Gyroscopic Investing

Hello everyone - my first post here, but I've been invested in the PP for a number of years.

Has anyone noticed that the PP CAGR is going down over time. Using performance data from craig's blog and calculating the CAGR every year starting with 1972, this is what we get:

[img width=500]http://s2.postimg.org/r6vf0mp6x/pp_cagr.png[/img]

My personal opinion is that this is due to the rates trending down from 1980s and in particular because of the very low interest rates in the past decade. Does anyone have any other explanations as to why this is the case? Do you think this trend will continue?

Thanks,
boruseek

Inflation is going to skew these results.  I think those are nominal returns rather than real.  What you have here is a graph (more or less) of inflation getting lower.

That's a nominal graph; adjusting it to be real would probably make it clear that inflation has been falling too, blunting the effect.

In other words, the PP is still doing its job of giving you a low but stable real return. It just looked more dramatic during the time when inflation was 5-10%

This is a very good point. Thanks for the replies.

The real CAGR looks much better with consistent 5% real return:

[img width=500]http://s28.postimg.org/rustwdl3h/pp_cagr_real.png[/img]

Thanks,
boruseek

Nice graph!

Does that graph show a rolling x-year average CAGR?  It must, because the CAGR in 2013 was negative.

I'm guessing it's CAGR since inception.

Yes, every data point is CAGR since 1972 to that year.

That approach would make any investing strategy appear to start out rough and then gradually get very smooth as it approaches the current time.

Here's the rolling real CAGR:

[img width=500]http://i61.tinypic.com/jzb61e.png[/img]