Even the most hardened of Wall Street hands have confessed to being just a little bit amazed by the past few weeks.

On Wall Street the Dow Jones index has hit a new record high, after rising 22 per cent from its low point in September.

And this at a time when Indonesia has gone up in flames, Russia has sunk further into chaos, and Japan has showed no sign of pulling itself out of its slump. Have the markets gone mad?

Perhaps not completely. Because the truth is, almost all the news since August has been good.

The G7 group of the world's richest countries has agreed a co-ordinated plan to restore confidence, including a new chunk of money for the International Monetary Fund that includes 18 billion dollars from the United States, approved at last by Congress.

Brazil, everyone's favourite as the next domino to fall into chaos, has steadfastly refused to go the way of Indonesia and Russia.

Interest rates have been falling in the US and here in Britain. There are signs of recovery in some parts of Asia, as interest rates fall and share prices rise, and an export boom may be developing.

And above all perhaps, Presidents Clinton and Yeltsin are still with us. Both had been written off - people said they'd be out by Christmas. But both are still clinging to power.

So on the basis of the flow of news since September, it is entirely reasonable that share prices should have risen very strongly.

The problem is that by most standards share prices, especially in the US, were ludicrously overpriced before they began to fall. All the historical comparisons point to shares being more expensive now that they've ever been before.

It may be that there has been a once and for all shift, and people have simply become prepared to buy shares at higher prices than before. But if they haven't, then sooner or later prices will have to fall to levels where people are prepared to buy them again.