[DavidC]

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If you rent for an extra 6 months due to a downswing in a booming real estate market, you lose a lot more than you would have if you had an upswing or stuck near EV. The "Sklansky Bucks" may be equal, but the real dollars won or lost are far from equal.

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Firstly, yes, the cost of keeping the 5k is basically the amount of time that you have to go without the car, which is significant due ot the shape of your utility curve. The interest doesn't compensate for this, in our current investment climate, though if you consider poker earnings "interest" (which you know you shouldn't), then keeping the 5k becomes much more attractive.

Regarding this point, I think that if you take on high variance with positive EV, you actually lose Sklansky Bucks when you've got something planned like taking out a mortgage... As you take on more variance you have a greater likelihood of renting, whereas the upside of that same variance wouldn't be as profitable to you as the downside would be unprofitable (you save a little on interest when you increase your downpayment, but you lose a lot when you don't have enough to pay it, particularly if real estate is in a downswing at the same time you are).

My response to that sort of situation, as you're aware, is to reduce your bankroll for all risk calculations, instead of your approach, which has been to say that you have baknroll X, but bet in a manner consistent with bankroll Y, where Y is less than X.

I think my approach is best, and it lends itself to evaluating all bets at baknroll Y, so that you avoid situations where betting at bankroll X provides a good but minimally acceptable hourly rate and then you're screwwed because you don't have your mortgage due to downswing. When you start mixing bankroll X and Y in your decisions, rather than using one or the other, you start taking on a real risk of ruin somewhere between your threshold at X and Y, which, if you really had your threshold at Y, means that you're taking on more risk than you desired.

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Likewise, if some individual were planning on buying a big money-pit, pain-in-the-ass, somewhat uneccessary, depreciating asset

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You mean like a car, right? [img]/images/graemlins/smile.gif[/img]

Let's just say that there are some utility factors involved here that supercede money. I intend to prove people wrong who say, "Man can not live on 'digs' alone."

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Tubasteve, what's discrete math? I'm kinda curious. I think I used to call it Finite when I was in highschool, but I"m not sure.