Eboli wrote:XFool wrote:That indeed is the only explanation I have been able to come up with for pyad's exuberant pedanticism. It sounds as if he is unlikely to explain any further. The trouble with this, AFAICS, is what then is left that can be called "interest", apart from fixed interest bonds? A normal "variable interest rate savings account" does not typically have a guaranteed for a year fixed rate - so that's not "interest"!

It's not that simple. The trouble is pyad (correctly) calling the interest forgone on the cost of purchase of a PB as being a "stake". In normal betting parlance it would be unusual for this to be referred to as a stake. Rather it is a bundle of stakes (and pyad, because of his tax history, will know that the question that then follows is how many stakes makes it a bundle). In a typical bet if you win you win your stake plus a return and if you lose you lose your stake. With PBs the more likely outcome is a partial loss of the interest forgone.

Consider paying someone £37 to place £1 on a given number on a roulette wheel for 37 spins. Of course the number of times you pay over £37 the more likely your average return will be £36 per bundle. But a stochastic distribution will produce in very large number of bundles many cases where no return whatsoever is paid. And indeed, like fund managers, there will always be the possibility of 37 wins in a row. And indeed when the numbers get large there may be more than one bundle that has this highly unlikely outcome.

You cannot draw a comparison with a variable interest account not having a guaranteed return. Because it is always possible to hold PBs and have no winnings at all perhaps for the rest of your life.

You can draw such a comparison. I do, as do others, it is simple and obvious. Nobody - apart from those who want to start a scrap - is saying it IS INTEREST. That is irrelevant. Income is income (after tax etc).

If I get £1000 in a year for working as a painter and decorator, you get £1000 in a year for working in a restaurant, who would claim: "I get an income from work - you do not get an income from work"? Well, there's always one...

IMO for a return on a lump sum you can choose to make the comparison with PBs, unless the recipient does have some specific requirement that definitely rules out PBs, such as a need for a definite monthly cash payment. Which, if they did, they would presumably know about and have already ruled out PBs for just that reason. But the context of this discussion, arising from the OP, is somebody who has heretofore been happily holding £40,000 in PBs.

Because it is always possible to hold PBs and have no winnings at all perhaps for the rest of your life.

"always possible", but how probable is that? It is not impossible that all the oxygen molecules in a room leave simultaneously for the other side of the room. I'm not worried. Should I be?

The variability of the annual return on a given (large) number of PBs is one of the "interesting" things that could be addressed by doing more maths than the easy back-of-the envelope annual return calculation referred to earlier. I haven't done so - I am far from sure I would know how to. Have you done this? This might be of more interest(!) than quibbles over "interest", IMO.