Be on Guard When the Perma Bulls Get Marched Out on CNBC

Last week, the S&P 500 Index reached a high on February 19, 2013 at $1530.94. Since that high in the S&P 500 Index there was a sharp plunge lower into February 26, 2013 when the S&P 500 Index traded as low as $1485.01. On February 22, 2013, CNBC brought out the Kansas City Fed President Jim Bullard to assure investors that the Federal Reserve Bank was going to continue it’s $85 billion a month mortgage back securities and U.S. Treasury purchases. Believe it or not, the stock market only sold off for two days at that time when Bullard appeared on CNBC. Many traders found this rather ironic that this important figure in monetary policy would be brought out so quickly.

Today, CNBC brought out Laszlo Birinyi who has been a perma-bull for as long as I can remember. The next person on the CNBC guest list was John Paulson who is frequent guest that is also always bullish. This coming Monday, CNBC will be featuring Warren Buffett who is always the most bullish person in the world. Remember, Warren Buffett bought Goldman Sachs Group Inc (NYSE:GS) when the stock was trading around $125.00 a share and watched it trade down to $48.00 a share before the U.S. taxpayer bailed out the stock. The average person just can’t afford to this, but Warren Buffett knows what stocks are going to be bailed out before he ever gets involved with the company. He is called an angel investor, but he is really just a smart investor who has smart and important political ties. He also bought Bank of America Corp (NYSE:BAC) in August 2011 around $7.00 a share and watched that stock drop to $5.13 on October 4, 2011 before the stock made a final low. Today, BAC stock trades at $11.29 a share. Mr. Buffett will certainly come on CNBC and talk the market up as he usually does.

Whenever all of these bullish talking heads come on the most popular financial news program it is usually a sign that someone is getting nervous about the stock market. This bull market that began in March 2009 is now four years old, so it is certainly long in the tooth. The Federal Reserve still has the pedal to the metal when it come to low interest rates and massive easy money policies. This is unprecedented by the central bank. After all, the Fed funds rate has been at basically zero percent since December 2008. Private equity firms are buying up most of the single family real estate in the U.S. creating a false sense of home ownership, but this is the world that we live in. Stock market leaders such as Apple Inc (NASDAQ:AAPL), Cliffs Natural Resources Inc (NYSE:CLF), Freeport-McMoRan Copper & Gold Inc (NYSE:FCX), and J.C. Penney Company, Inc (NYSE:JCP) have plunged recently. These are not signs of a healthy stock market, they are signs of a central bank inflated market. Traders should always be on guard when the perma-bulls get marched out on CNBC.

About Nicholas Santiago 575 Articles


Nicholas Santiago started trading in 1991. In 1997, he became a licensed Series 7 and 63 registered representative. He managed money for a large, affluent private client group. After applying his knowledge to his client base, he decided it was time to begin teaching those interested in learning his methods. He is an expert in Technical Analysis. He has become an accomplished technician in the studies of Elliot Wave, Gann Theory, Dow Theory and Cycle Theory. In 2007, he partnered with Gareth Soloway to form InTheMoneyStocks.Com and realize his dream of educating others about the truth of the markets.

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