Subject: Re: CAPE and BRK
Jim: The reason that CAPE has such strong predictive power for forward returns over a multi-year horizon is that the value of the companies a very broad index in a very broad economy can grow in value only as fast as that economy, which is a relatively small and predictable rate.

Does CAPE have strong predictive power?
I notice that over the last 10 years:
SPY (and Berkshire) CAGR 8.7% real
GDP CAGR 2.3% real
CAPE from 25 to 33 CAGR 2.75%

Is there 3.6% CAGR unaccounted for?