Karim Rahemtulla, Head Fundamental Tactician, Monument Traders Alliance Back in the day, coal miners used canaries to detect dangerous gases in mines. Canaries, and birds in general, are more sensitive than humans to poisons in the air. If the bird began to get sick or even die, the miners knew they shouldn't go any farther. That practice stopped in 1986. Today, in the financial industry, the term "canary in the coal mine" refers to news that can be extrapolated across the board. For example, if a bank reports bad earnings and blames it on the recession, it makes sense to predict that most other banks will report the same type of earnings. So investors sell the other banks they hold before their earnings are released in anticipation of bad news. The canary isn't always right, however. |
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