This plot is a 20 March 2008 update of our 6 March figure, assessing effect of recent rise in Dow - although the market has gone up about 800 points in the last two weeks, peak values of about 7400 are still significantly below "plateau" (see further discussion below) values of about 8700. This could of course be just the beginning of a market surge; it could also be what is sometimes picturesquely called on the Street as a "dead cat bounce", before it retreats again.
For what its worth, our forecast stands as before: although factors such as price/earnings ratio are favorable to a market surge, the overall economic situation is still dismal, with respect to very weak banking sector and the $500 trillion* (yes you read that right) in derivatives still "out there". That, plus the ~50% drop, leads us to forecast that the present upsurge will flatten into a "still-stand" before going down again.
Sorry, we would be very happy to be wrong, but this is the way we see it - not as economists but as two people familiar with analysis of abrupt transitions in noisy systems (in our case, the climate system).
PS: In case you were wondering my collaborator Matt Unterman informs me that the "other side of a trillion" is a "quadrillion" - so, in lingo, total derivatives now "out there" would represent about "half a quad".
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