My research led me to this company called Monsanto. Monsanto basically is a GMO seed producing company with really bad reputation. They agreed to plead guilty to illegally using a highly toxic pesticide and paid $10 million in fines. This in my opinion would be a bad investment.
Having the federal government involved in infrastructure projects is a recipe for malinvestment. This takes money away from the taxpayers to pay for projects that do not effect them. I may live in Wyoming but I will be paying for a highway project in New York for instance. There will be no benefit to most taxpayers. The states should fund their own projects and find ways to make them self supporting.
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I’m not actively looking for companies to call out as malinvestments but an example of a stock, crypto, or investment that I would consider a malinvestment is one that has a very high percentage ownership of the stock by only a couple of people. This could cause big issues when they decided to sell portions of their holding as the market can easily be manipulated. Watch out for stocks and cryptos that are purposely hyped up to then be rug pulled or massively dumped on from the biggest holders.
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In Brisbane, Australia, the viability of a road tunneling project, Clem7 tunnel, was based on traffic volume estimates that were ridiculous. The project team were pushed to get a favourable outcome as opposed to a realistic outcome. This ultimately saw the tunnel being built and the income stream being a fraction of that estimated (tolls).
This lead the project losing $2.4 bil when sold off (costing $3 bil to build and selling for $600 mil). If realistic traffic estimates were used the capital would have been used for different projects which could have benefited more of the community.
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I would go with one of the easiest, namely Covid-19 relief bill from your new President, I really think that bill is the perfect example of the definition of malinvestment. In my point of view, I think this malinvestment goes into category misallocation of Americans’ tax payers because it’s a tiny amount of the bill who stays in your Country.
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Germany’s investment into renewable energy vs. France’s Nuclear first clean energy investment. Basically, Germany has energy costs 41% greater than France and managed to increase its carbon foot print. The biggest malinvestment I’ve seen because bot only will Germans pay more for electricity, their policy actually increased their carbon foot print.
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Sydney/Australia, westconnex new M5 project , 2billion aus dollar project turned into a 10billion aus dollar project due to miscalculations, unexpected weather etc.
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The new airport in Berlin should’ve costed around 1.9 billion € and ended up with total costs of 7 billion €.
Apart from that it took the government nine years longer than initally calculated to finish the project. Most of the costs, which were caused by embarrasing missmanagement had to be paid by fresh tax payers money.
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I believe that investment into mining uranium is a malinvestment. Even with all of the proper precautions taken when harnessing nuclear power, disaster can strike through circumstances beyond human control. Take a look at the latest incident at Fukushima in 2011 where an earthquake and subsequent tsunami caused the reactors electrical supply at their nuclear power plant to fail. This resulted in no power to the pumps that circulated coolant through the reactors cores which led to 3 nuclear meltdowns and 3 hydrogen explosions. Fukushima and Chernobyl are 2 very valid reminders why nuclear investment is a misallocation of capital in my opinion.
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Our government build a metro railway in Amsterdam, this was supposed to cost 681M and finally the total costs ended in 3.1B !! Of course this could be a decent investment but many houses prolapsed and the money could better be used to set up a electric bicycle network or something, in my opinion.
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Alright I’m gonna break down what the city of Memphis,Tn paid the company I worked for at the time to repave Main Street which happens to be completely made of brick pavers about 7-8 city blocks. The trolly system failed and they decided to drive city busses up and down these streets destroying the road in allot of different locations and causing water to stand because they destroyed the natural slopes towards drains which was the main reason it need to be fixed. Anyways to make a long story a little shorter initially we were contracted to lay asphalt beds to set the new pavers upon reducing the likeliness of same effects previously brought on by the running busses. 1 week into the project the city realized they couldn’t afford the asphalt bedding so they went back with a sand bed which was the same thing that was in place before that caused the problem. There still running buses though not as many now they have a few trolly’s going but still gonna have the same damn problem sooner or later and this is my story of malinvestment.
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There are several government public infrastructure projects (highways, railways, train station, airports extension etc.) in my country that have fallen into this category. Most of them cannot continue due to problems of land acquisitions, poor projects budgeting, etc. and now COVID-19 situation has made it even worse, that caused those projects worth some billion of USD postponed until no further notice
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The whole system is malinvestment, you bail out the same corporations who help cause the problems. Approving borrowers with bad credit for loans they cant pay back. Printing monopoly money, no matter what you invest in, its not in the best interest of the investor, you never get back what you fully put in. You settle for a portion of the ROI and your happy with it. I cant even buy a new car cause as soon as i leave the lot im in debt to it. The whole system relys on someone losing, what a world, everythingvis rigged.
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When I started working 20 years ago, my grandma asked me to spend what is left from my salary to buy gold. She insisted on buying the purest one instead of buying the trending designs to mix it with copper and other metals. At the time, I thought that she was so old fashion and I cared about seeing my bank account numbers getting higher. Who knew that I was ignoring a financial advisor.
Me telling my younger self I should have been a better listener…
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Ireland Celtic tiger years and a booming economy
European Interest rates low, when needed to be high for Ireland
Banks lend out Billions to Builders, Investors, Homeowners and everything in between
Builders over extend, Investors large portions of housing stock, driving prices up in a large supply market, making homeowners pay premium prices.
Eventually prospective homeowners give up on chasing prices, deck of cards fall. Irish Tax payer left holding the can
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The QC, Canada government spends 100s of millions every year on “Bill 101”, a bill that requires all business to be conducted in the French language, even though they still operate as a Canadian Province. They are the only province to have this mandate and it has caused enormous complications with attracting new business to our major cities, it has forced people out of their homes because they do not speak the language even though they speak English fluently.
YoY, this continues to occur and get worse. The local government wants to force-out the English language completely.
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It is said that one of the greatest malinvestment is in the example of China
.The authoritarian control of structure by which heights of command run from Beijing creates a gap for capital misallocation scaled as large as the Chinese Great Wall. (Insider).
According to Mercenary Trader in the INSIDER, "
- Stimulative monetary policy creates falsely optimistic market signals.
- Private investment firms act aggressively on these false signals.
- As a result, the private sector “malinvests,” i.e. allocates badly.
- Capacity is increased prematurely, supply ramped up excessively, etc.
- When the stimulus wears off, the economy is in worse shape than before.
- Overhang of excess debt, capacity, supply etc. serves as a dead weight." (2012).
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The subscription service Moviepass was a malinvestment. The company reduced the charge for subscription plan to less than $10/month, without performing good short-term and long-term analysis on the business model especially potential additional revenue streams and subscribers’ movie habit. The $10/month subscription plan lured a huge customer base quickly, but the $10/month pricing was significantly below cost. The company soon burned up all its invested capital and shut down soon after. Hence, the capital investment in Moviepass yielded a negative return.
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In my country infrastructure projects partly financed with EU funds are often malinvestments because the government sees it as free money, which does come with some accountability but apparently not enough. The expenses of these projects are often so inflated that it is hard for controllers or neutral observers to find comparisons with similar price levels - i.e. our roads, bridges, streets etc. are always at least 50% more expensive than exact same solutions (with same materials or technology) in neighbouring countries. It is also amazing that there are a couple of construction companies that always win these public tenders and yet everyone knows that they pay salaries in cash i.e. only part of salary is official and is taxed. So then the whole population knows this and this never changes - that is a malinvestment.
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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 link below shows the best example of a Malinvestment , the Berlin Airport project that has been delayed for decades and a few more millions of euros more than planned and still no results it is still yet to be fully concluded . Being funded by taxpayers money and debt on top of debt to a project which is now out of date due to the series of misplaying and delayed completion and security bugs … it is a great mal investment.
https://www.aicgs.org/2020/08/the-saga-of-berlins-long-delayed-airport-opening/
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