DANGER: China is about to F**K Us.

Market Analysis: TikTok Deal, Private Credit, and Economic Outlook

Key Concepts:

• Triple Witching: The simultaneous expiration of stock options, stock index futures, and stock index options, typically causing increased trading volume and volatility.
• POMO (Permanent/Temporary Market Operations): Actions undertaken by the Federal Reserve to influence liquidity in the financial system. POMO involves the Fed buying or selling securities.
• AUM (Assets Under Management): The total market value of the financial assets that a financial institution manages on behalf of its clients.
• Bare Bull Scale: A proprietary scale used by Meet Kevin to gauge market bullishness, currently at 5.4.
• House Hack: A real estate investment strategy where an investor lives in a portion of a property while renting out the remaining space.
• Zero Hedge: A financial news and analysis website known for its contrarian viewpoints.
• St. Louis FRED: The Federal Reserve Economic Data database, a source of economic data.
• 27-Week Unemployed Level: A leading indicator of recession, peaking after a recession has already begun.

Market Rally & The TikTok-Oracle Deal

The stock market experienced a significant rally today, partially attributed to the perceived approval of a deal between TikTok and Oracle. Initial market reaction, specifically within the first five minutes of trading, showed exceptionally high volume – triple that of previous days – signaling strong bullish sentiment. A purchase made in the first minute of trading would have yielded substantial gains throughout the day, with the Q's (Nasdaq 100) testing the 617 level after bouncing off 607 yesterday.

Donald Trump announced a “definitive agreement” with ByteDance (TikTok’s parent company), but the deal is not yet finalized and hinges on approval from China. The market’s enthusiasm is currently based on the assumption of a successful deal, driving up stocks like Oracle (up 7%), Coreweave (68 to 79), Micron, AMD, and Nvidia.

The Looming Risk of Private Credit

A critical underlying concern is the size and potential fragility of the private credit market. The speaker draws a parallel to the 2008 JP Morgan bankruptcy, estimating the private credit market at approximately $4 trillion – a “too big to fail” level of risk.

Private credit has been flowing into data centers, and Oracle’s recent stock decline is linked to its private credit lender, Blue Owl, withdrawing support. The success of companies like Oracle is crucial for downstream industries like chip manufacturers, memory plays, and infrastructure buildout, ultimately impacting GDP growth.

Government Intervention & Liquidity

The speaker argues that the Trump administration is responding to the private credit situation by attempting to prop up Oracle’s stock, alongside the Federal Reserve’s ongoing liquidity injections. The Fed is currently implementing both temporary and permanent market operations (POMO), injecting $5 billion every few days and $60 billion per month (including $20 billion in mortgage-backed securities). This is intended to bolster private credit.

China’s Leverage & Geopolitical Concerns

Despite the apparent progress, the TikTok deal remains contingent on Chinese approval. The speaker invested $6 to access a Hong Kong-based article (and subsequently cancelled the subscription) revealing concerns about the algorithm’s control. If China retains control of the algorithm, it may not meet US regulatory requirements.

Furthermore, China is leveraging the deal in response to the US’s recent $11 billion arms sale to Taiwan, which Beijing strongly condemned as a violation of diplomatic agreements and a threat to regional stability. The speaker highlights escalating tensions, referencing a recent report on “dogfighting” between US and Chinese satellites in orbit and the creation of the US Space Force during the initial US-China trade war.

Economic Outlook & Market Catalysts

The speaker expresses skepticism about the sustainability of the current market rally, citing the worst consumer sentiment survey in 40 years (according to Zero Hedge). He believes the market is currently pricing in a “soft landing” scenario that may not materialize.

Key catalysts are identified as January 9th and 13th, alongside potential government shutdown risks. The speaker maintains a “bare bull” rating of 5.4, indicating cautious optimism. He points to the 27-week unemployed level (tracked on the St. Louis FRED) as a leading recession indicator, currently showing a concerning upward trend.

Diversification & Investment Opportunities

The speaker highlights the increasing investor interest in alternative investments like “House Hack” – a real estate strategy involving living in a portion of a property while renting out the rest – with over $2 million invested in the past week through his platform. He emphasizes the use of AI and machine learning in his company’s investment approach, noting the contributions of his development team.

Conclusion

While the TikTok-Oracle deal has provided a short-term boost to the market, significant risks remain. The fragility of the private credit market, China’s leverage, and underlying economic concerns suggest caution is warranted. The speaker anticipates a period of bullishness leading up to January 9th, but emphasizes the need for continued skepticism and diversification, particularly given the potential for a recessionary environment. He encourages investors to stay informed through resources like his Alpha Report and to prepare for potential market volatility.