Response:
Within the cryptospace: BCC (bitconnect)
The definition of a ponzi to the T. It was definitely a misallocation of people’s personal capital, but I’m sure the team that started it put the majority of it to their own good use. The growth model was just unsustainable, as you constantly had to bring people in to make any kind of money. There were quite a few of these a couple years ago that left people doubting the potential of crypto/BTC/Blockchain.
The company Gilead and its COVID drug, the Remdesivir could be seen as a malinvestment. The capital flow towards more natural medication or already known drugs was deviated towards this new drug, which was proved to provoke dangerous side effects on the body. There was a whole narrative controlled by the media to make think people that drugs like Hydroxycholoquine weren’t worth to use to treat CoVID whereas new drugs like Remdesivir where acclaimed as possible saviors. This whole orchestrated propaganda provoke a missalocation of capital.
The Fed has been pumping 1.5 Trillion dollars into the Repo Market in an attempt to keep the wheels of the economy turning. These efforts are sure to fail long term. The economic fallout will come after these bubble bursts. As a result the economy will be worse off after this happens.
First of all, I would like to say that in Chile we already have 2 local currencies: Peso and UF. UF was introduced nearly 30 or 40 years ago in the face of a deep USD/CLP exchange ratio imbalance, that got the economy to cripple. The UF is pegged to the CPI, and is commonly used by all obligations of payments, such as mortgages, contracts signed in B2B space, some housing rentals are in UF and so on. So I learned that the previous reading assignment story was already been played out in Chile!! We are really the experiment of the neo-capitalism, in terms of the book shock therapy by naomi klein.
One example: In chile we have some concsessions mechanism to attract foreign investment -because we lack of own capital and experimented professionals in some areas- so we have many highways, mining concessions, water concessions for building power plants and many others. But what the foreign company does is that they only come with the minimum amount of staffs (they are generally very experienced professionals and some business guys) and they hire everything from local assets: engineering services, transports, and many other things. And when the time passes, for example after 10 years from the highway being finished, we learned that the highway is payed around 10 to 20 times its value (very lucrative aint it? just like bitcoin) … So my idea of malinvestment, is that the government could borrow money to pay for the construction of the highway , you could even hire the same foreign company as an assesment company to check that everything is according to international standards and so on, and we could make 10 to 20 times more highways!!! But also we could have many experienced companies in the way of doing so, in different industries, and we could train highly specialized labour for that too. But my country is very short sighted when it comes to political decissions, so sad.
Hmmm good questions, i dont know where the Dutch is spending the money… But I know that hat several project like for example “de noordzuid lijn” that project should cost for example 5m but at the end it was 30m… also a lot of other projects where they had need to pay a lot more money.
I think Fraking its the perfect example of maillinvestment because of the enviroment issues it brings and also because its more expensive to extract the gas than what you get paid for it.
Brick and mortar stores are starting to seem like a malinvestment nowadays. More and more shopping is being done online; even more so since the pandemic started. It’d probably be a better allocation of resources to build an online store and presence.
I think that any company with high assets (airlines) or companies with a high volume of employees are very susceptible to this crisis.
McDonalds comes to my mind, although for people it is a fast food company when the reality is that is a real estate company, these are the first affected in their appreciation in times of crisis, if they want to move their investments to other latitudes such as What do they do? They cannot move their lands to other lands, they would not be able to sell their properties at fair prices due to the crisis, that is, a real disaster.
There is this Apartment/condo plaza supposed to rise in the Philippines where i live and nothing has been build yet people have dumped a lot of money already in it and it hasn’t even build on room but they are selling it. it was supposed to be finished around 2008 but its 2020 now. this is malinvestment in my eyes because these people that invested will never get their money back due to this building probably never being built
Fracking companies are going bankrupt at a rapid pace so it was hard to pick just one so i decided to write about the entire industry.
Fracking is and has been a total waste of resources. Companies borrow funds to spend on the extraction of oil and natural gas from the earth and spend more getting the oil and gas out of the ground than they could sell the same for on the open market.
Spending more creating a product or service than you can hope to sell said product or service is a classic example of a malinvestment. That is the entire fracking industry in a nutshell.
Monetary Policy Report, September 2020
The Swedish economy has now begun to recover after having fallen sharply in the spring. But the way back is long and fraught with uncertainty. To provide support to economic developments and help inflation to rise towards the target, the Riksbank is continuing its asset purchases and offering liquidity in all the programmes launched so far this year. The repo rate is held unchanged at zero percent and is expected to remain at this level in the coming years. The programmes have had a calming effect on financial markets and helped to keep interest rates to households and companies low in the crisis.
Less than two months of this report , the prices of house just went up 10%.
EMB (embercoin)
I don’t even know if that still exists.
EMB promised huge rates for staking, those rates attract fools that don’t understand yet that their money will massively devaluate over time because there is no project behind.
Investing in arilines, hotels industries and travels agencies shares are Malinvestment in 2020.
The bank bailout of 2008 in the US injected $700 billion into banks that were failing due to unpaid loans from clients. A part of the banks failing was that they had incentivized employees to loan out cash for mortgagees, loaning to risky parties who didn’t actually meet qualifications. As people weren’t able to pay back loans, foreclosures piled up. This resulted in the housing bubble an ultimate crash in 2008.
This scenario is the result of misallocation of funds on all levels. The greed of the banks, the defaulting of debtors, and ultimately the U.S government rewarding this bad behavior of the institutions.
The fast ferry scandal was a political affair in the late 1990s relating to the construction of three fast ferries by the Canadian provincial crown corporation BC Ferries headed at the time by Premier Glen Clark of the New Democratic Party
In addition to major delays and cost overruns, the ferries never fully met their original specifications, and only operated briefly in a reduced capacity, before being auctioned off at a substantial loss.
One of many examples of a Malignvestment would have to be the 2008 Housing bubble in the US.
Offering such low mortgage interest rates opened up the market to many individuals that realistically could not afford the repayments. In some cases multiple properties were bought to rent out as borrowing money was so cheap. As everyone began to borrow more and more while not preparing for the inevitable increased interest rates, they became higher and higher risk investments and eventually defaulting on the repayments bringing down many mortage firms with them.
How about a newly listed pharmaceutical company or oil exploration company that keep asking stock holders for more money to continue research or drilling for oil. Most often this turns into an ongoing habit of throwing money in a bottomless pit in exchange for hopes that the companies will eventually strike big. Even if it’s been known to happen, chances of malinvesting is substantially higher. That is, the companies finally throw in the towel meaning stock holders lose it all, or, in better cases, when the companies reach some level of success, the share price has been so diluted that the ROI is quite insignificant.
The Dot-com bubble consisted of numerous companies that were the result of malinvestments. People built and invested in highly speculative companies during the internet boom primarily because there was a decline in interest rates at the time and the capital gains tax had been previously lowered. When the Federal Reserve announced plans to aggressively raise interest rates, the volatility in the stock market began and investor confidence started to fall leading to sell-offs in the stock market.
Go ahead and say it like it is… “Hyperinflation” IS looming.
The storm clouds are on the horizon.
Two US based airlines…, American and Delta. Rather than pay down debt with their profits, they chose to buy their own stocks, inflating stock prices to make it look like they were doing well in an industry that has a high rate of bankruptcies. This artificial rise in their stock prices allowed top executives to earn millions in bonuses and such while being over leveraged . With the pandemic of 2020, airlines received (and probably will receive more) relief from previously mismanaged companies. It’s a “malinvestment,” in my opinon.