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.
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Multiple sources define CAPE for a single stock based on price and earnings per share, but indexes are different because they're measures of market cap instead of price per share. What this means is that LT3000's point holds for companies, but not to indexes. Interesting.
Using eps is convenient but not logical for cape calculations. Lt3000’s “point” doesn’t hold for companies or indices (indexes?). He’s just calculating things wrong and deriving conclusions from bad calculations.
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The thing is that CAPE for companies is defined based on price per share and EPS. So if you're saying that EPS should not be used for calculating company CAPE ratios, then you're essentially arguing the same point as LT3000, using the exact same logic.
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Or at least, that's the formula I'm seeing on most websites that talk about CAPE. But if those websites aren't using the conventional definition of CAPE, then I fully agree that LT's post is attacking a strawman (though a commonly used one).
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