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* * * * MONDAY, JANUARY 5, 2015 ~ VOL. CCLXV NO. 3 WSJ.com HHHH $3 .00

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CONTENTSAbreast of the Market C1Corporate News.... B2,3Global Finance............ C3Heard on the Street C6Law Journal................. B5Markets Dashboard C4

Media............................... B4Moving the Market C2Opinion.................. A15-17Sports.............................. B8U.S. News................. A2-4Weather Watch........ B7World News... A6-13,18

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What’sNews

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World-Widen Iowa Democratic leadersexpressed qualms over theprospect that Clinton couldwin the presidential caucuseswithout a serious challenge. A1n North Korea slammed newU.S. sanctions and accusedWashington of acting with lit-tle evidence linking Pyong-yang to the Sony hacking. A13n Alleged Boston Marathonbomber Tsarnaev is set to goon trial this week in a caseexpected to hinge on duelingportraits of the suspect. A3nHuckabee’s announcementthat he is weighing a GOPpresidential bid boosts pres-sure on other potential social-conservative candidates. A4n New York police officersagain turned their backs asMayor de Blasio spoke at afuneral for a slain officer. A3nEgypt put 26men on trial for“debauchery,” in what rightsgroups call part of a broadercrackdown on gaymen.A8n Pope Francis nominated15 new cardinals, with themajority hailing from small,developing countries. A6n The AirAsia crash probe isrevealing the shortcomings ofsafety procedures used byregulators and the carrier. A7nAU.S. health-careworkerwho had “high-risk exposure”to Ebola in Sierra Leone arrivedat a Nebraska hospital.A2nPakistani airstrikes and asuspected U.S. drone strikekilled 38 militants near the Af-ghan border, officials said. A8n Died: Stuart Scott, 49,longtime ESPN anchor. B4

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Vanguard received a re-cord $216 billion of inflows

in 2014, accentuating a trendaway from fundmanagers andtoward passive investing. A1nU.S. banks plan to roll outnew credit cards this year de-signed to foil counterfeiters butare steering clear of advanced“chip and PIN” technology. A1nWall Street strategists seethe S&P 500 gaining 8.2% thisyear despite a rate rise, fueledby U.S. economic growth andstrong corporate earnings. C1n Fed officials and economistswarned of potential turbulenceas the central bankmoves toraise interest rates this year forthe first time since 2006. A2n The CFPB is seeking to es-tablish the first federal rules forpayday lenders amid concernsthe debt can trap consumersin a cycle of borrowing. C1nHouse Republicans areconsidering a number of waysto stymie the FCC’s plannedregulations on broadband In-ternet providers in 2015. B1n The pilots union boardagreed to accept American’sfinal contract proposal andput the deal out to a speedymembership vote. B3n The office-vacancy ratewas nearly flat in the fourthquarter from a year earlier de-spite an increase in hiring. A3n China’s Xiaomi said itssmartphone shipments morethan tripled last year and thatsales more than doubled. B3nMovie box office in the U.S.and Canada fell 5.3% in 2014,the worst results since 2011. B4

Business&Finance

Iowa Democratic leaders saythey are troubled by the prospectthat Hillary Clinton could win thestate’s 2016 presidential caucuseswithout a serious challenge, aview primarily rooted in a desirefor a more liberal candidate or atleast a robust debate about theparty’s policies and direction.

Interviews with more thanhalf of Democratic chiefs inIowa’s 99 counties show a stateparty leadership so far reluctantto coalesce behind Mrs. Clinton.County Democratic officials alsovoiced qualms about Mrs. Clin-ton’s ability to win a generalelection and her fundraising tiesto Wall Street firms and corpora-tions, which remain a target ofliberal ire.

Many county officials saidthey would like to see senatorsincluding Elizabeth Warren ofMassachusetts and Bernie Sand-ers of Vermont enter the race,though they were split overwhether any could gain tractionand overtake Mrs. Clinton.

“My heart wouldn’t be in itfor Hillary to the extent that itmight be if it was a differentcandidate,” said Jennifer Her-rington, chair of the Page CountyDemocrats in southwest Iowa. “Iadmire Hillary, she’d be a greatpresident, but you know, sheisn’t my first choice I guess.”

Of course, candidates can se-cure a party nomination withoutwinning Iowa, an idiosyncraticcontest that tends to reward can-

PleaseturntopageA4

BY REID J. EPSTEINAND PETER NICHOLAS

IowansSlowtoEmbraceClinton

Investors gave stock pickers aresounding vote of no confi-dence in 2014, pouring $216 bil-lion—a record inflow for anymutual-fund firm—into Van-guard Group, the biggest pro-vider of index-tracking products,according to preliminary figuresfrom the mutual-fund group.

Those large inflows accentu-ate a trend away from fund man-

agers and toward so-called pas-sive investments that mimicindexes and other benchmarksfor a fraction of the cost of thetypical mutual fund.

Active investments have beenhurt by years of subpar perfor-mance and high fees. Datathrough November, the latestavailable, show investors pulled$12.7 billion in 2014 from ac-tively managed U.S. stock fundswhile plowing $244 billion into

similar passively managed funds,according to fund-research firmMorningstar Inc.

Even hedge funds, which caterto wealthy investors, have lostsome of their shine. Hedge fundslagged behind major indexes in2014 by a wide margin but stillcontinue to attract money.

The merits of passive invest-ing are becoming conventionalwisdom among retail investors.In addition, many financial ad-

visers have incentives to recom-mend low-cost funds becausethey can charge their own feeswithout giving investors stickershock.

Vanguard, which has longsold index and exchange-tradedfunds that track baskets of secu-rities, has been the prime bene-ficiary of the shift, said analystsand industry observers.

The Malvern, Pa., company’sPleaseturntothenextpage

BY KIRSTEN GRIND

Investors Shun Stock PickersIndex Funds Run by Vanguard See Record Inflows as Savers Turn to Autopilot

Retired Southwest Airlines co-founder HerbKelleher remembers a Texas bumper sticker fromthe late 1980s, when falling energy prices trig-gered an ugly regional downturn: “Dear Lord, giveme another boom and I promise I won’t screw itup.”

Texas got its wish with another energy-drivenboom, and now plunging oil prices are testingwhether the state has held up its end of the bar-gain.

The Lone Star State’s economy has been a na-tional growth engine since the recession ended, ex-panding at a rate of 4.4% annually between 2009and 2013, twice the pace of the U.S. as a whole.

The downturn in energy prices now has trig-gered a debate over whether Texas simply gotlucky in recent years, thanks to a hydraulic-frac-turing oil-and-gas boom, or whether it hit on an

economic playbook that other states, and the coun-try as a whole, could emulate.

One in seven jobs created nationally during the50-month expansion has been created in Texas,where the unemployment rate, at 4.9%, is nearly apercentage point lower than the national average.

But a big dose of the state’s good fortune comesfrom the oil-and-gas sector. Midland, which sitsatop the oil-rich Permian Basin, had the fastestweekly wage growth in the country among largecounties: 9% in the 12 months ending June 2014.

Now that oil prices have plunged nearly 51%from their June peak to $52.69 a barrel, some Tex-ans sobered by memories of past energy busts arebracing for a fall. The argument among economistsand business leaders isn’t whether the state will behurt, but how badly.

Mr. Kelleher is among the Texans predictingthis won’t be a replay of the 1980s oil bust andbanking crisis, which drove the state unemploy-

PleaseturntopageA14

By Jon Hilsenrath,Ana Campoy

and Ben Leubsdorf

‘THIS IS A TEST’

Plunging Oil Prices ChallengeTexas’ Economic Boom

Big U.S. banks are steeringclear of an advanced securitymeasure used in credit cardsaround the world, opting for asystem that is more convenientfor shoppers but may leave themvulnerable to fraud.

This year, firms ranging fromJ.P. Morgan Chase & Co. to Dis-cover Financial Services Inc. areexpected to roll out more than ahalf-billion new credit cards em-bedded with computer chips thatcreate a unique code for eachtransaction, making counterfeit-

ing much more difficult.In a retreat for the industry,

however, the new cards don’t usesome technology that could pre-vent fraud if a card is lost or sto-len.

Instead of requiring customersto put in a personal identificationnumber, or PIN, the new cardsneed users to authenticate credit-card transactions the same waythey often do now, with a signa-ture. PINs are widely consideredto be more secure than signa-tures, which can be easily copied.

The more advanced “chip-and-PleaseturntopageA18

BY ROBIN SIDEL

New Credit Cards FallShort on Fraud Control

Catholic Church Reaches Out to Emerging World for New Cardinals

AlessandroBianchi/

Reuters

NEW YORK—Like manyFrench expatriates here, ArnaudSchmitz likes to celebrate Jan. 6the traditional way: by sharing aking cake with his family andseeing who ends up biting on theplastic or ceramic trinket hiddensomewhere inside the almondand puff-pastry confection.

Whoever lands the slice withthe doodad is crowned king orqueen for the year to come—echoing the feast of the Epiph-any, or Three Kings Day, whichmarks the three wise men’s bib-lical visit to the baby Jesus. Bak-eries selling the cake often in-clude a paper crown for thenewly anointed, making the tra-

dition particularlyappealing to smallchildren.

The king cake,whose originsdate back to theRoman era, is en-joyed in manyshapes and tastesworld-wide be-tween Jan. 6 andMardi Gras, thelast day before Lent. It is espe-cially popular in France, wheremillions of galettes des rois aresold in the weeks surroundingthe Epiphany.

For Mr. Schmitz, though, thetradition comes with a real sur-prise: The cake he buys has notrinket in it.

“I think they’rejust afraid some-body might chokeon it,” says Mr.Schmitz, whomoved to NewYork more than adecade ago towork in the finan-cial-services in-dustry. He saysthe charm usually

is provided separately for thecustomer to hide himself if hewishes.

That is the case at MaisonKayser, a French bakery groupthat bakes the trinket into itsgalettes in most of the dozen orso countries it operates in—but

PleaseturntopageA14

BY DAVID MARCELIS

The Surprise in Your King Cake Might Be No Prize at Alli i i

For Safety, Some Bakeries Leave Out Baked-In Trinkets; Children Cry

Kayser’s galette des rois

FRESH LOOK: Pope Francis, above, nominated 15 new members to the College of Cardinals on Sunday, including nine from the emerging world,reflecting Catholicism’s changing face. The new batch includes three each from Asia and Latin America, and two each from Africa and Oceania. A6

GOP opts for middle ground... A4 Huckabee weighs bid................. A4

Cheap oil boosts economies in Asia............................ C3

Mexico

Panama

Uruguay

Cape VerdeEthiopia

PortugalItaly (2)

Myanmar

Thailand

Vietnam

Tonga

New Zealand

France

Spain

Countries that will gain a cardinal

Note: Nominees become cardinals on Feb. 14

Source: the Vatican

The Wall Street Journal

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What’s Ahead for BusinessWhat’s Ahead for BusinessSPORTS Jason Gay’s Wish List for 2015

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