Arezi Ratio for Jan 24


*                         1/3      1/10     1/17     1/24/22
S&P 500 Index             4766.18  4677.03  4662.85  4397.94
Trailing 12 month PE      24.92    24.36    24.21    22.79
Trail Earnings yield      4.01%    4.11%    4.13%    4.39%
Forward 12 month PE       22.71    22.28    22.30    21.03
Fwd Earnings Yield        4.40%    4.49%    4.48%    4.76%
90 day tbill yield        0.06     0.10     0.13     0.17
10 year tbond yield       1.52%    1.76%    1.78%    1.75%
Arezi Ratio               0.01     0.02     0.03     0.04
Fed Ratio                 0.35     0.39     0.40     0.37

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 below its 200DMA. - Bearish
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 98%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 109%.

Elan

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