Continuing to throw good money at bad money. There are many corporations that are considered zombie corps but continued to be bailed out after not making money. Example would by Uber.
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I’m in with @KevScha – just to say that …
why don’t we start w/ the “Fountainhead” (sic … A.Rand)
of the US Federal Reserve System?
- Not Federal
- Not a true Reserve
- pseudo “System”
Spanish housing bubble
In Spain, 2006 was a milestone as regards the number of houses constructed: 760,000; more than the 650,000 started that year in France and the United Kingdom, whose combined populations almost triple that of Spain. Between 2001 and 2008 around four million new houses have been built and the average number of housing units completed per year was 565,000, more than double the figure of 250,000 for the previous decade. This is equivalent to the construction of twelve dwellings per thousand inhabitants, far in excess of the European average of five per thousand.
In 2009, after the collapse of the construction sector caused by the bursting of the housing bubble and the effects of the global economic crisis, the number of housing units started fell to 160,000, and there were almost 700,000 housing units in stock (that is, completed but unsold). This has created ghost towns all across Spain.
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I consider the Plus token system as a clear malinvestment. It was a system that promised you dividends on invested crypto capital, whereby interest could reach 6% per month.
The funds went to a supposedly decentralized wallet, where the dividends could be paid out. But those dividends were not in the currency as per invested capital, but in an own token (the plustoken). Although those tokens increased in USD terms, at some time your invested capital was not able to be sent back to you (not your keys, not your coins;-))
Turned out this wallet was not so decentralized as one thought…
From my reading of this section it becomes more and more apparent to me that the banks are a definition of malinvestment because they use our money without our consent to obtain profit while charging us administration fees just for having the account. It is about the few looking after themselves at the expense of the many
One of their schemes is the Payment Protection Insurance that was sold as compulsory irrespective of whether a person had alternative cover alongside the fact that there were so many exclusions and criteria in their accident, sickness and unemployment cover which made it not worth the paper it was written on. It should not have been a compulsory part of any loan and I have made 3 successful claims, 2 were banks, the other was a car loan company. This was a malinvestment scheme designed to extract as much profit for the company rather than to serve the needs of the individual
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I think the purchase of Tiffany & Co. for $ 16 billion by the LVMH company is a good example. I believe that if the loan could not be obtained at such a low interest, the purchase would not have been financed.
Swine flue vaccin. In Sweden they bought double dose for each person. People who took it got narcolepsy and the government threw more than 50 % away since the flue was not as bad as media and government told us. We lost billions of SEK in taxpayer money to the vaccination industry.
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Savings accounts at banks are a huge malinvestment (or scam seems pretty appropriate too). They give you 1-2% interest, when actual inflation for the average person buying goods and services is more like 6-10% YoY, so your ‘savings plan’ is making you poorer every year, by a long shot.
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Activity Lesson 4
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)
- I am sure am not the only one that has made a Bad Investment in the crypto space. But i got into the Crypto space early 2017. During this time i had saved some capital which i came to receive and invested into Cryptocurrency. Now i was working, money was easy to make as in overtime/shift swaps etc, credit was great so i was being offered MasterCard, loans and so on. During the ICO hype i was 1000% Malinvestment of capital due to believing at the time money was so easy to obtain. This was due to not having any understanding of money before this. lol the truth. Another Malinvestment is having a Bank Account could also be a Bad investment. In terms of paying fees to use there services, only for them to make money of your money.
I think that Nieman Marcus falls under a malinvestment. They claim that the pandemic is the reason as to why they are filing bankruptcy. However, they have been racking up debt for a couple years. Apparently they received 675M to keep it going, but then had to borrow more (750M). They still don’t plan to liquidate because they think they come back, but they have been doomed for a while now. They refused to acknowledge consumer e-commerce in the past, as well as foresee it competitors luxury clothing for less (Tj Maxx).
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government infrastructure spending is often mal manged, mal planned, mal timed , full of mal ware and obviously mal invested (using tax payers value)
I guess for me one of the most notable in my lifetime that was one of the helping factors of the 2008 financial crisis was the selling of AAA-rated debt. Which basically placed high value, in bad investments.
MalInvestment example: Well last week the stock market was absolutely pumping and it was reported that many people have bought a lot of stock in bankrupt companies like Hertz and J.C. Penney. Meanwhile the companies stock price has risen considerably.
Why are these people investing? I believe people are investing in these companies not because the company’s fundamentals are sound but because they are just following others and see the price rising and also with the belief the government will continue to drop helicopter money into the stock market.
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I believe in investing in companies that pave the way for the future. Green companies, new technologies that has a large scale impact and disruptive components (main reason I was interested in crypto). It is basically about investing in where I think the world is heading, rather than where it is now. Having said that, malinvestments that come to mind are technologies or companies that deal with models that are being disrupted, such as brick and mortar stores (the usual big ones).
Tech Companies/Stocks in the late 1990s.
Internet/tech stocks were all the rage.
And some of this was for good reason: the internet has changed the world for sure.
However, no company is worth an infinite price. During the late 1990s you could find ridiculous P/E ratios for tech companies.
Also just because one gets the macro picture correct (I.E. the internet is going to change the world/be very valuable etc.) doesn’t mean that any and every tech related stock/company would be successful. Many would go bankrupt.
This is a humbling reminder for those of us in the crypto space. Crypto has and will change the world. But to profit off of this our crypto decisions must be wise and not simply based off of FOMO or Hope based on nothing .
An obvious answer right now is the police in the US. We spend huge % of local budgets on militarizing the police, and while its not exactly an economic bubble in the same sense as the internet bubble, there has come a time where the bubble pops in a social way. And it seems that time is now.
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It’s evident that the outsourcing of manufacturing had its negative impact on unemployment in the US. In addition, the initial incentive for greater profit backfired when it created a critical shortage of essential supplies needed for the handling of the covid-19 pandemic and a subsequent halting of the US economy. Had the US not allocated the capital to set up manufacturing abroad, we would not have sacrificed our intellectual data as well as lose our capacity to respond to the covid-19 pandemic effectively.
Stuttgart 21
A large political fail. Against large public protests, in fact tens of thousands over years now, the Stuttgarter Government is Building with private investors a new central Train Station. The only benefit out of it is that the investors gain some ground to build real estate as the station moves underground. The downsides are millions of tax payer money spend on moving historic buildings and a train station that has less capacity can service less types of trains and is in many ways less efficient as the previous one. This type of malinvestment scale is just possible with governments spending tax payer money as they have unlimited funds when costs rise and the result does not has to be profitable as in private economy.
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A malinvestment is a badly allocated business investment that is usually caused through manipulation from the central bank like artificially low interest rates or unsustainable increase of money supply. Many examples can be found in 2008 housing market crisis or 2000 dot-com bubble. One example of the dot-com bubble company that was a malinvestment could be webvan–an online supermarket/delivery company that started in SF Bay Area. The company was poorly run and made massive mistakes all because so much money and funding was available. It tried to create its own infrastructure in the form of warehouses and delivery before the business model was even proven. It targeted the wrong kind of customer. The funding that poured into this was all based on speculation only fueled by the Central Bank’s then Chairman, Alan Greenspan, who put his positive spin on stock valuations.
Inverse Mortgages or as we know them in the Latin community “hipoteca inversa” which has been proposed recently by politicians to make front against the up coming pension crisis.
Basically the way it works is, the bank will pay to you a monthly revenue based on the price of your property till you die. Once youre dead they acquire your properties. But the good think is that you dont have to worry about your pension (J.K).