BCV and BWV may have reached peak value

[peabody58]

... a spreadsheet entered into every decision. Then one day, I completely stopped. And my happiness increased significantly. How much should I value that in my spreadsheet?

You're dead to me! Spreadsheets are the definition of HAPPINESS. And if you were really good at spreadsheet development, you would know that there are lots of formulas in MS Excel for 'value'.

Naw just messing with you. I still spreadsheet everything, but not to go cheap anymore, but to feel good about spending so much while optimizing my points. Of course once we're on property, all inputs fly out the window and we just have fun and do us.

 

[havoc315]

Maybe to you, throwing it in the trash would have zero value. But if throwing it in the trash gave me pleasure, then it had value. Granted, that is an extreme example, but plenty of times I have given money away

That’s value. It’s value you don’t have when you prepay for something else.

And thus, it’s lost opportunity.

Now, I don’t know how you personally value having extra dinners out… or a new kitchen.. or the pleasure of burning your money in a bonfire. So we use general future discount rates in our analysis., based on if you saved the money. If you wouldn’t have saved the money because you take greater pleasure in burning your money, or a new kitchen, or dinners out—- then you lost value even greater than the savings.

Much like gravity, it’s a universal truth that you lose opportunity when you buy DVC. Now, say they were charging $2 per point, and you could get a grand villa for 2 points per year. So for $4, you could get 50 years of grand villas. In that case, you still had $4 of lost opportunity, which would then be adjusted to $5. But clearly, the value greatly exceeds your lost opportunity.

Or, imagine points were $500 per point, for a 3 year contract… so for $100,000, you could get studios for 1 night per year for 3 years—- clearly, the $100,000 isn’t worth the lost opportunity.

Now, obviously, the truth doesn’t fit either of those extremes. But we use lost opportunity to determine the real cost. Once we know the real cost, we can make an honest assessment of whether it’s worth it.

That’s the point..to me if I chose what I wanted, then whatever potential loss of that came from not choosing a different option is meaningless for me

I just don’t define the value money in the same way you do and don’t need all my decisions to be the ones that others might think make better financial sense.

Having said that, I agree that there are trade offs in everything you buy and if someone wants to make decisions, especially with every single financial aspect covered, more power to them.

 

[Sandisw]

That’s value. It’s value you don’t have when you prepay for something else.

And thus, it’s lost opportunity.

Now, I don’t know how you personally value having extra dinners out… or a new kitchen.. or the pleasure of burning your money in a bonfire. So we use general future discount rates in our analysis., based on if you saved the money. If you wouldn’t have saved the money because you take greater pleasure in burning your money, or a new kitchen, or dinners out—- then you lost value even greater than the savings.

Much like gravity, it’s a universal truth that you lose opportunity when you buy DVC. Now, say they were charging $2 per point, and you could get a grand villa for 2 points per year. So for $4, you could get 50 years of grand villas. In that case, you still had $4 of lost opportunity, which would then be adjusted to $5. But clearly, the value greatly exceeds your lost opportunity.

Or, imagine points were $500 per point, for a 3 year contract… so for $100,000, you could get studios for 1 night per year for 3 years—- clearly, the $100,000 isn’t worth the lost opportunity.

Now, obviously, the truth doesn’t fit either of those extremes. But we use lost opportunity to determine the real cost. Once we know the real cost, we can make an honest assessment of whether it’s worth it.

Of course when you spend your money on x there is a loss of opportunity to spend it on Y. So if that what you mean, we agree

But other than that, I simple dont agree that every decision including buying DVC needs to be calculated in that way.

It simply not how I value the use of money. For me, the value is in deciding how to spend it and as long as I am happy with my choice then I don’t consider what I didn’t choose to be a lost opportunity the same way you do.

 

[havoc315]

Of course when you spend your money on x there is a loss of opportunity to spend it on Y. So if that what you mean, we agree

But other than that, I simple dont agree that every decision including buying DVC needs to be calculated in that way.

Depends on whether you want to know the cost. If you don’t really care about the cost…
For example, if you don’t care whether DVC is a bit more expensive than just paying rack rate… it’s not about the cost to you… Then there is no reason to calculate the cost.

If you want to know the cost before you buy… then including lost opportunity cost is just like including closing costs, just like including annual dues. It’s part of the real cost.

I think you mentioned you replenished savings by skipping dinners out. So if you don’t like using the future discount rate—- I ask you this, what’s your value on the skipped dinners. If I paid you $10 to not eat any dinners out for 5 years… would you agree to that? If probably not, because dinners out have a personal value to you more than $10 over 5 years.
So say you are skipping 200 dinners out to pay for your DVC down payment …
Would you skip 200 dinners out for … $1000. Basically, every time (for 200 dinners) you’re thinking about eating out, I pay you $5 to skip the dinner out and stay in instead. Then your lost opportunity was subjectively worth $1,000 — and that $1,000 is part of the cost of your DVC.

It simply not how I value the use of money. For me, the value is in deciding how to spend it and as long as I am happy with my choice then I don’t consider what I didn’t choose to be a lost opportunity the same way you do.

Let’s put it this way- imagine you had $1,000 to save. You weren’t allowed to spend it. You had only 2 choices — put it in a CD with a 3% interest rate.. or put it under your mattress.
It’s undebatable that putting it under your mattress is a lost opportunity of 3%.

So when you say “I don’t consider what I lost”… you’re just saying you don’t care whether the money is in a CD or under your mattress. But whether you care or not, it’s part of the equation. In truth. Almost everyone does consider lost opportunity. Every time you spend a penny, you’re considering whether the subjective value you get is worth more than saving that penny. We just usually do it subconsciously without running a calculation.
When you’re buying a movie ticket— you don’t whip out a calculator and say “hmm… if I see it in the theater, pay for parking, bucket of popcorn.. add tax.. it will cost $26.12”
Instead, you roughly know the price in your head and decide if it’s worth it.

But as we see commonly around here, people try to calculate DVC price. And if you’re going to calculate the cost, future discount rate is a mathematical requirement. Just like including sales tax would be required to calculating current costs.

Last illustration — would you be willing to give me $10,000 today… if I promised to give you $10,001 in 25 years? Why not? Why turn down a $1 profit?
Because…. Over the next 25 years, you’re going to do other things with that money… things worth more than $1 to you. So the lost opportunity is not worth $1 to you.
What if we contracted… give me $100 today, and in 1 month, I’ll give you $1 million. Im guessing you would take that deal.
So what’s the difference between the first situation and the second situation? The difference is what you’re getting in exchange for lost opportunity.
If you can honestly say you would agree to the first deal, then you’re honestly saying you don’t care about lost opportunity. If you wouldn’t take the first deal, then you do care about lost opportunity.. you’ve just never run the calculation before.

 

[Sandisw]

Depends on whether you want to know the cost. If you don’t really care about the cost…
For example, if you don’t care whether DVC is a bit more expensive than just paying rack rate… it’s not about the cost to you… Then there is no reason to calculate the cost.

If you want to know the cost before you buy… then including lost opportunity cost is just like including closing costs, just like including annual dues. It’s part of the real cost.

I think you mentioned you replenished savings by skipping dinners out. So if you don’t like using the future discount rate—- I ask you this, what’s your value on the skipped dinners. If I paid you $10 to not eat any dinners out for 5 years… would you agree to that? If probably not, because dinners out have a personal value to you more than $10 over 5 years.
So say you are skipping 200 dinners out to pay for your DVC down payment …
Would you skip 200 dinners out for … $1000. Basically, every time (for 200 dinners) you’re thinking about eating out, I pay you $5 to skip the dinner out and stay in instead. Then your lost opportunity was subjectively worth $1,000 — and that $1,000 is part of the cost of your DVC.



Let’s put it this way- imagine you had $1,000 to save. You weren’t allowed to spend it. You had only 2 choices — put it in a CD with a 3% interest rate.. or put it under your mattress.
It’s undebatable that putting it under your mattress is a lost opportunity of 3%.

So when you say “I don’t consider what I lost”… you’re just saying you don’t care whether the money is in a CD or under your mattress. But whether you care or not, it’s part of the equation. In truth. Almost everyone does consider lost opportunity. Every time you spend a penny, you’re considering whether the subjective value you get is worth more than saving that penny. We just usually do it subconsciously without running a calculation.
When you’re buying a movie ticket— you don’t whip out a calculator and say “hmm… if I see it in the theater, pay for parking, bucket of popcorn.. add tax.. it will cost $26.12”
Instead, you roughly know the price in your head and decide if it’s worth it.

But as we see commonly around here, people try to calculate DVC price. And if you’re going to calculate the cost, future discount rate is a mathematical requirement. Just like including sales tax would be required to calculating current costs.

Last illustration — would you be willing to give me $10,000 today… if I promised to give you $10,001 in 25 years? Why not? Why turn down a $1 profit?
Because…. Over the next 25 years, you’re going to do other things with that money… things worth more than $1 to you. So the lost opportunity is not worth $1 to you.
What if we contracted… give me $100 today, and in 1 month, I’ll give you $1 million. Im guessing you would take that deal.
So what’s the difference between the first situation and the second situation? The difference is what you’re getting in exchange for lost opportunity.
If you can honestly say you would agree to the first deal, then you’re honestly saying you don’t care about lost opportunity. If you wouldn’t take the first deal, then you do care about lost opportunity.. you’ve just never run the calculation before.

Honestly, would I give you, a stranger, $10k for a $1 profit? No. Would I give it to someone I know? Yes.

And I have given money to people with no expectation to get any extra..or even the original back. And never once thought about what I couldn’t buy once it was gone

So maybe the better way to phrase it is when I make a choice, whatever is lost, doesn’t matter since I didn’t choose it when I could.

Everything in life is a choice and when you have to make one, then it means you let the other go. For me, letting it go isn’t the same as losing it. Losing something means I wanted it and couldn’t get it.

I just don’t do a lot of what ifs in that way.

 

[havoc315]

Honestly, would I give you, a stranger, $10k for a $1 profit? No. Would I give it to someone I know? Yes.

No… not talking about helping a friend where the value is helping someone.

I’m talking about a pure business arrangement. You are absolutely guaranteed the $1 profit. Binding contract, the money locked in a vault. You are 100% guaranteed to get the money back with a $1 profit. But no rational person would take that deal — because the lost opportunity is worth far more than $1.

And I have given money to people with no expectation to get any extra..or even the original back. And never once thought about what I couldn’t buy once it was gone

So maybe the better way to phrase it is when I make a choice, whatever is lost, doesn’t matter since I didn’t choose it when I could.

Everything in life is a choice and when you have to make one, then it means you let the other go. For me, letting it go isn’t the same as losing it. Losing something means I wanted it and couldn’t get it.

I just don’t do a lot of what ifs in that way.

 

[Cyberc1978]

No… not talking about helping a friend where the value is helping someone.

I’m talking about a pure business arrangement. You are absolutely guaranteed the $1 profit. Binding contract, the money locked in a vault. You are 100% guaranteed to get the money back with a $1 profit. But no rational person would take that deal — because the lost opportunity is worth far more than $1.

I think I’m getting where you are going but HOW do you put a monetary value on the lost opportunity?

It seems very subjective if the lost opportunity is $1 or $500.000

 

[Sandisw]

No… not talking about helping a friend where the value is helping someone.

I’m talking about a pure business arrangement. You are absolutely guaranteed the $1 profit. Binding contract, the money locked in a vault. You are 100% guaranteed to get the money back with a $1 profit. But no rational person would take that deal — because the lost opportunity is worth far more than $1.

But helping a friend with no payback now or in the future means financially I’m in the hole…and I do it anyway…lost opportunity to spend that money differently obviously doesn’t matter.

Every choice is a lost opportunity in some way because if you don’t chose one you lost the second. I think I already said I get that.

But calculating all the variables concerning future cash stays…which is what you are talking since getting value out of it doesn’t count….vs a simple approach on buying DVC to decide savings isn’t necessary for everyone.

If my simple calculations when buying DVC gave me a break even point at 7 years, and I’m happy with those numbers, the rest is irrelevant to me.

And, to be honest, if I felt locking money in a vault was in my best interest, even if it meant I didn’t earn a dime, then I’d do it because It meant I had a reason for that choice.

It certainly doesn’t make me irrational.

I simply view making choices differently. Yes, I lost out on a new kitchen….but I gained DVC….the future consequences of choosing one over was not part of the decision because it simply is irrelevant Because you can’t control it.

Decisions don’t have to include every bit of financial analysis to be considered a good deal.


So, if someone feels buying BCV can save them over cash stays using information known today, and they are comfortable with that level of analysis then it’s the correct way to do it.

 

[BeachClub2014]

It seems very subjective if the lost opportunity is $1 or $500.000

Yes. It is 100% subjective. I can totally appreciate and understand if people choose to use the time value of money or lost opportunity as a variable to determine cost and/or value. But it's a completely subjective number. One person could use 3% annually as the lost opportunity factor while another uses 4%, resulting in different guestimates of the total cost.

Let's say that I spend $30,000 on DVC (ignoring closing costs and dues for the example) which entitles me to receive and use 150 points each year for the next 48 years. So, initially, I physically spend $30K and get my first 150 points. When year two rolls around, I get another 150 points. How much do I have to again pay out of pocket for those next 150 points? Zero dollars, again ignoring the dues. And that would continue for 47 years. My actual, out-of-pocket cash outlay for the 7,200 total points is still $30K.

I'm not poo-pooing the use of time value of money as a potential variable in calculating overall ROI, or in calculating a value proposition, but I do think we need to acknowledge that it is really just a subjective number and doesn't translate to an actual out-of-pocket expense.

 

[Sandisw]

Yes. It is 100% subjective. I can totally appreciate and understand if people choose to use the time value of money or lost opportunity as a variable to determine cost and/or value. But it's a completely subjective number. One person could use 3% annually as the lost opportunity factor while another uses 4%, resulting in different guestimates of the total cost.

Let's say that I spend $30,000 on DVC (ignoring closing costs and dues for the example) which entitles me to receive and use 150 points each year for the next 48 years. So, initially, I physically spend $30K and get my first 150 points. When year two rolls around, I get another 150 points. How much do I have to again pay out of pocket for those next 150 points? Zero dollars, again ignoring the dues. And that would continue for 47 years. My actual, out-of-pocket cash outlay for the 7,200 total points is still $30K.

I'm not poo-pooing the use of time value of money as a potential variable in calculating overall ROI, or in calculating a value proposition, but I do think we need to acknowledge that it is really just a subjective number and doesn't translate to an actual out-of-pocket expense.

I agree. But even when you take the cash stays vs DVC…you have to use unknown variables thar may or may not be true. Not using rental because that only matters if it’s a real option for someone. We never did and never will rent.

You have assume what the dues increase will be, assume what rate the cash increase and potential discount could be, and assume
potential investment income, if you would keep it invested.

But owning DVC comes with the potential to rent you points…which too is a variable…that can change the numbers..

Even if you analyze all those things, you still don’t know how accurate the final numbers are because any one of those variables can be better or worse then you assumed.

It’s why for us, we did it the simple way. We assumed cash rate and dues rates increases to be a wash. We didn’t include investment income because we planned to spend it anyway.

We used the typical 35% discount we had gotten of cash rates, and a selling price of 50% buy in cost. If we had to sell in one year, we lost.. 5 years, break even…7 years..we can give it away for free and still break even…at 10 years…we come out ahead even giving it away and if it has a resale value? We make out like bandits.

So, we bought and never looked back…did that happen? No idea because once the decision was made it was no longer important to know if we really did break even on that schedule.

Of course, we added on more points to have more DVC stays so even that simple way of figuring it out no longer applied.

 

[sethschroeder]

Per year. 2019-2020 was high. Been pretty low since. And those are the final 2023 rates — you can book them now.

over the most recent 3 years: 540-890 —- 597-1044. About a 10%-15% increase over 3 years… while inflation is skyrocketing. In other words, Disney now lagging behind inflation in rate increases. (3-5% per year)

You brought up 3 years not me. Also when considering the math I would be looking back 10 years for the average and go by that anyways. Not just a single year. The reason you see such a low increase 1 year is a result of high increases the year prior most likely.

So Disney is not lagging behind inflation they just were ahead of the game with their increases. As outlined they are up 30%-40% in room costs since 2019 while inflation is up 12% so Disney was up around 3x more than inflation.

Which would you rather do — take a 7 day vacation in a studio every year for 50 years…
Or 7 days in a studio for 5 years. Then 8 days in. 1 bedroom. Then 7 days in a DVC
plus a 4 day cruise. Then a Grand Villa for a week plus a 10 day luxury cruise.

Done the math and realize this could possibly be true but you could also be out of money by year 11 as well. Which was the case for the last example I crunched the math on for this forum. I did the S&P return as their investment, took in their initial cash + MFs, and had them paying out at the end of the year for rental points (even though rentals you would pay up front).

They had the issue of the market tanking in 2008 throwing off their math. Some buy in to DVC avoid this potential pitfall as taking out money when the market is down only compounds the issue to this vacation fund.

Everyone wants to talk about the best case though which is fine. I am a realist and with vacations I am looking for the least amount of potential fluctuation long term. I do have money that is short term invested its just not tied to vacations because when I see the market tank I don't want my vacation to go from a 2BR at VGF down to a hotel room at the Hilton at Disney Springs in order to recover the money lost to the market.

Investments are amazing for long term and bad for the short term unless you really are tuned in or have someone you trust and is a great financial consultant. Even then most people are not always going to win short term but in the long term the short term game can add up to good returns (but again its about the long term).

 

[havoc315]

You brought up 3 years not me.

Correct — the most recent 3 years rack rates 2021, 2022, 2023.

Also when considering the math I would be looking back 10 years for the average and go by that anyways.

That’s fine. But far past history is not necessarily reflective of future performance. Things change over time. Last 3 years (2021-2023 rack rates) we have seen a dramatic slowing in price increases.

Not just a single year. The reason you see such a low increase 1 year is a result of high increases the year prior most likely.

So Disney is not lagging behind inflation they just were ahead of the game with their increases.

That’s not how inflation works. Nobody says, “I predict massive inflation in 2034, so I’m going to have a huge price increase in 2027.”

You increase prices to reflect increased costs AND you increase prices to increase profits — to the point the market will bear.

When they were increasing prices in 2019, with low inflation — they were increasing their prices more than their costs. So if inflation was 3%, but they increased prices 10%, it was a 7% increase in real profit per night per room.

But in 2022-2023, if inflation is 9%, and they are only increasing room charges by 4%… they are actually accepting a REDUCTION in real dollar profit. (They can brag about increases in per capita revenue, but real dollar profit is sinking because of inflation). Now, Disney isn’t accepting a profit reduction out of the goodness of their hearts — it’s because they know the market won’t bear those 10% price increases year after year. If they continued the rate increases that they were doing 5 years ago, then in 5 years, a night at Caribbean Beach Resort would cost more than a night at the Ritz Carlton. When rooms are $350 at the Swan, they would have trouble booking Yacht Club at $3,000 per night.

Essentially, they have hit a wall in terms of pricing demand. They will continue to increase prices as much as they can get away with. But clearly, in 2022-2023, they can’t even get away with matching inflation. On the other hand, dues are tied directly to inflation.

So how’s this for a bet: percentage wise, dues will increase in 2023 MORE than rack rates?

As outlined they are up 30%-40% in room costs since 2019 while inflation is up 12% so Disney was up around 3x more than inflation.

Yes—- absolutely! But you’ve excluded THIS year, where they are lagging BEHIND inflation —- significantly behind. In other words, it has CHANGED.

Done the math and realize this could possibly be true but you could also be out of money by year 11 as well.

Yes, depends on rate of return, rate of inflation. Lots of factors that aren’t completely predictable. So the best you can do is plug in moderately realistic numbers, see where it takes you, make an informed decision.

My numbers tell me that the 35+ year contracts are decent purchases. The 2042 direct priced contracts are losers — you’d get better Disney vacations by saving your money. And 2042 resale are around break even.

Now, you will get VERY different results if you assume Disney will increase rack rates by 20% per year, while inflation and dues only increase by 2%, and your investments/savings will only increase by 1% per year— in which case, DVC is the greatest vacation investment of all time.
Conversely, if you assume a 15% annual investment return, 3% rack rate increases, 7% inflation/dues increases, then DVC is the worst purchase of all time.

So those unrealistic numbers don’t tell you much. Best you can do is plug in realistic assumptions, and then make a decision.

Which was the case for the last example I crunched the math on for this forum. I did the S&P return as their investment, took in their initial cash + MFs, and had them paying out at the end of the year for rental points (even though rentals you would pay up front).

They had the issue of the market tanking in 2008 throwing off their math. Some buy in to DVC avoid this potential pitfall as taking out money when the market is down only compounds the issue to this vacation fund.

Everyone wants to talk about the best case though which is fine. I am a realist and with vacations I am looking for the least amount of potential fluctuation long term. I do have money that is short term invested its just not tied to vacations because when I see the market tank I don't want my vacation to go from a 2BR at VGF down to a hotel room at the Hilton at Disney Springs in order to recover the money lost to the market.

Yes….. all true. But if you had your money in bonds and CDs, you wouldn’t risk tanking — but you also wouldn’t get as high of gains.

In that sense, buying DVC is like putting your money in bonds. You’ll get your standard view 1 BR every year, even when the market tanks. But you’ll never get that Grand Villa.

Now, put that money in aggressive investments — you can start in that 1 stand view BR, but progress to water view 2 BR… progress to Grand Villas and Poly Bungalows. But also face the risk that the market tanks and you drop down to a Value Studio.

So at its best, DVC is a risk averse investment/insurance. Like a 2% return on a CD… keep your vacations steady, don’t fear a collapse. But you’re forfeiting the ability to grow into bigger better grander vacations.

And like all insurance policies, I look at the cost of the insurance. If I buy a $500 television, maybe I’ll pay $60 for the extended warranty. But I’m not going to pay $495 for the extended warranty… I’ll accept the risk that if the TV breaks, I’m down a few dollars.

Same with DVC… at what price point is it worth buying the extended warranty (worth it for the long contracts by my math), at what price point is the extended warranty a rip off (the 2042 direct contracts).

Investments are amazing for long term and bad for the short term unless you really are tuned in or have someone you trust and is a great financial consultant. Even then most people are not always going to win short term but in the long term the short term game can add up to good returns (but again its about the long term).

 

[kilik64]

Came for the debate on whether BCV and BWV have reached peak value, stayed for the economic dissertation on opportunity cost.

 

[havoc315]

But helping a friend with no payback now or in the future means financially I’m in the hole…and I do it anyway…lost opportunity to spend that money differently obviously doesn’t matter.

That’s entirely irrelevant to this discussion.

So, if Disney is charging $170 per point, you’d pay them $500 per point and tell them to keep the change, because you don’t mind being in the hole?

If your point is, “I don’t care how much money I lose… I take great joy in losing money” — then yes, lost opportunity is irrelevant to you.

Or did you lend money to a friend out of FRIENDSHIP? You wouldn’t just give your money to Disney for nothing in return?

So giving GIFTS is very different than making a purchase, buying a product, consuming a good, investing.

Every choice is a lost opportunity in some way because if you don’t chose one you lost the second. I think I already said I get that.

But calculating all the variables concerning future cash stays…which is what you are talking since getting value out of it doesn’t count….vs a simple approach on buying DVC to decide savings isn’t necessary for everyone.

If my simple calculations when buying DVC gave me a break even point at 7 years, and I’m happy with those numbers, the rest is irrelevant to me.

That’s fine.

But: walk into a store… they have 2 identical sweaters. Exact same. You pick up the first one, price tag says $29. You’re happy with the price, you decide to buy it. But the other sweater is $19. Exact same sweater. You ask the clerk, the clerk confirms it’s the same sweater.

Now, maybe that second sweater is irrelevant to you. You’re happy with paying $29 for the first sweater, so you pay for it and happily walk out.

I do think most people, if they are going through the trouble of price comparing, would want to know they could get the exact same sweater for $10 less.

And, to be honest, if I felt locking money in a vault was in my best interest, even if it meant I didn’t earn a dime, then I’d do it because It meant I had a reason for that choice.

What’s the reason?

If you had 2 banks. Both reputable banks, the ONLY difference:
Bank 1 locks $10,000 in a vault. You’re not allowed to withdraw it for 10 years. After 10 years, you get back $10,001.
Bank 2: you deposit $10,000. They add 5% per year to it, you can take it out whenever you want. It becomes over $20,000 over time, or you can take it out over time.

There are no other difference. The 2 banks are side by side. Unless you can honestly say you would pick Bank #1, then you actually do care about lost opportunity.

It certainly doesn’t make me irrational.

In economics, “rational” is a defined term. It’s what drives the supply and demand curve. It’s not a judgment of a person’s mental health. When offered, “would you rather pay $19 or $29 for this sweater.. it’s up to you”— the rational buyer chooses the lower price.

I simply view making choices differently. Yes, I lost out on a new kitchen….but I gained DVC….the future consequences of choosing one over was not part of the decision because it simply is irrelevant

Irrelevant… or you PREFER DVC to a new kitchen?

You got what you value??

Sounds like future consequences were very relevant. You felt having DVC in your future had more value to you than having a new kitchen.

Personally, I’d rather have the new kitchen AND annual cash rooms at the Grand Floridian, if that was cheaper than owning DVC. But either way, you made your estimation of value.

Because you can’t control it.

Decisions don’t have to include every bit of financial analysis to be considered a good deal.

So, if someone feels buying BCV can save them over cash stays using information known today, and they are comfortable with that level of analysis then it’s the correct way to do it.

Depends. John and Mike each have $30,000.
John buys DVC, stays in a BCV studio every year for a week for 19 years.
Mike analyzes the numbers… he takes a 1 week cash trip in a deluxe BC room every year, he gets a new kitchen, and he gets a new car, all from that initial $30,000.

Did they both get a good deal? John might be very happy with the “deal” he got. But Mike got a much better deal.

 

[Sandisw]

That’s entirely irrelevant to this discussion.

So, if Disney is charging $170 per point, you’d pay them $500 per point and tell them to keep the change, because you don’t mind being in the hole?

If your point is, “I don’t care how much money I lose… I take great joy in losing money” — then yes, lost opportunity is irrelevant to you.

Or did you lend money to a friend out of FRIENDSHIP? You wouldn’t just give your money to Disney for nothing in return?

So giving GIFTS is very different than making a purchase, buying a product, consuming a good, investing.



If my simple calculations when buying DVC gave me a break even point at 7 years, and I’m happy with those numbers, the rest is irrelevant to me.

That’s fine.

But: walk into a store… they have 2 identical sweaters. Exact same. You pick up the first one, price tag says $29. You’re happy with the price, you decide to buy it. But the other sweater is $19. Exact same sweater. You ask the clerk, the clerk confirms it’s the same sweater.

Now, maybe that second sweater is irrelevant to you. You’re happy with paying $29 for the first sweater, so you pay for it and happily walk out.

I do think most people, if they are going through the trouble of price comparing, would want to know they could get the exact same sweater for $10 less.



What’s the reason?

If you had 2 banks. Both reputable banks, the ONLY difference:
Bank 1 locks $10,000 in a vault. You’re not allowed to withdraw it for 10 years. After 10 years, you get back $10,001.
Bank 2: you deposit $10,000. They add 5% per year to it, you can take it out whenever you want. It becomes over $20,000 over time, or you can take it out over time.

There are no other difference. The 2 banks are side by side. Unless you can honestly say you would pick Bank #1, then you actually do care about lost opportunity.



In economics, “rational” is a defined term. It’s what drives the supply and demand curve. It’s not a judgment of a person’s mental health. When offered, “would you rather pay $19 or $29 for this sweater.. it’s up to you”— the rational buyer chooses the lower price.



Irrelevant… or you PREFER DVC to a new kitchen?

You got what you value??

Sounds like future consequences were very relevant. You felt having DVC in your future had more value to you than having a new kitchen.

Personally, I’d rather have the new kitchen AND annual cash rooms at the Grand Floridian, if that was cheaper than owning DVC. But either way, you made your estimation of value.








Depends. John and Mike each have $30,000.
John buys DVC, stays in a BCV studio every year for a week for 19 years.
Mike analyzes the numbers… he takes a 1 week cash trip in a deluxe BC room every year, he gets a new kitchen, and he gets a new car, all from that initial $30,000.

Did they both get a good deal? John might be very happy with the “deal” he got. But Mike got a much better deal.

Honestly, there is no sense in going on because each situation you present and I answer you change the choices.

First it’s a vault and you only get $1 and now it’s not that it’s picking between two vaults one that pays and one that doesn’t. Sure, if most likely pick the second,,,but if I don’t like the way that bank does business? Then no I don’t and I lose the money for principle.

But yes, sometimes I have paid more for the exact same thing because I didn’t care even though I knew I could go to the store next store and save $10.

I chose DVC because your right, getting a new kitchen wasn’t as important and I’ll do it next year instead.

And most likely it will cost me more to do it in this order than had I done the kitchen this year and DVC next. But since I can’t say for sure, that potential extra is what is irrelevant to me. Maybe it ends up costing me $65 K now..I don’t care because I still end up with both in two years.

I simply believe threre is more than one valid way of calculating whether DVC or BCV is a good deal or not and when you break even etc.

That is the purpose if this thread. So Let’s leave it at that.

 

[Brian Noble]

sweaters

This is an interesting aside, because it starts to take in the value of time. I can imagine a situation in which the $10 is not worth the time it takes to check the price tags to see if one of them is different.

A friend of mine who went on to work at DE Shaw (after having been made the offer by Shaw himself) first gave me this formulation as a way to get at the question. It's brilliant.

Suppose I had a task for you. That task will take time T to complete. If you drop everything else you are doing right now and work on the task, uninterrupted, until it is done, you will save ten days of effort evenly divided over the next year. How long can T get before you say "no thanks, not interested?"

The answer to this question is indirectly measuring your "time value of time"--meaning, how much more current time is worth to you than future time. The smaller the value of T, the higher your "interest rate" of time.

 

[havoc315]

Honestly, there is no sense in going on because each situation you present and I answer you change the choices.

First it’s a vault and you only get $1 and now it’s not that it’s picking between two vaults one that pays and one that doesn’t. Sure, if most likely pick the second,,,but if I don’t like the way that bank does business? Then no I don’t and I lose the money for principle.

Because the principle has value to you, greater than the monetary value.

Again, whether you realize it or not — you are computing value.

You are indeed considering the lost opportunity. You are weighing the values.

But yes, sometimes I have paid more for the exact same thing because I didn’t care even though I knew I could go to the store next store and save $10.

But that would require walking next door. The walk wasn’t worth $10 to you.


Once again, whether you realize it or not, you analyzed the value.

I chose DVC because your right, getting a new kitchen wasn’t as important and I’ll do it next year instead.

And most likely it will cost me more to do it in this order than had I done the kitchen this year and DVC next. But since I can’t say for sure, that potential extra is what is irrelevant to me. Maybe it ends up costing me $65 K now..I don’t care because I still end up with both in two years.

I simply believe threre is more than one valid way of calculating whether DVC or BCV is a good deal or not and when you break even etc.

That is the purpose if this thread. So Let’s leave it at that.

That’s what I’ve done. Just the whole equation. I don’t believe in misleading people.

 

[havoc315]

This is an interesting aside, because it starts to take in the value of time. I can imagine a situation in which the $10 is not worth the time it takes to check the price tags to see if one of them is different.

A friend of mine who went on to work at DE Shaw (after having been made the offer by Shaw himself) first gave me this formulation as a way to get at the question. It's brilliant.

Suppose I had a task for you. That task will take time T to complete. If you drop everything else you are doing right now and work on the task, uninterrupted, until it is done, you will save ten days of effort evenly divided over the next year. How long can T get before you say "no thanks, not interested?"

The answer to this question is indirectly measuring your "time value of time"--meaning, how much more current time is worth to you than future time. The smaller the value of T, the higher your "interest rate" of time.

Correct. And that even plays into DVC. “Cash rooms may be cheaper, but then I have to go through the trouble of checking discounts… DVC gives me an affordable room without having to take the time to check discounts.“

 

[DonMacGregor]

Came for the debate on whether BCV and BWV have reached peak value, stayed for the economic dissertation on opportunity cost.

I saw the opportunity to spend the 14 and a half hours I would have exhausted reading all of that doing something else.

 

[take36]

Are you talking about putting our dvc purchase money say 30k into a Sp500 fund and drawing from it yearly for our vacations? While I agree that make sense in the long term from a pure math standpoint, how does it affect our vacations year to year? The stock market can be volatile and I wouldn't want to tell my family that we will not be able to take a vacation this year because I'm down 20 percent.

The bucket approach others are suggesting is a bit better but the opportunity cost must be somewhat factored but maybe at the rate of an annuity or bond?