An example of an investment that meets the definition of a malinvestment that is a misallocation of capital, is in 1995 when Ted Turner sold Turner Broadcasting System to Time Warner. Ted Turner himself lost 80% of his wealth, 8 Billion dollar loss for himself. Many reasons are attributed to this fall in the large media conglomerate, including the AOL buying out Time Warner, economy fell into a recession, the Dot Com bubble burst, and the rise of broadband internet. Ted tried to chase something much bigger, instead of staying in his own lane, and ended up costing him dearly.
The one I know most about was the subprime mortgage crisis. It’s probably the most known example of malinvestment. It was a clearly a misallocation of capital, where banks lent without doing lending checks on those they were lending to. While at the same time the subprimes were cartolarized and sold to investors, while rating agencies and other surveillance institutions failed on warning investors on the dangers & huge risks of these “investment proposals”.
A term which could describe these malinvestment projects pretty well - “White elephant”. It describes many extremely expensive projects, normally uneconomical infrastructure projects, for single use then most capacity was wasted. An example are those for World Cup or Olympic Games. It is until these couple of decades that many countries realized how uneconomical these projects are and situation improved.
green energy / heath pumps for houses in the Netherlands. The government forces people away from gas into heath pumps. These heat pumps are not as energy efficient as gas, therefore, it can only be sustained with government subsidies resulting in higher taxes. This investment makes people pay two times for the same product not resulting in cheaper energy bills.
Dubai was a land full of grandiose, landmark projects, only to see the bubble burst. The office-space vacancy rate in prime locations was in 2009 according to some estimates at around 40%, other estimates arrived at a total 74% occupancy rate in residential and commercial space. Burj Dubai, the tallest building in the world (about 2,600 feet high with 160 stories) has been at its opening in January, 2010, described as mostly empty. 90% of its 900 apartments were still empty a year later.
i don’t know where to start or end 
has there ever been a government investment which actually was not a mal investment? Did government investments ever serve the people? Anyway, in a broader perspective globalization has shifted jobs and investments from the EU and the US to primarily China but also other Asian countries, this can be defined as mal investments for the communities of the EU and the US, resulting an massive job losses and reduced living standards in the EU and US but of course at the same time the opposite has taken effect in Asia. For the company executives it has been economically very rewarding, they pay less in salary to their workers and can buy their mansions. Whats a misallcocation of capital? When a company fails or when it excels but it’s workers suffers? I can draw the attention to the Boing Company, once the leading aircraft manufacturer of the world, now a sad relic of it’s heyday because company executives have financialised a once great company, fired engineer’s required to make a good product (many now in China), dismantled the pension scheme and converted previous assets to debt. This has led to products that don’t perform nearly like they should and as we have seen cause mass death and misery to benefit the few.
Chamath Palihapitiya had an interesting interview with CNBC back in April when he was talking about how governments should not be bailing out hedge funds and billionaires during this pandemic. Companies that were basically gambling and then got caught out when the effects of the pandemic hit the financial system - a disproportionate protection of poor performing CEO’s, companies and boards.
Not allowing a free market to determine the value of things and propping up the prices just kicks the can down the road which will result in much more servere consequences than if we dealt with the problem to begin with.
Invest in Bank shares at this time, I think is an example of Malinvestment
Lots of great posts here. One thing coming to mind is the black budget of the US Military. Unknown what these funds are used for. Trillions of USD. On Sept 10, 2001 Secretary Rumsfeld held a press briefing indicating that they could not account for $2.3 trillion. Convenient that the news coverage changed the next day. Today is 9/5/2020 close to the anniversary so it seemed pertinent.
In 2001, $2.3 trillion would have bought 8.487B ounces of gold at the price of $271.
The value of 8.478B oz. of gold today at $1,934 is $16.4 Trillion.
https://www.businessinsider.com/is-china-the-biggest-malinvestment-case-of-all-time-2012-9?r=US&IR=T
‘‘Since 1992, the MCI China Index, the most broadly referenced indicator of Chinese market performance, is down over 40 percent, while the Shanghai Composite Index has risen only a meager 180 percent. During the same period, China’s GDP has rocketed 1,700 percent. This suggests that China’s listed companies have not been significant drivers of the country’s fantastic growth, and that the capital they have received from investors — some $950 billion from the Hong Kong and domestic markets over the last 20 years — has been seriously misallocated.’’
The government owning more than 51% of a company’s shares as in China limits the companies’ capability to grow outside of the country by always having to keep the chinese governments wants in mind. The chinese government can invest unlimited amounts of currency into projects at will and this hurt the price discovery of the companies’ real value.
Top Military spending per country in 2014
- USA 581bn;
- China 129 bn;
- Saudi Arabia: 80 bn;
- Russia: 70 bn.
For what?
The world has not become safer with all these high military expenditures, while poverty continues to grow and gap between poor and rich is getting even bigger.
As a human race, have we progressed or become more civilised for the past years and decades? Why do we keep so many nuclear warheads? to defend ourselves of to destroy ourselves. Are we really smart?
Not, in my opinion!
Enron Scandel
US Bond Market (Yield Curve Inverse)
Trusting government by depositing money in a Greek bank during a time of crisis. It is always the tax payers who pay their politicians bad decisions. Not to be doomed, people have to find other solutions to preserve their wealth than the one proposed by the traditional system.
Buying infrared thermometers when the price of them on amazon is at ATH. 2 weaks later they drop by 70%
Example of a malinvestment : Keeping savings in a depreciating fiat currency.
A malinvestment is the issuing of mortgages pre-2008 crash, the abundance of mortgages been given to clients without any way of paying them back was disastrous. The mortgages were sold to investors through false grading done by crooked companies. This caused the bust of major banks. The US tax payer in the end paid for the bad practice of major corporations as all the debt was bought and printed by the central bank. Thus inflating the supply of the bag holders of fiat currency and eroding their savings.
In Australia the National Broadband Network (NBN) infrastructure spending is now expected to exceed budget by $10-20 billion (original budget $46 billion) and take another 5-10 longer than originally projected. Most people would agree the government should have let the free market companies determine the best way to upgrade broadband speeds rather than rely on this central planned strategy.
My concern is the Fed buying the shares of 25,000 companies (or rather 25,000 securities) is a malinvestment. Companies whose business models may be outdated or not competitive in the changing needs of the new economy will only drain the national resources and drag down the economy in the long run.
The worst thing that can happen is these companies take the money, declare bankrupt, close down operations, retrench all their employees etc. While the original intention is to make the economy afloat and keep the jobs, it can deescalate to a worse situation if not managed properly.
I think that the bailout that occurred after the 2008 housing bubble collapsed is a good example. The government just printed money and gave it the banks which lowered the purchasing power and thereby value of the money itself. Crooks were being paid for screwing over the whole country.