Note: I am traveling tomorrow so Daily H.E.A.T. will be back next week
Is Fiscal Dominance Replacing Monetary Dominance?-Why 60/40 Still Sucks……Here Come the Robots….China Enters the Weight Loss War
BofA's Harnett sees another stock/crypto bubble forming if interest rates are forced lower next year...
— #Special Situations 🌐 Research Newsletter (Jay) (#@SpecialSitsNews)
8:36 AM • Jul 1, 2025
All the momentum stocks that did so well last month got hit yesterday. Nothing out of the ordinary, figure a lot of start of the month rebalancing. The key question now is whether it’s a one off move or the start of a larger rotation. There is a lot of froth in some of these names so some sort of rotation would not be out of the ordinary.
The catalyst for the rotation is unknown. Reversion strategies may have been triggered. Potentially, it was the end of a remarkable quarter creating the opportunity for a defensive rotation. The timing works out, since tariff headlines are set to return next week and earnings season commences the following week. We had an ugly three-day unwind back in March as the S&P 500 corrected from the previous record highs. There were also single-day episodes similar to today in January and December. These episodes were more frequent in 2020 and 2021.
Trade headlines resulted in some market volatility with Trump suggesting that he would not extend the July 9th deadline. If confirmed it would be a slight negative as the market has come to view that 9th July deadline as bit if a non event. Trump had previously indicated that the 10% rate regime would be extended for countries where negotiations are already ongoing.
Keep an eye on DJT, James Bultard flagged a large put sale yesterday. Could be nothing, or wishful thinking on my part as I’ve gotten killed in this name, but we will see. Not only are these guys following a bitcoin treasury theme they are also launching bitcoin ETFs and plan to appeal to MAGA. I now people on the left put their money where their values are (ESG), never seen people on the right do it in any size. If these guys can pull it off it could be huge.
🔥 HEAT Formula Playbook: Portfolio Design
🧠 Is Fiscal Dominance Replacing Monetary Dominance?—Why 60/40 Still Sucks
This tweet caught my eye. Never been a fan of 60/40 for a number of reasons but never really thought about it in this way before. Why I argue for precious metals, crypto, and using preferred shares for bond exposure.
Could it be that Fiscal Dominance is replacing Monetary Dominance, and that a renewed bear steepening in the US yield curve might lead to another tail event? I think it’s a distinct possibility. The chart of the 10-year yield looks like a continuation pattern to me, centered
— #Jurrien Timmer (#@TimmerFidelity)
3:09 PM • Jun 27, 2025
✅ YES — This is a highly plausible thesis.
In academic terms, fiscal dominance occurs when monetary policy becomes subordinate to the financing needs of the government, i.e., the central bank must keep interest rates low or inflation elevated to ease public debt burdens.
Compare this to monetary dominance, where central banks independently target inflation, and fiscal policy takes a backseat.
Key Indicators of Fiscal Dominance (2020s):
Exploding debt-to-GDP ratios (U.S. over 120%, Japan ~250%)
Interest costs as a % of GDP exceeding defense spending
Central banks delaying rate hikes or cuts due to fiscal fragility
QE morphing into de facto debt monetization
Chronic primary deficits with no political will to shrink them
These are not theoretical. They are empirically observable now. The recent reluctance of central banks to push policy rates as high as Taylor Rules imply—despite sticky inflation—is a textbook sign of creeping fiscal dominance.
📘 Sargent and Wallace (1981) and Leeper (1991) laid the foundation for this concept. Timmer’s assertion maps almost perfectly to their frameworks: when fiscal authorities don’t adjust, monetary policy loses its anchor.
🔁 Regime Shift: End of the Great Moderation
The “Great Moderation” (mid-1980s to ~2019) was marked by:
Low inflation
Disinflationary globalization
Independent central banks
Negative stock/bond correlation
In this regime:
Bonds offered high Sharpe ratios
60/40 worked because bonds rallied when stocks fell
Treasuries were both a risk-off hedge and a positive-returning asset
That regime broke in 2022. Inflation and rate shocks caused both stocks and bonds to fall, flipping correlations positive—killing risk parity and damaging 60/40 returns.
🔮 Implications for 60/40, Gold, Bitcoin, and Alternatives
🔻 60/40 Portfolio: Under Siege
Metric | Great Moderation (Pre-2022) | Fiscal Dominance (Post-2022) |
|---|---|---|
Bond Returns | High, positive real yields | Capped, negative real yields |
Stock/Bond Correl. | Negative | Positive or unstable |
Diversification | Easy | Much harder |
Inflation Hedging | Built-in | Must be actively added |
Conclusion: The "40" is impaired by duration risk and lack of anti-fragility. It’s not dead—but it’s lost its automatic utility.
🪙 Gold: The New Long Bond?
Gold has historically done poorly in low-inflation, rate-normalizing regimes (e.g., 1980s–90s).
But in fiscal dominance—where real yields are suppressed and inflation is tolerated—gold shines.
Unlike bonds, gold has no default risk, no yield drag, and thrives when monetary credibility deteriorates.
Analogy: In a monetary-dominant world, you want bonds. In a fiscal-dominant world, gold behaves like a store-of-value “bond” substitute.
📈 2020–2025 data supports this: Gold has outperformed long-duration bonds despite rising nominal yields—something nearly impossible under monetary dominance.
₿ Bitcoin: The Digital Hard Asset
Like gold, BTC benefits from negative real rates and fiat instability.
Its supply cap and anti-debasement narrative make it a logical complement to gold in fiscal dominance regimes.
Historically more volatile—but high Sharpe ratio vs traditional risk assets, especially during liquidity stress.
Think of Bitcoin as gold with optionality and non-sovereign settlement rails.
🧩 Alternatives & “Stuff”
If the 40 is broken, you need a new diversification leg:
Infrastructure, farmland, commodity equities
Volatility strategies, convexity overlays
Market-neutral long/shorts or quant macro
Cash is now viable too: 4–6% yield with zero duration risk is competitive when bonds are impaired.
🧮 Suggested New Allocation (Based on Timmer’s View)
Old 60/40 | New Allocation (Fiscal Dominance) |
|---|---|
60% Stocks | 60% Stocks (but more global/cyclical) |
40% Bonds | 20% Bonds + 10% Gold + 5% Bitcoin + 5% Alts |
This is a modular framework—not fixed. But it reflects a world where safe bonds are no longer neutral hedges and hard assets matter again.
📌 Conclusion: This Thesis Holds Up
Fiscal dominance is not only plausible, it’s empirically observable.
The old rules of diversification no longer apply.
Investors must explicitly hedge inflation, policy failure, and fiscal inertia.
Gold and Bitcoin are no longer fringe—they are mathematically justified in this environment.
🔥 HEAT Formula Playbook: Themes
🤖 Household Robots in 10 Years, Surgery Across the Hemisphere—Who Wins, Who Loses?
1. Robotics Boom: Market Context
Amazon prediction: CEO Andy Jassy forecasts “most houses will have a robot within 10 years”—Amazon already uses 1 million warehouse robots and is innovating in home robotics .
China’s milestone: Chinese doctors conducted robotic surgery from 5,000 km away, enabled by 5G and satellite links. These trends signal fast adoption in home and medical domains.
$AMZN CEO SAYS MOST HOMES WILL HAVE A ROBOT WITHIN 10 YEARS
— #Shay Boloor (#@StockSavvyShay)
12:26 AM • Jul 1, 2025
🇨🇳CHINA PERFORMS REMOTE SURGERY FROM SPACE - LITERALLY
Chinese doctors just pulled off robotic liver surgeries over 5,000 km away using satellite tech - because 5G just doesn’t cut it anymore.
With 632 ms of lag, they kept robotic error under 0.32 mm, thanks to neural nets,
— #Mario Nawfal (#@MarioNawfal)
10:40 AM • Jun 30, 2025
2. 🏆 Winners in Robotics
Company | Segment | Why They Win | Score |
|---|---|---|---|
Amazon (AMZN) | Warehouse / Home Robotics | 1 million robots deployed; DeepFleet AI model; moves downstream into homes | 9 |
iRobot (IRBT) | Household Robots | Market leader in robot vacuums; brand recognition; benefits from rising volume | 8 |
Ecovacs (China) | Household Robots | 60%+ share in China; low-cost scalable platforms | 8 |
Boston Dynamics (HYMTF) | Industrial / Humanoid Robotics | Atlas, Spot platforms; Hyundai backing; focus on advanced mobility | 8 |
Ubtech Robotics | Humanoid / Service Robots | Chinese IPO, educational and industrial robots with AI tie-ins | 7 |
Unitree (China, private) | Humanoid Robotics | Viral G1 unit; cost-effective hardware appeal | 7 |
The Bot Company (private) | AI Home Robots | $2B valuation; ex-Tesla/Cruise team; AI-first home robot play | 7 |
Figure Robotics (private) | Humanoid Robots | MSFT/OpenAI/Bezos backing; ambitious humanoid roadmap | 7 |
MicroPort (China) | Surgical Robotics | Commercial authorization of remote surgery platform | 8 |
Agility Robotics (private) | Humanoid / Industrial | Digit robot for warehouse/logistics; U.S. investment | 7 |
3. Suppliers to Robotics Winners
These firms provide components (sensors, AI chips, semiconductors, actuators) essential to winner platforms:
NVIDIA (NVDA): GPUs for ROS and AI vision
Amazon (corollary): AWS for AI backend
Intel (INTC): CPUs/PXPs, Movidius VPUs
Qualcomm (QCOM): SoCs for edge inference
Sony (SONY): Cameras and imaging sensors
TE Connectivity: Precision connectors and actuators
ABB / FANUC: Robotic peripherals and motion controls
4. Robotics-Losing Aspect 📉
Labor-intensive services firms: Cleaning, delivery, warehousing jobs.
Low-tech appliance firms: Traditional vacuum cleaners, manual tools.
Telecom/IT: If communication is robust and robots go mainstream, new networks are in demand—but legacy telco may be bypassed for private networks.
🔚 Final Take
This home-robot and remote-surgery news cements robotics as a real mega-theme, not sci-fi. Amazon and iRobot/Ecovacs are positioned to lead consumer adoption. Boston Dynamics spearheads enterprise robotics. And surgical systems like MicroPort are unlocking global telemedicine.
Simultaneously, suppliers like Intel, NVIDIA, Sony are critical backbone players. Labor-intensive firms face displacement—but that’s the cost of automation.
🔥 HEAT Formula Playbook: Themes
🇨🇳 MOVE OVER OZEMPIC. CHINA JUST ENTERED THE WEIGHT LOSS DRUG WAR
A new drug called mazdutide just got approved in China, and over 30 more are already in the pipeline.
Obesity is rising fast in China, and with 600 million people projected to be overweight by 2050, the market’s
— #Mario Nawfal (#@MarioNawfal)
11:00 AM • Jun 30, 2025
⚠️ Headline Insight
China just approved mazdutide, a dual GLP-1/glucagon agonist licensed from Lilly via Innovent Biologics—making it the world’s first dual-action obesity drug to launch. It marks a serious challenge to existing players in a massive and growing market
🌍 China’s Obesity Opportunity
Over 600 million overweight adults projected by 2050.
Market forecast to explode, with China’s GLP‑1 market expected to grow ~23% annually, reaching ~$11 bn by 2033 .
Wegovy (Novo) and Zepbound (Lilly) were first movers in China; their patents on semaglutide (Wegovy/Ozempic) expire in 2026, opening room for domestics.
💊 What Mazdutide Brings to the Table
Dual mechanism (GLP‑1 + glucagon): Boosts both appetite suppression and energy expenditure.
Clinical results: 14.8% average weight loss at 48 weeks; ~50% lost ≥15% body weight.
Locally produced: Lower price point vs imported drugs; Chinese biotechs advancing rapidly (e.g., ecnoglutide)
📈 Impact on Novo (NVO) & Lilly (LLY)
Eli Lilly (LLY)
Short-term: Neutral to slightly positive—shares in R&D upside, as Mazdutide stems from licensed LLY technology.
Mid-to-long term: Negative—pricing erosion and market share losses in China once mazdutide launches and cheaper biosimilars follow.
Rating: 6/10 — retains IP upside, but growth dampened regionally.
Novo Nordisk (NVO)
Short-term: Possible softening in Chinese uptake of Wegovy/Ozempic, though exclusivity holds until generic entry post-2026.
Long-term: Hit by competition and biosimilar pressure; patents expiring soon, raising risk of commoditization.
Rating: 6/10 — global leadership intact, but China becomes a contested battleground sooner.
✅ Strategist Summary
China’s local innovation wave is strong: government backing, price sensitivity, and clinical performance make mazdutide a viable rival+
Lilly benefits short-term from licensing deals but will cannibalize its own future market in China.
Novo risk: Patent cliff + domestic competition could meaningfully erode long-term Chinese revenue share.
📌 Bottom Line
This signals a shift: prior GLP-1 dominators (NVO, LLY) face serious domestic competition in China.
LLY: Best-case, mazdutide adds revenue via license; worst-case, it undermines Zepbound’s China roll-out.
NVO: No license upside, patent expiration exposes Wegovy to local pricing pressure and loss of market share.
Both now need strategies to invest in Chinese biotech partnerships or fast-track next-gen molecules to retain share.
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Tuttle Wealth Management: Your Wealth Unschackled
Advanced HEAT Insights: Matt’s Inner Circle, Your Financial Edge
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