The Dutch Gas company, “de Gasunie” has caused by winning gas out of the earth gasbubble, instability in the earth. Earthqaukes followed this instability. Houses were distroyed. The dutch government promissed the house owners their damage would be restored and funds were made .
1 biljon euro was put into this fund. 970.000,- was spend on advisors How to devide this money… instead it was directly given to the harmed houseowners… malfunction in government malinvestment of the money to manage this fund by managers .
The banking sector is as a whole a group of companies that have been sustained with cheap lending through the Central Banks all over the world. For me there is no better example of a zombie company than a retail bank. For other examples is best to go to the production side of the economy with a longer term. Companies that produce airplanes, ships or cars could also be a good example in general terms (there are exceptions like Tesla or some other car companies that are innovating).
During the dot-com bubble, many of tech companies were badly allocated business investments. As a result, a lot of tech-companies went bankrupt.
Trusting banks with my savings!
Any of the Central Bank big-boys are a perfect example. Ill-advised investments in junk derivatives, knowing that they have failed with these investments in the past. But also knowing that they are too big to fail, they hold-up governments at gunpoint. Allow them to fail and potentially crash economies, or hold out their hands and wait for the bail-out that is inevitable. Malinvestment bailed out by malinvestment.
110% Mortgages set up by banks during the housing boom 2000->2008 in the UK.
This was irresponsible and led to lots of home owners defaulting on their mortgages when prices
dropped after the 2008 crash.
At the moment, stock prices approaching all time highs while unemployment at all time highs is a blatant misallocation of capital
Bank stocks in the present for long therm horizons.
Just look at the charts of Deutsche Bank, Wells Fargo, etc. They are all pointing downwards. If you are a good trader you might catch a few dips but I think that’s very risky. Also I suppose these banks are buying back their shares to keep the price up without adding any value to their company, so long therm this has to be destructive for your invested money in my opinion.
This is one of the biggest mistakes you can make in your early years with buying a new house! (if you have a low-medium paying income)
I personally believe that everyone taking long positions on the S&P500 during these days of pandemic and massive unemployment in the US is doing a malinvestment: even in case the investment ends up with a capital gain, the fundamentals suggest that the index is currently overpriced, and the current risk/reward ratio is not really great either.
There are two economies “Main street” and “Wall Street”. So they can act independently of each other. Thus you can get deflation in Main street while having inflation in Wall Street. Money printing that only goes to Wall Street is causing inflation in Wall Street.
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Graphic by William Joel / The Verge
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MoviePass, the subscription service that spent enormous amounts of venture capitalists’ money subsidizing movie tickets in a bid to upend the theater business model, is officially shutting down on September 14th. The news was announced today via emails to subscribers and separately in a press release issued by parent company Helios and Matheson. It marks the end of a tumultuous two-year saga that saw a once-popular platform go to extreme lengths to keep its business running, despite the obvious and fraught financial cost.
“For MoviePass, however, the business model was full of holes. For every ticket a user secured through its mobile app for effectively zero dollars, MoviePass had to cover the cost in full. It did so by issuing independent debit cards to subscribers, which pulled funds directly from a MoviePass-owned bank account. In short order, the subscription revenue MoviePass was generating was dwarfed by its monthly movie ticket costs. Although MoviePass raised nearly $70 million in venture capital, it was not enough to stem the bleeding.”
I remember my friends telling me how for $10 a month, they were seeing new movies, going 4+ times a week and I couldn’t for the life of me figure out how that worked out, apparently not very well.
Buying a new car. The car starts deprecating in value as soon as you drive it for the first time. It loses 20 – 30 % of its value in the first year and 50 – 60 % of its value in the first three years.
I think that most Bonds are a big malinvestment at the moment not only because of high price and negative yield but also because of the crazy money printing that drives the supply of all currencies to grow exponentially and only way to keep up the "sick " system is to print more money
The crash of 2008 where you barely needed collateral for buying houses in the US and could borrow on an appreciated interest rate of the actual estate. Subprime mortgages I believe they called it. Since people didn’t need to provide security to pay back the loan (job or high upfront cashpayment) the banks were putting themselves at a huge risk and in a very fragile state that later exploded. The prices on houses stagnated after a while and unemployment rose which had disastrous effects on the global economy.
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Fiat currencies are malinvestments. The centralized money printing devalues the currency. There is also a lot of debt build up. That dilutes the supply and incentivises the money printing even more so they are able to pay back the debt. This leads to a huge bubble and wealth redistribution.
Personally, I invested in Bitcoin during the run up to 14K on a FOMO buy in as my introduction to the world of financial instruments. When it reversed I sold on the way down and lost out, then bought in again. What makes this a malinvestment is not understanding the ballistics of market trading, and blindly throwing money at things you don’t understand can be considered a malinvestment or just plain gambling. Since then I’ve learnt to trade, and learnt a valuable lesson, even though I lost money which can be considered the cost of admission.
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Except for option trading, investing in stocks when they’re overvalued (and manipulated) would be a losing proposition as the bubble can burst any time. Also, not researching on which Gold ETFs to invest –though supposedly backed by gold but are actually not– that are often leveraged / sold to as many as 10 contracts to one are designed to fail over time and show clear results of under-performing when compared to physical gold.
In this time of economic slump, when people have little or no disposable income due to job loss, companies producing non-fundamental consumer goods are the first to suffer and so it would be unwise to invest in them. Other malinvestments are overvalued tech companies, shopping malls and retailers (esp. as business moves online), inflated housing / real estate property; companies repeatedly bailed out that tend to underperform; badly-run companies with self-defeating short-term corporate strategies and practices, e.g. 1) pharma companies that cut back on research yet raise drug prices, 2) outsourcing businesses to low-skill, inefficient and unreliable emerging markets, 3) cutting back training budgets, then hiring peon labor.
Lastly, just as in concluding quote from ‘Malinvestment’ lesson, the risk for companies is nationalization. Though not a malinvestment now, I wonder what would happen if FANG/M (Facebook, Apple, Netflix, Google, Microsoft) stocks, which constitute the bulk of market profits, become nationalized?
I found this website => https://projects.propublica.org/bailout/list/losses where you will find a list of recent companies which were failed bailout investments.
99.9% are banks, mostly private.
It’s a misallocation because they will never be repaid.