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Investing/Strategies / Mechanical Investing
|Subject: Arezi Ratio for Nov. 16||Date: 11/15/2007 7:42 PM|
|Author: elann||Number: 203937 of 252777|
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"
The 'S=120-50*Arezi Ratio' formula indicates an allocation of 90%
stocks, 10% 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 above 17. - Bearish
The treasury yield curve is normal (not inverted). - Bullish
For my own allocation I start with the Arezi formula and subtract 10%
for each bearish indicator. My current target allocation is 70%.
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