$135 million to Burma
$85.5 million to Cambodia
$1.4 billion for “Asia Reassurance Initiative Act”
$130 million to Nepal
$700 million to Sudan
$14 million to Kennedy Center
$10 million for “gender programs” in Pakistan*
$1.3 bill to Egypt
$453 million to Ukraine
$33 million to Venezuela
$500 mil to Israel
I believe this classifies as a “Mal-” or EVIL investment.
A classic malinvestment that most Hoosiers in Indiana should know about (but probably don’t) is the Indiana Mammoth Internal Improvement Act of 1836. It authorized the spending of $10 million dollars, mostly on canals, but also on railroads and highways through various parts of the state. The ensuing projects were most very badly managed and ended with the state in near bankruptcy. This also eventually resulted in a new state constitution which required balanced budgets from the state.
Over the the last 2 weeks, GameStop stock has climbed an amazing 1500+%. Simply based on fundamentals, the company is archaic and failing to adapt sufficiently from physical retail space to an online presence. It’s niche has become enveloped by other companies like Walmart and Amazon, making it a somewhat unnecessary redundancy. For all intents and purposes, a dying company. But recent developments in the gaming community has led to a rallying cry in response to vocal traders shorting the stock and deriding the company’s reputation. Although investing 2 weeks ago would have been a phenomenal investment. The likelihood of a 10 - 15x move back to near baseline over the next few weeks is much more likely than the stock appreciating at its current rate, or even a more modest rate. At some point, the reality of the company’s position and role in the marketplace will overturn this recent popular trend. Trading the stock at this point would be a malinvestment because the risk to reward ratio is very high and akin to gambling. Of course, that’s just my take, I’m still relatively new to trading.
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).
Subprime mortgage crisis.
Interest rates were very low so many lenders took advantage of this opportunity to make alot of money by lending as much residential and commercial loans as they could even to well unqualified borrowers.
These lenders got as many people approved for loans by lowering their lending guidelines like accepting stated income without actual proof and offering zero interest teaser rates.
Many of these borrowers would never be approved for a loan during normal times.
One of the biggest malinvestments in recorded history is War. Mostly this is centralization of power. For the betterment of few at the expense of most. Destroys socioeconomic platforms and creates FUD on an international level. Also creates massively bloated military budget (ie. military industrial complex)
I think the american stocks market has run up big this times. Due to continuing the dollar stimulus.
The Values of many stocks dont have underlying in term of productivity, goods or management.
THE STOCK MARKET’S RALLY TO A RECORD ON STIMULUS AND VACCINE HOPES@BobPisani The good news: So far, those hopes are coming to fruition. The bad news: The stock market has run up big and there is very little room for error.
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The S&P is trading in nosebleed territory: nearly 23 times 2021 earnings, well above the historic norm of roughly 15-17 times forward earnings.
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Technical levels are also at extremes. The 200-day moving average for the S&P 500 is a standard metric to measure momentum. The S&P 500 is now 16% above the 200-day moving average, twice the normal levels even in bullish markets. Other technical levels also are flashing overbought.
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Perhaps the biggest concern is that valuations are getting stretched everywhere.
PUBLISHED THU, JAN 21 20217:26 AM ESTUPDATED THU, JAN 21 20218:15 AM ESTCNBC.COM
Then when the economy is growing as big as is expected in the latter half of 2021 this dollars pumped assets may come to the end of this parabolic growth. And only with hopes and amazing suggestion there is no liquidity left. While the other markets see a similar expansion with a large scale rising to ask for goods and technologies, like in the asian market.
Oh this is perfect right now, Game Stop stock is absolutely pumping and there’s no reason it should be based on the company’s fundamentals. It’s only happening because a bunch of Redditors noticed that the company is being extremely heavily shorted and thought they could initiate a massive short squeeze by wall street hedge funds and the like. They were right! However, everybody knows the company is ridiculously overvalued right now and the time to get out could be any moment. Malinvestment at its finest?
I started my research for this by simply putting “malinvestment” into Wikipedia.
This was in the very first paragraph, and sums it all up very well.
" F. A. Hayek advocated the idea that malinvestment occurs due to the combination of fractional reserve banking artificially low interest rates misleading relative price signals which eventually necessitate a corrective contraction—a boom followed by a bust."
The blog post put forward here as a reading assignment from the IMF makes perfect sense now.
Perfect.
Not just low interest rates, but negative interest rates.
This is advocating malinvestment on steroids.
I know it’s repeating what was given to us, but looking at what Hayek is putting so clearly, it’d be worth re-reading it with this in mind; that the IMF itself is promoting malinvestment.
The investment of the South african government into South african airways
To keep the sinking ship afloat as it had already received multiple bailouts, a huge portion of the bailout went to the business rescue which could not do anything. The company for years was not even breaking even yet the government continued to pump more money into it as a vanity project.
In Britain, our government have spent over £12 billion on track and trace an initiative to trace people who have had the virus and then quarantine anyone who has been in contact with them. Having had the virus and used the service it is largely a complete waste of time. Meanwhile, our economy is crippled and they haven’t been nurses (public health care in UK) a pay rise in years who are very underpaid
The housing crash in 2008 is a perfect example. They were offering very low interest rates and kept printing money like there was no tomorrow. Doing this practically allowed them to give out loans to anybody with minimal verification. This bubble bursted not too long after and lots of people were hit with higher interest rates and lost their homes.
Brazil and the football World Cup of 2014. Brazil spent more than $3 billion building stadiums. Today, however, not all the stadiums are put to good use. One of them is used as bus parking and others are too expensive for teams to pay rent and to play on them.
Maybe Brazil is the country of football, but they could have used the money for better investments.
The Diamond Industry. Unlike gold or silver, diamond depreciate in value. Meaning, once you buy them in retail price, the price and value goes down as well. Brand names don’t help either - A diamond ring in Tiffany’s with the same cut, carat, and color is marked up because of branding, but the value is the same if you got the ring at James Allen.
A personal recent discover was I went through all of my Savings Bonds from the U.S. Treasury I had received over the years. I found out what they were worth and the interest they were accruing and how long it had taken for them to achieve their full potential. It was pathetic! And most of my bonds were purchased prior to 2008, back when interest rates were “higher.” https://www.savingsbonds.gov/indiv/research/indepth/ebonds/res_e_bonds_eeratesandterms_eebondsissued052005andafer.htm#buy
Savings Bonds are currently and will probably remain a malinvestment especially with the exponential money printing happening.
Needless to say, I cashed out all my bonds and reinvested into BTC.
Fixed income securities that barely (or not even) outperform inflation. That’s the case in Argentina for example, where you can hardly find bonds whose returns are over inflation. So you probably end up losing purchasing power.
Most of the Crypto coins from around 2015-2018. Although ICOs are exciting, and can function as a quick wealth transfer if you are positioned quickly, fundamentally most of them had no intrinsic worth. They were mostly unneeded copies of something that already existed. The coins/token today are different, in that they are generally tied to (or used in) services used in the DeFi space. This allows the worth of the coin to be a representation of the worth of the service, and thus gives it a basic value.
Many businesses here in the Philippines can be defined as malinvestment but one company named CD-r King is one of the most booming company here in the Philippines and everything that you can think of with gadgets you can get there for free and but it is also known as short term products due to its durability cheap means low durability here in the Philippines
And one day the CD-r King closed down many of their branches because of lack of service and something is more accessible and has faster and more durable items other than them and thats online apps and the thing that the CD-r King lacks for me is innovation people just goes with the trend here in the Philippines and people lose interest faster and faster so we need to think of how we can attract many people to buy our products.
Here in the European Union there is a law which states that when a member country’s government wants to do a construction project it has to be offered to contracters in all member countries. If I remember correctly, the country is also forced to take the cheapest offer.
This obviously leads to lots of undercutting and many sub-standard construction projects all over the EU. Additionally, when you get an architect who is unfamiliar with the client country to design the project, things tend to not work out very well - like a bicycle bridge in Copenhagen that’s so dangerous to ride on warning signs had to be put up. Millions are spent on renovating failed projects and multi-year delays are not uncommon due to projects needing to be redone several times.
I know of a $200K government website, not to mention all the staff salaries, that was intended to recruit college students to apply for internships and entry level jobs for college graduates. The problem was that there were less than 20 jobs in the entire agency each season and they were running a national campaign, with dedicated staff. Seemed very wasteful to me considering the return. Luckily, the website and program was shut down because it was a duplication of effort.
Well in the spring/summer of 2020 I was doing research and becoming more and more interest about the crypto currencies and how they could keep their value better than stocks. In the other hand trading sites like Robin Hood were growing rapidly a lot of friends that were receiving stumilous package at that time started to invest blindly in stocks for a lack of information perhaps or because web 3.0 is still hard to understand for them. But I kept learning about how companies like HERTZ were deliberated increasing their stocks value by investing themselves in there shares with FED’s money, so it was a no brainer that soon or later that bubble was going to explode, same with oil, same with airlines. They believed but didn’t verify!
