Poll

Would you gamble?

I would gamble the $50,000
69 (26.4%)
I wouldn't gamble the $50,000
192 (73.6%)

Total Members Voted: 240

Author Topic: Almost logical to gamble $50,000 on red...  (Read 66935 times)

cbgg

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Re: Almost logical to gamble $50,000 on red...
« Reply #200 on: March 24, 2014, 06:23:29 PM »
Based on the way you've described it, I think the logical option is to gamble.  But I could never do it.  I have no stomach for gambling and would rather have the extra $50k at the end of the year, guaranteed.

arebelspy

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Re: Almost logical to gamble $50,000 on red...
« Reply #201 on: March 24, 2014, 06:24:19 PM »
I've not read all the replies, but I've voted no simply because, personally, my nerves wouldn't be able to handle it, lol. Then again, I'm not a year away from FI, so I don't know if my answer would change closer to the time.

Just wanted to say, though, that the conception stats were interesting to see. The other "problem" that you may not have considered is also that the further in you get in the 3rd group, the higher the potential risk of conceiving a child with special needs. I'm not sure where your wife is in the 2nd group, but this may also be something to consider if she's close to that edge.

She'll have just turned 29 when we're planning on trying to conceive.

I do think it's interesting how many people couldn't stomach the bet.  If it was the logical choice, I'd have no problem laying 50 down.  In fact, I'd have a hard time living with NOT making the rational decision (if it was in fact the rational decision), and choosing emotion over reason.  I don't think I could do that.
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avonlea

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Re: Almost logical to gamble $50,000 on red...
« Reply #202 on: March 24, 2014, 06:43:40 PM »
I've not read all the replies, but I've voted no simply because, personally, my nerves wouldn't be able to handle it, lol. Then again, I'm not a year away from FI, so I don't know if my answer would change closer to the time.

Just wanted to say, though, that the conception stats were interesting to see. The other "problem" that you may not have considered is also that the further in you get in the 3rd group, the higher the potential risk of conceiving a child with special needs. I'm not sure where your wife is in the 2nd group, but this may also be something to consider if she's close to that edge.


She'll have just turned 29 when we're planning on trying to conceive.

I do think it's interesting how many people couldn't stomach the bet.  If it was the logical choice, I'd have no problem laying 50 down.  In fact, I'd have a hard time living with NOT making the rational decision (if it was in fact the rational decision), and choosing emotion over reason.  I don't think I could do that.

Predictably Irrational, we are. :)

Khan

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Re: Almost logical to gamble $50,000 on red...
« Reply #203 on: March 24, 2014, 09:25:21 PM »
I tried my hand at gambling. I spent 300$ and the entire time I was thinking to myself "I'd rather be playing in the stock market, at least then I still have a stock in a company, whether I was right or wrong". What a shitty brand of "entertainment" gambling is.

So Arebelspy, are you leaning towards doing it or not?

arebelspy

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Re: Almost logical to gamble $50,000 on red...
« Reply #204 on: March 24, 2014, 09:57:45 PM »
So Arebelspy, are you leaning towards doing it or not?

It's still quite a ways off (two years is my ideal time, if in two years I'm short, this question becomes relevant).

Like I said, I'm trying to work myself into a position where I won't need to answer that question if I can earn an extra 50k or so over the next two years.
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Twenty4Me

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Re: Almost logical to gamble $50,000 on red...
« Reply #205 on: March 24, 2014, 11:40:45 PM »
I do think it's interesting how many people couldn't stomach the bet.  If it was the logical choice, I'd have no problem laying 50 down.  In fact, I'd have a hard time living with NOT making the rational decision (if it was in fact the rational decision), and choosing emotion over reason.  I don't think I could do that.

For me, it would be because as I was laying down the bet, I'd be thinking of all the effort that went into getting that $50K saved. So, to me, it would be like laying down all the hours worked, budgets tweaked, and purchases deferred that wouldn't sit well with me.

As this potential situation is still at least 2 years away, I think the greater satisfaction for me would be to be able to not even have to be presented with it, ie. tweak that budget and defer those purchases just a little more strictly for the next 2 years. Take a bet on myself that I can do it, without having to go LV.

arebelspy

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Re: Almost logical to gamble $50,000 on red...
« Reply #206 on: March 25, 2014, 08:09:04 AM »
For me, it would be because as I was laying down the bet, I'd be thinking of all the effort that went into getting that $50K saved. So, to me, it would be like laying down all the hours worked, budgets tweaked, and purchases deferred that wouldn't sit well with me.

Ah, that makes sense to me.

For me, there was no effort to save it.  We like our jobs, and we spend as much as we want.  So the hours worked weren't painful, we don't budget, and we don't defer purchases.

The money saved is just the surplus sitting in the bank account after we spend whatever we want.

But if it was hard work, like you describe, I can see why it would be more emotional and harder to override with logic.

Take a bet on myself that I can do it, without having to go LV.

I live in LV, about a mile to the strip.  I've timed the walk to the Hard Rock.  Three minutes, if I jaywalk, or hit the crosswalk lights right.  ;)
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WageSlave

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Re: Almost logical to gamble $50,000 on red...
« Reply #207 on: March 25, 2014, 12:48:40 PM »
My FIRE expenses will be around 45k.  I expect to make significantly more than that income-wise (I'm shooting for a 50% savings rate in FIRE in a normal year, with that dropping to no savings at worst in the rare bad years).

Doesn't that imply a 2x safety factor?  If you're using the oft-discussed 4% SWR as your basis, you're actually planning on a 2% SWR, right?

Yes, and no, in that order.  I will not have a SWR, as I will have rental income for my FIRE income.  There will be no withdrawals from a traditional portfolio.

Isn't that kind of a semantic distinction?

I assume by "traditional" portfolio, you mean a "paper" portfolio, i.e. stocks and bonds.  With the traditional portfolios, it's typical to talk about "total" return, meaning both dividends and capital gains.  I've been under the impression that even if one's SWR is less than the dividend return, it's still called a withdrawal rate.  I.e., even if you can entirely fund your retirement from dividends, and never have to sell, it's still called SWR.

So for a rental property portfolio, how is that income different from bond interest or stock dividends?  I guess it's harder (impossible?) to automatically re-invest rental income (compared to the ease at which you can typically DRIP stock dividends or bond fund interest).

arebelspy

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Re: Almost logical to gamble $50,000 on red...
« Reply #208 on: March 25, 2014, 01:07:48 PM »
My FIRE expenses will be around 45k.  I expect to make significantly more than that income-wise (I'm shooting for a 50% savings rate in FIRE in a normal year, with that dropping to no savings at worst in the rare bad years).

Doesn't that imply a 2x safety factor?  If you're using the oft-discussed 4% SWR as your basis, you're actually planning on a 2% SWR, right?

Yes, and no, in that order.  I will not have a SWR, as I will have rental income for my FIRE income.  There will be no withdrawals from a traditional portfolio.

Isn't that kind of a semantic distinction?

I assume by "traditional" portfolio, you mean a "paper" portfolio, i.e. stocks and bonds.  With the traditional portfolios, it's typical to talk about "total" return, meaning both dividends and capital gains.  I've been under the impression that even if one's SWR is less than the dividend return, it's still called a withdrawal rate.  I.e., even if you can entirely fund your retirement from dividends, and never have to sell, it's still called SWR.

So for a rental property portfolio, how is that income different from bond interest or stock dividends?  I guess it's harder (impossible?) to automatically re-invest rental income (compared to the ease at which you can typically DRIP stock dividends or bond fund interest).

Not only that, how do I determine my SWR for a rental?  Based on equity? Total value of the property?  How do I determine that?

My "SWR" will be something silly like 6-12% depending on how you calculate it.

It's more than just a semantic distinction, it's categorically different.
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Re: Almost logical to gamble $50,000 on red...
« Reply #209 on: March 25, 2014, 01:55:58 PM »
For me, there was no effort to save it.  We like our jobs, and we spend as much as we want.  So the hours worked weren't painful, we don't budget, and we don't defer purchases.

The money saved is just the surplus sitting in the bank account after we spend whatever we want.

But if it was hard work, like you describe, I can see why it would be more emotional and harder to override with logic.

I'd just work the whole last year if I liked my (former) job as much as you like yours.  It sounds like very little effort, and you obviously care a lot about the well-being of the students.  Consider it volunteer work, and then have a nice big corpus of $50k to do some random acts of kindness throughout life.  Make it official and stick the $50k into a charitable trust at Vanguard. 

I don't know if it will happen, but if my portfolio ever doubles or triples so that I'm at the point you are (way more money than I could ever need with a fat margin of safety added in), I'll strongly consider doing something like a charitable trust.

arebelspy

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Re: Almost logical to gamble $50,000 on red...
« Reply #210 on: March 25, 2014, 02:03:30 PM »
I'll strongly consider doing something like a charitable trust.

Yes, this is part of our long term plans.
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The Happy Philosopher

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Re: Almost logical to gamble $50,000 on red...
« Reply #211 on: March 25, 2014, 03:56:44 PM »
My FIRE expenses will be around 45k.  I expect to make significantly more than that income-wise (I'm shooting for a 50% savings rate in FIRE in a normal year, with that dropping to no savings at worst in the rare bad years).

Doesn't that imply a 2x safety factor?  If you're using the oft-discussed 4% SWR as your basis, you're actually planning on a 2% SWR, right?

Yes, and no, in that order.  I will not have a SWR, as I will have rental income for my FIRE income.  There will be no withdrawals from a traditional portfolio.

Isn't that kind of a semantic distinction?

I assume by "traditional" portfolio, you mean a "paper" portfolio, i.e. stocks and bonds.  With the traditional portfolios, it's typical to talk about "total" return, meaning both dividends and capital gains.  I've been under the impression that even if one's SWR is less than the dividend return, it's still called a withdrawal rate.  I.e., even if you can entirely fund your retirement from dividends, and never have to sell, it's still called SWR.

So for a rental property portfolio, how is that income different from bond interest or stock dividends?  I guess it's harder (impossible?) to automatically re-invest rental income (compared to the ease at which you can typically DRIP stock dividends or bond fund interest).

Not only that, how do I determine my SWR for a rental?  Based on equity? Total value of the property?  How do I determine that?

My "SWR" will be something silly like 6-12% depending on how you calculate it.

It's more than just a semantic distinction, it's categorically different.

I would consider a rental more like an inflation adjusted annuity (expected income - expenses) where you get your principal back when you sell. Those assets then could be converted to paper and 4% or whatever rule applied.

arebelspy

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Re: Almost logical to gamble $50,000 on red...
« Reply #212 on: March 25, 2014, 04:01:58 PM »

I would consider a rental more like an inflation adjusted annuity (expected income - expenses) where you get your principal back when you sell. Those assets then could be converted to paper and 4% or whatever rule applied.

Yes, it's much more similar to that than a traditional portfolio, IMO.

So if someone had a COLA'd annuity to cover all their expenses, what would their SWR be?

Like I said:
Quote
I will not have a SWR, as I will have rental income for my FIRE income.  There will be no withdrawals from a traditional portfolio.
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Re: Almost logical to gamble $50,000 on red...
« Reply #213 on: March 25, 2014, 04:08:39 PM »
This is the first time I've actually seen a scenario where the second effect of gambling comes up.
Over the long run gambling loses you money but it also has the effect of reshaping your wealth probability curve.
The average wealth level shifts down but the probability of having lots of money goes up.
I've thought about this before but have never actually seen a real life scenario where it could apply.

The only scenario where something like this is useful is in cases with discrete thresholds like your 1 year contract scenario.
Assuming there would be no difference in life outcome between you losing and not gambling then, ignoring any psychological effects like others have discussed, gambling is the right decision.
I say take the bet, because logical choice and because of the novelty of being one of the few people ever to make a rational decision to gamble.

Off the top of my head, another scenario where this could come into play is if you get a treatable terminal illness without health insurance and the drugs cost one million dollars.
You only have 100 thousand and if you don't pay the one million you die. In this case the optimal decision is to spend all your savings on lottery tickets to maximize your chance of exceeding the threshold. Admittedly this scenario is far fetched (especially with the ACA) and there are other ways out of it.

The Happy Philosopher

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Re: Almost logical to gamble $50,000 on red...
« Reply #214 on: March 25, 2014, 04:15:58 PM »

I would consider a rental more like an inflation adjusted annuity (expected income - expenses) where you get your principal back when you sell. Those assets then could be converted to paper and 4% or whatever rule applied.

Yes, it's much more similar to that than a traditional portfolio, IMO.

So if someone had a COLA'd annuity to cover all their expenses, what would their SWR be?


Hmmmm. In that scenario one in theory wouldn't need any other assets. Although there is risk that the cola will not match ones personal inflation rate, and there is risk that the underlying annuity would fail.

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Re: Almost logical to gamble $50,000 on red...
« Reply #215 on: March 25, 2014, 04:41:23 PM »
This is the first time I've actually seen a scenario where the second effect of gambling comes up.
Over the long run gambling loses you money but it also has the effect of reshaping your wealth probability curve.
The average wealth level shifts down but the probability of having lots of money goes up.
I've thought about this before but have never actually seen a real life scenario where it could apply.

The only scenario where something like this is useful is in cases with discrete thresholds like your 1 year contract scenario.
Assuming there would be no difference in life outcome between you losing and not gambling then, ignoring any psychological effects like others have discussed, gambling is the right decision.
I say take the bet, because logical choice and because of the novelty of being one of the few people ever to make a rational decision to gamble.

Off the top of my head, another scenario where this could come into play is if you get a treatable terminal illness without health insurance and the drugs cost one million dollars.
You only have 100 thousand and if you don't pay the one million you die. In this case the optimal decision is to spend all your savings on lottery tickets to maximize your chance of exceeding the threshold. Admittedly this scenario is far fetched (especially with the ACA) and there are other ways out of it.

This kinda applies to me with the lottery.  I occasionally buy a lottery ticket because the $1 has very little marginal utility to me (X), and no chance of ruining me.  But winning, say, $10 million would put me above the retirement step function and thus has more than X times 10 million utility.

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Re: Almost logical to gamble $50,000 on red...
« Reply #216 on: March 25, 2014, 06:23:27 PM »

I would consider a rental more like an inflation adjusted annuity (expected income - expenses) where you get your principal back when you sell. Those assets then could be converted to paper and 4% or whatever rule applied.

Yes, it's much more similar to that than a traditional portfolio, IMO.

So if someone had a COLA'd annuity to cover all their expenses, what would their SWR be?


Hmmmm. In that scenario one in theory wouldn't need any other assets. Although there is risk that the cola will not match ones personal inflation rate, and there is risk that the underlying annuity would fail.

Agreed. There are risks.  But it's tough to pick a specific "SWR" to that scenario.

@dragoncar That's a slippery slope though, my friend, especially when you consider the sorites paradox.
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arebelspy

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Re: Almost logical to gamble $50,000 on red...
« Reply #217 on: March 25, 2014, 06:34:23 PM »
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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dragoncar

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Re: Almost logical to gamble $50,000 on red...
« Reply #218 on: March 25, 2014, 06:39:46 PM »


@dragoncar That's a slippery slope though, my friend, especially when you consider the sorites paradox.

The sorites paradox does not imply that I can't distinguish a heap any more than the dichotomy paradox implies that I can never reach my destination.
« Last Edit: March 25, 2014, 06:46:58 PM by dragoncar »

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Re: Almost logical to gamble $50,000 on red...
« Reply #219 on: March 25, 2014, 06:44:03 PM »


@dragoncar That's a slippery slope though, my friend, especially when you consider the sorites paradox.

The sorites paradox does not imply that I can't distinguish a heap any more than the dichotomy paradox implies that I can never reach my destination.

I tip my hat to you then, for you can do something I cannot.
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Re: Almost logical to gamble $50,000 on red...
« Reply #220 on: March 25, 2014, 06:50:48 PM »


@dragoncar That's a slippery slope though, my friend, especially when you consider the sorites paradox.

The sorites paradox does not imply that I can't distinguish a heap any more than the dichotomy paradox implies that I can never reach my destination.

I tip my hat to you then, for you can do something I cannot.

Sure you can, you've set your FI goal.  Thus, you've determined that X dollars is "enough" even though there's no particular significance to any annual expenditure.  You could spend one dollar more or less and be pretty much equally happy.

moved edit: actually the lottery can be seen as a variant of your proposition:  If I make, lets say, $500 per day, and on my last day of work I'll need $200 to reach my FI goal, then it could make sense to buy 300 lottery tickets prior to that last day.  Assuming my employer won't let me work a half day.

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Re: Almost logical to gamble $50,000 on red...
« Reply #221 on: March 25, 2014, 07:12:18 PM »
Sure you can, you've set your FI goal.  Thus, you've determined that X dollars is "enough" even though there's no particular significance to any annual expenditure.  You could spend one dollar more or less and be pretty much equally happy.

No, the X dollars gets me a certain number of properties and income.  One dollar less doesn't get me there, and one dollar past that has no utility.

I can determine in that situation, because there is a clear threshold/hard limit.

In a sorites paradox this doesn't exist.  If we said "5 is a heap" it would no longer be a sorites paradox.  I am saying "X is enough" - this no longer fits the definition, since we have defined the problem away.  This doesn't work with buying 1 lotto ticket.

moved edit: actually the lottery can be seen as a variant of your proposition:  If I make, lets say, $500 per day, and on my last day of work I'll need $200 to reach my FI goal, then it could make sense to buy 300 lottery tickets prior to that last day.  Assuming my employer won't let me work a half day.

Indeed, a small step function is introduced for everyone if you can pick the day you leave, but have to work that whole day, and it would push you over a limit you had decided.
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Mr One Wheel Drive

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Re: Almost logical to gamble $50,000 on red...
« Reply #222 on: March 25, 2014, 08:43:20 PM »
Do it! Do it! Do it!

Next time I pass the local casino I'm going to go in and throw $10 down as a proof of concept ;)

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Re: Almost logical to gamble $50,000 on red...
« Reply #223 on: March 25, 2014, 09:06:01 PM »
I would work the additional year.  Anyone that offers the option to gamble in a purely 50/50 scenario for such high value is suspect in my opinion.  In  times of emotional turmoil (such as when you get close to something you always drempt of), if it's too good to be true, something will ruin it, such as a 'cheap win' - you won't value it correctly if it works out in your favor anyways.  Say you win and get one more year off, it will have polluted your good and steadfast opinion of how you actually worked and saved to reach FI (but I'll go and read all the other replies now, since it's a fascinating idea.  If you do it, judging by the length of this thread there is plenty of interest, you gotta publicize it, Don King style, so you at least get some views if you lose...
« Last Edit: March 26, 2014, 01:25:00 PM by EscapeVelocity2020 »

arebelspy

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Re: Almost logical to gamble $50,000 on red...
« Reply #224 on: March 26, 2014, 07:02:10 AM »
Anyone that offers the option to gamble in a purely 50/50 scenario for such high value is suspect in my opinion.

And why is that?
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Re: Almost logical to gamble $50,000 on red...
« Reply #225 on: March 26, 2014, 07:43:24 AM »
I don't think concave utility functions are a reason to be suspicious. They're just unusual.

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Re: Almost logical to gamble $50,000 on red...
« Reply #226 on: March 26, 2014, 07:51:30 AM »
I don't think concave utility functions are a reason to be suspicious. They're just unusual.

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EscapeVelocity2020

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Re: Almost logical to gamble $50,000 on red...
« Reply #227 on: March 26, 2014, 10:49:18 AM »
Nice responses, I'd just wonder as a practical consumer, 'Why would someone go to the trouble of holding 50k liquid (to be able to pay) if there is no profit for them?  On the surface of it, they are essentially losing money by providing this service.

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Re: Almost logical to gamble $50,000 on red...
« Reply #228 on: March 26, 2014, 11:11:36 AM »
Nice responses, I'd just wonder as a practical consumer, 'Why would someone go to the trouble of holding 50k liquid (to be able to pay) if there is no profit for them?  On the surface of it, they are essentially losing money by providing this service.

Many of us have a cash portion of our AA.  50k is not unreasonable to have liquid at all...
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Roland of Gilead

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Re: Almost logical to gamble $50,000 on red...
« Reply #229 on: March 26, 2014, 11:35:26 AM »
I still think the stock option market would be your best place to make this bet.

If you pick a highly traded stock like Apple you can arrange some near term option spreads that give you a 100% return or 100% loss based on a very small movement of the stock (a coin flip).

Commissions would be negligible...perhaps $20 at Optionshouse for a $50,000 purchase.  Thus you would get very close to an ideal 50/50 coin flip without paying the house (the broker) much.


arebelspy

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Re: Almost logical to gamble $50,000 on red...
« Reply #230 on: March 26, 2014, 11:39:23 AM »
I still think the stock option market would be your best place to make this bet.

If you pick a highly traded stock like Apple you can arrange some near term option spreads that give you a 100% return or 100% loss based on a very small movement of the stock (a coin flip).

Commissions would be negligible...perhaps $20 at Optionshouse for a $50,000 purchase.  Thus you would get very close to an ideal 50/50 coin flip without paying the house (the broker) much.

The wife mentioned a sports bet to me.  Stock options would be another.  As I mentioned, if and when it comes to that, I'll start a thread discussing the various methods I might use to achieve it.

IMO something that minimized taxes would probably be more beneficial than something that minimized spread, but we'd have to run the EV of both scenarios.
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Flaneur

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Re: Almost logical to gamble $50,000 on red...
« Reply #231 on: March 26, 2014, 11:40:56 AM »
A 50/50 proposition with an even money payoff has a neutral expected value. Since I don't enjoy -EV or 0EV gambling I would not take the bet.

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Re: Almost logical to gamble $50,000 on red...
« Reply #232 on: March 26, 2014, 11:42:02 AM »
Nice responses, I'd just wonder as a practical consumer, 'Why would someone go to the trouble of holding 50k liquid (to be able to pay) if there is no profit for them?  On the surface of it, they are essentially losing money by providing this service.

Many of us have a cash portion of our AA.  50k is not unreasonable to have liquid at all...
I guess, never having gone to Vegas myself, that they are pretty shrewd about getting the best return money can buy.  Maybe I've just seen too many movies.  BTW - pls share when you do this if you ultimately go for it... I want to be there to see the reactions when you whip out your 50k and set it on red.  Or was it black?...
« Last Edit: March 26, 2014, 11:48:35 AM by EscapeVelocity2020 »

dragoncar

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Re: Almost logical to gamble $50,000 on red...
« Reply #233 on: March 26, 2014, 11:44:42 AM »
Sure you can, you've set your FI goal.  Thus, you've determined that X dollars is "enough" even though there's no particular significance to any annual expenditure.  You could spend one dollar more or less and be pretty much equally happy.

No, the X dollars gets me a certain number of properties and income.  One dollar less doesn't get me there, and one dollar past that has no utility.

I can determine in that situation, because there is a clear threshold/hard limit.

In a sorites paradox this doesn't exist.  If we said "5 is a heap" it would no longer be a sorites paradox.  I am saying "X is enough" - this no longer fits the definition, since we have defined the problem away.  This doesn't work with buying 1 lotto ticket.

moved edit: actually the lottery can be seen as a variant of your proposition:  If I make, lets say, $500 per day, and on my last day of work I'll need $200 to reach my FI goal, then it could make sense to buy 300 lottery tickets prior to that last day.  Assuming my employer won't let me work a half day.

Indeed, a small step function is introduced for everyone if you can pick the day you leave, but have to work that whole day, and it would push you over a limit you had decided.

Any definition of enough is equivalent to saying "enough is a heap of money".  The threshold you picked is arbitrary at fine scales because you chose (I think?) properties to generate X income.  But if you really think you will have a significant different between X income and X-$.01 income, then I think you may be fooling yourself.  Let me know if  misunderstanding how your are choosing your target.

totoro

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Re: Almost logical to gamble $50,000 on red...
« Reply #234 on: March 26, 2014, 11:48:42 AM »
I wouldn't gamble the $50,000 partly because I just don't care enough about the possibility of winning even in your near retirement no extra utility for extra dollars from excess time worked scenario.  I also think there is always utility for extra dollars, even it is not personal utility. 

Mostly I prefer to just mosey along maximizing opportunities as they arise or are created - thinking about interesting stuff (to me) along the way.  Engaging in risky stuff for more return is something I would do and have done, but only if it was intriguing for some other reason, like innovating the way something is done.

arebelspy

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Re: Almost logical to gamble $50,000 on red...
« Reply #235 on: March 26, 2014, 11:54:18 AM »
Sure you can, you've set your FI goal.  Thus, you've determined that X dollars is "enough" even though there's no particular significance to any annual expenditure.  You could spend one dollar more or less and be pretty much equally happy.

No, the X dollars gets me a certain number of properties and income.  One dollar less doesn't get me there, and one dollar past that has no utility.

I can determine in that situation, because there is a clear threshold/hard limit.

In a sorites paradox this doesn't exist.  If we said "5 is a heap" it would no longer be a sorites paradox.  I am saying "X is enough" - this no longer fits the definition, since we have defined the problem away.  This doesn't work with buying 1 lotto ticket.

moved edit: actually the lottery can be seen as a variant of your proposition:  If I make, lets say, $500 per day, and on my last day of work I'll need $200 to reach my FI goal, then it could make sense to buy 300 lottery tickets prior to that last day.  Assuming my employer won't let me work a half day.

Indeed, a small step function is introduced for everyone if you can pick the day you leave, but have to work that whole day, and it would push you over a limit you had decided.

Any definition of enough is equivalent to saying "enough is a heap of money".  The threshold you picked is arbitrary at fine scales because you chose (I think?) properties to generate X income.  But if you really think you will have a significant different between X income and X-$.01 income, then I think you may be fooling yourself.  Let me know if  misunderstanding how your are choosing your target.

But it's not X in dollars, it's X in properties that produce dollars.  X properties will produce enough, X-1 won't.

I feel like I may be missing your point.  Please elaborate.  :)
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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EscapeVelocity2020

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Re: Almost logical to gamble $50,000 on red...
« Reply #236 on: March 26, 2014, 12:46:42 PM »
It was Ashley Revell - bet his life savings on red in Vegas in 2004, and won.  He also got tons of publicity, probably just as valuable whatever the outcome had been.  Maybe you are being too conservative :)

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Re: Almost logical to gamble $50,000 on red...
« Reply #237 on: March 26, 2014, 12:55:22 PM »

Any definition of enough is equivalent to saying "enough is a heap of money".  The threshold you picked is arbitrary at fine scales because you chose (I think?) properties to generate X income.  But if you really think you will have a significant different between X income and X-$.01 income, then I think you may be fooling yourself.  Let me know if  misunderstanding how your are choosing your target.

But it's not X in dollars, it's X in properties that produce dollars.  X properties will produce enough, X-1 won't.

I feel like I may be missing your point.  Please elaborate.  :)

Yeah, we're definitely not understanding each other.  You seem to be saying that you will retire when you have X in properties.  But how did you choose X in properties?  I was assuming (and correct me if I'm wrong) that you chose X in properties because X in properties generates Y dollars per year, and Y is how much you plan to spend in retirement.  X-1 in properties might only generate Y-R dollars per year, where R is your return on assets.  It seems to me that earning one less dollar per year in retirement isn't a real boundary condition where you are no longer FI -- your planned annual spend in retirement is estimated, and a dollar here or there isn't truly significant (again, correct me if wrong -- I guess you might be planning to commit your entire income stream to all-or-nothing services like a retirement home where you have to give them Z dollars per month in exchange for food, shelter, and all entertainment -- and if you fail to give them Z dollars, they kick you out and you are unhappy).  Similarly, you can't just solve the sorites paradoxby saying "a heap is more than 500 grains" because 500 is arbitrary.  There's no satisfying reason that 499 grains is any less a heap than 500.  Similarly, I don't see a satisfying reason that $999,999 in assets generating $99,999.90 income is objectively any less FI than $1,000,000 in assets generating $100,000 in income.  It's well within the margin of estimation error.

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Re: Almost logical to gamble $50,000 on red...
« Reply #238 on: March 26, 2014, 05:38:52 PM »
But a "heap" is not defined.

Assets producing more than my expenses is defined. There is a clear demarcation line.

And yes, I try to estimate my expenses as exactly as possible, and then hit that number.

If a Heap was defined as 500, then no, 499 wouldn't do it.

If my FIRE expenses are 50k, then no, 49.9k doesn't do it.  One might reasonably try to trim $100 from their budget, but then they're changing the parameters so they can meet.  It'd be like defining a heap to be 500 and then if you have 499 redefining heap.

I'm fine with someone doing that, but I can't define heap.  I can define FIRE expenses.
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dragoncar

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Re: Almost logical to gamble $50,000 on red...
« Reply #239 on: March 26, 2014, 06:05:20 PM »
But a "heap" is not defined.

Assets producing more than my expenses is defined. There is a clear demarcation line.

And yes, I try to estimate my expenses as exactly as possible, and then hit that number.

If a Heap was defined as 500, then no, 499 wouldn't do it.

If my FIRE expenses are 50k, then no, 49.9k doesn't do it.  One might reasonably try to trim $100 from their budget, but then they're changing the parameters so they can meet.  It'd be like defining a heap to be 500 and then if you have 499 redefining heap.

I'm fine with someone doing that, but I can't define heap.  I can define FIRE expenses.

49.9k doesn't do it, but there's no way to be sure what level of assets will give you that 50k income.  Having a dollar less is equivalent to having your target, plus an unexpected $1 rental expense.  You are essentially choosing a level you are comfortable with that cannot be objective (probability that the extra $1 rental expense will occur).

I can define heap as "I'm comfortable with calling that a heap" and FIRE as "I'm comfortable retiring on those assets".  I don't really see how you can define FIRE any other way -- everybody chooses a particular chance of success that they are comfortable with, and there can be no objective bright-line guarantee that any particular person will not run out of money.  Just because there is fuzzy logic involved in FIRE doesn't mean it's not possible to FIRE.

Even assuming that the sorites paradox applies, the mere application of an apparent paradox to a statement does not imply that the statement is untrue.  If my target is $1 million, then I will first need to get my net worth halfway -- $500k.  Then I will need to get my networth halfway again -- $750k, and so on.  Just because the dichotomy paradox applies here does not mean I can never reach $1 million.

By the way, in real life do you actually look at a pile of bricks and say to yourself "well, I can't really say it's a pile of bricks because of the sorites paradox"?
« Last Edit: March 26, 2014, 06:07:10 PM by dragoncar »

arebelspy

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Re: Almost logical to gamble $50,000 on red...
« Reply #240 on: March 26, 2014, 06:18:14 PM »
49.9k doesn't do it, but there's no way to be sure what level of assets will give you that 50k income.  Having a dollar less is equivalent to having your target, plus an unexpected $1 rental expense.  You are essentially choosing a level you are comfortable with that cannot be objective (probability that the extra $1 rental expense will occur).

Sure, but you use the fuzzy logic to come up with a number.  That isn't the case in the heap.

I can define heap as "I'm comfortable with calling that a heap" and FIRE as "I'm comfortable retiring on those assets".  I don't really see how you can define FIRE any other way -- everybody chooses a particular chance of success that they are comfortable with, and there can be no objective bright-line guarantee that any particular person will not run out of money.  Just because there is fuzzy logic involved in FIRE doesn't mean it's not possible to FIRE.

FIRE: "I'm comfortable retiring on these assets because I have historical expenses, researched how expenses change in retirement, projected out the length of time things should last, have estimated various inflation scenarios, etc. etc. and that means I need $X annually, and these assets should give me the $X I need based on X, Y, and Z research."

HEAP: "I'm comfortable with calling this a heap because..." ???

I don't have any reason to call something a heap or not.  I do have reason to think a certain FIRE number will be sufficient.

By the way, in real life do you actually look at a pile of bricks and say to yourself "well, I can't really say it's a pile of bricks because of the sorites paradox"?

There aren't a lot of bricks in my life.  But yes, if I saw a pile of them and someone asked if it was a heap, and I actually paused and thought, I'd have to ask them what they meant by heap.  Just because we are often careless with language doesn't make precise language invalid.

(Also, BTW, I'm really enjoying this discussion.  Thank you dragoncar.)
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warfreak2

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Re: Almost logical to gamble $50,000 on red...
« Reply #241 on: March 26, 2014, 06:21:02 PM »
The problem is, it's not just that one dollar. It's an attitude that says, "that deliberate, unbudgeted expense doesn't matter because it could easily have happened by chance". The same logic justifies splurging $1000 bucks here or there because the stock market could very easily have performed $1000 worse than it did this year, and your pile of money will simply go from being "enormous" to "still enormous", so no problem.