Core Insights - The article discusses the evolution and performance of indexation investing, particularly focusing on ETFs, highlighting that passive funds have now surpassed active funds in assets under management by the end of 2023 [3][4] - It emphasizes the disappointing annualized returns of equity ETFs, which have been in the 7% to 8% range over the past 25 years, despite expectations of higher returns [4][5] - The concentration of the Information Technology sector in the S&P 500 is noted, raising concerns about potential capital loss if valuations contract [6][9] Group 1: ETF Performance and Market Dynamics - The total assets in ETFs grew from $65 billion in 2000 to over $90 billion for the iShares Bitcoin Trust ETF alone by 2023, marking a significant shift in market dynamics [3][4] - Annualized equity ETF returns have consistently underperformed expectations, with fixed-income ETFs yielding even lower returns, often negative when adjusted for taxes and inflation [4][5] - The dominance of the Information Technology sector, which now comprises 46.1% of the S&P 500 market value, raises concerns about market concentration and the risks associated with it [5][6] Group 2: Market Concentration and Valuation Concerns - The article presents data showing that the top 10 companies in the S&P 500 accounted for 38.9% of total market capitalization by October 2025, compared to 18.0% in 1988, indicating increased market concentration [11] - The valuation metrics of the Information Technology sector are highlighted, with a forward P/E ratio of 122x earnings, contrasting sharply with lower valuations in other sectors [10][12] - The historical context of market concentration is discussed, comparing the current situation to the Dot-com Bubble, suggesting that high valuations in the IT sector may not be sustainable [9][13] Group 3: Securities Exchanges and Investment Strategies - The commentary introduces the concept of investing in securities exchanges as a strategy to sidestep indexation, suggesting that these entities have outperformed regional stock indices over time [15][19] - Data shows that major securities exchanges have consistently outperformed their respective regional stock indices, with CME Group and Nasdaq demonstrating significant returns over 20 years [20] - The article argues that the business model of securities exchanges allows them to benefit from increasing trading volumes and market activity, making them a compelling investment opportunity [24][32] Group 4: Localized Inflation and Investment Opportunities - The article discusses the concept of localized inflation, emphasizing that individual experiences of inflation can vary significantly across different sectors and commodities [58][60] - It highlights the challenges in measuring inflation accurately and the implications for investment strategies, particularly in sectors like energy and food [49][55] - The performance of specific investment vehicles, such as oil royalty trusts, is presented as a potential hedge against localized inflation, showcasing their ability to provide robust cash flow without significant capital expenditures [66][69]