On 11 September, we published a proposition that looked decidedly awkward beside the name of our macro thesis: “Our Dovish Shock could begin with a rate hike!”
Five days later, the Federal Reserve raised rates. That did not prove the thesis. It made the next part of the investigation more consequential: how long could monetary restraint endure, and what would happen to the price of longer term money while the Fed defended its credibility?
The question took us considerably further than another argument about the next meeting.
Across September’s VMF’s Strategic Asset Allocation, VMF’s Security Selection and Alpha Tier, we examined Washington’s financing constraints, the productive possibilities of AI, the businesses positioned to capture them, and an increasingly interesting opportunity in government bonds.
That last investigation would inform a new hedge in October. Understanding why we introduced it requires following the research that came before it.
A hawk still has to live with the calendar
Begin with A Hawk on Borrowed Time.
Kevin Warsh’s determination to restore monetary credibility deserved to be taken seriously. We also believed investors risked treating his present stance as a permanent description of the policy ahead.
Credibility can increase a central banker’s freedom to respond when circumstances change. Our hypothesis was that the cost of refinancing yesterday’s debt might eventually change those circumstances more forcefully than the market expected. A borrower can enjoy a low fixed coupon for years, but the protection expires when the debt does.
The companion article, Old Debts, New Dollars, followed that problem into the Treasury.
Scott Bessent must keep finding buyers. His department’s expanded buybacks offered support to parts of the bond market, but their consequences depended on how they were financed and how investors interpreted the intervention. Better market functioning could help. A loss of confidence in fiscal discipline could make the financing problem more expensive.
The same article examined two responses to that uncertainty: reserve managers seeking independence through gold, and Washington encouraging digital dollars whose reserves can include Treasury bills. One reduces dependence on a sovereign promise; the other can extend that promise’s reach. Neither tells us, by itself, who will willingly lend for thirty years.
Old Debts, New Dollars
A thirty-year Treasury is not necessarily held by someone with thirty years to spare.
That was the monetary backdrop. It was demanding, but it could not explain everything happening in equities.
A richer economy does not reward every shareholder
A government bond’s payments are fixed. A company has more room to change the bargain.
It can develop a product, reach customers it could not previously serve or produce the same output at a lower cost. Better earnings prospects can therefore offset some of the damage imposed by a higher discount rate. This distinction, developed in Tier One, led directly into September’s Security Selection issue, Who Owns Abundance?
The public starting point is What Tomorrow Could Become.
We examined Anthropic’s economic scenarios, including an extreme case in which annual US growth eventually reaches approximately 15%. The authors assigned no probabilities to those scenarios, and we did not build an investment case around the most spectacular number.
The more useful possibility was that cheaper intelligence could expand the range of activities worth attempting. A research project, service or business that once cost too much to pursue might become viable. The resulting economy could be larger without distributing the benefits equally among investors.
What Tomorrow Could Become
Imagine being right about AI, right about economic growth, and still disappointed by the companies you bought.
Customers might receive most of the savings. Competition might eliminate an incumbent’s profits. A supplier could enjoy extraordinary demand while spending almost everything it earns to keep up.
That left us with a narrower question: which businesses could help make the future more productive while retaining a defensible share of its value?
The business behind the frontier
We followed that question into The Company That Builds the Frontier.
The subject was SpaceX ( SPCX 0.00%↑ ) , but the investment case extended beyond launching rockets. We examined how access to orbit, satellite deployment and connectivity could reinforce one another, and whether those capabilities offered an advantageous starting point for further businesses.
The distinction between an ambitious system and an attractive investment mattered throughout. Connectivity supplied evidence of operating profitability. Other opportunities required much more investment and had less established cash economics. They could not reasonably receive the same treatment simply because they shared a parent company.
The Company That Builds the Frontier
SpaceX may be extraordinarily expensive. It may also be building one of the most powerful commercial flywheels we have ever studied.
We also reversed the valuation question. Rather than assigning a precise present value to every ambition, we asked what the business would have to become for a given purchase price to deliver an acceptable return.
That made the demands on future revenue, margins and ownership visible. Dilution mattered. Capital expenditure mattered. A strategically indispensable company could still disappoint shareholders if too much of the value remained permanently committed to building the next capability.
The research led to an initial SpaceX allocation in Tier Two, followed by an allocation in Alpha Tier a week later. Both decisions recognised the uncertainty and the exposure already embedded elsewhere in the respective Model Portfolios.
When software starts choosing the supplier
The ownership question became more immediate in The Fight to Own the Customer.
Imagine delegating a task to an AI agent that compares suppliers, selects services and requests permission to pay. Somewhere in that process, a valuable customer relationship may have moved away from the business that previously controlled it.
September’s Alpha Tier examined what that could mean for distribution, software pricing and competition. Access to a capable model was only the beginning. Permissions, proprietary context, dependable execution and integration into important work could determine which businesses remained valuable to their customers. Alpha Tier - September 2026(3)Alpha Tier - September 2026(3)
Regulation added another complication. Sensible safety requirements could build trust and encourage adoption, while also imposing costs that established companies could absorb more easily than challengers.
Payments brought the discussion back to our Crypto Rails thesis. Agents completing commercial work need a way to transact, but that does not establish that every payment will use a blockchain or that every token will capture value. Conventional payment providers are competing for the same activity. The investment question concerns who earns the fees and what shareholders or token holders ultimately receive.
These were promising avenues for growth. Financing them remained another matter.
The investment nobody enjoyed owning
That brings us to The Cost of Building Abundance, and the part of September’s work with the clearest connection to October.
The bond market had endured an exceptionally difficult period. We examined the argument that those losses were creating better terms for a new investor, while resisting the tempting conclusion that a sufficiently bad history must guarantee a reversal.
The mechanics were more useful than the slogan. Falling bond prices mean the same promised payments offer a higher yield to the next buyer. Whether that buyer earns an attractive return still depends on inflation, real interest rates, risk compensation and the price paid.
The Cost of Building Abundance
An AI boom is an unlikely reason to reconsider government bonds. Yet that is where September’s research has taken us.
Our Abundance Shock supplied a reason to reconsider the inflation outlook, but it did not settle the bond case. A more productive economy can generate attractive investment opportunities that keep real interest rates elevated. Lower inflation and higher real rates can occur together.
For long nominal yields to fall, the forces pushing them down must outweigh those keeping them high. That is why September’s analysis separated the ingredients of a yield instead of attributing every movement to an inflation headline.
By the end of the month, long Treasuries had become a priority candidate for Alpha Tier. We still declined to add them there. The technical repair was incomplete, and an improving investment case did not oblige us to commit capital immediately.
What September allowed us to do in October
On 9 October, Tier One introduced a small additional position designed to benefit from falling long term Treasury yields.
Its attraction included a conditional hedging role. If expensive money weakened growth and risk appetite while yields fell, the position could help offset part of the pressure elsewhere. Benign disinflation could also support it without requiring a recession. An inflationary shock that drove yields higher would create a very different outcome.
We did not pretend that the chart had suddenly become favourable. The initial allocation was deliberately small because we were anticipating a possible change, rather than following a confirmed reversal.
The following week provided an encouraging first test. Between 9 and 15 October, the Federal Reserve’s thirty year Treasury yield measure declined from 5.60% to 5.43%. The ten year measure fell from 5.24% to 5.10%. Those moves support the direction of the position; they do not establish that the larger Dovish Shock has arrived or that the risks have disappeared.
This is why September’s apparently abstract discussions mattered. We were studying the conditions under which yesterday’s disappointing investment might become useful alongside tomorrow’s promising businesses.
The excerpts above let you follow that investigation. Subscribers received the complete research, the September allocations, the reasons for waiting on additional duration, and October’s subsequent hedge with its sizing, funding source and limitations.
Good investing!
Vasco Marques de Freitas, CFA, CMT
A subscription lets you follow those decisions as the evidence develops, rather than reconstruct the process from whichever excerpts appear later.
Important Disclosure
This article was produced by VMF Research, Lda., under the responsibility of Vasco Marques de Freitas, CFA, CMT, Founder and Chief Executive Officer. 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 September 2026 research across VMF’s Strategic Asset Allocation, VMF’s Security Selection and Alpha Tier, together with related public excerpts and a separately identified allocation introduced on 9 October 2026. Original analyses retain their respective research dates; subsequent developments are identified separately. This is a selective guide, not a complete investment thesis, comprehensive performance record or confirmation that earlier recommendations remain unchanged. The underlying publications contain the relevant sources, methodologies, assumptions, risks and dated disclosures. Recommendations are generally reviewed monthly, with weekly or additional updates where material developments warrant reassessment.
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 a financial instrument. Readers should conduct their own analysis and, where appropriate, consult an authorised financial intermediary or adviser. This article also promotes VMF Research’s paid publications.
The Dovish Shock, TACO Zone, Abundance Shock and Crypto Rails are conditional analytical frameworks, not assurances of policy decisions, technological progress or investment outcomes. The TACO Zone is not a permanent yield threshold or guarantee of intervention. Third party economic scenarios are not VMF Research forecasts; technological adoption does not guarantee attractive shareholder or token returns. Views may change as evidence develops.
The October position has a conditional hedging role, not a capital guarantee. Securities with substantial sensitivity to interest rates can suffer significant losses when yields rise, potentially alongside equities and other holdings. A small allocation limits the portfolio exposure, not the instrument’s underlying risk. The Treasury yield changes quoted in this article are observations of benchmark rates, not returns on the recommended instrument or evidence that the hedge will reliably offset losses.
Model Portfolios are illustrative research portfolios, not client accounts, investable funds or transactions executed by VMF Research. Allocations and model results are hypothetical research constructs. 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. All investments involve risk, including the possible loss of some or all invested capital.
Disclosure of interests: the dated source publications disclose relevant long positions held by legal entities controlled by the author in the KraneShares CSI China Internet ETF, ARK Innovation ETF, Scottish Mortgage Investment Trust PLC and Coinbase Global, Inc., together with listed ETPs providing exposure to Bitcoin, Ether and Solana. Scottish Mortgage’s reported holdings included SpaceX and Anthropic, creating indirect financial interests relevant to this article. These interests may create conflicts, may have changed since the source disclosures and do not validate the analysis, reduce risk or imply suitability.
The underlying publications report that neither VMF Research nor the author received compensation from covered issuers or sponsors for preparing that research, and that no covered entity reviewed, approved or amended its investment conclusions before first dissemination.