"We have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand."
- John Maynard Keynes.

An engineer, a biologist and an economist are washed ashore on a desert island. After a few days without food they are starving. Eventually, they stumble on a can of beans on the beach. They spend a few minutes considering how they might feed themselves. The engineer is the first to speak. "We could hit the can with a rock until it opens." The biologist counters, "We could suspend the can in a seawater solution and wait for erosion to work its magic." The economist is last to contribute: "Let us assume we have a can-opener."

So it's not the funniest joke in the universe. But it has the ring of truth. Nobel laureate William Sharpe, for example, established the capital asset pricing model in the 1970s in an attempt to establish the sort of risks that can be reduced by diversification. For anybody that cares (a category that does not include this author), the formula is as follows:

David Fuller's view The equation will produce a smile or two.

I think subscribers will be interested in the rest of this issue which is both insightful and droll.

I noted with particular interest this comment from Tim Price:

The Austrian school recognised the limitations of economic theory. We cannot model "the market" with precision, because the market is us.

Of course the market is us. That is why behavioural technical analysis - a discipline in which Fullermoney has long specialised - is based on monitoring the crowd. To learn more about BTA, treat yourself to The Chart Seminar.