Buying a NEW car has always been a malinvestment as it loses 10% of it’s value as soon as it is driven off the lot. They also only depreciate in value over time, costing you more money.
In September 2019 the publicly traded U.S. Global Jets ETF (JETS) would have been a bell-weather investment in the global airline industry.
So far, Year-to-Date in 2020 they are 50% off their February 12th value of $31.92 at $17.86.
This was a TERRIBLE investment at the end of 2019 and maybe one of the BEST investments, here at the end of 2020. They are a PREMIUM performer for 5 years at a 50% discount.
If you were 100% into this stock at the end of 2019, you have a diversity problem in your portfolio, not “bad” investments, but a lack of proper planning. Spread your risk among assets classes and industry sectors. That’s the only thing I can say to you. If you where heavily invested in JETS and nothing else, you’re an idiot.
I couldn’t help myself. They WERE a “Mal-Investment” but in my mind, the only “Mal-Investment” is one not made. Timing heals all wounds.
The time when Blockbuster were offered Netflix by co-founder Reed Hastings for around $50 million dollars back in 2000. Netflix had also proposed to promote Blockbuster too had the deal been struck. It ended up as a bad investment for Blockbuster as Netflix eventually overtook the company in movie and show rentals which resulted in losing many consumers and a bankruptcy filing in 2010.
Critically Blockbuster did not solve issues of charging late fees to customers who would rent their movies, games etc… As a result their competitors took advantage of this downside by offering monthly subscriptions and an online presence that would grow over the coming years.
Staying put to those late fines has been a very bad investment for Blockbuster as they chose an extra $200 million dollars of revenue over a monthly subscription service and an online presence. Had Blockbuster acted sooner then they would have been ahead of the digital curve or at least on the same wave length as their competitors.
Great example could be the Lebanese banking system, kind of Ponzi scheme worked well for around 30 years. Basically you deposit your money in USD you get a 6% interest sometimes for fresh money only you can get till 15 % interest. Then banks they lend all the money of the people to the Central bank with higher interest. The central bank were funding the government for many years, the government has not enough resources so they were surviving from those money and creating more and more debts. Now all people want back their money, they are blocked, only numbers on the accounts.
One example is rental-car company Hertz who filed for bankruptcy earlier this year and stock price fell dramatically as a consequence. However, retail investors came in and started buying Hertz stocks, making it rise by 500% before plummeting again. These retail investors made an obvious malinvestment as Hertz is, more or less, a zombie company ever since bankruptcy was filed.
In The Netherlands banks are preparing for risks of malinvestments. They are increasing their buffers to al the bad loans. Banks loaned out too much to so called ‘zombie’ businesses that could not repay their loan with the recent pandemic.
Floz.com was a 90’s dot-comer. It established a digital currency that was for internet purchases. Due to the low cost of credit, 35 million dollars was easily raised. Flooz.com swam in that overcrowded pool of unsustainable increases in the money supply. Drowning from these malinvestment practices, it folded in less than two years
1 Like
In my country, a lot of small cities face many infrastructure problems - especially regarding health and people’s security. Many times we see Majors “investing” expressive part of the low budget building new hospitals, for example, without long term planning. Not rarely, cities get in big trouble because the investment became a fixed expenditure the budget cannot afford in the subsequent years.
1 Like
So many examples ! 
In the traditional world, I am quite concerned about the bubble of the APPLE and TESLA stocks (and others). I am pretty sure it will break hard one day, especially when we look at the trend of the price earning ratio of these 2 stocks: 2x for APPLE and 3x for TESLA in 6 months… I think this is crazy…
In the crypto world, the SUSHI token, at its early stage, back in end-of-August / early September, is one of the good examples. People buying this no-value token, without thinking, only following their greed… There was only one possible end…
1 Like
(21st October 2020)
At current PE ratios, and considering the question is aimed at an investment perspective and not a trading one, most S&P 500 would be considered malinvestment, in my humble opinion. The markets are in a bubble that has been inflated by artificial currency injection.
Additionally, with the looming inflation that will eventually come, caused by record currency printing, Treasury Bonds with ridiculous interest rates are also not a good allocation of capital or any kind of hedge. Anything that is fixed at a dollar value with low return rates, like bonds, will not be an hedge or a good investment.
The swedish postal service company, PostNord, owned by the Swedish government. They are famous for not be able to deliver on time, have several scandals in their bag, and are not able to make a profit. The last two years, they have around 1 B SEK in losses. As a libertarian, I don’t appreciate when the government uses my taxdollars to try to run a company, when there are private options are available that work so much better and are more effective. Stop the malinvestments with taxpayers hard earned cash and sell your position within Postnord. (my recommendation to the Swedish government)
Bear Stearns in regards to the 2008 housing crisis. They engaged in malinvestment by taking on subprime loans and then packaging and selling those loans as mortgage back securities. These loans could not meet underwriting standards and were ultimately unloaded on federally backed companies Fannie Mae and Freddie Mac, which resulted in huge bank bailouts by the Federal Reserve.
1 Like
Ohhh my gosh the spending of billions of dollars to build Sports Stadiums that are now vacant because of Covid. NFL Cowboys, MBL Rangers and soo many others spent billions to build these polished stadiums expecting fans to pay hundreds of dollars per ticket to watch sporting events that have been cancelled for the last year is a huge example of a malinvestment.
1 Like
After Blockbuster video filed for bankruptcy is 2010, satellite television provider Dish Network purchased the company. The company once had 9,094 stores. Dish Network purchased the last 1,700 remaining store. Only four years later, the last 300 stores were closed. Without reinventing the company and adapting to newly emerging technology, assuming an investment in a once thriving company will be a savvy one, simply based off it’s current evaluation vs it’s previous much higher status, is to say the least, a misallocation of a companies capital.
1 Like
Financing a car is one of the worst investments you can make. Assuming you’re looking at it from the perspective of return on your money. It immediately loses value the moment you buy it and continues to do so for the entirety of the financing. Therefore, leaving you with paying for something at the price that it is no longer worth.
1 Like
In my country, Argentina, we have an average year inflation of 30%. Yet, people still keep their savings in the local currency, despite knowing the value is decreasing day by day.
1 Like
Right now I am looking at Crypto.com’s CRO token as a malinvestment. They offered an incredible incentive package for using their products, too good to be true apparently. In the past few weeks they have had to scale back on CRO interest rates and raise staking requirements for their VISA card. The announcements have been followed with a massive dump of CRO price from $.16 to $.09. Hopefully they will recover. I have mostly had good experiences using their products, but it currently appears like they are struggling to avoid collapse.
1 Like
This feels wrong to say
(especially as a public school educator), but any truth leads to growth.
College is a malinvestment. I understand that higher education offers more opportunities and the potential for a higher wage, but at what cost? The student loans that need to be paid back replace potential money that could be invested, saved for retirement, or used to acquire assets. College has been increasing in cost every year for a long time. Those in a lower socio-economic level have to then evaluate if the price of college is even worth the investment to go. Colleges are businesses. lets not get into the athletic departments and the money made from free labor through NCAA
Almost done, now compare majors to job availability in America (where I live) and you get nothing but broken promises. Public education does a disservice by telling the masses to “to go college”. No one talks about the $$ involved.
Let me know what you think Fam.
https://mises.org/library/no-end-sight-higher-education-malinvestment
https://nces.ed.gov/fastfacts/display.asp?id=37
https://www.forbes.com/sites/davidrosowsky/2020/05/10/if-colleges-are-businesses-why-not-run-them-that-way/#7fb54f175602
2 Likes
Mortgage Crisis of 2008 in the USA was a disastrous example malinvestment on the part of many working class citizens into sub-prime mortgage loans. History has shown us the terrible outcome of this misallocation of capital. Many, many people lost their homes and life savings. All due to market distortion and predatory lending practices.
1 Like
Research an investment (could be a public company, private company, government agency, infrastructure project, etc) that you believe meets the definition of a malinvestment (past or present) and argue why you think it’s a misallocation of capital (3-5 sentences).
A: The “New” Berlin Airport is just a dumpster fire of malinvestment. It costs billions and will be of no use during a global pandemic. Such projects should be on the blockchain to see which entities profit from such a mess.
1 Like