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* * * * * * WEDNESDAY, DECEMBER 4, 2013 ~ VOL. CCLXII NO. 132 WSJ.com HHHH $2 .00

Forget Internet IPOs: One ofthe best investments of the pastcouple of years was a bankruptairline.

When American Airlines par-ent AMR Corp. filed for bank-ruptcy protection in November2011, its stock plunged to 20cents a share and was soon de-listed from the New York StockExchange. The entire companywas valued at less than $90 mil-lion—less than the typical listprice of a new passenger jet—andits executives and lawyerswarned shareholders they couldbe wiped out, as usually happensin Chapter 11 reorganizations.

Today, as American preparesto close a merger with US Air-ways Group Inc., the stock tradesat just below $11, and a smallgroup of investors who bet on itwhen it was flying low are poisedto reap one of the biggest bank-

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BY JACK NICASAND MIKE SPECTOR

BankruptAirline SharesGo Sky HighFor Investors

U.S. regulators are expected toapprove next week a toughenedversion of the Volcker rule, ush-ering in an era of stricter over-sight for Wall Street with re-strictions on the trading bankscan do with their own money.

Four of the five agencieswrestling over the rule since itwas proposed by President Ba-rack Obama in January 2010 said

Tuesday that they will vote Dec.10 on a finished version of thetrading curbs. The fifth agency,the Securities and ExchangeCommission, is likely to take ac-tion “on or about” the same day,SEC Chairman Mary Jo Whitesaid.

Barring a last-minute sur-prise, the votes will result intighter restrictions on certaintrading activities that go beyondwhat regulators had agreed to

just a few weeks ago, accordingto people familiar with the mat-ter. Since then, regulators havebeen locked in tense negotiationsthat threatened to upend theprovision.

Under the final rule, regula-tors are expected to closely tracktrading activities with an eye onwhether certain trades known ashedges are designed to post aprofit rather than offset risksthat accompany trading with cli-

ents. The finished version of theVolcker rule is likely to requirethat hedges be designed to re-duce specific risks, according toa portion of the proposed rulereviewed by The Wall StreetJournal.

Hedging activity should shrinkor alleviate “one or more spe-cific, identifiable risks” such asmarket risk, currency or foreign-exchange risk, and interest-raterisk, the language says.

“This is the new era of BigBrother banking,” said MichaelMayo, an analyst with CLSAAmericas. “Now banks’ fortunesare more closely tied to the gov-ernment.”

Critics say the Volcker ruleleaves the U.S. financial industrymore vulnerable to competitionfrom other countries and couldharm the broader economy.Goldman Sachs Group Inc., J.P.

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BY SCOTT PATTERSON

Banks Brace for Tighter RegulationRegulators Expected to Pass Strict Version of Long-in-the-Making Volcker Rule to Restrict Trading

Vice President Joe Biden’svisit to Beijing on Wednesdaywas long intended to boost tradebut instead has become an ur-gent diplomatic mission.

Mr. Biden now has the task ofcalming tensions between Chinaand its neighbors to avoid fur-ther escalations and the poten-tial for direct conflict over Bei-jing’s recent declaration of a newair-defense zone over territoryalso claimed by Japan.

His arrival in China is Wash-ington’s first chance for high-level, face-to-face discussionsabout the rising tensions, amongother areas of dispute.

Separately, the Obama admin-istration has alerted South Koreathat it is concerned aboutSeoul’s plan to let a Chinesetelecommunications giant, Hua-wei Technologies Inc., developSouth Korea’s wireless network

Mr. Biden, who was scheduledto hold back-to-back meetingswith President Xi Jinping onWednesday before dining withthe Chinese leader, preceded thevisit with a tone that was firmbut cordial—apparently aimed atavoiding a public fight while atthe same time assuring jitteryallies that the U.S. was weighingin on the territorial dispute.

On a stop in Tokyo on Tues-day, Mr. Biden voiced concernabout the Chinese decision lastmonth to establish the air zone,which encompasses disputed is-lands in the East China Sea,known by the Japanese as the

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By Julian E. Barnes inWashington, Yuka

Hayashi in Tokyo andJeremy Page in Beijing

StakesEscalateFor BidenIn Beijing

Detroit Moves Forward in Largest-Ever Municipal Bankruptcy

LOOKING FOR FRESH START: Mayor Dave Bing walks in front of a mural depicting the city in sunnier times, after a judge said the former industrialpowerhouse was eligible to reorganize. In a key part of the case, the judge said Detroit’s public pension holders aren’t entitled to special protection. A4

RebeccaCo

ok/R

euters

When it comes to knitting,Lydia Schoenbein thought shehad seen it all. The 73-year-oldretired nursing-home supervisorfrom Morton, Ill., learned to knitand crochet when she was grow-ing up in Germanyand can make every-thing from socks andshawls to cable-knitsweaters.

So when her 22-year-old granddaugh-ter, Carly Hill, visitedand showed off herown creation—acrude-looking, rope-like cream scarf—“Iwas flabbergasted, totell you the truth,” re-calls Ms. Schoenbein.The accessory hadn’t exactlybeen handmade. It was the prod-uct of a new cultural yarn: armknitting.

An increasingly popular activ-

ity among younger do-it-yourselfenthusiasts, arm knitting usesthe forearms in lieu of knittingneedles.

The resulting scarves andblankets feature rows of loopsthat are 2.5” to 4” wide, depend-ing on the diameter of a given

knitter’s arm. Owingto the large, holeyrows, an entire projectcan be completed inless than 30 minutes—a fraction of the timeneeded to whip up ascarf using knittingneedles.

Arm knitting com-bines several thingsthat are appealing tomillennials: craftsprojects, chunky knit-wear (featured on the

fall 2013 runways), social mediaand instant gratification. It justso happens that a popular itemto make is a so-called infinity

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BY RACHEL DODES

Arm-in-Arm, MillennialsMarch Into the Future of Knitting

i i i

Web-Spun Craze Trades Needles for LimbsToMake Chunky Sweaters and Loopy Scarves

Carly Hill andher arm-knit scarf

DJIA 15914.62 g 94.15 0.6% NASDAQ 4037.20 g 0.2% NIKKEI 15749.66 À 0.6% STOXX600 319.13 g 1.5% 10-YR. TREAS. À 8/32 , yield 2.773% OIL $96.04 À $2.22 GOLD $1,221.70 g $0.60 EURO $1.3590 YEN 102.51

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TODAY IN PERSONAL JOURNALTODAY IN PERSONAL JOURNAL

REALLY PERSONAL SHOPPINGPLUSPLUS When to Go Back to the Job You Quit

CONTENTSBusiness Tech............ B4Corporate News B1-3,5,8Global Finance............ C3Heard on Street...... C16Home & Digital .... D1-3In the Markets........... C4

Leisure & Arts............ D5Property Report C10-14Opinion.................. A15-17Sports.............................. D6U.S. News................. A2-6Weather Watch........ B9World News......... A8-13

s Copyright 2013 Dow Jones & Company.All Rights Reserved

>

What’sNews

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World-WidenBiden voiced concern aboutBeijing’s establishment of anair-defense zone ahead of talkswith China’s leader, as he seeksto calm regional tensions. A1nThe U.S. is raising concernswith Seoul about plans to letChina’s Huawei develop SouthKorea’s wireless network. A8nThe U.S. and its allies haveopened talks with Islamist mili-tias in Syria. Saudi Arabia hasmoved to arm one group.A1nA judge declared Detroit el-igible for bankruptcy andruled that pensions aren’t pro-tected from potential cuts. A4n Illinois lawmakers passedan overhaul of the state pub-lic-employee retirement sys-tem. Unions vowed a fight. A4n Ukraine’s opposition failedto pass a no-confidence voteand the premier apologizedfor a police crackdown. A10nNorth Korea’s No. 2 leader,the uncle of dictator KimJong Un, appears to havebeen removed from power. A9n The engineer in Sunday’sfatal rail crash in New Yorkmay have lost focus shortlybefore the train derailed. A2n Thailand’s governmentand opposition protestersreached an uneasy truce aftera week of violent clashes. A11n Iran and six major powerswill meet next week to startwork on implementing the nu-clear accord, the EU said. A12nThe House voted to extenda ban on guns that can’t bespotted by metal detectors. A3n A Bolshoi dancer was sen-tenced to six years in prisonover an acid attack. A10

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A toughened version of theVolcker rule curbing

banks’ trading activity is ex-pected to win the approval ofU.S. regulators next week. A1The Richmond Fed’s chiefsaid the bankruptcy codeshould change to deal with alarge financial firm’s failure. C2n The Chinese yuan passedthe yen and euro to becomethe No. 2 currency in trade fi-nance after the dollar. C1n The EU is set to levy heavyfines on some major banksover alleged efforts to rig in-terbank lending rates. C3n The Dow dropped 94.15points, or 0.6%, its biggestdecline in a month, as inves-tors cashed in gains. C1n Some apparel chains areseeing inventory growth faroutpacing sales growth. B1n U.S. car sales rose 9% inNovember from a year ear-lier, aided by promotions. B5nAn Abercrombie investorsaid the retailer should replaceits CEO and consider a sale. B2n BJ’s private-equity ownershave expressed interest inbuying Hess’s gas stations. B5n Smaller mortgage firmsare gaining market share asbig banks retrench. C1n Russia cut its economicgrowth forecasts for 2013and the next two years. A10n SpaceX launched its firstcommercial satellite intohigh-earth orbit. B9nHotfile was ordered to pay$80million in damages to amovie-industry trade group. B5

Business&Finance

The U.S. and its allies have helddirect talks with key Islamist mili-tias in Syria, Western officials say,aiming to undercut al Qaeda whileacknowledging that religious fight-ers long shunned by Washingtonhave gained on the battlefield.

At the same time, Saudi Arabia is taking its ownoutreach further, moving to directly arm and fundone of the Islamist groups, the Army of Islam, de-spite U.S. qualms.

Both the Western and Saudi shifts aim toweaken al Qaeda-linked groups, which Western of-ficials now concede are as great a danger in Syriaas President Bashar al-Assad’s regime.

Some officials in Western capitals remain waryabout courting these groups, whose ultimate goal

is to establish a state ruled by Is-lamic law, or Shariah, in Syria.Throughout the conflict, the U.S.and its allies have balked at sendingpowerful arms to any Islamists,fearing such shipments could end

up in the hands of al Qaeda-backed forces.The Saudis and the West are pivoting toward a

newly created coalition of religious militias calledthe Islamic Front, which excludes the main alQaeda-linked groups fighting in Syria—the NusraFront and the Islamic State of Iraq and the Sham,known as ISIS.

Over the past two months, the militias, whichcommand the loyalty of tens of thousands of fight-ers driving the conflict in Syria, have begun to con-

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By Stacy Meichtry inParis, Ellen Knickmeyerin Riyadh and AdamEntous in Washington

END RUN ON AL QAEDA

U.S., Allies Reach OutTo Syria’s Islamist Rebels

Parole for Kozlowski

Former Tyco chief,jailed for fraud, is setfor January release. B2

JoannLublin/The

WallS

treetJournal

U.S. privately airs concerns withSeoul over a Huawei deal....... A8

Milestone for the yuan.............. C1

Call 1-800-iShares for a prospectus, which includes investment objectives, risks, fees,expenses and other information you should read and consider carefully before investing.Risk includes loss of principal. 190% of all institutional investors (pensions, foundations andendowments; assetmanagers; insurance companies and investment advisors) surveyed in2013U.S. Exchange Traded Funds StudybyGreenwichAssociates used iShares ETFs. Survey included176 institutional investors already using ETFs, interviewed 2/2013–4/2013. Distributed byBlackRock Investments, LLC.©2013BlackRock, Inc. All rights reserved. iShares®,BlackRock®and the iShares Core ETFs graphic are trademarks of BlackRock, Inc. iS-9152-0713

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