My students asked me out for beer Wednesday night.
Twenty-eight of them spread around Chicago now. Some work for Goldman. All traders and money managers. All analysts.
We sat there in a bar while the temperature dropped to 20 degrees outside. They're finishing finals next week. Then I'm set free from undergrads for at least two or three years.
One of them asked me something that's been on everyone's mind lately. Not about technical indicators or chart patterns. Something simpler.
"Professor, my dad keeps texting me saying the market can't keep going up like this. Is he right?"
I took a sip of my beer. Looked around the table. These kids have never seen a real correction. They don't know what 2008 looked like. They weren't trading in 2000.
And here's what I told him. Your dad is right. But not for the reasons he thinks.
This weekend I want to tell you the same thing I told my students Wednesday night. Because what's happening right now isn't about fundamentals or valuations. It's about something much simpler.
And once you understand it, you'll know exactly what comes next.
What YOLO Actually Means
Thursday I learned something new from my students. Well, relearned it.
The Anthropic CEO went on Bloomberg this week. He said some AI companies are simply "YOLO-ing." My students explained what that means.
You Only Live Once.
Even my daughter tells me this. Yolo. You only live once.
The AI revolution is no different than the dot-com bomb. They're kindred souls. Some will survive. Others will die on the vine.
Pets.com? Dead. The Globe? Dead. Exodus Communications at $400 a share? Dead. They don't exist anymore.
But here's what my students don't understand yet. The market doesn't care about fundamentals right now. It doesn't care that some AI companies are YOLO-ing their way through billions in capital.
It only cares about one thing. Getting to December 31st with numbers that justify bonuses.
The Carbon Copy Pattern
Wednesday I pulled up the S&P chart in class. Showed them December 2024 next to December 2023.
They're virtually identical. Carbon copies.
Bad news comes out, we buy. Good news comes out, we buy. No news comes out, we buy. Horrific news comes out, we buy buy buy buy.
There are no downticks. None. It's rigged. It's manipulated. That's how December works.
But here's what I showed them next. What happened in January 2024.
We started to back off. We popped briefly. Then starting in February and March we blew out.
I expect nothing less than a repetition next year. Because January 1st brings a change in regime. A change in narrative. A change in how the market operates.
If you're not out of this market by December 31st, I think you're screwed. If you don't rotate, you're gonna get caught looking and lose a lot of money in January.
You can't live forever on hope. You can't live on algos. You can't live on Christmas rallies and performance gaming forever.
The Week That Nearly Killed Me
Tuesday was brutal. The week from hell.
I had two separate classes. Grad and undergrad. They came together on the same day. I had to grade the last sets of homework before the break.
Then a Genesis COG call at 11. Then more grading. Dozens of homework assignments stressing me out.
Wednesday I walked downtown in 25-degree weather with 15-degree windchill. Had to teach my last class of instruction. Walked home the same way because catching a bus there is impossible.
Thursday I kept saying please kill me. Like from The Simpsons. I gotta go downtown one more time. Twenty degrees outside now. Just a review for the final exam.
And all week I kept thinking about what I'm teaching these kids. Applied Portfolio Management. The highest-ranking class at the university. I have a 5.0 rating.
But here's what they're not getting. What I can't seem to make them understand.
Money management isn't about being a homegrown hero. You want to play Casey at the bat? You're gonna strike out and blow your account out eventually.
Money management is simply about how you rearrange risk. You rearrange correlations. You rearrange weightings of positions. And you do it forever.
I've been doing this 38 years. It's the only way to make money. There's no other way to do this.
What Wednesday Night's Beer Taught Me
Sitting there with my students Wednesday night, I realized something.
They're walking into a market that's completely disconnected from reality. Where fundamentals mean less than they've ever meant. Where rotations have taken over everything.
Tuesday I looked at my portfolio. My short positions were killing it. The longs were getting absolutely trashed because they're defensive positions and valuation doesn't mean anything right now.
That's disturbing to me. That worries me about the market's long term.
But December doesn't care about long term. December cares about getting to year-end with numbers that justify another Ferrari. Another bonus. Another million from clients.
So the machines just keep buying. Every 10-point dip gets bought immediately. The selloff lasts three to five minutes maximum.
I've traded professionally for 38 years. I've never seen a market this bullish in December. Not even close.
The Buy Now Pay Later Economy
Thursday I told my students about something that perfectly captures what's happening.
Americans are forecast to spend $20 billion this month via the buy now pay later model. Twenty billion dollars.
Credit companies are warning us. This is a setup for another wave of defaults after Christmas. Just part and parcel of the system.
You remember Wimpy from Popeye? He'd go to the diner starving. Little cap on. Partially bald. Potbelly waist.
He'd say "I'm hungry for a hamburger." The chef would say "Pay me." And Wimpy would say "I'll gladly pay you Tuesday for a hamburger today."
That's what the market's doing right now. These people never intend on paying this ever.
But in that credit model that I teach at Loyola, it doesn't matter. You could literally extend credit to people and if 90% don't pay, they'll still make money.
Because the 10% that do pay on credit actually puts it in a cost-benefit analysis where they come out ahead.
This buy now pay later model is just saying we know 80% of these people are never gonna pay for what they buy for Christmas. We'll just write it off and ding the people we can collect from.
This is just inviting more bad behavior and more debt. This is the state of the economy we're in.
What The Machines Don't Read
Thursday I threw the kitchen sink at the market. Everything but the kitchen sink.
The news is irrelevant to this market because the algorithms don't read news. You read news. I read news. Kaufman reads news.
The algorithms don't. Can't read news. The algorithms only read one thing. Order flow and slopes.
Right now we're in the sweet spot of algorithmic buying. Fourth quarter. December. Pre-Christmas rally.
The machines are programmed to buy during this window regardless of what's happening in the real economy. They don't feel fear. They don't process economic stress. They just execute.
But come January, the programming resets. The window dressing ends. The performance gaming stops.
And that's when everything your dad texted you about actually matters.
My Position Going Into Next Week
Monday I walked 40 minutes to Loyola in 27-degree weather because the bus didn't show. Then walked home the same way.
All week I've been walking through this freezing Chicago weather thinking about positioning. About what I'm telling my students. About what comes after December 31st.
I'm at 60% cash right now. Could be fully invested. I have more cash than I know what to do with.
I'm only 40% invested in equities. 20% long and 20% short. That's it.
Why? Because I know what's coming. I promise you the SPY is gonna go down. I guarantee it's eventually gonna go down.
But it ain't gonna go down 2-3% like you think. It's gonna give back a lot of this. Because the law of large numbers, the law of math, nobody can avoid it.
Whatever goes parabolic comes down waterfall. We've gone parabolic.
The Genesis COG System tracks exactly when these year-end patterns exhaust themselves. When window dressing ends and January positioning begins. When the programming that defends every dip flips to systematic selling.
Most traders won't see this until their accounts drop 10% in three days. By then the repositioning already happened weeks earlier.
That's why I'm positioned the way I am. Not because I'm predicting a crash. Because I'm reading the same pattern that repeated last year. And I'm not waiting until December 31st to rotate.
What I Told My Students Wednesday Night
After we finished our beers, one of them asked me what I was going to do the rest of December.
I told him I'm going to walk in the cold. Grade finals. Get through next Friday. Then I'm set free from undergrads for two or three years.
And I'm going to sit in 60% cash while everyone else chases performance through year-end.
Because the student whose dad keeps texting him? His dad is right. Just 28 days too early.
The market can't keep going up like this forever. But it can keep going up like this through December 31st. That's what the machines are programmed to do.
Come January, the game changes. The rotations reverse. The defensive positions stop getting trashed. The fundamentals start mattering again.
Not because the economy suddenly improves. Because the programming that ignores all of it finally resets.
Take your family out this weekend. Enjoy the time before the cold really sets in. Have the conversations.
But Monday morning, ask yourself one question. Am I positioned like someone who learned from December 2023? Or am I still betting the machines will defend this through January?
Because sitting in that bar Wednesday night watching my students finish their beers, I already knew my answer.
And come January, they'll understand why.
Professor Jeffrey Bierman
Creator of the Genesis COG System