Subject: Arezi Ratio for Mar 11
* 2/19 2/26 3/4 3/11/24
S&P 500 Index 5005.57 5088.80 5137.08 5123.69
Trailing 12 month PE 26.44 26.77 26.56 26.46
Trail Earnings yield 3.78% 3.74% 3.77% 3.78%
Forward 12 month PE 22.65 23.06 23.18 22.89
Fwd Earnings Yield 4.41% 4.34% 4.31% 4.37%
90 day tbill yield 5.44 5.46 5.42 5.46
10 year tbond yield 4.30% 4.26% 4.19% 4.09%
Arezi Ratio 1.44 1.46 1.44 1.44
Fed Ratio 0.97 0.98 0.97 0.94
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 48%
stocks, 52% 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 28%.
An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 77%.
Elan