About Me 0116: February 2011

Monday, February 21, 2011

Making Money Easy

App Store Classics: Game Dev Story, a game about making games.

Ever wondered what it’d be like to run your own game development house? Me neither, but don’t let that stop you getting involved with Game Dev Story (iTunes link), a little gem of a game from Japanese developers Kairosoft, currently on sale in the app store for $0.99.

The concept is straightforward – grow your development house from a tiny team of four staff churning out cheap and cheerful PC games to a revered coding powerhouse in swanky offices crafting masterpieces for the latest consoles.

At first you’ll probably be going over budget left right and centre, trying to figure out which game types work best and therefore shift more units, but once you get into the swing of it you can concentrate on hiring and training the best staff and purchasing licences to develop console games, resulting in better made and better selling games with higher profit margins.

It’s not just a question of hiring and firing, coming up with game ideas and watching your staff working their buns off though. Through the use of ‘boosts’ which are periodically made available to purchase as the game progresses (not in-app purchases I hasten to add), you can choose one of your coders to work on enhancing one specific aspect of the game. This pushes up the overall quality of the game you’re making and results in better reviews and sales, adding a further strategic element as you choose the right moment and category in which to use your boosts. At certain points within the development cycle you also get the chance to work on the graphics and sound specifically, either using one of your own staff or hiring in a freelancer, and this too gives you the opportunity to increase the overall quality of your virtual product.

When you make your first million seller it’s a satisfying moment but there’s no time to rest on your laurels. There are always new consoles appearing on the market, contract jobs to take on, new staff to hire and new game types to discover. If you leave too much of a gap between development cycles you start losing fans and therefore a few sales, but think carefully about what kind of games you make – my pirate simulation was a right turkey.

It’s all great fun, but it’s fair to say there are a few things here which need to be addressed by the time Game Dev Story 2 arrives in the app store. I know it’s a tall order on a phone but I couldn’t help thinking how nice it would be if I could play the games my team had made. Even a comedy cut sequence showing some aspects of the latest game would have been good. There are also some hugely expensive advertising options within this game that offer no feedback other than some numbers increasing on a stat page. If I’m sponsoring a racing team I’d like to see my company logo on the side of a formula one car at least!

Finally, the game is perhaps a bit on the easy side. I’m sure if developing a multi million selling game was this straightforward we’d all be at it. Well, maybe not, but it’s easy to make enough money that you don’t have to worry too much about how you spend it, and this negatively impacts the strategy element.

All things considered however, Game Dev Story is great fun. It’s a good natured game and from the cute graphics and retro sound to the amusing titles you can give your creations, it’s a rewarding experience which works perfectly whether in short bursts or longer play sessions. Did I mention that it’s currently only $0.99 on the app store?

Coming to a station near you any time soon?Photo: Tim GilliamPresident Obama doesn't seem
like he's going to let this high-speed rail thing go, making it a centerpiece
of the infrastructure section of his State of the Union Address last night:

Within 25 years, our goal is to give 80 percent of Americans
access to high-speed rail. This could allow you to go places in half the time
it takes to travel by car. For some trips, it will be faster than flying --
without the pat-down. As we speak, routes in California and the Midwest are
already underway.

Sounds great, if you're a
high-speed rail fan. But last fall's midterm elections exposed GOP opposition
to Obama's plan to bring fast train service to all regions of the country. As a
gubernatorial candidate, Republican Scott Walker of Wisconsin made opposition
to a Milwaukee-Madison high-speed route a centerpiece of his campaign. After he
was elected, he
handed the feds back $810 million that would have funded the line, on the
grounds that it would be too expensive for the state to run. It was a move
echoed by New Jersey Gov. Chris Christie's rejection of funds for a regular-speed
rail tunnel under the Hudson River (Christie is fighting hard not to repay money the feds already spent on that project).

And in California, which
ended up getting some of that Wisconsin money, there's been controversy over the first phase of the state's own HSR project, with detractors calling it "a train to
nowhere" and farm communities worried about the impact on available land.

So it's notable that Obama
doesn't seem to be backing down from his push to make HSR part of his legacy.
That 80 percent figure is pretty aggressive.

The president also hammered
away at the need for the need to continue upgrading and repairing the
transportation infrastructure we already have:

So
over the last two years, we've begun rebuilding for the 21st century, a project
that has meant thousands of good jobs for the hard-hit construction industry.
And tonight, I'm proposing that we redouble those efforts.

We'll
put more Americans to work repairing crumbling roads and bridges. We'll make
sure this is fully paid for, attract private investment, and pick projects
based [on] what's best for the economy, not politicians.

Obama's
stance was cheered by Transportation for
America (T4A) a coalition group calling for a reform of the nation's
transportation system. At the same time, the group's statement also acknowledges the difficulty of
getting projects funded. From the statement released by T4A's executive director, James Corless, today:

We were thrilled to hear the President come right
out and say that investment in transportation and other infrastructure is
central to rebuilding and growing our economy. An upfront investment in the
most-needed, clean transportation projects is a great opportunity to create
near-term jobs and lay the groundwork for the future economy.

He acknowledged that money will be tight and we
have to make the best of use it. That requires fixing the 20th century
infrastructure -- our crumbling roads and bridges -- as we build out the
infrastructure for the 21st. That certainly includes
high-speed rail, but it also means helping communities get moving on
long-planned networks of light rail, street cars, rapid buses, and making
progress on road reconstruction to make our streets safer people walking,
biking and driving.

The President's vision for infrastructure is not just about
near-term construction jobs. It is, as he said, about growing new businesses,
livable neighborhoods and dynamic regions that can attract a young and mobile
workforce and compete with our international competitors. It's about the jobs
associated with new transportation technologies
and manufacturing modern transit vehicles, everything from real time
information systems to make our highways and transit corridors smarter, to the
new rail cars being built today by United Streetcar in Oregon that can breathe
new life into our cities and suburbs.

T4A's Equity Caucus, which focuses on
the needs of poor, working-class, and minority Americans, had this to say:

[O]ur inadequate, outdated,
and underfunded transportation systems are keeping too many struggling
Americans -- young and old, rural and urban -- from fully connecting and
contributing to the national economy.

Millions of Americans
rely exclusively on public transit, walking, or biking to get to work, to the
doctor's office, to school, and to the grocery store. Nearly 20 percent of
African American households, 14 percent of Latino households, and 13 percent of
Asian households live without a car. Fifteen percent of Native Americans must
travel more than 100 miles to access basic services.

Smarter transportation
investments can unleash the under-realized economic power of communities across
America.

All this comes in the context
of a transportation reauthorization bill that has been stalled for the past year and a
half in Congress -- and that was when the Democrats controlled both the House and the
Senate. With Republicans now in control of the House, things are bound to get more complicated. Rep. John Mica (R-Fla.), the new Republican chair of the Transportation and Infrastructure Committee in the House, had this to say about the president's call for more infrastructure spending (via Transportation Nation):

After the Administration derailed a major six-year transportation
bill in 2009, it is encouraging that they are now on board with getting
infrastructure projects and jobs moving again. However, just another
proposal to spend more of the taxpayers’ money, when we have billions of
dollars sitting idle tied up in government red tape, will never get our
economic car out of the ditch.

We’ve got to do more with less to improve our infrastructure in a fiscally responsible manner.

Central to all future
discussion about infrastructure enhancement and repair will be the question of
money. With lawmakers avowedly against raising the gas tax, finding the cash to
build new systems -- or to stop the proverbial crumbling of the old ones -- is
going to be the biggest problem.

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Thursday, February 17, 2011

foreclosure list

In the last week, several ideas for fixing the housing market have surfaced. One is the Third Way proposal, which appears to be an Administration trial balloon. Predictably, it is yet anther bailout, with plenty of smoke and mirrors to disguise that fact.

A second proposal, from Sheila Bair yesterday, is to establish a “foreclosure claims commission“. This is in keeping with the direction that Iowa’s Tom Miller has been pushing for with the 50 state attorneys general investigation. This scheme sounds more promising that the Third Way proposal, but is very likely to wind up in bailout territory.

Third is a not-widely-covered plan by Senator Jeff Merkley which has two provisions that would force banks to address the fact that mortgages are deeply under water. That makes it firmly anti-bailout (or more accurately, any resulting bailouts would be explicit as opposed to buried in various mortgage market gimmies to banks). It would thus speed recognition of housing market losses, force debt writedowns, and accelerate repricing and clearing of the housing market.

The Merkley proposal is pro consumer and pro investor; the other two are pro bank. Sadly, it isn’t hard to see which is likely to prevail in the absence of public pressure.

The Bair proposal was presented at the Mortgage Bankers Association meeting in DC, In addition to the not-very-fleshed out idea of a claims fund, she also proposed a list of fairly modest but still badly needed servicing reforms, the biggest being required write downs of second mortgages when the servicer is negotiating the first mortgage with a borrower, and a independent process for appealing loss mitigation turn-downs. The latter is useful but needs to be made broader. Borrowers still lack any recourse save costly and time-consuming litigation if they believe servicers have made errors, so independent review should include a disclosure and dispute process for routine servicing.

The restitution fund concept is worrisome. It is not yet clear whether it will be funded, which means it could be a joint private/public kitty. The provision of any explicit government funding in the absence of a serious investigation, including possible criminal action, is not warranted. The hallmark of this financial crisis is no perps, save some foot soldiers (the hapless robosigners, for instance) have been identified, much less held to account.

And even the private funding model is likely to prove unsatisfactory. HousingWire suggested that it might be based on the BP restitution fund. That’s a red flag. The BP fund was seen as a win for the embattled oil company, since BP was given several years to contribute money to the fund. In addition, even though the fund in theory did not limit BP’s liabilities, most investors reacted as if the damage had been capped. And given that any participant in the fund claims process had to waive his rights to litigate, the process did serve to limit exposure (particularly of the punitive damages sort). Moreover, many people who applied for damages were deemed not to be eligible because the harm they suffered was allegedly too indirect (think hotel owners in affected areas). Others were denied because they could not document revenue and expenses (many small fishermen run heavily cash-based operations that are not hugely profitable even in the best of times).

So it is also easy to imagine, as with the various government mortgage mod programs, that the banks will run the process and will use strict documentation requirements as a way to limit payouts, when their abuse of the documentation procedures they created is at the root of this crisis.

By contrast, there is much to like about the Merkley proposal, which was covered by Dave Dayen at FireDogLake. It has two mechanisms to force banks to recognize and realize losses on underwater mortgages, and thus put an end to “extend and pretend”.

First is a “national short refinance program”. Per Dayen:

When a bank sends a home into foreclosure, it becomes an REO property, to be sold at auction at a large loss for the investors. Instead of going through the long process of resale, with the attendant upkeep that has to be spent by the bank on the home, and the disruption to the property values from having a vacant home in their neighborhood, this short refi program would allow qualified families facing eviction to refinance to an FHA-guaranteed mortgage based on current property values and interest rates. In the interim the family could stay in the home during the appraisal, new underwriting and final resolution. Many families would be able to pay a reduced payment if the home was written down to real value. The investor would get a bigger payoff than selling a vacant home in foreclosure. Neighbors would see their communities stabilized without a vacant property in their midst. And the family would get to stay in their home.

The main effect of the FHA short refi program is likely not to be a wave of mass refis, but to force servicers to offer deep principal mods. If a mortgage leaves the pool via a refi, the servicer loses all of the fees associated with that loan. If the servicer concludes a mod, it still gets ongoing servicing income, but on a lower principal balance.

The second mechanism is judicial modifications, aka bankruptcy cramdowns. In pretty much every other type of secured lending, save for residential mortgages (which were exempted via legislation), when the borrower goes into bankruptcy, the secured debt is written down to the value of the debt, and any amount owing beyond that is added to unsecured debts. The idea is commonsensical: you can’t say a $200,000 mortgage is “secured” by a house now worth $160,000. The court process is well established and not controversial (as in you don’t see fulminating about abuses).

The scaremongering by the banking industry used to forestall judicial foreclosures is that every Tom, Dick, and Harry will run to the courthouse to get out of his mortgage, As anyone who has contemplated or gone though bankruptcy knows, it’s a very painful, humiliating, and disruptive process. And the widespread use of background checks as part of employment screening, with a bad credit record seen as a sign of bad character, is yet another deterrent. Correspondents of mine who would be ideal candidates (for instance, one is underwater due to investments gone sour and Chinese drywall making a sale of their home impossible, yet still have decent cashflow from their main business) are still loath to file.

Proof of the legitimacy of judicial mods as an option comes from the fact that most mortgage backed securities investors favor it, because they see it as a device for servicers to offer principal mods. With servicer fees and expenses coming first out of mortgage cashflow, the costly foreclosure process comes out of investors’ hides. All but a small percentage prefer principal mods because it will produce lower losses to them than costly foreclosures and sales of distressed property.

The Merkley plan has some other promising elements, such as requiring servicers to have a single point of contact (the Bair servicing reforms include this idea), a broad third party review process for mortgage mods (similar to successful programs at the state level) and the end of the “dual track” process (which keep the foreclosure process in motion while mod discussions are underway; this idea was present in a watered down form in the Bair speech as part of the foreclosure “settlement”).

Frankly, although individual borrowers may continue to suffer, the best prospect for an equitable long term solution is to let the wheels of justice continue to grind on. The outburst of reform ideas seems to be the direct result of the Massachusetts Supreme Judicial Court Ibanez decision. The terms of debate are, perversely, still very much skewed in favor of banks despite the considerable harm they have done to homeowners, investors, and communities. But judges are increasingly abandoning the assumption that banks must be right in foreclosure cases, and a more objective posture is sure to put the banking industry even more on the back foot. Letting the courts continue to do their work offers the best hope of exposing, and therefore ultimately remedying, large-scale misconduct by the securitization industry.

Taegan D. Goddard is the founder of Political Wire, one of the earliest and most influential political web sites.

Goddard spent more than a decade as managing director and chief operating officer of a prominent investment firm in New York City. Previously, he was a policy adviser to a U.S. Senator and Governor.

Goddard is also co-author of You
Won - Now What? (Scribner, 1998), a political
management book hailed by prominent journalists and politicians from
both parties. In addition, Goddard's essays on politics and public
policy have appeared in dozens of newspapers across the country,
including the Washington Post, USA Today, Boston Globe, San Francisco
Chronicle, Chicago Tribune, Philadelphia Inquirer and Christian Science
Monitor.

Goddard earned degrees from Vassar College and Harvard University. He lives in New York with his wife and three sons.

PRAISE FOR POLITICAL WIRE

"There are a lot of blogs and news sites claiming to understand
politics, but only a few actually do. Political Wire is one of them."

-- Chuck Todd, NBC News political director

"Concise. Relevant. To the point. Political Wire is the first site I check when I’m looking for the latest political nugget. That pretty much says it all."

-- Stuart Rothenberg, editor of the Rothenberg Political Report

"Political Wire is one of only four or five sites that I check every
day and sometimes several times a day, for the latest political news
and developments.”

-- Charlie Cook, editor of the Cook Political Report

"The big news, delicious tidbits, pearls of wisdom -- nicely packaged, constantly updated... What political junkie could ask for more?"

-- Larry Sabato, Center for Politics, University of Virginia

"If I were on the proverbial
desert island and had only one web site to access, Political Wire would
be it."

-- Dotty Lynch, CBS News political consultant

"Taegan Goddard has a knack for digging out political gems that too
often get passed over by the mainstream press, and for delivering the
latest electoral developments in a sharp, no frills style that makes
his Political Wire an addictive blog habit you don't want to kick."

-- Arianna Huffington, founder of The Huffington Post

"Political Wire is one of the absolute must-read sites in the blogosphere."

-- Glenn Reynolds, founder of Instapundit

"I love Political Wire. It is a one stop shopping site for all the political information I need. It makes me sound brilliant so naturally I like it!"

-- Dick Morris, political consultant

"I rely on Taegan Goddard's Political Wire for straight, fair political news, he gets right to the point. It's an eagerly anticipated part of my news reading."

-- Craig Newmark, founder of Craigslist.

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