True MMRI Calculation Revealed!

From Greg M

Lions and friends…

Since the creation of the MMRI, Mannarino Market Risk Indicator, I have had questions about its calculation…

So here goes.

First off, the MMRI is NOT a crash indictor.

The MMRI calculates stock market risk IN REAL TIME based on credit risk.

The reality of the stock market is this.. IT DERIVES ITS VALUE FROM WHAT IS HAPPENING IN THE DEBT MARKET- which makes the stock market as a whole a derivative.. (that is the stock market derives value from action occurring in the debt/credit market).

Understanding that the number one driver of the stock market is the debt market, and the US 10 year yield is the benchmark, I chose to use the US 10 year yield in the calculation. Also understanding that the relative strength of the dollar also plays a key roll in stock market risk, I chose to use the DXY.

But what about the 1.61?

The absolute correct formula for the MMRI calculation is actually the US10YR x DXY divided by 1.618, which happens to be THE GOLDEN RATIO. (For simplicity of the calculation I made it 1.61).

When I was putting the MMRI together, I needed a number to divide it by which would allow for specific levels to be defined, see image below.

Ironically it worked out to be The Golden Ratio.

That’s it! No more mystery. ; )

GM