Subject: Arezi Ratio for Nov 20
* 10/30 11/6 11/13 11/20/23
S&P 500 Index 4117.37 4358.34 4415.24 4514.02
Trailing 12 month PE 21.36 22.49 23.20 23.74
Trail Earnings yield 4.68% 4.45% 4.31% 4.21%
Forward 12 month PE 18.59 19.79 20.43 20.88
Fwd Earnings Yield 5.38% 5.05% 4.89% 4.79%
90 day tbill yield 5.59 5.53 5.53 5.50
10 year tbond yield 4.84% 4.57% 4.61% 4.44%
Arezi Ratio 1.19 1.24 1.28 1.31
Fed Ratio 0.90 0.90 0.94 0.93
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 55%
stocks, 45% 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 35%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 81%.
Elan