Subject: Arezi Ratio for Nov 11
* 10/21 10/28 11/4 11/11/24
S&P 500 Index 5864.67 5808.12 5728.80 5995.54
Trailing 12 month PE 28.72 28.33 27.99 29.08
Trail Earnings yield 3.48% 3.53% 3.57% 3.44%
Forward 12 month PE 23.66 23.36 22.96 24.42
Fwd Earnings Yield 4.23% 4.28% 4.35% 4.10%
90 day tbill yield 4.73 4.73 4.61 4.63
10 year tbond yield 4.08% 4.25% 4.37% 4.30%
Arezi Ratio 1.36 1.34 1.29 1.35
Fed Ratio 0.97 0.99 1.00 1.05
The Arezi Ratio is the 90 day tbill yield divided by the trailing
earnings yield of the S&P500. A low ratio means that stocks are undervalued.
The 'Fed Ratio' is the 10 year treasury bond yield divided by the
forward estimated operating earnings yield of the S&P500. A low ratio
means that stocks are undervalued. Thus, a ratio of 0.71 for example
means, according to Yardeni, that stocks are cheaper than 'fair value'
by 29%.
The 'S=120-50*Arezi Ratio' formula indicates an allocation of 53%
stocks, 47% cash this week.
Other timing indicators:
The S&P index is above its 200DMA. - Bullish
We are in the Nov-Apr part of the year. - Bullish
The trailing PE ratio of the S&P is above 17. - Bearish
The treasury yield curve is inverted. - Bearish
A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 33%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 80%.
Elan