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DECISION POINT
OVERVIEW OF MARKET FUNDAMENTALS
Thursday  4/10/2014


*************************** S&P 500 FUNDAMENTALS ****************************

The real P/E for the S&P 500 is based on "as reported" or GAAP earnings
(calculated using Generally Accepted Accounting Principles), and it is the
standard for historical earnings comparisons. The normal range for the GAAP
P/E ratio is between 10 (undervalued) to 20 (overvalued).

Market cheerleaders invariably use "pro forma" or "operating earnings,"
which exclude some expenses and are deceptively optimistic. They are
useless and should be ignored.

The following are the most recently reported and projected twelve-month
trailing (TMT) earnings, quarterly earnings, and price/earnings ratios (P/Es)
according to Standard and Poors.

                                             Est       Est       Est       Est
                               2013 Q4   2014 Q1   2014 Q2   2014 Q3   2014 Q4
TMT P/E Ratio (GAAP).......:     18.30     17.50     16.90     16.00     15.40
TMT P/E Ratio (Operating)..:     17.10     16.80     16.30     15.80     15.30

TMT Earnings (GAAP)........:    100.20    104.88    108.71    114.88    119.00
TMT Earnings (Operating)...:    107.30    109.23    112.51    116.25    120.13

QTRLY Earnings (GAAP)......:     26.48     28.90     28.70     30.80     30.60
QTRLY Earnings (Operating).:     28.25     27.70     29.64     30.66     32.13

For a more thorough discussion of earnings and other fundamentals
click here.

Based upon projected GAAP earnings the following would be the approximate
S&P 500 values at the cardinal points of the normal historical value range.
They are calculated simply by multiplying the GAAP EPS by 10, 15, and 20:

                                             Est       Est       Est       Est
                               2013 Q4   2014 Q1   2014 Q2   2014 Q3   2014 Q4
Undervalued (SPX if P/E = 10):    1002      1049      1087      1149      1190
Fair Value  (SPX if P/E = 15):    1503      1573      1631      1723      1785
Overvalued  (SPX if P/E = 20):    2004      2098      2174      2298      2380


*******************  COMPARISON OF MAJOR INDEXES  ***************************

                                  SPX     OEX     NDX    DJIA    DJTA    DJUA

Price/Earnings Ratio........:      18      18      24      16      17      22
Dividend Yield..............:    1.9%    1.8%    0.7%    2.3%    1.3%    3.8%


*********************** DIVIDEND VALUE RANGE ANALYSIS ***********************

The yield for the DJIA, DJTA and the S&P 500 has historically moved
between a range of 3% (overvalued) and 6% (undervalued). The normal yield
range for the DJUA is between 3% and 12%. Decision Point expresses this
range as an RVR (Relative to Value Range) value of between 0 (undervalued)
and 100 (overvalued). Values can fall outside that range, and, when they
do, indicate even greater extremes of market valuation.


                                     S&P 500     DJIA     DJTA    *DJUA
-----------------------------------  -------    -----    -----    -----
Current Closing Price.............:     1833    16170     7431      535
Current Yield.....................:     1.9%     2.3%     1.3%     3.8%
Current P/E.......................:       18       16       17       22
Current Payout Ratio..............:      0.4     43.7      0.2      0.8
Current RVR.......................:      136      124      157       92

Price at  1.5% Yield..............:     2322    24794     6440     1355
Price at  3.0% Yield (RVR 100)....:     1161    12397     3220      678
Price at  4.0% Yield..............:      871     9298     2415      508
Price at  5.0% Yield..............:      697     7438     1932      407
Price at  6.0% Yield  (RVR 0).....:      580     6199     1610      339
Price at  8.0% Yield..............:      435     4649     1208      254
Price at 12.0% Yield  (RVR 0 - DJUA).........................:      169


*********************** MISCELLANEOUS MARKET MEASURES ***********************

DJIA Yield.............:    2.29%  Bearish  (Norm Rng: 3% - 6%)

DJIA P/E...............:    15.92  Neutral  (Norm Rng: 10 - 20)

T-Bill Yield/DJIA Yield:     0.01  Bullish  (Norm Rng: 1.6 - 2.0)

Price to Dividend Ratio:    43.67  Bearish  (Should be less than 30)


*****************************************************************************

The chart below offers perspective regarding current S&P 500 P/E and yield
relative to normal historical ranges.


***************************************************************************** HUSSMAN P/E The chart beloww calculates the SPX P/E by dividing the SPX price by Prior Peak Earnings, a method developed by John Hussman, manager of the Hussman Funds. (hussmanfunds.com) It orients valuations to the long-term rising trend of earnings growth as defined by peak-to-peak earnings.

***************************************************************************** End of MARKET FUNDAMENTALS REPORT for Thursday 4/10/14 Copyright 2014 Decision Point.
 
   
   
   
   
 

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