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Subject: Arezi Ratio for Aug 10	Date: 8/7/2020 9:45 PM
Author: elann	Number: 278631 of 283341
* 7/20 7/27 8/3 8/10/20 S&P 500 Index 3224.73 3215.63 3271.12 3351.28 Trailing 12 month PE 32.47 32.61 33.31 35.61 Trail Earnings yield 3.08% 3.07% 3.00% 2.81% Forward 12 month PE 25.17 24.26 24.53 25.05 Fwd Earnings Yield 3.97% 4.12% 4.08% 3.99% 90 day tbill yield 0.11 0.11 0.09 0.10 10 year tbond yield 0.64% 0.59% 0.55% 0.57% Arezi Ratio 0.04 0.04 0.03 0.04 Fed Ratio 0.16 0.14 0.13 0.14 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=120-50Arezi 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 May-Oct part of the year. - Bearish 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=120-30Arezi Ratio and the first two of the other timing indicators, produces a target of 109%. Elan
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