Molson Hart

And it's not as if the methodology I decided to use is flawed. Buybacks typically are spread over the year, as are many dividends which are typically paid quarterly in the US. You're primary criticism is my analysis of how buybacks distort CAPE is wrong. I don't see how it is?

It’s the way you used EPS. If you just look at market cap/earnings, then buybacks and dividends give the same CAPE result. With that said @svrnco sent me some paper where shiller said corporate payout policy affects cape so I have to read that before being confident.

I don't really follow your argument (3). CAPE is calculated as price/10y trailing earnings, so if EPS is increasing over time while P/E remains constant, then CAPE will be inflated. Only way this doesn't apply is if you're arguing that P/E will change in response to buybacks.

I don’t know what 3 is a reference to but my original tweets are clear. What you wrote doesn’t make sense to me. Think of it this way. Cape has a bunch of variables in its calculation: earnings, price, time, inflation. You’re saying EPS is changing. Why? Because # of shares is.

Where is # of shares in that calculation? It’s not there. Therefore it does not affect CAPE.

These are my original tweets https://twitter.com/molson_hart/status/1249134084514811904?s=21 …https://twitter.com/Molson_Hart/status/1249134084514811904 …

3 is a reference to the tweet right after that, in which you compare 19.7x with 15x. Cape Ratio assuming zero inflation is defined as: Price per share_10/Average(EPS_1, ..., EPS_10) This is rewritten as: (Mkt cap_10 / #_10)/Average(Earnings_1/#_1, ..., Earnings_10/#_10)

If we assume that earnings are constant every year but # shares decreases annually, then the CAPE ratio will always be growing even though the P/E ratio remains constant.