Cory Driebish (2:43)

The number of publicly traded companies in the US has come down a lot. It's now roughly 3,700, according to the center for Research and Security Prices and and that's down about 17% from just three years ago. And one of the reasons why we're seeing such a decrease in publicly traded companies is that would be Public companies and their advisors cite the time consuming and costly work that's required to list and maintain publicly traded shares. And one of those really costly things is having to report your financial results every quarter.

Caitlin McCabe (3:23)

And now to some major deal news. Anglo American and Tech Resources have agreed to merge to create a copper producer valued at more than $53 billion. The tie up comes as miners look to shore up access to copper, which is a key metal for renewable energy products and data center wiring. Meanwhile, a new alliance between two of Europe's leading tech companies has emerged today with Dutch chip equipment giant ASML investing more than $1.5 billion in French artificial intelligence startup Mistral AI. The deal gives ASML an 11% stake in the Paris based company and gives Mistral fresh firepower in its bid to develop cutting edge AI models and data centers that are independent from its American competitors. It's also a welcome development for Europe, which has put more emphasis on homegrown AI as tensions have grown with the US over trade and tech policy. OpenAI's bid to restructure itself into a for profit company is growing increasingly complicated in the face of investigations from state regulators and pushback from some of California's biggest nonprofits and philanthropies. The groups are asking the attorney general to ensure that because OpenAI is controlled by a nonprofit, the new company that it creates doesn't violate charitable trust law. We've learned the pushback is stoking concern among company executives, so much so that OpenAI has discussed leaving California if the state's AG complicates the restructuring. We should note, an OpenAI spokesman said the company has no plans to leave the state. Journal Markets editor Alex Frangos explains what's at stake for the AI giant.

Alex Frangos (4:51)

They have billions and billions of dollars on the line commitments from investors who basically said we'll invest in you, help you build out your data centers and your new large language models. But you have to convert your corporate structure because if you're an investor, you want to be able to make a profit and you want the structure to be able to protect your investment. And right now they're concerned that the nonprofit aspect of the law endangers that. And so OpenAI started itself a decade ago as a nonprofit because they were worried in a way that AI could be detrimental to society and they wanted it to be in an entity that was completely focused on the well being of humanity. And now 10 years later, they need to change that.

Caitlin McCabe (5:36)

Coming up, we take a Look at the UK's mounting debt troubles and what that could mean for other heavily indebted nations, including the U.S. that story and more after the break.

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Caitlin McCabe (6:21)

Last week, UK markets hit a significant milestone. Yields on 30 year government bonds hit levels last seen in the 1990s. It was the kind of move that made both politicians and investors take a fresh look at the fiscal health of economies around the world. Their prognosis? Not good. The UK is confronting a problem that many countries, including the US face. It's heavily indebted and its borrowing costs keep rising. Meanwhile, it's struggled to cut ever growing welfare spending. Max Colchester is the Journal's UK correspondent and he joins me now. So Max, you have some pretty stunning statistics in your story. One that jumps out to me is that the UK's interest payments next year are expected to hit about $150bn. That's twice what the country spends on defense. How did we get here?

Max Colchester (7:05)

Yes, and as you say, the UK is not alone in this. A lot of countries really piled on debt during the pandemic all at once. And then this era of low interest rates has ended. And that means that servicing that debt has now become a lot more expensive. Now the UK is in a, in a particularly tight situation because unlike in the us, it doesn't have a major reserve currency. It also has a fiercely independent central bank. So unlike its European neighbors who are part of the eurozone, the ECB has previously orchestrated bailouts. So, so there is a sort of investors can sort of look to that as a pattern to how things could play out. Whereas the bank of England has really been quite strict on that. So the question is whether the UK really can grab the problem and actually take structural steps to try and reduce that debt. And right now investors are sceptical because mainly the left wing labor government has been unwilling to cut spending. And that means the market is quite skeptical about whether this British government can balance its books. And so you've seen yield started to sort of tick up quite a lot in the last few months.

Caitlin McCabe (8:14)

Yeah, it's really been a global problem in global, in bond markets, but particularly here in the uk. You write in your story that the UK could become the financial market equivalent of a canary in a coal mine. In other words, you know, a leading indicator for other heavily indebted nations like the US and France. Can you explain that a little bit more?

Max Colchester (8:35)

Yeah, sure. I mean, obviously when you've got a huge quantum of debt, you have three options. You can either raise growth so that you collect more tax to pay the interest on that debt and pay it down, you can either cut your spending, or thirdly, you can raise tax to try and get more money into again to service the debt. Now it looks increasingly that the uk, like many other Western governments, is going to go down par three. Instead of making the difficult decisions here of actually cutting the total amount of money it needs to borrow, it's just going to ask its citizens to pay more in tax and service it. And that obviously has the knock on consequence of impacting growth. So the UK is potentially caught in the sort of hamster wheel of having to tax people ever more to pay for an ever growing debt pile, which is, from an investor's point of view, challenging.

Caitlin McCabe (9:24)

So the UK isn't alone in this by any means, but why are economists so concerned here specifically?

Max Colchester (9:31)

Well, I think it's this combination of the fact that the UK is kind of a bit different in the sense it relies a lot on foreign investors to come and buy its debts. And there is a concern that that foreign investor base could shift its attentions elsewhere very quickly if it's so desired. Unlike in Japan, for instance, we have a lot of domestic interest in their sovereign debt, so that makes the UK a bit of an ally. Also, Britain had this episode in 2022 under the Prime Minister, then Liz Truss, when she announced these huge unfunded tax cuts and huge borrowing actually, which then caused a run on the pound. So investors now have that as a sort of base case of what happens when mismanage their affairs in the west. And they, and they, so they apply this so called moron premium to the UK debt. And so we still see a hangover that era. And then thirdly, the UK does have very high inflation still. And that's fundamentally what's propping up yields here is that inflation remains highest as a country that imports its food, its energy and so forth, and so really is at the mercy of international moves in prices.

Caitlin McCabe (10:33)

Yeah, it seems like there are a lot of important learnings here for other debt laden countries around the world.

Max Colchester (10:38)

Absolutely. Because the overarching trend here is that we're in a kind of world awash with government debt. And the IMF has a statistic showing that the debt to GDP ratio of mature economies has gone from around 40% in 2007 to 80% this year and it should hit 100%, close to 100% at the end of the decade. And the interest on that is absolutely phenomenal. It's being paid around $2.7 trillion of interest on that debt is being paid annually, which is absolutely eye watering. So we're in a background where suddenly people start to question the sustainability of all that.

Caitlin McCabe (11:17)

Max, that's really stunning statistic there. I really appreciate you joining today to share your insight into all of this.

Max Colchester (11:24)

Thank you so much, Caitlin.

Caitlin McCabe (11:28)

And finally, American high school seniors. Math and reading scores have fallen to their lowest level on record according to results released today by the Education Department. Math scores are the lowest since the tests began in 2005, while reading is lower than any point since 1992. The results mark the latest in a procession of gloomy data showing that US Students are learning less than several years ago. Journal Education reporter Matt Barnum says the achievement declines are widespread across the board and come at an uncertain time for the Education Department.

Matt Barnum (11:58)

We know there's some data showing that schools that were closed for longer during the pandemic experienced steeper declines in learning. But the learning losses have also been broad based and in many cases started before the pandemic. Another leading theory is kids being negatively affected by screens and social media. That said, one expert noted to me that there is no smoking gun yet to prove that The Trump administration has been trying to close the Education Department. They've said that we should return education to the states. Secretary of education Linda McMahon has already cited these results, which ironically came from the Education Department to support this view. Others argue that we actually need more federal leadership and not less. They note that states by and large already control education.

Caitlin McCabe (12:43)

According to Matt, it is also unclear whether there has been any recovery in the time since these tests were carried out more than a year and a half ago. And that's it for what's news for this Tuesday morning. Today's show is produced by Kate Bullivant and Hattie Moyer. Our supervising producer is Sandra Kilhoff. And I'm Caitlin McCabe for the Wall Street Journal. We'll be back tonight with a new show. Until then, thanks for listening. Truestage Companies simplify the complex with 90 years of delivering accessible insurance and innovative financial solutions. Let's work together and build a better tomorrow today. Learn more@truestage.com WSJ Trustage is the marketing name for TrueStage Financial Group, Inc. Subsidiaries and affiliates. Corporate headquarters is located in Madison, Wisconsin.