Canaries in the Coal Mine
By David Nelson, CFA
“The canary in the coal mine is always the first to go.” For more than a century miners carried them in small cages deep into the mine as an early warning detection system for poisonous gas or carbon dioxide. The first sign of distress in the cage sent the men back to the surface in a hurry.
Portfolio managers and traders are always looking for the Holy Grail, an indicator that can show if the path forward is safe. We spend fortunes on data terminals and hours developing quantitative systems that can help us avoid the next wiggle in the market or pull the rip cord to avoid being mauled by the bear. The answers we seek may be staring us right in the face.
The election was an adrenaline rush for small cap investors with (IWM) jumping nearly nearly 17% in just 4 weeks. Even today it’s up over 28% from a year ago but year to date it’s lagged its big brother large caps. With a nearly 400 basis point (4%) difference since the start of the year it begs the question; what’s wrong with this picture? (Click Here for full story on Yahoo Finance)