Arezi Ratio for Nov 21

*                         10/31    11/7     11/14    11/21/22
S&P 500 Index             3901.06  3770.55  3992.93  3965.34
Trailing 12 month PE      20.65    20.04    21.47    21.48
Trail Earnings yield      4.84%    4.99%    4.66%    4.66%
Forward 12 month PE       18.89    18.50    19.60    19.47   
Fwd Earnings Yield        5.29%    5.41%    5.10%    5.13%
90 day tbill yield        4.18     4.21     4.28     4.34
10 year tbond yield       4.02%    4.17%    3.82%    3.82%
Arezi Ratio               0.86     0.84     0.92     0.93
Fed Ratio                 0.76     0.77     0.75     0.74

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 73%
stocks, 27% 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 inverted. - Bearish

A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 43%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 82%.

Elan

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