There are many bubbles that have happened throughout the years in the US, and right now I believe right now there is a bigger bubble than ever. Banks have continuously lent out money to Americans who do not have any saving and live pay check to pay check. One industry that is going to collapse with the states is the auto industry. Many people are purchasing new and used cars that are 1/5 or more of there yearly income. With this pandemic we are seeing major job loss and these people will not be able to pay their car payment which they have over extended to get in the first place. That will then flood the used car industry. which then what happens is anyones guess is as good as mine.
I remember the biggest one happened last year was Plus Token where they cheated everyone for $6 billions. It showed how much severe it can do to every average investors’ life if we invest without doing due diligent. It also affected the trust in cryptocurrency space.
Tesla (TSLA) stock, trading at ~$2,010/share (USD).
(Data from Yahoo Finance).
The Tesla car, as a product, is superb. However, the company is valued at ~$375 billion USD, with a top line (revenue of ~$30 billion) and no profit. Its PE (price to earnings) ratio is ~1,000!
This is a by-product of market hype and excessive government money printing and investors being irrationally exuberant regarding this investment unicorn.
This does not mean that Tesla stock will not have a rational valuation one day, either by the stock price correcting or the profitability of the company rising to meet the stock price.
The US large airline industry is not a viable model and is always subsidized. They are dependent upon the government for survival rather than investing and directing assets more appropriately. Smaller airlines like Southwest and JetBlue and small regional airlines actually turn profits so it can be done. Also, how can such large airline companies acquire others?!
I think to invest now in 2020 into any social media companies would be a malinvestment.
These market giants are all part of web 2.0 which is a dying version of the web. These companies have proven also their political bias and also social bias on many subjects which i believe can be damaging on many different levels due to the promotion of agenda driven ideas and censorship of anything else including medical advice. Also these companies seem to have and want a monopoly on personal data farming giving them a great deal of power and cornering the market, or giving them and whoever they are friends with an unfair advantage in the market when it comes to advertising. This could also extend to any types of technology or apps like tik tok that silently support spying or personal data collection and giving or selling the data to the highest bidder or just nefarious entities.
Any investment into a project (sector) that do not increase productivity (or do not create any value) is a misallocation of capital. We had such an example before 2008 when excessive credit (home mortgages) was issued to those who couldn’t afford to pay it back. As a result the real estate prices artificially inflated.
Another example is happening now - the excessive credit is issued to corporations. They do not use it to increase production (services), but to buy back their own stocks, what artificially increases stock prices. As they do not generate enough revenue, they are not able to pay back those loans.
One that comes to mind for me is the dotcom bubble back in 2001. This was a combination of fad-based investing, an over abundance of start-up venture capital funding and the failure of them making a profit. Companies without any proprietary technology abandoned fiscal responsibility, and spent a fortune on marketing, to establish “brands” that would differentiate themselves from the competition. Some start-ups spent as much as 90% of their budget on advertising.
The lead up to the US Stock Market Crash in 1929 was an example of systemic malinvestments. The economy was booming and buying stocks became all the rage which resulted in people buying more of them and those who couldn’t afford stocks could buy on margin with as little as 10% down from a stockbroker. Also, banks were lending more and debt was growing as well as overproduction of goods. When the stock market crashed farmers literally had to dump overproduced food, companies had to dump their products with a loss and investor’s portfolios were decimated.
Dewayne “The Rock” purchase of the XFL for 15 million dollars.
In my opinion.
-
The XFL filed bankrupt in April due to the effect of the cornavirus, where is the cash coming from even with the NFL, NBA, MLB loosing key revenue streams due to having no fans attending games. I believe in the future people will stay-away after this situation improves
-
Of course his celebrity status could strike more interest in some people, but the sports industry is already hyper-competitive, what is XFL’s competitive advantage against the NFL?
-
The ROI (Return of Investment) is not worth it. Ask Vince McMahon’s about his 200 million dollar investment in the XFL years ago.
The Colombian government has many malinvestments. One of the worst in terms of infrastructure was related to the collapse of Chirajara bridge, they hire one of the most powerful construction companies in Colombia which the owner is the only man who is multimillionaire in Colombia Luis Carlos Sarmiento Angulo. They wasted a lot of free money and it was a complete failure, bad engineering, bad materials, etc. And the multimillionare didn’t even pay any fine to repair the damage to our nation. IT’S A SHAME! IT’S A JOKE! our government s**ks
Fidget spinners with an item that drew alot of attention you’d think itd be a good investment. But with the process and equipment necessary to make it a sustainable product it was just a fad that would have lost its attraction before it hit the market fully.
Damn…Where to start?
I think in Germany everything what the government is involved. Airport, Stuttgart21, Autobahn and so on.
The spend billions of the tax payers money, but as long as it’s not their money, they don’t care. The berlin airport is going to miscalculated, that is impossible to to think it is really worth it and it will pay of some day.
The autobahn are kind of cheap to repair, but only cause the involved companies are getting the toll for the next 20 years and afterwards they probably have to repair it again.
401ks and Pension plans are malinvestments. They tax companies and penalize individuals in order to create pools of money managed by people on wall street such as hedge fund managers for pension plans and those institutions exploit that capital for their own gain. 401k and pension plans are looted by these institutions and the individual who it was intended to benefit is penalized for “cashing-out”.
A public Canadian company that meets the definition of a malinvestment is “Canopy Growth Corporation” (ticket WEED). It is a Canadian cannabis company that produces and sells marijuana products, both medicinal and recreational.
It has an $8 BILLION dollar valuation, but has negative earnings - it spends more money than it brings in (revenue ~$400 million, spending over $1.2 billion). While it is an early stages start up still, it is highly inflated in its valuation. It is normal for an early stage company to be in a deficit, however, it has been in a deficit for years, relying on raising easy investments via inflated share prices and cheap debt.
This makes the share/company unattractive to most investors.
WeWork. It was based on “hype” and the board made poor decisions. Expanding too fast, no real business model, rebranding themselves.
For my opinion it´s a big malinvestment when doctors (= governments) ordinate medicine/vaccines etc. and do not educate, prevent and keep people responsible on the importance of having a proper diet, a high immune system, getting enough sleep, exercising daily etc. Many of the modern diseases could be decreased with prevention. The ROI would be very high when you compare with the billions of dollars that each year are spent in hospitals in Europe where we have a free healthcare system and where millions are used daily to save lives because of illnesses which in many cases could have been avoided.
investing in any car is an awful investment. Cars depreciate by nature, and banking on the hope that your car might be different is an awful idea that will lose you immense amounts of money. The only time an automotive investment might be a god idea, is if the car you are buying is a limited production supercar, such as a Bugatti or a Koenigsegg.
I believe Exxon NYSE: XOM is a terrible purchase. Due to factors such as climate change + heightened environmental awareness from younger generations + clear innovation toward renewable energy resources all point toward a future where oil consuming products are on their way out the door, Just a matter of time until innovation pushes it out.
A historical investment I would consider a misallocation of capital would be almost any tech company during the internet boom of the 90’s. Most companies didn’t have a real use case or way to make any money, therefore they had no real value, except for maybe Amazon. People invested because the general rumor was that internet stocks were going to explode in popularity, and they did, but not for any real reason. Then the bubble popped.
- Mauritius retirement pension fund
- Because the retirement pension fund that the government proposed just before the past election(which i think played a big role in getting them re-elected) was like a fairy-tale, they proposed a retirement pension that was higher than the minimum wage for an employee, which literally means a person that is retired that maybe have never worked in his life would have got much more than someone who is currently working and getting the minimum salary, and with the current covid19 crisis they’ve changed their plan stating that they won’t be able to implement this for now and it could be coming in 4 to 5 years time and they’ve also adopted a new pension contribution system where the current working people will contribute for the current pensioners as compared to before where the pensioners themselves contributed by means of monthly payment to a pension scheme.