"We're talking ten years out. So I'm going to go back to 100 years. The growth of real inflation directed earnings is surprisingly low. From 1890 to 1990 it was only 1.5 percent a year," he said.
"I take earnings and I extrapolate them out at 1.5 percent from where they—S&P earnings—are now and then I apply a price earnings ratio of 15, which is the historical average for 1890 to 1990," Shiller said.
The 1,430 level actually makes sense if you look at the 50 year chart extended out to 2020 (click for larger view).
I'll do a new post with a chart analyzing Shiller's data at econ.yale.edu (S&P, EPS, CPI, Bond Yields and CAPE). I asked David Einhorn in a post on 12/12/2010 if he thought the CAPE would test the lows around 6, which is where the market bottomed in 1932 and 1982. I believe we're around 22 now, up from 13 when the market bottomed in March of 2009 (still double the low). Watch the CNBC video after the jump.