The Wall Street Journal - November 03, 2016.pdf - For personal non-commercial use only Do not edit or alter Reproductions not permitted To reprint or

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Unformatted text preview: For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or World Premiere: ‘Trump the Opera’ THE MIDDLE SEAT | D1 DANIEL HENNINGER OPINION | A13 ISTOCK HOLIDAY TRAVEL’S BIG SURPRISE: DEALS * * * * * * * DJIA 17959.64 g 77.46 0.4% NASDAQ 5105.57 g 0.9% STOXX 600 331.55 g 1.1% 10-YR. TREAS. À 7/32 , yield 1.799% OIL $45.34 g $1.33 GOLD $1,306.80 À $20.40 Cubs End 108 Years of Heartbreak in Thrilling World Series Win What’s News Business & Finance anks accounted for less than half the mortgage dollars extended to borrowers last quarter, reflecting the growing role of less riskaverse nonbank lenders. A1 B  The U.S. filed an antitrust suit against AT&T’s DirecTV, alleging collusion in connection with a bitter dispute over SportsNet LA. B1  Oil futures tumbled 2.9% to $45.34 a barrel on a report of the biggest weekly U.S. crude surplus on record. C1  Stocks extended a losing streak on election concerns and oil’s slump. The Dow fell 77.46 points to 17959.64. C4  Five stocks have been responsible for 81% of the Dow’s gains this year. C1  Whole Foods scrapped its dual-CEO leadership and posted its first annual drop in comparable sales. B1  Valeant is exploring a sale of its eye-surgery equipment business. B1 World-Wide  Secret recordings fueled a battle between FBI agents and corruption prosecutors over whether to pursue a probe of the Clinton Foundation. A1  Trump could face conflicts of interest over his children’s business with politically connected foreign firms. A1  Google’s Schmidt helped with early development of Clinton’s campaign, according to leaked emails. A4  Mississippi police were interviewing a “person of interest” over a fire at a black church on which someone painted “Vote Trump.” A3  An Iowa man was held in connection with the ambushstyle killings of two police officers near Des Moines. A3  Syrian rebels rejected a call by Russia for militants and civilians to escape Aleppo during a “humanitarian pause” on Friday. A9  Americans are leaving the costliest cities for cheaper areas faster than they are being replaced. A3  Venezuela’s Maduro threatened to jail rivals calling for street protests, putting talks at risk. A9  A South African report alleged that a wealthy family influenced Zuma’s cabinet appointments. A10  Germany postponed approval of climate measures, less than a week before U.N. global-warming talks. A10 CONTENTS Arts in Review...... D5 Business News B2-3,8 Crossword................. B6 Election 2016.... A4-6 Global Finance........ C3 Heard on Street.... C8 In the Markets....... C4 Opinion.............. A13-15 Sports.......................... D6 Style & Travel.... D2-4 U.S. News............. A2-3 Weather..................... B6 World News...... A8-11 > s Copyright 2016 Dow Jones & Company. All Rights Reserved EZRA SHAW/GETTY IMAGES  Wells Fargo is facing an SEC probe over whether it violated investor disclosures and other matters relating to its sales-tactics scandal. C3 EURO $1.1100 YEN 103.31 Banks Fall Back In Mortgage Lending BY ANNAMARIA ANDRIOTIS  The Fed left rates unchanged but sent new signals it could move next month, noting that inflation has “increased somewhat.” A1  Facebook’s profit nearly tripled as revenue soared 56%, but shares tumbled after hours due to a caution about advertising growth. B1 HHHH $3.00 WSJ.com THURSDAY, NOVEMBER 3, 2016 ~ VOL. CCLXVIII NO. 106 FIELD OF DREAMS: The Chicago Cubs took baseball’s crown with an 8-7, 10-inning victory over the Cleveland Indians in an epic Game 7, ending a drought dating back to 1908. The Cubs overcame a 3-1 deficit in the series. D6, WSJ.com/Sports. Secret Recordings Fueled FBI Feud in Clinton Probe BY DEVLIN BARRETT AND CHRISTOPHER M. MATTHEWS Secret recordings of a suspect talking about the Clinton Foundation fueled an internal battle between FBI agents who wanted to pursue the case and corruption prosecutors who viewed the statements as worthless hearsay, people familiar with the matter said. Agents, using informants and recordings from unrelated cor- dation that started in summer 2015 based on claims made in a book by a conservative author called “Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich,” these people said. The account of the case and resulting dispute comes from interviews with officials at multiple agencies. Starting in February and continuing today, investigators  New battles erupt over the ‘ballot selfie’......................... A4  Counties reflect contest’s broader trends.................... A6  Missouri race, like fight for Senate, is dead heat....... A6 ruption investigations, thought they had found enough material to merit aggressively pursuing the investigation into the foun- from the Federal Bureau of Investigation and public-corruption prosecutors became increasingly frustrated with each other, as often happens within and between departments. At the center of the tension stood the U.S. attorney for Brooklyn, Robert Capers, who some at the FBI came to view as exacerbating the problems by telling each side what it wanted to hear, these people said. Through a Please see FBI page A4 TRUMP’S FOREIGN CONFLICTS Banks no longer reign over the U.S. mortgage market. They accounted for less than half of the mortgage dollars extended to borrowers during the third quarter—the first quarter that banks, credit unions and other depository institutions have fallen below that threshold in more than 30 years, according to Inside Mortgage Finance. Taking their place are nonbank lenders more willing to make riskier loans banks now shun. Independent mortgage lenders have come close to the 50% mark before. But they haven’t topped it in recent history, even in the run-up to the 2008 housing bust, making this a notable moment for the most important consumer-credit market. The shift reflects banks’ aversion to risk, especially in the mortgage business, which has left an opening for independent lenders among home buyers with lower credit scores. Banks also remain fearful of legal and regulatory problems that have cost them tens of billions of dollars in mortgage-related fines and settlements in recent years. The independent firms aren’t taking on the same sorts of risky loans that prevailed before the crisis. But their growing role does give rise to potential new dangers in the mortgage market. Chief among them is whether nonbanks have Please see LOANS page A10 Upwardly Mobile Facebook’s quarterly revenue and profit soared as its mobile advertising business grew. B1 Facebook's mobile ad revenue as a share of total ad revenue 3Q 2016 84% 100% Candidate’s offspring in family firm have long dealt with politically connected concerns abroad 80 BY ALEXANDRA BERZON Donald Trump’s adult children have spent a decade doing business with politically connected foreign firms—a role that will present potential conflicts of interest whether he wins on Nov. 8 or continues to pursue politics if he loses. Those whom Ivanka Trump, Donald Trump Jr. and Eric Trump have worked with abroad include: the family of a developer in India who is a ruling-party politician, an Azerbaijani government Fed Indicates Rate Increase More Likely In December BY KATE DAVIDSON Inflation is finally showing signs of behaving the way Federal Reserve officials want it to, bolstering the case for them to raise short-term interest rates next month. They decided Wednesday to leave rates unchanged while sending new signals that they could move at their next meeting, Dec. 13-14. Inflation has “increased somewhat since earlier this year,” Fed officials said in a statement released after a two-day policy meeting, noting also that some investors’ expectations of future inflation “have moved up but remain low.” Officials also said they wanted to see “some further evidence” of economic progPlease see FED page A2 minister’s son and a media company that became the Turkish president’s outlet of choice during the July 15 coup attempt. No recent president has had a portfolio of international business interests as extensive as Mr. Trump’s—or as great a level of business engagement on his behalf by offspring, who have also played a role in his campaign. U.S. law exempts the president and vice president from conflict-of-interest rules that require many federal em- ployees to recuse themselves from decisions involving their financial interests. Presidents George W. Bush, Bill Clinton, George H.W. Bush and Ronald Reagan voluntarily put most assets in blind trusts. Presidential candidate Mitt Romney said that, if elected, he would have created a federally qualifying blind trust. A President Trump “would not be involved in the business,” said Trump Organization general counsel Alan Garten. Please see TRUMP page A12 Don’t Tell Texas, but Arkansas Says It’s America’s Queso Capital i i i Sales by the gallon and a tourism push sharpen state’s case; ‘cheese dip for life’ 60 40 20 0 2013 ’14 ’15 ’16 Source: the company THE WALL STREET JOURNAL. Oracle #1 Cloud ERP BY ALISON SIDER When it comes to food, Arkansas has long lived in the In a safe in Little Rock, shadow of neighbors such as Ark., restaurateur Scott McGe- Texas, Louisiana and Tenneshee keeps five recipes for see, known respectively for what he considers one of the their fajitas, gumbo and Memstate’s biggest culinary trea- phis barbecue. Many Arkansans think cheese dip has fisures. Two cheese-dip recipes nally given them something to were handed down by his late call their own. Nick Rogers, a father, Frank. One former lawyer now came from the working on a doclong-gone Taco Kid torate in sociology, chain and cost presented evidence $2,000, with hotin his 2009 docusauce and chili formentary “In Queso mulas thrown into Fever: A Movie the deal. The collecAbout Cheese Dip” tion represents “the that the world’s greatest recipes in Cheese dip first cheese dip cheese-dip lore,” might have been says Mr. McGehee, who melded them into the served at Mexico Chiquito, a “five families cheese dip” North Little Rock restaurant served at his Heights Taco & chain that opened in 1935 and Please see QUESO page A12 Tamale Co. in Little Rock. 2,802 228 Oracle Cloud ERP Customers Workday Cloud ERP Customers “Oracle has their act together better than SAP” Aneel Bhusri, Workday CEO Midsize and large scale Enterprise Fusion ERP Cloud customers. cloud.oracle.com/erp or call 1.800.ORACLE.1 Copyright © 2016, Oracle and/or its affiliates. All rights reserved. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or THE WALL STREET JOURNAL. A2 | Thursday, November 3, 2016 U.S. NEWS How to Salvage Globalization N o matter what happens in this election,” venture capitalist Peter Thiel said in Washington this week, “what Trump represents isn’t crazy and it’s not going away.” When it comes to globalization, Mr. Thiel, a prominent donor to Republican nominee Donald Trump, is CAPITAL almost cerACCOUNT tainly right. GREG IP Mr. Trump is unique, but his antipathy to free trade and increased immigration isn’t. Those sentiments are shared in differing degrees by the Democratic voters who propelled Vermont Sen. Bernie Sanders to second place in the party’s primary, by the Britons who voted to leave the European Union in June, and in the populist parties gaining strength across Europe. Hillary Clinton may have turned against the negotiated, unratified 12nation Trans Pacific Partnership to fend off Mr. Sanders, but is unlikely to flip back. Why spend scarce political capital on a treaty much of her party despises? For advocates, salvaging globalization requires understanding what’s behind the backlash. Many populists think it’s a zero-sum game that the U.S. is losing. “The sheer size of the U.S. trade deficit shows that something has gone badly wrong,” claims Mr. Thiel. Actually, it doesn’t: The U.S. has had one of the developed world’s fastest growth rates since 1990 despite that deficit, while Japan has had one of the slowest despite a sur- FED Continued from Page One ress before raising rates, a suggestion that the bar for lifting them has been lowered. “We fully expect this evidence to emerge over the next six weeks,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, “so only a shock—the election of [Donald] Trump or an external geopolitical or market event—can now prevent a December hike.” The Fed has left its benchmark federal-funds rate unchanged since December in a range between 0.25% and 0.5%. Officials started 2016 expecting to raise it by a full percentage point this year but held off because of worries about a variety of risks, including weak economic growth earlier in the year and BARNEYS.COM NEW YORK CHICAGO B E V E R LY H I L L S BOSTON SAN FRANCISCO LAS VEGAS S E AT TLE F O R I N S I D E R A C C E S S : T H E W I N D O W. B A R N E Y S . C O M BORSALINO DR AKE’S BARNE YS NEW YO RK Is Free Trade Running Out of Gas? The number of new trade agreements is slipping, though the share of global output covered by them is still rising. Free-trade agreements By year of signature Share of global GDP covered by free-trade agreements 50 25% 40 20 30 15 20 10 10 5 0 0 1980 ’90 2000 ’10 1980 plus. Advocates of free-trade deals think the real problem is that the country as a whole benefits from more trade and immigration while only a minority of workers get hit, blame outsiders and turn to politicians like Mr. Trump. Their prescription is to help that minority transition to new and better jobs. Yet this may not be an antidote to populism. The economic impact of free trade is easily overstated. Trade barriers have steadily declined. This means the gains to incremental liberalization are quite small—one reason the number of new pacts has also been slipping. Two studies conclude the Trans-Pacific Partnership would eventually raise U.S. output by 0.2% to 0.5%, a positive but hardly life-changing sum. The gains to Canada and Europe from the justcompleted Comprehensive Economic and Trade Agreement are similarly slim. market turmoil abroad. While most Fed officials agree the labor market has improved significantly over the past year, inflation has run below their 2% target for more than four years, providing little urgency for raising rates. Recent data suggest that may be starting to shift. Socalled core inflation, which excludes volatile food and energy prices, rose 1.7% in the third quarter from a year earlier, according to the personalconsumption-expenditures price index, the central bank’s preferred inflation gauge. A measure of investors’ expected annual price increases over the next 10 years hit its highest level in more than a year. Policy makers pay close attention to inflation expectations because they can influence firms’ and households’ spending decisions, which affect actual prices. ’90 2000 ’10 THE WALL STREET JOURNAL. Source: International Monetary Fund Nor is opposition to globalization primarily economic. “It’s about fairness, loss of control, and elites’ loss of credibility. It hurts the cause of trade to pretend otherwise,” Dani Rodrik, a Harvard University economist and longtime skeptic of globalization, wrote recently. T reaties like TPP seek to level the playing field for firms operating across borders, for example in product regulation, settling disputes with governments, and intellectual property protection. Left-wing populists consider this a surrender of national sovereignty to corporate interests. Lori Wallach, of the leftleaning advocacy group Public Interest, and Jared Bernstein, a former adviser to Vice President Joe Biden, recently proposed that U.S. agreements should henceforth ditch investor-state dispute settlement, constraints on domestic regulation and The Fed nodded to these gains and dropped language it had used in previous statements that it expected inflation “to remain low in the near term.” The Fed’s new assessment suggests officials are more confident inflation is moving toward their 2% goal—setting the stage for an increase in Some Fed officials expressed concern about postelection market upheaval. December—but aren’t worried that it is rising too quickly. The Fed’s policy committee “judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives,” it said. Officials used similar language in their September statement but on Wednesday added the word “some” to indicate how much more evidence they need to see before moving. The word suggests they don’t need to see much more to raise rates. The committee voted 8-2 to hold rates steady. Kansas City Fed President Esther George and Cleveland Fed President Loretta Mester dissented, saying they would have preferred to raise the fed-funds rate by a other features that favor corporations. This might satisfy some critics on the left. Similar concessions by Canada and the EU overcame opposition to their deal. But it also leaves little to liberalize beyond tariffs, which are already quite low. Narrowing talks down to just that in the U.S. would make it hard to get the support of businesses and Republicans. For populists on the right, immigration is a bigger worry than free trade. But they too are concerned about more than just their pocketbooks. Many are bothered about cultural change, pressure on public services, and the inability to control the number of foreign entrants. Support for Mr. Trump is strong in counties where the immigrant population has grown most, even as unemployment falls there. So stronger wage growth likely won’t defuse the immigration backlash. What can help are immigration policies better tuned to the host country’s absorption capacity and labor force needs. Canada supports legal immigration by picking candidates for language and work skills, and keeping illegal arrivals to a minimum. In the U.S., a deal to legalize the illegal population will require satisfying skeptics that strong controls over illegal immigration are in place. B road majorities of the public still think free trade and immigration are good things. The bad news for globalizers is that the populists on the right and left who disagree are increasingly able to stop the process. quarter percentage point. Economic data released since the Fed’s September meeting show the labor market has continued to make progress, while economic growth has rebounded after a weak first half of the year. Employers added 156,000 jobs in September and the unemployment rate rose a tenth of a percentage point to 5% because the share of Americans seeking jobs continued to edge up, the Labor Department said. It is set to release its October employment report Friday. The economy grew at a 2.9% annual rate in the third quarter, up from 1.4% in the second quarter, the Commerce Department reported last week. Consumer confidence dipped last month after soaring over the summer, but consumer spending remained on track. Business investment, while still modest, picked up in the third quarter. The decision to stand pat despite a stronger case for moving reflected some Fed officials’ concerns about the potential market turbulence that could stem from the U.S. presidential election on Tuesday. Wednesday’s statement “carries enough room for the Fed to wriggle out come December if economic and financial conditions change” following the election, said Luke Bartholomew of Aberdeen Asset Management. CORRECTIONS  AMPLIFICATIONS The name of Ciena Corp., which sells optical communications technology, was misspelled as Cienna in a Technology article Wednesday about a Facebook Inc. effort in that market. An Off Duty article Saturday about Las Vegas was incorrectly acc...
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