Activity Lesson 4

Bitcoin Monetary Revolution
#972

Here is a typical chain of events (as laid out by yours truly):

1) Stimulative monetary policy creates falsely optimistic market signals. 2) Private investment firms act aggressively on these false signals. 3) As a result, the private sector “malinvests,” i.e. allocates badly. 4) Capacity is increased prematurely, supply ramped up excessively, etc. 5) When the stimulus wears off, the economy is in worse shape than before. 6) Overhang of excess debt, capacity, supply etc. serves as a dead weight. 7) Struggling to ignite growth, the authorities order more stimulus. 8) A speculative bubble ignites instead, furthering the malinvestment. 9) Yet more excess capacity, debt, supply etc. is accumulated. 10) The additional stimulus wears off… 11) Repeat the process until you get full-on economic collapse.

The really vicious thing about the cycle as described above is this: The collapse at the end is virtually preordained!

JS ([email protected])

#973

I believe Russian government is a malinvestment.
Putin has been named the richest man in 2018. He puts rich businessmen in jail (or poisons them) that he disagrees with and takes their companies. Misallocating all their money in his pocket.
Putin has been in power for 21 years now.

https://www.townandcountrymag.com/society/money-and-power/a14480615/vladimir-putin-net-worth/

#974

putting money on Microsoft company share should be consider as malinvestment because the owner of their largest shares use the money they are making from this investment to develop vaccines, a completely separated product which are not corelated what so ever unless the vaccines has a build in nanochip function to connect with Microsoft software and the gap be filled by forces of pandemic situation and government mandate to its people, taking away their rights of soverignity

#975

Recently Texas has had problems with blackouts because they have over subsidized wind energy. Wind energy is a very poor investment as it costs way more than its worth. The narrative of renewable energy is being pushed too hard in my opinion and not thought out all that well, resulting in situations like this. I’m all for renewable energy, but wind isn’t the answer.

#976

All in all many live insurances are bad investments.

For example, life insurance policies taken out in Germany brought an average return of 3% after deducting costs. Assuming actual inflation of 3-4% and an increase in the money supply of 12% per year.

Source: https://de.statista.com/statistik/daten/studie/241829/umfrage/entwicklung-der-geldquote-m3-in-der-euro-zone/

Do we have actual inflation of at least 15%. This means that the money saved in insurance loses about 10% purchasing power in real terms each year.

The same goes for savings.

#977

I believe the current 2021US housing boom may be a malinvestment. You are seeing the market propped up everywhere by lowering of interest rates from the FED. This may be just the beginning as interest rates may stay low or go to negative despite the ongoing woes for the common American homeowner and worker. Many people may be taking of the 3% down on very expensive homes and over leveraging their risk.

#978

In my opinion investing money into Doge coin is a malinvestment mainly its main driving force is the built-up hype around it. Investing in anything that does not have strong fundamentals or a genuine utility to me feels like it a malinvestment, regardless of the volatility potentially enriching you in the short-term.

#979

The financial crisis of 2008 bought wall street giants to their knees and triggering a great recession. The financial crisis began years earlier with cheap credit and lax lending that fuelled a housing bubble. This great recession left millions of American homeowners in higher debt and without jobs.

It began with good intentions, with the aim to boost the economy by making money available to businesses and consumer, which caused an upward spiral in borrowing from banks.

The Fed started raising rates in 2004, the rate had gone from 1% in 2003 to 5.25% in2007, this then left borrowers unable to pay back their loans which left the financial institutions holding trillions of dollars worth of near-worthless investments in subprime mortgages.

Mortgages and loans should never be a given and the rules were far to laxed. People were given morgages that they could not possible pay back that were offered.

#980

An example of malinvestment was the dot com bubble in the late 90’s where everyone was just throwing money to anything internet related.

#981

https://www.reuters.com/article/us-soccer-euro-hungary-stadium-idUSKBN1XX08I

Hungarian Prime minister`s love for football and his ridicules spending to build new stadiums and support clubs paying large sum to their players, while there is hardly any achievement for Hungarian football since the 1950-60s not even mention the lack of demand for those seats in the stadiums using maybe half of its capacity at best.

#982

There have been people lately capitalizing on the publicity that the WallStreetBets and GMC got and have created telegram groups and the like telling young people who don’t know what they’re doing to invest in certain things. These people will load up beforehand on whatever stock or coin, then tell everyone to pump it. These people will then sell after it has pumped and then it dumps and a lot of the new people who participated will lose all or a lot of their money. For everyone who isn’t the person deciding what to pump, these are malinvestments.

#983

Our lovely government in Poland spent 50 millions in dollars for respirators to fight with covid. The problem was that our health minister ordered them from some dodgy people and Poland has never received them, then he stepped down from his position.
The other example is when government spent 20 millions in dollars for printing voting cards, which supposed to be used for president elections. The problem was they print them out, before actually government agreed for postal type of voting. In the end our voting happened in normal system and all these precious cards went to skip. Nice waste of money.
As the last example from Poland, I would like to write about “temporary Covid hospitals”. Government decided to use large spaces like football stadium (under the roof), exhibition halls etc, as a temporary covid hospitals, as our normal ones were full. They spent another millions for that. They bought new equipment, new respirators ,new beds etc. Very good idea, but after they did it, they found out that there is one small problem, really small … they have no doctors or nurses to work there! Looking at news now, either patients :see_no_evil:

Our polish government is never ending story.

#984

I chose to research a malinvestment from history, the tulip bubble of 1637 in Holland. Apparently at the time tulips were such a symbol of success that wealthy people bid up the price for a single tulip bulb to approximately 40 times what the average person in Holland made per year. In modern terms, using 40 times the average annual income of the United States circa 2019, that would be like spending $2.7 million USD on a single tulip bulb. The hype didn’t last long though, and before the end of the year prices had dropped by %99.99 and the effects of the crash lingered in the area for many years afterward. I believe this definitely counts as a misallocation of funds and is one of the more blatant examples in history of something temporarily selling for insanely more than it is worth.

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#985

Alitalia - the largest airline in Italy
An example of how government spending can get out of hand. A failed business model that stayed afloat until 2008 and gave up to bankruptcy. Somehow this was not enough and with some name changing and shifting of debts on paper, the company looks so good that even Etihad wants to participate in it. Etihad, realizing the malinvestment of 2015, get it’s 49% position in Alitalia bought out by the Italian government in 2020.

This is probably not a nice summary, but serves as an example of recurrent malinvestment of taxpayer money in companies with a business model that’s proven to fail.

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#986

I think one of the biggest Malinvestments is to let politicians run projects like building infrastructure, most of them, for example in Germany, have no idea about how the free markets work. All their life they are employed somewhere in the government system. Only in their private life they need to spend their money.
As an politician they always spend government money. So the costs in the end do not really matter. That always turns out as an katastrophe to the tax payer.
My advise: Put important projects in private hands!!

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#987

Leaving money in the bank is the worst investment imo.

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#988

The whole situation that caused the 2008 housing crash is an incredible example in terms of malinvestment caused by the creation of real estate bonds that were based on loans from banks to a multitude of sketchy customers.

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#989

Alitalia is unfortunately a black hole for gov money, sono italiano anche io conosco bene il problema. :airplane: :airplane: :airplane:

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#990

I think tesla stock at present could be one. The earnings in market cap price exceeds the stock price. I read that Tesla was not earning money from their car sales, but from their stock.

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#991

I would like to talk about recent news of GME and WallStreetBets. This community was rekt by pump and dump strategy. When a lot of people see that gains, Musk’s tweets and the main thing is idea of crushing Wall streets wolf with their methods, a lot of people decides to buy this stocks on hype, but we all know how this ends. A lot of people, who invested without fundamentals analysis, and any idea what could happend in future with this hype, lose their money.

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