Tobias: I’ve seen other papers that say that CAPE works fine.
The most interesting thing out of it though I thought was that there are certain countries where it’s not very predictive and I find that they’re mostly bank financed.
Buffett’s intuition on that was right and it’s probably a reasonably good metric just to bear in the back of your mind when we’re very, very expensive relative to our own long run average, you might want to be just mindful about what you’re sticking your shackles into.
