Subject: Re: Exploding CAPEtown
Excellent study with a creative presentation that prompted me to think of CAPE differently. CAPE can be deconstructed (exploded) into a detrending step and a valuation step. Detrending is needed because prices have trended higher over the years, and so something is needed to allow comparison between different time periods. Valuation is what we are evaluating: is the valuation predictive of future returns.

Another possible strawman is to use a random price series. Standard deviation of monthly returns has been stable around 3.5% (except for the 1930s). Maybe generate a random price series using monthly change: average 0.0, standard deviation 3.5%.