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Hodr
Guest
Worse, sure. Much worse? Not so sure.
Lots of people have won who didn't play (mainly through fraud and theft, but you didn't exclude those).
Powerball
- Thread starter Merlin99
- Start date
Worse, sure. Much worse? Not so sure.
Lots of people have won who didn't play (mainly through fraud and theft, but you didn't exclude those).
Some employees rigged a Pennsylvania lottery drawing. They injected liquid in all but 2 of the balls then bought lots of tickets with those combinations. 666 came out as the winner, which is pretty prophetic. A few people went to prison for that an nobody got to keep the money.
They probably would have gotten away with it if they hadn't of told other family members and the unusual amount of winners tipped authorities off.
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Hodr
Guest
Fox doling out the good investment advice again. You could use whatever money you have left after they convinced you to buy gold at $1900/ounce.
Tilted
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Oooh, ooh, ooh... lottery math. Fun!
As others have already pointed out, you couldn't guarantee that you'd come out ahead because you might have to split the pot. But the question remains, would that be a sound financial investment? Would buying all those tickets represent a positive expected value? That still might not make it a sound financial decision as there are varying-utility-of-money considerations, but if someone had enough money - say they had $5 billion that they had invested in various way - then an EV of plus a few percent, all things taken into consideration, might make it a good financial decision.
Wanna do the back-of-the-envelope math? The answer would depend a great deal on how many tickets were sold this time around (as that would effect how much of the bonus pool - the money carried over, the free money so to speak from a gambling perspective - they could expect to leverage and to what degree it would offset the built-in house advantage (and player disadvantage) that exists in such lotteries).
Okay, ashamed though I should probably be to admit it, I've already done the rough math (which I'll share if you're interested). Basically, if only 400 million tickets are sold (which would mean an annuity jackpot of around $1.4 billion) there's a small after-tax expected return from this strategy - about $15 million on the $584 million investment, 2-1/2 % over a few weeks or however long it takes to get the money. Not too shabby, but it's of course a high risk / possibly high return proposition. You might make $300 million or you might lose $300 million. But you have about a 60% chance of coming out ahead (but even in that case, there'd be a 60% or so chance that you'd only make about $20 million rather than the $300 million).
When you get to 500 million tickets sold (about $1.5 billion annuity jackpot), the after-tax EV has gone slightly negative and it gets worse the more tickets are sold. The no-tax EV (if you could somehow avoid all taxes on any winnings) stays positive even past 600 million tickets sold ($1.6 billion-ish annuity jackpot), but soon after turns negative.
Local tax rates would of course affect the numbers, I used a 45% effective total tax rate. And there are a number of assumptions built in - e.g., I assume that you don't otherwise have a half billion dollars worth of gambling wins this year such that you could claim the full costs of the losing tickets as deductions even if you didn't win the whole prize. Gambling loses are deductible (and in this case you'd have a half billion dollars worth of gambling loses), but only up to the amount of your gambling winnings for the year. So if you didn't have to split the pot (or only split it with one other person), you'd win more than you lost and you'd be able to take full advantage of those loses. However, if the pot got split more ways your winnings would be less than your loses and so you'd lose the tax value of some of those loses. Your net winnings would be reduced by taxes, but your net loses would not be reduced by taxes. That's why the after-tax EV can be negative even when the no-tax EV is positive even though, if you win, only the net winnings are effectively taxed. But if you'd already won a ####-ton of money gambling this year, this investment / gambling scheme makes more sense financially because that dynamic doesn't come into play.
Oh, I also assumed taking the cash payment rather than the annuity. Trying to figure the real present value of that future revenue stream (and possible tax implications) would bring in too many variables, the cash payment option represents a simplified version of that present value consideration anyway.
Tilted
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Where did you hear that?
Based on the number of tickets that were reportedly sold for the last drawing, I don't think that can be correct. Something like 78% of the possible combinations should have been covered, perhaps a bit less if we account for dynamics which might make the distribution something less than completely random (e.g. people tending to pick lower names to match birthdays and such). But given the size of the sample and the high number of tickets that are computer chosen (i.e. ostensibly randomly) - and how many tickets were sold, reportedly 440 million or so - there's basically no chance that the covered combinations could be that low.
I'd go so far as to say that if it were the case that only 55% of the possible combinations were covered, there needs to be an investigation. That reality alone would probably be enough to get the thing shut down until they could figure out what was going on. It would likely mean that the computer algorithms they use to create tickets had been monkeyed with such that they weren't really random, possibly with the purpose of increasing the number of duplicate tickets and reducing the likelihood that the jackpot wasn't won so that they could sell more tickets when the jackpot got really big.
With less tickets sold, yeah, the number of combinations covered would be considerably less. With 200 million sold it should be something like 50% covered. And there are typically far less tickets sold - as in, when the jackpot isn't so large - so the number of covered combinations would be lower still. Maybe what you heard was referring to an older drawing, not this last Saturday's but the one prior?
Tilted
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It's over 1.3 BILLION now....Next drawing is Wen, 3 days away.... Any bets on 2.0 Billion by then?
I wouldn't be surprised if went higher by the time the drawing was held, they typically lowball their early estimates for how many tickets will be sold. Indeed, the estimate is already up to $1.4 billion. But that $1.3 billion wasn't what the jackpot value (which also includes estimate for annual returns if you take the annuity option) already was, it was an estimate of what it would get to by drawing time. (It jumped more than $300 million from the value for the previous drawing to that $1.3 billion estimate almost immediately - not because they sold that many tickets right after the last drawing but because they were estimating how many they would sell over the next few days.)
I suspect it will get to $1.5 billion, maybe a little higher. But then again, having hit the billion-dollar-plus level people might go completely crazy and buy a billion tickets this time, that would push it over $2 billion (annuity value).
Tilted
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The expected return on lottery tickets is (almost always) negative, yes. But there's entertainment value (which takes many forms). So your expected loss on a $2 ticket might be $1, but that $1 expected loss is paying for some form of entertainment - e.g., the two days of dreaming that you might strike it rich. We spend money for enjoyment all the time; for different people different forms of enjoyment are valued differently. For some people it's worth spending $50 for a good meal, for others it's worth losing (i.e. an expected loss of) $500 for a weekend of gambling in Atlantic City, for others it's worth $150 to watch a Redskins game in person.
That said, while the expected value of buying a lottery ticket is usually pretty negative on a percentage basis - it's usually a terrible investment based only on financial considerations (and not accounting for the varying utility of money) - this is one of the rare cases where the expected value of buying a ticket gets fairly close to zero (rather then being highly negative). We're still not there yet, but depending on the number of tickets sold this time around it might only be about 10 cents. By next time, if no one wins this time and people don't go completely Powerball crazy the next time, buying a ticket might actually creep into positive expected value territory - a very rare thing when it comes to lotteries.
It was just one of those "heard it from somebody who heard it from somebody else" things. When I heard it, it did make me wonder how their random number generator worked.
Tilted
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I'm impressed, they actually got the main aspects of that consideration right (though I think some of their math is a little bit off, it's not enough to change the take-away). Over the last few days I've read a number of these pieces - pieces analyzing the expected return and such from buying a ticket now - and most of them have butchered the subject - e.g., failed to take important aspects in consideration or misunderstood how certain things work.
Okay, I spent all the blow-off time I get for the day in this thread.
Tilted
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Gotcha. I'd guess what they heard was referring to the previous drawing, last Wednesday, and that they transposed the meaning. I just checked how many tickets were sold for that drawing (176 million) and we'd expect that about 55% of the combinations weren't covered based on that number.
glhs837
Power with Control
Yep, been worth my $12 just to have conversations with my 18 year old son about it. "Well, son, you mother and I become silly millionaires, what do you think we should do about/for you? Fund that lifestyles of the rich and lazy for life? How do you think we should handle relatives and friends?"
and of course the fun to be had with the wife and I regarding what you might or not do.
and of course the fun to be had with the wife and I regarding what you might or not do.
Tilted
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I think Warren Buffett hit the nail on the head when he was talking about why he was giving most of his money to charity. He said - and I'm paraphrasing, I don't recall the exact quote - that rich parents should leave their children enough money so that they can do anything, but not enough money so that they could do nothing.
glhs837
Power with Control
Restitution
New Member
300,000,000-1 odds or ∞-1 is much, much, worse. It's literally the difference between a chance and no chance.
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Hodr
Guest
Probably wouldn't work unless you could establish residency before the numbers are drawn. And even if you managed that, as you bought a Maryland ticket you would have to claim it in Maryland, meaning the winnings would probably be subject to taxation by Maryland anyways.
Times like this I feel I should setup an LLC in Delaware just in case I ever have need of it.
glhs837
Power with Control
Meh, I think that will be the last dime I ever spend here, whats another 20-30 million if I'm left with well over 300 million? Think of it a tip to the whole state for bad service
I think my 5 'random' numbers contained 1 or 2 of the numbers in Sat. drawing ....
.... I saw a post on face book, a guy had a ticket that was -1 for each number chosen - he had ALL the numbers, just minus one even the Powerball