The Wall Street Journal - 19.10.2019 - 20.10.2019

B2| Saturday/Sunday, October 19 - 20, 2019 **** THE WALL STREET JOURNAL.

THE SCORE

THE BUSINESS WEEK IN 7 STOCKS

JPMORGAN CHASE & CO.

Big banks have yet to feel the sting of recent rate

cuts and stock market turbulence. JPMorgan Chase

sharesrose 3% Tuesdayfollowing a strong third-

quarter earnings report, underscoring the continued

solid performance of the largest U.S. lenders at a time of

global tensions and economic worries. Still, JPMorgan exec-

utives warned that falling interest rates would eventually

take their toll on profits.



JPM

3%

PERFORMANCE OF BANK STOCKS THIS PAST WEEK

Source: FactSet

5

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0

1

2

3

4

%

JPMorgan

Chase

Citigroup

WellsFargo

Goldman

SachsGroup

Mon. Tues. Wed. Thurs. Fri.

few hours to spare this weekend,

you can attend your child’s soccer

game, read The Wall Street Journal

or study a disclosure for a broker-

age account you’re about to open.

Chances are, you’ll go to the

whole game, read most of the

Journal (thank you very much),

but end up opening the brokerage

account without plowing through

any of the fine print.

Being blazy keeps investors

from doing their homework.

Among households that own

mutual funds, for example, 22%

said fees and expenses are “not

very important” or “not at all im-

portant,” according to a 2018 sur-

vey by the Investment Company

Institute, a fund trade group.

In a study for the SEC, roughly

a quarter of investors said they

didn’t know which types of fees

they pay, while more than 20% in-

sisted they don’t pay any at all.

And because most of us regard

ourselves as ethical and compe-

tent, we often fail to understand

how widespread and harmful ad-

visers’ conflicts of interest can be.

Someone we trust seems much

less likely to put his interests

ahead of our own—even though

conflicts are the everyday cur-

rency of Wall Street.

So, before reporting fees and

expenses, disclosures should say

something like: “The cost of in-

vestments and financial advice is

the single most controllable factor

in how much your money can grow

over time. The more you pay, the

less you will get to keep.” Then

you should be able to see an ad-

viser’s fees compared with the av-

erage, and to the high and low,

costs available industrywide.

Before discussing conflicts of

interest, disclosures should say:

“Your financial advisers are obli-

gated to put your interests ahead

of their own. However, advisers

still may earn more on some ac-

tions or recommendations than on

others. That can lead them to put

their own interests ahead of

yours, raising your risk and lower-

ing your return. No adviser can

avoid all conflicts of interest or

claim to be conflict-free.” Then

you should be able to see how the

number and severity of a given

adviser’s conflicts compare to

those of other advisers.

Such comparisons should be vi-

sual: color-coded from red to

green, for instance, or arrayed on

a scale from 1 to 10. Form CRS

gives firms some latitude to do

that, but probably not enough.

And evaluating whether a par-

ticular adviser’s fees are competi-

tive will remain a guess. Before

Form CRS, no one could tell what

the average financial adviser

charges to manage $100,000,

$250,000 or $1 million. After Form

CRS, that won’t be much clearer,

because the reporting of fees still

isn’t thoroughly standardized.

AsRep.Castensays,“Let’scom-

municate as clearly and efficiently

as we can—more like Hemingway,

less like lawyers.”

Time for Advisers to Speak in Plain English

The SEC is making financial information simpler. But it’s not yet simple enough.

THE INTELLIGENT INVESTOR|JASON ZWEIG

An SEC spokesperson declined

to comment. The agency’s chair-

man, Jay Clayton, said in a speech

in July that the amount of feed-

back and investor testing that the

SEC used to develop Form CRS

was “extensive—perhaps even un-

precedented.” Firms have until

June 30, 2020, to comply with the

new rule.

The testing that the SEC con-

ducted while preparing the rule

isn’t entirely encouraging.

In an online survey, the Rand

Corp. studied how long people

spent reading the information in a

draft version of Form CRS. They

typically spent 46 seconds reading

about fees and costs and 22 sec-

onds on conflicts of interest.

Why didn’t people take more

time on such disclosures?

Most investors aren’t stupid or

irrational. We are, instead, what I

like to call “blazy”: busy and lazy.

In a world where information is

almost infinite, but time and at-

tention are limited, none of us

want to think any harder than we

have to.

So it’s rational to use shortcuts

to make decisions. If you have a

Being ‘blazy’—busy

and lazy—keeps

investors from doing

their homework.

ALEX NABAUM

If you think your

job is tough, try sim-

plifying financial dis-

closures.

A new Securities

and Exchange Com-

mission rule requires

brokers and financial advisers to

describe their services, fees and

conflicts of interest in “plain Eng-

lish” and a maximum of four pages.

But, as my dad used to say,

nothing is harder than making

something look easy. The SEC

needed roughly 165,000 words and

almost 170 pages in the Federal

Register to specify how advisers

and brokers should “reduce retail

investor confusion.”

The new disclosure, called

Form CRS, makes financial infor-

mation simpler—but not simple

enough. Investors don’t just need

to learn what to ask, but why the

answers matter.

“The simplest test of communi-

cation is whether the person

you’re communicating with under-

stands it,” Rep. Sean Casten (D.,

Ill.) told me this week. “And the

American people don’t seem to un-

derstand these disclosures.”

A bill sponsored by Rep. Casten

would require the SEC to conduct

detailed tests, including “one-on-

one cognitive interviews” with in-

dividual investors, before introduc-

ing new disclosures.

Rep. Casten’s bill, passed by the

House on Oct. 17, isn’t likely to

make it through the Republican-

controlled Senate.

YUM BRANDS INC.

Taco Bell Corp. said Tuesday

it voluntarily recalled about

2. 3 million pounds of sea-

soned beef from its restau-

rants and distribution sites

Friday after a customer re-

portedly found a metal shaving in an

order of food. The Yum Brands subsid-

iary said the products were removed

from restaurants in 21 states across

the Midwest, Southeast and Northeast.

Taco Bell also got hit by a supplier is-

sue this summer when it ran out of

10 -inch tortillas, prompting backlash

on social media from customers and

hurting sales. Yum Brands sharesfell

1.4% Tuesday.



YUM

1.4%

that use of J&J’s baby powder

and its other talc-containing

products caused ovarian cancer

and a rare cancer, mesothelioma.

Some of the lawsuits allege that

asbestos in the talc products con-

tributed to the cancer because as-

bestos is a known carcinogen.

While some of the lawsuits fo-

cus on the use of talcum powder

manufactured many years ago,

plaintiffs’ lawyers say that their

allegations aren’t limited to the

past and that the continuing

safety of J&J’s talcum powder is

an issue in the cases.

J&J says that numerous tests

over the past 40 years showed no

asbestos in its baby powder and

that its talc products are safe and

don’t cause cancer. J&J has won

some cases at trial but has lost

some costly verdicts in others.

“Our talc comes from one of

the cleanest mines in the world,”

which tests have shown to be as-

bestos-free, Susan Nicholson, vice

president of women’s health in

J&J’s medical safety division, said

on a conference call Friday.

Plaintiffs’ lawyers say that as-

bestos was present in J&J’s tal-

cum powder in greater concentra-

tions many decades ago and that

the concentrations dissipated as

J&J changed sources for the min-

ing of talc, a mineral.

Yet the lawyers say more re-

cent tests, including by experts

they have hired, have shown trace

amounts in products made since

the 1970s. J&J has disputed the

validity of those tests.

Ted Meadows, an attorney with

Beasley Allen in Alabama who has

represented plaintiffs in several

talcum-powder trials, said the re-

call will strengthen his arguments

at future trials.

It’s contrary “to what J&J has

been telling the public and telling

juries across the country,” he said.

The New Brunswick, N.J., com-

pany said it has a “rigorous test-

ing standard in place to ensure its

cosmetic talc is safe and years of

testing, including the FDA’s own

testing on prior occasions—and as

recently as last month—found no

asbestos.”

J&J said Friday the latest FDA

test indicated the presence of

chrysotile asbestos contamination

in well under 1% of the sample

from a single bottle. J&J said the

bottle was purchased from an on-

line retailer but didn’t identify the

retailer. It said the lot was pro-

duced and shipped in the U.S. last

year. An FDA spokeswoman de-

clined to comment immediately.

J&J said it is investigating the

matter, and at this early stage it

can’t confirm whether the sample

was taken from a bottle with an

intact seal, or whether the prod-

uct tested was authentic or coun-

terfeit.

Continued from page B

UBER TECHNOLOGIES INC.

Uber’s problems are not yet

in its rear-view mirror. The

ride-hailing company said

Monday it will cut about 350

jobs, or about 1 % of its work-

force, in units including its

food-delivery service Uber Eats and au-

tonomous driving. The move marks a

third round of layoffs for Uber as it

faces pressure to cut losses and assure

investors it can turn a profit. Earlier this

year, the company cut more than 8 00

workers from its product, engineering,

and marketing divisions. Uber’s shares

rose 3.3% Mondayto close at $ 31. 12 ,

but the stock remains well below its

May IPO price of $ 45.



UBER

3.3%

UNITEDHEALTH GROUP INC.

The ailing health care sector

is licking some of its wounds.

UnitedHealth Group and

Johnson & Johnson reported

earnings that topped analyst

expectations and raised full-

year profit guidance, sending shares

higher. UnitedHealthsurged 8.2% Tues-

day,lifting health care-related stocks

across the board. The health care sector

has been lagging behind the S&P 500

this year due largely to legal troubles.

Johnson & Johnson on Friday recalled

about 33 , 000 bottles of its Johnson’s

Baby Powder after the U.S. Food and

Drug Administration found a small

amount of asbestos in a single bottle.



UNH

8.2%

NETFLIX INC.

A drama is unfolding inside

Netflix: Will it be able to fend

off competition from Disney

and Apple? Netflix missed its

subscriber-growth target

Wednesday in its last quar-

terly report before Walt Disney Co. and

Apple Inc. enter the streaming-video

field with offerings that cost less than

Netflix’s most-popular plan. The com-

pany’s sharesrose 2.5% Thursdayas

Netflix’s U.S. subscriber base did grow in

the third quarter. Netflix played down

the looming threat from Disney, Apple

and others—but warned that there may

be some immediate impact to its own

ability to expand.



NFLX

2.5%

FACEBOOK INC.

Facebook’s Mark Zuckerberg

hit ‘like’ on free expression

Thursday as he pushed back

on calls for tighter controls

in a rare policy speech at

Georgetown University. The

chief executive said he worries that

“increasingly today across the spec-

trum, it seems like there are more peo-

ple who prioritize getting the political

outcomes that they want over making

sure that everyone can be heard.” Face-

book has spent much of the last two

years trying to quell concerns about

misinformation, hate speech and safety

issues on its platform. Facebook shares

gained 0.4% Thursday.



FB

0.4%

COCA-COLA CO.

Coca-Cola is getting some of

its fizz back. CEO James

Quincey said the company’s

sales rose in the latest quar-

ter thanks largely to varia-

tions on its namesake cola,

including some that contain less sugar

such as Coke Zero Sugar and its 7. 5 oz

“mini cans.” The beverage giant over the

past few years has expanded into cof-

fee, tea, dairy and water as consumers

shifted away from sugary sodas. It is

rolling out a coffee-flavored variant

called Coca-Cola Plus Coffee and a new

energy drink called Coca-Cola Energy.

Coca-Cola sharesrose 1.8% Friday.

—Francesca Fontana



KO

1.8%

J&J Recalls

Baby Powder

For Asbestos

The company said it

issued the withdrawal

after receiving the

FDA report Thursday.

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