I really appreciate your discussion. Well thought out and very true! Thanks Dave
Municipal bonds: Many local governments are extremely mismanaged financially and since states don’t have the power to print money, they need to raise taxes to pay their bills. In many states (like Illinois, where I live), the politicians promised extremely large pensions to public workers and now are faced with bankruptcy and lower credit ratings. A recent proposal to raise taxes was just defeated this past week. Without a federal stimulous to bail us out, investing in Illinois or municipal bonds is definitely a malinvestment. Another real-life example to this was investing in Puerto Rico munis, and then facing pennies on the dollar only a few years later. (This actually happened to my parents).
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).
Definitavely i would say Bank , malinvestment definately i consider a " Money Cartel" just compare when you ask for loan we have to pay hight interest but when we put the money on the bank the interest is close to nothing , and at the meantime they loan (our money ) that really they dont have and if something like a crisis happend goverment has balliouts ready to help the with free money and nationalize the debt with taxes for example , more inflation reduce the money value more and more .
Paying taxes. Horrible RoI. Every time I go for a drive down a road that is supposed to be maintained by taxes; I hit a minimum of 10 potholes. While we’re on this topic. Working hard by itself is also terrible investment. You end up wearing out your body and precious time. Of course, only to pay more taxes because your labor equals increases taxable “pay”. I find it mind blowing as I experience more time in our society how little I knew, how little I still know, and yet how that fraction of knowledge is enough to observe the ruse that is taxes.
I think one of the biggest Malinvestments is the stimuilus packages goverments across the world are investing into industries such as airline industries to keep companies afloat.
This is a huge misallocation of capital caused by the ease of money creation in the form of stimulus. created by a government bond bought up by central banks (essentially debt creation).
We’re it not for the ease of access to this capital for the government at a particularly low interest rate repayable to the central bank and also the ease for the governments to inflate away the cost of repayment for the bond + interest by increasing the monetary supply, the government would not have chosen to make these investments into ‘zombie companies’ which did not have a sustainable business model or enough cash reserves to survive a black swan event.
Instead governments would likely have allowed these businesses to fail whilst leaving the markets to decide which companies survive and what new companies break into the market from the opportunity created by companies going bust.
Additionally should money creation have been much more expensive and difficult and had interest rates payable on the bonds been at a much higher cost to the government it is likely that their misallocation of capital to the markets would not have been enacted.
It is a misallocation of capital also due to the future problems that could be caused by the capital as the economy continues to inflate disproportionately in comparison to its true productivity which will likely cause an even bigger bubble which will result in an even deeper or longer recession eventually. Which in turn in the long run will negatively impact the government and both irs power over citizens and also its power in global affairs as its currency is devalued or hyperinflated and also as its economic strength declines
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Looking into the US stock market crash at the beginning of the corona virus pandemic economic dump and the subsequent V shaped recovery…
A vast swathe of misallocated funds hit the market as the fed bought stocks of what appear now to be mostly ‘zombie companies’ that cannot function as normal and create wealth at all, and yet seem to be pumping on zero fundamentals. Take for a great example Hertz, went bankrupt stock price kept climbing, agreed this was probably in conjunction with the stimulus bill granted to the retail investors, lacking any investment knowledge point and shoot buying strategy.
(hope this is the sort of information you were looking for as i have only just joined the academy and this is my first post as i have been to intimidated to post on the previous activities, but done them none the less)
thanks. hope your studies are going well
In my humble opinion, high interest rate savings accounts are a malinvestment, especially right now when governments are floating the lockdown economy with newly printed currency to stabilize the lack of GDP due to forced business closures or business output capacity to service the debt built in a debt based economy. The high interest rates are significantly lower than the inflation rates of currency. However, even before the lockdowns these investments were going down significantly due to the high debt economies in the world have been running on for decades.
For me what comes to mind is Snapchat. Multiple companies like Snapchat have an operating negative cashflow. In a downturn without subsidies they wouldn’t last.
It a perfect example and the same could be said about many central banks. The problem is always the link between central banks and governments which operate over a short time horizon.
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Banking sector. Rescued during last financial crisis. Umprofitable, inneficient, unfair, anticapitalistic
Bail out of zombie companies everywhere in the world especially this year in US. Free markets no longer exist and capital is allocated to inefficient companies which disrupts the economy as a whole.
Investment programs from almost any bank in Mexico are a malinvestment. The yearly interest rates that you get are usually less than 1% and that doesn´t make sense since inflation is way higher than that (including what the goverments reports which is also not true) and basically any savings will be losing its purchasing power each year.
I would say investing in banks, types of bank account savings and even bonds. These are all considered the safest way to get the best interest such as CD accounts but you must trust the company and follow all the restrictions along with it and pay all these fees related to your accounts and bonds have very bad returns compared to Bitcoin and others. I have bonds which I forgot about but I am going to put them all into bitcoin with Dollar Cost Averaging. I wish I knew about them when I was in highschool without a job, I wouldve put it all into bitcoin. Although I was always told I cant withdraw my money until I was 18 no matter what and something about my parents not being able too either due to how bonds work. This may have been a lie told from my parents to keep me from spending it.
An example of a malinvestment.
A company called ScaleFactor were thought be rewarded for a “fake it til you make it” by venture capital firms who liked to throw money at products until it meets expectations. The company ended up chasing capital instead of focusing on building software that satisfied the needs of customers.
The company was on rocky grounds before the pandemic and failed during the past few months - if you had invested in Scalefactor I would say that is an example of a malinvestment.
An example of malinvestment could be the financial crisis happened in 2008 in the USA, where the excessive risk taken by US banks giving money with a low-interest rate and the loss of thousands of jobs, combined with the burst of the housing bubble did culminate with the bankruptcy of several banks and financial institutions.
MalInvestments
I believe many of the ICOs of 2017 were malinvestments. Many newbies(*myself) were caught up with
the promise of what most companies had described as a revolution in projects that were written
only on a white paper. Many of these of these startups often were running in an absence of legal
contracts, lawyers, lack of controls or disclosures rules in the world of crypto in 2017…the
status of projects and the uses of ICO funding are often anyone’s guess. Many, 3 years later
haven’t even delivered on the promise of what the their prospective technology was goin to do
or even offer an update on whta is goin on with their current project…
YLC. Form the start, there was so much hype from the devs and a lot of people bought their tokens. After a few days after it was launch and hits coinmarketcap, a huge dump is happening. Most people suspected it was the devs themselves who dumped their tokens. Then 1 by 1 the group disbanded. Although the token is still in coinmarketcap, its value is almost zero and no further development is going on. 
The North American Housing Bubble. 2008 Artificially low interest rates created an incentive for investors to speculate. Consumers and homebuyers are fooled by the low rates. Living beyond their means. The bubble burst resulting in mass amounts of foreclosures. Also causing the ripple effect in mortgage markets, home builders, home supply chain etc.
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).
The sovereign fiat currencies of the world have always been a source of contention. History has deemed many of these currencies obsolete at one time or another. The invention and refining of decentralized blockchain technology coupled with mismanaged or unfavorable monetary policies will force these currencies to become malinvestments and their eventual obsolescence. While the broad definition of a malinvestment does apply to all sovereign currencies opportunities and goals provide an objective stance for the individual user.