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We do believe we're in a bull market that is broadening out. A a very healthy bull market climbing a wall of worry. There is a lot to worry about. Um uh wars and uh and even turmoil uh in the US uh along political lines recently. And yet we have this wall of worry. uh the market climbing this wall of worry and broadening out uh we think uh which is uh very much uh important uh uh uh in in terms of uh the market sustaining this this bull momentum and uh we do think that there's going to be a breakaway uh for innovation um stocks uh truly technologically enabled disruptive innovation we think is going to start outperforming these indices when we think that uh the Ethereum protocol is where most of the DeFi or decentralized financial revolution uh is taking place.
Kathy Wood kicks things off by zeroing in on two of the biggest drivers of markets, inflation and interest rates. She points out both are moving lower, just as Arc Invest anticipated. And while tariffs have added pressure, it's businesses, not consumers, shouldering most of the costs with companies absorbing more than half of the impact.
If you're getting value from this breakdown, make sure to hit that like button, subscribe, and drop your thoughts in the comments. And don't forget, I share exclusive insights and daily updates in our Telegram group. Links in the description. We do believe we're in a bull market that is broadening out.
A a very healthy bull market climbing a wall of worry. There is a lot to worry about. Um uh wars and uh and even turmoil uh in the US uh along political lines recently. And yet we have this wall of worry. Uh the market climbing this wall of worry and broadening out uh we think uh which is uh very much uh important uh uh uh in in terms of uh the market sustaining this this bull momentum bullish momentum.
So with that back to you Dan first one's coming back to you kind of a highle question here. It seems like passive index tracking investing only further inflates valuations of the largest companies. What is ARC's view on this phenomenon? Well, uh we have been talking about this phenomenon particularly in 23 and 24 as the market was hitting all-time highs and it was powered by the largest stocks uh in a very concentrated indices by historical standards.
Uh so yes, self-fulfilling prophecy and this is the battle we've been uh fighting from an active management point of view uh for I'm going to say 20 years uh really this started after the tech and telecom bust uh and even more so it accelerated and gained momentum this move towards benchmark sensitivity or passive uh after 08 and 09.
Uh, and so we think the pendulum has swung um far enough, but we thought that a few years ago as well. Um as I mentioned uh in my introduction the market broadening out here is really important and uh we do think that there's going to be a breakaway uh for innovation um stocks uh truly technologically enabled disruptive innovation we think is going to start outperforming these indices.
Why it is because some of the largest holdings in the broad-based uh benchmarks are going to be disrupted themselves. Uh many uh many people have been talking about Apple and its inability to get its footing uh in the AI space or in the autonomous mobility space. what is the uh ultimate mobile device.
It's an autonomous vehicle and uh Apple had been trying uh to to break into that world uh and I think for the last six seven years and we've seen one turnover after another after another in terms of strategy and management uh teams. Uh so that's a candidate and is a very large part of the index. Uh Google we think is one of the best AI companies in the world.
It has some of the best talent in the world from DeepMind an acquisition uh from the UK uh and and yet uh it is in harm's way from this point of view. It has had a lock on the search market and now there are many more players. Uh Perplexity of course is one. Even Bing uh with open AI and m Microsoft is gaining share.
Uh now uh Google is also uh combating that but the fact remains it had almost it had roughly 95% plus of the search market and that is changing and even Amazon uh again we love Amazon's positioning in the cloud. We think the cloud is extremely important uh here. Uh you know Oracle's report uh put an exclamation point uh on on that uh and and yet Oracle is could it be a spoiler in this market?
We noticed that Amazon's cloud margins uh went down while its revenue growth did accelerate. Uh that's an open question and of course agentic AI uh calls into question whe whether or not we're going to as we are on shopping expeditions uh whether we're going to let our personal uh assistant do the shopping for us or go back to our old habits uh and start with Amazon which historically has been uh the first place many people did start their shopping e expeditions.
We don't know. Uh and so the world the very comfortable world that those companies dominated uh is changing and uh we think that there are many other companies that are much quicker, more agile. Uh but as Nick Grus uh our director of research for consumer internet and fintech would say distribution, distribution, distribution.
So, we have a live debate uh here at ARC. Our uh Brett Winton, our chief futurist, is uh is somewhat skeptical uh and thinks that there will be more disintermediation uh than many analysts out there expect. So bottom line, we do think the market's going to broaden out here as some of the most important and biggest positions in these benchmarks start to disappoint.
Maybe not in a huge way, but at the margin. Uh so with that, back to you, Dan. Yeah, thank you Kathy. And just the sheer size of that like passive universe, everyone thinks the broad benchmarks in general. There are a lot of funds out there that are quasi benchmarker or benchmark hugging that really it doesn't come up in that first initial look.
Um so you know that pendulum has swung quite far. The the next question turning to the crypto side here with uh Lorenzo. Um a lot of talk about digital asset treasury companies or DATs. Can you please explain ARC's uh just general thesis here? Yeah, of course. Um so maybe I I'll give uh um a brief overview.
DATs are um companies uh that trade publicly that uh are accumulating as much um Ethereum, Salana or Bitcoin as as possible. And so it really depends on the on the mandate uh that that they have. Um, we've invested in Bitmine. And so, um, as an update on on Bitine, uh, they, uh, now hold more than 2 million ETH, um, on their balance sheet.
And I think now they have more, uh, Ethereum than the rest of the top 10 Ethereum DATs. Uh, so they've really pulled away and and hit escape velocity. um they've been able to to increase uh you know to continue to increase the the the ETH per share and so I think in terms of the thesis down uh we think that are interesting uh rappers they are you know for certain assets and specifically uh smart contract layer ones and and even some of the other uh altcoins uh are a more efficient exposure gi given the the yieldbearing uh nature of these assets uh and um the you know the flexibility that you have with these assets to use them onchain to generate potentially more revenue.
So that that is the the general thesis. Um if we compare then to to ETF and we've talked about this um for now um staking is not allowed and even if it were we believe uh you know they're going to be able to stake a portion of the of the AUM and so it will be from a revenue perspective and yield an inferior product.
Um so so that really is the thesis. I think overall what we've seen uh you know in the first two months um mnavs have really compressed right like in the in the in the past uh weeks uh a lot of these dats are trading now between one xm nnav and 1.1 1.2 too. And so I think the the first phase was really to um to leverage the ATMs uh and be able to increase the Ether Salana or Bitcoin per share.
Uh I think perhaps now we're really looking at the market with some compression on the MNAV and so perhaps we're hitting um a second phase where they'll you know they'll need uh perhaps to repurchase the shares which we've seen when you know with ESBED and a couple of other DATs or perhaps tap into the debt market or convertible and so we're uh yeah we're actively monitoring uh the um the situation and the space uh I think one interesting point uh also So, for Bidmine, they've um they've just invested uh $20 million into ATCO, which is the uh digital asset treasury that uh is accumulating World Coin tokens.
And so, they they uh own about 13.7 million shares of of the debt. And I think Tom has said that they want to allocate about 1% of their balance sheet to uh Ethereum ecosystem opportunities. Uh so that would be either DAS or perhaps underlying tokens. And so um that really has been the the first investment uh the first investment from uh um from Bitmine.
And so um yeah, I think we're very much entering into um a more mature phase and we'll see, you know, how um how these uh companies evolved and how they're able to to leverage, you know, capital markets in in different ways. Yes. And uh Lorenzo uh just in terms of why we uh bought uh Bit Mine immersion in the first place, it was very difficult to gain a towh hold in ether uh uh through staked ETFs.
We we had to resort to the Canadian ETFs uh because the US at least so far does not allow staking uh in ETFs. And uh so this was a solution. This DAT, Bitmine immersion uh for Ether was a solution to that problem. That wraps up Kathy Wood's latest outlook from falling inflation and interest rates to how businesses, not consumers, are carrying the brunt of tariffs.
If you found this video helpful, don't forget to like, subscribe, and share your thoughts in the comments below. Do you think the market is already pricing in this shift, or is Wall Street still behind the curve? If you're getting value from this breakdown, make sure to hit that like button, subscribe, and drop your thoughts in the comments.
And don't forget, I share exclusive insights and daily updates in our Telegram group, links in the description.
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