Inflation: The Cookie Monster of Savings Accounts

              If you have ever had a conversation about money with anyone they have probably told you that saving your money is a good idea. While I cannot argue against that point I can say that just saving your money is the worst of the good ideas out there.

              Your savings should be anywhere from 3 to 6 months of your living expenses in liquid assets, anything that is cash or can be sold easily for cash with little or no effect on its value. Yes, that does sound like a lot because it is and it is for a good reason. Here is a short list of monthly expenses (depending on lifestyle) $1000 for rent, $300 for food, $250 for health insurance, $150 for gas, $120 for electric, $80 for cellphone, $60 for car insurance, $50 for internet, and $20 for property insurance. This is a rough estimate and it is just considering you are single, healthy, have zero debt, and have no dependents. The grand total is $2,030 a month, 3-6 months of that could be anywhere from $6,090 to $12,180. This may seem like a lot of money sitting around not doing anything because it is.

              Having the emergency fund is important to help you navigate those obstacles in life like losing a job, major car repairs, or a serious injury without having to dip into things like your retirement accounts. However, having that money sitting in a savings account is almost the worst thing you can do with it besides spending it on non-emergencies. Savings accounts accrue almost insulting amounts of interest, sometimes as low as .01%.

              Having large amounts of cash in a savings account is detrimental and in the long term will cause you to lose money. There is this nasty thing called inflation, it has been around forever terrorizing peoples savings accounts. Inflation causes your money to lose value, essentially it won’t be able to buy as much in the future as it can now. Currently the average rate of inflation from 1913 to 2013 is 3.22%. To give you an idea of what this does to your money; If you currently had 3 months of expenses saved, $6,090, you would have to have $8,399 dollars to purchase the same amount of goods 10 years from now. While your money won’t be disappearing, you will find out later that it won’t be able to buy as much.

              This can be very discouraging but I am happy to tell you there are plenty of things you can do to negate the effects of inflation. The basic idea is to buy an asset that can appreciate but can also be sold quickly enough to provide cash to cover emergency expenses. These assets are liquid assets or something that can flow in and out of the state of cash without losing too much of its value. There are plenty of these types of assets available, however there are certain types that are better than others for mimicking a savings account. The qualities you want to look for in assets; 1. They can be sold relatively quickly without major depreciation in value or penalties; 2. Has a history and a predicted future of low volatility; 3. Has a yield that is close to or above the rate of inflation.

              The first is the most important because the whole purpose of having savings is so that you can cover unforeseen expenses. If the assets you are invested in can’t be sold quickly enough or without penalty then they really aren’t serving their purpose and should be used for something else. This does not mean you should have all cash because if you did and you never run into any large emergencies you miss out on the potential profits that could have come out of that money. It also does not mean you should have zero cash, there are many instances when cash is necessary instantaneously such as over drafting your checking account or something as crazy as a once in a lifetime investment opportunity. Bottom line a good amount of cash would be that of an expensive yet realistic car repair or at least the largest amount that could potentially be over drafted on your checking account.

              Low volatility while being second inline is a very close second, any asset you do purchase will have some sort of risk involved in it. One dollar will always be one dollar but a piece of gold bought for one dollar will not always be worth one dollar. Having said that the purchasing power of one dollar will rarely if ever increase but the amount that asset, like gold, could be sold for an increase in value at some point. The big downside is that when you do purchase an asset it can at some point lose all or most of its value, the chance of this happening is its volatility. One example would be if you owned Enron stock at its height of about $90, close to a year later it would be worth $.50. Therefore, you want to buy an asset that has a history of low volatility and a predicted future of the same. While this is an extreme case it is a good example of why the asset you buy should not be stock in publicly traded company. You should buy an asset that has very little chance of entirely losing its face value.

              The yield, or growth of the asset is the last thing you need to look for. It should be close to or above the average rate of inflation. While this is the main point of buying a financial product in this specific case, it cannot be the main determinant when selecting that product, do not get greedy. The bigger the possible gains the asset proposes it probably has equally as bad possible losses. Now that we know all these things the idea is to get as close to the risk reward breaking point as possible while maintaining that liquidity that is so important.

              Now we get to the proverbial question “What do I need to buy?” While I have suggestions, I like to leave this up to you because everyone’s situation is different. I will give you the pros and cons of the three main options and tell you which one that I would pick. After all the best way to get to financial independence is by making your own decisions.

              The easiest and safest thing you could do is invest in a money market account. These accounts are like savings accounts but generally have a slightly higher interest rate. They have the safety of an account that is FDIC insured and are in-volatile, but this comes with a price, you will still be losing in the long run to inflation. Their interest rates while higher than savings accounts are generally never above 1%. If you decide to use a money market fund I would suggest that you do not put all your cash into it unless you must do everything possible to maintain its current value while still earning a bit of interest.

              The harder of the riskier options would be investing in fixed income products like CD's, Bonds, Annuities, and Treasury Notes. These investment products do have a much higher yield than money market funds but in some cases, are more un-liquid or not able to be used in an emergency. They are also slightly riskier especially if they aren’t issued by the U.S. Government. The benefit is that it requires a lot of research to find the right asset to buy. This gives you the chance to learn about major financial players in our economy which will hopefully give you knowledge that can lead you to making other informed financial decisions. In the financial world knowledge is money.

              This brings us to our last option, the easier of the riskier options, and the one that I think is all around the best, Bond Funds. These are essentially just like mutual funds made up of stocks but are made up of bonds that are issued by companies or government agencies. The financial wizards that manage these funds do all the heavy research for you and you get to reap all the benefits. The benefits of bond funds are the perfect blend of yield and risk level because they are usually sell-able without penalty and the proceeds can be used relatively quickly while still having the low volatility of fixed income assets. The returns on these funds are not anything to get excited about but it is easy to find one that meets or exceeds the inflation rate. The only concerns with them is that they do tend to fluctuate in value especially with the movement of interest rates in our economy and they have expense ratios. These are amounts of money that you must pay to those that manage the fund you decided to invest in, however it is also easy to find a bond fund that has substantially less than a 1% expense ratio.

              If it were up to me I would buy a bond fund that is comprised of government backed securities which would give me very predictable interest rates and relatively low risk. But I won’t rob you of making your own decision. One of the best feelings is taking your future into your own hands and that goes for your financial future as well. Now that you have some of the facts you can make the right decision for yourself, just try not to stress about it too much, the worst decision you could make is to do nothing and let inflation eat away at your savings.

Who is better for your wallet: What about Gary?!?

Don't worry I didn't forget about Gary

But wait...there's more! Yes, there actually is another candidate and his name is Gary Johnson. While not unpopular, he is less mainstream than Hillary and Trump because of his extremely differing policies. You could say he is the best of both worlds, Republican and Democrat, stereo-typically he is fiscally-conservative yet socially liberal.

    His tax plan is probably one of the greatest policy ideas that he is proposing. It is a consumption tax (sales tax) on any product that is purchased by an individual consumer, (all purchases made by businesses are not taxed.) It is designed to be a "fair" tax because there is only one tax bracket for everyone, and one deduction or "prebate" determined by the poverty level that offsets the cost of

If you didn't know this is Gary Johnson

necessary goods and services. For example, if your monthly prebate is $1000 and you only spend $900 on goods and services for that month (regardless of their necessity), you would have an effective tax rate of less than 0% regardless of income. However, if you spend $1800 and your tax prebate is that same $1000, your effective tax rate would be calculated from that net $800 you spent. Considering the median household income is $51,939 (2014), your effective tax rate would only be 18%, much lower than the 32% you would otherwise be paying in total income and payroll taxes under current laws.

    Another attractive feature is that it stops double, triple and quadruple taxing. With no business income taxes, the money being paid to employees is not taxed. When you are paid, there are no employer income taxes of any type, the only time anything is taxed is the first time it is purchased by a consumer. For example, if you were to purchase a computer, it would be taxed at 23%, but when you sold it to another person or business it wouldn't be taxed again. However, if a business bought it first, they would not be taxed unless they decided to sell it to a consumer (then it would be taxed at 23%.)

    The first and very obvious advantage to this plan is that you would be taxed much less than you are being taxed now,especially if you decide not to do a lot of spending. The second advantage is having a surplus of business income if you own or operate one, because there would no longer be additional taxes on them. This would give you and your business the opportunity to attract better employees with higher wages, invest more on research and development, and effectually expand your business. A secondary benefit of this would be job creation and hopefully a chance to find employment if you need it.

    As far as trade goes, he doesn't have any documented positions on his website for how he views globalism and free trade. However, he generally agrees with free trade but not in how it is currently written and practiced-- he believes it benefits specific corporations rather than economies as a

Gary Johnson Climbed Mt. Everest

whole. He believes that there is no way to fight globalism since that is where our economies are heading, and as a result we might as well formulate our trade agreements to help benefit us in the long run.

    Since he doesn't have any specific plans laid out, it is hard to determine  how his trade policies during his presidency would affect you financially. Based on how he has discussed trade issues in the past, it is likely that he wouldn't impose tariffs that may start trade wars between countries. But I do see him holding countries accountable through the World Trade Organization if they practice unfair trade policies.

    Who is best for your wallet? Who is going to give you the most post-tax income and who might give you better economic opportunity? For everyone, it will undoubtedly be Gary Johnson-- especially since you will be able to keep all of the money that you’re paid, no matter who you are. However, if you live below the poverty line or are a minority citizen, Hillary Clinton has outlined some pretty serious initiatives to help you better your economic situation. Or contrarily, if you make a large amount of money like Donald Trump, then you will most benefit from his presidency. Mr. Johnson, however, seems to be the easiest way for everyone in the country to have increased economic opportunity no matter their race or economic status. With Johnson, everyone wins.

Hillary vs. Trump: Who's better for your Wallet

Hillary vs. Trump: Who's better for your Wallet

      With both candidates claiming they are the best for the future of the United States, you might be wondering, “ which one is going to be the best for my finances?” The answer might seem clear at first as one candidate, Donald Trump, is boasting quite the tax cut for all income levels. However, the more you dig into each candidate's plans, the more difficult it becomes to determine who will truly be better for your wallet in the long term.

    Since we already mentioned him, let's start with Mr. Trump's plans. The main goal of his trade policies are to keep and create jobs in the U.S. This is no small task since our citizens demand their goods at great values and we are a member of several free trade agreements. To do this he wants to hold foreign governments accountable for unfair trade policies like artificially deflating prices and manipulating their currency. While his plans aren't extremely detailed, he centers their completion around imposing tariffs and using international trade law to get countries to compete fairly in global markets. This would theoretically then stimulate exports from the U.S., and create more jobs here for our citizens.    

    This idea may actually work regardless of whether foreign governments decide to compete fairly or not. If they decide to stop artificially decreasing the prices of their goods, then it would be more economically viable to produce goods in the U.S. If the countries do not stop trading unfairly, then tariffs will drastically increase the prices of the goods to make it viable for companies to produce those goods here in the U.S. instead.

    However, his plan has several undesirable consequences. First, it will increase the price of goods for consumers here in the U.S. If wages don’t increase as well, which could occur due to stagnation in wage growth, then consumers will consume less, producers will produce less and jobs will be cut. If tariffs are enacted, then it is likely that the other countries would impose tariffs on our exports as well, and both economies would hurt.

    Donald Trump's tax plans are probably the highlight of his policies and embody a pretty standard republican view, lowering taxes and simplifying the U.S. tax code. U.S. income tax currently has 7 brackets: 10, 15, 25, 28, 33, 35, 39.6%. Qualifying for each bracket depends on both income and filing status. Trump's plan wants to reduce it to 3 brackets which would be 10, 20, and 25%, however he is currently rethinking his tax brackets. In addition, anyone filing singly with income less than or equal to $25k, or jointly less than or equal to $50k would pay no taxes (also being rethought). Additionally, he wants to reduce the corporate tax rate to a flat 15% from it's current 39.1%.

    The main benefit of these cuts is that it puts a significant amount of money back in the pockets of consumers and corporations to hopefully spend on products, increase production, or research new technologies. In turn, the boost in consuming and spending would lead to more employment and

thus more taxpayers. Some estimates peg economic growth at up to 11% in GDP and an addition of up to 5 million jobs. With these tax cuts must come a serious debate of what government spending should also be cut. Mr. Trump has already voiced that he does not want to cut any spending from Social Security or Medicaid, and wants to have an even greater military than what we already have. Without cutting spending from any of these three areas, it would be impossible for him to also claim to be able to reduce our nation's debt. When adjusting for economic growth, it would be a loss of about $1 Trillion a year from tax revenues! If this were to continue into the future, it would create a scenario where our country's debt would reach catastrophic levels.

    Again, you might be wondering, "but how will this affect my wallet?" The biggest positive (and only guaranteed) outcome with this plan is that you will have an increase in after-tax income, meaning what actually gets deposited into your bank account and can be spent by you. This is a great thing for you but only a great thing for the country's economy if you decide to spend it--saving doesn't really do much for economic growth. Next, you might find it easier to secure employment because of an increase in domestic production of goods created out of the hypothetically fair global market. There is one major problem with the latter, and it’s that the World Trade Organization, the international body that helps make global trade fair,has been something Mr. Trump has been very critical of.) I guess he has never learned that you can't have your cake and eat it too.

    While Mr. Trump's plans seem to be very centered around what might be best for our country, they could have secondary and tertiary effects that have lasting negative impacts on our country and it's economy. There is a serious dichotomy between what he is saying he will do and what he can actually do if he were elected to be the next president of The United States.

    At first glance, Hillary Clinton has a far wider array of ideas for the future of the United States to include actual names of existing or proposed policies with extensive explanations. But in many cases, just because they are detailed doesn't mean that those plans are going to work.

    Having said that, let's air out some of her basic ideas regarding Taxes, trade, and job creation. When it comes to trade, she generally wants the same things as Mr. Trump-- fair trade deals that provide economic opportunity to all, and better enforcing of current and future deals in order to prevent unfair practices. Currently Hillary is against signing the Trans Pacific Partnership, or TPP,

Yes I made this Meme

and has expressed interest in renegotiating NAFTA. If President Obama gets the TPP signed before he leaves office then his successor will have a difficult time renegotiating NAFTA because of stipulations regarding preexisting deals. Hillary also wants to impose stricter rules on countries who trade their goods illegally, provide unfair subsidies to their manufacturers, or those who manipulate currency to make their goods cheaper. To be fair, she doesn't just want to impose a bunch of rules on foreign countries and hope everything sorts itself out. She is proposing that we hold U.S. companies accountable for shipping jobs overseas and use tax inversion to bypass our tax system. She proposes any U.S. company shipping jobs overseas would have to pay back any tax incentives taken from the Federal government in addition to adding exit taxes to companies that shift their profits overseas to avoid taxes.

    Her reasoning behind those decisions is essentially the same as Mr. Trump's-- to promote keeping and creating jobs in the United States. All of the outcomes of her ideas are essentially the same as well. If tariffs are enacted, then foreign governments may do the same to us again and possibly create a trade war. However, Hillary has many other plans that encourage U.S. companies to keep jobs in the United States. Most of her proposals offer some type of tax incentive for investing in U.S. manufacturing, and further incentives for creating jobs in specific hard-hit areas that need to be revitalized. She also wants it to be easier for companies to bring jobs back to the United States by streamlining the process between governments.

    Similarly, her tax plans are focused on top wage earners in the U.S., but conversely she plans on increasing taxes for top earners. For example, she plans on imposing a 4% tax on anyone that makes more than $5 million a year, a mandatory effective tax rate of 30% on anyone making more

I made this one too

than $1 million (Buffet Rule), she wants to close loopholes that are available to those that can afford them, and increase capital gains taxes. She also plans to make it easier, quicker and less expensive to start a business and to file taxes for those small businesses.

    The reason for her tax changes is to pay for the plans she wants to implement which will hopefully increase economic opportunity for lower and middle-class Americans. These plans provide federal funding to state and local programs that help increase youth employment, supply re-entry programs for the incarcerated, aid entrepreneurship and infrastructure programs for underserved areas, as well as create affordable housing. These plans, in addition to  everything else she has proposed, would cost about $1.8 trillion over a period of 10 years. She has current planned offsets of $1.6 trillion which are largely funded by the tax increases on the wealthy which we have already discussed. The difference would hopefully be bridged by certain corporate taxes creating a proposed $275 billion in revenue.

    So how will Hillary's plans affect your wallet? As far as her trade policies, they would be quite similar to Mr. Trump's. Just like Trump's plans, hers is proposed to create an increase in jobs in the United States. Therefore, if you are looking for employment, this could benefit you! Unfortunately, a fairer trading arena will likely increase the cost of the products we consume making it more expensive for us to live. Hillary and Trump’s tax plans are also similar in the sense that it targets the highest wage earners. Bottom line: the people reading this (mainly middle class Americans) will not be affected by her tax plan. It is targeted at the highest wage earners, increasing their taxes in order to pay for the plans that will benefit those that earn the least.

    Who is really better for your wallet? It’s hard to say at this point because both candidates have some good and some bad policies that end up offsetting each other. In my opinion, if Mr. Trump wasn’t so against free trade he might actually be the best economic choice. His tax cuts will put more after tax income into everyone’s pockets. Both have a very serious shortcoming though, they offer no serious plan to reduce the country's looming debt crisis. This, by far, is one of the more serious but never talked about issues we should be addressing that could seriously hinder our future financial well being. If you want real financial security for the future vote for someone that addresses this issue.

 

My personal favorite

   


      

Brexit, Smexit, Who Even Cares?

The European Union & The Brexit

    You may have heard on the news lately that the United Kingdom (UK) was planning on leaving the European Union (EU). Many people in the UK have been disgruntled with the EU and finally, after a conservative party win in an election, a referendum was held to finally decide—  leave or stay.

    You may be wondering what the EU and Brexit are, or maybe even what the United Kingdom is. Surprisingly enough, you aren't the only one. After polls closed and the results showed in favor of leaving the EU, the people of the U.K. took to google to ask a few "solid" questions such as: "What's the EU?", "What is Brexit?", and "What happens if we leave the EU?".

    So, who even cares? Well for starters, Europe does—and so does the United Kingdom—but you should too. Before we delve into why you should, let’s take a look at some background information on the European Union and the Brexit.

    The EU started as the European Economic Community in 1957 with the "Treaty of Rome", involving Belgium, France, Italy, Luxembourg, Netherlands, and West Germany. It was created out of a sickness European leaders had for the constant warring that had been plaguing Europe for

Current EU Countries

centuries culminating in World War II. In many ways, the impact of it was felt greatest with the economic ties that were created and the resulting free trade that was initiated between the participating countries. Since then, several other treaties have been signed like the Manstricht (creating the euro and economic rules) and Schengen (allowing free travel between countries) and 22 other European countries have become members with many more to follow.

    Brexit, is the exit of the UK from the EU. There are a multitude of reasons why the UK wants to distance itself from the EU—EU immigrants are taking UK jobs (and welfare benefits), "unsecured borders", high costs of membership, and the difficulty of trading with non-EU members.

    How will this affect the U.S.? Realistically, I don't foresee a recession like  ‘07 happening, so we can all calm down a bit.

    However, if you really want something to worry about, consider this: If the EU and the UK can't negotiate on some sort of exit that doesn't completely ruin trade relationships, then we might have a problem. If we pretended that the EU was one giant country, it would be the world's largest economy

EU Flag

with a GDP of $16-19 trillion.  The UK is the second largest country in the EU and 6th largest in the world at almost $3 Trillion GDP. Meanwhile, the U.S. is in the Top 5 of exporting and importing partners with the UK. The Brexit might actually help their trading relationship with the U.S. or China since they won't be bound by EU rules anymore. However, if you look at who makes up the majority of their exporting and importing partnerships, you’ll find that they are EU countries. This will undoubtedly hurt both economies because of the loss of trade agreements once the UK officially leaves the EU. There will be a negative impact on the price of goods, job creation, and financial markets.

    While we are not dependent on the UK or the EU by any means, we are a large part of the exporting and importing trade for both of them. This could be a potential drag on U.S. financial markets or to any businesses with large ties to the European economy. The most likely scenario for now is that you will see a roller coaster pattern forming out of your retirement account values. Markets will crash for a day or two and then go back up when people's’ fears subside. This will likely continue to happen as small details continue to emerge about the ramifications of the UK leaving the EU.

    Who is it bad for? People nearing retirement age. Usually massive market fluctuations are a drain on the nerves of those about to retire since some of their assets may be adversely affected. However, if your retirement portfolio was managed correctly, most of your current assets should be relatively protected from this period of uncertainty.

    Who is this good for? Specifically, for young people just entering the investing world. But, it could be a great opportunity for anyone with cash that can be invested. The fluctuations in the market

Brexit Referendum Results

should end up giving you a chance to purchase great companies at a significant discount. For example, I recently acquired stock in Toyota Motor Company (TM) for a 5% discount. However, you need to enter this type of market atmosphere having done your due diligence. The only reason I purchased TM was because I had done a few months of research before the purchase, but was merely waiting on a good time to pull the trigger. Little did I know the next day TM would drop another 5%. It can be a bit nerve wrecking at times, but remember that purchasing good companies at great prices will more than likely result in profit, just have patience.

    Depending on how the United Kingdom decides to deal with their exit from the EU and vice versa we may have a few exciting years in front of us. This will not be done anytime soon and there are even rumors that it may not even happen. I would take this period to look at where you stand financially and possibly get some advice from others that may be going through the same type of scenario. It could potentially help you immensely with your future financial standing!

From Galaga to Esports, Video Games are Changing

Gaming Industry Interview

    Video games have been around for nearly 60 years, and today, you would be hard-pressed to find someone that has never played before. They have evolved from giant arcade games to something that can fit into your pocket or be played on your phone. My generation (millennials), have gone through some of the most prolific changes in the industry. We have been around them our entire lives, many even spend a large portion of our adult lives still playing them for entertainment. Because of their significant role throughout our lives, I wanted to interview several gamers to understand broader views on the industry and where they predict its future lies.

    In order to preserve their "confidentiality" I have assigned them pseudonyms. For gamer 1 it will be: Jane; gamer 2 will be: John; and gamer 3 will be: Joe. And, for ease of reading, I will present the question first, then summarize their answers & my response, and finally present their answers. Enjoy the interview!

    Question 1: “How long have you been playing video games?”

    Summary: Most of us Millennials have been playing video games since our early years, probably from the age of 4 or 5. You may have been tricked into playing educational games
like Jane and I, or maybe you were lucky enough to play the cooler stuff like John and Joe. I remember my first video games being played on an old MS-DOS computer, but my first actual gaming system was the Nintendo-64 with James Bond "Goldeneye".

    Jane: “If we're counting computer games, then since I was in 1st grade. My parents used to buy us those learning video games like "Jump Start" and Mario Typing to trick us into learning. It was pretty effective. If we're not including those then probably about 10 years old.”  

    John: “I have been playing video games since my brother brought home his brand new Nintendo Entertainment System, complete with Mario Brothers, Duck Hunt, and Mike Tyson's ‘Punch Out.’"

    Joe: “Not counting those terrible Bandai handhelds they released in the 90's, probably when I was four or five when my parents bought me a Sega Genesis for Christmas.”

    Question 2: “What is it about video games that makes you love them?”

    Summary: While the answers vary across the board, they all have a very similar underlying idea. Joe really sums it up the best in his oh-so-honest, almost depressing, response. Basically we want to fantasize about another reality and take a moment to take a break from our lives. However, this break from reality can't take place unless there is a captivating storyline and immersive game play scenario.

    Jane: “Not to give a cop-out answer, but that really depends on the video game. This is going to sound weird, but chiefly I like video games for the social, team-work aspect, getting to play them with my friends or siblings and working together to win. When I'm playing on my own, though, it's that they're kind of like movies or books you get to play out rather than just watching or reading. I can play my favorite characters- like who doesn't want to be Aragon from Lord of the Rings or Obi Wan from Star Wars? My favorite types of games are the critical-thinking, problem solving kind though, like King's Quest. I just really enjoy the creativity and the sense of accomplishment at figuring it out and moving through the story. But even those that aren't that type, I think we all enjoy them just because they give us an opportunity to do and be things that we just couldn't otherwise. I'll always want to fly. I can't do that in real life, but in a video game I can. Or I can trounce 20 guys or use magic, it's the same reason we read books or watch movies but we get to be more involved with video games.”

    John: “In the last few years I've been more interested in engaging story lines, nothing beats being told an amazing story. The video game mainstay, however, is solid game play. It doesn't matter the genre, if the game mechanics work and are engaging, I will absolutely play it. Examples of this: The Dark Souls series, Duck Game, Half Life/Half Life 2, Smash Brothers Melee, the Total War series, Myst series, The Last of Us.”

    Joe: “The ability to immerse yourself in another reality and distract oneself from the void that is life.” (I appreciate the honesty on this one.)

    Question 3: “What are some of your favorites?”

  

  Summary: The favorites vary from person to person depending on the type of genre of video game they want to immerse themselves in. However, the industry standards are Call of Duty, Diablo, Starcraft, Halo, Grand Theft Auto, and Minecraft, among a few others.   

    Jane: “King’s Quest, Undertale, Resident Evil 6, League of Legends, White Day”

    John: “Including the list above [his last answer], I’m a big fan of games that challenge me, not just to beat the game itself but to think differently than I already do. Riven was eye-opening to me as a kid, I became a lot better at problem solving because of it. The original Halo holds a special place in my heart because throughout high school, pretty much every weekend was devoted to 16-player brawls in Mark Johnson’s garage. Pitting yourself against another person is the best way to improve yourself. I learned that from games.”

    Joe:  “Call of Duty Modern Warfare 2, Final Fantasy IX, Empire, Earth, Europa Universalis IV”

    Question 4: “Do those favorites really embody what you love about video games?”

    Summary: Obviously yes, that’s why they’ve become favorites, but it seems that it’s hard to find one specific game that encompasses every quality that a gamer enjoys. Video games already offer a wide range of purposeful experiences, it is just difficult for a company to make an all-encompassing game that is also marketable enough to create a profit.

    Jane: “Creativity, problem-solving, and teamwork, yeah! ;) League of Legends, not as much….I like playing it because the teamwork is fun, but it’s still fighting with no story.”

    John: “Absolutely. Half Life and The Last of Us have two of the most engaging storylines in modern gaming. There are whole websites devoted to discerning the sparse clues given throughout the Dark Souls series as to what is really going on in the world. Video games don’t have to be a time-waster, they can force you to think and feel in very meaningful ways.”

    Joe: “Yep.” (Clearly he appreciates brevity.)

    Question 5: “Do you see the industry moving away from why you love video games or getting closer to it?”

    Summary: For the most part they think things are moving away from what they really love about gaming. Jane & Joe believe it is toor focused on creating billion dollar franchises in just a few genres. While some see this as a bad thing, others see opportunities.

    Jane: “Meh, I don’t know the industry well enough to really comment on this, but I’d say it seems to be moving away from it. Everyone’s into the “versus” games, combat-shooters (Halo, Plants vs. Zombies, Mass Effect) and fighting games (Injustice: God’s Among Us, Mortal Combat, etc.) or solo-games (Fable, Skyrim, Assassin’s Creed). It seems to be less and less story and more just beat-people-up/shoot-them-in-the-face. ”

    John: “I think of it less as a movement away from one side to another and more of an expansion outwards from a center. Sure, there are games like Call of Duty and [insert yearly EA Sports title] that are released primarily for a paycheck. But there is also the resurgence of independent developers whose games have become classics very quickly. It works the same way in any industry, there will always be people trying to sell for quantity and others for quality. I can’t fault them for trying to make a buck, I also don’t have to buy their products.”

    Joe: “Moving further and further away. As with all media, not just games, it is a safer and better financial bet to re-release a game/movie with some updated features because there's a core audience that will buy the game no matter what. That'd be fine if the sequels added something new and interesting but most are unoriginal with their content. Everything in the gaming industry is moving towards franchises because the publishers know that people will buy them no matter what. For example, Call of Duty and Battlefield have essentially become the Madden games of the FPS world.”

    Question 6: “Does that thought apply to Activision/Blizzard games?”

    Summary: The verdict really isn't out on this one yet. Activision/Blizzard is trying to achieve a balance between making money and the creative game development dichotomy occurring in the industry. They are making  money off the masses with their highly popular franchises like COD but also trying to stay true to very serious gamers.Activision targets mass consumer markets while Blizzard develops games targeted towards the "serious" gamers. I see an issue arising in either market if they continue to try to squeeze every possible dollar out of their consumers.    

    Jane: “Yeah.” [Very thorough contribution by Jane here]

    John: “Some of them. The Diablo series is one of the best and most iconic in the world, same with Starcraft and Warcraft.  I’m not a huge fan of monthly subscription gaming though, and micro-transactions/pay-to-play gaming ain’t my thing. At the end of the day, for me it boils down to content, game mechanics/playability and storyline.”

    Joe: “It's hard to say, because on one side Activision is releasing one of the worst received Call of Duties alongside a remaster of Call of Duty Modern Warfare 1. On the flip side, Blizzard is listening to their World of Warcraft player base and meeting with gamers who ran one of the most successful privately held servers to see where they can improve.”

    Question 7: “Since Activision/Blizzard has become popular, how many of their games have you purchased and/or how many have you downloaded?”

    Summary: This varies depending on the type of gamer, but if you have ever been truly interested in video games then you have played an Activision/Blizzard game.

    Jane: [No answer]

    John: “Blizzard and Activision have been making popular games since before I knew games were prevalent outside of my mom’s computer, it’s hard for me to put an actual number on it to be honest. More than a few but less than a lot.”

    Joe: “I've purchased games made by them from Lost Vikings to the Call of Duty franchise.”

    Question 8: “How much have you spent on in-game content?”

    Summary: Reluctantly Jane, John, and Joe have all spent money on in-game purchases but stopped because they felt guilty.

    Jane: “Not really much, I mostly play them through friends :p I’ve spent probably like $50 on League of Legends upgrades and skins and stuff, which is part of the reason I stopped playing.”

    John: “I’d like to say $0, but I’m sure somewhere down the line I’ve bought something, so I’ll say $10.”

    Joe: “Aside from the DLC map packs on the first two Modern Warfares I don't think I've purchased anything in-game, which was seven years ago, so I'm unsure of the amount. Fuck microtransactions and half finished games.” [I'll apologize for his use of language, but I like to think it adds to his point, lol.]

Activision Blizzard also recently acquired King Digital,
maker of Candy Crush

    Question 9: “Do you see yourself as ‘loyal’ to Activision/Blizzard or any other content producer, or are you unbiased and purely play games that fit your interest?”

    Summary: From all three gamers the answer is a resounding, “No!” It seems that if they are interested in it, they will play it regardless of who makes the game. As for myself, if I spent enough time playing video games I wouldn't care either even though I am a share owner of Activision/Blizzard.

    Jane: “No, I just play what I like.”

    John: “My thought process is a little bit mercenary, if I’m interested I’ll give it a shot.”

    Joe: “I don't particularly see myself as loyal to any game publisher. I own over 15 consoles and a gaming computer, so I'm not exactly a picky gamer.”

    Question 10: “Let’s move our questioning to mobile gaming. Do you partake?”

    Summary: All three gamers have partaken in some form of mobile gaming, but most don't currently do it because it is seen as quite a distraction by them. I personally agree with them, but every now and then when I have absolutely nothing better to do I will reluctantly waste time playing Pokemon on my phone.

    Jane: “I have. I don’t currently.”

    John: “I don’t, but I have before. I find that carrying games in my pocket tends to make me less productive during my day though.”

    Joe: “Aside from emulators on my phone, not really.” (Emulators mimic a console system on your phone.)

    Question 11: “If you do, what games?”

    Summary: Jane and John have played some of the most popular mobile gaming games out there, Joe being the only one that hasn't but still plays a very popular adaptation of Pokemon for phones.

    Jane: “I played Clash of Clans, but it took up time and money (because I have no patience, lol) and it wasn’t worth it.”

    John: “Angry Birds, Castle Crashers, Solitaire, Chess”

    Joe:  “Usually Pokemon. Gotta catch'em all.” (I've played this too on an emulator, it's pretty cool, you should try it out.)

    Question 12: “”Have you made in-app purchases via mobile gaming?”

    Summary: Jane is unfortunately the only person out of the three gamers that has succumbed to this addictive facet of mobile gaming. She ended up spending money on Clash of Clans, which many people have. I have friends that have dropped over $100 through in-app purchases for Clash of Clans.

    Jane: “Yes, unfortunately.”

    John: “Not to my knowledge.”

    Joe: “Nope.”

    Question 13: “If you haven't played [mobile games] why haven't you?”

    Summary: None of the gamers play mobile games anymore.Jane and Joe discuss how they are never that interesting and don't have the qualities of normal console or computer based games.  

    Jane: “I don’t enjoy phone games as much. They take up data and they’re never as fun. I like the story and creativity, and you don’t really get that much thought or effort put into phone games.”

    John: “I don’t play them anymore, primarily because I don’t like to play games during the day, when I should be working.”

    Joe: “They're typically terrible and based on micro-transactions.”

    Question 14: “What would change your mind to playing mobile games?”

    Summary: I think John's answer was a bit sarcastic since most people don't like the games for their propensity for time-wasting. Jane and Joe would be willing to play the mobile games if they, for a lack of a better term, didn't “suck.” Jane and Joe are 100% right, most of the games are designed to get people addicted and then spend money on small transactions. If they were geared more towards better storylines and game play then more people might enjoy them, but let's face it, that's not what brings in the money.

    Jane: “If they had more games like I described, with a storyline and cool characters and gameplay that you could follow through. I’m SURE you could make something like the old King’s Quest games or Undertale on the phone, and I would play the hell out of that! But people don’t put thought into phone games, at least not that I’ve seen, but maybe I just don’t know about them.

And they’d have to take less data. Cuz I don’t have that kind of money.”

    John: “An income that allowed me to lounge for the majority of my time.”

    Joe: “Have them not suck.” (My favorite answer.)

    Question 15: “What is your opinion about e-sports? Essentially, people watching people play video games just like you would watch athletes play sports on tv. Have you ever played in an e-sports tournament or competed for money in video gaming?”

    Summary: Jane and Joe are a bit pessimistic about the esports industry that is quickly emerging. John thinks the emergence of e-sports is fantastic because it allows "countless people to connect over a hobby they love." There is now an official esports section on the ESPN website, check it out here.

    

    Jane: “I mean, I like to watch Let’s Plays, you can enjoy the fun and creativity of a game without having to put in the time and money, and go through it with someone who is way better at video games than, say, I am. :p But I wouldn’t pay for it, and I certainly wouldn’t go to a tournament or something. I don’t enjoy that with sports, much less when people are sitting around clicking on a mouse. I’m so impressed….”

    John: “The rise in popularity esports has had over the last few years symbolizes a shift in perspective on gaming. It’s mainstreaming. Websites like Twitch have enabled countless people to connect over a hobby they love and I think it's outstanding. I have never competed in a tournament or made money gaming, but that's not why I play.”

    Joe: “If you're referring to Twitch, it's whatever to me. I'll occasionally watch it when I'm interested in buying a game and want to see unbiased reactions and gameplay from an actual player. If I want to waste my life watching useless content Netflix offers plenty of crappy shows and movies. I've never had an opportunity to play or compete for money, so no.”

$339 million to date, 88% overseas.

    Video games have been around for quite some time now but have only been mainstream for probably the last 15-20 years. Over that time they have changed drastically from games that once operated out of machines the size of refrigerators, to tiny devices that you can fit in your pocket and play against someone on the other side of the world. ESPN even has a section on its website devoted to covering competitive video gaming in which prizes can exceed $1 million. With the advent of mobile gaming, viable options for virtual reality gaming, and esports, the industry of video gaming has barely tapped into it's full potential.

Activision Blizzard (ATVI) and Electronic Arts (EA) are at the top of their game. I would look to the advances they are making in the future and watch closely for them attempting to further monetize their massive franchises through mobile gaming adaptations, movies, and esports. Even more interesting is the fact that Activision Blizzard's recent release of the WarCraft Movie made significantly more money in China than the U.S. Keep the changing society in China as a factor in this Industry as well. With all things investing please do your own research before making any purchases and to disclose I have a long position in ATVI.