On share buybacks and earnings inflation: Share buybacks are important because they raise the payout ratio for equities (i.e., the percentage of earnings which get returned to shareholders via dividends and share buybacks). A higher payout commands a higher valuation.
Also, using the price-to-total-cash ratio creates a more favorable (or less onerous) valuation dynamic than the traditional CAPE ratio (cyclically adjusted P/E using 10-year earnings). That in turn leads to a more favorable outcome for the CAPE model (which holds that the 10-year CAPE ratio predicts the forward 10-year return), per the chart below. The 10-year forward annualized return (CAGR) projected by the CAPE ratio is only 4%, but using the price/cash ratio it jumps to 9%. The payout ratio matters, and therefore share buybacks matter.
Of course, with all those buybacks comes a significant amount of earnings inflation. With fewer shares outstanding, every dollar of earnings gets a lot more mileage in terms of translating into earnings-per-share (EPS).
By my calculations, earnings per share are 20% overstated because of the reduced share count. By extension, the 5-year cyclically adjusted P/E ratio is 4.6 points understated. Such are the effects of financial engineering.