WSJ What’s News - Inside the U.S.-Ukraine Mineral-Rights Deal

Episode Date: February 26, 2025

A.M. Edition for Feb. 26. WSJ foreign correspondent Ian Lovett explains how Washington and Kyiv bridged differences over security guarantees and future mineral revenues to strike an agreement Ukraine hopes can reset relations with President Trump. Plus, House Republicans pass a budget plan, overcoming disagreements on the size of proposed spending cuts. And investing columnist Spencer Jakab unpacks the widening gap between the expected returns of large U.S. growth stocks and cheaper alternatives abroad. Luke Vargas hosts. Sign up for the WSJ’s new Markets A.M. newsletter here—it’s free! Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode is sponsored by Northern Trust Wealth Management. There is more to being a successful entrepreneur than just good business practices. What is it about an entrepreneur's childhood that helped fuel their entrepreneurial spirit? What are entrepreneurs doing to cultivate this spirit in their own children and build a legacy beyond their business? Tune in each month to the Road to Why podcast by the Northern Trust Institute, where host Eric Schapea dives deeper with leading entrepreneurs on these topics and more. Find the road to why where you listen to your favorite podcasts. Ukraine agrees to a mineral rights deal with the U.S. We'll get the latest from Kiev.

Plus House Republicans pass a budget plan overcoming disagreements on the size of proposed spending cuts and President Trump floats a five million dollar gold visa for wealthy individuals. Trump said the new program would eventually provide a pathway for full citizenship and companies like Apple could pay to get approval for high skilled workers to live in the U.S. permanently. It's Wednesday, February 26th. I'm Luke Vargas for the Wall Street Journal and here is the AM edition of What's News, the top headlines and business stories moving your world today. The U.S. and Ukraine have agreed to the terms of a Mineral Rights Deal that could be signed

by President Trump and President Volodymyr Zelensky in Washington as soon as Friday. Zelensky had said for months Ukraine's allies could have access to the country's mineral resources but that an agreement would need to include security guarantees. So how does the final deal measure up? I asked journal foreign correspondent Ian Lovett. So the final deal is less ambitious both for for Ukraine and for the US than I think the respective sides had potentially been hoping for. Last week, the US presented Zelensky with a draft that had some pretty aggressive economic

demands in it. And the most notable of those was that the US would have the right to future proceeds from mineral resource development up to $500 billion, but it did not have security guarantees of any kind for Ukraine. This deal, by contrast, really has neither of those things. The economic provisions are just that there will be a fund established that will put some portion of proceeds from mineral resource development in Ukraine into a fund that will then go towards

investment in Ukraine. Ukraine will pay 50% into that fund and it's unclear exactly what kind of stake the U.S. might have in that fund or in other kind of joint ownership projects that is set to be hashed out in future agreements. But there were also no security guarantees in this deal for Ukraine.

Given that, Ian, I would imagine it would be extra important for Ukrainian officials for this deal to become commercially viable. Analysts you report estimate the potential value of those minerals could amount to trillions of dollars, but what is the outlook for those critical minerals actually entering the US supply chain eventually? Yeah, part of the appeal from the Ukrainian side of doing some sort of mineral rights deal with the US is that they hoped it would keep the US invested in Ukraine's future and keeping the country sovereign under Ukrainian control in a way so that whatever economic

benefit the US stood to gain that they would want to make sure that they could get that. Ukraine is believed to have deposits of at least 20 of the 50 minerals that the US government has designated as critical. A lot of these have never been developed. Up to about 40% of them are currently in parts of the country that are under Russian control. And so access to those, you know, we don't know when, if ever, Ukraine might get control of those areas back. And even in the areas that Ukraine does control,

many of the minerals there have never been mined. And it would take years of studies and hundreds of millions of dollars in investment, in some case, before any of those deposits started becoming commercially viable and potentially turning a profit. That was foreign correspondent Ian Leavitt in Kiev. deposits started becoming commercially viable and potentially turning a profit. That was foreign correspondent Ian Lovett in Kiev.

House Republicans squeezed through a budget blueprint late last night with all but one GOP lawmaker backing the framework for President Trump's tax, border, and spending cut agenda. The plan, which likely won't accommodate all of the tax reductions Trump wants, calls for at least $1.5 trillion in spending cuts over a decade and will require significant cuts to Medicaid, an issue that's left House Republicans deeply divided. While party leaders say the blueprint doesn't specifically mention Medicaid, more than half of the cuts it targets will come from the Energy and Commerce Committee which has jurisdiction over the program. Though its passage is a sign Republicans

can deliver major legislation despite holding slim majorities in Congress, the budget plan faces a complicated path ahead. The Senate, which favors larger tax cuts, plans to alter the House blueprint rather than accept it. In a shake-up of American visa programs, President Trump plans to roll out a five million dollar gold card visa that would allow wealthy people to buy permanent residency and potentially provide a pathway to full citizenship. Trump says the US could sell a million gold cards and that they would enable companies like Apple to pay to get approval

for highly skilled workers to live in the U.S. The new visas would replace the existing EB-5 visa that offers green cards to people who invest in the U.S., a program that has been plagued by cases of fraud, but which Journal White House reporter Tarini Party said also enjoys strong bipartisan support in states that have benefited from it. The next steps are unclear. The president has said that he is going to roll out the details of this program in the

next few weeks. The EB-5 system was created by Congress, so it remains unclear how he is going to be able to make changes to an existing program without the approval of Congress. Meanwhile, the Trump administration has created a registry where immigrants in the U.S. illegally will have to submit their personal information or face fines in prison time. According to documents seen by the Journal, those immigrants, including children 14 and older, would be required to submit their fingerprints and home addresses. Those who fail to do so could be fined up to $5,000 and sentenced to up to six months in prison. Previously, immigrants in the country illegally were committing a civil offense and could be detained and deported, but weren't

considered to have committed a crime. Coming up, investing columnist Spencer Jacob stops by to discuss the widening gap between the expected returns for large U.S. growth stocks and cheaper alternatives abroad. That and other news moving markets after the break. This episode is sponsored by Northern Trust Wealth Management. There is more to being a successful entrepreneur than just good business practices. What is it about an entrepreneur's childhood that helped fuel their entrepreneurial spirit? What are entrepreneurs doing to cultivate this spirit in their own children and build a legacy beyond their business? Tune in each month to the Road to Why podcast by the Northern Trust

Institute, where host Eric Schapea dives deeper with leading entrepreneurs on these topics and more. Find the Road to Why where you listen to your favorite podcasts. America's biggest growth stocks have a big expensive problem, so writes the journal's investing columnist Spencer Jacob, who's been tracking data that compares the expected returns of those stocks against cheaper alternatives, and he's here to share what that data has been turning up. Spencer, the premise of your latest column is that there's been a bit of unusual activity in the relationship between the performance of the S&P 500 and the MSCI IFA, IFA standing for Europe, Australasia, and the Far East.

So broadly here, US stocks versus non-US developed market stocks. And namely, it's that this relationship lately has been trending way outside of historic norms. Break this down for us. Yeah, and it could be a wake up call because it comes at a time when US stocks are very expensive and that was supercharged a bit by Trump's re-election. You had the Trump trade, Trumpforia, whatever you want to call it, and the last several days it's moved into reverse. The correlation between the two is lower than it has been all but maybe 0.3% of the time. But I think the more interesting thing is just how expensive US stocks still are today,

especially these large growth stocks that have driven the market, you know, Nvidia, Microsoft, Google, Amazon, Apple, etc., etc., compared to really everything else in the world. JS And how you measure how expensive they are has a lot to do with their predicted returns. You hooked up with research affiliates to kind of look at their 10-year forecast for a number of different categories. What did you find? JS Yeah, nothing good.

First of all, if you look at how expensive they are relative to all of their history, developed market large growth, which is dominated by US companies, is at its 98th percentile. That means it has only been more expensive 2% of the time in history. Non-US large value stocks have only been cheaper 2% of the time. So that is a record spread between those two types of stocks. Now, you might look at some of these companies like Nestle or BP or Shell or Roche in Switzerland and say like, well, they're slower growing.

But even if they're much slower growing, they're so much cheaper that their perspective return is far superior to the US. And so the numbers that they come out with are that non-US developed market large value stocks could return about 10% a year over the next decade, whereas US large growth stocks could return 1.8% a year, which is negative after inflation.

So it's a gigantic difference. And I just would point out that research affiliates, they only look for their projected returns over the last 35 years. So you know, really since the computer era. So you know, if you're saying you can't compare that old era technologically, we have data going back to the 1870s for US stocks. No, I guess you probably can't.

But they're giving you the benefit of the doubt if you say that and they're saying, yeah, we'll just take the last 35 years. It's still true. And Spencer, lest someone be very tempted right now to put the podcast down and go and trade on the basis of some of the analysis you've just given us, of course, it's not always that easy and there could be factors that conspire to make this not be the winning bet over the coming decade, I'm sure. Nothing is guaranteed.

I mean, yeah, I would say that valuation is really interesting. If you're just reading or hearing about it today that there's this gigantic gap in valuation, it might seem like something you should rush out and do and change your portfolio. And I would just caution that had we had this conversation a year ago, it wasn't as extreme, but it was still fairly large gap a year ago and you'd be kicking yourself because US growth stocks did really well last year and European value stocks just did so-so. So you would not have done as well.

Valuation is not a market timing tool. It works in the long run. It does not work in the short run. If you are into trying to catch a dip or a turning point in the markets This is not for you if you're an investor rather than a speculator I you know you're putting money away for money that you'll need in 10 20 years Then you should pay attention because it's a gigantic difference in terms of the amount of money that you could have If research affiliates is even close to being correct Spencer Jacob is the Wall Street Journal's investing columnist and he edits our Markets

AM newsletter, which you can subscribe to for free at the link we've left in our show notes. Spencer, thanks so much for dropping by. Hey, thanks a lot. And in news moving markets today, U.S. listed shares in Budweiser Brewer AB InBev are sharply higher in off-hours trading after it reported growth in its U.S. market share on the backs of its Micolob Ultra and Bushlight brands.

The company's global results left more to be desired, though, as fourth-quarter sales volumes fell, dragged by lingering weakness in China. Copper prices are rising after White House officials said the U.S. would investigate imposing global import tariffs on the metal. Senior administration officials said the probe was necessary to spur domestic production, but declined to say how high the tariffs could be or when they could be imposed. And on deck today, Lowe's and TJ Maxx owner TJX Companies are reporting earnings this morning with Salesforce and Nvidia following this afternoon.

And the Commerce Department will release new home sales figures for January at 10am Eastern. And that's it for What's News for this Wednesday morning. Today's show was produced by Daniel Bach and Kate Bullivant with supervising producer Christina Rocca, and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening. This episode is sponsored by Northern Trust Wealth Management. There is more to being a successful entrepreneur than just good business practices.

What is it about an entrepreneur's childhood that helped fuel their entrepreneurial spirit? What are entrepreneurs doing to cultivate this spirit in their own children and build a legacy beyond their business? Tune in each month to the Road to Why podcast by the Northern Trust Institute, where host Eric Schapea dives deeper with leading entrepreneurs on these topics and more. Find the Road to Why where you listen to your favorite podcasts.