Arezi Ratio for Jan 17


*                         12/27    1/3      1/10     1/17/22
S&P 500 Index             4725.79  4766.18  4677.03  4662.85
Trailing 12 month PE      24.87    24.92    24.36    24.21
Trail Earnings yield      4.02%    4.01%    4.11%    4.13%
Forward 12 month PE       22.57    22.71    22.28    22.30%
Fwd Earnings Yield        4.43%    4.40%    4.49%    4.48%
90 day tbill yield        0.07     0.06     0.10     0.13
10 year tbond yield       1.50%    1.52%    1.76%    1.78%
Arezi Ratio               0.02     0.01     0.02     0.03
Fed Ratio                 0.34     0.35     0.39     0.40

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 118%
stocks, -18% 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 normal. - Bullish

A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 108%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 119%.

Elan

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