An investment thesis can become a habit without its owner noticing. After enough time defending it, every new development starts to look like another reason to own the same things. Agreement from the wider market only makes the habit harder to question.
August was a useful month to interrupt that process.
Across VMF’s Strategic Asset Allocation, VMF’s Security Selection and Alpha Tier, we revisited assumptions that had shaped our portfolios, examined why two experienced investors were changing their methods, and followed our Dovish Shock thesis into a policy channel beyond the Federal Reserve.
Seven substantial excerpts from that work are now available free. This guide connects them, while explaining where the public research ends and the complete subscriber analysis begins.
The inflation thesis met its counterargument
Begin with When Contrarian Becomes Consensus, from August’s Strategic Asset Allocation issue.
Our original framework treated the pandemic as a break with the previous investment regime. Inflation and interest rates would become higher and more volatile, while physical resources and productive capacity would matter more. That thinking shaped the portfolio’s exposure to alternatives and natural resources, alongside its relatively small conventional fixed income allocation.
By August, those arguments had become considerably less unusual. The question was whether investors had become so accustomed to finding inflation everywhere that they were overlooking what might push in the opposite direction.
When Contrarian Becomes Consensus
The most dangerous moment for a good investment thesis is not when the market disagrees with you. It is when the market finally agrees.
Lacy Hunt’s evolving framework made that question particularly interesting. In The Old Deflation Map, we examined how an economist associated with debt driven disinflation was placing greater weight on constraints in supply. Debt could still weaken demand, but its consequences depended on the economy’s ability to expand production.
His analysis also raised a serious objection to the AI optimism developing elsewhere: the spending required to build the technology was arriving before its full productivity dividend.
The Old Deflation Map
Lacy Hunt changing his mind deserves more attention than another hot CPI print.
That tension led into The Hawk and the TACO Zone. Our question was whether the market was interpreting Kevin Warsh’s commitment to price stability too mechanically. A firm inflation target does not prescribe the same interest rate under every economic outcome.
The Dovish Shock remained a hypothesis about expectations. A market anticipating renewed tightening could reprice meaningfully if the eventual policy path proved less restrictive, even without an aggressive cutting cycle.
The Hawk and the TACO Zone
Two weeks ago, the market was still asking how soon Kevin Warsh might raise rates.
The potential economic reason for that repricing appears in Part II of The Abundance Shock.
Building AI requires scarce electricity, equipment, construction capacity and capital. Deploying it could allow businesses to complete more work without increasing their inputs proportionately. The same technology can therefore intensify bottlenecks during construction while helping to reduce costs elsewhere.
The important question is how quickly those benefits spread. Cheaper software does not automatically produce a falling general price level, and promising productivity data do not establish that AI caused the improvement. We examined both the opportunity and the reasons it might take longer than enthusiasts expect.
The Abundance Shock – Part II
Four months ago, we published an article with a deliberately provocative premise:
That explains the paid issue’s title, Barbell. We retained exposure to physical scarcity while also owning businesses and sectors that could benefit from cheaper intelligence. The Model Portfolio did not require us to declare one side permanently victorious before the evidence justified it.
Quality has a deadline
Two weeks later, Security Selection encountered a related problem inside company analysis.
Terry Smith had built Fundsmith around buying good businesses, avoiding excessive prices and then allowing compounding to work. Yet the fund reported 51.8% portfolio turnover during the first half of 2026 and announced a greater emphasis on fundamental and share price momentum.
When “Do Nothing” Stops Working examines what changed, including the pressure that redemptions can impose on a manager whose investments need time.
When "Do Nothing" Stops Working
Terry Smith spent fifteen years telling investors that most of their activity was a tax on compounding.
We did not conclude that patience had become obsolete. We concluded that patience requires more demanding evidence.
A recoverable setback needs an intact franchise, capable management and enough time to repair the damage. AI may compress that third condition. A company can retain attractive historical margins while competitors become faster, customers reconsider alternatives and the window for a turnaround narrows.
That gave us a useful test: would this business become more valuable or less valuable if intelligence became dramatically cheaper?
Following it led us back into life sciences, but beyond the biotechnology companies introduced in July. The new recommendation was an established business embedded in the specialised work surrounding the industry, where useful intelligence must operate alongside permissions, traceable evidence and trusted processes.
Its opportunity depends on capturing part of the value AI creates. Helping customers become more productive is not sufficient if competition forces all the benefit into their hands. The paid issue examined that distinction through the business economics, valuation scenarios and risks before making a measured initial allocation. The company’s identity and complete investment case remain reserved for subscribers.
The same discipline went back through existing recommendations. Regeneron and Halozyme supplied stronger operating evidence, while disappointing quarters at Universal Music Group and Amrize required a less comfortable examination of margins, cash conversion and execution. A rising share price deserves scrutiny just as a falling one does.
A gold buyer inside the crypto economy
Alpha Tier approached another familiar investment argument through The End of Simple Frameworks.
Tether provided the case study. A company built inside digital finance was also accumulating physical gold, while Treasury securities remained central to the reserves supporting its dollar business. Its balance sheet made the usual argument over whether gold or Bitcoin must “win” look rather incomplete.
We examined the different jobs those assets can perform, and the equally important question of how they are owned. A scarce asset placed inside a financed company acquires risks that do not belong to the asset itself. Debt, distributions and redemption obligations can force decisions that a patient owner might otherwise avoid.
The End of Simple Frameworks
Tether has a peculiar way of preparing for the future of money: it keeps buying gold.
This connected directly with the Fundsmith discussion. An investment’s prospects cannot be separated entirely from the demands placed on its owner. Understanding the asset is only part of understanding the position.
The Treasury gave us a new signal
The final excerpt is The Treasury Just Blinked.
On 19 August, Treasury announced that liquidity support buybacks in the longer maturity sectors would increase from a maximum of $2 billion to at least $4 billion per operation, beginning in September. Its stated purpose was to provide greater liquidity support in those markets.
Our August Alpha Tier interpreted that announcement through the TACO Zone framework: the area where long term borrowing costs become consequential for mortgages, investment, valuations and government financing. We saw another channel through which financial conditions might change, without waiting for the federal funds rate to move.
The Treasury Just Blinked
Investors waiting for the Fed to blink may be watching the wrong building.
The distinction matters. Treasury buybacks are not quantitative easing or a promise to cap yields. Nor does a potential drawdown in the Treasury General Account establish that a particular amount of liquidity will be released.
The issue also examined the contrary case, articulated by Stanley Druckenmiller: intervention intended to improve market functioning could ultimately make investors demand more compensation for fiscal and policy risk. That would have very different implications for bonds from the benign liquidity scenario.
We regarded the announcement as supporting evidence for the Dovish Shock, not its completion. Warsh’s Jackson Hole speech on 28 August maintained the emphasis on inflation and made clear that better summer readings had not convinced him that the underlying trend had improved sufficiently. The test remained live.
What the research changed
August produced a new company recommendation, but it did not produce wholesale Model Portfolio changes.
Tier One retained its balance between scarcity and abundance. Alpha Tier examined improving signals across precious metals, miners and crypto, then left its allocations unchanged. Existing exposure was already meaningful; stronger confirmation alone did not make increasing it the best use of capital.
That is the practical thread connecting the month. We challenged the macro framework, tightened the test for business durability and reconsidered the portfolio implications as policy and prices evolved.
The seven excerpts give you a substantial body of that research to examine for yourself. The complete August issues also contain the new life sciences recommendation, its valuation and risks, the reviews of existing positions and the analysis behind the allocation decisions.
A subscription provides that complete work when it is published, together with the subsequent updates, rather than requiring you to reconstruct it from selected excerpts weeks later.
Important Disclosure
This article was produced by VMF Research, Lda., under the responsibility of Vasco Marques de Freitas, CFA, CMT, Founder and CEO. It contains general investment research and commentary, including summaries of investment recommendations. VMF Research’s activity as a producer of investment recommendations is subject to the European market abuse framework, including Regulation (EU) No 596/2014 and Commission Delegated Regulation (EU) 2016/958, and to supervision by the Comissão do Mercado de Valores Mobiliários (CMVM) in Portugal. Supervision does not constitute regulatory approval or endorsement of the research.
The article reviews research published on 7, 21 and 28 August 2026, together with excerpts subsequently released on VMF’s Market View. Original analyses and portfolio decisions retain their respective research dates; subsequent developments are identified separately. This is a selective guide, not a complete investment thesis, a comprehensive performance record or confirmation that earlier recommendations remain unchanged. The underlying publications provide the relevant sources, methodologies, assumptions, valuation work, risks and dated disclosures.
The content is not personalised investment advice and does not consider any reader’s objectives, financial circumstances, knowledge, experience, liquidity requirements or tolerance for risk. It does not constitute portfolio management, order execution or an offer to transact in any financial instrument. References to other investors, institutions and their decisions are analytical case studies, not endorsements or evidence of affiliation. This article also promotes VMF Research’s paid publications.
The Dovish Shock, TACO Zone and Abundance Shock are conditional analytical frameworks, not assurances of policy decisions, technological progress or investment outcomes. Historical relationships may change, and the TACO Zone is not a permanent yield threshold or promise of intervention. Views are reviewed through monthly publications, with weekly or ad hoc updates where appropriate.
Model Portfolios are illustrative research portfolios, not client accounts, investable funds or transactions executed by VMF Research. Unless otherwise stated, model returns use published reference prices, include recorded cash distributions and exclude taxes, transaction costs, custody charges, bid and ask spreads and currency effects. Past performance, model results and scenarios are not reliable indicators of future returns. Investments can lose some or all their value. Precious metals, mining equities and crypto exposures can be particularly volatile. Diversification does not guarantee capital protection.
Disclosure of Interests: the original August disclosures reported relevant long positions held by legal entities controlled by the author in the KraneShares CSI China Internet ETF, ARK Innovation ETF, Altius Minerals Corporation, Universal Music Group N.V. and Amrize Ltd., together with listed ETPs providing exposure to Bitcoin, Ether and Solana. These financial interests may create conflicts and may have changed since those disclosures. Their existence does not validate the analysis, reduce risk or imply suitability.
Neither VMF Research nor the author received compensation from covered entities for preparing the original research, and no covered entity reviewed, approved or amended its conclusions before first dissemination. Readers should conduct their own analysis and, where appropriate, consult an authorised financial intermediary or adviser.