The Ignorant Investor

The other day I had to eat crow on the Dow, only to find this story in the wire the next day:

NEW YORK - Disappointing earnings from Alcoa Inc. sent stocks lower Tuesday and threatened to halt the market's January rally one day after the Dow Jones industrial average closed above 11,000 for the first time since June 2001.

Alcoa is part of the Dow and a major producer of aluminum.

Alcoa disturbed investors by reporting a 16 percent drop in earnings from the year-ago period. Copper maker Phelps Dodge Corp. also said its fourth-quarter earnings will fall well below expectations . . .

At a time when the economy is booming, Mr. Market goes looking for a canary in the mine to signal when the economy is cooling off. Because all economies cool off eventually. Always. That's in the Bible somewhere, I think. Look it up. Einstein implied it in his famous formula. We're talking universal rule. Like the desire of every man for representative democracy and consumer goods (well, outside the Sunni triangle, anyway).

Aluminum and copper are used by other companies use to make goods that later show up on our shelves and in our garages-- it's the lego blocks of the modern economy- so when the demand for aluminum and copper drops Mr. Market takes notice. The damage is likely to be limited here because these are just a couple of companies out of all commodity producers and this might only be a blip in a long boom for commodities.

In other words, the canary might not be dead yet. He might just have indigestion. But I'm going to keep my eye on him.