.58 -3.5 13.4 16.4
Pictet-Eastern Europe-P EUR EU EQ LUX 08/16 EUR 324.52 -19.9 -9.6 14.8
Pictet-Emerging Markets-P USD GL EQ LUX 08/17 USD 544.05 -11.7 4.4 11.4
Pictet-Eu Equities Sel-P EUR EU EQ LUX 08/16 EUR 396.52 -13.2 -5.0 4.7
Pictet-EURBonds-P EU BD LUX 08/15 EUR 402.95 1.1 -1.2 3.0
US EQUITY A US EQ IRL 08/16 USD 916.11 -6.5 10.1 8.0
US EQUITY B US EQ IRL 08/16 USD 990.46 -6.2 10.7 8.7
nTHENATIONAL INVESTOR
POBox 47435, AbuDhabi, UAEWeb:www.tni.ae
MENAReal Estate Fund OT EQ BMU 07/07 USD 773.34 -6.5 -11.0 -10.6
MENASpecial Sits Fund OT OT BMU 07/31 USD 1023.92 -10.8 -8.1 -2.0
MENAUCITS Fund OT OT IRL 08/11 USD 954.02 -13.2 -5.1 NS
UAE Blue Chip Fund OT OT ARE 08/11 AED 4.75 -5.9 1.8 -9.8
nYUKI MANAGEMENT&RESEARCH
nYMR-NSeries
YMR-NGrowth Fund JP EQ IRL 08/17 JPY 8726.00 -7.4 6.1 -3.7
nYuki 77 Series
Yuki 77 General JP EQ IRL 08/17 JPY 5185.00 -10.3 1.2 -10.3
nYuki Asia Umbrella Series
Yuki Rebounding Gro Fd JP EQ IRL 08/17 JPY 9069.00 NS NS NS
nYuki ChugokuSeries
Yuki Chugoku Jpn Gen JP EQ IRL 08/17 JPY 5911.00 -11.9 0.1 -6.2
Yuki Chugoku JpnLowP JP EQ IRL 08/17 JPY 6994.00 -11.2 -1.1 -9.6
nYuki HokuyoJapanSeries
Yuki Hokuyo Jpn Gen JP EQ IRL 08/17 JPY 3948.00 -8.5 0.7 -9.0
Yuki Hokuyo Jpn Inc JP EQ IRL 08/17 JPY 4477.00 -11.2 -3.8 -9.8
Yuki Hokuyo Jpn SmCap JP EQ IRL 08/17 JPY 4601.00 -7.5 7.2 -8.0
nYuki MizuhoSeries
Yuki Mizuho Gen Jpn III JP EQ IRL 08/17 JPY 3707.00 -8.8 0.2 -10.0
Yuki Mizuho Jpn Dyn Gro JP EQ IRL 08/17 JPY 3756.00 -14.0 -4.6 -12.3
Yuki Mizuho Jpn Exc 100 JP EQ IRL 08/17 JPY 5904.00 -7.6 1.8 -7.6
Yuki Mizuho Jpn Gen JP EQ IRL 08/17 JPY 7737.00 -9.7 2.4 -6.1
Yuki Mizuho Jpn Gro JP EQ IRL 08/17 JPY 5675.00 -9.4 2.7 -7.8
Yuki Mizuho Jpn Inc JP EQ IRL 08/17 JPY 6681.00 -11.0 -3.5 -8.2
Yuki Mizuho Jpn Lg Cap JP EQ IRL 08/17 JPY 4273.00 -13.8 -3.9 -9.9
Yuki Mizuho Jpn LowP JP EQ IRL 08/17 JPY 10277.00 -10.2 -1.3 -9.8
Yuki Mizuho Jpn PGth JP EQ IRL 08/17 JPY 6360.00 -13.0 -2.3 -13.1
Yuki Mizuho Jpn SmCp JP EQ IRL 08/17 JPY 6597.00 -5.9 8.4 -5.9
Yuki Mizuho Jpn Val Sel AS EQ IRL 08/17 JPY 4791.00 -14.2 -3.5 -10.3
Yuki Mizuho Jpn YoungCo AS EQ IRL 08/17 JPY 2411.00 -4.0 4.7 -11.3
MultiAdv Arb S GBP OT OT JEY 07/29 GBP NS.00 1.5 3.5 6.1
MultiAdv Arb S USD OT OT CYM 07/29 USD NS.00 1.4 3.2 5.8
MultiAdv Arb USD OT OT JEY 07/29 USD NS.00 0.6 1.9 4.5
nHSBCUni-folio
Asian AdbantEdge EUR OT EQ JEY 07/29 EUR 101.61 -0.3 4.9 1.6
Asian AdvantEdge OT EQ JEY 07/29 USD 186.92 -0.4 5.1 1.8
Emerg AdvantEdge OT EQ JEY 07/29 USD 169.08 -0.6 3.3 2.5
Emerg AdvantEdge EUR OT EQ JEY 07/29 EUR 93.87 -0.3 3.2 2.3
Europ AdvantEdge EUR OT EQ JEY 06/30 EUR 127.84 -3.4 -1.3 2.2
Europ AdvantEdge USD OT EQ JEY 06/30 USD 135.07 2.0 4.3 5.1
Real AdvantEdge EUR OT OT JEY 07/29 EUR 107.54 -5.4 5.4 1.6
Real AdvantEdge USD OT OT JEY 07/29 USD 107.94 -5.6 5.4 1.8
Trading AdvantEdge OT OT GGY 07/29 USD 154.66 1.3 8.9 3.5
Trading AdvantEdge EUR OT OT GGY 07/29 EUR 139.75 1.6 8.6 3.2
Trading AdvantEdge GBP OT OT GGY 07/29 GBP 148.61 1.2 8.8 3.6
nMERIDENGROUP
Tel: + 376741 175Fax: + 376741 183 Email: meriden@meriden-ipm.com
Antanta Combined Fund EE EQ AND 08/05 USD 419.03 -4.9 10.6 25.8
Antanta MidCap Fund EE EQ AND 08/05 USD 736.00 -17.1 -0.8 29.4
Meriden Opps Fund GL OT AND 07/27 EUR 41.65 -6.2 -9.6 -25.2
Average daily trading
volume on the London
Stock Exchange last week
was almost three times the
average daily volume this
year.
hotnpapers
FUND SCORECARD
EURMoney Market, Stable
These funds place an emphasis on capital preservation, by limiting maturity to less than 90days and and
maintainingahighlevel of averagecredit quality. Rankedon%total return(dividendsreinvested) inEuros
for one year ending August 17, 2011
Leading 10Performers
FUND FUND LEGAL %Return in $US **
RATING* NAME FUNDMGM'T CO. CURR. BASE YTD 1-YR 2-YR 5-YR
NS Adequity Lyxor EURFRA 0.31 14.52 7.65 NS
Montaire International Asset Management
NS LCL Triple Amundi EURFRA 7.54 11.96 NS NS
Horizon Montarise Mars 2010
NS Corinthe Amundi EURFRA 0.67 6.26 5.57 4.29
Janvier 2011 Montarise A/I
NS Boule de Natixis Asset EURFRA 0.90 5.92 6.51 0.60
Neige 5 Montaire Management
1 SGPrudence Amundi EURFRA 0.31 4.60 2.21 1.28
PEAAcc
NS Boule de Natixis Asset EURFRA -0.12 4.36 2.78 -0.66
Neige 4 Montaire Management
NS UniEuribor Union Investment EURPOL 2.19 3.41 4.27 NS
TFI S.A.
NS Renta 4 Renta 4 Gestora EURESP 2.09 3.17 NS NS
Monetario FI
NS Unnim UnnimGesfons EURESP 1.84 2.70 1.86 2.55
Fondipsit FI
5 Profit Gesprofit EURESP 1.89 2.55 1.76 2.90
Dinero FI
NOTE: Changes in currency rates will affect performance and rankings. Source: Morningstar, Ltd
KEY: ** 2YRand 5YRperformance is annualized 1 Olivers Yard, 55-71 City Road
NA-not available due to incomplete data; London EC1Y 1HQUnited Kingdom
NS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com
Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001
MARKETS
Financial Shares Lead
U.K., Germany Lower
European stocks ended mixed
Wednesday, helped off lows by
strong earnings from a handful of
U.S. retailers.
The Swiss franc climbed after
the Swiss National Bank announced
liquidity measures to curb the cur-
rencys strength but
stopped short of
pegging the cur-
rency to the euro.
Investors shied away from Euro-
pean bank and financial stocks fol-
lowing a controversial proposal by
German and French leaders for a tax
on financial transactions.
The tax announcement, which
caused exchanges and financial
stocks to plunge, was announced
late Tuesday by French President
Nicolas Sarkozy and German Chan-
cellor Angela Merkel.
Deutsche Brse slumped 5.8%,
as investors feared that such a plan
would hurt exchange operators fu-
ture business volumes and margins.
Although it was suggested that the
U.K. market wouldnt follow suit,
London Stock Exchange fell 2.8%,
while Paris-listed shares of NYSE
Euronext dropped 4.7%.
Interdealer broker Icap, which
acts as a broker to financial institu-
tions dropped 3.7% in London.
Among banks, Royal Bank of Scot-
land Group fell 3.8% in London and
Deutsche Bank dropped 2.2% in
Frankfurt.
Firmer U.S. equity markets ear-
lier helped some of Europes main
indexes out of the doldrums. The
Stoxx Europe 600 index ended up
0.2% at 238.05. The U.K.s FTSE 100
closed down 0.5% at 5331.60, and
Germanys DAX slipped 0.8% to
5948.94. Frances CAC-40 gained
0.7% at 3254.34.
In the U.S., blue-chip stocks eked
out a small gain, as investors
weighed earnings from some high-
profile retailers against signs of ris-
ing input costs and continued dis-
satisfaction over efforts to find a
solution to Europes debt woes.
The Dow Jones Industrial Aver-
age inched up 4.28 points, or 0.04%,
to end at 11410.21. The Standard &
Poors 500-stock index edged up
0.1% to 1193.89, while the Nasdaq
Composite fell 0.5% to 2511.48.
Separately, the index of U.S. pro-
ducer prices rose 0.2% in July,
driven by higher costs for food,
trucks and pharmaceuticals.
Technology and consumer-dis-
cretionary stocks led the decliners.
Hewlett-Packard fell 3.7% to lead
the Dow laggards, after rival Dell
tumbled 10%. Investors dumped
shares in computer-maker Dell after
it reported slowing sales and low-
ered its full-year revenue target.
Dell said it expected revenue to
climb 1% to 5% for the year, lower
than its previous range of 5% to 9%,
as it faces a challenging sales envi-
ronment.
In currency markets, the euro
was higher versus the dollar, at
$1.4451 from $1.4408 late Tuesday.
The Swiss franc gained on the cen-
tral banks latest efforts to curb the
currencys strength. The euro fell
against the Swiss franc, to 1.1408
francs from 1.1466 francs.
The British pound fell but later
recovered after minutes from the
Bank of Englands rate-setting meet-
ing in August revealed a unanimous
decision to keep the key rate on
hold at 0.5%. Two members of the
monetary policy committee dropped
their calls for a quarter-point rise in
the rate due to the deteriorating
market outlook.
The pound was at $1.6561, com-
pared with $1.6456 late Tuesday.
In commodity markets, crude-oil
futures trimmed gains after a rise in
U.S. oil stockpiles. Crude inventories
rose last week according to the U.S.
Department of Energy. Light, sweet
crude for September delivery rose
93 cents, or 1.1%, at $87.58 on the
New York Mercantile Exchange. And
gold for December delivery on the
Comex division of Nymex gained
$8.80 per troy ounce, or 0.5%, to
$1,791.20, a record settle.
In major market action: Veolia
Environnement rose 2.5% and
Sanofi gained 2.8% as utilities and
drug companies generally per-
formed well across the continent.
Carlsberg tumbled nearly 18% in
Copenhagen after the brewer re-
ported a 22% drop in profit and cut
its outlook for the year as markets
in Northern and Western Europe are
expected to shrink slightly.
Vestas Wind Systems surged
24% in Copenhagen after the wind
turbine maker reported better-than-
expected quarterly results.
Aixtron SE fell 11% in Frankfurt
after Deutsche Bank downgraded
the semiconductor equipment com-
pany to hold from buy, saying recent
market volatility could hurt orders.
In Switzerland, Nobel Biocare
Holding fell 5.8% after Morgan
Stanley downgraded the stock to
underweight from overweight,
saying the near-term outlook is de-
teriorating after a sharp growth
deceleration in Europe.
Roche Holding rose 1.7% in Zur-
ich after the U.S. Food and Drug Ad-
ministration approved its skin-can-
cer drug Zelboraf.
Gold and silver miner Fresnillo
rallied 5.6%, helped by strengthen-
ing gold prices.
BY ANDREA TRYPHONIDES
AND SIMON KENNEDY
Investors shied away from
bank and financial stocks
after a controversial
proposal by German and
French leaders for a tax on
financial transactions.
MARKET
REPORT
ECBs Bond Resolve
Faces More Tests
The European Central Banks
purchases of Italian and Spanish
government bonds has succeeded in
driving down yields from their wor-
rying highs of early August.
But with the ECB seemingly in-
tent on capping Italian and Spanish
10-year bond yields
around 5%, analysts
are expecting bond
investors to in-
creasingly test its resolve.
The central bank last week added
bonds from those two countries to
its purchasing list under the Securi-
ties Market Program, after their
yields rose to euro-era highs on
fears that the Greek debt crisis
would spread to larger euro-zone
members. That immediately drove
10-year yields down to around 5%,
where they have remained.
Without ECB intervention, yields,
which had risen well over 6%, could
rise further, pushing borrowing
costs into unsustainable territory
and eventually forcing governments
to ask for bailouts.
The ECB hasnt said that it is
targeting specific yield levels, but
traders say it has been ready when-
ever 10-year Italian and Spanish
yields look set to rise significantly
above 5%. Italys 10-year yield ended
Wednesday at 4.805%; the Spanish
yield was at 4.932%.
Now the ECB is running to stand
still. If the impact of its intervention
is measured by the move in yields, it
is already getting less bang for its
buck. There is a law of diminishing
returns, said Marc Ostwald, fixed-
income research strategist at Monu-
ment Securities. Weve seen that
already. People will be watching
[the size of those bond purchases]
very, very closely.
One reason the ECBs purchases
matter so much is that private in-
vestors dont appear to have fol-
lowed the central banks lead.
According to one trader, many
investors are using the higher prices
that lower yields have brought to
sell their bonds. They may not re-
sume buying until they see that the
austerity measures adopted by the
Italian and Spanish governments are
implemented and debt levels are
falling.
At some point, the private sec-
tor has to be involved in funding It-
aly and Spain, said Gary Jenkins,
head of fixed-income research at
Evolution Securities in London.
The whole point of the ECB buying
is that it encourages others to buy.
Potential pressure points for Ital-
ian and Spanish bonds are looming.
Mr. Jenkins noted that all 17 euro-
zone governments must ratify the
powers being given to the European
Financial Stability Facility, the euro-
zones bailout fund, to buy debt.
But bond investors know that the
EFSFs firepower is limited to 440
billion, or about one-fifth the com-
bined outstanding debt of Italy and
Spain. The idea of boosting its size
was scotched at Tuesdays meeting
between German Chancellor Angela
Merkel and French President Nicolas
Sarkozy.
Moreover, Italy and Spain will
soon be in need of their own buyers,
as they start selling new bonds to
finance their debts. That could make
the ECBs job even harder.
BY MARK BROWN
Buying Time?
Yields on 10-year government bonds
Source: ICAP
7
3
4
5
6
%
June July Aug.
Spain
Italy
Aug. 8: ECB begins buying
Italian and Spanish bonds
MARKET
FOCUS
EU Transaction Tax Criticized
FRANKFURTGerman exchange
operator Deutsche Brse AG and
several lobby groups have rejected a
proposed tax on financial transac-
tions that resulted from a meeting
between the German and French
government leaders Tuesday.
However, the opponents stopped
short Wednesday of offering an al-
ternative proposal.
French President Nicolas Sarkozy
and German Chancellor Angela
Merkel said late Tuesday that their
finance ministers will propose a plan
in September to European institu-
tions for a tax on financial transac-
tions. The idea has been floated reg-
ularly in recent years but faces
strong opposition in the U.K., Eu-
ropes main financial hub.
One person familiar with the
matter said the U.K. wouldnt likely
want to get involved in such a tax.
Deutsche Brse shares fell
Wednesday, as investors anticipated
the tax hurting future business and
margins of exchange operators, as
automated trades, or algo trades,
could take a nose dive. The shares
fell 2.15, or 5%, to 41.10 ($59.21),
underperforming the wider market.
Deutsche Brse said a financial-
transactions tax would be unsuitable
to enhance transparency, integrity
and safety of financial markets. In-
stead, it would present incentives
for moving even more business into
nontransparent, unregulated finan-
cial centers and financial products
world-wide, distort competition and
lead to regulatory arbitrageto be
avoided as one of the lessons
learned during the financial crisis.
Even if the tax covered a large
geographic area, whether it had the
desired regulatory and financial im-
pact can be doubted, not least be-
cause the recording of all financial
transactions will likely remain
patchy, it said.
Christian Muschick, analyst with
Sylvia Quandt Research, said the tax
wouldnt solve the euro areas fun-
damental problem of excessive sov-
ereign debt. If at all, a financial-ac-
tivity tax would help avoid
regulatory arbitrage, he said.
A European trading lobby group,
the Association for Financial Mar-
kets in Europe, said the tax would
hamper economic growth, and the
financial-services industry, already
one of the largest contributors of tax
revenue, should not be seen as an
additional source of tax revenue but
as an essential part of a stable and
sustainable economy.
Germanys BdB, which represents
commercial banks like Deutsche
Bank AG and Commerzbank AG,
said the tax wont stabilize the Euro-
pean monetary union and would dis-
tract from the real causes of the fi-
nancial crisis.
Germanys DSW retail-share-
holder association said the tax
would hamper retail investment, be-
cause banks would pass on the costs.
Not all market participants, how-
ever, categorically opposed the tax.
One trader said long-term inves-
tors would benefit from diminished
automated trading, as such orders
can drive up prices artificially and
give the false impression that liquid-
ity has increased.
Long-term investors such as as-
set managers and retail funds wont
suffer if the tax were limited to 0.1
to 0.15 percentage point of the
transaction volume, while a level of
above a 0.25 percentage point would
be damaging even to cash-market
traders, the trader said.
Ainsley Thomson and Michael
Otto Denzin contributed
to this article.
BY ULRIKE DAUER
hotnpapers
Commodities Prices of futures contracts with the most open interest
EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia
Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange;
NYMEX: NewYork Mercantile Exchange;ICE-EU: ICE Futures Europe
ONE-DAY CHANGE Year Year
Commodity Exchange Last price Net Percentage high low
Corn (cents/bu.) CBOT 725.75 -1.75 -0.24% 733.50 536.00
Soybeans (cents/bu.) CBOT 1367.50 18.00 1.33% 1,411.25 1,238.00
Wheat (cents/bu.) CBOT 758.00 6.00 0.80 986.75 639.00
Live cattle (cents/lb.) CME 117.275 -2.900 -2.41 126.375 108.100
Cocoa ($/ton) ICE-US 3,035 46 1.54 3,600 2,846
Coffee (cents/lb.) ICE-US 265.95 10.95 4.29 313.75 224.60
Sugar (cents/lb.) ICE-US 29.46 1.42 5.06 31.68 20.69
Cotton (cents/lb.) ICE-US 107.85 4.00 3.85 144.66 93.20
Rapeseed (euro/ton) LIFFE 421.50 2.25 0.54 485 387
Cocoa (pounds/ton) LIFFE 1,909 13 0.69 2,285 1,814
Robusta coffee ($/ton) LIFFE 2,380 36 1.54 2,673 1,995
Copper ($/lb.) COMEX 4.06 0.05 1.23 4.61 3.84
Gold ($/troy oz.) COMEX 1793.30 8.30 0.46 1,817.60 1,317.40
Silver ($/troy oz.) COMEX 40.43 0.58 1.45 49.81 26.41
Aluminum($/ton) LME 2,384.00 10.00 0.42 2,774.00 2,374.00
Tin ($/ton) LME 24,405.00 355.00 1.48 33,210.00 22,700.00
Copper ($/ton) LME 8,896.00 116.00 1.32 10,124.00 8,548.00
Lead ($/ton) LME 2,389.00 43.50 1.85 2,853.00 2,255.00
Zinc ($/ton) LME 2,193.00 35.00 1.62 2,574.00 2,120.00
Nickel ($/ton) LME 21,655 100 0.46 29,075 21,225
Crude oil ($/bbl.) NYMEX 87.71 0.86 0.99 115.55 76.15
Heating oil ($/gal.) NYMEX 2.9669 0.0343 1.17 3.3665 2.5194
RBOBgasoline ($/gal.) NYMEX 2.7453 0.0437 1.62 3.1167 2.3460
Natural gas ($/mmBtu) NYMEX 4.090 unch. unch. 5.1060 4.0310
Brent crude ($/bbl.) ICE-EU 110.77 1.64 1.50 125.16 93.40
Gas oil ($/ton) ICE-EU 935.25 7.75 0.84 1,060.75 789.00
Sources: SIX Telekurs; WSJ Market Data Group
Currencies London close on Aug. 17
Per In
AMERICAS Per euro In euros U.S. dollar U.S. dollars
Argentina peso-a 6.0103 0.1664 4.1654 0.2401
Brazil real 2.2879 0.4371 1.5856 0.6307
Canada dollar 1.4168 0.7058 0.9819 1.0184
Chile peso 682.48 0.001465 472.99 0.002114
Colombia peso 2565.28 0.0003898 1777.85 0.0005625
Ecuador US dollar-f 1.4429 0.6930 1 1
Mexico peso-a 17.5876 0.0569 12.1889 0.0820
Peru sol 3.9627 0.2524 2.7463 0.3641
Uruguay peso-e 26.884 0.0372 18.632 0.0537
U.S. dollar 1.4429 0.6930 1 1
Venezuela bolivar 6.28 0.159320 4.35 0.229885
ASIA-PACIFIC
Australia dollar 1.3690 0.7305 0.9488 1.0540
1-mo. forward 1.3744 0.7276 0.9525 1.0498
3-mos. forward 1.3846 0.7222 0.9596 1.0421
6-mos. forward 1.3973 0.7157 0.9684 1.0327
China yuan 9.2109 0.1086 6.3836 0.1567
Hong Kong dollar 11.2400 0.0890 7.7898 0.1284
India rupee 65.3070 0.0153 45.2605 0.0221
Indonesia rupiah 12330 0.0000811 8545 0.0001170
Japan yen 110.34 0.009063 76.47 0.013077
1-mo. forward 110.30 0.009066 76.44 0.013082
3-mos. forward 110.23 0.009072 76.40 0.013090
6-mos. forward 110.07 0.009085 76.29 0.013108
Malaysia ringgit-c 4.2935 0.2329 2.9756 0.3361
NewZealand dollar 1.7214 0.5809 1.1930 0.8382
Pakistan rupee 125.223 0.0080 86.785 0.0115
Philippines peso 61.237 0.0163 42.440 0.0236
Singapore dollar 1.7354 0.5762 1.2027 0.8315
South Korea won 1542.56 0.0006483 1069.06 0.0009354
Taiwan dollar 41.857 0.02389 29.009 0.03447
Thailand baht 43.083 0.02321 29.858 0.03349
Per In
EUROPE Per euro In euros U.S. dollar U.S. dollars
Euro zone euro 1 1 0.6930 1.4429
1-mo. forward 1.0004 0.9996 0.6933 1.4424
3-mos. forward 1.0013 0.9987 0.6939 1.4411
6-mos. forward 1.0023 0.9977 0.6946 1.4396
Czech Rep. koruna-b 24.431 0.0409 16.932 0.0591
Denmark krone 7.4507 0.1342 5.1637 0.1937
Hungary forint 269.92 0.003705 187.07 0.005346
Norway krone 7.7906 0.1284 5.3992 0.1852
Poland zloty 4.1433 0.2414 2.8715 0.3482
Russia ruble-d 41.623 0.02403 28.847 0.03467
Sweden krona 9.1545 0.1092 6.3445 0.1576
Switzerland franc 1.1389 0.8780 0.7893 1.2669
1-mo. forward 1.1367 0.8797 0.7878 1.2693
3-mos. forward 1.1332 0.8824 0.7854 1.2733
6-mos. forward 1.1290 0.8857 0.7825 1.2780
Turkey lira 2.5561 0.3912 1.7715 0.5645
U.K. pound 0.8703 1.1491 0.6031 1.6580
1-mo. forward 0.8706 1.1487 0.6033 1.6574
3-mos. forward 0.8711 1.1479 0.6037 1.6564
6-mos. forward 0.8719 1.1469 0.6043 1.6548
MIDDLE EAST/AFRICA
Bahrain dinar 0.5448 1.8355 0.3776 2.6484
Egypt pound-a 8.6326 0.1158 5.9828 0.1671
Israel shekel 5.0845 0.1967 3.5238 0.2838
Jordan dinar 1.0225 0.9780 0.7087 1.4111
Kuwait dinar 0.3928 2.5461 0.2722 3.6738
Lebanon pound 2187.17 0.0004572 1515.80 0.0006597
Saudi Arabia riyal 5.4111 0.1848 3.7501 0.2667
South Africa rand 10.2315 0.0977 7.0909 0.1410
United Arab dirham 5.2998 0.1887 3.6730 0.2723
a-floating rate b-financial c-government rate c-commercial rate d-Russian Central Bank rate.
Source: ICAPPlc.
Major stock market indexes Stock indexes fromaround the world, grouped by region. Shown in local-currency terms.
PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
EUROPE Stoxx Europe 600 238.05 0.49 0.21% -13.7% -7.6%
Stoxx Europe 50 2259.14 2.90 0.13 -12.7 -9.9
Euro Zone Euro Stoxx 230.42 0.61 0.27 -16.0 -11.6
Euro Stoxx 50 2331.12 7.45 0.32 -16.5 -14.6
Austria ATX 2241.68 11.87 0.53 -22.8 -9.6
Belgium Bel-20 2254.71 7.79 0.35 -12.6 -10.3
Czech Republic PX 1022.2 16.80 1.67 -16.5 -13.7
Denmark OMXCopenhagen 343.88 -1.60 -0.46% -19.5 -9.6
Finland OMXHelsinki 5650.26 28.38 0.50 -26.3 -16.2
France CAC-40 3254.34 23.44 0.73 -14.5 -10.8
Germany DAX 5948.94 -45.96 -0.77 -14.0 -3.8
Hungary BUX 18630.97 309.08 1.69 -12.6 -15.9
Ireland ISEQ 2566.22 28.76 1.13 -11.1 -10.1
Italy FTSE MIB 15950.75 200.15 1.27 -20.9 -22.3
Netherlands AEX 292.65 1.14 0.39 -17.5 -10.7
Norway All-Shares 426.73 6.12 1.46 -12.3 3.6
PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
Poland WIG 41125.87 241.97 0.59 -13.4 -3.4
Portugal PSI 20 6289.82 52.16 0.84 -17.1 -15.3
Russia RTSI 1663.86 31.55 1.93% -6.0 14.1
Spain IBEX35 8728.2 53.90 0.62 -11.5 -16.0
Sweden OMXStockholm 301.70 -0.15 -0.05% -18.1 -8.6
Switzerland SMI 5421.21 47.91 0.89 -15.8 -14.8
Turkey ISE National 100 54217.83 120.40 0.22 -17.9 -8.8
U.K. FTSE 100 5331.60 -26.03 -0.49 -9.6 0.5
ASIA-PACIFIC DJ Asia-Pacific 130.67 0.44 0.34 -8.3 6.3
Australia SPX/ASX200 4303.90 56.60 1.33 -9.3 -3.8
China CBN600 24550.53 -97.11 -0.39 -8.1 -1.0
Hong Kong Hang Seng 20289.03 76.95 0.38 -11.9 -3.5
India Sensex 16840.80 109.86 0.66 -17.9 -7.8
Japan Nikkei Stock Average 9057.26 -50.17 -0.55 -11.5 -2.0
Singapore Straits Times 2828.53 -4.20 -0.15 -11.3 -3.1
South Korea Kospi 1892.67 12.80 0.68 -7.7 7.4
AMERICAS DJ Americas 319.66 -0.55 -0.17 -6.2 9.0
Brazil Bovespa 54340.95 17.34 0.03 -21.6 -19.7
Mexico IPC 33833.42 -115.06 -0.34 -12.2 4.4
Note: Americas index data are as of 3:00 p.m. ET. Sources: SIXTelekurs; WSJ Market Data Group
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 0.9488 1.5731 1.2020 0.1495 0.0329 0.1757 0.0124 0.2693 1.3690 0.1837 0.9663 ...
Canada 0.9819 1.6280 1.2440 0.1548 0.0340 0.1819 0.0128 0.2787 1.4168 0.1902 ... 1.0349
Denmark 5.1637 8.5614 6.5420 0.8139 0.1790 0.9564 0.0675 1.4654 7.4507 ... 5.2589 5.4425
Euro 0.6930 1.1491 0.8780 0.1092 0.0240 0.1284 0.0091 0.1967 ... 0.1342 0.7058 0.7305
Israel 3.5237 5.8424 4.4644 0.5554 0.1222 0.6526 0.0461 ... 5.0845 0.6824 3.5887 3.7140
Japan 76.4725 126.7926 96.8859 12.0534 2.6510 14.1636 ... 21.7020 110.3433 14.8097 77.8827 80.6014
Norway 5.3992 8.9520 6.8405 0.8510 0.1872 ... 0.0706 1.5322 7.7906 1.0456 5.4988 5.6907
Russia 28.8465 47.8280 36.5468 4.5467 ... 5.3427 0.3772 8.1863 41.6231 5.5864 29.3785 30.4040
Sweden 6.3445 10.5192 8.0380 ... 0.2199 1.1751 0.0830 1.8005 9.1545 1.2287 6.4615 6.6870
Switzerland 0.7893 1.3087 ... 0.1244 0.0274 0.1462 0.0103 0.2240 1.1389 0.1529 0.8039 0.8319
U.K. 0.6031 ... 0.7641 0.0951 0.0209 0.1117 0.0079 0.1712 0.8703 0.1168 0.6143 0.6357
U.S. ... 1.6580 1.2669 0.1576 0.0347 0.1852 0.0131 0.2838 1.4429 0.1937 1.0184 1.0540
Source: ICAPPlc.
MSCI indexes
Developed and emerging-market regional and country indexes
fromMSCI Barra as of August 17, 2011
Price-to- LOCAL-CURRENCY
Dividend earnings PERFORMANCE
yield ratio Morgan Stanley Index Last Daily YTD 52-wk.
2.60% 14 ALL COUNTRY(AC) WORLD* 306.78 0.53% -7.2% 5.9%
2.60 14 World(DevelopedMarkets) 1,196.58 0.69 -6.5 6.4
2.40 15 Worldex-EMU 144.71 0.67 -6.0 7.9
2.60 14 Worldex-UK 1,193.74 0.79 -6.7 6.3
3.40 13 EAFE 1,521.92 0.31 -8.2 3.2
2.50 12 EmergingMarkets (EM) 1,018.64 -0.51 -11.5 2.7
3.70 12 EUROPE 82.22 -0.09 -13.8 -7.1
4.10 11 EMU 151.17 0.79 -10.0 -3.1
3.90 11 Europe ex-UK 86.89 -0.42 -15.1 -8.9
4.90 10 Europe Value 84.30 -0.28 -15.7 -12.4
2.60 15 Europe Growth 77.51 0.09 -11.9 -1.8
2.70 18 Europe Small Cap 166.45 -1.07 -16.8 -2.2
2.50 8 EMEurope 281.33 -0.65 -17.5 -8.2
3.30 14 UK 1,587.22 0.13 -9.0 1.9
3.50 12 Nordic Countries 141.93 -0.57 -20.5 -8.0
1.90 7 Russia 768.65 -1.90 -12.8 4.0
3.00 16 SouthAfrica 779.32 -0.55 -6.2 5.7
2.90 14 ACASIAPACIFICEX-JAPAN 434.91 -0.46 -9.2 6.3
1.90 16 Japan 480.65 0.25 -14.4 -9.0
2.50 12 China 59.21 0.10 -10.9 -5.3
1.30 17 India 650.33 -0.89 -19.8 -9.9
1.20 12 Korea 521.02 5.24 -11.3 4.5
4.00 14 Taiwan 273.52 -0.38 -14.3 -0.9
1.90 15 USBROADMARKET 1,344.76 1.11 -5.6 9.1
1.40 25 USSmall Cap 1,932.86 1.75 -8.4 10.2
2.80 11 EMLATINAMERICA 3,897.87 0.22 -15.5 -4.2
*Twenty-three developed and 26emerging markets Source: MSCI Barra
Thomson Reuters is the primary data provider for several statistical tables in The Wall Street Journal, including foreign
stock quotations, futures and futures options prices, and foreign exchange tables. Reuters real-time data feeds are used
to calculate various Dow Jones Indexes.
DowJones Indexes
Price-to-
Dividend earnings PERFORMANCE(euros) PERFORMANCE(U.S.dollars)
yield* ratio* Dows Jones Index Last Daily 52-wk. Last Daily 52-wk.
2.35% 18 Global TSM 2418.64 0.15% 7.1%
2.15 16 Global Dow 1233.00 -0.32% -9.2% 1892.58 0.06 2.1
2.37 16 Global Titans 50 157.60 -0.09 -4.5 170.07 0.29 7.4
2.95 17 Europe TSM 2553.95 0.58 4.6
2.38 19 DevelopedMarkets TSM 2348.68 0.10 7.9
2.38 15 EmergingMarkets TSM 4224.48 0.57 0.7
2.79 14 Africa 50 764.00 0.63 -12.2 700.89 1.01 -1.3
2.75 15 BRIC50 405.10 0.21 -15.1 558.20 0.59 -4.5
4.05 14 GCC40 501.50 0.09 -9.4 460.02 0.47 1.8
1.88 21 U.S. TSM 12356.76 -0.38 9.6
4.42 17 Kuwait Titans 30 -c 185.94 -0.12 -7.5
1.34 16 RusIndexTitans 10 -c 3480.40 1.71 2.5 5989.40 2.17 8.7
Price-to-
Dividend earnings PERFORMANCE(euros) PERFORMANCE(U.S.dollars)
yield* ratio* Dows Jones Index Last Daily 52-wk. Last Daily 52-wk.
2.94% 16 Turkey Titans 20 -c 444.70 0.38% -31.5% 651.24 0.17% -9.4%
5.11 15 Global Select Div -d 169.60 0.76 -3.3 209.83 1.15 8.7
5.83 12 Asia/Pacific Select Div -d 303.70 1.84 15.9
4.05 19 U.S. Select Dividend -d 351.76 0.06 8.6
1.69 20 Islamic Market 2093.17 -0.03 10.5
2.01 19 Islamic Market 100 1739.50 -0.39 -2.1 2151.69 -0.01 10.1
3.53 15 Islamic Turkey -c 1255.70 1.47 -22.9 3157.12 1.27 2.0
2.62 16 Sustainability 805.60 -0.05 -7.2 983.09 0.33 4.4
3.36 22 BrookfieldInfrastructure 1708.40 0.25 1.6 2354.09 0.63 14.3
1.12 23 Luxury 1207.60 -0.37 16.9 1479.77 0.01 31.5
2.48 12 UAESelect Index 204.79 0.20 -5.9
DJ-UBSCommodity 152.40 0.61 7.0 159.96 0.99 20.3
*Fundamentals are based on data in U.S. dollar. Footnotes: a-in USdollar. b-dividends reinvested. c-in local currency. Note:All data as of 2 p.m.ET. Source: DowJones Indexes
GLOBAL MARKETS LINEUP
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receive email alerts that summarize the days trading in Europe and Asia. To sign up, go to WSJ.com/email
hotnpapers
Major players benchmarks
Below, a look at the Dow Jones Stoxx 50,
the biggest and best known companies in
Europe, including the U.K.
Credit derivatives
Spreads on credit derivatives are one way the market rates
creditworthiness. Regions that are treading in rough waters can see
spreads swing toward the maximumand vice versa. Indexes below
are for five-year swaps.
Markit iTraxxIndexes SPREADRANGE, in pct. pts.
Mid-spread, since most recent roll
Index: series/version in pct. pts. Mid-price Coupon Maximum Minimum Average
Europe: 15/1 1.44 98.07% 0.01% 1.56 0.94 1.09
Eur. HighVolatility: 15/1 2.19 94.89 0.01 2.38 1.32 1.58
Europe Crossover: 15/1 6.02 96.22 0.05 6.52 3.52 4.11
Asiaex-JapanIG: 15/1 1.44 97.98 0.01 1.59 1.02 1.14
Japan: 15/1 1.32 98.53 0.01 1.43 1.17 1.28
Note: Data as of August 16
Spreads
Spreads on five-
year swaps for
corporate debt;
based on Markit
iTraxx indexes.
In percentage points
2.00
1.50
1.00
0.50
0
t
Asia ex-Japan IG
t
Australia
2011
Mar. April May June July Aug.
Index roll
Source: Markit Group
Tracking
credit
markets
dealmakers
Dow Jones Industrial Average P/E: 13
LAST: 11410.21 s 4.28, or 0.04%
YEAR TO DATE: t 167.30, or 1.4%
OVER 52 WEEKS s 994.67, or 9.5%
Note: Price-to-earnings ratios are for trailing 12 months
12700
12200
11700
11200
10700
10200
20 27 3 10 17 24 1
June
8 15 22 29
July
5 12
Aug.
High
Close
Low
50day
moving average
t
Stoxx Europe 50: Wednesday's best and worst...
Previous
close, in STOCKPERFORMANCE
Company Country Industry Volume local currency Previous session YTD 52-week
Sanofi SA France Pharmaceuticals 3,761,594 49.92 2.84% 2.6% 10.5%
Novartis AG Switzerland Pharmaceuticals 8,850,983 45.22 2.19 -19.7 -14.8
Unilever CVA Netherlands Food Products 7,187,636 23.55 2.19 -0.5 11.2
ENI Italy Integrated Oil &Gas 20,210,107 13.45 2.13 -21.3 -21.3
Intesa Sanpaolo Italy Banks 140,877,376 1.32 2.01 -32.0 -32.0
Barclays United Kingdom Banks 39,355,858 173.95 -4.21% -34.2 -46.8
Nokia Corp Finland Telecommunications Equipment 38,914,637 4.14 -3.81 -46.9 -40.5
Societe Generale France Banks 4,568,555 24.64 -2.51 -39.7 -43.9
Deutsche Bank Germany Banks 10,144,556 30.07 -2.20 -23.7 -43.3
BNP Paribas France Banks 5,507,520 36.69 -2.16 -24.2 -31.7
...And the rest of Europe's blue chips
Latest,
in local STOCKPERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week
Roche Holding Part. Cert. 2,305,919 133.60 1.67% -4.0% -6.3%
Switzerland (Pharmaceuticals)
Nestle 7,735,067 50.90 1.60 -9.5 -4.2
Switzerland (Food Products)
Hennes &Mauritz Series B 5,053,478 207.00 1.57 -8.8 -14.0
Sweden (Apparel Retailers)
Total 7,596,455 33.85 1.50 -15.6 -14.0
France (Integrated Oil &Gas)
GDF Suez 4,071,011 20.71 1.32 -24.0 -20.3
France (Multiutilities)
AXA 9,088,161 11.36 1.25 -9.7 -15.7
France (Full Line Insurance)
Telefonica S.A. 16,541,510 14.60 1.21 -15.1 -16.8
Spain (Fixed Line Telecommunications)
Anheuser-Busch InBev 3,022,864 39.25 0.80 -8.9 -6.0
Belgium(Brewers)
France Telecom 7,633,329 13.25 0.68 -15.6 -20.0
France (Fixed Line Telecommunications)
AstraZeneca 2,321,060 2,850 0.62 -3.9 -14.1
United Kingdom(Pharmaceuticals)
Banco Santander S.A. 37,467,090 6.55 0.54 -18.2 -31.3
Spain (Banks)
Anglo American PLC 3,542,270 2,471 0.43 -27.0 -0.1
United Kingdom(General Mining)
BHP Billiton 6,382,256 2,022 0.37 -22.6 5.5
Tesco 10,755,503 384.25 0.33 -10.5 -5.0
United Kingdom(Food Retailers &Wholesalers)
Rio Tinto 3,798,173 3,739 0.27 -18.4 9.8
Zurich Financial Services 787,630 175.00 0.06 -28.9 -25.4
Switzerland (Full Line Insurance)
GlaxoSmithKline 10,210,617 1,279 -0.08 1.6 5.1
United Kingdom(Pharmaceuticals)
E.ON 11,434,433 15.21 -0.13 -33.8 -33.9
Germany (Multiutilities)
INGGroep 21,178,787 6.15 -0.16 -15.3 -16.7
Netherlands (Life Insurance)
Vodafone Group 59,511,067 167.65 -0.18 0.4 9.1
United Kingdom(Mobile Telecommunications)
Latest,
in local STOCKPERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week
Daimler 5,221,379 38.00 -0.18% -26.0% -7.4%
Germany (Automobiles)
Deutsche Telekom 14,113,890 9.54 -0.33 -1.7 -9.2
Germany (Mobile Telecommunications)
Banco Bilbao Vizcaya Argn 27,141,620 6.48 -0.34 -15.5 -34.9
Spain (Banks)
Bayer 2,934,371 46.07 -0.37 -17.5 -4.2
Germany (Specialty Chemicals)
Allianz SE 2,194,385 75.97 -0.52 -15.3 -12.5
Germany (Full Line Insurance)
ABB 8,831,539 17.08 -0.52 -19.0 -17.1
Switzerland (Industrial Machinery)
Siemens 3,661,746 74.25 -0.54 -21.6 -2.4
Germany (Diversified Industrials)
Royal Dutch Shell A 2,586,447 1,993 -0.62 -7.5 10.5
United Kingdom(Integrated Oil &Gas)
L.M. Ericsson Telephone B 19,502,569 70.20 -0.71 -11.3 -11.0
Sweden (Telecommunications Equipment)
BGGrp 3,746,287 1,308 -0.83 -0.9 25.8
BP PLC 21,376,506 413.00 -0.85 -12.4 1.2
BASF 4,138,760 53.50 -0.89 -12.8 19.7
Germany (Commodity Chemicals)
Diageo 4,390,800 1,183 -0.92 -1.4 7.1
United Kingdom(Distillers &Vintners)
Standard Chartered 3,340,092 1,405 -1.16 -19.7 -20.8
United Kingdom(Banks)
UBS 15,074,566 11.62 -1.27 -25.5 -34.2
Switzerland (Banks)
UniCredit 262,728,187 1.03 -1.62 -31.6 -31.6
Italy (Banks)
British American Tobacco 4,695,856 2,739 -1.63 9.9 20.1
United Kingdom(Tobacco)
HSBC Hldgs 19,572,201 542.00 -1.92 -17.7 -18.8
United Kingdom(Banks)
Credit Suisse Group 5,649,806 23.29 -2.14 -39.1 -50.8
Switzerland (Banks)
SAP 3,777,040 36.39 -2.15 -5.2 2.9
Germany (Software)
Sources: Telekurs
DJIAcomponent stocks
Volume,
CHANGE
Stock Symbol in millions Latest Points Percentage
AT&T T 22.6 $29.16 0.37 1.29%
Alcoa AA 19.0 12.26 ... ...
AmExpress AXP 7.0 45.87 0.98 2.18
BankAm BAC 155.1 7.46 0.05 0.74
Boeing BA 5.3 62.17 0.06 0.10
Caterpillar CAT 10.0 87.63 1.72 1.93
Chevron CVX 8.2 97.68 0.32 0.33
CiscoSys CSCO 53.8 15.85 0.15 0.94
CocaCola KO 10.9 69.30 1.13 1.66
Disney DIS 12.2 33.36 0.06 0.18
DuPont DD 6.8 46.72 0.17 0.36
ExxonMobil XOM 17.9 74.16 0.66 0.90
GenElec GE 45.6 16.22 0.07 0.43
HewlettPk HPQ 23.6 31.39 1.22 3.74
HomeDpt HD 15.5 33.39 0.27 0.82
Intel INTC 49.9 20.67 0.12 0.58
IBM IBM 4.8 171.34 0.10 0.06
JPMorgChas JPM 26.3 36.59 0.56 1.55
JohnsJohns JNJ 10.8 64.23 0.13 0.20
KftFoods KFT 11.2 34.53 0.32 0.94
McDonalds MCD 5.2 87.50 0.83 0.96
Merck MRK 13.4 32.20 0.10 0.31
Microsoft MSFT 49.8 25.25 0.11 0.41
Pfizer PFE 43.6 18.49 0.18 0.98
ProctGamb PG 7.7 61.67 0.05 0.08
3M MMM 5.2 80.91 0.67 0.82
TravelersCos TRV 2.2 52.18 0.20 0.38
UnitedTech UTX 4.4 72.04 0.03 0.04
Verizon VZ 13.9 35.60 0.72 2.06
WalMart WMT 14.5 51.53 0.39 0.75
Source: WSJ Market Data Group
Credit-default swaps: European companies
At itsmost basic, thepricingof credit-default swapsmeasureshowmuchabuyer hastopaytopurchase-and
howmuch a seller demands to sell-protection fromdefault on an issuer's debt. The snapshot belowgives a
sense which way the market was moving yesterday.
Showingthe biggest improvement...
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day
Nokia 269 23 86 2
Rhodia 88 5 1 5
Legal Gen 134 7 2 10
Intl Pwr 110 6 6 14
Nestle 41 2 1 6
ENI 167 7 5 25
Klepierre 156 4 10 49
Rentokil Initial 1927 112 3 2 10
Telenor 89 2 3 14
ABElectrolux 90 2 4 4
Andthe most deterioration
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day
Clariant 202 30 30 81
StdChartered 140 9 2 27
BAWAG 196 11 33 37
ROYAL DUTCHSHELL 90 5 24 27
Shell Pete 90 4 24 27
ABVolvo 172 8 4 48
PernodRicard 189 8 16 44
MELIAHOTELSIntl 923 37 95 259
SCOR 159 6 23 28
HSBC 110 4 12 21
Source: Markit Group
BLUE CHIPS BONDS
WSJ.com
Follow the markets throughout the day, with updated stock
quotes, news and commentary at WSJ.com.
Also, receive emails that summarize the days trading in Eu-
rope and Asia. To sign up, go to WSJ.com/Email.
US: Bank revenues from equity capital markets
Behind every IPO,
follow-on or
convertible equity
offering is one or
more investment
banks. At right,
investment banks
historical and year-
to-date revenues
from global equity-
capital-market
(ECM) deals
Source: Dealogic
75% 12
50 8
25 4
0 0
2005 2006 2007 2008 2009 2010 2011
nEquity capital markets nDebt capital markets (both in billions, left axis)
ECM as a percentage of total
(right axis)
t
hotnpapers
PERSONAL JOURNAL: LIFE/WORK
Is the Web Making Kids Nicer?
Studies Suggest Spending Time Online Helps Young People Develop Better Social Skills
In the flurry of messages college
students post on one anothers
Facebook pages, social scientists see
something larger at work: Time
spent online may be helping people
learn to be more empathetic and
make more friends in real life.
A growing body of research indi-
cates the widespread use of texting,
emailing or posting
on social-media
sites has social ben-
efits. The studies fly in the face of
the image of a child sitting lonely in
front of a computer, or being bullied
online.
Several recent studies have
found that digital communication
can lead to more or better friend-
ships online and off, greater hon-
esty, faster intimacy in relationships
and an increased sense of belonging,
in addition to practical social bene-
fits like an expanded circle for net-
working.
On the whole, technology ap-
pears to enhance real-world rela-
tionships, says Nancy Baym, a com-
munication-studies professor at the
University of Kansas in Lawrence.
One reason: People use digital com-
munication primarily to interact
with people they are closest to off-
line, not with strangers. The com-
munication tightens the bonds be-
tween them, Dr. Baym and her
colleagues found in a study they
published in the journal Informa-
tion, Communication & Society in
2009.
Some studies show technology-
driven communication may be par-
ticularly helpful for people who are
shy or anxious in social settings.
These researchers concentrated on
the psychological impact of inten-
sive social online communication,
not the role it plays in mass gather-
ings.
In a study of New York Univer-
sity students who described them-
selves as either socially anxious or
nonanxious, participants were ran-
domly assigned to interact in groups
of three, either in-person or through
an Internet chat room. Anxious stu-
dents reported greater shyness and
discomfort than nonanxious stu-
dents in face-to-face groups. In the
chat room, however, they said they
felt significantly less shy, more com-
fortable and better accepted by
their peers.
In a follow-up study, researchers
randomly assigned high- and low-
anxiety students to groups of four
to interact in an online chat room or
face to face. Socially anxious partici-
pants were more likely to make de-
cisions and lead the group when
they were in the chat room than
when face-to-face with others. Other
group members said they found the
anxious participants more likeable
and extroverted when the interac-
tion occurred online. In the face-to-
face situation, the nonanxious par-
ticipants were the ones seen as
leaders.
Frequent communication online
could serve as practice for in-person
social interactions, says Larry Rosen,
a psychology professor at California
State University, Dominguez Hills.
Dr. Rosen and his team were es-
pecially curious about empathy, be-
cause it is so frequently communi-
cated nonverbally via facial
expressions and body language. The
researchers informally scanned doz-
ens of Facebook profiles, looking for
comments that individuals posted
and the responses to them that ap-
peared to show understanding of
the original posters feelings, such
as supportive messages to a friend
who said her mother was having
surgery the next day.
These messages suggested empa-
thy could indeed be recognized and
communicated through written, on-
line communication. This inspired
the researchers to investigate how
this related to the expression of em-
pathy in real life.
In a study presented earlier this
month at the annual American Psy-
chological Association conference in
Washington, D.C., they asked 1,283
people aged 18 to 30 through a se-
ries of questionnaires how much
time they spent online, and the de-
gree to which they felt empathetic
toward offline and online friends.
For instance, participants were
asked to rate on a five-point scale
how well they could understand a
friends happiness when the friend
did something well. They were then
asked the same questions regarding
friends with whom a majority of
communication was done online
through social networking or email.
Based on participants self-re-
ports, the researchers found users
expressed a significant amount of
empathy online, and that the more
time college students spent on Face-
book, the more empathy they ex-
pressed online and in real life.
As with any novel research,
these preliminary findings need to
be repeated in future studies, par-
ticularly since self-reported data can
be skewed if participants inaccu-
rately recall or misreport their feel-
ings.
Digital communication also ap-
pears to bolster individuals sense of
community and group identity, says
Nicole Ellison, a professor in tele-
communications, information stud-
ies and media at Michigan State
University in East Lansing. Students
reporting low self-esteem who ac-
tively used Facebook were more
likely to say they felt a part of the
Michigan State community than low
self-esteem individuals who didnt
use Facebook as intensely, Ms. Elli-
son found in a study published in
the Journal of Computer-Mediated
Communication in 2007.
And some of the drawbacks of
online communication may not be
as widespread as feared, researchers
are finding. While online bullying is
a concern, in-person bullying re-
mains far more prevalent.
In a survey of 3,777 teenagers,
nearly 45% reported some bullying
in the past year. But of those who
said they were bullied, nearly 40%
said it had occurred in person.
Fewer than 20% said it had oc-
curredsolely or in addition to
other bullying methodsonline, by
phone or by text messaging, says
Michele Ybarra, president of non-
profit research group Internet Solu-
tions for Kids Inc., who ran the sur-
vey. And two-thirds of kids who say
they are bullied online say they
dont find it upsetting, according to
a new study by Dr. Ybarra that she
expects will be published soon in
the journal Pediatrics. And young
people are still far more likely to
see sexual content or violence on
television than online, she says.
BY SHIRLEY S. WANG
Technology-driven communication may help those who are shy or anxious in social settings. Above, children at a technology fair in Hannover, Germany, in March.
IN THE LAB
Bullies, Live and On Screens
In a survey, 45% of 13- to 18-year-olds said they were bullied in the past year. Below,
the ways they said they were bullied. Subjects could answer yes to more than one.
Source: Internet Solutions for Kids
IN PERSON
BY PHONE
VIA TEXT MESSAGE
ONLINE
SOME OTHER WAY
39%
14%
17%
10%
10%
Getty Images
Negotiate
Your Salary
Using Tips
From FBI
During a job search, candidates
must adopt the skills of many pro-
fessions. You analyze the job market
like a research scientist, craft a r-
sum like a best-selling author and
network like a seasoned politician.
Theres also an occupation to
emulate at the crucial moment when
salary is discussed: U.S. Federal Bu-
reau of Investigation Hostage Nego-
tiator.
Imagine the human-resources di-
rector sitting across from you is a
lunatic in a bank vault with 10 hos-
tages. Instead of demanding millions
and a private jet, hes guarding the
spreadsheet containing the payroll
budget.
The FBI publication Crisis Inter-
vention: Using Active Listening
Skills in Negotiations, outlines a
few techniques to bring about a pos-
itive outcome in such negotiations:
Using minimal encouragement,
paraphrasing, mirroring and pausing
the conversation, among others.
So lets say the HR person says,
We think youre a great fit for the
job, and wed like to offer you a
starting salary of $75,000. Say
something like: I see. So youre
saying that the salary for this posi-
tion would be $75,000. Then be si-
lent. In doing so, youve listened at-
tentively, paraphrased what the
interviewer has said, mirrored the
last few words, and left an effective
pause in the conversation to allow
the interviewer to fill the gap.
Most people hate awkward si-
lence in conversation, and will rush
to fill it, and what can happen in
this scenario is they fill it with a
higher offer.
Here are three other ways to ne-
gotiate your salary using FBI. tac-
tics:
Gather information: On arriving
at the scene, a good agent will im-
mediately assess the situation. In
your case, preparation must take
place long before the standoff. Youll
need a firm understanding of what
your skills are worth for this posi-
tion. You can do so by asking col-
leagues and contacts in your net-
work and researching salary data on
the Internet.
Build trust: In order to have a
favorable negotiation, you need to
be seen as a credible source. You do
this by building rapport with the
other person, listening to their pro-
posal, understanding their position
and being prepared with supporting
data for your side of the argument.
When both parties can review third-
party industry data, it creates less
of a you vs. me confrontation.
Stay calm: No matter how crazy
the situation gets, a hostage negoti-
ator always remains calm and up-
beat. The same goes for salary dis-
cussions. Storming into your bosss
office and demanding a raise or
threatening to quit will rarely give
you the desired outcome.
If you succeed in your role as ne-
gotiator, by the end of the standoff,
everyone is happy, no one gets shot,
and you get your fair share of that
budget.
Jim Hopkinson is the author of
Salary Tutor: Learn The Salary
Negotiation Secrets No One Ever
Taught You (Grand Central Pub-
lishing, Business Plus).
BY JIM HOPKINSON
hotnpapers
There are times when the fi-
nal Test match of the English
summer provides unforgettable
drama. Think the final Test of
the 2005 Ashes or Devon Mal-
colms nine-wicket demolition of
South Africa in 1994.
But as England and India
prepare to face off at the Oval
in London on Thursday, the fi-
nal Test of the four-match
Npower series is shaping up to
be a forgettable affair.
England has been so domi-
nant in the first three games
that it has succeeded in wrap-
ping up a series victory while
increasing its winning margin
with each matcha quite re-
markable feat considering it
won the opening Test at Lords
by 196 runs.
Given the disparity between
the two teams so far, its hard
to see any respite for India at
the Oval. Oddsmakers consider
the touring team a major out-
sider and Sportingbet offers a
best-price 11/2 on an India win.
The same firm offers just 3/1
for England to win by an in-
nings, which underlines the
scale of the challenge confront-
ing India.
While the potential for bad
weather looks to be Indias best
chance of avoiding defeat, its
worth noting that India hasnt
lost a Test on this ground in its
past six visits since 1959. In ad-
dition, the last five matches be-
tween the sides here have all
ended in a draw. That result
can be backed at 6/5.
Even so, Englands record of
six wins and just two defeats
from its 11 games at the Oval
since 2000 make it difficult to
ignore the 6/4 on offer for An-
drew Strauss team to complete
a series clean sweep.
Tip of the Day
55
Source: FIFA
Andrew Strauss
A
s
s
o
c
i
a
t
e
d
P
r
e
s
s
SPORT
Tale of Woe for Weary Indians
Punishing Schedule Contributes to Downfall of Former World No. 1 Test Cricket Nation
Indias epic collapse in the
Npower Test series against England
isnt especially hard to fathom.
Through the opening three
matches, the teams batting has been
a mess, its bowlers have been pa-
thetic, and its fielding has had all
the intensity of a sleeping kitten.
Heading into the fourth Test,
which starts Thursday at the Oval in
London, India has already lost the
series, surrendered its position as
the worlds No. 1-ranked Test match
nation, and is just five days removed
from the third-heaviest defeat in its
79 years of Test cricket.
But if theres one reason why In-
dias players have spent most of the
series looking like they couldnt wait
to get home, it may be the result of
the teams almost ceaseless sched-
ule, which is unrivaled in world
cricket.
India have been on the go non-
stop since the beginning of the
year, said Geoffrey Boycott, the for-
mer England captain and a cricket
analyst for the BBC. Is it any won-
der theyve looked tired and jaded?
The numbers tell the story rather
starkly. Since the start of last year,
India has played 46 one-day interna-
tionals, 21 Test matches and nine
Twenty20 internationals, which is
equivalent to 160 days of scheduled
play. In that period, Australia has
played 45 one-day internationals, 13
Tests and 19 Twenty20 games, or
129 days of play, while South Africa
and Sri Lanka have both faced just
100 days of cricket.
England is the only country with
an international schedule compara-
ble to Indias. The English team has
played 36 one-day internationals, 21
Tests and 14 Twenty20 games since
the start of 2010, which corresponds
to 155 days of play. But the figures
ignore the impact the Indian Pre-
mier League has had on the global
cricket calendar.
While English players rarely ap-
pear in the IPL, Indias cash-rich
Twenty20 tournament, the stars of
the Indian team are fixtures for each
of the leagues 10 franchises. As a re-
sult, Indias cramped schedule has
become even more grueling.
This years 45-day IPL season
was staged directly after Indias vic-
tory in the ICC World Cup, meaning
many of the countrys biggest stars
have been playing almost without
interruption for the past 12 months.
Since August 2010, India captain
Mahendra Singh Dhoni has played a
total of 101 days of top-class cricket,
while Graeme SwannEnglands
busiest playerhas played for just
86 days in that time.
In 2011 we have played close to
six-odd games [Tests] and we have
bowled 900 overs, Dhoni said after
Indias 319-run defeat at Trent
Bridge in the second Test. Thats a
lot of overs.
The upshot of all this is that a
game many think of as a peaceful,
leisurely pursuit is fast becoming an
exercise in attrition. Because of
wear and tea, Indias tour of England
has been a maddening procession of
broken bones, ligament tears and in-
jury scares.
Zaheer Khan, the countrys lead-
ing bowler, limped off with a series-
ending hamstring injury in the open-
ing Test at Lords, while Guatam
Gambhir, Harbajhan Singh and Yu-
vraj Singh have all been ruled out
during the series. Virender Sehwag,
the swashbuckling opening batsman,
was ruled out from the start after
aggravating a shoulder injury in the
IPL. Even when he returned at Edg-
baston, he looked woefully under-
cooked: Sehwag was out first ball in
both innings, becoming only the 13th
player in Test history to collect a
king pair.
We depend on tried and tested
players, even though they are com-
ing off of injuries and not having
enough match practice, said Dilip
Vengsarkar, the former India cap-
tain. You cant compete like that.
Not everyone accepts that Indias
struggles are down to wornout play-
ers. Following its latest capitulation
at Edgbaston, Kris Srikkanth, the
countrys chief selector, refused to
blame a fatigue factor for the dis-
mal performance. All countries are
playing cricket 365 days a year, he
said. Its not only the Indians.
In addition, no one seemed un-
duly worried about the crowded
cricket calendar during Indias 20-
month reign as the worlds No. 1-
ranked Test team, when the side was
unbeaten in seven consecutive series
and won the ICC World Cup for the
second time.
But some say the biggest prob-
lem facing India isnt overworked
veterans but a bunch of undercooked
reserves. The injuries incurred by
regulars in recent weeks have forced
India to hand starting roles to un-
proven prospects such as Suresh
Raina, Abhinav Mukund and Virat
Kohli. Despite encouraging displays
in the IPL, none of them has looked
good enough for Test cricket.
England quickly sussed out
Rainas weakness to the short ball
and he hasnt got past 12 runs since
the second innings of the first Test.
Mukund was jettisoned after three
straight failures, while Kohli is likely
to make his first appearance of the
series at the Oval, but struggled
against short-pitched bowling
against West Indies last month.
Given that Sachin Tendulkar, Ra-
hul Dravid and VVS Laxman, the su-
perstar batters who have under-
pinned Indias success for most of a
decade, are all near the end of their
careers, the country is now on edge
over the players supposed to replace
them. You cannot go on with 35- or
38-year-olds for eternity, said Arun
Lal, the former India batsman. We
need to infuse new talent.
But heres one advantage of In-
dias unending schedule: The new-
comers wont have to wait long for
another chance to impress.
Following the conclusion of this
weeks fourth Test, India faces five
one-day internationals in England.
One week after that, the Champions
League Twenty20 starts in India.
Five days after that, India has sched-
uled five home one-day internation-
als against England, and shortly af-
ter that comes a home Test series in
November against West Indies. That
flurry should allow the selectors to
blood more new players in the start-
ing lineup.
Still, there are those who doubt
whether the introduction of new tal-
ent will come in time to save India
from a similar shellacking when it
travels to Australia for a four-match
Test series in November.
Things could get worse, said
Ian Chappell, the former Australia
captain and a member of the ICC
Cricket Hall of Fame. This disas-
trous tour has been awhile in the
making. The selectors failure to ad-
dress an aging batting lineuphas
come home to roost.
BY JONATHAN CLEGG
Indias Virender Sehwag walks off after being dismissed without scoring for the second time during the third Test against England at Edgbaston last week.
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OFF THE WALL
Aquafarming
Helps to Save
Population
Of Seahorses
L
ISA Parnpichate says she is ob-
sessed with collecting sea-
horses as pets, but her past
efforts to keep the delicate crea-
tures alive repeatedly failed. This
year, she gave it one more try.
The Houston resident says she
devoted hours going through tutori-
als on how to care for seahorses.
She built a specially designed aquar-
ium that keeps a constant tempera-
ture and provides plenty of places
for the animals to hang onto with
their tails. Then she located a new
supplier, a breeding facility in Ha-
waii that had figured out how to
raise the animals in captivity. Her
total investment: about $6,000, she
estimates.
Five months later, Ms. Parn-
pichates seahorses-four males
and three females, which she named
after Norse gods-are doing fine.
The 38-year-old says she talks to
them and reaches into the water to
hold them. Ms. Parnpichate, who
works as a special agent in U.S. fed-
eral law enforcement, says her
friends are amazed by the pets.
The animals are so unusual and
most people havent seen them up
close, she says. The biggest attrac-
tion: Thor, who is 15-centimeters
long and very active in the tank.
What made the difference for
Ms. Parnpichate was the growing
popularity of captive-bred sea-
horses. New techniques and recent
discoveries about the animals be-
havior have enabled breeders to set
up aquafarms for raising seahorses
in places like Mexico, Australia and
Hawaii. In the past, most seahorses
found in home aquariums, including
Ms. Parnpichates, were plucked
from natural habitats like coral
reefs, seagrass beds and mangroves,
contributing to their declining pop-
ulations, experts say.
Captive-bred seahorses, which
retail for as much as $85 each, are
less disease-prone than their wild
cousins, breeders say. They also can
live for more than a decade, far lon-
ger than the few months seahorses
captured in the wild do. Its more
expensive but well worth it, Ms.
Parnpichate says.
The global population of sea-
horses has plummeted by as much
as 80% in some locations since
2005, according to the U.N. Conven-
tion on the International Trade in
Endangered Species (Cites). Hobby-
ists contribute to the decline. In
June, New York State lawmakers
banned the commercial netting of
seahorses for sale in tropical-fish
stores.
More problematic for seahorse
populations are habitat destruction
and demand for the creatures for
use in traditional Chinese medicine.
Cites estimates at least 10 million
seahorses are taken from the wild in
an average year for medicinal pur-
poses, ranging from kidney disor-
ders to impotence.
The status of seahorses is peril-
ous, and most species are listed as
threatened or endangered by inter-
national conservation groups, says
Amanda Vincent, research chair-
woman in marine conservation at
the University of British Columbias
Fisheries Centre and director of
Project Seahorse. There is an in-
herent wonder about them that is
worth preserving, she says.
Aquafarming is used with other
fish, of course, especially food stock
like salmon and cod. Breeders dont
expect aquafarming can replenish
the worlds seahorse populations,
but it can significantly reduce the
number captured for hobbyists.
Christopher Buerner, president
of aquarium-fish wholesaler Quality
Marine, in Los Angeles, says he now
purchases seahorses solely from
breeders. He says captive breeding
has helped increase the interest in
seahorses among hobbyists.
Although seahorses dont look
like typical fish, they are in the
same class as salmon and tuna.
When reproducing, its the male sea-
horse that becomes pregnant and
delivers the young. Most species ap-
pear to be monogamous, remaining
faithful to one partner for the
breeding season and perhaps sev-
eral seasons.
Breeding seahorses in captivity
became possible only in recent
years. The biggest hurdle was train-
ing them to eat frozen shrimp in-
stead of their natural diet of small
live crustaceans and other inverte-
brates, says Carol Cozzi-Schmarr,
president of Ocean Rider, a seahorse
aquafarm in Kailua-Kona, Hawaii.
The animals, which have no stomach
or teeth, were reluctant to try the
frozen shrimp, partly because they
dont move through the water the
way their natural food does, she
says. Finally, one seahorse, which
the breeders nicknamed Mikey, ac-
cepted the change of diet. The
Ocean Rider breeders moved Mikey
from one tank to another to teach
the other seahorses by example to
eat the frozen shrimp.
BY LINDA HIMELSTEIN
A longsnout seahorse, one of 48 known species, in an aquarium. Captive-bred ones are less disease-prone, breeders say.
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WSJ.com
ONLINE TODAY: Watch a video
about seahorses raised on aqua-
farms at WSJ.com/lifestyle.
More problematic for the
species are habitat
destruction and demand for
the creatures for use in
traditional Chinese
medicine.
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HEARD ON THE STREET
Email: heard@wsj.com FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard
Carlsberg Hurt
By Russians
Cutting Back
Carlsberg shareholders should
pour themselves a stiff drink. The
Danish brewers shares plunged 17%
Wednesday after it reported a 22%
drop in second-quarter earnings and
projected growth of between 5% and
10% for the full year versus 20%
guidance three months ago. What
has changed?
Last years 200% surge in excise
tax has hammered Russian beer. In
May, Carlsberg expected the Russian
beer market would grow between
2% and 4% this year in volume
terms. But facing inflation of 9%
year on year in July, consumers
have been slow to swallow the tax-
induced 30% rise in beer prices over
the past 18 months. Carlsbergs beer
shipments in Russia dropped 9% in
the second quarter.
There will likely be even more
pressure on beer volumes next year.
In July the Russian Duma passed a
bill to ban television, radio and bill-
board advertising for alcoholic
drinks in 2012. A year later sales of
all alcohol at popular kioskswhich
account for around 15% of beer vol-
umeswill be outlawed. Carlsberg
says it also will need to raise prices
by another 5% in 2012 to offset
higher taxes.
That is made even worse by
competitive pressures. Carlsberg,
which owns Russian biggest brewer
Baltika, has been losing share as
groups including Heineken have
pushed cheaper economy brands
harder. And vodka prices, while ris-
ing fast, havent kept up with beer.
Sure, Carlsberg is squeezing out
more cost savings in Northern and
Western Europe. It also is gaining
share in key markets like Poland,
despite tough price competition. But
that isnt enough to divert investors
attention from Russia, which ac-
counts for roughly 40% of Carls-
bergs operating profit. Trading on
just 8.1 times forecast 2012 earnings
based on consensus estimates,
Carlsbergs status as Europes low-
est-rated consumer goods group
looks hard to budge.
Rene Schultes
European Firms Face Cash Conundrum
During the latest stock market
slump, European companies could
at least draw comfort from one
thing: their high cash balances. But
the fears about growth and sover-
eign debt that are spooking markets
also are likely to make companies
even more risk averse. If that
means they continue to hoard cash,
it would help embed the weak
growth outlook.
Corporate-bond issuance has
ground to a halt this summer, while
the net proportion of euro-zone
banks reporting an increase in loan
demand slumped to 4% in the sec-
ond quarter from 19% in the previ-
ous three months, according to the
European Central Bank.
Many companies, meanwhile, are
targeting a higher credit rating
than pre-crisis to provide a buffer
against further economic stress. For
example, a credit rating of A-plus
or A should ensure a company re-
tains access to commercial-paper
markets, faces less onerous terms
on bond issuance and qualifies for
easier bank debt covenants.
That rating is several notches
higher than many might have tar-
geted during the boom when com-
panies were happy to operate with
higher leverage, taking advantage
of relatively cheap debt to reduce
their cost of capital.
This shift could prove durable.
Despite the nominal cost of debt
falling to ultralow levelsthe aver-
age yield on bonds issued by Euro-
pean industrial companies is now
3.16%, compared with around 4.5%
pre-crisiscompanies are reluctant
to invest when the outlook for de-
mand is so uncertain. While merg-
ers-and-acquisition activity has
picked up, it remains low. Caution
also may hold companies back from
reducing equity levels by returning
cash.
That suggests Europes corpo-
rate deleveraging may have further
to run. Average net debt-to-equity
ratios in nonfinancial European
companies could fall to 35.5% by
the end of 2012 from 55% at the
end of 2010, JPMorgan forecasts.
That would be a two-decade low
and down from 68.2% in 2007.
Anyone counting on corporate
cash piles to drive growth and in-
vestment returns is likely to be dis-
appointed.
Andrew Peaple
No Interest in Chinas Benchmark Rates
Rationing anything creates distor-
tions in the price. Chinas credit ra-
tioning creates distortions in the
price of capital.
In the 1980s, Chinas consumer
goods were in short supply. Every-
thing from a radio to a bicycle was
very cheap if it could be purchased
directly from the state, and very ex-
pensive if it had to be purchased in
the private market. Today, with quo-
tas rationing access to finance, there
is a flourishing informal market in
credit. That means watching the
benchmark interest rate set by the
Central Bank isnt the best way to
get a read on Chinas monetary pol-
icy conditions.
Credit rationing has implications
for all sectors of the economy. Even
the big state-owned firms served by
the big state-owned banks are af-
fected to a degree.
A reduction in the credit quota
this year means that interest rates
firms pay for bank loans have risen
by more than the benchmark rate.
The Peoples Bank of Chinas own
data show that in June 61% of short-
term loans were issued above the
benchmark interest rate, compared
with 49% in January.
Provincial firms served by the
smaller banks feel the pain more di-
rectly. And it may get more acute.
After seven weeks of stability, the
central bank has signaled a move to
money market interest rates higher.
If that happens, the result will be a
higher cost of capital for small banks
and their customerssome of whom
are already paying double the bench-
mark rate for short-term loans.
The real pinch comes, however,
for small private firms that are ex-
cluded from the formal banking sys-
tem. Data on loans in the informal fi-
nancial sector are hard to come by.
But one recent estimate by He
Zhicheng, an economist at Agricul-
tural Bank of China, put annualized
rates at 30% to 40% for credit from
loan guarantee companies, and 60%
or higher for black market loans.
With the credit quota remaining
relatively tight$75 billion in new
loans in July was the lowest monthly
rate so far this yearand an uncer-
tain outlook increasing the risk pre-
mium, the cost of credit for small
businesses is likely to stay high.
Turmoil in financial markets and
fears of a slowing global recovery
might mean Chinas benchmark lend-
ing rates stay on hold.
But in an economy where credit is
rationed, investors relying too heav-
ily on that for their view of mone-
tary conditions risk missing the big-
ger picture.
Tom Orlik
Stashing Cash
Average net debt-to-equity ratios in
non-nancial European companies
Source: J.P. Morgan
Note: Years 2011 and 2012 are forecast
30
40
50
60
70
00 05 10
Loan Range
Chinese loan rates* versus the
benchmark
Sources: People's Bank of China, He Zhicheng,
WSJ reporting
*Annualized lending rates
Note: Rates other than the benchmark are estimated
Benchmark rate
City Commercial
Banks
Trusts
Loan guarantee
companies
Black market
6.56%
12
20
30
60
Tech seems a great place for
second acts lately. Frank Quat-
trones career as an investment
banker stalled while he successfully
fought civil and criminal charges
that he offered shares of hot IPOs
like VA Linux to favored clients.
But he has come back with a ven-
geance. His latest big deal: advising
Motorola Mobility on its sale to
Google. That moves Mr. Quat-
trones small firm, Qatalyst Part-
ners, to 11th in Dealogics 2011
league table for U.S. tech M&A vol-
ume.
Meanwhile,Thomas M. Coughlin
is looking to resurrect his career
this time in tech. The former Wal-
Mart vice chairman, who resigned
before pleading guilty to federal
wire-fraud and tax-evasion charges,
has popped up on Geeknets board.
Geeknet, run by Home Depot
founder Ken Langone, is what is
left of the old VA Linux, and now
gets most of its revenue selling
geek-themed clothing. Mr. Cough-
lins retail experience should come
in handy.
OVERHEARD
Many companies are
targeting a higher credit
rating than pre-crisis to
provide a buffer against
further economic stress.
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VOL. XXI X NO.

Europes Executive Travel Program

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