Capitalism 2 and Capitalism Lab Forum

What do you think about the gameplay balance of the bond system?

For details of the bond system, please see: https://www.capitalismlab.com/banking-d ... ate-bonds/

Hi,

I really like the idea of the bond système, the only thing is that most of the bonds become D level after a certain time. the only way i was able to have one that had it's évaluation increase is when i bought one from a Company i owned. So profitable compagnies dont take loans to try to expand there compagnie. They only do it when They have money troubles. Which make the bond market not that smart of an inversement because even if you receive income for a certain time , your capital Will eventually be lost .

The other thing that would be nice , is to have a history of the average Price you Pay your bonds a bit like the the stock market where i can see how much i Paid and the the profit or loss on the amount Paid.

Last thing , thank you for the hard work , i've been playing your game since my teen years . I'm. almost 30 and i still love this game. Good job to your whole team

(sorry for the English Errors, i'm French Canadian )

I really like the idea of the bond système, the only thing is that most of the bonds become D level after a certain time. the only way i was able to have one that had it's évaluation increase is when i bought one from a Company i owned. So profitable compagnies dont take loans to try to expand there compagnie. They only do it when They have money troubles. Which make the bond market not that smart of an inversement because even if you receive income for a certain time , your capital Will eventually be lost .

Did you mean that the gameplay balance will be better if companies receive better credit ratings in general? In other words, a company's credit rating should not drop to D so easily?

The other thing that would be nice , is to have a history of the average Price you Pay your bonds a bit like the the stock market where i can see how much i Paid and the the profit or loss on the amount Paid.

I will forward this request to the dev team.

Last thing , thank you for the hard work , i've been playing your game since my teen years . I'm. almost 30 and i still love this game. Good job to your whole team

Thank you for your support!

The bond market is good.

I think the global stock market is somewhat unbalanced. I found that it is easily to make huge amount of money there. And the global company's market cap seems to become larger and larger forever which worths trillions of trillions dollars...

Thanks.

David wrote: Sat Sep 14, 2019 5:29 pm

I really like the idea of the bond système, the only thing is that most of the bonds become D level after a certain time. the only way i was able to have one that had it's évaluation increase is when i bought one from a Company i owned. So profitable compagnies dont take loans to try to expand there compagnie. They only do it when They have money troubles. Which make the bond market not that smart of an inversement because even if you receive income for a certain time , your capital Will eventually be lost .

Did you mean that the gameplay balance will be better if companies receive better credit ratings in general? In other words, a company's credit rating should not drop to D so easily?

I mean that all the bonds in the stock market become D rated éventualy .I've seen only one Company that did not drop and it eventually bought back its bond. The reason is because those companies are already losing money and don't invest in growt. They often are the kind companies that that dont makee it pass 10 years. So what i would change is that i would also have compagnies expanding companies try to find funding . Because those are the kind of compagnies that Will have a stable Rating. If we take a réal compagnie like Shopify , it has a lot of debt because there expanding. They keep finding credit and Took a long time to make profit to be able to expand as fast as possible but They still make revenu .

In the game, i often borrow a lot of money in the beginning to help expand as fast as possible. I don't Wait to have enough money in the Bank. The AI compagnies and Cities dont borrow to expand but to stay afloat . Which make there bonds rate fall lower with time.

Gameplay Balance and the Bond Market:

Use as a Corporate Funding Source:

• Game play Balance: You don't want one source of company financing to become the go to feature there should be trade offs between each type that makes you have to weigh the options.

• Potential Corporate Funding Sources:
o Debt:
- General: Allows Owners to Retain Equity Control of Company
- Bonds: Lower Interest Cost than Loans, Better for Larger Scale Organizations or Projects
- Loans: Easier to Obtain than Bonds, Better for Startup Organizations or Small Projects
o Equity Stock/Shares: Can only borrow so much before you need equity to finance growth

• Potential Balance Tools?:
o Minimum Issue Size say $100+ Million: meaning that you need something that you can put the large amount into to get a return greater than your interest cost: new firms, paying down higher cost loans, etc?
o Does the Difference in Interest Rates from Loans to Bonds create a good trade off?
o Issue Limitations:
-Option 1: Corporate Bonds can only be issued if all bond interest payments do not exceed X% of companies prior year operating profits to maintain a reasonable Interest coverage ratio this also means that new startup companies without profits cannot issue bonds?
-Option 2: Corporate Bonds can only be issued if all bond interest payments do not exceed X% of companies prior year revenue?
-Option 3: Limit Bonds to X% of a Companies Capitalization?
o Possibly have an upper limit on Loans so that you have to borrow using bonds when you company becomes large. Something like you can only have $250-$500 Million in loans at a time.

Use as an Investment Market:

• Game play Balance: You don't want one type of investment to become the go to feature there should be trade offs between each type that makes you have to weigh the options.

• Potential Investments:
-Bonds: Steady but limited Returns in exchange for Reduced Risk of Loss
-Equity Stock/Shares: Higher Potential Return in exchange for Higher Risk of Loss
-Real Estate

• Distribution of Credit Quality and Availability of Investment Opportunities:
o Real World:
- The Bond Market is typically much larger than the equity market the game market should look similar.
- The Credit Quality is concentrated at the lower end of investment grade the majority being A or BBB the game market should look similar. Junk Bonds Should be a small part of the market. https://www.spglobal.com/en/research-in ... ay-in-2019

• Potential Balance Tools?
o Risk: Safety of Principle
-Potential Maximum Loss: Bonds 50% of Principal, Equity 100% of Principal https://www.thebalance.com/bond-default ... ion-416900
-Bonds should not default very often because of strict issuing standards and a typical bond owner should not lose more than 75%-80% of their principal in an average default.

o Returns:
-Investment Grade Equity Returns: Earnings: ~5%-7%+, Earnings Growth: ~3%-5%+, Total Return 8%-12%+, Valuation Multiple: 10-20 Times Earnings
-Investment Grade Bonds Returns: Interest: ~5%-8%+, Potential for Price Appreciation depending on interest rates

o Distribution of Credit Quality and Availability:

Simulated Market:
-National Government Debt Market: Significantly Lower Interest Payments that Municipal and Corporate Bonds to provide a bond market base
-Local Competitors: Lower Interest Payments that In Game Corporate Bonds to provide a bond market base.

In Game Organizations:
-Municipals: Cities must Borrow Minimum of 20%-25% of their Capital or allocate X% of tax revenue to interest payments and borrow accordingly yet attempt to maintain a reasonable credit quality.
-In Game Companies: AI companies must finance minimum of 20%-25% of their company assets with bonds or allocate a 25-50% of operating profits to interest payments and borrow accordingly.

I mean that all the bonds in the stock market become D rated éventualy

This has been improved. In the latest version 6.0.02, the bonds' ratings are more reasonable.

You may download version 6.0.02 from https://www.enlight.com/forum/viewtopic.php?f=52&t=6904

standardplayer wrote: Sat Sep 14, 2019 10:34 pm Gameplay Balance and the Bond Market:

Use as a Corporate Funding Source:

• Game play Balance: You don't want one source of company financing to become the go to feature there should be trade offs between each type that makes you have to weigh the options.

Thanks for your inputs. I have forwarded them to the dev team.

I am not in the beta test, but I have one observation to make:-

According to the current document, when a company issue bonds, the Coupon Rate is determined by credit rating and maturity date (let's say 15% for the sake of argument). However, the same company may have existing bond trading in the market (with similar or shorter maturity date) and the market price may create price disparity (if the bond value drop and yield suddenly become 25%).

The price disparity affect game balance in two ways: 1) in real life, market price reflects how much yield the public is required before the public is willing to hold the company's bond and lend to that company. It is illogical (and won't happen in real life) that they will then subscribe to an initial offering of bonds issue by the same company with lower Coupon Rate, 2) when market price of a bond drop, the issuing company can simply issue new bond to buy back old bond (at a discount price). This is unfair and could be abused.

Suggestion: if a company has a bond trading at larger than 40% (or whatever %) yield, that company should be prohibited from issuing any bond. The Coupon Rate should determined by the maximum of the following two values [a) the existing Coupon Rate determined by the system by credit rating and maturity date, b) the highest market yield of any one bond the company already issued which has the same or shorter maturity date].

I think the new system is great but there should be an option to quickly purchase bonds with a large issue size. If you issued $10bil in bonds and want to buy it back you literally have click and hold the button for 10 minutes. Not fun.