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* * * * * FRIDAY, DECEMBER 28, 2012 ~ VOL. CCLX NO. 151 WSJ.com HHHH $2 .00

CONTENTSArena................................ D1Corporate News... B2-5Film................................... D8Global Finance........... C3Heard on the Street C10In the Markets.......... C4

Mansion......................... M1Market Data................ C5Opinion.................. A13-15Sports.............................. D9U.S. News................. A2-6Weather Watch........ B6World News... A7-10,16

DJIA 13096.31 g 18.28 0.1% NASDAQ 2985.91 g 0.1% NIKKEI 10322.98 À 0.9% STOXX600 280.60 À 0.04% 10-YR. TREAS. À 12/32 , yield 1.716% OIL $90.87 g $0.11 GOLD $1,662.60 À $2.80 EURO $1.3237 YEN 86.11

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Vital Signs

Homeownership lookslike a relative bargain, asmortgage rates keeptumbling to near-recordlevels. The fixed rate for a30-year mortgage fell to anaverage of 3.35% for the pastweek, edging down from theprevious week’s 3.37%.According to Freddie Mac,for all of 2012, the 30-yearfixed-rate mortgage averaged3.66%, the lowest annualaverage in at least 65 years.

Fixed rate on a 30-yearmortgage

Source: Freddie Mac

'09 '10 '11 '12’080

2

4

6%

>

Working to forestallonerous regulation, prac-

titioners of high-frequencytrading and their lobbyistscite research, some of itseeded by the firms, thatsays their trading is benefi-cial to the broader market. A1n Consumers are worryingmore about the economic out-look, according to a new reportsuggesting they have begunfocusing on possible tax in-creases and government spend-ing cuts in the new year. A4n The Dow industrials re-couped most of a 151-point in-traday loss amid speculationabout budget talks, ending 18.28points lower at 13096.31. C4n The stock market’s feargauge vaulted above aclosely watched level amid areturn of jitters about theimpact of the fiscal cliff. C4nA contract dispute that mayclose East Coast ports on Sun-day hinges on a 1960s-era payprovision that has balloonedwith greater cargo volumes. B3nWal-Mart plans to monitorsubcontractors’ U.S. warehousesafter protests, fines and law-suits stemming from complaintsabout worker treatment. B4nApple CEO Cook received anestimated $4.2 million in com-pensation for this year, a rela-tively modest figure comparedwith his 2011 pay package. B2n Berkshire Partners isspending more than $2 billionto buy and merge two pro-viders of fiber-optic networks,Lightower and Sidera. B3n Raj Rajaratnam agreed topay $1.45 million to resolvean SEC lawsuit related to hisalleged insider trading basedon tips from Rajat Gupta. C3n SeaWorld Entertainmentfiled for an initial public of-fering, three years after a$2.3 billion buyout by private-equity shop Blackstone. B3n Japanese leaders’ deter-mination to weaken the yencould complicate Tokyo’s re-lations with the U.S. and othermajor trading partners. A7n Finra fined five financialfirms a total of $4.5 millionfor allegedly funneling moneyfrom California bond-sale pro-ceeds into lobbying efforts. C3n Insurers are expected toface a host of lawsuits bybusinesses over coveragedisputes stemming from su-perstorm Sandy claims. C1n Toshiba said it is negoti-ating with three parties tosell up to 16% of its Westing-house Electric nuclear-power subsidiary. B4n The mutual-fund industryis appealing a ruling thatwould require commoditiesfunds to register with theCFTC in addition to the SEC. C2

n Russia’s proposed ban onU.S. adoptions raised tensions.Putin said he would sign thebill to ban U.S. citizens fromadopting Russian children—retaliation for a U.S. law topunish Russian human-rightsviolations. The proposal hasbecome an international is-sue, raising pressure on theWhite House to respondmore forcefully at a timewhen it is seeking Moscow’ssupport in Syria. A1, A10A ban, set for Jan. 1, wouldhit U.S. adoption agenciesand some 1,000 householdstrying to adopt in Russia.n As the fiscal cliff looms,Obama invited congressionalleaders to a last-ditch meet-ing this afternoon, and theHouse plans to reconvene onSunday. But the Senate’sReid said deal prospects be-fore year-end are low. A1, A4n EPA chief Lisa Jacksonsaid she would leave herpost in early 2013, ending atumultuous four years. GOPand industry groups had of-ten criticized her. A2n Hospitals nationwide areconfronting a surge in babiesborn dependent on drugssuch as oxycodone, a conse-quence of the prescription-pain-pill epidemic. A3n China’s seafood hunger istesting relations with othercountries. Argentina said ithad captured two Chinesefishing vessels that it saidwere illegally fishing. A7n Chinese authorities ap-peared to tighten their gripover a restive portion ofwestern China following aspate of ethnic Tibetans set-ting themselves on fire. A10n The U.S. military endedplans to equip the AfghanAir Force with Italian-madetransport planes, a setbackin building a more self-suffi-cient Afghan military. A16n Kurds rallied in Turkey onthe anniversary of a deadlymilitary jet attack. A16nMubarak’s health is morefragile. The ousted Egyptstrongman was moved to anarmy hospital from a prisonhospital after a fall. A10n The State Department isclosing its embassy in theCentral African Republic asviolence there escalates. A10n Smokers will be bannedin more U.S. public places,with some rules set to kickin on New Year’s Day. A6n New York City’s subwayis preparing its first smart-phone application, catchingit up in the tech race. A2n Florida paleontologistEric Prokopi pleaded guilty toconspiracy in connection withimporting dinosaur fossils.n Rep. Markey plans to runfor the Massachusetts Sen-ate seat of John Kerry. A6n Died: Retired Gen. NormanSchwarzkopf, 78, led 1991’sOperation Desert Storm. A6… Fontella Bass, 72, St. Louissoul singer of “Rescue Me.”

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MANSIONReal-Estate

GameChangersOf theYear THE BEST OF 2012

ARENA

10

What’s News–i i i i i i

The chief executive of KnightCapital Group Inc. told Congressin June that rapid-fire trading,the backbone of its business, is aboon to the overall stock market.

He cited a studythat cautionedregulators againstunintended con-sequences ofcurbing the prac-

tice known as high-frequencytrading.

It was a 2010 study Knight it-self had commissioned. Its leadauthor that year joined theboard of a stock-exchange com-pany that caters to high-speedtraders and is partly owned byKnight.

Less than two months afterthe Knight executive’s testimony,Knight nearly imploded whencomputerized trades went hay-wire, costing it $461 million inlosses. Last week, the hobbledfirm agreed to a takeover.

High-frequency trading firmsare fighting to fend off regula-tion as scrutiny of their practiceof unleashing blizzards of orderscoincides with repeated techni-cal glitches in the markets. Asthe firms work to convince pol-icy makers their practices arebenign or even beneficial, one oftheir primary tools has been re-search seeded by the industry it-self, promoted by lobbying thathas increased in recent years.

Yet research conclusions pre-sented as firm endorsements of

PleaseturntopageA12

Congress and the White Housetook small steps toward breakingthe budget impasse Thursday, butDemocrats and Republicans grewincreasingly fearful they won’t beable to avert the tax increasesand spending cuts known as thefiscal cliff, a prospect that is un-nerving consumers and investors.

President Barack Obama in-vited congressional leaders to theWhite House on Friday afternoon

for a last-ditch effort to broker adeal, as the Senate returned toWashington on Thursday. HouseGOP leaders said in a Thursdayconference call with Republicans,who are growing nervous abouttheir party being blamed for thedeadlock, that the House will re-convene Sunday evening.

It is still possible the two sidescan reach a deal, especially withthe leaders meeting Friday. Anyresolution would be a scaled-backversion of the package Mr.Obama and congressional leaders

had anticipated passing after theNovember election. The WhiteHouse is pressing for the Senateto extend current tax rates for in-come up to $250,000, extend un-employment benefits, keep thealternative minimum tax fromhitting millions of additional tax-payers and delay spending cutsset to take effect in January.

The 11th-hour strategy carriesenormous risk because it leavesno margin for error in Congress’sbalky legislative machinery. Sen-ate Majority Leader Harry Reid

(D., Nev.) said the prospects forpassage of a bill before the lastday of the year are fading rapidly.“I have to be very honest,” hesaid. “I don’t know time-wisehow it can happen now.”

Anxiety about Washington’sability to resolve its budget bat-tles is roiling the economy. Con-ference Board figures showedthat consumer confidence fell in

PleaseturntopageA4

BY JANET HOOKAND CAROL E. LEE

Cliff Talks Down to the WireBoth Sides to Meet at White House Today; Any Deal Is Likely to Be Limited

MOSCOW—President VladimirPutin said Thursday he will signa bill banning U.S. citizens fromadopting Russian children, rais-ing tensions with Washington asthe Obama Administration is try-ing to win Moscow’s support toend the war in Syria.

Russian officials portrayed thelatest legislation as a tit-for-tatretaliation against a new U.S. lawthat seeks to punish Russians ac-cused of human-rights violations.

Moscow’s legislation—whichwould also ban U.S.-funded civicgroups in the country—wouldput concrete action to rising Rus-sian complaints, voiced most ve-hemently by Mr. Putin, that theU.S.’s own human-rights failingsgive it no credibility to lectureothers.

But the proposed adoptionban has exposed Mr. Putin tocriticism both internationally andwithin his own government. Crit-ics allege that the law makes po-litical pawns out of Russian or-phans, whose living conditionscan be dire and prospects foradoption often slim.

The Russian ban, if signed,would go into effect Jan. 1. Adop-tion workers and Russian offi-cials said it would effectively haltnew adoptions and end those al-ready in progress.

The Russian moves raise pres-sure on the White House to re-spond more forcefully, highlight-ing the challenge the ObamaAdministration faces in trying tocontinue its “reset” policy of im-proving relations with Russianow that Mr. Putin has returnedto the presidency.

Mr. Putin’s election campaignearlier this year played heavilyon anti-American themes. TheKremlin later moved to crackdown on critics, with laws limit-ing protests and upping pressure

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BY GREGORY L. WHITE

Putin SetToSignBan onU.S.Adoptions

BY JENNY STRASBURGAND SCOTT PATTERSON

High-Speed Traders RaceTo Fend Off Regulators

BORN INTO PAIN: A Tampa baby receives doses of narcotics to combat withdrawal from prescriptiondrugs his mother took while pregnant. Hospitals across the U.S. are seeing a wave of such newborns. A3

JasonHenry

forTh

eWallS

treetJournal

Handing Down a Drug-Dependent Legacy

Making Their CaseHigh-frequency trading firmsramped up payments tolobbyists in recent years.

Source: OpenSecrets.orgThe Wall Street Journal

*2012 data are annualized based on figuresthrough October.Note: Spending is for firms whose primarybusiness is high-frequency trading; it doesn’tinclude all firms that do such trading.

$3.0

0

0.5

1.0

1.5

2.0

2.5

million

2008 '09 '10 '11 '12

$2.1 million*

Coke Calls a Doc to Put FizzIn Sales, but Is He the Real Thing?

i i i

A 19th-Century Pharmacist’s ImageAdds Mystery; 2.5 Miles of Memorabilia

Doc Pemberton, the 19th-cen-tury pharmacist who inventedCoca-Cola by mixing naturally caf-feinated kola nuts with cocaleaves, which naturally contain co-caine, is selling Coca-Cola again.

Coke won’t commenton whether its originalsoft drink ever containedcocaine. Until lately, ithasn’t had much to sayabout Doc Pemberton ei-ther. Now, though, it’sleaning on his legend toput some fizz back intoits flagging U.S. colasales.

Doc Pemberton—whose real name wasJohn Stith Pemberton—is regularly featured on an elec-tronic billboard for all to see asthey enter downtown Atlanta. Hislikeness often greets visitors tothe company’s website and Face-book page. Pictures are posted on-

line of him wrestling with an alli-gator and walking on the moon.He has more than 100,000 follow-ers on Twitter.

Doc makes an irreverent newpitchman compared to Coke’s tra-ditional mainstays—polar bearsand Santa—conjuring up a myste-

rious time in Coke’s past,which is perhaps whatthe global marketerneeds right now.

But here’s a mysterythe company hadn’t an-ticipated: What did DocPemberton look like, andis Coke’s image of ahandsome, robustlybearded Doc the realthing?

A well driller in Maineis betting it isn’t. He re-

cently plunked down $17,825 at anauction to buy an 1888 photo-graph the auction house claimedto be the only original of Doc. Itdepicts a slight man who is bald-

PleaseturntopageA12

Doc Pemberton

BY MIKE ESTERL

What’s YourBusiness News IQ?Take our annual year-endquiz and find out. B1

Consumer outlook darkens..... A4What’s expiring at year-end... A4

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